Bank of Am., N.A. v. SFR Invs. Pool 1, LLC

• Decision Date: 13 September 2018
• Docket Number: No. 70501,70501
• Citation: 427 P.3d 113
• Parties: BANK OF AMERICA, N.A., Successor by Merger to BAC Home Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing, LP, Appellant, v. SFR INVESTMENTS POOL 1, LLC, a Nevada Limited Liability Company, Respondent.
• Court: Nevada Supreme Court

427 P.3d 113

BANK OF AMERICA, N.A., Successor by Merger to BAC Home Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing, LP, Appellant,

v.SFR INVESTMENTS POOL 1, LLC, a Nevada Limited Liability Company, Respondent.

No. 70501

Supreme Court of Nevada.

FILED SEPTEMBER 13, 2018

As Amended on Denial of Rehearing November 13, 2018

Akerman, LLP, and Darren T. Brenner, Thera A. Cooper, and Vatana Lay, Las Vegas, for Appellant.

Kim Gilbert Ebron and Jacqueline A. Gilbert, Howard C. Kim, Zachary Clayton, and Jason G. Martinez, Las Vegas, for Respondent.

BEFORE THE COURT EN BANC.

OPINION

By the Court, PICKERING, J.:

This is a quiet title dispute between the buyer at an HOA lien foreclosure sale and the holder of the first deed of trust on the property. The holder of the first deed of trust tendered the amount needed to satisfy the superpriority portion of the lien to the HOA before the sale but the trustee proceeded with foreclosure anyway. The question presented is whether the buyer took title subject to the first deed of trust. We hold that a first deed of trust holder’s unconditional tender of the superpriority amount due results in the buyer at foreclosure taking the property subject to the deed of trust. We therefore reverse the district court’s grant of summary judgment for SFR Investments Pool 1, LLC and remand for further proceedings consistent with this opinion.

I.

In 2012, the original owner of 3617 Diamond Spur Avenue (Property) fell behind on his payments to the Sutter Creek Homeowners Association (HOA). The HOA initiated foreclosure proceedings, recording a delinquent assessment lien and a notice of default and election to sell. After receiving notice of the default, Bank of America, the holder of the first deed of trust on the property, contacted the HOA, seeking to clarify the superpriority amount and offering to pay that amount in full. Based on the HOA’s representations, Bank of America tendered payment of $720—nine months' worth of assessment fees—to the HOA. The letter included with the tender stated that the HOA’s acceptance would be an "express agreement that [Bank of America]’s financial obligations towards the HOA in regards to the [Property] have now been ‘paid in full.’ " The HOA rejected the payment and sold the property at foreclosure to respondent SFR Investments Pool 1, LLC.

After the foreclosure sale, litigation ensued with Bank of America and SFR both claiming title to the Property. On cross-motions for summary judgment, the district court granted summary judgment to SFR and denied summary judgment to Bank of America, from which order Bank of America timely appealed. The case was routed to the court of appeals, which reversed and remanded. SFR then petitioned for review of the decision under NRAP 40B(a), which we granted.

II.

Bank of America argues that its tender was valid and satisfied the superpriority portion of the HOA’s lien. SFR responds that the HOA’s rejection was in good faith because at the time of the tender it was unsettled as to the amount of the superpriority portion of the lien, and the tender was conditional. SFR also asserts that it is protected as a bona fide purchaser of the property.

The grant or denial of summary judgment is reviewed de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005). Summary judgment is appropriate if the pleadings and other evidence on file, viewed in the light most favorable to the nonmoving party, demonstrate that no genuine issue of material fact remains in dispute and that the moving party is entitled to judgment as a matter of law. Id. "A genuine issue of material fact exists if, based on the evidence presented, a reasonable jury could return a verdict for the nonmoving party." Butler ex rel. Biller v. Bayer, 123 Nev. 450, 457-58, 168 P.3d 1055, 1061 (2007).

A.

Bank of America asserts that it tendered the correct amount to satisfy the superpriority portion of the HOA lien and that it was not required to do more. A valid tender of payment operates to discharge a lien or cure a default. Power Transmission Equip. Corp. v. Beloit Corp., 55 Wis.2d 540, 201 N.W.2d 13, 16 (1972) ("Common-law and statutory liens continue in existence until they are satisfied or terminated by some manner recognized by law. A lien may be lost by ... payment or tender of the proper amount of the debt secured by the lien."); see also 74 Am. Jur. 2d Tender § 41 (2012). Valid tender requires payment in full. Annotation, Tender as Affected by Insufficiency of Amount Offered , 5 A.L.R. 1226 (1920). The HOA refused to accept Bank of America’s tender, because it did not satisfy both the superpriority and subpriority portions of the lien.

NRS 116.3116 governs liens against units for HOA assessments and details the portion of the lien that has superpriority status. At the time of the tender in 2012, the statute provided that the superpriority portion of an HOA lien was prior to a first security interest on a unit

to the extent of any charges incurred by the association on a unit pursuant to NRS 116.310312 [maintenance and nuisance abatement] and 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.

NRS 116.3116(2) (2012). A plain reading of this statute indicates that the superpriority portion of an HOA lien includes only charges for maintenance and nuisance abatement, and nine months of unpaid assessments. We explained as much in SFR Investments Pool 1 v. U.S. Bank , 130 Nev. 742, 748, 334 P.3d 408, 412 (2014), and Horizons at Seven Hills v. Ikon Holdings , 132 Nev. ––––, ––––, 373 P.3d 66, 72 (2016).¹

The record establishes that Bank of America tendered the correct amount to satisfy the superpriority portion of the lien on the property. Pursuant to the HOA’s accounting, nine months' worth of assessment fees totaled $720, and the HOA did not indicate that the property had any charges for maintenance or nuisance abatement. Bank of America sent the HOA a check for $720 in June 2012. On the record presented, this was the full superpriority amount.

B.

The district court deemed Bank of America’s tender insufficient because it was conditional. It based this finding on the letter Bank of America sent with its payment, which stated,

This is a non-negotiable amount and any endorsement of said cashier’s check on your part, whether express or implied, will be strictly construed as an unconditional acceptance on your part of the facts stated herein and express agreement that [Bank of America]’s financial obligations towards the HOA in regards to the [property] have now been "paid in full."

SFR argues, and the district court found, that this clause imposed an impermissible condition on the tender, as it required the HOA to potentially accept less than the full amount it was due under NRS 116.3116, given that the scope of the superpriority portion of an HOA’s lien was not yet clarified at the time of the tender.

In addition to payment in full, valid tender must be unconditional, or with conditions on which the tendering party has a right to insist. 74 Am. Jur. 2d Tender § 22 (2012). "The only legal conditions which may be attached to a valid tender are either a receipt for full payment or a surrender of the obligation." Heath v. L.E. Schwartz & Sons, Inc., 203 Ga.App. 91, 416 S.E.2d 113, 114-15 (1992) ; see also Stockton Theatres, Inc. v. Palermo, 179 Cal.App.2d 323, 3 Cal.Rptr. 767, 768 (1960) (tender of entire judgment with request for satisfaction of judgment was not conditional); cf. Steward v. Yoder, 86 Ill.App.3d 223, 41 Ill.Dec. 709, 408 N.E.2d 55, 57 (1980) (concluding tender with request for accord and satisfaction was conditional, but not unreasonable).

Although Bank of America’s tender included a condition, it had a right to insist on the condition. Bank of America’s letter stated that acceptance of the tender would satisfy the superiority portion of the lien, preserving Bank of America’s interest in the property. Bank of America had a legal right to insist on this. SFR’s claim that this made the tender impermissibly conditional because the payment required to satisfy the superpriority portion of an HOA lien was legally unsettled at the time is unpersuasive. As discussed in Section A, a plain reading of NRS 116.3116 indicates that at the time of Bank of America’s tender, tender of the superpriority amount by the first deed of trust holder was sufficient to satisfy that portion of the lien. Thus, this issue was not undecided, and Bank of America’s tender of the superpriority portion of the lien did not carry an improper condition.

C.

SFR claims that even if Bank of America’s tender was valid, the HOA’s good-faith rejection because of a belief that Bank of America needed to tender the entire amount of the lien, is a defense to the tender. Bank of America responds that SFR’s assertion is speculative because the HOA never gave a reason for its rejection, and thus cannot serve as the basis for summary judgment in SFR’s favor.

Bank of America first contacted the HOA for assistance in determining the property’s monthly assessment fee so it could pay the superpriority portion of the lien. The HOA responded with a demand that Bank of America pay the entire HOA lien to halt the foreclosure proceedings. Bank of America then tendered nine months of the property’s assessment fees, along with a statutory analysis explaining that the amount was sufficient. The HOA returned the check a few weeks later and continued with foreclosure proceedings, giving no explanation for its rejection.

SFR did not present its good-faith rejection argument to the district court. But see Schuck v. Signature Flight Support of Nev., Inc ., 126 Nev, 434, 436, 245 P.3d 542, 544 (2010) ("[A] de novo standard of review does not trump the general rule that ‘[a] point not urged in the...