CitiMortgage, Inc. v. Corte Madera Homeowners Ass'n

• Citation: 962 F.3d 1103
• Decision Date: 19 June 2020
• Docket Number: No. 17-16404,17-16404
• Parties: CITIMORTGAGE, INC., Plaintiff-Counter-Defendant-Appellant, v. CORTE MADERA HOMEOWNERS ASSOCIATION; Susan Patchen; Eagle and the Cross, LLC; Nevada Association Services, Inc., Defendants-Counter-Claimants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

962 F.3d 1103

CITIMORTGAGE, INC., Plaintiff-Counter-Defendant-Appellant,

v.CORTE MADERA HOMEOWNERS ASSOCIATION; Susan Patchen; Eagle and the Cross, LLC; Nevada Association Services, Inc., Defendants-Counter-Claimants-Appellees.

No. 17-16404

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 13, 2019

Submission Vacated January 21, 2020

Resubmitted June 12, 2020 Pasadena, California

Filed June 19, 2020

Darren T. Brenner (argued), Ariel E. Stern, Scott R. Lachman, and Thera Cooper, Akerman LLP, Las Vegas, Nevada, for Plaintiff-Counter-Defendant-Appellant.

Michael N. Beede and James W. Fox, The Law Office of Mike Beede PLLC, Henderson, Nevada, for Defendants-Counter-Claimants-Appellees.

Before: Susan P. Graber, Marsha S. Berzon, and Morgan Christen, Circuit Judges.

OPINION

CHRISTEN, Circuit Judge:

In 2014, Corte Madera Homeowners Association conducted a non-judicial foreclosure sale in Las Vegas, Nevada to enforce a lien representing delinquent amounts owed by one of its homeowner members, Kathy Horton. CitiMortgage's ("Citi") first deed of trust on the property was extinguished in the foreclosure by operation of section 116.3116 of the Nevada Revised Statutes, which gave superpriority status to a portion of Corte Madera's lien.

Citi sued Corte Madera for wrongful foreclosure, breach of the statutory duty of good faith required by section 116.3113 of the Nevada Revised Statutes, and quiet title.

The district court granted summary judgment in favor of defendants on all of Citi's claims, and sua sponte rejected the allegation in Citi's complaint that Corte Madera's foreclosure notices violated the automatic stay imposed in Horton's bankruptcy proceeding. Citi appeals the dismissal of its quiet title claim. We have jurisdiction pursuant to 28 U.S.C. § 1291. In a separately filed memorandum disposition, we affirm the district court's denial of Citi's due process challenge and the denial of Citi's argument that the sale should be set aside due to an inadequate sale price. In this opinion, we affirm the district court's ruling regarding the adequacy of the lender's tender, but we remand for reconsideration of the complaint's allegation that Corte Madera's foreclosure notices violated the homeowner's bankruptcy stay.

BACKGROUND

Kathy Horton owned real property located at 2517 Danborough Court, Unit 106, Las Vegas, Nevada. In 2006, Horton refinanced the property with a $120,100.00 loan secured by a deed of trust. The deed of trust was reassigned to Bank of America Home Loans (later Bank of America, N.A.; hereinafter BANA) and recorded in December 2009. BANA later reassigned the deed to Citi.

Horton fell behind in the assessments she owed to Corte Madera. She filed a chapter 7 bankruptcy proceeding on February 29, 2012. On July 2, 2013, Nevada Association Services, Inc. (NAS) recorded a notice of delinquent assessment lien on behalf of Corte Madera showing that Horton owed Corte Madera $1,649.22 on its homeowners association (HOA) lien. On October 11, 2013, NAS recorded a notice of default. By then, Horton owed Corte Madera $2,955.10.

BANA responded to the notice of default in a letter to Corte Madera.¹ The letter argued that BANA's lien generally took priority over the HOA lien, but it also conceded that the portion of the HOA lien amounting to nine months of common assessments was "arguably senior" to BANA's deed of trust pursuant to section 116.3116 of the Nevada Revised Statutes. BANA requested that Corte Madera identify the superpriority amount of its HOA lien, with a breakdown of nine months’ assessments so BANA could calculate and tender that portion of the lien. Corte Madera acknowledged receipt of BANA's letter but responded that it required all payoff requests to be submitted through its online request form. Corte Madera provided no information about the amount due to satisfy the superpriority portion of the HOA lien. Neither BANA nor Citi submitted an online request to Corte Madera.

Corte Madera recorded a notice of trustee sale in April 2014, and Susan Patchen purchased the property for $11,100 at the non-judicial foreclosure sale that followed. Patchen later executed a quitclaim of her interest to The Eagle and the Cross, LLC (Eagle).

In February 2016, Citi filed a complaint in the federal district court for the District of Nevada naming Corte Madera, NAS, Patchen, and Eagle as defendants. The complaint alleged that defendants breached the duty of good faith imposed by section 116.3113 of the Nevada Revised Statutes, and it included a claim for wrongful foreclosure against NAS and Corte Madera. Citi also sought to quiet title against all defendants. The complaint prayed for equitable relief from foreclosure and a preliminary injunction prohibiting Eagle from selling or encumbering the property and requiring that Eagle pay all taxes, insurance, and HOA dues. The defendants filed counterclaims for quiet title and injunctive relief. Eventually, the parties filed cross-motions for summary judgment.

Citi does not dispute that section 38.330(1) of the Nevada Revised Statutes required its complaint to be accompanied by a sworn statement indicating that its claims for breach of the duty of good faith and for wrongful foreclosure had been mediated, and that no such statement was filed. The district court dismissed these two claims because Citi failed to certify that it had attempted to mediate. Citi does not appeal the district court's order dismissing these claims.²

Turning to Citi's quiet title claim, the district court rejected Citi's due process argument because it concluded that Citi lacked standing to assert BANA's due process rights, and because Citi did not dispute receiving actual notice of the non-judicial foreclosure sale. Because the court concluded that Citi failed to offer evidence that the foreclosure sale price was unreasonable due to any fraud, unfairness, or oppression, the court also rejected Citi's argument that the sale should be set aside.

In this opinion, we address Citi's tender and bankruptcy arguments in support of its quiet title claim. The district court rejected Citi's argument that BANA's letter to Corte Madera successfully tendered the superpriority portion of the lien. The court ruled that the lender's offer to pay the superpriority portion, conditioned on receipt of "adequate proof" of the amount of the lien, was not a valid tender. The district court also recognized that Citi's complaint alleged that the notice of delinquent assessment and notice of default violated the automatic bankruptcy stay that arose when Horton filed for chapter 7 protection. Neither party briefed that issue in the district court, but the district court reached it and decided that the foreclosure sale did not violate the bankruptcy stay because Horton received a discharge in May 2012, her bankruptcy case was closed in October 2013, and Corte Madera's non-judicial foreclosure sale did not occur until May 2014.³

Citi timely appealed the district court's order granting summary judgment to defendants on its quiet title claim.

STANDARD OF REVIEW

We review de novo a district court's order granting summary judgment. Fed. Home Loan Mortg. Corp. v. SFR Invs. Pool 1, LLC , 893 F.3d 1136, 1144 (9th Cir. 2018), cert. denied , ––– U.S. ––––, 139 S. Ct. 1618, 203 L.Ed.2d 897 (2019).

DISCUSSION

Section 116.3116(1) of the Nevada Revised Statutes allows homeowners associations to pursue liens on members’ homes for unpaid assessments and charges. HOA liens are split into superpriority and subpriority components; the superpriority component is prior to all other liens, including first deeds of trust, with enumerated exceptions not relevant here. Nev. Rev. Stat. § 116.3116(2). The superpriority portion comprises nine months’ worth of common assessments and any nuisance-abatement or maintenance charges. Id. § 116.3116(3) ; see also Bank of Am., N.A. v. Arlington W. Twilight Homeowners Ass'n , 920 F.3d 620, 622 (9th Cir. 2019) (per curiam); SFR Invs. Pool 1 v. U.S. Bank, N.A. ("SFR Investments "), 130 Nev. 742, 334 P.3d 408, 411 (2014) (en banc), superseded by statute on other grounds as stated in Saticoy Bay LLC Series 9050 W Warm Springs 2079 v. Nev. Ass'n Servs. , 135 Nev. 180, 444 P.3d 428 (2019). An HOA may foreclose on its superpriority lien through a non-judicial foreclosure sale. See Nev. Rev. Stat. § 116.31162 ; see also Arlington W. , 920 F.3d at 622.

To initiate a non-judicial foreclosure proceeding, an HOA must give notice of delinquency and wait 90 days to allow the homeowner to pay off the lien. See Nev. Rev. Stat. § 116.31162. Notice of default and notice of sale must be provided to the homeowner and to any holders of security interests in the property. Id . The holder of the first deed of trust may protect its collateral by tendering the amount of the superpriority portion of the lien to the HOA. SFR Invs. , 334 P.3d at 411. Before 2015, these notices were not required to state the amount of the superpriority portion.⁴ Interpreting the version of the statute in effect when Corte Madera sought to foreclose on Horton's property, the Nevada Supreme Court ruled that, because notices of default were required to be sent to all lienholders, it was permissible for the notice to state the total amount in default without segregating the superpriority amount. Id. at 418. The court reasoned that lenders holding first deeds of trust could protect their interests by either determining and tendering the exact amount of the superpriority component, or by tendering the full amount indicated in the notice and requesting a refund of the balance. Id .

A. BANA's Offer Did Not Constitute Valid Tender.

Citi argues that Corte Madera's non-judicial foreclosure sale did not extinguish its interest because BANA tendered the superpriority portion of the lien to Corte Madera. More specifically, Citi argues that BANA's letter to Corte Madera constituted a valid tender because the letter insisted on a permissible condition: that Corte...