Skylights LLC v. Byron

• Decision Date: 24 June 2015
• Docket Number: Case No. 2:15–cv–00043–GMN–VCF.
• Citation: 112 F.Supp.3d 1145
• Parties: SKYLIGHTS LLC, Plaintiff, v. David BYRON ; Jennifer Byron; CCSF LLC ; Federal National Mortgage Association; CitiMortgage, Inc.; Clear Recon Corp. as Trustee; Does I through X, inclusive; and Roe Corporations I through X, inclusive, Defendants, Federal Housing Finance Agency, as Conservator of the Federal National Mortgage Association, Intervenor, Federal National Mortgage Association; Federal Housing Finance Agency, as Conservator of the Federal National Mortgage Association, Counter–Plaintiff, v. Skylights LLC; and The Falls at Rhodes Ranch Owners Association, Inc., Counter–Defendants.
• Court: U.S. District Court — District of Nevada

112 F.Supp.3d 1145

SKYLIGHTS LLC, Plaintiff,

v.David BYRON ; Jennifer Byron; CCSF LLC ; Federal National Mortgage Association; CitiMortgage, Inc.; Clear Recon Corp. as Trustee; Does I through X, inclusive; and Roe Corporations I through X, inclusive, Defendants,Federal Housing Finance Agency, as Conservator of the Federal National Mortgage Association, Intervenor,Federal National Mortgage Association; Federal Housing Finance Agency, as Conservator of the Federal National Mortgage Association, Counter–Plaintiff,

v.Skylights LLC; and The Falls at Rhodes Ranch Owners Association, Inc., Counter–Defendants.

Case No. 2:15–cv–00043–GMN–VCF.

United States District Court, D. Nevada.

Signed June 24, 2015.

Michael N. Beede, Law Office of Mike Beede, Las Vegas, NV, for Plaintiff.

Krista Nielson, Aldridge Pite, LLP, Las Vegas, NV, Laurel I. Handley, Pite Duncan, LLP, San Diego, CA, for Defendants.

Asim Varma, Howard Cayne, Michael A.F. Johnson, Arnold & Porter LLP, Washington, DC, John D. Tennert, Leslie Bryan Hart, Fennemore Craig, P.C., Reno, NV, for Intervenor.

Krista Nielson, Aldridge Pite, LLP, Las Vegas, NV, Laurel I. Handley, Pite Duncan, LLP, San Diego, CA, Asim Varma, Howard Cayne, Michael A.F. Johnson, Arnold & Porter LLP, Washington, DC, John D. Tennert, Leslie Bryan Hart, Fennemore Craig, P.C., Reno, NV, for Counter–Plaintiff.

Joseph P. Garin, Kaleb D. Anderson, Peter E. Dunkley, Lipson, Neilson, Cole, Seltzer, Garin, P.C., Michael N. Beede, Law Office of Mike Beede, Las Vegas, NV, for Counter–Defendants.

ORDER

GLORIA M. NAVARRO, Chief Judge.

Pending before the Court is the Joint Motion for Summary Judgment (ECF No. 26) filed by Defendant/Counter–Plaintiff Federal National Mortgage Association ("Fannie Mae") and Intervenor/Counter–Plaintiff Federal Housing Finance Agency ("FHFA"). Counter–Defendant The Falls at Rhodes Ranch Owners Association (the "HOA") filed a Response in Opposition (ECF No. 31), and Plaintiff/Counter–Defendant Skylights LLC ("Skylights") also filed a Response in Opposition (ECF No. 32). Fannie Mae and FHFA filed a Reply in Support (ECF No. 38).

I. BACKGROUND

This case arises out of a dispute between the parties over the effects of the HOA's foreclosure on their "super-priority" interest in real property under Nevada Revised Statutes § 116.3116, when a first priority loan secured by the foreclosed upon property is held by Fannie Mae or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The primary question at issue involves the interplay between Nevada Revised Statutes § 116.3116 and 12 U.S.C. § 4617, the latter of which provides certain protections for property held by Fannie Mae and Freddie Mac while under the conservatorship of FHFA.

A. Legal Background

1. A homeowner association's super-priority in Nevada

Chapter 116 of Nevada Revised Statutes codifies Nevada's Uniform Common–Interest Ownership Act, and—with some exceptions—applies to all common-interest communities created in Nevada, including homeowner associations of unit owners organized under a properly recorded declaration. Nev.Rev.Stat. §§ 116.001, -.1201, - .2101, -.3101. Under section 116.3116, a homeowner association has a lien on a unit for assessments levied against that unit. Nev.Rev.Stat. § 116.3116(1). Nevada Revised Statutes § 116.3116(2) further provides that such homeowner association liens are prior to all other liens and encumbrances, subject to certain exceptions.

One exception to the homeowner association lien priority is for "[a] first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent." Nev.Rev.Stat. § 116.3116(2)(b). However, under the so-called "super-priority" provision contained in the same subsection, the homeowner association's lien is prior to even a first security interest, but only "to the extent of" charges for assessments "which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien." Id.

Confusion over how to interpret section 116.3116's apparent exception within an exception has spawned a wave of litigation in Nevada between purchasers of real property at homeowner association foreclosures and the holders of first position security interests recorded before those foreclosures. Initially, whether the foreclosure of a homeowner association's super-priority interest extinguished a first security interest under Nevada Revised Statutes § 116.3116 remained an open question in Nevada, with courts issuing contradictory rulings on the question. Compare SFR Investments Pool 1, LLC v. Wells Fargo Bank, N.A., No. 2:13–cv–01153–APG–PAL (D.Nev. July 25, 2013) (concluding that the HOA had established a likelihood of succeeding on the merits of its claim that foreclosure of the super priority portion of the HOA lien extinguished a first recorded Deed of Trust) with Bayview Loan Servicing, LLC v. Alessi & Koenig, LLC, 962 F.Supp.2d 1222 (D.Nev.2013) (granting summary judgment in favor of lender's assignee and holding that the foreclosure of an HOA lien did not extinguish the first mortgage). On September 18, 2014, however, the Supreme Court of Nevada finally resolved the issue and found that a homeowner association's foreclosure of its super-priority lien extinguishes a first recorded security interest. SFR Investments Pool 1 v. U.S. Bank, ––– Nev. ––––, 334 P.3d 408, 409 (2014).

2. FHFA's conservatorship over Fannie Mae and Freddie Mac

In July of 2008, Congress passed the Housing and Economic Recovery Act of 2008 ("HERA"), Pub.L. No. 110–289, 122 Stat. 2654,codified at 12 U.S.C. § 4511 et seq., which established FHFA for the purpose of regulating Fannie Mae, Freddie Mac, and the twelve Federal Home Loan Banks. In September of 2008, FHFA placed Fannie Mae and Freddie Mac into conservatorships "for the purpose of reorganizing, rehabilitating, or winding up [their] affairs." 12 U.S.C. § 4617(a)(2). As conservator, FHFA immediately succeeded to "all rights, titles, powers, and privileges" of Fannie Mae and Freddie Mac. 12 U.S.C. § 4617(b)(2)(A)(i).

In HERA, Congress granted FHFA numerous privileges and exemptions to carry out its statutory functions when acting as conservator of Fannie Mae and Freddie Mac. Among these is a statutory "exemption" captioned "Property protection" providing that when acting as conservator, "[n]o property of [FHFA] shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of [FHFA], nor shall any involuntary lien attach to the property of [FHFA]." 12 U.S.C. § 4617(j)(3).

B. Factual Background

Specifically at issue in this case is a dispute between the parties over their respective interests in certain real property located at 9050 West Warm Springs Road 2096, Las Vegas, NV, 89148 (the "Property"). On November 1, 2007, David and Jennifer Byron obtained a loan in the amount of $105,700 from CitiMortgage, Inc. ("CitiMortgage") that was secured by a Deed of Trust on the Property. (Deed of Trust, ECF No. 27–1).¹ The Deed of Trust named Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for CitiMortgage, as the beneficiary and First American Title Company as the trustee. (Id. ). At some point after the creation of the Deed of Trust and before this action, Clear Recon Corporation ("Clear Recon") was allegedly substituted as the trustee of the Deed of Trust. (Compl. ¶ 7, ECF No. 1–1).

On September 6, 2008, FHFA's Director placed Fannie Mae and Freddie Mac into conservatorships pursuant to HERA. See (Pollard Decl. ¶ 2, ECF No. 26–1).

On November 18, 2011, MERS recorded an Assignment of Mortgage, assigning its interest in the Deed of Trust to CitiMortgage. (Assignment of Mortgage, Ex. 2 to ECF No. 271). On March 7, 2014, CitiMortgage recorded a Corporate Assignment of Deed of Trust, assigning its interest in the Deed of Trust to Fannie Mae. (Corp. Assignment of Deed of Trust, Ex. 3 to ECF No. 27–1).

On September 26, 2014—six months after CitiMortgage assigned its interest in the Deed of Trust to Fannie Mae—Alessi & Koenig, LLC, as agent for the HOA, recorded a Trustee's Deed Upon Sale, stating that Skylights had purchased the Property for $28,500 at a foreclosure sale conducted by the HOA on September 17, 2014. (Trustee's Deed Upon Sale, Ex. 4 to ECF No. 27–1). At no time during the process did FHFA, as conservator of Fannie Mae, consent to the HOA's foreclosure. See (Pollard Decl. ¶¶ 3–4, ECF No. 26–1).

C. Procedural Background

Skylights initiated this action by filing the original complaint in state court on December 5, 2014, asserting a claim for quiet title against Fannie Mae, Clear Recon, CCSF, CitiMortgage, and the Byrons. (Compl., ¶¶ 11–16, ECF No. 1–1). Fannie Mae, Clear Recon, and CitiMortgage subsequently removed the action to this Court on January 8, 2015. (Not. of Removal, ECF No. 1). On January 16, 2015, Fannie Mae and Clear Recon filed their Answers to the Complaint, asserting counterclaims against Skylights and the HOA. (Ans. to Compl. & Counterclaims, ECF Nos. 6, 8).

On January 23, 2015, this Court entered an Order granting a stipulation among the parties to add FHFA as an intervenor. (Intervenor Order, ECF No. 12). Three days later, on January 26, 2015, FHFA filed its own Answer, which also asserted counterclaims against Skylights and the HOA. (FHFA Answer and Counterclaims, ECF No. 14). Subsequently, on March 23, 2015, Fannie Mae and FHFA filed the pending Joint Motion for Summary Judgment.

On June 18, 2015, the Court held a hearing on the pending Motion for Summary Judgment, which was attended by the parties in this case as well as the parties in several related cases² pending before this Court involving the same issue concerning the application of 12 U.S.C. § 4617(j) to prevent the foreclosure of a homeowner association's super-priority lien. (Min. of Hearing, ECF No. 46). After listening to the arguments presented by all parties present at the hearing, the Court took the motion under submission.

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