U.S. Bank, N.A. v. Azure Estates Owners Association, Inc., et al

MOTION for Summary Judgment

D. Neb.January 13, 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 Page 1 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C. KALEB D. ANDERSON, ESQ. Nevada Bar No. 7582 JULIE A. FUNAI, ESQ. Nevada Bar No. 8725 9900 Covington Cross Drive, Suite 120 Las Vegas, Nevada 89144 Phone: (702) 382-1500 Fax: (702) 382-1512 kanderson@lipsonneilson.com jfunai@lipsonneilson.com Attorneys for Defendant Azure Estates Owners Association UNITED STATES DISTRICT COURT DISTRICT OF NEVADA U.S. BANK, N.A., AS SUCCESSOR TRUSTEE TO BANK OF AMERICA, N.A., AS SUCCESSOR BY MERGER TO LASALLE BANK N.A., AS TRUSTEE FOR HOLDERS OF BEARN STEARNS ASSET BACKED SECURITIES I LLC, ASSET- BACKED CERTIFICATES, SERIES 2007- HE3 Plaintiff, v. AZURE ESTATES OWNERS ASSOCIATION; INC., a Nevada non-profit corporation, 421 WEST AZURE TRUST; JANE DOE, TRUSTEE OF 421 WEST AZURE TRUST; JOHN DOES 1 through 10, inclusive, and ROE CORPORATIONS 1 through 10, inclusive, Defendants. CASE NO: 2:16-cv-00317-GMN-NJK DEFENDANT AZURE ESTATES OWNERS ASSOCIATION’S MOTION FOR SUMMARY JUDGMENT COMES NOW, Defendant Azure Estates Owners Association, (the “HOA”) by and through its counsel of record, LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C., hereby submits this Motion for Summary Judgment, in response to the Complaint filed by U.S. Bank (“USB”).1 / / / 1 Defendant Azure Estates filed a Motion to Dismiss or in the Alternative for Summary Judgment on April 1, 2016 [11], which is still pending before the Court.. Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 1 of 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 Page 2 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 This Motion is made and based upon the following Memorandum of Points and Authorities along with Exhibits and any oral argument the Court may consider. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION. USB attacks the HOA foreclosure in this case by alleging various accounting errors in the imposition of assessments, fines and cost against the homeowner. USB lacks standing to assert such claims against the homeowners, which arise from the Covenants, Conditions & Restrictions (“CC&Rs”) between the HOA and the homeowner. Furthermore, even if USB had standing, such claims are squarely governed by NRS 38.310 and this case must first be mediated. The allegations comprise the essence of the scope of mediation, which is required for claims that involve The interpretation, application or enforcement of any covenants, conditions or restrictions applicable to residential property or any bylaws, rules or regulations adopted by an association NRS 38.310(a). All of USB’s claims for relief derive from these alleged predicate acts and are subject to mediation. The proffered theories that go beyond it (due process, commercial unreasonableness) fail as a matter of law. II. BACKGROUND. a. THE LEGAL ENVIRONMENT IN NEVADA.2 In 1991, Nevada adopted the Uniform Common Interest Owner Act at Nev.R.Stat. Chapter 116 et seq. (“NRS 116”). This regulatory scheme establishes that:  HOA’s may impose assessments. (NRS 116.3115.)  HOA’s may have a lien against units for assessments. (NRS 116.3116.) 2This Court may take judicial notice of publically recorded documents and information which “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2); See Eagle SPE NV 1, Inc. v. S. Highlands Dev. Corp., No. 2:12-CV-00550-MMD, 2014 WL 3845420 (D. Nev. Aug. 5, 2014) (taking judicial notice of facts under Fed. R. Evid. 201, and facts on posted on government website); Wensley v. First Nat. Bank of Nevada, 874 F. Supp. 2d 957, n. 1 (D. Nev. 2012) (Court may consider deed of trust, substitution of trustee, election to sell, and other such matters of public record in motions to dismiss). Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 2 of 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 Page 3 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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  HOA liens are perfected upon the recording of the CC&Rs. NRS 116.3116(5). On September 18, 2014, the Nevada Supreme Court ruled that, pursuant to NRS 116.3116(2), an HOA’s assessment lien was a true “superpriority” lien and the foreclosure of such a lien could extinguish a first security interest. SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 419 (2014). III. UNDISPUTED FACTS. A. Declaration of CC&Rs. The Declaration of CC&Rs for Azure Estates Owners Association governs the property at issue here, located at 421 West Azure Avenue, North Las Vegas, Nevada. See, Complaint, ¶¶ 11, 15. Attached as Exhibit A is a true and correct copy of the Declaration of CC&Rs for Azure Estates Owners Association. By recording the CC&Rs, the HOA perfected its lien for assessments. NRS 116.3116(5). The CC&Rs provide that the HOA may levy assessments and may foreclose such a lien pursuant to NRS 116. Article 5 of the CC&Rs provides, in relevant part, as follows (emphasis added): 5.1 Personal Obligation of Assessments. Declarant, on behalf of itself and all future Owners, hereby covenants and agrees to pay, and each Owner by accepting title to a Lot or any interest therein, whether or not it shall be expressed in the deed or other instrument conveying title, shall be deemed to covenant and agree to pay to the Association, Annual Assessments and other amounts as required or provided for in this Declaration. . . . Other amounts payable by an Owner to the Association, (or payable with respect to an Owners Lot), including charges, fines, penalties, interest, attorneys fees and other costs expenses incurred by the Association in collecting unpaid amounts shall be added to the Annual or Special Assessments charged to his Lot and shall be enforceable and collectible as Annual or Special Assessments.. . . . Subject to the provisions hereof, the Board shall have the power and authority to determine all matters in connection with Annual or Special Assessments, including, without limitation, power and authority to determine where, when and how Assessments shall be Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 3 of 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 Page 4 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 paid to the Association, and each Owner shall comply with all such determinations. 5.8 Time for Payments. The amount of any Assessment, charge, fine, penalty or other amount payable by an Owner or Resident with respect to such Owner's or Resident's Lot shall become due and payable as specified herein and if said payment is not received, then said Owner or Resident shall also be responsible for any late charges, interest, fines, penalties or attorneys fees related thereto. . . . 5.9 Delinquency. Any installment of an assessment provided for in this Declaration shall be delinquent if not paid within fifteen (15) days of the due date as established by the Board of Directors of the Association. Upon such delinquency, the full amount of the Assessment (i.e., not simply the delinquent installment) immediately become due and payable: The Board shall be authorized to adopt a system pursuant to which the full amount of any Annual Assessments or Special Assessments not paid within thirty (30) days after the due date, plus all reasonable charges, penalties, fines, or other costs of collection (including attorneys' fees) and late charges as provided herein, shall bear interest commencing thirty (30) days from the due date until paid at the rate of up to eighteen percent (18%) per annum, but in no event more than the maximum rate permitted by law. The Board may also require the delinquent Owner to pay a late charge. The Association need not accept any tender of a partial payment of an installment of an assessment and all costs and attorneys fees attributable thereto, and any acceptance of any such tender shall not be deemed to be a waiver of the Association's right to demand and receive full payments thereafter. 5.10 Creation and Release of Lien. All sums assessed in accordance with the provisions of this Declaration shall constitute a lien on the respective Lot from the time such sums become due prior and .superior to all other liens and encumbrances thereon except (a) liens and encumbrances Recorded before Recordation of this Declaration; (b) a first Mortgage on the Lot Recorded before the date on which the assessment sought to be enforced became delinquent, except the Association lien shall have priority for six (6) months' Annual Assessments and related charges including late charges, interest, and attorneys fees, pursuant to Section 116.3116.2{c) of the Nevada Revised Statutes; . . . 5.11 Enforcement of Liens. It shall be the duty of the Board of Directors to enforce the collection of any amounts due under this Declaration by one (1) or more of the alternative means of relief afforded by this Declaration or in any other matter permitted by law. The lien on a Lot may be enforced by sale of the. Lot by the Association, the Association's attorneys, any title insurance company authorized to do business in Nevada, or other persons authorized to conduct the sale Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 4 of 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 Page 5 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 as a trustee, or in any other manner permitted by law, after failure of the Owner to pay any Annual or Special Assessment, or installments thereof, as well as any charges, penalties, fines, late charges, interest or attorneys fees as provided herein. Exhibit A, §§ 5.01 - 5.11. B. Alleged Defects in Foreclosure of HOA Lien. USB’s allegations focus specifically on the accounting of the assessment lien, and assert detailed errors in the calculation and type of charges that made of the assessment lien upon which the HOA foreclosed. Specifically, USB asserts at various paragraphs of the Complaint (paraphrased except where quoted): 17 and 23. NAS [foreclosure trustee] grossly overstated the amount of the overdue common areas assessments, including part of the purported $774.83 unpaid balance amounts that had, in fact, been paid: 18. The HOA calculated that the borrowers were 7 quarterly assessments behind, when they were only behind one assessment. 19. The unpaid balance included interest on unpaid fines and collection costs. 29. A $178.00 payment for assessments was received, bringing current the common area assessment charges. 32. The amount in the Notice of Sale, $2,837.18, included collection fees, costs, late charges, interest, when the records indicate the Borrowers were current. 40. “Upon information and belief, the HOA Sale did not comply with the requirements under the CC&Rs.” 43. “The HOA foreclosure notices included improper fees and costs in the amount demanded.” USB also contends the credit sale to the HOA for $5,089.01 was grossly unreasonable, “as defined by the Nevada Supreme Court and Restatement (Third) of Property: Mortgages § 8.3 cmt. B (1997). See, Complaint, ¶¶ 62 and 63. / / / / / / Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 5 of 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 Page 6 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 IV. LEGAL STANDARDS. A. Standard for Summary Judgment. Summary judgment should be entered if the pleadings ... show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. Lynn v. Sheet Metal Workers Int’l Ass’n, 804 F.2d 1472, 1483 (9th Cir. 1986); S.E.C. v. Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982). If there are no genuine issues of fact, the movant's burden is not evidentiary because the facts are not disputed, but the court has the obligation to resolve the legal dispute between the parties as a matter of law. Gulf Ins. Co. v. First Bank, 2009 WL 1953444 *2 (E.D.Cal.2009) (citing Asuncion v. Dist. Dir. of U.S. Immigration & Naturalization Serv., 427 F.2d 523, 524 (9th Cir.1970)). V. DISCUSSION. A. USB Lacks Standing to Assert Errors in the Calculation of Charges to the Homeowner. As stated in the CC&Rs, § 5.01, the assessments charged by the HOA against the property are a personal obligation of the Owner. USB is not a party to the CC&Rs nor does this obligation arise from any section that may reference the lender. USB lacks standing to assert the private rights of the un-joined formers owners of the property. We “must hesitate before resolving a controversy on the basis of the rights of third persons not parties to the litigation” for two reasons. “First, the courts should not adjudicate such rights unnecessarily, and it may be that in fact the holders of those rights do not wish to assert them.” ... “Second, third parties themselves usually will be the best proponents of their own rights. The courts depend on effective advocacy, and therefore should prefer to construe legal rights only when the most effective advocates of those rights are before them.” Mortgage Freedom Co. v. Las Vegas Dev. Corp., 106 F.Supp.3d 1174, 1180 (D. Nev. Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 6 of 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 Page 7 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 2015) (cit. The Wilderness Soc’y v. Kane Cnty., Utah, 632 F.3d 1162, 1169 (10th Cir.2011)). Defendant notes that USB has failed to join the Borrowers as parties to this suit, in derogation of Fed.R.Civ.Proc. 19. All of the alleged errors in accounting and in assessing improper fines, fees, and charges, are a potential wrong done to the owners of the property Jeffrey and Victoria Kilgore, identified at ¶ 5 of USB’s Complaint, but not joined as parties. They are the proper parties to assert these alleged errors and seek redress. USB has no standing. B. The Claim For “Declaratory Relief” Fails as a Matter of Law. USB alleges that the foreclosure failed to extinguish its Deed of Trust because of numerous defects in the foreclosure process, including that: the recorded notices failed to delineate the super-priority amount, failed to described the deficiency in payment, was commercially unreasonable, grossly unfair, and deprived USB of due process. Complaint, ¶¶ 49). All of these arguments fail as a matter of law. 1. All notices were proper under the law. The Foreclosure Deed contains recitals which are conclusive proof, not merely conclusive rebuttable presumptions: A trustee's deed reciting compliance with the notice provisions of NRS 116.31162 through NRS 116.31168 “is conclusive” as to the recitals “against the unit's former owner, his or her heirs and assigns, and all other persons.” NRS 116:31166(2). SFR Investments Pool 1, 334 P.3d 408, 411-12 (2014); Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 80 F. Supp. 3d 1131, 1135 (D. Nev. 2015) (granting summary judgment, based in part, because deed recitals are conclusive). The conclusive proof standard “cannot be overcome by any additional evidence or argument.” Employers Ins. Co. of Nev. v. Daniels, 122 Nev. 1009, 1016 n. 15 (2006) (citing Black’s Law Dictionary 1223 (8th Ed. 2004)). Furthermore, once the conclusive proof is established by statute, “courts will not stop to inquire [whether it is correct or not] because Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 7 of 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 Page 8 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 the statute does not permit the conclusive proof to be overcome….” Wilson v. Hill, 17 Nev. 401 (1888). In the nonjudicial foreclosure context, this is especially true to provide finality in transactions and marketability of title to foreclosure properties. See Restatement (Third) of Property (Mortgages) § 7.1 TD No 4 (1995) (citing West's Ann. Cal. Civ. Code § 2924; West's Colo. Rev. Stat. Ann. § 38-39-115; Rev. Code Mont. § 52-410; Nev. Rev. Code Ann. § 107.030(8); Utah Code Ann. § 57-1-28.) Because the recitals are conclusive, there is no genuine issue regarding these alleged “disputed facts” regarding the notices and sale. Plaintiff alleges that the notices do not describe the “super priority” amount. However, USB admits that the foreclosure notices included the amount of the lien which any junior lien holder (or any interested third party) could have paid to bring the account current and stopped the nonjudicial foreclosure. See SFR Investments Pool 1, 334 P.3d 408, 418 (total lien amount proper in lien notices). 2. “Commercial reasonableness” Is irrelevant to foreclosure sales under NRS Chapter 116. “Commercially reasonable” is not a nonjudicial foreclosure requirement. See, e.g., Bourne Valley Court Trust v. Wells Fargo Bank, N.A., No. 2:13-CV-00649-PMP, 2015 WL 301063, at *5 (D. Nev. Jan. 23, 2015) (given the risks at foreclosure sales “a large discrepancy between the purchase price a buyer would be willing to pay and the assessed value of the property is to be expected.”) Nevada has long established that: “inadequate price standing alone is insufficient grounds for setting aside the sale…” Brunzell v. Woodbury, 85 Nev. 29, 32, 449 P.2d 158, 159 (1969); see also, Golden v. Tomiyasu, 79 Nev. 503, 514, 387 P.2d 989, 995 (1963) (“inadequacy of price, however gross, is not in itself a sufficient ground for setting aside a trustee's sale…”) (quoting the rule adopted by the Nevada Supreme Court from Oller v. Sonoma County Land Title Company, 137 Cal.App.2d 633 (1955)). The Nevada law is mirrored throughout the nation, even in the context of bankruptcy. See BFP v. Resolution Trust Corp., 511 U.S. 531, 532, 114 S. Ct. 1757, 1758, 128 L. Ed. 2d 556 (1994) (“it is black letter foreclosure law” that a low foreclosure price is not a basis Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 8 of 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 Page 9 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 to voiding the sale.) “Mere inadequacy of price is not sufficient to justify setting aside a foreclosure sale, absent a showing of fraud, unfairness or oppression.” Long v. Towne, 98 Nev. 11, 13, 639 P.2d 528, 50 (1982). USB holds the Deed of Trust drafted by the lender and replete with safeguards and remedies in the event of default by the borrower. Here, Plaintiff insists that the HOA is somehow responsible for protecting USB’s security to the point of monitoring the publicity of the foreclosure sale and the number of bidders who may show up at it. If USB had simply shown up to the sale of its own property interest or exercised other remedies in the contract, this entire action would have been avoided. USB incorrectly pleads that the Nevada Supreme Court has formally adopted Restatement (Third) of Property: Mortgages § 8.3. See, Complaint, ¶¶ 62 and 63(“grossly inadequate as defined by the Nevada Supreme Court and the Restatement”). The Nevada Supreme Court made no such pronouncement or adoption. In Shadow Wood HOA, et al. v. NYCB, 132 Nev. Adv. Op. 5, 15 No. 63180 (Jan. 28, 2016), the Supreme Court merely references the Restatement as a “see also” in a string cite. Shadow Wood was a reversal of summary judgment in favor of the lender and the Supreme Court never adopted § 8.3, cmt. b of the Restatement (Third) of Property: Mortgages. When the Court decides to formally adopt a section of a Restatement as the settled law in Nevada, it does so with clarity. See, Houston v. Bank of Am. F.S.B., 78 P.3d 71, 74 (Nev. 2003)(“Because the Restatement approach is the most persuasive, we adopt the view expressed by it.”)(adopting section 7.6 of the Restatement (Third) of Property: Mortgages)); St. James Village, Inc. v. Cunningham, 210 P.3d 190, 191 (Nev. 2009)(“We conclude that the statement made in Swenson indicating that fixed easements cannot be moved is overbroad, and determine that adoption of section 4.8 of the Restatement (Third) of Property is warranted . . . .”); Gen. Motors Corp. v. District Court, 134 P.3d 111, 116 (Nev. 2006)(“We take this opportunity to clarify Nevada's choice-of-law jurisprudence and Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 9 of 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 Page 10 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 hold that the Second Restatement's most significant relationship test governs choice-of-law issues in tort actions.”). The Court’s passing reference to the Restatement is not an “adoption” of it, nor was that point the holding in the case. Indeed, what Shadow Wood did do was reaffirm the holding in Long v. Towne, 98 Nev. 11, 639 P.2d 528 (1982)(“As discussed above, demonstrating that an association sold a property at its foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a showing of fraud, unfairness, or oppression.”) C. The Constitutional Arguments Cannot Afford USB Relief From the Lender’s Own Failure to Protect the Deed of Trust. USB alleges that the foreclosure under NRS 116 should not extinguish the Deed of Trust because NRS 116 violates its due process rights. Complaint ¶¶ 30, 49.) However, this cry rings hollow in light of the fact that the Lender and Borrower contracted for duties and remedies with full knowledge of the HOA’s rights to enforce liens. These are memorialized within the Deed of Trust and PUD Rider. In other words, the Lender knew what it could have done, but elected not to, and now USB asks this Court to do for USB what its assignor was unwilling to do for itself. 1. The Nevada Supreme Court has already ruled in SFR Investments that the statute is constitutional. USB’s challenge fails as a matter of law. “A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid.” United States v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 2100, 95 L. Ed. 2d 697 (1987). (emphasis added). A facial challenge to a statute is essentially a two-step process which requires: (1) a finding of “as-applied” unconstitutionality before a party brings a facial challenge, and (2) then establishing that the statute would be unconstitutional in any context. See County Ct. of Ulster Cnty. v. Allen, 442 U.S. 140, 154-55, 99 S.Ct. 2213, 60 L.Ed.2d 777 (1979) (“As a Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 10 of 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 Page 11 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 general rule, if there is no constitutional defect in the application of the statute to a litigant, he does not have standing to argue that it would be unconstitutional if applied to third parties in hypothetical situations.”); Broadrick v. Oklahoma, 413 U.S. 601, 610, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973) (“Embedded in the traditional rules governing constitutional adjudication is the principle that a person to whom a statute may constitutionally be applied will not be heard to challenge that statute on the ground that it may conceivably be applied unconstitutionally to others, in other situations not before the court.”); Woollard v. Gallagher, 712 F.3d 865, 882 (4th Cir.2013) (applying the rule from Broadrick that a law must be unconstitutional as applied to a party in order for that party to facially challenge the law). Facial challenges are also contrary to judicial restraint that courts should not “‘anticipate a question of constitutional law in advance of the necessity of deciding it’ ” or “‘formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.’ ” Ashwander v. TVA, 297 U.S. 288, 346-347, 56 S.Ct. 466, 80 L.Ed. 688 (1936) (Brandeis, J., concurring) (quoting Liverpool, New York & Philadelphia S.S. Co. v. Commissioners of Emigration, 113 U.S. 33, 39, 5 S.Ct. 352, 28 L.Ed. 899 (1885)). Facial challenges are also disfavored because they undermine the will of the people: [F]acial challenges threaten to short circuit the democratic process by preventing laws embodying the will of the people from being implemented in a manner consistent with the Constitution. We must keep in mind that “‘[a] ruling of unconstitutionality frustrates the intent of the elected representatives of the people.’ ” Ayotte v. Planned Parenthood of Northern New Eng., 546 U.S. 320, 329, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006) (quoting Regan v. Time, Inc., 468 U.S. 641, 652, 104 S.Ct. 3262, 82 L.Ed.2d 487 (1984) (plurality opinion)). Washington State Grange v. Washington State Republican Party, 552 U.S. 442, 450-51, 128 S. Ct. 1184, 191, 170 L. Ed. 2d 151 (2008). In this case, the facial challenge fails as a matter of law, at the first step, because the statute is valid ‘as applied’ as determined by SFR Investment. Therefore, as a matter of law, there is a “set of circumstances [which] exists under which [NRS 116] would be Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 11 of 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 Page 12 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 valid” and the facial challenge fails. United States v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 2100, 95 L. Ed. 2d 697 (1987). In SFR Investments, the Nevada Supreme Court rejected the due process arguments of lenders for a number of reasons: (1) “[I]t is well established that due process is not offended by requiring a person with actual, timely knowledge of an event that may affect a right to exercise due diligence and take necessary steps to preserve that right.” ; and (2) nothing prevented the lender from paying the entire lien to protect its interest; and (3) regarding the sufficiency of the notices, it is appropriate to state the full amount because the notices go to all junior lien holders, as well as the prior owner of the Property. See generally, SFR Investments, 334 P.3d at 418. In this case, the lender had actual knowledge of the HOA lien at the time it created the Deed of Trust. It is undisputed that: (1) Nevada adopted NRS 116 in 1991; (2) the HOA’s super priority lien was perfected when the CC&Rs were recorded; (3) the Deed of Trust expressly references the CC&Rs, payment of assessments, and remedies for failure to pay assessments. Given the undisputed facts, USB is essentially complaining that the statute does not provide notice of something USB’s predecessor already knew about and had already contracted for with the Borrower. The Court should reject the facial challenge. To the extent, USB alleges the statute is unconstitutional because the statute does not require the HOA to parse the lien amount, the Nevada Supreme Court has already spoken, as noted above, the foreclosure notices may contain the full amount because the notices go to all junior lien holders, as well as the prior owner of the Property. Id. The facial challenge fails. 2. A nonjudicial foreclosure is not a state action. A nonjudicial foreclosure sale is not a state action. A nonjudicial foreclosure, pursuant NRS 116 and the CC&Rs, does not violate the Constitution because the HOA is not the government and an HOA’s nonjudicial foreclosure not a function of the government. Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 12 of 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 Page 13 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 See Mendez v. Fiesta del Norte Home Owners Ass'n, No. 2:15-CV-00314-RCJ, 2015 WL 2219695, at *3 (D. Nev. May 12, 2015) (“non-judicial foreclosure sales by private lien- holders are not traditional government functions. Apao v. Bank of N.Y., 324 F.3d 1091, 1093-95 (9th Cir.2003)”). See also, Southern Comfort Campgrounds v. Federal Home Loan Bank Bd., 1995 WL 63090 (E.D.La.1995) (foreclosure sale was not a taking under the Fifth Amendment, because “a taking only results from the government's exercise of its sovereign power to appropriate private property for public use”). See also, Apao v. Bank of N.Y., 324 F.3d 1091, 1095 (9th Cir.2003) (a lender’s non-judicial foreclosure pursuant to state law was not a government actor.) Thus, the HOA is not a government actor in the nonjudicial foreclosure context. The Deed of Trust and Rider demonstrate the Lender’s foreknowledge of the HOA’s lien and the CC&Rs, and provides a mechanism for both the Borrower and the Lender to protect the Deed of Trust and to avoid the loss. The public records also provided notice to the Lender of the CC&Rs, the HOA’s lien, and of NRS 116. See Allen v. Webb, 87 Nev. 261, 272, 485 P.2d 677, 684 (1971) (recording of real property instrument provides notice to the world). See also, Alliance Property Management & Dev., Inc. v. Andrews Ave. Equities, Inc., 133 A.D.2d 30, 34, 518 N.Y.S.2d 804, 807, 1987 N.Y. App. Div. LEXIS 49571, 10 (N.Y. App. Div. 1st Dep't 1987) (“those who lend money secured by real property are aware that the security provided by the real property is dependent on the payment by owners of the real property of real estate taxes, and that they should inform themselves of the relevant statutory provisions.”) (dictum in dissent). As noted above and stated by the Nevada Supreme Court, “[I]t is well established that due process is not offended by requiring a person with actual, timely knowledge of an event that may affect a right to exercise due diligence and take necessary steps to preserve that right…” SFR Investments, 334 P.3d at 418. In this case, it is undisputed that each of the HOA’s notices contained the amount necessary to protect the Deed of Trust. Yet, the Lender did nothing. The Court should not Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 13 of 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 Page 14 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 do for the Lender, what the Lender was unwilling to do for itself. NRS 116 does not violate the U.S. or Nevada Constitutions. D. The Claim for Unjust Enrichment Derives from an Untenable Theory. USB’s Third Claim for Relief is labeled “Unjust Enrichment.” However, aside from repeating the prior allegations, this Claim only adds the conclusory statement that the HOA “has benefited from the unlawful HOA Sale.” Complaint, ¶ 81. Absent specific additional facts, this claim is based upon either the alleged defects in calculating the assessment lien, being grossly unfair, violative of USB’s due process rights, or is commercially unreasonable. Thus, this claim, such as it is, fails as a matter of law or is subject to mediation. At the very least, USB has failed to plead and specific facts to differentiate this claim from the First Claim, and USB should be required under Fed.R.Civ.Proc. 56 to assert specific facts via affidavit or other admissible evidence to support this claim. E. The Fifth3 Claim for Fraudulent Conveyance Rests on Commercial Unreasonableness. The Fifth Claim for Relief alleges with minimal information that the HOA failed to pay reasonably equivalent value for title to the property. Complaint, ¶ 93. USB attempts to bootstrap a non-judicial foreclosure pursuant to statute into a fraudulent transfer under NRS 112.180. Sportsco Enterprises v. Morris, 112 Nev. 625, 917 P.2d 934 (1977). When the HOA has conducted a properly noticed public auction and received only the amount allowed by statute for the property, it begs the question whether this can even be categorized as a transfer by the debtor. USB fails to plead with specificity any element of fraud or intent, or delineate any of the indices under NRS 112.810(2). Moreover, USB seeks in this Claim for Relief that, “the Court should unwind the HOA Sale.” Complaint, ¶ 95. Again, seeking this relief necessarily requires joining the Kilgores as parties to this action. 3 It appears that this is the Fourth Claim for Relief, not the Fifth. Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 14 of 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 Page 15 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 Finally, to the extent “reasonably equivalent value” is a function of being “commercially unreasonable,” this Claim fails for the reasons discussed above. F. The Claim for Conversion Misapprehends the Foreclosure Sale. USB’s final claim for relief, conversion, assumes that the HOA received money. See, Complaint, ¶100 (“Azure received proceeds form he purposed foreclosure sale of the Property in excess of amounts actually due and owing under the Assessment Lien.”). As USB well knows, this was a credit bid in the amount of the assessments and costs of collection. See, Exhibit C, NAS Invoice, Disbursement Sheet, and Ledger. Not only did the HOA not receive money, it was required to pay NAS almost $3,000 in costs. These are costs it is allowed to charge and enforce as part of the lien under the CC&Rs. The HOA is allowed once it obtains the property, to sell it to recoup its costs. If USB or its predecessor so chose, it could have appeared at the auction and bid for the property. Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 15 of 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 Page 16 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 VI. CONCLUSION. For the above reasons, the HOA respectfully requests that the Court its Motion for Summary Judgment for the HOA. DATED this 13th day of January, 2017. LIPSON, NEILSON, COLE, SELTZER, GARIN, P.C. By: __/s/_ Julie A. Funai KALEB D. ANDERSON, ESQ. Nevada Bar No.7582 JULIE A. FUNAI Nevada Bar No. 8725 9900 Covington Cross Drive, Suite 120 Las Vegas, Nevada 89144 702-382-1500 Attorneys for Defendant Azure Estates Owners Association Case 2:16-cv-00317-GMN-NJK Document 50 Filed 01/13/17 Page 16 of 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 Page 17 of 17 LI PS O N, NE IL SO N, CO LE ,S EL TZ ER & G AR IN ,P .C . 99 00 C ov in gt on C ro ss D riv e, S ui te 1 20 La s Ve ga s, N ev ad a 8 91 44 Te le ph on e: ( 70 2) 3 82 -1 50 0 F ac si m ile : (7 02 ) 3 82 -1 51 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 CERTIFICATE OF SERVICE I hereby certify that on the 13th day of January, 2017, pursuant to FRCP 5, service of the foregoing DEFENDANT AZURE ESTATES OWNERS ASSOCIATION’S MOTION FOR SUMMARY JUDGMENT was made via the Court’s electronic service system (“CM/ECF”) to the following parties: Abran E. Virgil, Esq. Justin A. Shiroff, Esq. BALLARD SPAHR LLP 100 North City Parkway, Suite 1750 Las Vegas, NV 89106-4617 vigila@ballardspahr.com shiroffj@ballardspahr.com Attorneys for U.S. Bank National Association Luis A. Ayon, Esq. Margaret E. Schmidt, Esq. MAIER GUTIERREZ AYON 400 South Seventh Street, Suite 400 Las Vegas, NV 89101 laa@mgalaw.com mes@mgalaw.com Attorneys for Defendant 421 West Azure Trust Sean L. Anderson, Esq. Timothy C. Pittsenbarger, Esq. LEACH JOHNSON SONG & GRUCHOW 8945 W. Russell Road, Suite 330 Las Vegas, NV 891148 _Debra Marquez________________________________ Employee of LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C. 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