Bank of N.Y. v. S. Highlands Cmty. Ass'n

• Decision Date: 07 September 2018
• Docket Number: Case No.: 2:17-cv-02699-APG-PAL
• Parties: BANK OF NEW YORK, as Trustee FOR the CERTIFICATEHOLDERS OF CWALT, INC., Alternative Loan Trust 2005-84 Mortgage Pass-Through Certificates, Series 2005-84, Plaintiff v. SOUTHERN HIGHLANDS COMMUNITY ASSOCIATION and SFR Investments Pool 1, LLC, Defendants
• Court: U.S. District Court — District of Nevada

329 F.Supp.3d 1208

BANK OF NEW YORK, as Trustee FOR the CERTIFICATEHOLDERS OF CWALT, INC., Alternative Loan Trust 2005-84 Mortgage Pass-Through Certificates, Series 2005-84, Plaintiff

v.SOUTHERN HIGHLANDS COMMUNITY ASSOCIATION and SFR Investments Pool 1, LLC, Defendants

Case No.: 2:17-cv-02699-APG-PAL

United States District Court, D. Nevada.

Signed September 7, 2018

Ariel E. Stern, William S. Habdas, Akerman, LLP, Las Vegas, NV, for Plaintiff.

Alexander Williams, Kurt R. Bonds, Alverson, Taylor, Mortenson & Sanders, Diana S. Ebron, Jacqueline A. Gilbert, Karen L. Hanks, Jason G. Martinez, Kim Gilbert Ebron, Las Vegas, NV, for Defendants.

Order (1) Granting in part Defendant Southern Highlands Community Association's Motion to Dismiss; (2) Granting Defendant SFR Investments Pool 1, LLC's Motion to Dismiss; (3) Granting Plaintiff Bank of New York Leave to Amend; and (4) Denying Motion to Certify

[ECF Nos. 24, 25, 44]

ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE

Plaintiff Bank of New York (BONY) sues to determine whether a non-judicial foreclosure sale conducted by defendant Southern Highlands Community Association (Southern Highlands) extinguished BONY's deed of trust that encumbered property located at 10995 Calcedonian Street in Las Vegas, Nevada. Defendant SFR Investments Pool 1, LLC (SFR) purchased the property at the homeowners association (HOA) foreclosure sale.

BONY sues for declarations that its deed of trust remains as an encumbrance against the property and that it may enforce the deed of trust through either a judicial or non-judicial foreclosure sale. BONY also sues Southern Highlands and its foreclosure agent, defendant Alessi & Koenig, LLC (Alessi), for equitable indemnification and wrongful foreclosure in the event that BONY's deed of trust was extinguished by the HOA sale.

SFR and Southern Highlands separately move to dismiss, contending BONY's claims are untimely. After briefing on the motions to dismiss was completed, I issued a decision in another case in which I held that the four-year catchall was the applicable limitation period for similar quiet title claims by lienholders. 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). Following that ruling, BONY requested that I certify to the Supreme Court of Nevada the question of which statute of limitations applies. SFR and Southern Highlands oppose certification.

The parties are familiar with the facts, and I will not repeat them here except where necessary to resolve the motions. I grant in part Southern Highlands' motion, grant SFR's motion, deny the motion to certify, and grant BONY leave to amend.

II. ANALYSIS

In considering a motion to dismiss, "all well-pleaded allegations of material fact are taken as true and construed in a light most favorable to the non-moving party." Wyler Summit P'ship v. Turner Broad. Sys., Inc. , 135 F.3d 658, 661 (9th Cir. 1998). However, I do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations in the complaint. See Clegg v. Cult Awareness Network , 18 F.3d 752, 754-55 (9th Cir. 1994). A plaintiff must make sufficient factual allegations to establish a plausible entitlement to relief. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Such allegations must amount to "more than labels and conclusions, [or] a formulaic recitation of the elements of a cause of action." Id. at 555, 127 S.Ct. 1955.

"A claim may be dismissed as untimely pursuant to a 12(b)(6) motion only when the running of the statute of limitations is apparent on the face of the complaint." United States ex rel. Air Control Techs., Inc. v. Pre Con Indus., Inc. , 720 F.3d 1174, 1178 (9th Cir. 2013) (alteration and quotation omitted). A limitation period begins to run "from the day the cause of action accrued." Clark v. Robison , 113 Nev. 949, 944 P.2d 788, 789 (1997). A cause of action generally accrues "when the wrong occurs and a party sustains injuries for which relief could be sought." Petersen v. Bruen , 106 Nev. 271, 792 P.2d 18, 20 (1990) ; see also State ex rel. Dep't of Transp. v. Pub. Emps.' Ret. Sys. of Nev. , 120 Nev. 19, 83 P.3d 815, 817 (2004) (en banc) ("A cause of action ‘accrues’ when a suit may be maintained thereon." (quotation omitted) ). Nevada has adopted the discovery rule, and thus time limits generally "do not commence and the cause of action does not ‘accrue’ until the aggrieved party knew, or reasonably should have known, of the facts giving rise to the damage or injury." G & H Assocs. v. Ernest W. Hahn, Inc. , 113 Nev. 265, 934 P.2d 229, 233 (1997).

The HOA foreclosure sale took place on September 19, 2012, the trustee's deed upon sale was recorded on October 9, 2012, and BONY filed the original complaint in this matter on October 20, 2017. ECF Nos. 1 at 1; 17 at 6. Consequently, claims that are governed by a limitation period of five years or less are untimely.

A. Declaratory Relief (Count One)

Count one of the amended complaint seeks a declaration that the deed of trust still encumbers the property or that the HOA sale was void. ECF No. 17 at 6-8. Southern Highlands argues this claim is essentially one to quiet title so a five-year limitation period applies. SFR argues that this claim alleges statutory violations under Nevada Revised Statutes Chapter 116 and generally challenges Southern Highlands' authority to foreclose as it did, and thus a three-year limitation period applies under Nevada Revised Statutes § 11.190(3)(a). Alternatively, SFR argues the four-year catchall provision in § 11.220 applies.

BONY responds that no limitation period applies because the sale was conducted pursuant to an unconstitutional statute and thus is void as a matter of law. BONY also argues that its claim is based on the fact that it tendered the superpriority amount and that the sale should be set aside for fraud, oppression, or unfairness, so its claim does not necessarily rely on statutory violations. BONY asserts a variety of reasons as to why its claim is timely, including that (1) the time to enforce the deed of trust has not expired, so its claim about the continued validity of the deed of trust is timely; (2) its declaratory relief claim is a defense to a future wrongful foreclosure claim by SFR if BONY proceeds with a foreclosure; (3) non-judicial foreclosures are not subject to a statute of limitations, so a declaratory relief claim seeking permission to foreclose likewise has no limitation period; and (4) even if a limitation period applies, it would be 10 years from acceleration or maturity under § 106.240.

Alternatively, BONY argues that if a shorter limitation period applies, BONY's complaint should relate back to when it initiated non-judicial foreclosure proceedings in November 2008, or the limitation period should be equitably tolled because BONY did not delay initiating non-judicial foreclosure proceedings, less than three years after the borrower was in default.

I have previously ruled that the four-year catchall limitation period in § 11.220 applies to claims under § 40.010 brought by a lienholder seeking to determine whether an HOA sale extinguished its deed of trust. See Country Garden Owners Ass'n , 2018 WL 1336721, at *2. BONY's claim for a declaration that the deed of trust was not extinguished therefore is untimely.

BONY relies on Facklam v. HSBC Bank USA for Deutsche ALT-A Sec. Mortg. Loan Tr. , ––– Nev. ––––, 401 P.3d 1068 (Nev. 2017) (en banc) to argue no limitation period applies to its quiet title claim because it could still conduct a non-judicial foreclosure. In Facklam , the Supreme Court of Nevada held that no statute of limitation applies to a non-judicial foreclosure because such statutes apply only to judicial actions. 401 P.3d at 1070-71. Facklam has no application here because BONY commenced this judicial action, to which a statute of limitations applies.

Alternatively, BONY contends that if a limitation period applies, its claim is governed by Nevada Revised Statutes § 106.240. That section provides:

The lien heretofore or hereafter created of any mortgage or deed of trust upon any real property, appearing of record, and not otherwise satisfied and discharged of record, shall at the expiration of 10 years after the debt secured by the mortgage or deed of trust according to the terms thereof or any recorded written extension thereof become wholly due, terminate, and it shall be conclusively presumed that the debt has been regularly satisfied and the lien discharged.

This section is not a statute of limitation. It "creates a conclusive presumption that a lien on real property is extinguished ten years after the debt becomes due." Pro-Max Corp. v. Feenstra , 117 Nev. 90, 16 P.3d 1074, 1077 (2001).

Finally, BONY argues that its declaratory relief claim is a defense to a future wrongful foreclosure claim by SFR if BONY proceeds with a foreclosure and that defenses have no statute of limitations. Generally, a party can assert defenses "that, if raised as claims, would be time-barred," because the statute of limitations "should be used only as a shield, not a sword." City of Saint Paul, Alaska v. Evans , 344 F.3d 1029, 1033-34 (9th Cir. 2003) (noting that otherwise, a potential plaintiff could wait until a limitation period expired and "then pounce on the helpless defendant"); see also Dredge Corp. v. Wells Cargo, Inc. , 80 Nev. 99, 389 P.2d 394, 396 (1964) ("Limitations do not run against defenses."). But that does not mean that defenses are never subject to a statute of limitations.

For example, in City of Saint Paul , the City filed suit for declaratory relief against a counter-party to a settlement agreement two years after the limitation period for a claim by a governmental entity had expired. 344 F.3d at 1032-33. The defendant counterclaimed, to which the City then asserted as defenses mirror images of its affirmative claims. Id. at 1033....