Res. Grp., LLC v. Nev. Ass'n Servs., Inc.

• Decision Date: 14 March 2019
• Docket Number: No. 71268,71268
• Citation: 437 P.3d 154
• Parties: RESOURCES GROUP, LLC, AS TRUSTEE OF the EAST SUNSET ROAD TRUST, Appellant, v. NEVADA ASSOCIATION SERVICES, INC. ; and Hydr-O-Dynamic Corporation, a Revoked Nevada Corporation, Respondents.
• Court: Nevada Supreme Court

437 P.3d 154

RESOURCES GROUP, LLC, AS TRUSTEE OF the EAST SUNSET ROAD TRUST, Appellant,

v.NEVADA ASSOCIATION SERVICES, INC. ; and Hydr-O-Dynamic Corporation, a Revoked Nevada Corporation, Respondents.

No. 71268

Supreme Court of Nevada.

FILED MARCH 14, 2019

OPINION

By the Court, HARDESTY, J.:

This case presents us with an opportunity to clarify whether a person conducting a sale under NRS Chapter 116, governing nonjudicial foreclosure sales by a unit-owners' association (UOA), has the discretion to refuse to issue a foreclosure deed to the highest bidder at a foreclosure sale after payment has been made, when it is later determined that the delinquency amount may have been paid by the property owner before the sale.² We first hold that each party in a quiet title action has the burden of demonstrating superior title in himself or herself. We further hold that once a bid is accepted and payment is made, the foreclosure sale is complete and title vests in the purchaser, and the person conducting the sale has no discretion to refuse to issue the foreclosure deed. Lastly, we reaffirm our prior holdings that the correct standard for determining whether to set aside a sale on equitable grounds is whether there has been some showing of fraud, unfairness, or oppression affecting the sale.

Here, the purchaser demonstrated superior title by showing that it paid the sales price following a valid foreclosure sale. The burden of demonstrating that the delinquency was cured presale, rendering the sale void, was on the party challenging the foreclosure, who failed to meet its burden. Because we also conclude that the district court correctly found that there was no showing that fraud, unfairness, or oppression affected the sale, we hold that title vested in the purchaser’s name and that the district court abused its discretion by setting aside the sale.

FACTS AND PROCEDURAL HISTORY

Respondent Hydr-O-Dynamic Corporation (HODC) was the legal owner and titleholder of real property located at 571 East Sunset Road in Henderson (the Property). The Property was located within a common-interest community comprised of commercial buildings overseen by Sunpac, a UOA formed under NRS Chapter 116. HODC became delinquent on the periodic assessments it was required to pay to the UOA, and respondent Nevada Association Services, Inc. (NAS), as the UOA’s foreclosure agent, complied with all statutory presale requirements for a nonjudicial foreclosure sale of the Property pursuant to NRS 116.3116, including mailing default and sale notices certified with return receipt requested to HODC. The foreclosure sale was scheduled to take place on February 13, 2015, at 10 a.m.

On February 6, 2015, HODC’s president mailed a check for the full amount of the delinquency ($6,554.09) to NAS via regular mail. At 10 a.m. on February 13, NAS, unaware that HODC had mailed a delinquency payment, began its property auctions, which included the subject Property. The auctions concluded at approximately 10:30 a.m. Appellant Resources Group, LLC, was the successful bidder on the Property, paying $350,000 in cashier’s checks immediately following the conclusion of the auctions. That same day, at some point between 9:30 a.m. and 11 a.m., NAS received the check from HODC. NAS did not inform its general counsel that it had received the check until February 17, however, due to an intervening three-day weekend. NAS’s general counsel then contacted Resources Group, explained the situation, and offered to return Resources Group’s cashier’s checks, along with interest for the five days that had elapsed since the sale, in exchange for canceling the sale of the Property. Resources Group declined the offer, stating that it wanted either $1 million or the Property. Resources Group’s agent informed NAS that he saw the mailman arrive on February 13 as he was leaving NAS’s offices following the foreclosure sale, which would have been about 10:30 a.m., and thus, by the time NAS could have processed the payment, the foreclosure sale would have been completed. Despite this claim, NAS declined to issue a foreclosure deed to Resources Group.

Resources Group then filed a complaint against NAS, the UOA,³ and HODC regarding title to the Property. After an unsuccessful summary judgment motion, the parties proceeded to trial. Ultimately, the district court entered judgment against Resources Group, finding that although HODC was delinquent in paying its assessments and the UOA’s lien was perfected, Resources Group failed to demonstrate that the check curing the delinquency had not arrived before the foreclosure sale. The court discounted the testimony regarding the mailman as the agent had no specific memory distinguishing that day from any other. The court therefore concluded that Resources Group failed to meet its burden of showing that title should vest in its name.

The district court also concluded that the equities weighed in favor of setting aside the sale, reasoning that nothing in this court’s recent line of NRS Chapter 116 foreclosure opinions "limit[ed] the exercise of equity to only those instances where there is gross inadequacy of price and fraud, unfairness or oppression that accounts for [an] inadequacy of price," even though that is a more common ground for setting aside a sale than it being deemed void due to sale irregularities. In balancing the equities, the court found that Resources Group tendered payment for the Property not knowing of the possible arrival of HODC’s check, such that Resources Group arguably held bona fide purchaser status, but that setting aside the sale would not result in any prejudice to Resources Group as it would only suffer a loss of interest. The court also found that HODC did nothing more than deposit its delinquency-curing check in regular mail without any follow-up that NAS had received the check, but that the statutory scheme evidenced a legislative intent to allow post-sale redemption and that HODC would be severely prejudiced if the sale was not set aside. Based on these facts, the court concluded that the equities weighed in favor of HODC and set the sale aside such that HODC retained title to the Property.

DISCUSSION

I.

Resources Group argues that completion of a foreclosure sale and tender of the bid amount vests title to the property in the bidder, that the burden then lies on HODC to show that the sale was invalid because it cured the delinquency, and that HODC failed to meet that burden. Thus, Resources Group asserts that title to the Property vested in its name when it delivered the cashier’s checks upon conclusion of the foreclosure sale and that there is no basis to set the sale aside.

Conversely, HODC argues that title passes to a successful bidder only at the conclusion of a valid foreclosure sale and payment of the bid amount. On this foundation, HODC argues that if its payment of the delinquency was received prior to the sale, the sale was invalid, and Resources Group had the burden to show that the sale was valid by demonstrating that HODC’s check arrived after the sale or otherwise failed to cure the delinquency.

A.

While the "burden of proof [in a quiet title action] rests with the plaintiff to prove good title in himself," Breliant v. Preferred Equities Corp ., 112 Nev. 663, 669, 918 P.2d 314, 318 (1996), abrogated on other grounds by Delgado v. Am. Family Ins. Grp., 125 Nev. 564, 570, 217 P.3d 563, 567 (2009), "a plaintiff’s right to relief [ultimately] ... depends on superiority of title," W. Sunset 2050 Tr. v. Nationstar Mortg., LLC , 134 Nev. ––––, ––––, 420 P.3d 1032, 1034 (2018) (internal quotation marks omitted). And because "[a] plea to quiet title does not require any particular elements, ... each party must plead and prove his or her own claim to the property in question." Chapman v. Deutsche Bank Natl Tr. Co., 129 Nev. 314, 318, 302 P.3d 1103, 1106 (2013) (internal quotation marks omitted). Thus, we analyze the parties' respective claims to the Property.

B.

A foreclosure sale generally terminates a party’s legal title to the property. See Bldg. Energetix Corp. v. EHE, LP, 129 Nev. 78, 86, 294 P.3d 1228, 1234 (2013) ; Charmicor, Inc. v. Bradshaw Fin. Co., 92 Nev. 310, 313, 550 P.2d 413, 415 (1976). This general rule is subject to certain limited exceptions, such as where the sale is void. See Energetix , 129 Nev. at 86, 294 P.3d at 1234 (noting that a lack of substantial compliance with the relevant statutes and a lack of proper notice are exceptions to the general rule); see also Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, 134 Nev. ––––, ––––, 427 P.3d 113, 121 (2018), as amended on denial of reh'g (2018) (holding that a foreclosure sale on a lien is void where that lien has been satisfied prior to the sale "as the lien is no longer in default"); Henke v. First S. Props., Inc., 586 S.W.2d 617, 619-20 (Tex. Civ. App. 1979) (concluding that the payment of past-due installments cured a loan’s default such that the subsequent foreclosure on the property was void); 1 Grant S. Nelson, Dale A. Whitman, Ann M. Burkhart & R. Wilson Freyermuth, Real Estate Finance Law § 7:21 (6th ed. 2014) (noting that a trustee’s sale is void where there is no authorization to foreclose, and that there is no authorization to foreclose when the loan is not in default). To complete a valid foreclosure sale for unpaid assessments in Nevada, a UOA must comply with the provisions set forth in NRS Chapter 116. Relevant to the present case, the UOA must mail and record a notice of delinquent assessment, NRS 116.31162(1)(a), "a notice of default and election to sell," NRS 116.31162(1)(b), and a notice of foreclosure sale, NRS 116.311635(1)(a).⁴ Moreover, a foreclosure sale is complete and title vests in the purchaser once payment has been made by the highest bidder. See Dazet v. Landry, 21 Nev. 291, 295, 30 P. 1064, 1066 (1892), overruled on other grounds by Golden v. Tomiyasu, 79 Nev. 503, 514-15, 387 P.2d 989, 995 (1963). After a sale is completed and...