Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, Case No.: 2:15-cv-00692-GMN-CWH

• Decision Date: 29 September 2018
• Docket Number: Case No.: 2:15-cv-00692-GMN-CWH
• Parties: BANK OF AMERICA, N.A., Plaintiff, v. SFR INVESTMENTS POOL 1, LLC; SBH2 HOMEOWNERS ASSOCIATION; FRANCES ESCAMILLA; and GREGG ESCAMILLA, Defendants. SFR INVESTMENTS POOL 1, LLC, Cross-Claimant, v. FRANCES ESCAMILLA; and GREGG ESCAMILLA, Cross-Defendants. SFR INVESTMENTS POOL 1, LLC, Counter-Claimant, v. BANK OF AMERICA, N.A., Counter-Defendant. SBH2 HOMEOWNERS ASSOCIATION, Third-Party Plaintiff, v. NEVADA ASSOCIATION SERVICES, INC. Third-Party Defendant. NEVADA ASSOCIATION SERVICES, INC., Counter-Claimant, v. SBH2 HOMEOWNERS ASSOCIATION., Counter-Defendant.
• Court: U.S. District Court — District of Nevada

BANK OF AMERICA, N.A., Plaintiff, v. SFR INVESTMENTS POOL 1, LLC; SBH2 HOMEOWNERS ASSOCIATION;

FRANCES ESCAMILLA; and GREGG ESCAMILLA, Defendants.

SFR INVESTMENTS POOL 1, LLC, Cross-Claimant, v. FRANCES ESCAMILLA; and GREGG ESCAMILLA, Cross-Defendants.

SFR INVESTMENTS POOL 1, LLC, Counter-Claimant, v. BANK OF AMERICA, N.A., Counter-Defendant.

SBH2 HOMEOWNERS ASSOCIATION, Third-Party Plaintiff, v. NEVADA ASSOCIATION SERVICES, INC. Third-Party Defendant.

NEVADA ASSOCIATION SERVICES, INC., Counter-Claimant, v. SBH2 HOMEOWNERS ASSOCIATION., Counter-Defendant.

Case No.: 2:15-cv-00692-GMN-CWH

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

September 29, 2018

ORDER

Pending before the Court is the Motion for Summary Judgment, (ECF No. 105), filed by Defendant SBH2 Homeowners Association ("HOA"). Plaintiff Bank of America, N.A. ("BANA") filed a Response, (ECF No. 115), and HOA filed a Reply, (ECF No. 117).

Also pending before the Court is the Motion for Partial Summary Judgment, (ECF No. 109), filed by BANA. HOA and SFR Investment Pool 1 ("SFR") filed Responses, (ECF Nos. 119, 120), and BANA filed a Reply, (ECF No. 123).

Also pending before the Court is the Motion for Summary Judgment, (ECF No. 113), filed by SFR. BANA filed a Response, (ECF No. 118), and SFR filed a Reply, (ECF No. 122).

For the reasons discussed below, the Court GRANTS SFR's Motion for Summary Judgment, (ECF No. 113), GRANTS HOA's Motion for Summary Judgment, (ECF No. 105), and DENIES BANA's Motion for Partial Summary Judgment, (ECF No. 109).

I. BACKGROUND

This case arises from the non-judicial foreclosure on real property located at 6018 Tea Light Court, Las Vegas, Nevada 89113 (the "Property"). (Am. Compl. ¶ 12, ECF No. 5). In 2007, Gregg and Frances Escamilla purchased the Property by way of a loan in the amount of $347,274.00 secured by a deed of trust ("DOT") recorded on October 9, 2007. (Deed of Trust, Ex. A to Am. Compl., ECF No. 5-1). The DOT identifies BANA as the lender. (Id.).

On June 15, 2010, HOA, through its agent Nevada Association Services, Inc. ("NAS"), recorded a Notice of Delinquent Assessment Lien against the Property. (Notice of DelinquentAssessment, Ex. B to Am. Compl., ECF No. 5-2). On August 24, 2010, HOA recorded a Notice of Default and Election to Sell to satisfy the delinquent amount. (Notice of Default, Ex. C to Am. Compl., ECF No. 5-3). A Notice of Trustee's Sale was recorded against the Property on September 7, 2012, and a non-judicial foreclosure occurred on January 11, 2013, through which SFR purchased its interest in the Property. (See NAS Letter Regarding Payment from Auction Proceeds, Ex. 1 to HOA's MSJ, ECF No. 105-1). SFR recorded its Foreclosure Deed on January 16, 2013. (Answer to Am. Compl. ¶ 5).

BANA filed its Amended Complaint on April 27, 2015, asserting the following causes of action against various parties involved in the foreclosure and subsequent sale of the Property: (1) quiet title with a requested remedy of declaratory relief against all Defendants; (2) wrongful foreclosure against HOA; (3) breach of Nevada Revised Statute 116.1113 against HOA; and (4) injunctive relief against SFR. (Am. Compl. ¶¶ 31-64).

II. LEGAL STANDARD

The Federal Rules of Civil Procedure provide for summary adjudication when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. "Summary judgment is inappropriate if reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict in the nonmoving 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)). A principal purpose of summary judgment is "to isolate and dispose of factually unsupported claims." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

In determining summary judgment, a court applies a burden-shifting analysis. "When the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case." C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). In contrast, when the nonmoving party bears the burden of proving the claim or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 323-24. If the moving party fails to meet its initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 (1970).

If the moving party satisfies its initial burden, the burden then shifts to the opposing party to establish that a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." T. W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations that are unsupported by factual data. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial. Celotex Corp., 477 U.S. at 324.

At summary judgment, a court's function is not to weigh the evidence and determine the truth but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. The evidence of the nonmovant is "to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. But if the evidence of the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted. Id. at 249-50.

III. DISCUSSION

In its Motion for Summary Judgment, SFR argues that there is no dispute of material fact that the Property foreclosure sale extinguished BANA's prior DOT, thereby justifying quiet title in SFR's favor. (SFR's MSJ 6:21-23, ECF No. 113). HOA in its Motion for Summary Judgment contends that the quiet title dispute remains between BANA and SFR alone, which deserves dismissal of any quiet title claims against HOA. (HOA's MSJ 7:17-23, ECF No. 105). BANA, by contrast, argues that summary judgment should be granted in its favor because HOA received tender of the super priority amount prior to foreclosure, the sale price was grossly inadequate, and the Ninth Circuit's decision in Bourne Valley Court Tr. v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), cert. denied, No. 16-1208, 2017 WL 1300223 (U.S. June 26, 2017),¹ compels a finding that its DOT survived the sale. (See MSJ 2:7-3:19, ECF No. 109). The Court addresses each of those issues in turn, beginning with the applicability of Bourne Valley to this case.

A. Constitutionality of the Foreclosure

In Bourne Valley, the Ninth Circuit held that NRS § 116.3116's "'opt-in' notice scheme, which required a homeowners' association to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively requested notice, facially violated the lender'sconstitutional due process rights under the Fourteenth Amendment to the Federal Constitution." Bourne Valley, 832 F.3d at 1156. Specifically, the Court of Appeals found that by enacting the statute, the Nevada legislature acted to adversely affect the property interests of mortgage lenders and was thus required to provide "notice reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Id. at 1159. The statute's opt-in notice provisions therefore violated the Fourteenth Amendment's Due Process Clause because they impermissibly "shifted the burden of ensuring adequate notice from the foreclosing homeowners' association to a mortgage lender." Id.

In holding that NRS § 116.3116's opt-in notice scheme is facially unconstitutional, the Ninth Circuit rejected the appellant's argument that NRS § 107.090 should be read into NRS § 116.31168(1) to cure the constitutional deficiency. Id. Specifically, the appellant argued that the "incorporation of section 107.090 means that foreclosing homeowners' associations were required to provide notice to mortgage lenders even absent a request." Id. The Ninth Circuit, interpreting Nevada law, held that this interpretation "would impermissibly render the express notice provisions of Chapter 116 entirely superfluous." Id.

Subsequent to Bourne Valley, a court in this District certified the following question to the Nevada Supreme Court: "Whether NRS § 116.31168(1)'s incorporation of NRS § 107.090 required a homeowner's association to provide notices of default and/or sale to persons or entities holding a subordinate...