Mortg. Fund IVC Tr. v. Brown
| Decision Date | 24 September 2019 |
| Docket Number | Case No. 2:17-cv-2309-KJD-BNW |
| Parties | MORTGAGE FUND IVC TRUST 2016-RN5, Plaintiff, v. DEWEY D. BROWN, et al., Defendants. |
| Court | U.S. District Court — District of Nevada |
Before the Court are cross-motions for summary judgment filed by plaintiff Mortgage Fund IVC Trust (#36) and defendant Saticoy Bay, LLC Series 2175 Clearwater Lake (#37). Both parties have filed their respective responses and replies. None of the remaining defendants have filed a dispositive motion, nor have they joined Saticoy Bay's motion.
Mortgage Fund IVC Trust ("the Trust") seeks a declaratory judgment that its deed of trust survived Sun City Anthem Community Association's nonjudicial foreclosure. Before the foreclosure, Sun City's agent, Red Rock Financial Services, assured the Trust's predecessor-in-interest that its deed of trust was superior to the association's lien. Believing its lien to be safe, the Trust did not tender the superpriority lien or attempt to protect its deed of trust from extinguishment. Sun City then sold the property to Saticoy Bay, LLC, who believes it took the property free from the Trust's deed of trust. The Trust now moves for summary judgment, arguing that Red Rock Financial's assurances that the Sun City lien was junior to the Trust's deed of trust demonstrate the association's intent to foreclose only on the sub-priority portion of its outstanding lien. If so, the foreclosure did not extinguish the existing deed of trust. Alternatively, the Trust argues that even if Sun City foreclosed on the superpriority portion of its lien, Red Rock Financial's assurances that the deed of trust was safe coupled with the grossly inadequate sales price of the property render the foreclosure fraudulent, unfair, or oppressive. As a result, that sale should be equitably unwound.
Whether Sun City foreclosed on its sub-priority lien or its superpriority lien is unclear from the record. Nevada law is similarly unclear whether NRS § 116 permits an association to facilitate a sub-priority-only foreclosure where the superpriority lien has not been cured. Despite that uncertainty, Nevada law is clear is that the Court retains equitable authority to set aside a foreclosure sale where the association has misled a deed of trust holder that its deed of trust will survive the foreclosure. Such a direct misrepresentation rises to the level of fraud, unfairness, or oppression that justify equitably unwinding a foreclosure sale. That is what Sun City Anthem and its agent did here. Therefore, the Court grants the Trust's motion for summary judgment and sets aside Sun City Anthem's foreclosure sale.
The parties agree on the basic facts. In 2008, former owners Dewey and Lillian Brown purchased a piece of real property located at 2175 Clearwater Lake Drive in Las Vegas, Nevada. The Browns borrowed $316,680.00 from Countrywide Bank to finance the purchase. Countrywide secured its interest by recording a deed of trust against the property. Deed of Trust, ECF No. 36 Ex. A. After a series of assignments, Mortgage Fund IVC Trust became beneficiary under the deed of trust. Assignment of DOT, ECF No. 36 Ex. E.
The Clearwater Lake property was part of the Sun City Anthem Community Association and was subject to the association's Covenants, Conditions, and Restrictions ("CC&Rs"). The CC&Rs required the Browns to pay monthly assessments for shared maintenance and general community upkeep. The Browns fell behind on their assessments, which prompted Sun City Anthem to begin foreclosure proceedings. On March 15, 2013, Sun City Anthem, through its agent Red Rock Financial Services, recorded a Lien for Delinquent Assessments against the property. ECF No. 36 Ex. F. That notice identified a past-due balance of $15,577.57. Id. The Browns did not pay the past due balance, causing Red Rock Financial to record a Notice of Default and Election to Sell. ECF No. 36 Ex. G. Again, neither the Browns nor the Trust paid the outstanding balance, and Red Rock Financial recorded a Notice of Foreclosure Sale. ECF No. 36 Ex. H. Saticoy Bay purchased the home at the foreclosure sale for $45,100.00. Foreclosure Deed,ECF No. 36 Ex. J.
Three months before the foreclosure sale, however, Red Rock Financial sent the Trust's predecessor-in-interest, Bayview Loan Servicing,1 a courtesy letter to notify it of the pending foreclosure action and its attempt to collect the delinquent balances. That letter assured Bayview that "The Association's Lien for Delinquent Assessments is Junior only to the Senior Lender/Mortgage Holder." Red Rock Letter, ECF No. 36 Ex. I (emphasis added). At that time, Bayview was the "Senior Lender/Mortgage Holder" and believed its deed of trust to be safe. As a result, Bayview did not attempt to satisfy Sun City's outstanding lien, nor did it attempt to halt the association's foreclosure.
Saticoy Bay, meanwhile, purchased the Clearwater Lake property at auction and believed it to be free of the Trust's interest. The Trust then brought this suit, seeking a declaration that its deed of trust still encumbered the Clearwater Lake property. Compl., ECF No. 1. The parties performed discovery and filed their first round of dispositive motions, but the Court denied those motions, opting instead to stay the case pending the Nevada Supreme Court's clarification of NRS § 116.3116(2)'s notice requirements. Order Staying Case 2, ECF No. 33. The Court has since lifted the stay, and the parties have renewed their motions for summary judgment to which the Court now turns.
The purpose of summary judgment is to avoid unnecessary trials by disposing of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986); Nw. Motorcycle Ass'n v. U.S. Dept. of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). It is available only where the absence of material fact allows the Court to rule as a matter of law. Fed. R. Civ. P. 56(a); Celotex, 477 U.S. at 322. Rule 56 outlines a burden shifting approach to summary judgment. First, the moving party must demonstrate the absence of a genuine issue of material fact. The burden then shifts to the nonmoving party to produce specific evidence of a genuine factual dispute for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A genuine issue of fact exists where the evidence could allow "a reasonable jury [to]return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court views the evidence and draws all available inferences in the light most favorable to the nonmoving party. Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986). Yet, to survive summary judgment, the nonmoving party must show more than "some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586.
Where parties have filed competing motions for summary judgment, the Court must review each motion on its own merits. Fair Housing Council of Riverside Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). In reviewing each motion, the Court views the evidence and makes all available inference in favor non-moving party. See Kaiser Cement Corp., 793 F.2d at 1103. At bottom, a party does not prevail on summary judgment solely because the other party did not prevail. See Riverside Two, 249 F.3d at 1136.
Of the Trust's four causes of action, it seeks summary judgment only on its quiet title and declaratory relief claim against each defendant and its claim for injunctive relief against Saticoy Bay.2 As an initial matter, the Trust's claim for preliminary or permanent injunctive relief is not itself a cause of action, but rather a remedy. See In re Wal-Mart Wage and Hour Emp. Pract. Litig., 490 F. Supp. 2d 1091, 1130 (D. Nev. 2007). Accordingly, the Court dismisses that "claim."
The Trust's remaining quiet title and declaratory relief claim hinges on the effect of Red Rock Financial's assurance that the association's lien was junior to the Trust's existing deed of trust. The Trust argues that at best, Red Rock Financial's assurance was evidence that the association only intended to foreclose on its sub-priority lien, leaving the deed of trust unaffected. At worst, the assurance was a ploy that lulled the Trust into a false sense of security and allowed Saticoy Bay to extinguish the deed of trust without resistance.3 Either way,according to the Trust, Sun City did not extinguish the existing deed of trust. Saticoy Bay counters that the Trust's claims are barred by a three-year statute of limitations. And even if the claims were timely, they fail because the association could not elect to foreclose only on its sub-priority lien and that there is no evidence of fraud, oppression, or unfairness that allows the Court to equitably set aside the sale.
Saticoy Bay argues that the Trust's quiet title claim is untimely because NRS § 11.190(3) imposes a three-year statute of limitations, and the Trust waited nearly four years to file its complaint. Although this district is split on the applicable statute of limitations for this type of quiet title and declaratory relief claim, no court has imposed a three-year statute of limitations. The split is between a four-year and five-year statute of limitations.4 The disagreement boils down to whether these quiet title claims are "founded upon the title to real property" under NRS § 11.070 or an attempt to recover property under NRS § 11.080. If so, the five-year limitations period applies. If §§ 11.070 & 11.080 do not apply, the Court is left with NRS § 11.220's four-year catch-all period for actions not covered by the other limitations provisions.
Both the Nevada Supreme Court and Ninth Circuit have suggested that a five-year statute of limitations applies. See Weeping Hollow Ave. Tr. v. Spencer, 831 F.3d 1110, 1114 (9th Cir. 2016) (citing NRS § 11.070) ("[u]nder Nevada law, [homeowner] could have...
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