Berezovsky v. Moniz

Decision Date25 August 2017
Docket NumberNo. 16-15066,16-15066
Parties Alex BEREZOVSKY, Plaintiff-Counter-Defendant-Appellant, v. Gregory MONIZ; Idell Moniz; Red Rock Financial Services, LLC, Wells Fargo Bank, N.A.; Garden Terrace Homeowners Association, Defendants, and Bank of America, N.A., Defendant-Appellee, Federal Home Loan Mortgage Corporation; Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, Defendants-Counter-Claimants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Luis A. Ayon (argued), Maier Gutierrez Ayon, Las Vegas, Nevada; Michael V. Infuso and Keith W. Barlow, Green Infuso LLP, Las Vegas, Nevada; for Plaintiff-Counter-Defendant-Appellant.

Michael A.F. Johnson (argued), Matthew J. Oster, Elliott C. Mogul, Dirk C. Phillips, Asim Varma, and Howard N. Cayne, Arnold & Porter LLP, Washington, D.C.; Leslie Bryan Hart and John D. Tennert, Fennemore Craig P.C., Reno, Nevada; Darren T. Brenner, Akerman LLP, Las Vegas, Nevada; Marc James Ayers and R. Aaron Chastain, Bradley Arant Boult Cummings LLP, Birmingham, Alabama; for Defendants-Counter-Claimants-Appellees.

Before: Marsha S. Berzon and Richard R. Clifton, Circuit Judges, and Kimberly J. Mueller,** District Judge.


MUELLER, District Judge:

If a homeowners association member in Nevada misses property payments for six months, Nevada law equips the association with the ability to foreclose on a "superpriority lien," quashing all other property liens or interests recorded after the recordation of the Covenants, Conditions, and Restrictions attached to the title. On its face, this superpriority lien has the potential to trump certain federal property interests, despite Congress's passage of a provision known as the Federal Foreclosure Bar, which prohibits nonconsensual foreclosure of Federal Housing Finance Agency ("Agency") assets. This clash of state and federal law has spawned considerable litigation in Nevada. This decision resolves the clash in favor of the Federal Foreclosure Bar.

Appellant Alex Berezovsky purchased a home at a homeowners association foreclosure sale in 2013. He argues the Nevada superpriority lien provision empowered the association to sell the home to him free of any other liens or interests, priority status aside. The Federal Home Loan Mortgage Corporation ("Freddie Mac") claims it has a priority interest in the home Berezovsky purchased. Freddie Mac is under Agency conservatorship, meaning the Agency temporarily owns and controls Freddie Mac's assets. The Federal Foreclosure Bar's prohibition on nonconsensual foreclosure gives teeth to the Agency's statutory mandate to guard its conservatorship assets.

Berezovsky sued to quiet title in Nevada state court. Armed with the Federal Foreclosure Bar, Freddie Mac intervened and counterclaimed for the property's title, removed the case to federal district court, and moved for summary judgment. The Agency joined Freddie Mac's counterclaim. Together the federal entities argued that Berezovsky did not acquire "clean title" in the home because the Federal Foreclosure Bar preempts Nevada law, invalidating any purported extinguishment of Freddie Mac's interest through the association foreclosure sale. In resolving the parties' cross-motions, the district court agreed with the federal entities.

On appeal, Berezovsky disputes the Federal Foreclosure Bar's applicability and contends Freddie Mac lacks an enforceable property interest. We are unpersuaded and affirm the district court's holding.


The home Berezovsky purchased is located in Las Vegas, Nevada. Gregory and Idell Moniz previously owned the home, which is located in a community governed by a homeowners association. On March 5, 2007, the Monizes took out a $220,000 loan secured by a deed of trust. The deed of trust listed the Monizes as the loan borrowers and named Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary under the security instrument, and as nominee for the lender, Countrywide Home Loans, Inc., and its successors and assigns. Freddie Mac purchased the Monizes' loan in 2007 and has owned it ever since. On July 22, 2011, MERS assigned its beneficial interest under the deed of trust to Bank of America, N.A. ("BANA"), and BANA immediately recorded the assignment.

In early 2011, the Monizes missed $1,767.38 in payments they owed to the homeowners association. This lapse triggered Nevada's superpriority lien law, empowering the homeowners association to record a lien against the home, which it did on March 17, 2011. The association recorded a formal notice of default on May 9, 2013, and then exercised its power to foreclose on the home and extinguish all other property interests. Berezovsky acquired the home at the June 4, 2013, foreclosure sale for $10,500; he then recorded the deed in his name.

In his state action to quiet title, Berezovsky sued all those holding a property interest in the home, including the Monizes and BANA. Freddie Mac intervened, counterclaimed for title, removed the case to federal court, and moved for summary judgment. To establish its priority property interest under Nevada law, Freddie Mac produced evidence showing it had owned the Monizes' loan since 2007, and that BANA, the recorded deed-of-trust beneficiary, had been its loan-servicing agent.

The Agency also intervened as Freddie Mac's conservator and joined the summary judgment motion. See Housing and Economic Recovery Act of 2008 ("HERA"), 12 U.S.C. §§ 4511, 4513 (empowering Agency to place entities like Freddie Mac into conservatorship to protect nation's housing market and participate in litigation toward same end). In placing Freddie Mac into conservatorship in 2008, the Agency acquired Freddie Mac's "rights, titles, powers, and privileges ... with respect to [its] assets" for the life of the conservatorship. 12 U.S.C. § 4617(b)(2)(A)(I). The Agency's conservatorship assets are shielded from certain adverse actions as spelled out by statute. See generally id. § 4617. The asset protection clause known as the Federal Foreclosure Bar1 provides that "[n]o property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency." Id. § 4617(j)(3). In this case, the Agency did not consent to the association's foreclosure of Freddie Mac's lien. For this reason, the district court concluded, the Federal Foreclosure Bar supported granting summary judgment for Freddie Mac.

Berezovsky timely appealed. He argues the Federal Foreclosure Bar does not apply and, even if it does, Freddie Mac lacks an enforceable property interest. We review the district court's decision to grant summary judgment de novo. Gordon v. Virtumundo, Inc ., 575 F.3d 1040, 1047 (9th Cir. 2009) (citing Burrell v. McIlroy , 464 F.3d 853, 855 (9th Cir. 2006) ).


Berezovsky offers two reasons the Federal Foreclosure Bar does not apply. He says (1) the Bar does not apply to private association foreclosures generally, because it protects the Agency's property only from state and local tax liens; and (2) it does not apply specifically to this foreclosure, because Freddie Mac and the Agency implicitly consented to the foreclosure when they took no action to stop the sale.2

Whether the Federal Foreclosure Bar applies to private foreclosures generally is a matter of first impression. In answering the question, we turn first to the statute's structure and plain language. See Avila v. Spokane Sch. Dist. 81 , 852 F.3d 936, 941 (9th Cir. 2017). HERA identifies the powers granted to the Agency as a conservator and the exemptions from which it benefits. A subsection of the statute entitled "Other agency exemptions"3 includes the Federal Foreclosure Bar as the third exemption, and provides as follows:

(1) Applicability
The provisions of this subsection shall apply with respect to the Agency in any case in which the Agency is acting as a conservator or a receiver.
(2) Taxation
The Agency, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Agency shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, and the tax thereon, shall be determined as of the period for which such tax is imposed.
(3) Property protection
No property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency.
(4) Penalties and fines
The Agency shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due.

12 U.S.C. § 4617(j).

On its face, the first provision makes clear that this subsection applies to "any case" in which the Agency serves as conservator, without limitation. Id. § 4617(j)(1). Congress expressly limited the second exemption to taxation under the plain language of the provision. See id. § 4617(j)(2) ( "shall be exempt from all taxation," with specified exceptions). But the Federal Foreclosure Bar, titled "Property protection," is not so limited and does not expressly use the word "taxes" at all. See id. § 4617(j)(3). Notably, it does not limit "foreclosure" to a subset of foreclosure types. Id. The text of exemption four, titled "Penalties and fines," references taxes, negating agency liability for penalties or fines arising from unpaid property, probate, or recording taxes. See id. § 4617(j)(4). A...

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