Bank of N.Y. Mellon v. Log Cabin Manor Homeowners Ass'n

• Decision Date: 23 January 2019
• Docket Number: Case No. 2:15-cv-02026-MMD-CWH
• Citation: 362 F.Supp.3d 930
• Parties: The BANK OF NEW YORK MELLON fka The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2006-OC9, Mortgage Passthrough Certificates, Series 2006-OC9, Plaintiff, v. LOG CABIN MANOR HOMEOWNERS ASSOCIATION; SFR Investments Pool 1, LLC; Doe Individuals I-X, Inclusive, and Roe Corporations I-X, Inclusive, Defendants. SFR Investments Pool 1, LLC, Counterclaimant, v. The Bank of New York Mellon fka The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2006-OC9, Mortgage Passthrough Certificates, Series 2006-OC9; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation, as Nominee Beneficiary for DHI Mortgage Company, Ltd.; Victoria J. Arboldea, an Individual and Joaquin Valdez, an Individual, Counter-Defendants/Cross-Defendants.
• Court: U.S. District Court — District of Nevada

362 F.Supp.3d 930

The BANK OF NEW YORK MELLON fka The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2006-OC9, Mortgage Passthrough Certificates, Series 2006-OC9, Plaintiff,

v.LOG CABIN MANOR HOMEOWNERS ASSOCIATION; SFR Investments Pool 1, LLC; Doe Individuals I-X, Inclusive, and Roe Corporations I-X, Inclusive, Defendants.

SFR Investments Pool 1, LLC, Counterclaimant,

v.The Bank of New York Mellon fka The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2006-OC9, Mortgage Passthrough Certificates, Series 2006-OC9; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation, as Nominee Beneficiary for DHI Mortgage Company, Ltd.; Victoria J. Arboldea, an Individual and Joaquin Valdez, an Individual, Counter-Defendants/Cross-Defendants.

Case No. 2:15-cv-02026-MMD-CWH

United States District Court, D. Nevada.

Signed January 23, 2019

Ariel E. Stern, Darren T. Brenner, Jamie K. Combs, Thera A. Cooper, Natalie L. Winslow, Akerman LLP, Dana Jonathon Nitz, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Plaintiff.

Phil Wen-Sheng Su, Robert S. Larsen, Brian K. Walters, Gordon & Rees LLP, Jacqueline A. Gilbert, Karen L. Hanks, Diana S. Ebron, Las Vegas, NV, for Defendants.

Jacqueline A. Gilbert, Karen L. Hanks, Diana S. Ebron, Las Vegas, NV, for Counter Claimant.

Ariel E. Stern, Darren T. Brenner, Natalie L. Winslow, Akerman LLP, Dana Jonathon Nitz, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Counter-Defendants/Cross-Defendants.

ORDER

MIRANDA M. DU, UNITED STATES DISTRICT JUDGE

I. SUMMARY

This dispute arises from the foreclosure sale of property to satisfy a homeowners' association lien. Before the Court are Defendant SFR Investments Pool 1, LLC's ("SFR") motion for summary judgment (ECF No. 109); Plaintiff Bank of New York Mellon's ("BONY") motion for summary judgment (ECF No. 110); and Defendant Log Cabin Manor Homeowners Association's ("HOA") motion for partial summary judgment (ECF No. 115). The Court has reviewed the various joinders, responses, and replies thereto. (ECF Nos. 111, 112, 113, 114, 116, 117, 120, 121, 122, 123.) Because the Court agrees with SFR that the foreclosure sale at issue extinguished BONY's interest in the property, the Court grants SFR's and the HOA's motions for summary judgment and denies BONY's motion for summary judgment.

II. BACKGROUND

The following facts are undisputed unless otherwise indicated.

A. Deed of Trust History

Victoria J. Arboleda and Joaquin Valdez ("Borrowers") purchased property ("Property") located within the HOA at 8106 Making Memories Place, Las Vegas, NV 89131 on August 1, 2006. (ECF No. 110 at 3.) The Borrowers executed a note ("the Note") and first deed of trust ("DOT") in exchange for $ 285,660. (Id. ) The DOT was assigned to BONY on November 29, 2011. (Id. )

B. HOA Lien and Foreclosure

The Borrowers failed to pay HOA assessments, and the HOA recorded a notice of delinquent assessment lien on August 31, 2010, alleging that $ 513.02 was due. (Id. ) The HOA recorded a notice of default and election to sell under the HOA's lien through its agent, Allesi & Koenig, LLC, on March 31, 2011, alleging that $ 1,824.88 was due. (Id. ) Bank of America, N.A.—servicer of the loan at the time for the DOT beneficiary—paid the HOA $ 1,824.88. (Id. ) The HOA subsequently released its lien. (Id. )

The HOA recorded a new notice of delinquent assessment lien on March 8, 2012, through its agent Nevada Association Services ("NAS"). (Id. at 4.) The HOA recorded a notice of default on April 24, 2012, alleging that $ 1,954.41 was due. (Id. )

The HOA recorded a notice of foreclosure sale on July 1, 2014, alleging that $ 3,344.53 was due to the HOA. (Id. ) The notice represented that the sale ("HOA Sale") would occur on July 25, 2014, but the HOA Sale was postponed and the HOA actually foreclosed on August 29, 2014. (Id. ; see also ECF No. 113 at 22.) SFR purchased the Property at the HOA Sale for $ 49,000. (Id. )

C. Complaint & Counterclaim

BONY filed the Complaint on October 20, 2015, asserting the following claims: (1) quiet title/declaratory judgment against SFR; (2) injunctive relief against SFR; (3) violation of procedural due process against the HOA and SFR; (4) tortious interference with contract against the HOA; (5) breach of the duty of good faith against the HOA; (6) wrongful foreclosure against the HOA; and (7) deceptive trade practices against the HOA. (ECF No. 1 at 6-13.)

SFR counterclaimed for quiet title. (ECF No. 14 at 15.)

III. LEGAL STANDARD

"The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court." Nw. Motorcycle Ass'n v. U.S. Dep't of Agric. , 18 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the pleadings, the discovery and disclosure materials on file, and any affidavits "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). An issue is "genuine" if there is a sufficient evidentiary basis on which a reasonable fact-finder could find for the nonmoving party and a dispute is "material" if it could affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where reasonable minds could differ on the material facts at issue, however, summary judgment is not appropriate. See id. at 250-51, 106 S.Ct. 2505. "The amount of evidence necessary to raise a genuine issue of material fact is enough ‘to require a jury or judge to resolve the parties' differing versions of the truth at trial.’ " Aydin Corp. v. Loral Corp. , 718 F.2d 897, 902 (9th Cir. 1983) (quoting First Nat'l Bank v. Cities Serv. Co. , 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968) ). In evaluating a summary judgment motion, a court views all facts and draws all inferences in the light most favorable to the nonmoving party. Kaiser Cement Corp. v. Fishbach & Moore, Inc. , 793 F.2d 1100, 1103 (9th Cir. 1986).

The moving party bears the burden of showing that there are no genuine issues of material fact. Zoslaw v. MCA Distrib. Corp. , 693 F.2d 870, 883 (9th Cir. 1982). Once the moving party satisfies Rule 56's requirements, the burden shifts to the party resisting the motion to "set forth specific facts showing that there is a genuine issue for trial." Anderson , 477 U.S. at 256, 106 S.Ct. 2505. The nonmoving party "may not rely on denials in the pleadings but must produce specific evidence, through affidavits or admissible discovery material, to show that the dispute exists," Bhan v. NME Hosps., Inc. , 929 F.2d 1404, 1409 (9th Cir. 1991), and "must do more than simply show that there is some metaphysical doubt as to the material facts." Orr v. Bank of Am., NT & SA , 285 F.3d 764, 783 (9th Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient." Anderson , 477 U.S. at 252, 106 S.Ct. 2505.

IV. SFR & BONY'S MOTIONS (ECF NOS. 109, 110)

The Court addresses the issues raised in SFR and BONY's respective summary judgment motions collectively. SFR argues that it is entitled to summary judgment on its counterclaim for quiet title because the HOA Sale extinguished the DOT. (ECF No. 109 at 14.) BONY argues in its response as well as in its own motion for summary judgment that the HOA Sale was invalid because the statute governing the HOA Sale is unconstitutional and, alternatively, that it is entitled to equitable relief. (See generally ECF Nos. 110, 112.) The Court considers the constitutionality of the statute governing the HOA Sale— NRS § 116.3116 —before turning to BONY's request for equitable relief.

A. Constitutionality of NRS § 116.3116

BONY argues that NRS § 116.3116 is void ab initio , facially unconstitutional, and unconstitutional as applied, rendering the HOA Sale void. (ECF No. 110 at 5-10; ECF No. 112 at 4-12.) SFR argues that NRS § 116.3116 is constitutional and further argues that BONY lacks Article III standing to challenge the constitutionality of NRS § 116.3116 on due process grounds. (ECF No. 109 at 8-13; ECF No. 113 at 6, 10-18.)

1. Standing

SFR argues that BONY lacks Article III standing to challenge NRS § 116.3116 on due process grounds because BONY received actual notice of the HOA Sale. (ECF No. 109 at 12; ECF No. 113 at 6.) But in the relevant cases that SFR cites, the plaintiffs challenged the method of notice—not the adequacy of the notice's content. See Lehner v. United States , 685 F.2d 1187, 1190 (9th Cir. 1982) (plaintiff argued that oral notice of foreclosure as opposed to written notice violated due process); Wiren v. Eide , 542 F.2d 757, 762 (9th Cir. 1976) (plaintiff argued that notice provision of criminal forfeiture statute providing solely for notice by publication violated due process); see also United Student Aid Funds, Inc. v. Espinosa , 559 U.S. 260, 272, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) (no challenge to notice's content). The difference is important because an individual who challenges the method of notice despite receiving actual notice "has clearly been accorded due process in the application of the statute as to him personally." Wiren , 542 F.2d at 762. By contrast, BONY contends it has not personally received due process because the notice required under NRS § 116.3116 (via incorporation of NRS § 107.090 ) is inadequate. (See ECF No. 112 at 9.) Accordingly, the Court finds SFR's argument unpersuasive.

2. Bourne Valley

BONY seems to base its argument about the constitutionality of NRS § 116.3116 in part on a Ninth Circuit decision that no longer controls: Bourne Valley Court Tr. v. Wells Fargo Bank, NA , 832 F.3d 1154 (9th Cir. 2016). (See, e.g. , ECF No. 110 at 2; ECF No. 112...