Bank of N.Y. Mellon v. Terra Bella Owners Ass'n, Inc., Case No.: 2:16-cv-00549-APG-NJK

• Decision Date: 04 December 2019
• Docket Number: Case No.: 2:16-cv-00549-APG-NJK
• Citation: Bank of N.Y. Mellon v. Terra Bella Owners Ass'n, Inc., Case No.: 2:16-cv-00549-APG-NJK (D. Nev. Dec 04, 2019)
• Parties: BANK OF NEW YORK MELLON, Plaintiff v. TERRA BELLA OWNERS ASSOCIATION, INC., et al., Defendants
• Court: U.S. District Court — District of Nevada

BANK OF NEW YORK MELLON, Plaintiff v. TERRA BELLA OWNERS ASSOCIATION, INC., et al., Defendants

Case No.: 2:16-cv-00549-APG-NJK

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

December 4, 2019

Order (1) for Supplemental Briefing and (2) Granting Unopposed Motion for Leave to File Supplemental Authority

[ECF No. 61]

Plaintiff Bank of New York Mellon (BONY) sues to determine whether a deed of trust still encumbers property located at 7524 Midnight Rambler Street in Las Vegas following a non-judicial foreclosure sale conducted by the homeowners association (HOA), defendant Terra Bella Owners Association, Inc. (Terra Bella). Defendant Midnight Rambler Trust (Trust) purchased the property at the HOA foreclosure sale and later quitclaimed it to defendant Saticoy Bay LLC, Series 7524 Midnight Rambler Street (Saticoy).

BONY seeks a declaration that the HOA sale did not extinguish the deed of trust. Alternatively, it asserts damages claims against Terra Bella and its foreclosure agent, defendant Hampton & Hampton Collections LLC (Hampton).¹ Saticoy and Trust counterclaim to quiet title.

The parties move for summary judgment, raising a variety of grounds. Because the parties have not adequately addressed the pivotal factual question of whether BONY received actual notice of the 2012 foreclosure notices, I order the parties to file supplemental briefs.

I. BACKGROUND

The former homeowners, Robert Garvey and Rosonna Garvey, executed a deed of trust encumbering the Midnight Rambler property in 2004. ECF No. 51-1. The original lender was Full Spectrum Lending, Inc., and Mortgage Electronic Registration Systems, Inc. (MERS) was identified as the beneficiary of the deed of trust. Id. The next year, the Garveys quitclaimed the property to the Robert & Rosonna M. Garvey Family Limited Partnership (Garvey Family Limited Partnership), with the only address identified as the Midnight Rambler address. ECF No. 51-2. Information from the Nevada Secretary of State shows Robert and Rosonna Garvey as the only officers for the partnership and provides the Midnight Rambler address for the partnership and for the Garveys. ECF No. 55-16.

In August 2008, Rosonna Garvey filed for bankruptcy.² ECF No. 51-4. The Midnight Rambler property was listed in her bankruptcy schedule. Id. at 11, 16.

In January 2009, Hampton sent the Garveys a letter notifying them of a delinquency in the homeowners assessments and advising them as to how to cure the default. ECF No. 50-6. On March 2, 2009, Hampton recorded a notice of delinquent assessment lien. ECF No. 50-7. Later that same month, Hampton mailed, but did not record, a notice of default. ECF No. 57-1 at 4. At that time, BAC Home Loans Servicing, L.P. (BAC) was the servicer for the loan. ECF No. 50-14 at 9. BAC received a copy of this notice of default. Id. In June 2009, Rosonna Garvey's bankruptcy proceeding was closed. ECF Nos. 51-6 at 5-6; 51-8. The next month, Hampton mailed, but did not record, a notice of sale. ECF No. 57-1 at 5. BAC received this notice of sale. Id. The sale did not take place.

BAC merged into BONY in July 2011. ECF No. 50-14 at 9. That same month, MERS assigned the deed of trust to BONY as Trustee for the Certificateholders of CWABS, Inc., Asset Backed Certificates, Series 2004-AB1, and it listed an address for BONY. ECF No. 50-5. Thereafter, Bank of America, N.A. (BANA) serviced the loan for BONY. ECF No. 50-14 at 9.

On August 24, 2012, Hampton recorded a notice of default and election to sell. ECF No. 50-8. Hampton sent the notice of default by certified and first-class mail to Robert and Rosonna Garvey at the Midnight Rambler address. ECF No. 50-9 at 2. The certified mail was returned and marked "return to sender." ECF No. 51-7 at 31-32. Hampton sent the notice of default to BONY by first-class mail at the address listed in the deed of trust, but it did not include in the mailing address that it was being sent to BONY as Trustee for the Certificateholders of CWABS, Inc., Asset Backed Certificates, Series 2004-AB1. Id.; see also ECF No. 51-7 at 15. BANA, who was BONY's servicer at the time, has no record of receiving the notice of default. ECF No. 51-10 at 2.

On December 14, 2012, Hampton recorded a notice of trustee's sale. ECF No. 50-10. That notice referred back to the March 2, 2009 notice of default, not the August 2012 notice of default. ECF Nos. 51-11; 51-7 at 17-18. Hampton sent the notice of sale by certified and first-class mail to the Garveys at the Midnight Rambler address and by first-class mail to the Garvey Family Limited Partnership at the same address. ECF No. 50-11; 51-7 at 18, 25. There is no evidence that the certified mail was returned to Hampton or that someone signed for it. Hampton sent the notice of sale to BONY by first class mail and again did not identify the trustee information in the address. ECF No. 50-11; 51-7 at 25. BANA has no record of receiving the notice of sale. ECF No. 51-10 at 2.

In 2012, it was BANA's policy upon receiving an HOA foreclosure notice to retain the law firm Miles Bauer Bergstrom & Winters, LLP to determine and pay the superpriority amount. ECF No. 51-10 at 3. There is no evidence BANA did so in relation to this property.

The HOA foreclosure sale took place on January 24, 2013. ECF No. 50-3. Trust purchased the property at the sale for $18,100.00. Id. Trust later transferred the property to Saticoy. ECF No. 50-2. On August 14, 2019, the bankruptcy court in Rosonna Garvey's bankruptcy proceeding retroactively annulled the automatic stay in relation to the Midnight Rambler property. ECF No. 61-1.

II. LEGAL STANDARD

Summary judgment is appropriate if the movant shows "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), (c). A fact is material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to set forth specific facts demonstrating there is a genuine issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000); Sonner v. Schwabe N. Am., Inc., 911 F.3d 989, 992 (9th Cir. 2018) ("To defeat summary judgment, the nonmoving party must produce evidence of a genuine dispute of material fact that could satisfy its burden at trial."). I view the evidence and reasonable inferences in the

/ / / /light most favorable to the non-moving party. James River Ins. Co. v. Hebert Schenk, P.C., 523 F.3d 915, 920 (9th Cir. 2008).

III. DECLARATORY RELIEF CLAIMS

The parties raise a variety of arguments regarding BONY's declaratory relief claim and Saticoy and the Trust's counterclaims for declaratory relief and to quiet title. I address them in turn below.

A. Statute of Limitations

Saticoy and Trust argue that BONY's declaratory relief claim is untimely. I have previously ruled that the four-year catchall limitation period in Nevada Revised Statutes § 11.220 applies to claims under Nevada Revised Statutes § 40.010 brought by a lienholder seeking to determine whether an HOA sale extinguished a deed of trust. See Bank of Am., N.A. v. Country Garden Owners Ass'n, No. 2:17-cv-01850-APG-CWH, 2018 WL 1336721, at *2 (D. Nev. Mar. 14, 2018). The HOA foreclosure sale took place on January 24, 2013. BONY filed its complaint on March 11, 2016. ECF No. 1. Therefore, its declaratory relief claim is timely. I deny Saticoy and Trust's motion for summary judgment on this basis.

B. Due Process

Saticoy, Trust, and Terra Bella argue Nevada Revised Statutes Chapter 116 as it existed at the time of this sale did not violate due process. BONY argues Chapter 116 facially violates its due process rights because the statute did not require HOAs to warn mortgagees that their deeds of trust were in jeopardy. Alternatively, BONY argues this sale violated BONY's due process rights as applied because Hampton failed to send the notice of default and notice of sale by certified mail to BONY, and sending those notices to BONY by first class mail without alsospecifying the trust that BONY represents is not reasonably calculated under the circumstances to provide BONY with notice of the sale.

Terra Bella responds to the as-applied argument by contending that BONY had actual notice of the sale in 2009, and those notices were also sent by first-class mail. It further argues that BONY took the assignment of the deed of trust with notice of the delinquent assessment lien and is charged with its predecessor's knowledge and receipt of the notices, so it has not suffered a due process violation.

As to BONY's facial challenge, the Ninth Circuit's decision in Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016) is no longer good law and Chapter 116 as it existed as of the time of this sale did not violate BONY's due process rights. See Bank of Am., N.A. v. Arlington W. Twilight Homeowners Ass'n, 920 F.3d 620, 623-24 (9th Cir. 2019) (citing SFR Invs. Pool 1, LLC v. Bank of N.Y. Mellon, 422 P.3d 1248 (Nev. 2018) (en banc)); Nationstar Mortg. LLC v. Amber Hills II Homeowners Ass'n, No. 2:15-cv-01433-APG-CWH, 2016 WL 1298108, at *6-9 (D. Nev. Mar. 31, 2016).

With respect to the as-applied challenge, BONY does not cite any law for the proposition that sending the notices by first-class mail and not including BONY's full name even though the mail was otherwise correctly addressed to BONY at the identified address amounts to a constitutional violation under the due process clause. First-class mail has repeatedly been recognized as a valid...