Deutsche Bank National Trust Company v. Talasera And Vicanto Homeowners' Association et alMOTION for Summary JudgmentD. Neb.October 6, 20161 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 ARIEL E. STERN, ESQ. Nevada Bar No. 8276 MELANIE D. MORGAN, ESQ. Nevada Bar No. 8215 TENESA S. SCATURRO, ESQ. Nevada Bar No. 12488 AKERMAN LLP 1160 Town Center Drive, Suite 330 Las Vegas, NV 89144 Telephone: (702) 634-5000 Facsimile: (702) 380-8572 Email: ariel.stern@akerman.com melanie.morgan@akerman.com tenesa.scaturro@akerman.com Attorneys for Deutsche Bank National Trust Company as trustee for the GSAA Trust Mortgage Pass-Through Certificates, Series 2006-8, Nationstar Mortgage LLC, and Bank of America, N.A. UNITED STATES DISTRICT COURT DISTRICT OF NEVADA DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8, Plaintiff, v. TALASERA AND VICANTO HOMEOWNERS' ASSOCIATION; SFR INVESTMENTS POOL I, LLC, Defendants. Case No.: 2:15-cv-1139-JCM-PAL DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS- THROUGH CERTIFICATES, SERIES 2006-8, NATIONSTAR MORTGAGE, LLC, AND BANK OF AMERICA, N.A.'S MOTION FOR SUMMARY JUDGMENT SFR INVESTMENTS POOL 1, LLC, a Nevada limited liability company, Counter-Claimant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8; NATIONSTAR MORTGAGE, LLC, a Delaware limited liability company; BANK OF AMERICA, N.A., a national association; DAVID BASES, an individual; KERI BASES, an individual, Counter-Defendant/Cross-Defendants. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 1 of 18 2 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 Plaintiff and cross-defendant Deutsche Bank National Trust Company as trustee for the GSAA Trust Mortgage Pass-Through Certificates, Series 2006-8, (Deutsche Bank) moves for summary judgment on its claims against Talasera and Vicanto Homeowners' Association's (Talasera) and SFR Investments Pool 1, LLC (SFR). Additionally, Deutsche Bank and cross- defendants Nationstar Mortgage LLC (Nationstar), and Bank of America, N.A. (BANA) (together with Deutsche Bank, lenders) move for summary judgment on SFR's counterclaims against the lenders. This motion is made pursuant to Federal Rule of Civil Procedure 56 on the grounds there is no genuine issue of material fact and the lenders are entitled to judgment as a matter of law. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This case arises out of Talasera's September 21, 2012 non-judicial foreclosure sale. Prior to the sale, lenders, who hold the senior deed of trust against the property at issue, offered to pay the super-priority portion of Talasera's lien and even delivered a check to Talasera for the full amount of the super-priority portion of the lien. As recently confirmed by the Nevada Supreme Court in its August 11, 2016 Stone Hollow opinion, it does not matter whether Talasera accepted lenders' offer. Stone Hollow Avenue Trust v. Bank of America, N.A., No. 64955, 2016 WL 4543202, at *1 (Nev. Aug. 11, 2016) (unpublished disposition). It is equally irrelevant under Stone Hollow whether SFR, the purchase at Talasera's foreclosure sale, contends it is a bona fide purchaser. Under Stone Hollow, lenders' offer of payment, even if rejected, redeemed the priority of the senior deed of trust over Talasera lien as a matter of law. The day after the Nevada Supreme Court entered its decision in Stone Hollow, the Ninth Circuit held in Bourne Valley that NRS chapter 116's "opt-in" notice scheme violates the Fourteenth Amendment's Due Process Clause on its face because it allows a mortgage lender to be stripped of its deed of trust without requiring actual notice to the lender of the intent to foreclose. Bourne Valley, __ F.3d __, 2016 WL 4254983, at *2-3 (9th Cir. Aug. 12, 2016). The Due Process Clause requires, under all circumstances, that a statute authorizing extinguishment of a lien in a foreclosure sale also mandate actual notice to those lienholders. Under the Ninth Circuit's ruling, Talasera's Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 2 of 18 3 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 foreclosure sale could not extinguish Deutsche Bank's lien because it was conducted under an unconstitutional and void statute. While Stone Hollow and Bourne Valley are dispositive, summary judgment in lenders' favor is warranted for the additional reasons that (a) the Nevada Supreme Court's decision in SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014) should not be applied retroactively to extinguish Deutsche Bank's lien, and (b) SFR's slander of title counterclaim fails as a matter of law because lenders did not record any false documents with malice and SFR has not disclosed, let alone established, any special damages; and (c) the foreclosure sale was commercially reasonable, as set forth in lenders' opposition to SFR's motion for summary judgment. (ECF No. 69). II. STATEMENT OF UNDISPUTED FACTS A. Deutsche Bank is the Beneficiary of the Senior Deed of Trust. David Bases and Keri Bases (the borrowers) financed the property located at 9165 Cantina Creek Court, Las Vegas, Nevada 89178 with a $377,000.00 loan. Ex. 1 to ECF No. 69, Deed of Trust, at 1-2. The borrowers secured the loan with a deed of trust on the property recorded in February 2006. Id. The senior deed of trust was assigned to BAC Home Loans Servicing LP f/k/a Countrywide Home Loans Servicing LP (BAC) via an assignment of deed of trust recorded in June 2011. Ex. 2 to ECF No. 69, Assignment, at 1. BAC merged into BANA effective July 1, 2011. Ex. A, Certificate of Merger, at 1. BANA later assigned the senior deed of trust to Nationstar in August 2013. Ex. 3 to ECF No. 69, Assignment, at 1. Nationstar then assigned the senior deed of trust to Deutsche Bank in September 2014. Ex. 4 to ECF No. 69, Assignment, at 1. B. Talasera and NAS Initiate the Foreclosure Process. Talasera, through Nevada Association Services, Inc. (NAS), recorded a notice of delinquent assessment lien against the property in December 2011. Ex. 5 to ECF No. 69, Notice of Delinquent Assessment Lien, at 1. The notice indicates the borrowers owed $1,099.40. Id. NAS recorded a notice of default and election to sell to satisfy the delinquent assessment lien in February 2012. Ex. 6 to ECF No. 69, Notice of Default and Election to Sell Under Homeowners Association Lien, at 1. The notice states the borrowers owed $1,942.90. Id. Talasera, through NAS, recorded a notice of foreclosure sale in August 2012. Ex. 7 to ECF Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 3 of 18 4 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 No. 69, Notice of Foreclosure Sale, at 1. The notice states the borrowers owed Talasera $3,483.57 including "reasonably estimated costs, expenses and advances." Id. at 2. C. NAS Rejected BANA's Super-Priority Tender. BANA's former counsel, Paterno C. Jurani, Esq. of Miles, Bauer, Bergstrom & Winters LLP (Miles Bauer) sent NAS a letter dated March 26, 2012. Ex. 12 to ECF No. 69, Miles Bauer Affidavit, ¶¶ 4, 6 and Ex. 1. Mr. Jurani wrote "[i]t is unclear, based on the information known to date, what amount the nine months' of common assessments pre-dating the NOD actually are." Id., Ex. 1 at 2. Mr. Jurani then wrote, "my client hereby offers to pay that sum upon presentation of adequate proof of the same by the HOA." Id. NAS did not respond. Id. ¶ 7. BANA, therefore, used a statement of account previously provided by NAS with respect to a different property in the Talasera association, which detailed the monthly assessment amount, to calculate the super-priority portion of Talsera's lien. Id. ¶¶ 7-8 and Ex. 2. Based on that ledger, on April 12, 2012, Miles Bauer, on behalf of BANA, sent a $765.00 check to NAS. Id. ¶¶ 7-8, Exs. 2-3. Unbeknownst to BANA, the assessments incurred on a semi- annual basis, rather than a monthly basis, so that $765.00 tender was more than the nine month super-priority due and owing for assessments at the time the check was sent to NAS. Ex. B, Dep. Tr. of Susan Moses, 41:9-42:14. NAS later returned the check to Miles Bauer. Ex. 12 to ECF No. 69, ¶ 10, Ex. 4. D. Talasera and NAS Sold the Property After Rejecting BANA's Tender Despite BANA's tender, Talasera, through its agent NAS, foreclosed on the property on or about September 21, 2012. Ex. 8 to ECF No. 69, Foreclosure Deed, at 1. A foreclosure deed in favor of SFR was recorded with the Clark County Recorder on or about September 25, 2012. Id. The foreclosure deed reflects a $8,800.00 sale price. Id. E. Several Documents Were Recorded After the Sale. In August 2013, BANA recorded an assignment of the senior deed of trust to Nationstar. Ex. 3 to ECF No. 69. Nationstar then assigned the senior deed of trust to Deutsche Bank in September 2014. Ex. 4 to ECF No. 69. In September 2014, Deutsche Bank recorded a substitution of trustee appointing Clear Recon Corp. as substitute trustee under its deed of trust. Ex. C, Substitution of Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 4 of 18 5 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 Trustee, at 1. Nationstar, who services the loan on behalf of Deutsche Bank, recorded a request for notice in January 2015. Ex. D, Request for Notice Under NRS Chapter 107 and 116. III. REQUEST FOR JUDICIAL NOTICE Lenders request the court take judicial notice of the following exhibits pursuant to Federal Rule of Evidence 201: 1. Exhibit A. This is a public record of the Texas Secretary of State and is therefore subject to judicial notice. See Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152, 1157 (D. Nev. 2009). 2. Exhibits C and D. These are publicly recorded documents concerning the property's title history governing the common interest community where the property is located. Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). IV. LEGAL STANDARD Summary judgment shall be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). Summary judgment is inappropriate if a reasonable finder of fact, drawing all inferences in favor of the non-moving party, could return a verdict in the non-moving party's favor. Diaz v. Eagle Produce Ltd. P'ship, 521 F.3d 1201, 1207 (9th Cir. 2008) (citing United States v. Shumway, 199 F.3d 1093, 1103-04 (9th Cir. 1999)). V. ARGUMENT A. BANA's Tender Discharged the "Super-Priority" Lien Under Stone Hollow and Renders SFR's Bona Fide Purchaser Argument Irrelevant. 1. BANA's Tender Preserved the Seniority of the Deed of Trust. On August 11, 2016, the Nevada Supreme Court held that an offer to pay the "super-priority" amount prior to an HOA foreclosure sale preserves the lender's deed of trust, even if the HOA refuses to accept payment. Stone Hollow, 2016 WL 4543202, *1. This ruling closely follows the Nevada Supreme Court's confirmation that, prior to the amendments effective October 1, 2015, the "super- priority" lien is limited to nine months of common assessments and not a penny more. See Horizon at Seven Hills Homeowners Ass'n v. Ikon Holdings, LLC, 373 P.3d 66, 72 (Nev. 2016). In Ikon Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 5 of 18 6 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 Holdings, the court specifically held that the "super-priority" lien granted by NRS 116.31162(2) "is limited to an amount equal to the common expense assessments due during the nine months before foreclosure." Id. Stone Hollow confirms an offer to pay the "super-priority" amount redeems the first deed of trust's priority even if the offer is rejected. In that case, plaintiff Stone Hollow purchased the property at issue in an HOA sale and then filed suit against the mortgagee to quiet title. See Stone Hollow Ave. Trust v. Bank of America, N.A., No. 64955, 2016 WL 1109167, at *1 (Nev. Mar. 18, 2016), vacated by Stone Hollow, 2016 WL 4543202, at *1. The trial court entered summary judgment in favor of the mortgagee. Id. Stone Hollow appealed. Id. On appeal, the Supreme Court first reversed the trial court because it had not considered Stone Hollow's status as a bona fide purchaser for value.1 Id. The mortgagee moved for rehearing on the grounds that its tender of the super-priority amount discharged the super-priority lien as a matter of law, rendering equitable doctrines inapplicable. The three-judge panel agreed-reversing its prior ruling. Stone Hollow, 2016 WL 4543202, at *1. The court found the HOA's rejection of the proffer of the full super-priority lien amount was "unjustified" and "[w]hen rejection of a tender is unjustified, the tender is effective to discharge the lien." Id. Although unpublished, Stone Hollow "telegraphs how the high court would rule on the instant issue." Fernando v. MortgageIT, 2:11-CV-1352-JCM-GWF, 2012 WL 1586015, at *2 (D. Nev. 2012). Stone Hollow is especially persuasive considering that all three panel members in Stone Hollow were in the majority of the SFR Investments opinion. Stone Hollow, 2016 WL 1109167; SFR Inv. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 419 (2014). Stone Hollow also accords with both SFR Investments and the Nevada Real Estate Division (NRED)'s December 12, 2012 opinion. As the SFR Investments court noted: 1 In Shadow Wood, the Nevada Supreme Court previously held that "equity balancing" was required to determine whether an HOA foreclosure sale divested an owner of title to the property. Shadow Wood Homeowners' Ass'n, Inc. v. New York Cmty. Bancorp, Inc., 132 Nev. Adv. Op. 5, at 21 (Nev. Jan. 28, 2016). As distinguished from Stone Hollow and this case, in Shadow Wood the entirety of the HOA's lien was senior to the title holder's ownership interest, and questions of fact remained whether the owner tendered payment of the entirety of the HOA's lien prior to the sale. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 6 of 18 7 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 As to first deeds of trust, NRS 116.3116(2) thus splits an HOA lien into two pieces, a superpriority piece and a subpriority piece. The superpriority piece, consisting of the last nine months of unpaid HOA dues and maintenance and nuisance-abatement charges, is "prior to" a first deed of trust. The subpriority piece, consisting of all other HOA fees or assessments, is subordinate to a first deed of trust. SFR Inv., 334 P.3d at 411 (emphasis added). The court acknowledged that a lender may preserve its interest by tendering "the precise super priority amount" in advance of the sale. Id. at 418. NRED agrees. See December 12, 2012 NRED Advisory Opinion No. 13-01, at 11 (Ex. E); see also NRS 107.080(2)(a) (preventing a foreclosure on a first deed of trust until junior lienholders are provided notice and an opportunity to pay the prior lien). BANA did precisely what Nevada law requires to protect its lien priority. Prior to Talasera's foreclosure, counsel for BANA, Miles Bauer, sent NAS a letter dated March 26, 2012. Ex. 12 to ECF No. 69, Ex. 1. The letter stated: It is unclear, based on the information known to date, what amount the nine months' of common assessments pre-dating the [Notice of Default] actually are. That amount, whatever it is, is the amount BANA should be required to rightfully pay to fully discharge its obligations to the HOA . . . and my client hereby offers to pay that sum upon presentation of adequate proof of the same by the HOA. Id. at 6. (emphasis added). NAS did not respond to this inquiry, but Miles Bauer was able to use a different payoff statement for another property also overseen by Talasera, which was dated March 2011 and detailed the monthly common assessments. Id. at 8-12 and Ex. 2. BANA tendered a check in the amount of $765.00 to NAS on April 12, 2012-before the date of the foreclosure sale. Id. at 13 and Ex. 3.2 NAS, on behalf of the Talasera, rejected the tender, but this rejection is immaterial under Stone Hollow. Id. at ¶ 10 and Ex. 4. BANA's tender of the super-priority amount alone preserves its lien. Stone Hollow, 2016 WL 4543202, *1 2. Stone Hollow Renders SFR's Bona Fide Purchaser Argument Irrelevant. As noted above, the Stone Hollow opinion holds BANA's tender of the super-priority portion of the statutory HOA lien satisfied that portion of the lien as a matter of law, which renders SFR's claim to be a bona fide purchaser irrelevant. In Stone Hollow, the Nevada Supreme Court first 2 This amount actually exceeded the nine-month super-priority amount because the assessment identified in the previous ledger was a semi-annual charge rather than a monthly charge. Ex. J at 41:9-42:14. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 7 of 18 8 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 reversed the district court's award of summary judgment in BANA's favor based on Stone Hollow's argument that it was a bona fide purchaser. Stone Hollow, 2016 WL 1109167, *1. The Court initially held "because the district court did not take into account [Stone Hollow]'s putative status as a bona fide purchaser when it granted summary judgment, we conclude that summary judgment in respondent's favor may not have been proper." Id. On reconsideration, however, the Supreme Court vacated its previous ruling and instead affirmed the district court's judgment based on BANA's tender of the full super-priority portion of the statutory HOA lien. Id. The Court found the association's rejection of the tender "unjustified," and ruled that "[w]hen rejection of a tender is unjustified, the tender is effective to discharge the lien." Id. Therefore, there was no need to remand the case for consideration of Stone Hollow's bona fide purchaser claim because at the time of [the association]'s foreclosure sale, the superpriority portion of [the association]'s lien had been discharged, leaving only the subpriority portion of the lien to be foreclosed." Id. As a matter of law, therefore, BANA's tender in this case discharged Talasera's super-priority lien and rendered SFR's title, at best, subject to Deutsche Bank's deed of trust, regardless of its claim to be a bona fide purchaser.3 . . . 3 Even if Stone Hollow were not considered, SFR's knowledge, experience, and investment strategy eliminate any argument it might have to be a bona fide purchaser for value. See, e.g. Yates v. West End Fin. Corp. 25 Cal. App. 4th 511, 523 (1994) (buyer's experience relevant in assessing bona fide purchaser claim); Countrywide Home Loans, Inc. v. United States, No. CV F 02 6405 AWI SMS, 2007 WL 87827, *12 (E.D. Cal. Jan. 9, 2007) (extensive real estate experience a factor against the buyer's claims to bona fide purchaser status). As Judge Jones of the Nevada federal court recently ruled in another case involving SFR: Even assuming the issue were whether SFR had notice not only of the fact of a competing interest but also of the legal possibility that the DOT might survive the [HOA] foreclosure sale, SFR was not an innocent purchaser in that regard. The law was not clear at the time of the sale that the [HOA] sale would extinguish the DOT, and a reasonable purchaser would have perceived a serious risk that it would not. Indeed, SFR's own appraisal expert is adamant that the reason for the low valuation was the near certainty of subsequent litigation over this point and the high uncertainty of success on the issue. Nationstar Mortgage v. SFR Investments Pool 1, LLC, 2016 WL 1718374, *5 (D. Nev. April 29, 2016). To the extent the Court decides to consider SFR's bona fide purchaser claim on the merits, notwithstanding Stone Hollow, Deutsche Bank respectfully requests the opportunity to present the facts of SFR's experience and knowledge to the Court. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 8 of 18 9 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 3. Even if Stone Hollow is ignored, the Refusal to Accept Tender Violates Due Process As Applied to the Facts of This Case. To the extent Stone Hollow is not dispositive, Talasera's sale violated Deutsche Bank's due process rights as applied to the facts of this case.4 SFR Investments held that a lender's due process rights would be violated if, despite the exercise of due diligence, it was unable to determine the "precise" amount of the super-priority lien. See SFR Inv., 334 P.3d at 417. In SFR Investments, U.S. Bank argued that its due process rights were violated because the HOA's notices did not identify the super-priority portion of the lien. See generally SFR Inv., 334 P.3d at 417-418. The Court rejected this argument only in part, finding 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." Id. at 418. The Court then remanded the case for a determination of whether the record revealed a deprivation of due process. As stated by the Court: "from what little the record contains, nothing appears to have stopped U.S. Bank from determining the precise superpriority amount in advance of the sale or paying the entire amount and requesting a refund of the balance." Id. This case has that record. To the extent the payment did not redeem, the only thing that "stopped" lenders from redeeming the senior deed of trust's priority was Talasera's refusal to accept payment. Under the reasoning of SFR Investments, Talasera's actions violate Deutsche Bank's due process rights as applied to the facts of this case. B. NRS Chapter 116 Is Unconstitutional Under Bourne Valley. 1. NRS Chapter 116 Does Not Mandate Notice to Deed of Trust Beneficiaries. The due process clause requires, "at a minimum, [the] deprivation of life, liberty, or property by adjudication be preceded by notice and an opportunity for hearing appropriate to the nature of the case." Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). An "elementary and fundamental requirement" is "notice reasonably calculated, under all circumstances, to apprise 4 The tender/redemption argument is a separate, distinct theory from the due process analysis. The quintessential question on tender is whether, as a matter of law, the payment was sufficient to redeem. Only if it was not does the Court reach the question of whether Deutsche Bank's due process rights were violated. SFR Investments effectively answers this question as well. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 9 of 18 10 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 interested parties of the pendency of the action and afford them an opportunity to present their objections." Tulsa Prof'l Collection Services, Inc. v. Pope, 458 U.S. 478, 484 (1988) (quoting Mullane, 339 U.S. at 314) (emphasis added)). NRS chapter 116 did not mandate notice to mortgagees prior to its recent amendment. Instead, the statute contained "request-notice" or "opt-in" notice provisions, requiring notice only if lienholders requested it in advance. See e.g., NRS 116.31163(2) (requiring notice of default to "any holder of a security interest encumbering the unit owner's interest who has notified the association, 30 days before the recordation of the notice of default, of the security interest.") (emphasis added); NRS 116.311635 (requiring notice of sale to "[t]he holder of a recorded security interest or the purchaser of the unit, if either of them has notified the association, before the mailing of the notice of sale, of the existence of the security interest, lease of contract of sale, as applicable.") (emphasis added). As the Ninth Circuit explained, NRS chapter 116 "required a homeowners' association to alert a mortgage lender it intended to foreclose only if the lender had affirmatively requested notice."5 Bourne Valley, 2016 WL 4254983, *1. Pointing out the absurd practical effect of this "opt-in" notice scheme, the Ninth Circuit commented: [D]espite that only the homeowners' association knew when and to what extent a homeowner had defaulted on her dues, the burden was on the mortgage lender to ask the homeowners' association to please keep it in the loop regarding the homeowners' association's foreclosure plans. How the mortgage lender, which likely had no relationship with the homeowners' association, should have known to ask is anybody's guess. Id. at * 3. 5 The Nevada Supreme Court also made clear NRS chapter 116 is an "opt-in" notice statute in SFR Investments: "Before [foreclosure], the HOA must give notice of sale to the owner and to the holder of a recorded security interest if the security interest holder 'has notified the association, before mailing of the notice of sale of the existence of the security interest.'" SFR Invs., 334 P.3d at 411 (emphasis added) (citing NRS 116.311635(1)(b(2)). The Nevada Supreme Court did not decide the constitutionality of NRS chapter 116 in SFR Investments. See id. at 418. That mortgagee made an as-applied, rather than facial challenge to NRS chapter 116, arguing it received insufficient notice under the due process clause. See id. The Nevada Supreme Court did not reach the as-applied challenge because "at the pleadings stage, we credit the allegations of the complaint that [the HOA] provided all statutorily required notices as true and sufficient to withstand a motion to dismiss." Id. There was no consideration of the argument that NRS is facially unconstitutional because it impermissibly requires mortgagees to opt-in to their due process rights. SFR Investments has no precedential value in deciding the facial unconstitutionality issue presented here. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 10 of 18 11 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 As an issue of first impression, Bourne Valley holds NRS chapter 116's "peculiar scheme" is facially unconstitutional under the Fourteenth Amendment. Id. Plaintiff Bourne Valley Court Trust obtained a quitclaim deed to a reverted property following an HOA foreclosure sale. Id. at *2. It then filed suit to quiet title against the senior mortgagee. Id. The district court granted summary judgment to Bourne Valley Court Trust, holding that the HOA's sale extinguished the lender's interest under SFR Investments. Id. On appeal, the Ninth Circuit reversed, finding NRS chapter 116's "opt-in" notice scheme "not only strange [but] also unconstitutional" because it "required a homeowners' association to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively requested notice." Id. at *1, 3. In the absence of controlling authority analyzing the constitutionality of an "opt-in" notice scheme, the Ninth Circuit turned to the Fifth Circuit, who evaluated a similar clause in the context of Louisiana's foreclosure statute. Id. at *4. In Small Engine Shop, Inc. v. Cascio, 878 F.2d 883 (5th Cir. 1989), the Fifth Circuit held that the Louisiana statute-which mandated prior notice of seizure only to those who requested it-did not pass constitutional muster because it impermissibly shifted the "entire burden of ensuring adequate notice to an interested party regardless of the circumstances." Id. at 884 (citing Mennonite, Bd. of Missions v. Adams, 462 U.S. 791, 797 (1983)). Bourne Valley analogized NRS chapter 116's "opt-in" notice provisions to those in the unconstitutional Louisiana statute, finding NRS chapter 116 similarly impermissibly shifts the burden of ensuring adequate notice to mortgage lenders "without regard for (1) whether the mortgage lender was aware that the homeowner had defaulted on her dues to the homeowners' association, (2) whether the mortgage lender's interest had been recorded such that it would have been easily discoverable through a title search, or (3) whether the homeowners' association had made any effort whatsoever to contact the mortgage lender." Bourne Valley, 2016 WL 4254983, at *4. Invoking NRS 107.090 does not salvage NRS chapter 116. Bourne Valley rejected the argument that NRS 107.090-which governs the notice required for default and sale under a deed of trust-cures NRS chapter 116's deficiencies. Id. Bourne Valley argued NRS 107.090's notice requirements "should be read into" chapter 116 via NRS 116.31168(1), under which "[t]he provisions of NRS 107.090 apply to the foreclosure of [a homeowners'] association's lien as if a deed Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 11 of 18 12 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 of trust were being foreclosed." Id. The Ninth Circuit disagreed, noting Bourne Valley's statutory interpretation renders chapter 116's notice provisions entirely superfluous. Id. The court further recognized that the Nevada legislature would have had no reason to amend NRS chapter 116-as it did last year-if the statute already required notice to mortgagees whose interests may be extinguished. Id. at *4, n.4. The potential extinguishment of the senior deed of trust under NRS chapter 116 amounts to state action and thus requires application of the due process clause. Bourne Valley, 2016 WL 4254983, at *5; see also Culbertson v. Leland, 528 F.2d 426, 432 (9th Cir. 1975) (holding operation of innkeeper's lien statute that permitted non-judicial seizure to be state action); J.D. Construction v. IBEX Int'l Group, 126 Nev. 366, 240 P.3d 1033 (2010) (holding mechanic's lien statute implicates a property owner's federal and state due process rights). In Bourne Valley, the Ninth Circuit concluded because NRS chapter 116 failed to mandate notice to mortgage lenders and met the other requirements for finding a violation of due process, it was facially unconstitutional. Bourne Valley, 2016 WL 4254983, at *5. This decision should be apply here because the sale through which SFR purports to have acquired its interest in the property was conducted under the same unconstitutional statute. 2. Any Alleged Factual Issue Concerning Actual Notice is Irrelevant. Whether lenders had actual notice of the "super-priority" lien amount is irrelevant. An unconstitutional law is void. Journigan v. Duffy, 552 F.2d 283, 289 (9th Cir. 1977). Consequently, a successful facial challenge invalidates the statute itself. Foti v. City of Menlo Park, 146 F.3d 629, 635 (9th Cir. 1998); Dehne v. Avanino, 219 F. Supp. 2d 1096, 1102 (D. Nev. 2001). Actual notice does not change the analysis. Garcia-Rubiera v. Calderon, 570 F.3d 443, 456 (1st Cir. 2009).6 Bourne Valley itself recognized Wells Fargo's failure to "present evidence that it did not receive notice" did not affect its facial challenge. See Bourne Valley, 2016 WL 4254983, at *3.7 The statute 6 See also Planned Parenthood v. Casey, 505 U.S. 833, 894 (1992) (holding spousal abortion notification law unconstitutional notwithstanding some women would voluntarily notify their husbands). 7 The Ninth Circuit has consistently rejected the argument an actor might voluntarily provide more process than the statute provides. See Lopez-Valenzuela v. Arpaio, 770 F.3d 772, 789 (9th Cir. 2014) (where statute failed to provide for individualized determination before setting bail, declining to Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 12 of 18 13 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 is facially unconstitutional and therefore void as a matter of law. C. SFR Investments Should Not be Applied Retroactively When SFR Investments was decided on September 18, 2014, it displaced more than twenty years of practice regarding the priority between first deeds of trust and HOA assessment liens. The decision should not be applied retroactively to permit extinguishment of the senior deed of trust. In Chevron Oil Co. v. Hudson, 404 U.S. 97, 106-07 (1971), the United States Supreme Court expanded the application of the doctrine of non-retroactivity outside the criminal area, in both constitutional and non-constitutional cases. The Court noted: In our cases dealing with the non-retroactivity question, we have generally considered three separate factors. First, the decision to be applied non-retroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, (citation omitted) or by deciding an issue of first impression whose resolution was not clearly foreshadowed (citation omitted). Second, it has been stressed that "we must… weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation." (Citation omitted.) Finally, we have weighed the inequity imposed by retroactive application, for "[w]here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the 'injustice or hardship' by a holding of non-retroactivity." (Citation omitted.) Id. at 107. The first factor of Chevron Oil Co. is pertinent for this analysis. SFR Investments was not clearly foreshadowed. The SFR Investments decision recognized, "Nevada's state and federal district courts are divided on whether NRS 116.3116 establishes a true priority lien." SFR Invs., 334 P.3d at 412. As a result, SFR Investments should be applied only prospectively, because it establishes a new principle of law, deciding an issue of first impression not clearly foreshadowed, and overruling clear past precedent on which litigants may have relied. Recently, another Nevada federal court held retroactive application of SFR Investments was improper. In Christina Trust v. S&P Homes, No. 2:15-cv-01534-RCJ-VCF, 2015 WL 6962860 (D. Nev. Nov. 9, 2015), Judge Jones explained: consider whether officials might decide to provide such determination voluntarily and holding entire statute unconstitutional). Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 13 of 18 14 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 It is not disputed that both the state and federal trial courts were in sharp disagreement as to whether an HOA Sale under NRS 116.3116 extinguished a prior-recorded first mortgage, and that the practice in the real estate industry prior to the announcement of the Nevada Supreme Court's controversial decision was to treat such sale as not extinguishing first mortgages . . . At best, the [SFR Investments decision] decided an issue of first impression whose resolution was not clearly foreshadowed. Id. at *4. The court also held retroactive application of SFR Investments did not further the purpose of the HOA super-priority rule and that the extinguishment of a first deed of trust through an HOA sale "where the extinguishment rule was not only unclear but presumed within the relevant industry at the time of the foreclosure sale to be to the contrary, would be an extremely, not just a substantially, inequitable result." Id. at *5.8 The court should do the same here. D. Lenders Are Entitled to Summary Judgment on SFR's Slander of Title Claim. There is no record evidence supporting SFR's slander of title claim. To successfully maintain a slander of title claim, SFR must establish (1) lenders made a false statement; (2) lenders made the statement maliciously/acted with malice; and (3) SFR sustained some special damages as a direct and natural result of the words being spoken. Rowland v. Lepire, 99 Nev. 308, 313, 662 P.2d 1332, 1335 (1983). To establish malice, SFR must show lenders either knew the statement was false or acted in reckless disregard for its veracity. Id. When the speaker of the allegedly false statement reasonably believes the statement to be true, it cannot act with malice. Id. Lenders are entitled to judgment as a matter of law. SFR purchased the property at Talasera's foreclosure sale on September 21, 2012. Ex. 8 To ECF No. 69, at 1. Since then, the following documents have been recorded in the Clark County property records related to the deed of trust: (1) an assignment of deed of trust from BANA to Nationstar (Ex. 3 to ECF No. 69, at 1); (2) an assignment of the deed of trust from Nationstar to Deutsche Bank (Ex. 4 to ECF No. 69, at 1); (3) a substitution of trustee (Ex. C at 1); and (4) a request for notice under NRS chapters 107 and 116 (Ex. D at 1). SFR apparently believes statements in these documents are false because Talasera's foreclosure sale extinguished the deed of trust and any interest in the property Deutsche Bank or its predecessors had. As explained, both Stone Hollow and Bourne Valley reject this conclusion. 8 The court also noted Chevron Oil Co. "cited ten of its own cases dating as far back as the Civil War for the rule limiting the retroactivity of 'judicial decisions' not only in criminal cases but also 'in cases of nonconstitutional, noncriminal state law.'" Id. at *4. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 14 of 18 15 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 SFR similarly claims lenders acted with malice because they "knew, or should have known" the senior deed of trust "had previously been extinguished" as a result of the foreclosure sale. ECF No. 22, SFR Investments Pool 1, LLC's Answer to Complaint, Counterclaim and Cross-Claim, at ¶ 64. Lenders did not know, and continue to dispute, the senior deed of trust was extinguished when Talasera foreclosed its lien as evidenced by Deutsche Bank's filing this quiet title action and this motion for summary judgment. Further, at the time of the sale, Nevada law was unsettled with respect to the effect of an HOA foreclosure sale on a senior deed of trust. The Nevada Supreme Court itself acknowledges the SFR Investments decision is not the panacea of all issues raised in Nevada homeowners association litigation. See Wells Fargo Bank, N.A. v. Premier One Holdings, Inc., No. 67873, 2016 WL 3481164, at *2 (Nev. June 22, 2016) (unpublished) ("SFR did not resolve all disputes surrounding an HOA superpriority lien foreclosure including, for instance, . . . commercial reasonableness."). SFR's claim also fails for lack of damages. It is inconceivable SFR has been affected in any way by the assignments, substitution of trustee, or request for notice. SFR's own disclosures foreclose its claim. See Ex. F, SFR Investments Pool 1, LLC's First Supplemental Disclosure of Witnesses and Documents, at 6:11-15. The only damages identified by SFR are attorneys' fees for $11,315.00 Id. SFR's slander of title claim is simply not supported by the record. Lenders are entitled to summary judgment. E. Lenders Are Entitled to Summary Judgment Because the Foreclosure Sale was Commercially Unreasonable. As set forth in Lenders' Opposition to SFR's motion for summary judgment, incorporated herein by reference, lenders are entitled to summary judgment because the HOA foreclosure sale was commercially unreasonable and void as a matter of law. ECF No. 69, 8:13-11:24. . . . . . . . . . . . . . . . Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 15 of 18 16 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 VI. CONCLUSION The court should enter summary judgment for lenders because, under Stone Hollow, tender is all Nevada law requires to extinguish a homeowners' association's super-priority lien and protect the priority of the senior deed of trust. Alternatively, this court should follow Bourne Valley's first- impression, facial-unconstitutionality ruling and declare SFR's interest in the property, if any, is subject to lenders' interest. In the event the court finds neither Stone Hollow nor Bourne Valley are dispositive, the court should grant summary judgment in favor of lenders because SFR Investments should not apply retroactively. The court should enter summary judgment in lenders' favor on SFR's slander of title counterclaim because there is no evidence lenders recorded any false documents or acted with malice, nor is there any evidence SFR suffered damages. DATED October 6, 2016 AKERMAN LLP /s/ Tenesa S. Scaturro . ARIEL E. STERN, ESQ. Nevada Bar No. 8276 MELANIE D. MORGAN, ESQ. Nevada Bar No. 8215 TENESA S. SCATURRO, ESQ. Nevada Bar No. 12488 1160 Town Center Drive, Suite 330 Las Vegas, Nevada 89144 Attorneys for Deutsche Bank National Trust Company as trustee for the GSAA Trust Mortgage Pass-Through Certificates, Series 2006-8, Nationstar Mortgage LLC, and Bank of America, N.A. Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 16 of 18 17 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 INDEX OF EXHIBITS TO DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8, NATIONSTAR MORTGAGE, LLC, AND BANK OF AMERICA, N.A.'S MOTION FOR SUMMARY JUDGMENT CASE NO. 2:15-cv-1139 Exhibit A Certificate of Merger Exhibit B Deposition of Susan Moses (relevant pages) Exhibit C Substitution of Trustee Recorded September 12, 2014 Exhibit D Request for Notice Recorded January 23, 2015 Exhibit E December 12, 2012 NRED Advisory Opinion No. 13-01 Exhibit F SFR Investments Pool 1, LLC’s First Supplemental Disclosure of Witnesses and Documents Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 17 of 18 18 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 A K E R M A N L L P 1 16 0 T O W N C E N T E R D R IV E , S U IT E 3 30 L A S V E G A S , N E V A D A 89 1 44 T E L .: (7 02 ) 6 34 -5 00 0 - F A X : (7 02 ) 38 0 -8 57 2 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on October 6, 2016, and pursuant to Fed. R. Civ. P. 5(b), I served via the CM/ECF electronic filing system a true and correct copy of the foregoing, DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8, NATIONSTAR MORTGAGE, LLC, AND BANK OF AMERICA, N.A.'S MOTION FOR SUMMARY JUDGMENT on all parties and counsel as identified on the Court generated notice of electronic filing. Diana Cline Ebron Jacqueline A. Gilbert Karen L. Hanks KIM GILBERT EBRON 7625 Dean Martin Drive, Suite 110 Las Vegas, Nevada 89139 Attorneys for SFR Investments Pool 1, LLC Sean L. Anderson Ryan D. Hastings LEACH JOHNSON SONG & GRUCHOW 8945 W. Russell Road, Suite 330 Las Vegas, Nevada 89148 Attorneys for Talasera and Vicanto Homeowners' Association /s/ Chelsie Willey An employee of AKERMAN LLP Case 2:15-cv-01139-JCM-PAL Document 89 Filed 10/06/16 Page 18 of 18 EXHIBIT A Certificate of Merger {38264028;1} ; Case 2:15-cv-01139-JCM-PAL Document 89-1 Filed 10/06/16 Page 1 of 2 Corporations Section P.O.Box 13697 Austin, Texas 78711.3697 Hope Andrade Secretary of State Office of the Secretary of State CERTIFICATE OF MERGER The undersigned, as Secretary of State of Texas, hereby certifies that a filing instrument merging BAC Home Loans Servicing, LP Domestic Limited Partnership (LP) [File Number• 13186910] Into Bank of America, National Association Other Entity/Organization USA [Entity not of Record, Filing Number Not Available] has been received in this office and has been found to conform to law Accordingly, the undersigned, as Secretary of State, and by the virtue of the authority vested in the secretary by law, hereby issues this certificate evidencing the acceptance and filing of the merger on the date shown below Dated: 06/28/2011 Effective: 07/01/2011 Hope Andrade Secretary of State Caine visit us on the Internet at http.11-www.sos.state.tx.us/ Phone: (512) 463-5555 Fax: (512) 463-5709 Dial: 7.1-1 for Relay Services Prepared by• Jean Marchione TID: 10343 Document: 374034630002 Case 2:15-cv-01139-JCM-PAL Document 89-1 Filed 10/06/16 Page 2 of 2 EXHIBIT B Deposition of Susan Moses {38264028;1} ; Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 1 of 8 1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 5 6 7 8 9 10 11 12 13 14 15 DEPOSITION OF SUSAN MOSES 16 30(b)(6) REPRESENTATIVE OF NEVADA ASSOCIATION SERVICES, INC. 17 Taken by Plaintiff 18 Taken on Monday, May 16, 2016 19 At 10:14 a.m. 20 At All-American Court Reporters 21 1160 North Town Center Drive, Suite 300 22 Las Vegas, Nevada 23 24 25 REPORTED BY: CINDY MAGNUSSEN, RDR, CCR NO. 650 DEUTSCHE BANK NATIONAL TRUST ) COMPANY AS TRUSTEE FOR THE GSAA ) TRUST MORTGAGE PASS-THROUGH ) CERTIFICATES, SERIES 2006-8, ) ) Plaintiff, ) ) vs. ) CASE NO. ) 2:15-cv-01139-JCM-PAL TALASERA AND VICANTO HOMEOWNERS' ) ASSOCIATION; SFR INVESTMENTS POOL) 1, LLC; DOE INDIVIDUALS I-X, ) inclusive, and ROE CORPORATIONS ) I-X, inclusive, ) ) Defendants. ) ) CERTIFIED COPY Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 1 All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) epres i er s ( ) TRUSTEE FOR THE GSA nd ROE CORPORATIONS ________________________________ CINDY MAGNUSSEN, R Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 2 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 2 1 ) SFR INVESTMENTS POOL 1, LLC, a ) 2 Nevada limited liability company,) ) 3 Counter Claimant, ) ) 4 vs. ) ) 5 DEUTSCHE BANK NATIONAL TRUST ) COMPANY AS TRUSTEE FOR THE GSAA ) 6 TRUST MORTGAGE PASS-THROUGH ) CERTIFICATES, SERIES 2006-8; ) 7 NATIONSTAR MORTGAGE, LLC, a ) Delaware limited liability ) 8 company; BANK OF AMERICA, N.A., a) national association; DAVID ) 9 BASES, an individual; KERI BASES,) an individual, ) 10 ) Counter ) 11 Defendant/Cross-Defendants. ) ) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) TRUSTEE FOR THE GSA Defen t/Cross-Defenda ts. _________________________________ Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 3 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 3 1 APPEARANCES: 2 For Deutsche Bank National Trust Company as Trustee for the 3 GSAA Trust Mortgage Pass-Through Certificates, Series 2006-8: 4 TENESA SCATURRO, ESQ. 5 Akerman, LLP 1160 Town Center Drive 6 Suite 330 Las Vegas, Nevada 89144 7 (702) 634-5000 8 For SFR Investments Pool 1, LLC: 9 CHANTEL M. SCHIMMING, ESQ. 10 Kim Gilbert Ebron 7625 Dean Martin Drive 11 Suite 110 Las Vegas, Nevada 89139 12 (702) 485-3300 13 14 EXAMINATION 15 WITNESS: PAGE Susan Moses 16 Examination by Ms. Scaturro 4 17 18 19 EXHIBITS 20 NUMBER DESCRIPTION PAGE 21 1 Notice of Deposition. 4 22 2 File. 4 23 3 Miles, Bauer Letter. 39 24 4 Miles, Bauer Letter 40 25 All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) APPEARANCE , Nevada s, Nevada WITNES NUMBE Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 4 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 4 1 LAS VEGAS, NEVADA; MAY 16, 2016 2 10:14 A.M. 3 -o0o- 4 (FRCP Rule 30(b)(5) waived by the parties prior to the 5 commencement of the deposition.) 6 (Exhibits 1 & 2 marked) 7 Thereupon-- 8 SUSAN MOSES, 9 was called as a witness, and having been first duly sworn, 10 was examined and testified as follows: 11 EXAMINATION 12 BY MS. SCATURRO: 13 Q. Good morning. Please state your name for the 14 record. 15 A. Susan Moses, S-u-s-a-n M-o-s-e-s. 16 Q. I'm going to hand you what we have marked as 17 Exhibit 1. If you could take a look at that for me, 18 please. 19 A. Okay. 20 Q. The date has changed, but otherwise, have you 21 seen this notice before? 22 A. Yes. 23 Q. Have you been designated by Nevada Association 24 Services to appear and testify pursuant to this subpoena? 25 A. To most of them. Some of them, the policy and All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) e O G od morning. Please state your name Susan Moses, S-u-s-a- I'm going to hand you what we If you could take a loo Oka The date has changed, but other Ye Have you b en designated by Neva To most of the Some of them, the pol Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 5 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 41 1 Q. Have you seen this document before? 2 A. No. 3 Q. You've seen a form of this document? 4 A. Correct. 5 Q. Do you know if NAS received this document? 6 A. I didn't see a copy of it in the file. 7 Q. Okay. Do you know if NAS responded to this? 8 A. I didn't see a response in the file. 9 Q. Okay. This is a letter from Miles, Bauer on 10 behalf of Bank of America, which includes a check for 11 $765; is that correct? 12 A. Correct. 13 Q. Okay. And at the time of the HOA's foreclosure 14 sale, how much was due in assessments? 15 Sorry. We can refer back to our ledger. 16 Well, I guess if we look at the disbursement, 17 would that tell you? Amounts to disburse? 18 A. Can you ask your question? 19 Q. Sure. How much was owed to the HOA for 20 assessments at the time of the sale? 21 A. At the time of the sale? 22 Q. Yeah. 23 A. Not the recording of the notice of sale, but the 24 actual sale date? 25 Q. Right. All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) Have you seen this docu N You've s en a form of t Corre Do you know if NAS received I didn't see a copy of i Okay. Do you know if NAS responded I didn't see a response Okay. This is a le ter from Miles, Ba Corre Okay. And at the time of the HOA's fore We can refer back ll you? Amount Can you ask your Sure. How much was owed to the H At the time of Yea Not the recording of the notice o Rig Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 6 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 42 1 A. Okay. So on 256, which is NAS's ledger, it was 2 printed the day of the sale -- or it's through the day of 3 the sale, would be three semiannual assessments that 4 total $255. 5 Q. Okay. So and even if we are looking at 256, 6 even the box that says assessments, we have already went 7 over what that included was the three $85 semiannual 8 payments, the $50 intent to lien, and the hearing -- 9 miscellaneous hearing assessment fee. That amount was 10 730. Correct? 11 A. Correct. 12 Q. So this check for 765 was more than the 730 13 owed. Right? 14 A. Correct. 15 Q. Okay. And do you know whether NAS accepted this 16 check? 17 MS. SCHIMMING: Objection. Form. Asked 18 and answered, as well. 19 THE WITNESS: I don't believe so. I 20 didn't see it on the ledger. So if we had accepted it, 21 it should have been recorded as a payment on our 22 ledger. 23 BY MS. SCATURRO: 24 Q. Do you know did the HOA provide a copy of its 25 CC&Rs to NAS? All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) Okay. So on 256, which is NAS's ledger, O S -- ing assessment fee. 730. Co rect Corre So this check for 765 was mo owed. Righ Corre Okay. And do you know whether NAS accep CHIMMING: jection. m. As TNESS: lieve so. he ledger. So if Do you -- Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 7 of 8 Susan Moses May 16, 2016 30(b)(6) Representative of Nevada Association Services, Inc. Page 44 1 CERTIFICATE OF REPORTER 2 3 I, Cindy Magnussen, Certified Court Reporter, 4 State of Nevada, do hereby certify: 5 That I reported the deposition of Susan Moses, 6 30(b)(6) Rep of Nevada Association Services, Inc., 7 commencing on Monday, May 16, 2016, at 10:14 a.m. 8 That prior to being deposed, the witness was duly 9 sworn by me to testify to the truth. That I thereafter 10 transcribed my said shorthand notes into typewriting and 11 that the typewritten transcript is a complete, true and 12 accurate transcription of my said shorthand notes. That 13 prior to the conclusion of the proceedings, the reading and 14 signing was waived by the witness or a party. 15 I further certify that I am not a relative or 16 employee of counsel of any of the parties, nor a relative or 17 employee of the parties involved in said action, nor a 18 person financially interested in the action. 19 In witness whereof, I hereunto subscribe my name 20 at Las Vegas, Nevada, this 31st day of May, 2016. 21 22 CIND MAGNUSSEN; RDR, CCR No. 650 23 24 25 All-American Court Reporters (702) 240-4393 www.aacrlv.com ses May 16, ( ) Represe t i er s ( ) ify to the truth. ption of my said shorthand notes. _________________________________ Y MAGNUSSEN, RDR, C Case 2:15-cv-01139-JCM-PAL Document 89-2 Filed 10/06/16 Page 8 of 8 EXHIBIT C Substitution of Trustee Recorded September 12, 2014 {38264028;1} ; Case 2:15-cv-01139-JCM-PAL Document 89-3 Filed 10/06/16 Page 1 of 2 County of State of Ita)(Gt- eN ) ss. APN: 176-20-410-044 RECORDING REQUESTED BY: Sei-viceLink, A Black Knight Financial Services Company AND WHEN RECORDED MAIL TO: Clear Recon Corp. 4375 Jutland Drive Suite 200 San Diego, California 92117 !net*. 20140912-0000748 Fees: $17.00 N/C Fee: $0.00 0911212014 10:21:40 AM Receipt* 2150470 Requestor: LSI TITLE AGENCY INC. Recorded By: OSA Pgs: 1 DEBBIE CONWAY CLARK COUNTY RECORDER SPACE ABOVE THIS LINE FOR RECORDER'S USE TS No.: 018207-NV Loan No.: ******7741 The undersigned hereby affirms that there is no Social Security number contained in this document. SUBSTITUTION OF TRUSTEE WHEREAS, DAVID BASES AND KERI BASES, HUSBAND AND WIFE was the original Trustor, DAVID BROWN was the original Trustee, and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR RYLAND MORTGAGE COMPANY, AN OHIO COMPANY, ITS SUCCESSORS AND ASSIGNS was the original Beneficiary under that certain Deed of Trust dated 2/1/2006 and recorded on 2/14/2006, as Instrument No. 20060214-0004202, of Official Records of Clark County, Nevada; and WHEREAS, the undersigned is the present Beneficiary under said Deed of Trust, and WHEREAS, the undersigned desires to substitute a new Trustee under said Deed of Trust in place and instead of said original Trustee, or Successor Trustee, thereunder, in the manner in said Deed of Trust provided, NOW, THEREFORE, the undersigned hereby substitutes CLEAR RECON CORP., whose address is 4375 Jutland Drive Suite 200, San Diego, California 92117, as Trustee under said Deed of Trust. Whenever the context hereof so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes e plural. r Dated: q /4 201ci Jay Martinez Assistant SecretarY On 50-erier 4.4 ,?a 4/before me, Andrew Patrick Kane Notary Public, persona ly appeared Jay Martinez personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my ha pd and official seal. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS- THROUGH CERTIFICATES, SERIES 2006-8 by NATIONSTAR MORTGAGE LLC AS ATTORNEY IN FACT Signature Seal) ANDP.EW PAIRiCX KANE i NC.:C:10/ C>klbi;L:. Strite of Texas My Cognrilistiri Expires f; Jt;!".e, 25, 2015 _ Case 2:15-cv-01139-JCM-PAL Document 89-3 Filed 10/06/16 Page 2 of 2 EXHIBIT D Request for Notice Recorded January 23, 2015 {38264028;1} ; tice Case 2:15-cv-01139-JCM-PAL Document 89-4 Filed 10/06/16 Page 1 of 2 lost #: 20150123.0002315 Fees: $17.00 N/C Fee: $0.00 01/23/2015 09:53:08 AM Receipt #: 2291248 Requestor: 5 ARCH CODE COMPLIANCE LLC Recorded By: OSA Pgs: 1 DEBBIE CONWAY CLARK COUNTY RECORDER NATIONSTAR MORTGAGE, LLC do 5 Arch Code Compliance, LLC P.O. Box 7338 . Newport Beach, CA 92658 333.TJG.RVB.NV.RFN REQUEST FOR NOTICE Under NRS Chapters 107 and 116 The undersigned is a person with an interest in the real property described herein, having an interest in that certain Deed of Trust, wherein the Trustor is DAVID BASES AND KERI BASES , HUSBAND AND WIFE, the Trustee is DAVID BROWN, and the Beneficiary is MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC, which was recorded as Instrument No. 20060214-0004202 on 2/14/2006 in the Official Records of Clark County, Nevada Pursuant to NRS 116.31168, the name(s) of the property owner(s) Ware BASES, DAVID and BASES, KERI, and the name(s) of the common-interest community/ies is/are TALASERA AT SM. This Request for Notice relates to any liens recorded against the property. Accordingly, the undersigned hereby requests that a copy of any notice of default and a copy of any notice of sale sent pursuant to NRS Chapters 107 or 116, including but not limited to NRS 107.090 and NRS 116.31168, is mailed to the address listed below. APN: 176.20-410-044 LOAN NUMBER: 618607741 RECORDING REQUESTED BY: 5 ARCH CODE COMPLIANCE, LLC WHEN RECORDED MAIL TO: NATIONSTAR MORTGAGE, LLC Gannaway, Assistant Secretary DATED: December 30, 2014 Address for Notices: NATIONSTAR MORTGAGE, LLC do 5 Arch Code Compliance, LLC P.O. Box 7338 Newport Beach, CA 92658 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ORANGE ) On December 30, 2014, before me, Rachel Victoria Bingham, Notary Public, personally appeared, Tim Gannaway, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the sane in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrtunent. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. RACHEL VICTORIA BINGHAM Cornmisalon • 1983080 Notary Public - California g Orange County My COMM. &alma Jun 23, 2016 1 Case 2:15-cv-01139-JCM-PAL Document 89-4 Filed 10/06/16 Page 2 of 2 EXHIBIT E NRED Opinion {38264028;1} ; Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 1 of 21 STATE OF NEVADA DEPARTMENT OF BUSINESS AND INDUSTRY REAL ESTATE DIVISION ADVISORY OPINION Subject: The Super Priority Lien Advisory No. 13-01 21 pages Issued Real Estate Division By: Amends/ N/A Supersedes Reference(s): NRS 116.3102; ; NRS 116.310312; NRS 116.310313; NRS 116.3115; NRS 116.3116; NRS 116.31162; Commission for Common Interest Communities and Condominium Hotels Advisory Opinion No. 2010-01 Issue Date: December 12, 2012 QUESTION #1: Pursuant to NRS 116.3116, may the portion of the association's lien which is superior to a unit's first security interest (referred to as the "super priority lien") contain "costs of collecting" defined by NRS 116.310313? QUESTION #2: Pursuant to NRS 116.3116, may the sum total of the super priority lien ever exceed 9 times the monthly assessment amount for common expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115, plus charges incurred by the association on a unit pursuant to NRS 116.310312? QUESTION #3: Pursuant to NRS 116.3116, must the association institute a "civil action" as defined by Nevada Rules of Civil Procedure 2 and 3 in order for the super priority lien to exist? SHORT ANSWER TO #1: No. The association's lien does not include "costs of collecting" defined by NRS 116.310313, so the super priority portion of the lien may not include such costs. NRS 116.310313 does not say such charges are a lien on the unit, and NRS 116.3116 does not make such charges part of the association's lien. 1 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 2 of 21 SHORT ANSWER TO #2: No. The language in NRS 116.3116(2) defines the super priority lien. The super priority lien consists of unpaid assessments based on the association's budget and NRS 116.310312 charges, nothing more. The super priority lien is limited to: (1) 9 months of assessments; and (2) charges allowed by NRS 116.310312. The super priority lien based on assessments may not exceed 9 months of assessments as reflected in the association's budget, and it may not include penalties, fees, late charges, fines, or interest. References in NRS 116.3116(2) to assessments and charges pursuant to NRS 116.310312 define the super priority lien, and are not merely to determine a dollar amount for the super priority lien. SHORT ANSWER TO #r: No. The association must take action to enforce its super priority lien, but it need not institute a civil action by the filing of a complaint. The association may begin the process for foreclosure in NRS 116.31162 or exercise any other remedy it has to enforce the lien. ANALYSIS OF THE ISSUES: This advisory opinion - provided in accordance with NRS 116.623 - details the Real Estate Division's opinion as to the interpretation of NRS 116.3116(1) and (2). The Division hopes to help association boards understand the meaning of the statute so they are better equipped to represent the interests of their members. Associations are encouraged to look at the entirety of a situation surrounding a particular deficiency and evaluate the association's best option for collection. The first step in that analysis is to understand what constitutes the association's lien, what is not part of the lien, and the status of the lien compared to other liens recorded against the unit. Subsection (1) of NRS 116.3116 describes what constitutes the association's lien; and subsection (2) states the lien's priority compared to other liens recorded against a unit. NRS 116.3116 comes from the Uniform Common Interest Ownership Act (1982) (the "Uniform Act"), which Nevada adopted in 1991. So, in addition to looking at the language of the relevant Nevada statute, this analysis includes references to the Uniform Act's equivalent provision (§ 3-116) and its comments. 2 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 3 of 21 I. NRS 116.3116(1) DEFINES WHAT THE ASSOCIATION'S LIEN CONSISTS OF. NRS 116.3116(1) provides generally for the lien associations have against units within common-interest communities. NRS 116.3116(1) states as follows: The association has a lien on a unit for any construction penalty that is imposed against the unit's owner pursuant to NRS 116.310305, any assessment levied against that unit or any fines imposed against the unit's owner from the time the construction penalty, assessment or fine becomes due. Unless the declaration otherwise provides, any penalties, fees, charges, late charges, fines and interest charged pursuant to paragraphs (j) to (n), inclusive, of subsection 1 of NRS 116.3102 are enforceable as assessments under this section. If an assessment is payable in installments, the full amount of the assessment is a lien from the time the first installment thereof becomes due. (emphasis added). Based on this provision, the association's lien includes assessments, construction penalties, and fines imposed against a unit when they become due. In addition - unless the declaration otherwise provides - penalties, fees, charges, late charges, fines, and interest charged pursuant to NRS 116.3102(1)(j) through (n) are also part of the association's lien in that such items are enforceable as if they were assessments. Assessments can be foreclosed pursuant to NRS 116.31162, but liens for fines and penalties may not be foreclosed unless they satisfy the requirements of NRS 116.31162(4). Therefore, it is important to accurately categorize what comprises each portion of the association's lien to evaluate enforcement options. A. "COSTS OF COLLECTING" (DEFINED BY NRS 116.310313) ARE NOT PART OF THE ASSOCIATION'S LIEN NRS 116.3116(1) does not specifically make costs of collecting part of the association's lien, so the determination must be whether such costs can be included under the incorporated provisions of NRS 116.3102. NRS 116.3102(1)(j) through (n) identifies five very specific categories of penalties, fees, charges, late charges, fines, and interest associations may impose. This language encompasses all penalties, fees, 3 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 4 of 21 charges, late charges, fines, and interest that are part of the lien described in NRS 116.3116(1). NRS 116.3102(1)(j) through (n) states: 1. Except as otherwise provided in this section, and subject to the provisions of the declaration, the association may do any or all of the following:... (j) Impose and receive any payments, fees or charges for the use, rental or operation of the common elements, other than limited common elements described in subsections 2 and 4 of NRS 116.2102, and for services provided to the units' owners, including, without limitation, any services provided pursuant to NRS 116.310312. (k) Impose charges for late payment of assessments pursuant to NRS 116.3115. (1) Impose construction penalties when authorized pursuant to NRS 116.310305. (m) Impose reasonable fines for violations of the governing documents of the association only if the association complies with the requirements set forth in NRS 116.31031. (n) Impose reasonable charges for the preparation and recordation of any amendments to the declaration or any statements of unpaid assessments, and impose reasonable fees, not to exceed the amounts authorized by NRS 116.4109, for preparing and furnishing the documents and certificate required by that section. (emphasis added). Whatever charges the association is permitted to impose by virtue of these provisions are part of the association's lien. Subsection (k) - emphasized above - has been used - the Division believes improperly - to support the conclusion that associations may include costs of collecting past due obligations as part of the association's lien. The Commission for Common Interest Communities and Condominium Hotels issued Advisory Opinion No. 2010-01 in December of 2010. The Commission's advisory concludes as follows: An association may collect as a part of the super priority lien (a) interest permitted by NRS 116.3115, (b) late fees or charges authorized by the declaration, (c) charges for preparing any statements of unpaid assessments and (d) the "costs of collecting" authorized by NRS 116.310313. 4 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 5 of 21 Analysis of what constitutes the super priority lien portion of the association's lien is discussed in Section III, but the Division agrees that the association's lien does include items noted as (a), (b) and (c) of the Commission's advisory opinion above. To support item (d), the Commission relies on NRS 116.3102(1)(k) which gives associations the power to: "Impose charges for late payment of assessments pursuant to NRS 116.3115." This language would include interest authorized by statute and late fees if authorized by the association's declaration. "Costs of collecting" defined by NRS 116.310313 is too broad to fall within the parameters of charges for late payment of assessments.1 By definition, "costs of collecting" relate to the collection of past due "obligations." "Obligations" are defined as "any assessment, fine, construction penalty, fee, charge or interest levied or imposed against a unit's owner."2 In other words, costs of collecting includes more than "charges for late payment of assessments."3 Therefore, the plain language of NRS 116.3116(1) does not incorporate costs of collecting into the association's lien. Further review of the relevant statutes and legislative action supports this conclusion. B. PRIOR LEGISLATIVE ACTION SUPPORTS THE POSITION THAT COSTS OF COLLECTING ARE NOT PART OF THE ASSOCIATION'S LIEN DESCRIBED BY NRS 116.3116(1). The language of NRS 116.3116(1) allows for "charges for late payment of assessments" to be part of the association's lien.4 "Charges for late payments" is not the same as "costs of collecting." "Costs of collecting" was first defined in NRS 116 by the adoption of NRS 116.310313 in 2009. NRS 116.310313(1) provides for the association's Charges for late payment of assessments comes from NRS 116.3102(1)(k) and is incorporated into NRS 116.3116(1). 2 NRS 116.310313. 3 "Costs of collecting" includes any fee, charge or cost, by whatever name, including, without limitation, any collection fee, filing fee, recording fee, fee related to the preparation, recording or delivery of a lien or lien rescission, title search lien fee, bankruptcy search fee, referral fee, fee for postage or delivery and any other fee or cost that an association charges a unit's owner for the investigation, enforcement or collection of a past due obligation. The term does not include any costs incurred by an association if a lawsuit is filed to enforce any past due obligation or any costs awarded by a court. NRS 116.310313(3)(a). 4 NRS 116.3102(1)(k) (incorporated into NRS 116.3116(1)). 5 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 6 of 21 right to charge a unit owner "reasonable fees to cover the costs of collecting any past due obligation." NRS 116.310313 is not referenced in NRS 116.3116 or NRS 116.3102, nor does NRS 116.310313 specifically provide for the association's right to lien the unit for such costs. In contrast, NRS 116.310312, also adopted in 2009, allows an association to enter the grounds of a unit to maintain the property or abate a nuisance existing on the exterior of the unit. NRS 116.310312 specifically provides for the association's expenses to be a lien on the unit and provides that the lien is prior to the first security interest.5 NRS 116.3102(1)(j) was amended to allow these expenses to be part of the lien described in NRS 116.3116(1). And NRS 116.3116(2) was amended to allow these expenses to be included in the association's super priority lien. The Commission's advisory opinion from December 2010 also relies on changes to the Uniform Act from 2008 to support the notion that collection costs should be part of the association's super priority lien. Nevada has not adopted those changes to the Uniform Act. Since the Commission's advisory opinion, the Nevada Legislature had an opportunity to clarify the law in this regard. In 2011, the Nevada Legislature considered Senate Bill 174, which proposed changes to NRS 116.3116. S.B. 174 originally included changes to NRS 116.3116(1) such that the association's lien would specifically include "costs of collecting" as defined in NRS 116.310313. S.B. 174 proposed changes to NRS 116.3116 (1) and (2) to bring the statute in line with the changes to the same provision in the Uniform Act amended in 2008. The Uniform Act's amendments were removed from S.B. 174 by the first reprint. As amended, S.B. 174 proposed changes to NRS 116.3116(2) expanding the super priority lien amount to include costs of collecting not to exceed $1,950, in addition to 9 months 5 See NRS 116.310312(4) and (6), 6 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 7 of 21 of assessments. S.B. 174 was discussed in great detail and ultimately died in committee.6 Also in 2011, Senate Bill 204 - as originally introduced - included changes to NRS 116.3116(1) to expand the association's lien to include attorney's fees and costs and "any other sums due to the association."7 The bill's language was taken from the Uniform Act amendments in 2008. All changes to NRS 116.3116(1) were removed from the bill prior to approval. The Nevada Legislature's actions in the 2009 and 2011 sessions are indicative of its intent not to make costs of collecting part of the lien. The Nevada Legislature could have made the costs of collecting part of the association's lien, like it did for costs under NRS 116.310312. It did not do so. In order for the association to have a right to lien a unit under NRS 116.3116(1), the charge or expense must fall within a category listed in the plain language of the statute. Costs of collecting do not fall within that language. Based on the foregoing, the Division concludes that the association's lien does not include "costs of collecting" as defined by NRS 116.310313. A possible concern regarding this outcome could be that an association may not be able to recover their collection costs relating to a foreclosure of an assessment lien. While that may seem like an unreasonable outcome, a look at the bigger picture must be considered to put it in perspective. NRS 116.31162 through NRS 116.31168, inclusive, outlines the association's ability to enforce its lien through foreclosure. Associations have a lien for assessments that is enforced through foreclosure. The association's expenses are reimbursed to the association from the proceeds of the sale. NRS 116.31164(3)(c) allows the proceeds of the foreclosure sale to be distributed in the following order: (1) The reasonable expenses of sale; 6 See http://leg.state.ny.us/Session/76th2m1/Reports/history.cfm?ID=423. 7 Senate Bill No. 204 - Senator Copening, Sec. 49, ln. 1-16, February 28, 2011. 7 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 8 of 21 (2) The reasonable expenses of securing possession before sale, holding, maintaining, and preparing the unit for sale, including payment of taxes and other governmental charges, premiums on hazard and liability insurance, and, to the extent provided for by the declaration, reasonable attorney's fees and other legal expenses incurred by the association; (3) Satisfaction of the association's lien; (4) Satisfaction in the order of priority of any subordinate claim of record; and (5) Remittance of any excess to the unit's owner. Subsections (1) and (2) allow the association to receive its expenses to enforce its lien through foreclosure before the association's lien is satisfied. Obviously, if there are no proceeds from a sale or a sale never takes place, the association has no way to collect its expenses other than through a civil action against the unit owner. Associations must consider this consequence when making decisions regarding collection policies understanding that every delinquent assessment may not be treated the same. II. NRS 116.3116(2) ESTABLISHES THE PRIORITY OF THE ASSOCIATION'S LIEN. Having established that the association has a lien on the unit as described in subsection (1) of NRS 116.3116, we now turn to subsection (2) to determine the lien's priority in relation to other liens recorded against the unit. The lien described by NRS 116.3116(1) is what is referred to in subsection (2). Understanding the priority of the lien is an important consideration for any board of directors looking to enforce the lien through foreclosure or to preserve the lien in the event of foreclosure by a first security interest. NRS 116.3116(2) provides that the association's lien is prior to all other liens recorded against the unit except: liens recorded against the unit before the declaration; first security interests (first deeds of trust); and real estate taxes or other governmental assessments. There is one exception to the exceptions, so to speak, when it comes to priority of the association's lien. This exception makes a portion of an association's lien prior to the first security interest. The portion of the association's lien given priority status to a first security interest is what is referred to as the "super priority lien" to 8 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 9 of 21 distinguish it from the other portion of the association's lien that is subordinate to a first security interest. The ramifications of the super priority lien are significant in light of the fact that superior liens, when foreclosed, remove all junior liens. An association can foreclose its super priority lien and the first security interest holder will either pay the super priority lien amount or lose its security. NRS 116.3116 is found in the Uniform Act at § 3-116. Nevada adopted the original language from § 3-116 of the Uniform Act in 1991. From its inception, the concept of a super priority lien was a novel approach. The Uniform Act comments to § 3-116 state: [A]s to prior first security interests the association's lien does have priority for 6 months' assessments based on the periodic budget. A significant departure from existing practice, the 6 months' priority for the assessment lien strikes an equitable balance between the need to enforce collection of unpaid assessments and the obvious necessity for protecting the priority of the security interests of lenders. As a practical matter, secured lenders will most likely pay the 6 months' assessments demanded by the association rather than having the association foreclose on the unit. If the lender wishes, an escrow for assessments can be required. This comment on § 3-116 illustrates the intent to allow for 6 months of assessments to be prior to a first security interest. The reason this was done was to accommodate the association's need to enforce collection of unpaid assessments. The controversy surrounding the super priority lien is in defining its limit. This is an important consideration for an association looking to enforce its lien. There is little benefit to an association if it incurs expenses pursuing unpaid assessments that will be eliminated by an imminent foreclosure of the first security interest. As stated in the comment, it is also likely that the holder of the first security interest will pay the super priority lien amount to avoid foreclosure by the association. 9 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 10 of 21 III. THE AMOUNT OF THE SUPER PRIORITY LIEN IS LIMITED BY THE PLAIN LANGUAGE OF NRS 116.3116(2). NRS 116.3116(2) states: A lien under this section is prior to all other liens and encumbrances on a unit except: (a) Liens and encumbrances recorded before the recordation of the declaration and, in a cooperative, liens and encumbrances which the association creates, assumes or takes subject to; (b) A first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent or, in a cooperative, the first security interest encumbering only the unit's owner's interest and perfected before the date on which the assessment sought to be enforced became delinquent; and (c) Liens for real estate taxes and other governmental assessments or charges against the unit or cooperative. The lien is also prior to all security interests described in paragraph (b) to the extent of any charges incurred by the association on a unit pursuant to NRS 116..q1o.q12 and to the extent of the assessments for common expenses based on the periodic budget adopted by the association pursuant to NRS 116..q115 which would have become due in the absence of acceleration during the q months immediatelu preceding institution of an action to enforce the lien, unless federal regulations adopted by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association require a shorter period of priority for the lien. If federal regulations adopted by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association require a shorter period of priority for the lien, the period during which the lien is prior to all security interests described in paragraph (b) must be determined in accordance with those federal regulations, except that notwithstanding the provisions of the federal regulations, the period of priority for the lien must not be less than the 6 months immediately preceding institution of an action to enforce the lien. This subsection does not affect the priority of mechanics' or materialmen's liens, or the priority of liens for other assessments made by the association. (emphasis added) Having found previously that costs of collecting are not part of the lien means they are not part of the super priority lien. The question then becomes what can be included as part of the super priority lien. Prior to 2009, the super priority lien was limited to 6 months of assessments. In 2009, the Nevada legislature changed the 6 months of 10 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 11 of 21 assessments to 9 months and added expenses for abatement under NRS 116.310312 to the super priority lien amount. But to the extent federal law applicable to the first security interest limits the super priority lien, the super priority lien is limited to 6 months of assessments. The emphasized language in the portion of the statute above identifies the portion of the association's lien that is prior to the first security interest, i.e. what comprises the super priority lien. This language states that there are two components to the super priority lien. The first is "to the extent of any charges" incurred by the association pursuant to NRS 116.310312. NRS 116.310312(4) makes clear that the charges assessed against the unit pursuant to this section are a lien on the unit and subsection (6) makes it clear that such lien is prior to first security interests. These costs are also specifically part of the lien described in NRS 116.3116(1) incorporated through NRS 116.3102(1)(j). This portion of the super priority lien is specific to charges incurred pursuant to NRS 116.310312. Payment of those charges relieves their super priority lien status. There does not seem to be any confusion as to what this part of the super priority lien is. Analysis of the super priority lien will focus on the second portion. A. THE SUPER PRIORITY LIEN ATTRIBUTABLE TO ASSESSMENTS IS LIMITED TO 9 MONTHS OF ASSESSMENTS AND CONSISTS ONLY OF ASSESSMENTS. The second portion of the super priority lien is "to the extent of the assessments for common expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115 which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien." The statute uses the language "to the extent of the assessments" to illustrate that there is a limit on the amount of the super priority lien, just like the language concerning expenses pursuant to NRS 116.310312, but this portion concerns assessments. The limit on the super priority lien is based on the assessments for 11 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 12 of 21 common expenses reflected in a budget adopted pursuant to NRS 116.3115 which would have become due in 9 months. The assessment portion of the super priority lien is no different than the portion derived from NRS 116.310312. Each portion of the super priority lien is limited to the specific charge stated and nothing else. Therefore, while the association's lien may include any penalties, fees, charges, late charges, fines and interest charged pursuant to NRS 116.3102 (1) (j) to (n), inclusive, the total amount of the super priority lien attributed to assessments is no more than 9 months of the monthly assessment reflected in the association's budget. Association budgets do not reflect late charges or interest attributed to an anticipated delinquent owner, so there is no basis to conclude that such charges could be included in the super priority lien or in addition to the assessments. Such extraneous charges are not included in the association's super priority lien. NRS 116.3116 originally provided for 6 months of assessments as the super priority lien. Comments to the Uniform Act quoted previously support the conclusion that the original intent was for 6 months of the assessments alone to comprise the super priority lien amount and not the penalties, charges, or interest. It is possible that an argument could be made that the language is so clear in this regard one should not look to legislative intent. But considering the controversy surrounding the meaning of this statute, the better argument is that legislative intent should be used to determine the meaning. The Commission's advisory opinion of December 2010 concluded that assessments and additional costs are part of the super priority lien. The Commission's advisory opinion relies in part on a Wake Forest Law Review8 article from 1992 discussing the Uniform Act. This article actually concludes that the Uniform Act language limits the 8 See James Winokur, Meaner Lienor Community Associations: The "Super Priority" Lien and Related Reforms Under the Uniform Common Interest Ownership Act, 27 WAKE FOREST L. REV. 353, 366-69 (1992). 12 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 13 of 21 amount of the super priority lien to 6 months of assessments, but that the super priority lien does not necessarily consist of only delinquent assessments.9 It can include fines, interest, and late charges.'o The concept here is that all parts of the lien are prior to a first security interest and that reference to assessments for the super priority lien is only to define a specific dollar amount. The Division disagrees with this interpretation because of the unreasonable consequences it leaves open. For example, a unit owner may pay the delinquent assessment amount leaving late charges and interest as part of the super priority lien. If the super priority lien can encompass more than just delinquent assessments in this situation, it would give the association the right to foreclose its lien consisting only of late charges and interest prior to the first security interest. It is also unreasonable to expect that fines (which cannot be foreclosed generally) survive a foreclosure of the first security interest. Either the lender or the new buyer would be forced to pay the prior owner's fines. The Division does not find that these consequences are reasonable or intended by the drafters of the Uniform Act or by the Nevada Legislature. Even the 2008 revisions to the Uniform Act do not allow for anything other than assessments and costs incurred to foreclose the lien to be included in the super priority lien. Fines, interest, and late charges are not costs the association incurs. In 2009, the Nevada Legislature revised NRS 116.3116 to expand the association's super priority lien. Assembly Bill 204 sought to extend the super priority lien of 6 months of assessments to 2 years of assessments.11 The Commission's chairman, Michael Buckley, testified on March 6, 2009 before the Assembly Committee on Judiciary on A.B. 204 that the law was unclear as to whether the 6 month priority can 9 See id. at 367 (referring to the super priority lien as the "six months assessment ceiling" being computed from the periodic budget). 10 See id. 11 See http: //leg. state.ny.us/Session/75th2 oo 9/Reports/history. cfm?ID =416. 13 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 14 of 21 include the association's costs and attorneys' fees.12 Mr. Buckley explained that the Uniform Act amendments in 2008 allowed for the collection of attorneys' fees and costs incurred by the association in foreclosing the assessment lien as part of the super priority lien. Mr. Buckley requested that the 2008 change to the Uniform Act be included in A.B. 204. Mr. Buckley's requested change to A.B. 204 to expand the super priority lien never made it into A.B. 204. Ultimately, A.B. 204 was adopted to change 6 months to 9 months, but commenting on the intent of the bill, Assemblywoman Ellen Spiegel stated: Assessments covered under A.B. 204 are the regular monthly or quarterly dues for their home. I carefully put this bill together to make sure it did not include any assessments for penalties, fines or late fees. The bill covers the basic monies the association uses to build its regular budgets. (emphasis added).13 It is significant that the legislative intent in changing 6 months to 9 months was with the understanding that no portion of that amount would be for penalties, fines, or late fees and that it only covers the basic monies associations use to build their regular budgets. It does make sense that a lien superior to a first security interest would not include penalties, fines, and interest. To say that the super priority lien includes more than just 9 months of assessments allows several undesirable and unreasonable consequences. B. NEVADA HAS NOT ADOPTED AMENDMENTS TO THE UNIFORM ACT TO ALTER THE ORIGINAL INTENT OF THE SUPER PRIORITY LIEN. The changes to the Uniform Act support the contention that only what is referenced as the super priority lien in NRS 116.3116(2) is what comprises the super priority lien. In 2008, § 3-116 of the Uniform Act was revised as follows: 12 See Minutes of the Meeting of the Assembly Committee on Judiciary, Seventy-fifth Session, March 6, 2009 at 44-45, 13 See Minutes of the Senate Committee on Judiciary, Seventy-fifth Session, May 8, 2009 at 27. 14 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 15 of 21 SECTION 3-116. LIEN FOR ASSESSMENTS; SUMS DUE ASSOCIATION; ENFORCEMENT. (a) The association has a statutory lien on a unit for any assessment levied against attributable to that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, reasonable attorney's fees and costs, other fees, charges, late charges, fines, and interest charged pursuant to Section 3-1o2(a)(1o), (11), and (12), and any other sums due to the association under the declaration, this fact], or as a result of an administrative, arbitration, mediation, or judicial decision are enforceable in the same manner as unpaid assessments under this section. If an assessment is payable in installments, the lien is for the full amount of the assessment from the time the first installment thereof becomes due. (b) A lien under this section is prior to all other liens and encumbrances on a unit except: (i)(i) liens and encumbrances recorded before the recordation of the declaration and, in a cooperative, liens and encumbrances which that the association creates, assumes, or takes subject toy ; (ii)(2) except as otherwise provided in subsection (c), a first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent, or, in a cooperative, the first security interest encumbering only the unit owner's interest and perfected before the date on which the assessment sought to be enforced became delinquenty; and (iii-1(3) liens for real estate taxes and other governmental assessments or charges against the unit or cooperative. (c) A The lien under this section is also prior to all security interests described in subsection (b)( 2) clause (ii) above to the extent of both the common expense assessments based on the periodic budget adopted by the association pursuant to Section 3-115(a) which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the lien and reasonable attorney's fees and costs incurred by the association in foreclosing the association's lien. This subsection Subsection (b) and this subsection does do not affect the priority of mechanics' or materialmen's liens, or the priority of liens for other assessments made by the association. [The A lien under this section is not subject to the provisions of [insert appropriate reference to state homestead, dower and curtesy, or other exemptions].] Explaining the reason for the changes to these sections, the Uniform Act includes the following comments: 15 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 16 of 21 Associations must be legitimately concerned, as fiduciaries of the unit owners, that the association be able to collect periodic common charges from recalcitrant unit owners in a timely way. To address those concerns, the section contains these 2008 amendments: First, subsection (a) is amended to add the cost of the association's reasonable attorneys fees and court costs to the total value of the association's existing 'super lien' - currently, 6 months of regular common assessments. This amendment is identical to the amendment adopted by Connecticut in 1991; see C.G.S. Section 47-258(b). The increased amount of the association's lien has been approved by Fannie Mae and local lenders and has become a significant tool in the successful collection efforts enjoyed by associations in that state. The Uniform Act's amendment in 2008 is very telling about § 3-116's original intent. The comments state reasonable attorneys' fees and court costs are added to the super priority lien stating that it is currently 6 months of regular common assessments. The Uniform Act adds attorneys' fees and costs to subsection (a) which defines the association's lien. Those attorneys' fees and costs attributable to foreclosure efforts are also added to subsection (c) which defines the super priority lien amount. If the association's lien ever included attorneys' fees and court costs as "charges for late payment of assessments" or if such sum was part of the super priority lien, there would be no reason to add this language to subsection (a) and (c). Or at a minimum, the comments would assert the amendment was simply to make the language more clear. It is also clear by the language that only what is specified as part of the super priority lien can comprise the super priority lien. The additional language defining the super priority lien provides for costs that are incurred by the association foreclosing the lien. This is further evidence that the super priority lien does not and never did consist of interest, fines, penalties or late charges. These charges are not incurred by the association and they should not be part of any super priority lien. The Nevada Legislature had the opportunity to change NRS 116.3116 in 2009 and 2011 to conform to the Uniform Act. It chose not to. While the revisions under the i6 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 17 of 21 Uniform Act may make sense to some and they may be adopted in other jurisdictions, the fact of the matter is, Nevada has not adopted those changes. The changes to the Uniform Act cannot be insinuated into the language of NRS 116.3116. Based on the plain language of NRS 116.3116, legislative intent, and the comments to the Uniform Act, the Division concludes that the super priority lien is limited to expenses stemming from NRS 116.310312 and assessments as reflected in the association's budget for the immediately preceding 9 months from institution of an action to enforce the association's lien. IV. "ACTION" AS USED IN NRS 116.3116 DOES NOT REQUIRE A CIVIL ACTION ON THE PART OF THE ASSOCIATION. NRS 116.3116(2) provides that the super priority lien pertaining to assessments consists of those assessments "which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien." NRS 116.3116 requires that the association take action to enforce its lien in order to determine the immediately preceding 9 months of assessments. The question presented is whether this action must be a civil action. During the Senate Committee on Judiciary hearing on May 8, 2009, the Chair of the Committee, Terry Care, stated with reference to AB 204: One thing that bothers me about section 2 is the duty of the association to enforce the liens, but I understand the argument with the economy and the high rate of delinquencies not only to mortgage payments but monthly assessments. Bill Uffelman, speaking for the Nevada Bankers Association, broke it down to a 210-day scheme that went into the current law of six months. Even though you asked for two years, I looked at nine months, thinking the association has a duty to move on these delinquencies. NRS 116 does not require an association to take any particular action to enforce its lien, but that it institutes "an action." NRS 116.31162 provides the first steps to foreclose the association's lien. This process is started by the mailing of a notice of delinquent 17 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 18 of 21 assessment as provided in NRS 116.31162(1)(a). At that point, the immediately preceding 9 months of assessments based on the association's budget determine the amount of the super priority lien. The Division concludes that this action by the association to begin the foreclosure of its lien is "action to enforce the lien" as provided in NRS 116.3116(2). The association is not required to institute a civil action in court to trigger the 9 month look back provided in NRS 116.3116(2). Associations should make the delinquent assessment known to the first security holder in an effort to receive the super priority lien amount from them as timely as possible. ADVISORY CONCLUSION: An association's lien consists of assessments, construction penalties, and fines. Unless the association's declaration provides otherwise, the association's lien also includes all penalties, fees, charges, late charges, fines and interest pursuant to NRS 116.3102(1)(j) through (n). While charges for late payment of assessments are part of the association's lien, "costs of collecting" as defined by NRS 116.310313, are not. "Costs of collecting" defined by NRS 116.310313 includes costs of collecting any obligation, not just assessments. Costs of collecting are not merely a charge for a late payment of assessments. Since costs of collecting are not part of the association's lien in NRS 116.3116(1), they cannot be part of the super priority lien detailed in subsection (2). The super priority lien consists of two components. By virtue of the detail provided by the statute, the super priority lien applies to the charges incurred under NRS 116.310312 and up to 9 months of assessments as reflected in the association's regular budget. The Nevada Legislature has not adopted changes to NRS 116.3116 that were made to the Uniform Act in 2008 despite multiple opportunities to do so. In fact, the Legislative intent seems rather clear with Assemblywoman Spiegel's comments to A.B. 204 that changed 6 months of assessments to 9 months. Assemblywoman Spiegel stated that she "carefully put this bill together to make sure it did not include any 18 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 19 of 21 assessments for penalties, fines or late fees." This is consistent with the comments to the Uniform Act stating the priority is for assessments based on the periodic budget. In other words, when the super priority lien language refers to 9 months of assessments, assessments are the only component. Just as when the language refers to charges pursuant to NRS 116.310312, those charges are the only component. Not in either case can you substitute other portions of the entire lien and make it superior to a first security interest. Associations need to evaluate their collection policies in a manner that makes sense for the recovery of unpaid assessments. Associations need to consider the foreclosure of the first security interest and the chances that they may not be paid back for the costs of collection. Associations may recover costs of collecting unpaid assessments if there are proceeds from the association's foreclosure.14 But costs of collecting are not a lien under NRS 116.310313 or NRS 116.3116(1); they are the personal liability of the unit owner. Perhaps an effective approach for an association is to start with foreclosure of the assessment lien after a nine month assessment delinquency or sooner if the association receives a foreclosure notice from the first security interest holder. The association will always want to enforce its lien for assessments to trigger the super priority lien. This can be accomplished by starting the foreclosure process. The association can use the super priority lien to force the first security interest holder to pay that amount. The association should incur only the expense it believes is necessary to receive payment of assessments. If the first security interest holder does not foreclose, the association will maintain its assessment lien consisting of assessments, late charges, and interest. If a loan modification or short sale is worked out with the owner's lender, the association is better off limiting its expenses and more likely to recover the assessments. Adding unnecessary costs of collection - especially after a short period of delinquency - can NRS 116.31164. 19 Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 20 of 21 make it all the more impossible for the owner to come current or for a short sale to close. This situation does not benefit the association or its members. 20 The statements in this advisory opinion represent the views of the Division and its general interpretation of the provisions addressed. It is issued to assist those involved with common interest communities with questions that arise frequently. It is not a rule, regulation, or final legal determination. The facts in a specific case could cause a different outcome. Case 2:15-cv-01139-JCM-PAL Document 89-5 Filed 10/06/16 Page 21 of 21 EXHIBIT F SFR Investments Pool 1, LLC's First Supplemental Disclosure of Witnesses and Documents {38264028;1} ; ’ Case 2:15-cv-01139-JCM-PAL Document 89-6 Filed 10/06/16 Page 1 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 17 18 19 20 21 22 23 0 7 00 24 25 26 27 28 DIANA CLINE EBRON, ESQ. Nevada Bar No. 10580 E-mail: diana@ kgelegal.com JACQUELINE A. GILBERT, ESQ. Nevada Bar No. 10593 E-mail: jackie@ kgelegal.com KAREN L. HANKS, ESQ. Nevada Bar No. 9578 E-mail: karen@ kgelegal.com KIM GILBERT EBRON 7625 Dean Martin Drive, Suite 110 Las Vegas, Nevada 89139 Telephone: (702) 485-3300 Facsimile: (702) 485-3301 Attorneys for SFR Investments Pool 1, LLC UNITED STATES DISTRICT COURT DISTRICT OF NEVADA DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8, Plaintiff, VS. TALASERA AND VICANTO HOMEOWNERS' ASSOCIATION; SFR INVESTMENTS POOL 1, LLC; DOES INDIVIDUALS I-X, inclusive, and ROE CORPORATIONS I-X, inclusive, Defendants. SFR INVESTMENTS POOL 1, LLC, a Nevada limited liability company, Counter-Claimant, vs. DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR GSAA TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-8; NATIONSTAR MORTGAGE, LLC, a Delaware limited liability company; BANK OF AMERICA, N.A., a national association; DAVID BASES, an individual; KERI BASES, an individual, Counter-Defendants/Cross-Defendants. Case No. 2:15-cv-01139-JCM-PAL SFR INVESTMENTS POOL 1, LLC'S FIRST SUPPLEMENTAL DISCLOSURE OF WITNESSES AND DOCUMENTS 1 Case 2:15-cv-01139-JCM-PAL Document 89-6 Filed 10/06/16 Page 2 of 3 33. Transcript of the trial testimony of Rock Jung, Esq., in Case No. A-14-695002-C. [Rebuttal/ Impeachment Evidence] 34. Transcript of the trial testimony of Douglas Miles, Esq., in Case No. A-14-695002-C. [Rebuttal/ Impeachment Evidence] 35. Transcript of the trial testimony of Jessica Woodbridge in Case No. A-14-695002-C. [Rebuttal/ Impeachment Evidence] 36. Transcript of the trial testimony of Chris Yergensen in Case No. A-14-695002-C. [Rebuttal/ Impeachment Evidence] 37. Transcript of the deposition of the 30(b)(6) Witness for Thomas Reuters, in Case No. 2:15-cv-02026-MMD-CWD. [Rebuttal/ Impeachment Evidence] 38. Any documents provided by other parties. SFR specifically reserves the right to supplement this disclosure to add relevant documents, if subsequent information and investigation so warrant. III. COMPUTATION OF DAMAGES Damages: Attorneys' Fees: $11,315.00. SFR specifically reserves the right to supplement this disclosure to add relevant damages, if subsequent information and investigation so warrant. IV. INSURANCE No policy of insurance is likely to be called upon to satisfy the claims raised in this action. SFR specifically reserves the right to supplement this disclosure to add relevant documents, if subsequent information and investigation so warrant. DATED this 2nd day of June, 2016. KIM GILBERT EBRON /s/ Karen L. Hanks Diana Cline Ebron, Esq. Nevada Bar No. 10580 Jacqueline A. Gilbert, Esq. Nevada Bar No. 10593 Karen L. Hanks, Esq. Nevada Bar No. 9578 7625 Dean Martin Drive, Suite 110 Las Vegas, Nevada 89139 Attorneys for SFR Investments Pool 1, LLC - 6 - 1 2 3 4 5 6 7 8 9 10 11 12 • 2 • ," 13 Jf:q '11 g E""4 '21 14 W 4 • „3- 15 )-4 94 16 Aa 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:15-cv-01139-JCM-PAL Document 89-6 Filed 10/06/16 Page 3 of 3