Jpmorgan Chase Bank, N.A. v. Sbw Investment Llc,Et Al.,

MOTION for Summary Judgment

D. Neb.April 4, 2017

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 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 Joel E. Tasca Nevada Bar No. 14124 Sylvia O. Semper Nevada Bar No. 12863 Kyle A. Ewing Nevada Bar No. 14051 BALLARD SPAHR LLP 100 North City Parkway, Suite 1750 Las Vegas, Nevada 89106 Telephone: (702) 471-7000 Facsimile: (702) 471-7070 tasca@ballardspahr.com sempers@ballardspahr.com ewingk@ballardspahr.com Attorneys for Plaintiff/Counter/Cross- Defendant JPMorgan Chase Bank, N.A. UNITED STATES DISTRICT COURT DISTRICT OF NEVADA JPMORGAN CHASE BANK, N.A., a national banking association, Plaintiff, vs. SBW INVESTMENT LLC, a Utah limited liability company; SFR INVESTMENTS POOL 1, LLC, a Nevada limited liability company; TIMBER CREEK HOMEOWNERS’ ASSOCIATION, a Nevada non-profit corporation; EDUARDO A. PALANG, JR, an individual; VIVIAN KIM, an individual, Defendants. Case No. 2:16-cv-01839-GMN-PAL JPMORGAN CHASE BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT SFR INVESTMENTS POOL 1, LLC, a Nevada limited liability company, Counter/Cross-Claimant, vs. JPMORGAN CHASE BANK, N.A., a national banking association; EDUARDO A. PALANG, JR., an individual; and VIVIAN KIM, an individual, Counter/Cross-Defendants. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 1 of 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 2 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 Pursuant to Federal Rule of Civil Procedure 56, Plaintiff/Counter/Cross- Defendant JPMorgan Chase Bank, N.A. (“Chase”), by and through its counsel of record, Ballard Spahr, LLP, hereby submits its Motion for Summary Judgment (the “Motion”) on its claims for quiet title and declaratory relief, as well as on Defendant/Counterclaimant SFR Investments Pool 1 LLC’s (“SFR”) counterclaims for quiet title and declaratory relief. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION On August 3, 2012, Nevada Association Services, Inc. (“NAS”), as agent for Defendant Timber Creek Homeowners’ Association (the “HOA”), conducted a homeowners’ association foreclosure sale under NRS § 116.3116(2) (the “State Foreclosure Statute”), at which Defendant SBW Investment LLC (“SBW”) purported to purchase the property at issue in this case (the “HOA Sale”). SFR, the current (purported) title holder of the property at issue, contends that under the State Foreclosure Statute, the HOA Sale extinguished a deed of trust recorded in 2008 (the “Deed of Trust”), leaving SFR with title free and clear of that Deed of Trust. However, the Ninth Circuit has ruled that the notice provisions of the State Foreclosure Statute are facially unconstitutional. As a result, the HOA Sale did not extinguish the Deed of Trust, and the Court should grant summary judgment to Chase on its claims for quiet title and declaratory relief. For the same reasons, the Court should grant Chase summary judgment on SFR’s declaratory relief and quiet title claims.1 II. STATEMENT OF UNDISPUTED FACTS 1. A Deed of Trust listing Eduardo A. Palang, Jr. and Vivian Kim (collectively, the “Borrowers”) as the borrowers, Pulte Mortgage, LLC (“Pulte”) as the original lender, Mortgage Electronic Registration 1 Chase reserves the right to file a motion for summary judgment on other grounds. This Motion is strictly limited to the unconstitutionality of the State Foreclosure Statute pursuant to Bourne Valley. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 2 of 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 3 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 System, Inc. (“MERS”) as beneficiary solely as nominee for the lender, and Lawyers Title of Nevada as trustee, was recorded on May 30, 2008. The Deed of Trust granted Pulte a security interest in real property known as 5531 Gemini Bridges Street, Las Vegas, Nevada 89130 (the “Property”) to secure the repayment of a loan to the Borrowers in the original amount of $288,117 (the “Loan”). See Exh. 1, Deed of Trust, 1-2. 2. On June 30, 2011, NAS, on behalf of the HOA, recorded a Notice of Delinquent Assessment Lien (the “NOA”) against the Property. See Exh. 2, Notice of Lien, 1. 3. On July 3, 2012, MERS, as nominee for Pulte assigned the Deed of Trust to Chase. A Corporate Assignment of Deed of Trust evidencing the assignment was recorded against the Property on July 23, 2012. See Exh. 3, Corporate Assignment, 1. 4. On August 9, 2012, a Foreclosure Deed was recorded against the Property. See Exh. 4, Foreclosure Deed, 1. The foreclosure deed states that an interest in the Property was sold pursuant to the NOA on August 3, 2012 to SBW, with a purchase price of $6,900.00. See id. 5. On March 28, 2013, SBW conveyed the property to SFR for $10.00. A Grant, Bargain, Sale Deed evidencing the conveyance was recorded on April 5, 2013. See Exh. 5, Grant, Bargain, Sale Deed, 2. III. PROCEDURAL HISTORY On August 3, 2015, Chase initiated this case by filing its Complaint. (See generally ECF No. 1). The Complaint asserts three causes of action against SFR: (1) quiet title; (2) declaratory relief; and (3) unjust enrichment. (See ECF No. 1, 7-10). Specifically, Chase seeks a declaration and determination that its Deed of Trust was not extinguished by the HOA Sale or that the HOA sale is void or voidable or, alternatively, that SFR has been unjustly enriched by Chase. (See id. at 10-11). The Borrowers, SBW, and the HOA were named as defendants pursuant to Federal Rule Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 3 of 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 4 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 of Civil Procedure 19(a), but Chase alleges no substantive causes of action against them. (See id. at ¶¶ 15-17). On September 22, 2016, SFR filed an answer, counterclaim, and cross-claim. (See generally ECF No. 22). SFR asserts two claims for relief against Chase and the Borrowers: (1) declaratory relief/quiet title and (2) preliminary and permanent injunction.2 (See id. at 15-16). Additionally, SFR brings a third claim for slander of title against Chase only. (See id. at 16-17). SFR seeks a judgment and declaration that it is the owner of the Property free and clear of all claims of Chase and the Borrowers. (See id. at 17). In August 2016, the Ninth Circuit ruled that the notice provisions of the State Foreclosure Statute are facially unconstitutional. See Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016). On November 4, 2016, the Ninth Circuit denied a petition for rehearing en banc and a companion motion to stay the mandate pending a petition for certiorari to the U.S. Supreme Court. See Orders, Bourne Valley, (No. 15-15233), ECF Nos. 69, 75. The Ninth Circuit issued the mandate on December 14, 2016. See Mandate, Bourne Valley, (No. 15-15233), ECF No. 76. With this Motion for Summary Judgment, Chase seeks judgment in its favor with regard to: (1) Chase’s claims for quiet title and declaratory relief and (2) SFR’s counterclaims for quiet title/declaratory relief and slander of title against Chase. Each of these claims and counterclaims involves interpretation of the State Foreclosure Statute. IV. LEGAL STANDARD In evaluating a motion for summary judgment, courts must view all facts and draw all inferences in the light most favorable to the nonmoving party. See Amerson v. Clark Cnty., 995 F. Supp. 2d 1155, 1159 (D. Nev. 2014) (citing Kaiser 2 Chase notes that Preliminary and Permanent Injunctions are not claims for relief, but rather forms of relief. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 4 of 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 5 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986)). Summary judgment shall be granted if the moving party demonstrates that the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Zoslow v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). V. ARGUMENT A. Bourne Valley Controls the Parties’ Claims Bourne Valley controls SFR’s claims for quiet title and declaratory relief because each claim, at its core, seeks recognition that the HOA Sale extinguished the Deed of Trust. However, because the HOA Sale at issue here was conducted under the same statute that the Ninth Circuit ruled facially unconstitutional in Bourne Valley, the HOA Sale could not have extinguished the Deed of Trust. Bourne Valley unequivocally held that the “‘opt-in’ notice scheme” of the State Foreclosure Statute “facially violated mortgage lenders’ constitutional due process rights.” 832 F.3d at 1160. The State Foreclosure Statute employed that “opt- in” scheme at the time of the HOA Sale on August 3, 2012, more than three years before the notice scheme was amended, effective October 1, 2015. Therefore, Bourne Valley controls and the Court must hold that the HOA Sale did not extinguish the Deed of Trust. See Hart v. Massanari, 266 F.3d 1155, 1170 (9th Cir. 2001) (“Binding authority must be followed unless and until overruled by a body competent to do so.”); Lakeside Cmty. Hosp. v. Tahoe Reg'l Planning Agency, 461 F. Supp. 1150, 1153 (D. Nev. 1978) (“At the outset it should be emphasized that this Court is duty bound to follow the law as articulated by the Court of Appeals for this Circuit.”).3 3 Bourne Valley has indicated its intent to petition the United States Supreme Court for a writ of certiorari, though has not filed a petition to date. However, a writ of certiorari would have no impact in this case as a district court still must follow the law of the Circuit even where a writ of certiorari has issued. United States v. Morales-Landa, 18 F. Supp. 3d 1015, 1021 (S.D. Cal. 2014); Lakeside Cmty. Hosp., 461 F.Supp. at 1153. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 5 of 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 6 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 Moreover, this Court must follow Ninth Circuit precedent even on issues of state law. See Mohamed v. Uber Techs., Inc., 836 F.3d 1102, 1111-12 (9th Cir. 2015) (reversing district court for failing to follow previous Ninth Circuit precedent on California state law). Indeed, in a recent case, another court in this district evaluated almost identical facts and similar claims, as an entity that purchased a property at an HOA foreclosure sale conducted pursuant to the State Foreclosure Statute contended that the sale extinguished a first deed of trust. See Las Vegas Dev. Grp., LLC v. Steven, No. 2:15-CV-01128-RCJ-CWH, 2016 WL 7115989, at *2 (D. Nev. Dec. 6, 2016). The court dismissed the purchaser’s claims, holding that “[t]he Bourne Valley ruling is enough to settle the quiet title and declaratory judgment claims in favor of [the holder of the deed of trust] as a matter of law as to the HOA’s foreclosure and therefore the HOA’s foreclosure did not extinguish deed of trust against the property.” Id. This Court should employ the same reasoning here. The Nevada Supreme Court’s recent decision in Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortg., a Div. of Wells Fargo Bank, N.A., 388 P.3d 970, 972 (Nev. 2017) has no bearing on Bourne Valley or the Court’s determination of Chase’s Motion. “Whether certain conduct is ‘under color of state law’ or ‘state action’ is a question of federal, not state law.” Gorenc v. Salt River Project Agr. Imp. & Power Dist., 869 F.2d 503, 505 (9th Cir. 1989). “Otherwise, the states acting through their legislatures or courts would have the power to immunize their agencies and officials from liability under [federal law].” Id. Accordingly, the Nevada Supreme Court’s conclusion that the enactment of NRS 116 involved no state action is of no moment, as federal courts “owe no deference to state courts” on matters of federal law. Vandevere v. Lloyd, 644 F.3d 957, 964 (9th Cir. 2011). The Ninth Circuit’s Bourne Valley decision thus binds this Court, notwithstanding the Nevada Supreme Court’s disagreement on this federal constitutional question. The Court is also required under Bourne Valley to hold that the notice scheme of Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 6 of 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 7 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 Chapter 116 violates due process by requiring purported junior lienholders to opt in for notice. Saticoy Bay does not change the outcome of this case in any way. See Bourne Valley, 832 F.3d at 1160. Specifically, the Court should hold that Bourne Valley resolves all claims in Chase’s favor. Chase asserts claims for quiet title and declaratory relief against SFR based on, inter alia, the fact that the State Foreclosure Statute, as it existed at the time of the HOA Sale, violates the due process clause of the U.S. Constitution and that a foreclosure sale held pursuant to it could not therefore have extinguished Chase’s interest in the Property. SFR asserts counterclaims against Chase for quiet title and declaratory relief based on its contention that it purchased the Property at a foreclosure sale conducted “pursuant to the powers conferred by the [State Foreclosure Statute].” (See ECF No. 22 at 10:27-11:3). The Court should enter summary judgment in favor of Chase on each of those claims, as the Ninth Circuit’s decision in Bourne Valley unquestionably entitles Chase to the relief it seeks and bars SFR’s entitlement to the relief it seeks. Were the Court to grant this motion, SFR’s claim for slander of title, which rests on its contention that the HOA Sale extinguished Chase’s interest in the Property, would be moot. (See ECF No. 22 at 16-17). Thus, the sole remaining claim between Chase and SFR would be Chase’s claim against SFR for unjust enrichment. ECF No. 32 at p. 5:23-6:13. If the Court grants this Motion and determines that the HOA Sale did not extinguish the Deed of Trust, Chase will voluntarily dismiss its unjust enrichment claim without prejudice. B. Whether Chase Received Notice is Irrelevant Chase anticipates that SFR will argue that Chase’s facial challenge fails because Chase had actual notice of the HOA Sale, or, alternatively, that the Court should deny the Motion so that SFR can conduct further discovery into that issue. Any such notice is not relevant to Chase’s facial constitutional challenge, however, and the Court should reject any argument based thereon. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 7 of 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 8 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 A party can challenge the constitutionality of a statute in two ways: based on the statute’s application to the specific facts of a case (an as-applied challenge) or based on the statute’s intrinsic terms, which violated a constitutional right from the day of the law’s enactment (a facial challenge). See Ezell v. City of Chicago, 651 F.3d 684, 698-99 (7th Cir. 2011); Seguin v. City of Sterling Heights, 968 F.2d 584, 589-90 (6th Cir. 1992). For a facial challenge, “individual application of the facts do[es] not matter,” and “the plaintiff’s personal situation becomes irrelevant. It is enough that we have only the statute itself and the statement of basis and purpose that accompanied its promulgation.” Ezell, 651 F.3d at 697 (citing Reno v. Flores, 507 U.S. 292, 300-01 (1993)). Therefore, a facially unconstitutional notice scheme cannot be saved by additional notice voluntarily given. In Wuchter v. Pizzutti, the U.S. Supreme Court addressed a New Jersey statute which allowed plaintiffs to serve out-of-state defendants by leaving process with the New Jersey secretary of state. 276 U.S. 13, 16 (1928). The court held the statute violated due process because it did not reasonably ensure the secretary of state would forward the notice to the out-of-state defendant. Id. at 24. The defendant in Wuchter “had actual notice by service out of New Jersey into Pennsylvania.” Id. However, “such notice was not required by the statute. Not having been directed by the statute it cannot, therefore, supply constitutional validity to the statute or to service under it.” Id.; see also Wash. State Grange v. Wash. State Republican Party, 552 U.S. 442, 449-50 (2008). VI. CONCLUSION Chase respectfully requests that the Court grant this Motion for Summary Judgment, resolve the claims between Chase and SFR in Chase’s favor, and declare that the HOA Sale did not extinguish the Deed of Trust and that the Deed of Trust thus continues to encumber the Property. The Court should also dismiss SFR’s slander of title counterclaim as moot in light of the fact that Chase’s interest in the Property was not extinguished. Further, upon Chase’s dismissal of the unjust Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 8 of 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 9 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 enrichment claim, the Court should enter final judgment as between Chase and SFR. Dated: April 4, 2017 BALLARD SPAHR LLP By: /s/ Sylvia O. Semper Joel E. Tasca Nevada Bar No. 14124 Sylvia O. Semper Nevada Bar No. 12863 Kyle A. Ewing Nevada Bar No. 14051 100 North City Parkway, Suite 1750 Las Vegas, Nevada 89106 Attorneys for Plaintiff/Counter/Cross- Defendant JPMorgan Chase Bank, N.A. Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 9 of 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 10 DMWEST #15214192 v2 BA LL AR D S PA H R LL P 10 0 N O RT H C IT Y PA RK W AY , S U IT E 17 50 LA S VE G AS , N EV AD A 89 10 6 (7 02 ) 4 71 -7 00 0 FA X (7 02 ) 4 71 -7 07 0 CERTIFICATE OF SERVICE I certify that on April 4, 2017, and pursuant to F.R.C.P. 5, a true copy of the foregoing JPMORGAN CHASE BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT was filed via the Court’s CM/ECF System and electronically served by the Court on all parties in interest. In addition, a copy was served on the following parties by U.S. mail, postage pre-paid and marked for delivery as follows: Vivian Kim 36327 8th Avenue SW Federal Way, WA 98023 Eduardo A. Palang, Jr. 5217 Evergreen Meadow Avenue Las Vegas, NV 89130 /s/ Charlie Bowman an Employee of Ballard Spahr Case 2:16-cv-01839-GMN-PAL Document 53 Filed 04/04/17 Page 10 of 10