JPMorgan Chase Bank, N.A. v. SFR Invs. Pool 1, LLC, Case No. 2:14–cv–02080–RFB–GWF

• Decision Date: 28 July 2016
• Docket Number: Case No. 2:14–cv–02080–RFB–GWF
• Citation: 200 F.Supp.3d 1141
• Parties: JPMORGAN CHASE BANK, N.A., Plaintiff, v. SFR INVESTMENTS POOL 1, LLC, et al., Defendants.
• Court: U.S. District Court — District of Nevada

200 F.Supp.3d 1141

JPMORGAN CHASE BANK, N.A., Plaintiff,

v.SFR INVESTMENTS POOL 1, LLC, et al., Defendants.

Case No. 2:14–cv–02080–RFB–GWF

United States District Court, D. Nevada.

Signed July 28, 2016

Chelsea Crowton, Dana Jonathon Nitz, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Plaintiff.

Howard C. Kim, Diana Cline Ebron, Jacqueline A. Gilbert, Kim Gilbert Ebron, Bradley Epstein, Paul P. Terry, Jr., Aaron Cheng-I Yen, Michael W. McKelleb, Troy R. Dickerson, Angius & Terry LLP, Las Vegas, NV, for Defendants.

ORDER

RICHARD F. BOULWARE, II, United States District Judge

I. INTRODUCTION

This is a quiet title and wrongful foreclosure action brought by Plaintiff JPMorgan Chase Bank, N.A. ("Chase"). Chase, which was the beneficiary of a deed of trust encumbering certain real property in Las Vegas, Nevada, brought suit seeking declaratory, injunctive, and monetary relief against a homeowners association, a collection service, and the entity that purchased the property when the homeowners association foreclosed on it for unpaid assessments pursuant to Nevada's HOA lien statute, N.R.S. 116.3116.

This case raises a series of questions with respect to the constitutionality of N.R.S. 116.3116 and the validity of other challenges to various aspects of HOA foreclosure sales in Nevada. The case is now before the Court on several motions for summary judgment. For the reasons discussed below, the Court finds that N.R.S. 116.3116 is constitutional. The Court also rejects Chase's remaining challenges to the foreclosure sale that occurred in this case. Summary judgment is therefore granted in favor of Defendants on all claims.

II. BACKGROUND

A. Procedural History

Chase filed its Verified Complaint on December 9, 2014. ECF No. 1. In its Complaint, Chase names the following Defendants: SFR Investments Pool I, LLC ("SFR"), The Preserves at Elkhorn Springs Homeowners Association, Inc. ("HOA"), ATC Assessment Collection Group, LLC ("ATC"), and Heather and Jason Reinhard ("the Reinhards"). After filing a Notice of Bankruptcy, the Reinhards were voluntarily dismissed from this action by Chase on April 15, 2015. ECF Nos. 25, 46.

In its complaint, Chase states that the Reinhards owned certain real property that was subject to a set of Covenants, Conditions, and Restrictions (CC&Rs) enforced by the HOA and that Chase was the beneficiary of a deed of trust encumbering that property. Chase alleges that the HOA foreclosed on the property pursuant to a lien for unpaid assessments and that SFR purchased the property at the resulting foreclosure sale. Chase claims that the foreclosure sale did not extinguish its deed of trust pursuant to Nevada's HOA foreclosure statutes, N.R.S. 116.3116 et seq.

Chase asserts the following causes of action in its Complaint: 1) Quiet Title/Declaratory Relief against all Defendants; 2) Permanent and Preliminary Injunction against SFR; 3) Wrongful Foreclosure— Commercial Unreasonableness against ATC and the HOA; 4) Wrongful Foreclosure—Violation of N.R.S. 116.3116 against ATC and the HOA; 5) Wrongful Foreclosure—Violation of N.R.S. 116.3102 against ATC and the HOA; 6) Negligence against ATC and the HOA; 7) Negligence Per Se against ATC and the HOA; 8) Breach of Contract against ATC and the HOA; 9) Misrepresentation against the HOA; 10) Unjust Enrichment against SFR; and 11) Waste against SFR.

SFR filed a Motion to Dismiss or, in the Alternative, Motion for Summary Judgment and a Motion to Expunge Lis Pendens on January 23, 2015, in which ATC and the HOA joined. ECF Nos. 18, 23. On April 1, 2015, Chase filed an opposition to the Motion to Dismiss as well as a Countermotion for Summary Judgment or, in the Alternative, Motion for Continuance under Fed. R. Civ. P. 56(d) against SFR. ECF No. 38. On the same date, Chase also filed an opposition and Countermotion for Summary Judgment against ATC and the HOA. ECF No. 40. The parties engaged in discovery, which closed on September 15, 2015. ECF No. 60. On December 14, 2015, Chase filed a Second Motion for Summary Judgment against all Defendants to which Chase attached evidence obtained during discovery. ECF No. 69. Pursuant to an order from the Court, the parties filed supplemental briefs on February 8, 2016 addressing the applicability to this case of the Nevada Supreme Court's decision in Shadow Wood HOA v. N.Y. Cmty. Bancorp, Inc., ––– Nev. ––––, 366 P.3d 1105 (2016).

B. Undisputed Facts

After reviewing the evidence submitted by the parties, the Court finds the following undisputed facts.

1. Reinhard Loan and Deed of Trust

On approximately August 21, 2008, the Reinhards purchased the real property located at 7400 Brittlethorne Avenue, Las Vegas, Nevada (the "Property"). On May 22, 2009, the Reinhards executed a Deed of Trust against the Property securing a loan in the amount of $406,000. The Deed of Trust identified MetLife Home Loans ("MetLife") as the lender, Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary, and Fidelity National Title Agency as the trustee. The Reinhards' loan for the Property is insured by the Department of Housing and Urban Development (HUD), a department of the federal government. On February 17, 2012, MERS assigned its beneficial interest under the Deed of Trust to MetLife. On October 17, 2013, MetLife assigned its beneficial interest under the Deed of Trust to Chase.

2. CC&Rs

The Property is part of a planned community governed by the HOA. The HOA recorded a Declaration of Covenants, Conditions, and Restrictions (CC&Rs) against the Property on February 19, 1997. Section 17.3(b) of the CC&Rs requires that the HOA give prompt written notice to each "Eligible Mortgagee" and "Eligible Insured," as those terms are defined in the CC&Rs, of any delinquency in payment of HOA assessments for 60 days where the unit is subject to a first security interest. Section 18.3 contains a limited mortgage savings clause. It provides that the HOA has a lien for unpaid HOA assessments, and that "[e]xcept to the extent permitted under [N.R.S. 116.3116(2) ], a lien under this Section is prior to all other liens and encumbrances except ... a first Security Interest on the Unit recorded before the date on which the assessment sought to be enforced became delinquent."

3. First HOA Foreclosure and Rescission

On July 25, 2011, the HOA recorded a Notice of Delinquent Assessment Lien against the Property. On September 1, 2011, Hampton & Hampton, on behalf of the HOA, recorded a Notice of Default and Election to Sell against the Property. On approximately October 7, 2011, MetLife, the Lender for the Reinhards' mortgage, tendered a payment of $1,973 to Hampton & Hampton for miscellaneous foreclosure expenses on behalf of the Reinhards. On October 21, 2011, Hampton & Hampton recorded a Notice of Rescission of the July 25, 2011 Lien.

4. Second HOA Foreclosure and Sale of Property

On June 22, 2012, ATC, on behalf of the HOA, recorded a Notice of Delinquent Assessment Lien against the Property. On July 25, 2012, ATC recorded a Notice of Default and Election to Sell against the Property. The Notice of Default and Election to Sell was mailed on August 1, 2012 to the Reinhards, MERS, and MetLife, among others. On July 10, 2014, ATC recorded a Notice of Sale against the Property. The Notice of Sale was mailed on July 8, 2014 to the Reinhards, MERS, MetLife Home Loans, and Chase, among others.

On August 5, 2014, ATC, on behalf of the HOA, conducted a foreclosure sale by public auction. SFR was the winning bidder at the foreclosure sale with a bid of $69,000. On August 14, 2014, a Trustee's Deed Upon Sale was recorded, reflecting the fact that the Property was sold to SFR. The Deed states that ATC "has complied with all requirements of law including, but not limited to, the elapsing of 90 days, mailing of copies of Notice of Delinquent Assessment Lien and Notice of Default and the Posting and Publication of the Notice of Sale."

III. LEGAL STANDARD

Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show "that 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) ; accord Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In ruling on a motion for summary judgment, the court views all facts and draws all inferences in the light most favorable to the nonmoving party. Johnson v. Poway Unified Sch. Dist., 658 F.3d 954, 960 (9th Cir. 2011).

Where the party seeking summary judgment does not have the ultimate burden of persuasion at trial, it "has both the initial burden of production and the ultimate burden of persuasion on a motion for summary judgment." Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). "In order to carry its [initial] burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial."Id. If it fails to carry this initial burden, "the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial." Id. at 1102–03. If the movant has carried its initial burden, "the nonmoving party must produce evidence to support its claim or defense." Id. at 1103. In doing so, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts .... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (alteration in original) (internal quotation marks omitted). However, the ultimate burden of persuasion on a motion for summary judgment...