SFR Invs. Pool 1, LLC v. U.S. Bank, N.A.

• Decision Date: 26 September 2019
• Docket Number: No. 74532,74532
• Citation: 449 P.3d 461
• Parties: SFR INVESTMENTS POOL 1, LLC, a Nevada Limited Liability Company; and Copper Ridge Community Association, Appellants, v. U.S. BANK, N.A., a National Banking Association, AS TRUSTEE FOR the CERTIFICATE HOLDERS OF WELLS FARGO ASSET SECURITIES CORPORATION, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-AR4; and NV West Servicing, LLC, a Nevada Limited Liability Company, as Trustee for Nashville Trust 2270, Respondents.
• Court: Nevada Supreme Court

449 P.3d 461

SFR INVESTMENTS POOL 1, LLC, a Nevada Limited Liability Company; and Copper Ridge Community Association, Appellants,

v.U.S. BANK, N.A., a National Banking Association, AS TRUSTEE FOR the CERTIFICATE HOLDERS OF WELLS FARGO ASSET SECURITIES CORPORATION, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-AR4; and NV West Servicing, LLC, a Nevada Limited Liability Company, as Trustee for Nashville Trust 2270, Respondents.

No. 74532

Supreme Court of Nevada.

FILED SEPTEMBER 26, 2019

Kim Gilbert Ebron and Athanasios E. Agelakopoulos, Jacqueline A. Gilbert, Howard C. Kim, and Diana S. Ebron, Las Vegas, for Appellant SFR Investments Pool 1, LLC.

Alverson, Taylor & Sanders and Kurt R. Bonds and Trevor R. Waite, Las Vegas, for Appellant Copper Ridge Community Association.

Snell & Wilmer LLP and Andrew M. Jacobs, Kelly H. Dove, and Holly E. Cheong, Las Vegas, for Respondent U.S. Bank, N.A.

Noggle Law PLLC and Robert B. Noggle, Las Vegas, for Respondent NV West Servicing, LLC.

BEFORE THE COURT EN BANC.

OPINION

By the Court, HARDESTY, J.:

In this homeowners’ association (HOA) foreclosure case, the homeowner filed for bankruptcy protection under Chapter 11, which imposed an automatic stay on actions against her real property. The HOA subsequently sold the property at a foreclosure sale in violation of the stay. The purchaser, appellant SFR Investments Pool 1, LLC, sought to quiet title and obtained a retroactive annulment of the stay, which has the legal effect of validating the sale. The district court nevertheless set aside the sale on equitable grounds and granted summary judgment in favor of respondent U.S. Bank, N.A., finding that the HOA’s foreclosure sale being conducted in violation of the bankruptcy stay on the property was evidence of unfairness and the sale price was inadequate.

We conclude that, although the retroactive annulment means that the sale did not legally violate the bankruptcy stay, it was reasonable for the district court to consider the bankruptcy stay in determining whether there was unfairness in the HOA foreclosure sale at the time it was held. However, the mere fact that the foreclosure sale was held in violation of the bankruptcy stay is not by itself evidence of unfairness. Because U.S. Bank failed to produce any evidence showing how the sale’s violation of the automatic stay constituted unfairness, we reverse the district court’s grant of summary judgment to U.S. Bank. Furthermore, because SFR met its burden of showing that the HOA foreclosure sale complied with the procedures in NRS Chapter 116, which is conclusive proof that title vests with SFR, we remand with instructions for the district court to grant summary judgment in favor of SFR.

FACTS AND PROCEDURAL HISTORY

The property at issue is located in a Nevada neighborhood governed by an HOA. The previous homeowner obtained a loan from Wells Fargo Bank for $331,500 and eventually defaulted on the loan. In 2010, Wells Fargo recorded a notice of default and election to sell under the deed of trust, and then assigned the beneficial interest in the deed of trust to U.S. Bank. In July 2010, a notice of trustee’s sale was recorded but, before U.S. Bank could sell the property, the homeowner filed for Chapter 11 bankruptcy protection in California, which resulted in an automatic stay on actions impacting the property. With this knowledge, U.S. Bank filed a motion for relief from the automatic stay so that it could foreclose upon the property, and the bankruptcy court granted it.

In July 2012, shortly before U.S. Bank was granted relief from the bankruptcy stay, Nevada Association Services (NAS), as an agent for the HOA, recorded a notice of delinquent assessment lien and then recorded its own notice of default and election to sell under the HOA lien. NAS never requested relief from the automatic stay from the bankruptcy court. On March 1, 2013, NAS, on behalf of the HOA, held a foreclosure sale where SFR purchased the property for $14,000, in violation of the automatic stay. U.S. Bank did not attend the sale or attempt to stop it. A week after the HOA’s foreclosure sale, U.S. Bank proceeded with its own foreclosure sale of the property by filing a notice of trustee’s sale and, several months later, held a foreclosure sale and sold the property to respondent NV West Servicing, LLC.

SFR filed a complaint for quiet title and injunctive relief against U.S. Bank on March 22, 2013. U.S. Bank asserted counterclaims against SFR, seeking, amongst other things, declaratory relief and quiet title. It also brought a third-party complaint, bringing NAS and the HOA into the action.

The parties moved for summary judgment in January 2017. SFR argued that the HOA’s foreclosure sale had extinguished U.S. Bank’s deed of trust and that the trustee’s deed to SFR was conclusive proof that the sale was conducted in compliance with NRS Chapter 116, so as to vest title in SFR. U.S. Bank argued, among other things, that the HOA’s foreclosure sale was void for violating the bankruptcy stay, and, even if it was not void, it was voidable because the sale had been commercially unreasonable. U.S. Bank claimed that it had had no reason to believe that NAS or the HOA would, or could, foreclose on the HOA lien without first seeking leave of the bankruptcy court, and also that it did not know about the HOA sale because it did not receive notice until five days after the sale. In its opposition, SFR asserted that it had just filed a motion in the bankruptcy court for a retroactive annulment of the automatic stay, which was pending while the district court considered the summary judgment motions. It also argued that the HOA had provided notice of the foreclosure sale to U.S. Bank by way of Wells Fargo, who was the servicer for the loan on behalf of the trustee at that time, and there was no irregularity in the sale process.

On May 15, 2017, the bankruptcy court issued a limited order retroactively annulling the bankruptcy stay. The order specifically stated that any acts taken by SFR "to enforce its remedies regarding the [p]roperty do not constitute a violation of the stay," and provided the same relief "for any and all actions in support of the foreclosure taken with respect to the [p]roperty by the [HOA and its agent]." After the district court received the bankruptcy court's order, it ordered supplemental briefing on the impact of the retroactive annulment on equitable relief. U.S. Bank supplemented its initial briefing by arguing that the bankruptcy court’s decision to retroactively annul the automatic stay does not mean that the sale was fair, especially when the HOA clearly violated the stay whereas U.S. Bank delayed its own foreclosure proceedings to first obtain relief from the stay, in accordance with the law. It further argued that the sale price, which was just 6 percent of the property’s fair market value, was grossly inadequate, and that the automatic stay dissuaded higher bidders from offering a commercially reasonable price based on knowledge that the sale could be declared void for violating the stay. SFR argued that it had not known about the bankruptcy stay at the time of the HOA sale, that U.S. Bank provided no evidence the bankruptcy stay was considered by SFR or any other potential bidder when SFR bid on the property, and that there was legally no violation of the stay because it was retroactively annulled.

The district court granted U.S. Bank’s motion for summary judgment. It determined that, though SFR had purchased the property from the HOA in violation of an automatic stay, the sale was no longer void because the bankruptcy court had retroactively annulled the stay. The district court then applied Golden v . Tomiyasu, 79 Nev. 503, 387 P.2d 989 (1963), to determine that the sale should be set aside on equitable grounds. The court found that the sale price was inadequate in light of both the fair market value of the property and the initial amount originally loaned for the property, and that the HOA foreclosure sale conducted in violation of the bankruptcy stay constituted evidence of fraud, oppression, or unfairness related to the sale. The district court explained that it was reasonable for U.S. Bank to expect that any party seeking to foreclose on the property would first need to seek relief from the automatic stay, and that U.S. Bank could not have reasonably foreseen at the time of the sale that years later SFR would obtain a retroactive annulment of the stay. The district court never made specific findings that the stay affected the sale price. Thus, the district court set aside the HOA foreclosure sale. SFR¹ appealed.

DISCUSSION

We review a district court's decision to grant summary judgment de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005). Summary judgment is proper if "the pleadings and other evidence on file demonstrate that no genuine issue as to any material fact remains and that the moving party is entitled to a judgment as a matter of law." Id. (alteration and internal quotation marks omitted). All evidence "must be viewed in a light most favorable to the nonmoving party." Id. The party opposing a properly presented and supported summary judgment motion must "show the existence of a genuine issue of material fact." Cuzze v. Univ. & Cmty. Coll. Sys. of Nev., 123 Nev. 598, 602, 172 P.3d 131, 134 (2007) ; see also NRCP 56(e). If the opposing party bears the burden of persuasion on the issue at trial, "the party moving for summary judgment may satisfy the burden ... by ... ‘pointing out ...that there is an absence of evidence to support the nonmoving party's case.’ " Cuzze, 123 Nev. at 602, 172 P.3d at 134 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).

The filing of a bankruptcy petition imposes an automatic stay against the debtor’s property. 11 U.S.C. § 362(a) (2012). In LN Management LLC Series 5105 Portraits Place v. Green Tree Loan Servicing LLC , we recognized that "a...