Bank of America, N.A. v. Antelope Homeowners' Association et al

MOTION for Summary Judgment

D. Neb.October 19, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 1 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C. J. WILLIAM EBERT, ESQ. Nevada Bar No. 2697 DAVID MARKMAN, ESQ. Nevada Bar No. 12440 9900 Covington Cross Drive, Suite 120 Las Vegas, Nevada 89144 (702) 382-1500 - Telephone (702) 382-1512 - Facsimile bebert@lipsonneilson.com dmarkman@lipsonneilson.com Attorneys for Defendant Antelope Homeowners’ Association UNITED STATES DISTRICT COURT DISTRICT OF NEVADA BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS SERVICING, LP, F/K/A COUNTRYWIDE HOME LOANS SERVICING LP, Plaintiff, v. ANTELOPE HOMEOWNERS’ ASSOCIATION; LAS VEGAS DEVELOPMENT GROUP, LLC; ALESSI & KOENIG, LLC, Defendants. CASE NO.: 2:16-cv-00449-JCM-PAL DEFENDANT ANTELOPE HOMEOWNERS’ ASSOCIATION MOTION FOR SUMMARY JUDGMENT Defendant ANTELOPE HOMEOWNERS ASSOCIATION (“HOA”), by and through its counsel of record at the law firm of LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C. hereby submits its Motion for Summary Judgment against Bank of America, N.A. (the “lender” or “BANA”). This Motion is made and based upon the papers and pleadings on file with the Court, the attached Memorandum of Points and Authorities, and such argument as may be presented at any hearing on the Motion. /// // Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 1 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 2 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This case is about placing the burden of a lost deed of trust on the proper parties, who agreed to, and were obligated to, but failed to, protect a deed of trust, (the “Deed of Trust”). Since 1991, and confirmed in 2014 by the Nevada Supreme Court, the foreclosure of an HOA’s lien for assessments extinguishes a first security instrument, such as a deed of trust. That’s what happened in this case. Because the Deed of Trust establishes the rights, duties, obligations, and remedies between the parties thereto -- the Borrower and the Lender -- there is no legal or equitable basis to pursue the HOA for the loss of the Deed of Trust. The HOA is not a party to the Deed of Trust, had nothing to do with the negotiation of the Deed of Trust. In this case, rather than pursuing legal remedies against the party or parties who failed to protect the Deed of Trust, the Lender attempts to retroactively divest the HOA of its statutory rights to enforce its assessment lien, and attempts to retroactively unwind the consequences of failing to avail itself to its pre-contemplated legal remedies. Law and equity require the Lender and the Borrower to honor and enforce their express agreement, rather than permitting the Lender to seek an action against a non- party to the agreement. The factual universe of this case is complete. There is no genuine factual issue, the legal issues may be decided as a matter of law, accordingly, summary judgment may be entered in favor of the HOA. This action arises from a non-judicial foreclosure sale of real property located at 7828 Garden Rock St., Las Vegas, Nevada 89149 (“Property”). The HOA foreclosure sale occurred on March 2, 2011. ECF No. 1 ¶ 25. Although Plaintiff Bank of America, N.A. (“Plaintiff”) knew or reasonably should have known its interests in the Property were at risk and had notice of the pending sale, it allowed the HOA to foreclose on a delinquent assessment lien and extinguish Plaintiff’s senior deed of trust. Five years later, Plaintiff filed the instant action on March 2, 2016, challenging the sufficiency of the sale. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 2 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 3 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 Plaintiff’s claims are time-barred by a three-year statute of limitations that applies to any action which is based upon liability created by statute. Nev. Rev. Stat. § 11.190(3). Therefore, any action challenging the NRS Chapter 116 foreclosure proceedings should have been brought by March 2, 2014. Instead, Plaintiff waited until September 21, 2015 to file its claims with NRED and didn’t file its complaint until March 2, 2016. Plaintiff’s claims are now barred and summary judgment must be entered on behalf of the HOA. I. BACKGROUND a. THE LEGAL ENVIRONMENT IN NEVADA.1 In 1991, Nevada adopted the Uniform Common Interest Owner Act (“NRS 116”). NRS 116 states that HOA’s may impose assessments. (NRS 116.3115.) NRS 116 states that HOA’s may have a lien against units for assessments. (NRS 116.3116.) NRS 116 provides that HOA liens are perfected upon the recording of the HOA’s CC&Rs. NRS 116.3116(5). II. UNDISPUTED FACTS a. THE PARTIES AND THEIR OBLIGATIONS i. THE HOA The Antelope Homeowners Association, (the “HOA”) recorded its CC&Rs on June 23, 2004 as Instrument No. 200406230002016. See Deed of Trust, attached as Exhibit A, to ECF # 30 BANA’s Motion for Summary Judgment. Upon the recording the CC&Rs, and upon Nevada’s adoption of the UCIOA in 1991 the HOA has a perfected lien for assessments. NRS 116.3116(5), NRS 1 This Court may take judicial notice of publically recorded documents and information which “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2); See also, Eagle SPE NV 1, Inc. v. S. Highlands Dev. Corp., No. 2:12-CV-00550-MMD, 2014 WL 3845420 (D. Nev. Aug. 5, 2014) (taking judicial notice of facts under Fed. R. Evid. 201, and facts on posted on government website (citing Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998-99 (9th Cir.2010)). See also, NRS 47.130, judicial notice of facts which are: “Capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned, so that the fact is not subject to reasonable dispute.” Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 3 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 4 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 116.1206(1)(a). The CC&Rs provide that the HOA may levy assessments and may foreclose such a lien. See CC&Rs, attached as Exhibit I to ECF # 30 BANA’s MSJ. The HOA did not co-sign any loan with the Borrower (See Deed of Trust). It is undisputed that through the CC&Rs, every homeowner expressly promised to pay assessments. ii. THE BORROWER On July 2, 2008, more than 4 years after the HOA perfected its assessment lien, Borrower executed the Deed of Trust which encumbered real property located at 7828 Garden Rock St., Las Vegas, Nevada 89149, (the “Property”). (See Deed of Trust; see also, Compl. ECF No. 1, ¶ 13.) The Property is within the HOA and is subject to the CC&Rs and the Borrower was obligated to pay assessments. (See Compl. ECF No. 1 ¶ 9.) The Deed of Trust secured a loan; the terms of the transaction between the original lender and the Borrower are memorialized by a note and the Deed of Trust. (See Deed of Trust, Exhibit A to ECF # 30.) The parties to the Deed of Trust are: (1) the Borrower; (2) Universal American Mortgage Company, LLC, as the lender; (3) Stewart Title Company, as the trustee; (4) MERS, as the nominee beneficiary of the lender. (See Deed of Trust.) The HOA is NOT a party to the Deed of Trust. (See generally, Deed of Trust.) The Original Lender and the subsequent beneficiaries, servicers, etc., knew the Property was subject to CC&Rs and assessments at the time the loan was granted because the Planned Unit Development Rider (“Rider”) to the Deed of Trust expressly references that the Property is part of a planned unit development and requires the payment of “PUD dues and assessments.” (See Deed of Trust, at Planned Unit Development Rider.) The Deed of Trust expressly likewise obligates the borrower to “discharge any lien which has priority over this [Deed of Trust]...” (See Deed of Trust, § 7.) Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 4 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 5 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 The Deed of Trust expressly sets forth remedies for the Lender, in the event that the Borrower fails to protect the Deed of Trust: “then Lender may do and pay whatever is necessary to protect the [Deed of Trust]. (See Deed of Trust, § 7.) The Deed of Trust offers additional protection to the Lender because “Any amounts disbursed by Lender under this paragraph shall become additional debt of the Borrower and be secured by this [Deed of Trust and] amounts [paid] shall bear interest at the Note rate....” (See Deed of Trust, Planned Unit Development Rider.) The Rider also expressly states the Lender’s remedies: “If [the Borrowers] does not pay the PUD dues and assessments ... the Lender may pay them [and any payments] shall become additional debt of the Borrower secured by the [Deed of Trust].” (Id. at § C.) It is undisputed that the Borrower has an express contractual relationship, through the note and Deed of Trust, with the Lender and the Lender’s successors, and that the Borrower was obligated, through the Deed of Trust and Rider, to pay assessments or otherwise protect the Deed of Trust. It is also undisputed that the Deed of Trust and Rider enables the Lender but does not obligate the Lender, to protect the Deed of Trust by paying assessments on behalf of the Borrower, if the Borrower fails to do so, and any payments by the Lender are added to the Borrower’s debt. iii. THE LENDER As noted above, the Deed of Trust secured a loan from Original Lender to the Borrower which the Lender performed by providing the Borrower with the loan, the proceeds of which were used to acquire the Property. (Compl. ¶ 13.) BANA alleges to have become the beneficiary of the Deed of Trust and the promissory note, via assignment which was recorded on June 20, 2011. (Compl. ¶ 15; see also Exhibit A to BANA’s MSJ, ECF # 30.) Even though BANA could not have become a beneficiary as the assignment was recorded three months after the property was foreclosed upon. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 5 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 6 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 As set forth above, the terms of the Lender’s relationship with the Borrower is expressed within the note and Deed of Trust, which expressly obligates the Borrower to protect the Deed of Trust. See Deed of Trust, Rider. Pursuant to the Deed of Trust, if the Borrower fails to protect the Deed of Trust, the Lender may pursue its remedies, against the Borrower, including paying “any” lien on behalf of the Borrower, and conducting its own nonjudicial foreclosure under NRS 107. b. THE BORROWER’S BREACH OF THE DEED OF TRUST. At first the Borrower paid the HOA assessments pursuant to the CCRs as required by the Deed of Trust. But eventually, the Borrower failed to pay assessments which resulted in a Notice of Delinquent Assessment being recorded in June 25, 2009 (Compl. ¶ 17.) The Notice of Delinquent Assessment Lien included the lien amount. (Id.) The Borrower failed to pay assessments and a Notice of Default and Election to Sell was recorded on August 31, 2009. (Compl. ¶ 18.) The Notice of Default included the amount of the HOA’s lien. (Id.) The Borrower failed to pay assessments and the Notice of Sale was recorded on August 9, 2010 (Compl. ¶ 19). The Notice of Sale included the lien amount. (Id.) The Notice of Sale also included a warning and instructions for the Borrower to take action to avoid the loss of the Property, and included the telephone number of the foreclosing agent, and the Ombudsman’s Office, in BOLD and ALL CAPS. (See Notice of Sale, attached as Exhibit F to ECF # 30 BANA’s MSJ.) Despite having actual notice of the nonjudicial foreclosure and despite the undisputed content of the notices, each of which clearly indicating the lien amount, BANA or its predecessors declined to exercise their contractual right (but not obligation) to pay “any lien” on behalf of its Borrower, and instead did nothing to protect its interest failing to even inquire about paying off the lien. The Borrower failed to pay assessments and the HOA’s lien was foreclosed upon and sold at a public auction on March 2, 2011 (Compl. ¶ 25). The Foreclosure Deed Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 6 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 7 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 was recorded on March 11, 2011. (Id.) See a copy of the Foreclosure Deed attached as Exhibit G to ECF # 30 BANA’s MSJ. The NRED Claim was not filed until September 21, 2015. (See Complaint ECF # 1 ¶ 8) The Lender did not attend the publicly noticed sale. (See generally, Compl.) At the publicly noticed and conducted foreclosure sale, co-defendant Las Vegas Development Group, LLC. acquired title to the Property. (See Foreclosure Deed.) The Foreclosure Deed contains recitals regarding compliance with the necessary requirements set forth in NRS 116. (See Foreclosure Deed.) III. SUMMARY JUDGMENT STANDARD Summary judgment should be entered if the pleadings ... show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. Lynn v. Sheet Metal Workers Int’l Ass’n, 804 F.2d 1472, 1483 (9th Cir. 1986); S.E.C. v. Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982). If there are no genuine issues of fact, the movant's burden is not evidentiary because the facts are not disputed, but the court has the obligation to resolve the legal dispute between the parties as a matter of law. Gulf Ins. Co. v. First Bank, 2009 WL 1953444 *2 (E.D.Cal.2009) (citing Asuncion v. Dist. Dir. of U.S. Immigration & Naturalization Serv., 427 F.2d 523, 524 (9th Cir.1970)). Here, there are no genuine factual issues regarding the timing and sufficiency of the Lender’s purported receipt foreclosure notices and knowledge of its contractual rights and remedies under the Deed of Trust. The Complaint does not allege fraud, oppression, or unfairness, but states the foreclosure wrongful, unconstitutional, commercially unreasonable because the recorded notices were insufficient. None of the allegations excuse the inaction. The Lender dropped the ball but is inexplicably attempting to hold the HOA accountable for its own mistakes. The Lender’s remedies Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 7 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 8 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 were set forth in the Deed of Trust. There is no contractual or common law remedy against the HOA. Summary Judgment should be granted in favor of the HOA. IV. LEGAL ARGUMENT The Court should not reward the Lender’s inaction. The Borrower was obligated to protect the Deed of Trust. The Lender’s remedies for the Borrower’s failure are set forth in the Deed of Trust. The Lender had at least two opportunities and obligations to protect the Deed of Trust from extinguishment, but failed to do so, and instead attempts to shift the blame to the HOA. To the extent the Lender is entitled to any remedy, it should be proscribed by: (1) its inaction in refusing to avail itself to the contractual remedies within the Deed of Trust and Rider; and (2) the Lender’s failure to protect the Deed of Trust by appearing at the publically noticed and conducted foreclosure sale. It is undisputed that the Lender had actual knowledge of the sale. Retroactively depriving the HOA of the full effect of its lien, or invalidating the HOA’s foreclosure sale, would deprive the HOA of its rights to enforce liens pursuant to the CC&Rs and NRS 116. Additionally, the Lender lacks standing to assert a claim on behalf of FHA. Quiet title fails because the Lender cannot establish good title in itself. In addition, the wrongful foreclosure claims (even under the guise of a quiet title claim) should be denied and summary judgment should be entered for the HOA on all causes of actions. a. Plaintiff’s Claims Regarding Liability under NRS Chapter 116 are Barred by the Statute of Limitations. Nevada Revised Statutes, Section 11.190(3) provides that an action which is based upon liability created by statute must be commenced within three (3) years. Nev. Rev. Stat. § 11.190(3). The three-year time period begins to run when “the aggrieved party knew of, or reasonably should have known, of the facts giving rise to the damage or injury.” Nevada State Bank v. Jamison Partnership, 106 Nev. 792, 800, 801 P.2d Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 8 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 9 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 1377, 1382 (1990). All of Plaintiff’s claims against the HOA involve purported liability arising under NRS Chapter 116, and Plaintiff admits it did not make any tenders because it believed the HOA and/or A&K would have rejected any tender. See ECF No. 1 ¶ 24. This admission suggests that Plaintiff knew that their security interest on the Property was at but Plaintiff made a conscious choice not to take any action. Despite the fact, the HOA, through A&K, had recorded various notices indicating there was a competing and superior lien upon the Property. See generally Id. The foreclosure sale took place on March 2, 2011 and the forlecosure deed was recorded on March 11, 2011. Id. ¶ 3, 25. Therefore, Plaintiff’s NRED claim or lawsuit against the HOA should have been filed, at the very latest, by March 11, 2014. The action is now time barred and summary judgment should be granted in favor of the HOA on all causes of action alleged against it by BANA as they all rely upon NRS 116. b. A DEED OF TRUST IS A CONTRACT WHICH IS BINDING ONLY ON THE PARTIES-THE LENDER AND BORROWER. A promissory note and deed of trust are contracts which expressly define the contracting parties’ rights and obligations. See Garand v. JPMorgan Chase Bank, 532 F. App'x 693, 696 (9th Cir. 2013) (“the rights and obligations of the parties are dictated by express contracts - the first mortgage note and deed of trust.”). Contracts such as the Deed of Trust in this case, expressly provides for the remedies in the event of a breach by one of the parties. We recognized long ago that a deed of trust ‘provides the remedies for its own enforcement.’ Spruill v. Ballard, 61 App.D.C. 112, 58 F.2d 517, 519 (1932). Bryant v. Jefferson Fed. Sav. & Loan Ass'n, 509 F.2d 511, 513 (D.C. Cir. 1974). There is no provision within the Deed of Trust, and no authority which obligates the HOA to protect the Deed of Trust. See Bourne Valley Court Trust v. Wells Fargo Bank, N.A., No. 2:13-CV-00649-PMP, 2015 WL 301063, at *5 (D. Nev. Jan. 23, 2015) (in granting Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 9 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 10 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 summary judgment against the lender, noting that the lender does not “point to evidence or legal authority indicating that beyond selling the property to the highest bidder, the HOA was responsible for protecting [the lender’s] interests in addition to the homeowners' interests.”)(Overruled on other grounds). “It goes without saying that a contract cannot bind a nonparty.” E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 294, 122 S. Ct. 754, 764, 151 L. Ed. 2d 755 (2002). “[N]one is liable upon a contract except those who are parties to it.” County of Clark v. Bonanza No. 1, 96 Nev. 643, 615 P.2d 939, 943 (Nev.1980). Additionally, when a party has a legal remedy, equity is likely improper. See Hedges v. Dixon Cty., 150 U.S. 182, 192, 14 S. Ct. 71, 74, 37 L. Ed. 1044 (1893) (“The established rule, although not of universal application, is that equity follows the law, or as stated in Magniac v. Thomson, 15 How. 299, ‘that, wherever the rights or the situation of parties are clearly defined and established by law, equity has no power to change or unsettle those rights or that situation, but in all such instances the maxim ‘equitas sequitur legem’ is strictly applicable.'”); see also Estate of Strickland v. Strickland, No. CV-12-433-TUC-JGZ, 2013 WL 673513, at *4 (D. Ariz. Feb. 25, 2013) (“[W]herever the rights or the situation of parties are clearly defined and established by law, equity has no power to change or unsettle those rights or that situation, but in all such instances the maxim ‘equitas sequitur legem’ [equity follows the law] is strictly applicable.”) (quoting Petersen v. E.F. Johnson Co., 366 F.3d 676, 680 (internal citation omitted). In this case, the HOA did not co-sign the loan. The Borrower was obligated to protect the Deed of Trust but failed to do so. The Lender had the right to pay the lien on behalf of the Borrower, but elected not to. Thus, the actual dispute is between the parties to the Deed of Trust. There is still no basis for the Lender to ignore contractual remedies and the chain of responsibility as expressed within the Deed of Trust, and Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 10 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 11 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 pursue the HOA, which is not a party to the Deed of Trust. c. BANA LACKS STANDING TO ASSERT A CLAIM ON BEHALF OF FHA. The Lender lacks standing to assert a claim, which even if it exists, belongs to FHA. The Lender’s claim is based on the Supremacy Clause. For the Supremacy Clause to apply, the federal law must pre-empt the state law. Aguayo v. U.S. Bank, 653 F.3d 912, 918 (9th Cir.2011) (citing Bank of Amer. v. City & Cnty. of S.F., 309 F.3d 551, 558 (9th Cir.2002)). However, merely alleging that the Supremacy Clause precludes the foreclosure does not plausibly state a claim of pre-emption. See, e.g., Freedom Mortgage Corp. v. Las Vegas Dev. Grp., LLC, No. 2:14-CV-01928-JAD-NJ, 2015 WL 2398402, at *5-8 (D. Nev. May 19, 2015) (holding that NRS 116 is not pre-empted by HUD insurance program, and notes that under HUD guidelines, “lenders must take any action necessary to protect HUD's interest in the property against foreclosure actions brought by a condominium/HOA” (quoting HUD publication as stated in n. 56) 2. The Lender’s position has been rejected for a number of reasons. First, the Lender cannot stand in FHA’s shoes because: the “federal government is the best advocate of its own interests.” Freedom Mortgage Corp. v. Las Vegas Dev. Grp., LLC, No. 2:14-CV-01928-JAD-NJ, 2015 WL 2398402, at *4 (D. Nev. May 19, 2015) (quoting The Wilderness Soc. v. Kane Cnty., Utah, 632 F.3d 1162, 1172 (10th Cir. 2011) 2 Freedom Mortgage footnote 56 states: “U.S. Dep't of Hous. & Urban Dev., Mortgagee Letter 2002-19 at 2-3, available at http:/ /portal.hud.gov/hudportal/HUD?src=/program-offices/ administration/hudclips/letters/mortgagee/2002ml (emphasis added). Letter 2002-19 was superseded by HUD Mortgagee Letter 2012-11 effective November 1, 2012. See U.S. Dep't of Hous. & Urban Dev ., Mortgage Letter 20120-11, availbale at http://portal.hud.gov/hudportal/documents/ huddoc? id=12- 11ml.pdf; and U.S. Dep't of Hous. & Urban Dev., Mortgage Letter 2012-14, available at http://portal.hud.gov/hudportal/documents/ huddoc?id=12-14ml.pdf. Letter 2012-11 was superseded by Mortgage Letter 2013-18, supra note 49. In each iteration of publication, HUD has warned participating banks that the ultimate responsibility to keep properties free and clear of HOA liens fall on the banks.” Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 11 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 12 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 (emphasis in original).) See also, JPMORGAN CHASE BANK, N.A., v. SFR INVESTMENTS POOL 1, LLC, No. 214CV02080RFBGWF, 2016 WL 4084036, at *11 (D. Nev. July 28, 2016) (“[The Lender] argues that the operation of N.R.S. 116.3116 to extinguish its Deed of Trust is pre-empted by FHA's mortgage insurance program. The Court finds that federal and state law do not conflict on this issue, and thus the Supremacy Clause does not bar enforcement of N.R.S. 116.3116.”) As stated further by Judge Boulware: The Court finds that N.R.S. 116.3116 is not pre-empted by HUD's insurance program under any of the pre-emption doctrines. First, Chase has not identified, and the Court has not found, any authority expressly pre- empting the operation of state law in the context of HOA foreclosures on HUD-insured mortgages. Thus, express pre-emption does not apply…Second, it is clear that field pre-emption does not apply…. [Third,] conflict pre-emption does not apply in this case. Lenders are perfectly capable of complying with both HUD's program and N.R.S. 116.3116; in fact, HUD's regulations expressly contemplate situations in which a lender forfeits its security interest by failing to protect it against senior interests. JPMORGAN v. SFR, 2016 WL 4084036, at *12 (D. Nev. July 28, 2016) (bold italics emphasis added). The same is true here, the Lender has not identified any of the three bases for pre-emption to apply. BANA also alleges that NRS 116 is pre-empted because it is an obstacle to the FHA program. The allegation is off-base because BANA is essentially saying that it may ignore its rights and remedies within the Deed of Trust, rights and remedies that exist to protect the Deed of Trust from an HOA lien foreclosure, but that if the HOA chooses to enforce its lien through foreclosure, even if BANA does nothing, the HOA is somehow causing an obstacle. The HOA has no agreement or insurance policy with FHA; BANA does. The HOA did not promise BANA it would pay itself assessments, the Borrower did. Thus, BANA’s inaction and failure to comply with FHA requirements to protect Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 12 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 13 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 the Deed of Trust are, as the Nevada Supreme Court stated: “The inequity [the bank] decries is thus of its own making…” SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 414 (2014). Additionally, an insurance interest is not federal property. In the Ninth Circuit, the government must own either a deed of trust or the property itself to have protection under the Property Clause of the Constitution. Freedom Mortgage Corp. v. Las Vegas Dev. Grp., LLC, No. 2:14-CV-01928-JAD-NJ, 2015 WL 2398402, at *4 (D. Nev. May 19, 2015) (string cite in n. 32 and discussion in n. 38.) See also JPMORGAN v. SFR, 2016 WL 4084036, at *10 ([The Lender] has not cited-and the Court has not found-any case in which the Supreme Court or the Ninth Circuit has held that a federal insurance policy on a private loan gives the federal government a property interest protected by the Property Clause.) But see, Washington & Sandhill Homeowners Ass'n v. Bank of Am., N.A., No. 2:13-CV-01845-GMN, 2014 WL 4798565 (D. Nev. Sept. 25, 2014). In addition to no authority indicating insurance is federal property, the alleged insurance policy would automatically terminate upon the HOA’s foreclosure. See 24 C.F.R. § 203.315(a)(2)(i) (insurance terminated when “property is bid in and acquired at foreclosure by a party other than the mortgagee.”; see also, 24 C.F.R. § 203.368(i)(5)(ii) (“When a mortgage files a claim for the Insurance benefits without conveying the title to the property of the Commissioner, as authorized by this section ... [t]he mortgage shall file its claim ... (ii) within 30 days after a party other than the mortgagee acquired good marketable title to the property”). In this case, because the HOA’s foreclosure occurred five years ago, and the conveyance took place more than 30 days ago, “HUD’s status with respect to this property will likely never be more than a former insurer of the …loan.” Freedom Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 13 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 14 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 Mortgage Corp. v. Las Vegas Dev. Grp., LLC, No. 2:14-CV-01928-JAD-NJK, 2015 WL 2398402, at *5 (D. Nev. May 19, 2015). Thus, there is no standing even assuming the alleged facts are true. Asserting a potential claim and federal defenses on behalf of FHA is FHA’s job, not the Lender’s job.The Court may grant summary judgment, quieting title against the Lender. d. THE QUIET TITLE CLAIM FAILS BECAUSE BANA CANNOT ESTABLISH GOOD TITLE IN ITSELF. The Court should summary judgment in favor of the HOA on Quiet Title because BANA cannot establish it has title to the Property. A plea to quiet title does not require any particular elements, but “each party must plead and prove his or her own claim to the property in question” and a “plaintiff's right to relief therefore depends on superiority of title.” Yokeno v. Mafnas, 973 F.2d 803, 808 (9th Cir.1992); see also Hodges Transp., Inc. v. Nevada, 562 F.Supp. 521, 522 (D.Nev.1983). Chapman v. Deutsche Bank Nat'l Trust Co., 129 Nev. Adv. Op. 34, 302 P.3d 1103, 1106 (2013). And because a quiet title claim determines title, each party must have a claim to title. “An action to quiet title is based upon the presumption that the plaintiff has title.” Daly v. Lahontan Mines Co., 39 Nev. 14, 151 P. 514, 516 (1915) aff'd on reh'g, 39 Nev. 14, 158 P. 285 (1916). See also, Majuba Mining v. Pumpkin Copper, 129 Nev. Adv. Op. 19, 299 P.3d 363, 364 (2013) (dismissing quiet title claim because claimant had no claims to protect). In this case, BANA claims only that it possessed a security instrument in the Property, and not an actual ownership interest. (Compl. ¶ 13.) An encumbrance is not title. See Hamm v. Arrowcreek Homeowners' Ass'n, 124 Nev. 290, 299, 183 P.3d 895, 902 (2008) (“The filing of the lien created a monetary encumbrance that did not alter the Hamms' title to the property. Accordingly, we conclude that the Hamms' action to release the lien did not relat[e] to the title to residential property.”) BANA does not allege it had title to the Property and cannot have established Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 14 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 15 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 good title in itself, accordingly, the quiet title claim fails. Additionally, LVDG acquired title to the Property through the foreclosure sale. (See Foreclosure Deed.) Lastly, the HOA claims no interest in the title to the property. Accordingly, there are no genuine issue of fact regarding this issue. Therefore, the Court should grant summary judgment on this issue in favor of the HOA. e. THE CONSTITUTIONAL ARGUMENTS DO NOT PROVIDE BANA RELIEF FROM BANA’S FAILURE TO PROTECT THE DEED OF TRUST. BANA alleges that the foreclosure under NRS 116 fails to extinguish the Deed of Trust because, if NRS 116 does so, the Statute would violate procedural due process, as applied and facially. (ECF # 1 ¶¶ 32-38.) i. The Nevada Supreme Court already determined NRS Chapter 116 is constitutional and its decision interpreting its statute is binding. “The fundamental requisite of due process of law is the opportunity to be heard.” In re Medaglia, 52 F.3d 451, 455 (2d. Cir. 1995), citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). To fulfill this requisite, interested parties must be provided with “notice reasonably calculated … to apprise [them] of the pendency of the action.” Mullane, 339 U.S. at 314. However, “it is well established that due process is not offended by requiring a person with actual, timely knowledge of an event … to exercise due diligence and take necessary steps to preserve [his] rights.” In re Medaglia, 52 F.3d at 455; see also SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 418 (2014). BANA’s facial challenge fails as a matter of law because the statute is valid ‘as applied’ as determined in SFR.3 Therefore, as a matter of law, a “set of circumstances 3 SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 130 Nev. Adv. Op. 75, 334 P.3d 408, 418 (2014). Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 15 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 16 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 exists under which [NRS 116] would be valid” and the facial challenge fails.4 In SFR, the Nevada Supreme Court rejected the various due process arguments of lenders because: 1) “[I]t is well established that due process is not offended by requiring a person with actual, timely knowledge of an event that may affect a right to exercise due diligence and take necessary steps to preserve that right.”; 2) nothing prevented the lender from paying the entire lien to protect its interest; 3) regarding the sufficiency of the notices, it was appropriate to state the full amount of the lien because the notices go to all junior lien holders, as well as the prior owner of the Property; 4) Both the majority and dissent agreed Chapter 116 required notice to the first deed of trust holders; and 5) “Chapter 116 was enacted in 1991, and thus [the lender] was on notice that by operation of the statute, the [earlier recorded] CC&Rs might entitle the HOA to a super priority lien at some future date which would take priority over a [later recorded] first deed of trust.”5 The Nevada Supreme Court determines the constitutionality of state statutes through its interpretation thereof, not the Ninth Circuit. Because SFR establishes the Nevada Supreme Court interpreted NRS § 116.3116 et seq. and found it 4 United States v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 2100, 95 L. Ed. 2d 697 (1987). 5 See generally, SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 418 (2014) quoting 7912 Limbwood Court Trust, 979 F.Supp.2d at 1152; Las Vegas Development Group, LLC, v. Yfantis, 2:15-cv-01127-APG-CWH, Docket Entry No. 72, (D. Nev. Mar. 24, 2016). The Court noted “both the majority and the dissenting opinions agreed the statutory scheme requires notice to the first deed of trust holder[.]” Id. At 9:11-13. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 16 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 17 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 constitutional, the Court should defer to the Nevada Supreme Court’s precedent.6 ii. Even if Bourne Valley were binding, the Ninth Circuit majority errs Federal district courts have an obligation to interpret state statutes as the highest court in the state would in the absence of precedent from that Court.7 Here, there is precedent, but should the Court determine SFR not binding in light of the Bourne decision, then it should use all available information and resources to independently determine how the Nevada Supreme Court would interpret the statute despite Bourne. The Ninth Circuit majority got it wrong. The HOA adopts the reasoning in the Judge Wallace’s dissent because: 1) Chapter 116 already requires notice to the lender and 2) an HOA is not a state actor and a nonjudicial foreclosure does not rise to the level of state action.8 The language of the statute does not support the majority’s reasoning, nor does its focus on the facts provide any meaning to a facial constitutional analysis. For instance, “it is unclear if [the Lender and the HOA] were even aware of each other’s existence.”9 The facts contradict this statement. The Lender knew about the HOA and NRS 116 when it elected to make the loan in July 2005, which is why the Deed of Trust memorializes the Association, the Borrower’s obligation to pay assessments, and the Lender’s remedies to pay assessment on behalf of its Borrower.10 The majority also 6 Planned Parenthood Idaho, Inc. v. Wasden, 376 F.3d 908, 920 (9th Cir. 2004). 7 See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); see also Shannon-Vail Five Inc., et al. v. Bunch, et al., 270 F.3d 1207, 1210 (9th Cir. 2001) (“A federal district court must apply the state law that would be applied by the state court of the state in which it sits.”). 8 Id. Bourne Valley, 2016 WL 4254983, *6 (Wallace, J. dissenting). 9 Bourne Valley, 2016 WL 4254983, at *5 (Wallace, J. dissenting. 10 Id. at *7-8; see also Bourne Valley v. Wells Fargo, 2:13-cv-00649-JSM-GWF, ECF No. 25-2, Recorded Deed of Trust, Recorded Instrument 20060505-0003630. The Deed of Trust references the CC&Rs and includes a Planned Unit Development Rider. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 17 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 18 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 misunderstood, or ignored, the fact lenders knew Chapter 116 could “strip[] a mortgage lender of its first deed of trust” as the statute was enacted in 1991, well before the existence of the deed of trust at issue.11 The undisputed facts demonstrate: 1) Nevada’s 1991 adoption of the UCIOA enacted as Nev. Rev. Stat. § 116 predated to the loan and deed of trust at issue, and 2) all public records of the property indicating it is part of an HOA, i.e.  recorded CC&Rs;  property’s legal description in the Lender’s Deed of Trust references the CC&Rs, and;  the content of the grant deed through which the Borrower obtained title, which also references the CC&Rs.12 Put simply, the majority is wrong and this Court’s obligation is to interpret the statute as the highest Court in Nevada would do so. Additionally, for due process to be implicated, there must be a state actor.13 Without a state actor, then due process, including allegation of the sufficiency of “notice” does not apply.14 The burden of establishing a state actor is on the party claiming a deprivation of a constitutionally protected interest.15 The burden is steep and “necessarily fact-bound[.]”16 In the nonjudicial foreclosure procedure of NRS 116, there is no state actor 11 2016 WL 4254983, at *1; NRS § 116 et seq. enacted 1991. 12 Bourne Valley v. Wells Fargo, 2:13-cv-00649-JSM-GWF, ECF No. 25-2, Recorded Deed of Trust, Recorded Instrument 20060505-0003630. 13 Brentwood Acad. v. Tenn. Secondary Sch. Athletic Ass'n, 531 U.S. 288, 295 (2001). 14 Id.; see also Rendell-Baker v. Kohn, 457 U.S. 830, 838 (1982) (“If the action of the respondent school is not state action, our inquiry ends.”). 15 Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156 (1978). 16 Brentwood, 531 U.S. at 298. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 18 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 19 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 enforcing an association lien.17 The HOA is not the government and an HOA’s nonjudicial foreclosure is not a government function.18 The Nevada Supreme Court agrees “[t]he general rule is that the Constitution does not apply to private conduct.”19 The private actor must be “performing a function that has traditionally been exclusively performed by the state.”20 As one federal district court noted, “the power to impose fines or enforce liens are not traditional and exclusive governmental functions.”21 Thus, a nonjudicial foreclosure does not meet the requirement of a state actor and the due process argument fails.22 The lack of a state actor defeats any due process claims.23 In conclusion, the Nevada Supreme Court already addressed the due process issue and its decision on it is binding. The Ninth Circuit majority chose to ignore its federal mandate in order to “reach its desired outcome” and this Court should reject Bourne given all the evidence in contrast to the ruling and the Court’s obligation to apply 17 Bourne Valley, 2016 WL 4254983, *6 (Wallace, J., dissenting). 18 See Mendez v. Fiesta del Norte Home Owners Ass'n, No. 2:15-CV-00314-RCJ, 2015 WL 2219695, at *3 (D. Nev. May 12, 2015) (“non-judicial foreclosure sales by private lien-holders are not traditional government functions. Apao v. Bank of N.Y., 324 F.3d 1091, 1093-95 (9th Cir.2003)”). See also, Southern Comfort Campgrounds v. Federal Home Loan Bank Bd., 1995 WL 63090 (E.D.La.1995) (foreclosure sale was not a taking under the Fifth Amendment, because “a taking only results from the government's exercise of its sovereign power to appropriate private property for public use”). See also, Apao v. Bank of N.Y., 324 F.3d 1091, 1095 (9th Cir.2003) (a lender’s non-judicial foreclosure pursuant to state law was not a government actor.) 19 S.O.C., Inc. v. Mirage Casino-Hotel, 117 Nev. 403, 410, 23 P.3d 243, 247-48 (2001) citing Hudgens v. N.L.R.B., 424 U.S. 507, 513 (1976). 20 Id. Citing Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156-59 (1978). 21 Snowdon v. Preferred RV Resort Owners Ass'n, 2:08-cv-01094-RCJ-PAL, at 14:14-15 (D. Nev. Apr. 1, *9 2009), aff'd, 379 Fed.Appx. 636 (9th Cir. 2010) (“[Association] did not perform the traditional and exclusive public function of municipal governance.” citing Marsh v. Alabama, 326 U.S. 501 (1946)). 22 The “opt-in” analysis the Lender makes is a red-herring to distract the court from reviewing the Deed of Trust. See generally, Las Vegas Development Group, LLC, v. Yfantis, 2:15-cv-01127-APG-CWH, Docket Entry No. 72, (D. Nev. Mar. 24, 2016). The Court noted “both the majority and the dissenting opinions agreed the statutory scheme requires notice to the first deed of trust holder[.]” Id. at 9:11-13. 23 S.F. Arts & Athletics, Inc. v. USOC, 483 U.S. 522, 547 (1987) (“Because the USOC is not a governmental actor, the SFAA's claim that the USOC has enforced its rights in a discriminatory manner must fail.”). Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 19 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 20 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 Nevada’s interpretation of state law.24 f. FOLLOWING NRS 116 DOES NOT RESULT IN A BREACH OF NRS 116.1113 Nevada Revised Statutes, Section 116.1113 states as follows: Every contract or duty governed by this chapter imposes an obligation of good faith in its performance or enforcement. Nev. Rev. Stat. § 116.1113. Plaintiff believes that Antelope breached its duty of good faith by making certain representations in the community’s CC&Rs, by failing to identify the super priority amount of its lien, by not notifying Plaintiff that its security interest was at risk, and by allegedly obstructing BANA’s ability to protect its security interest. ECF No. 1 ¶¶ 56 - 61. These arguments are simply untrue. First, the only notification duties that Antelope owed to Plaintiff were outlined in NRS Chapter 116 and 107. Antelope, through A&K, complied with these duties by recording notices of delinquent assessment liens, notices of default and intent to sell, and a notice of foreclosure sale. There was no statutory requirement for Antelope to provide Plaintiff with the exact amount of the purported “super-priority” portion of the delinquent assessment lien. Further, it is disingenuous for Plaintiff to argue that Desert Sands failed to notify Plaintiff that its security interest was at risk. Plaintiff clearly received notice of the pending foreclosure or otherwise it would not have alleged in its complaint that had it attempted to tender the amounts due under the lien, the tender would have been rejected. See ECF #1 Complaint at ¶ 24. Second, section 116.1104 clearly states that the provisions of NRS Chapter 116 “may not be varied by agreement, and rights conferred by it may not be waived.” Nev. Rev. Stat. § 116.1104. Further, as discussed by the Nevada Supreme Court, NRS 116.1104 “defeats” the Lender’s allegations because the CC&Rs cannot waive or vary 24 Bourne Valley, 2016 WL 4254983 *10 (Wallace, J. dissenting). Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 20 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 21 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 NRS 116. SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 419 (2014), reh'g denied (Oct. 16, 2014) reaffirmed in Horizons at Seven Hills v. Ikon Holdings, 132 Nev. Adv. Op. 35, 373 P.3d 66, 73 (2016). Lastly, there was no misrepresentation made to Plaintiff. As even if the CC&Rs contained a mortgage protection clause, the CC&Rs are a contract between Antelope and the individual homeowners - not their lenders. See generally Nev. Rev. Stat. § 116.3103 (stating that the executive board are fiduciaries and shall act in the best interest of the association). Third, NRS 116.1113 does not create HOA obligations to BANA or any third party unless there is a contract with the HOA. NRS 116.1113 states: “Every contract or duty governed by this chapter imposes an obligation of good faith in its performance or enforcement.” There is no contract between the HOA and BANA, so we next look to the duties. The HOA’s duties are to the homeowners and are set forth in the CC&Rs, and NRS 116.3103, which provides that the HOA acts “in the best interests of the association …. ordinary and reasonable care of officers and directors of a nonprofit corporation, subject to the business-judgment rule”. In other words, NRS 116.1113 does not create a duty or obligations to third-parties such as lenders or any other junior lien holders. See Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 80 F. Supp. 3d 1131, 1136 (D. Nev. 2015) (no authority that HOA must protect deed of trust). The only “duties” owed to BANA by the HOA are outlined in sections 116.3116 through 116.31168. As previously mentioned, the HOA complied with these duties by providing notice regarding the pending foreclosure. Therefore, in light of the requirements of NRS 116, the duty of the HOA is to the association rather than to third-parties such as lenders. The absence of a contract with BANA, and considering the conclusive proof of compliance of NRS 116 in the foreclosure deed recitals, and there being no genuine issues regarding the material facts in this case, summary judgment in favor of the HOA is proper at this time. /// // Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 21 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 22 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 g. THE WRONGFUL FORECLOSURE CLAIM SHOULD BE SUMMARILY DECIDED FOR THE HOA. Among the alleged defects of the foreclosure sale are that the sale was wrongful because: (1) the notices were insufficient (ECF #1 ¶ 66); and (2) the foreclosure was “commercially unreasonable” (ECF #1 ¶ 67); Each of the bases for a wrongful foreclosure claim fails. i. WRONGFUL FORECLOSURE FAILS AS A MATTER OF LAW To prevail on a wrongful foreclosure claim, the Lender must establish that: (1) defendants exercised a power of sale or foreclosed on plaintiffs' property and (2) at the time the power of sale was exercised, there was no breach of condition or failure of performance by plaintiffs that would have authorized foreclosure. Collins v. Union Fed. Sav. & Loan Ass'n, 99 Nev. 284, 304, 662 P.2d 610, 623 (1983). The material issue in a wrongful foreclosure claim is whether “the trustor was in default when the power of sale was exercised.” Id. at 304, 662 P.2d 610. Turbay v. Bank of Am., N.A., No. 2:12-CV-1367 JCM PAL, 2013 WL 1145212, at *4 (D. Nev. Mar. 18, 2013). In this case, it is undisputed that the Borrower had stopped paying assessments. (See ECF # 1 complaint generally.) The foreclosure was lawful; as all the HOA did was exercise its statutory right to conduct a sale following the borrower’s breach of its duties to the HOA under the CC&Rs. Accordingly, summary judgment should be granted in the HOA’s favor as a matter of law. When viewed in light of the undisputed facts, the 1991 adoption of the UCIOA, the prior recording of the CC&Rs, the multiple references to the HOA and lien within the Deed of Trust, the foreclosure notices, all of which contained the lien amount and were recorded, “The inequity BANA decries is thus of its own making….” SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 414 (2014), reh'g denied (Oct. 16, 2014). ii. THE UNDISPUTED CONTENT OF THE NOTICES PROVIDED THE LENDER ALL THE INFORMATION IT NEEDED TO ELECT TO EXERCISE ITS CONTRACTUAL RIGHTS UNDER THE DEED OF TRUST. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 22 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 23 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 The Lender would have the Court impose additional notice requirements that did not exist at the time of this foreclosure. The notice requirements are set forth in NRS 116. It is undisputed that each of the recorded notices contained the amount that anyone in the world could pay to avoid the lien. (See ECF # 1 Compl. ¶¶ 17-19 (confirming notices and lien amounts).) It is also undisputed that the Lender received actual notice of the HOA’s lien, but simply did not want to pay the HOA’s lien. Failure of the Lender to pay the Borrower’s obligation does not create a wrongful foreclosure claim. This foreclosure took place in March of 2011 (See ECF #1 Compl. ¶ 25) which is before the SFR decision, which confirmed that it is appropriate to state the full amount because the notices go to all junior lien holders, as well as the prior owner of the Property. See generally, SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 418 (2014). As the Nevada Supreme Court confirmed, “a wrongful foreclosure claim challenges the authority behind the foreclosure, not the foreclosure act itself.” McKnight Family, L.L.P. v. Adept Mgmt., 129 Nev. Adv. Op. 64, 310 P.3d 555, 559 (2013) citing See Collins v. Union Fed. Sav. & Loan, 99 Nev. 284, 304, 662 P.2d 610, 623 (1983). Further, this Court should summarily grant the Wrongful Foreclosure claim in favor of the HOA because the mere fact that an association “sold a property at its foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a showing of fraud, unfairness, or oppression.” Shadow Wood HOA v. N.Y. Cmty. Bancorp., 132 Nev. Adv. Op. 5, 6 (2016) (emphasis added), citing Long v. Towne, 98 Nev. 11, 639 P.2d 528. 530. There are no fraud allegations in this matter and there are no facts discovered in this matter sufficient to find that Antelope acted deceptively or violated a confidential or fiduciary relationship with any of the involved parties. See generally Long, 98 Nev. at 13. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 23 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 24 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 Additionally, any purported unfairness on Antelope’s part “must be weighed against [Plaintiff’s] (in)action” during the months leading up to the sale. Shadow Wood HOA, 132 Nev. Adv. Op. at 8. Plaintiff knew Antelope intended to foreclose on the Property. Despite this fact, Plaintiff never attempted to request a ledger from the HOA Ultimately, Plaintiff allowed the sale to move forward. It has not alleged that it attended the sale, bid on the Property, tendered any amount to the HOA, or sought to enjoin the sale from moving forward. Finally, “[t]he commercial reasonableness [at issue] must be assessed as of the time the sale occurred,” and Plaintiff’s contention that the Property sold in a commercially unreasonable manner “ignores the practical reality that confronted the purchaser at the sale.” Bourne Valley Court Trust, 80 F. Supp. 3d at 1136 (overruled on other grounds). Before the Nevada Supreme Court’s decision in SFR Investments (and arguably even after), buying a foreclosed property is “a risky investment, akin to purchasing a lawsuit.” Id. In light of these risks, it is unsurprising that NRS Chapter 116 itself does not contain a “commercial reasonableness” requirement, and “a large discrepancy between the purchase price … and the assessed value of the property is to be expected.” Id. It is undisputed that the Lender received actual notice of the HOA’s foreclosure sale and that each of the recorded notices contained the amount of the HOA’s lien. A lender’s election to ignore the statutory notices does not equal a wrongful foreclosure claim. Therefore, Summary Judgment should be granted in favor of the HOA. iii. THERE IS NO “COMMERCIAL REASONABLENESS” REQUIREMENT IN NEVADA (OR IN THE UNITED STATES) for NONJUDICIAL FORECLOSURES In order to state a wrongful foreclosure claim, the Lender would have this court Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 24 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 25 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 create a commercial reasonableness standard which does not exist in Nevada’s nonjudicial foreclosures. First, the UCC’s “commercial reasonable” standard does not appear in NRS 116 (or NRS 107) or in the Golden v. Tomiyasu, 79 Nev. 503, 514, 387 P.2d 989, 995 (1963) decision, or in Long v. Towne, 98 Nev. 11, 639 P.2d 528 (1982), or in the Shadow Wood decision. On the other hand, the price disparity rule is recognized nation wide. See BFP v. Resolution Trust Corp., 511 U.S. 531, 532, 114 S. Ct. 1757, 1758, 128 L. Ed. 2d 556 (1994) (“it is black letter foreclosure law that, when a State's procedures are followed, the mere inadequacy of a foreclosure sale price is no basis for setting the sale aside.”). Shadow Wood did not overrule Tomiyasu or its progeny, Shadow Wood did not adopt a new rule in Nevada. In fact, just the opposite occurred when the Nevada Supreme Court states, repeatedly, that: “As discussed above, demonstrating that an association sold a property at its foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a showing of fraud, unfairness, or oppression. Long, 98 Nev. at 13, 639 P.2d at 530.” Shadow Wood HOA v. N.Y. Cmty. Bancorp., 132 Nev. Adv. Op. 5 (2016) (emphasis added). There is no language of overruling the black letter foreclosure law; there is no language adopting any of the various examples discussed by the Court, such as the Restatement (Third) of Property Mortgages; there is no expression of creating a “commercial reasonable” standard in nonjudicial foreclosures. There is no indication of express overruling or express adoption that is typically found when the Nevada Supreme Court overrules or adopts a law. See e.g., Golden v. Tomiyasu, 79 Nev. 503, 514, 387 P.2d 989, 994-95 (1963) (“we adopt the rule laid down in Oller v. Sonoma County Land Title Company”) (emphasis added); see also, Cucinotta v. Deloitte & Touche, L.L.P., 129 Nev. Adv. Op. 35, 302 P.3d 1099, 1099 (2013) (“we adopt the rule set forth in the Restatement (Second) of Torts …”) (emphasis added); see also, State v. Harris, 131 Nev. Adv. Op. 56, 355 P.3d 791, 794 (2015) (“we overrule Lewis…”) (emphasis added); Aspen Fin. Servs., Inc. v. Eighth Judicial Dist. Court of State ex rel. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 25 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 26 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 Cty. of Clark, 129 Nev. Adv. Op. 93, 313 P.3d 875, 879 (2013) (“we overrule that [Las Vegas Sun] case”) (emphasis added). If the Nevada Supreme Court wanted to adopt a new rule, or overrule an old rule, it would have said so. It didn’t. There is no commercial reasonableness standard in nonjudicial foreclosures. Unless a claimant can establish that (1) a low price at a foreclosure sale, and (2) that the low price was caused by fraud, oppression, or unfairness, the sale must stand. Shadow Wood HOA v. N.Y. Cmty. Bancorp., 132 Nev. Adv. Op. 5 (2016). In this case, the Lender alleges that the HOA Sale was commercially unreasonable (See ECF # 1 Compl. ¶ 49, 67.) Thus, the Lender essentially posits a standard that does not exist against facts which are not disputed and which are immaterial. The entire exercise of the nonexistent standard is nonsensical because it is undisputed that the Lender knew of the foreclosure and knew of its rights to pay on behalf of its borrowers, but it elected not to do so. Even after the Shadow Wood decision, the Nevada Supreme Court affirms that the standard is still that price disparity by itself is insufficient. Centeno v. JP Morgan Chase Bank, N.A., Case No. 67365, March 18, 2016 (Unpublished Order) (Confirming low price not enough); see also, NATIONSTAR MORTGAGE LLC, v. AMBER HILLS II HOMEOWNERS ASSOCIATION, INC., No. 215CV01433APGCWH, 2016 WL 1298108, at *10 (D. Nev. Mar. 31, 2016 (“[D]emonstrating that an association sold a property at its foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a showing of fraud, unfairness, or oppression.” [Shadow Wood] (citing Long v. Towne, 639 P.2d 528, 530 (Nev. 1982)”). /// /// /// // / Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 26 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 27 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 V. CONCLUSION For the above reasons, the HOA respectfully requests that the Court grant Summary Judgment that the HOA sale was valid and extinguished the Deed of Trust which the Borrower and Lender failed to protect. DATED this 19th day of October, 2016. LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C. By:__/s/ David Markman_____________________ J. WILLIAM EBERT, ESQ. Nevada Bar No. 2697 DAVID A. MARKMAN, ESQ. Nevada Bar No. 12440 9900 Covington Cross Drive, Suite 120 Las Vegas, NV 89144 Attorney for Defendant Antelope Homeowners Association Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 27 of 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 28 of 28 L i p s o n , N e i l s o n , C o l e , S e l t z e r & G a r i n , P . C . 9 9 0 0 C o v in g to n C ro ss D ri v e , S u it e 1 2 0 L a s V e g a s , N e v a d a 8 9 1 4 4 ( 7 0 2 ) 3 8 2 - 1 5 0 0 F A X : ( 7 0 2 ) 3 8 2 - 1 5 1 2 CERTIFICATE OF SERVICE I hereby certify that on the 19th day of October, 2016, service of the foregoing DEFENDANT ANTELOPE HOMEOWNERS ASSOCIATION’S MOTION FOR SUMMARY JUDGMENT was made pursuant to FRCP 5(b) and electronically transmitted to the Clerk's Office using the CM/ECF system for filing and transmittal to all interested parties: Ariel E. Stern William S. Habdas Allison Schmidt AKERMAN LLP 1160 Town Center Drive Suite 330 Las Vegas, NV 89144 702-634-5000 Ariel.stern@akerman.com William.habdas@akerman.com Attorneys for Plaintiff Bank of America Timothy Rhoda Roger P. Croteau ROGER P. CROTEAU & ASSOCIATES, LTD. 9120 West Post Road Suite 100 Las Vegas, NV 89148 702-254-7775 croteaulaw@croteaulaw.com Attorney for Las Vegas Development Group, LLC /s/ David Markman _______________________________________________________ An Employee of LIPSON, NEILSON, COLE, SELTZER, GARIN, P.C. Case 2:16-cv-00449-JCM-PAL Document 31 Filed 10/19/16 Page 28 of 28