U.S. Bank, N.A. v. Thunder Props., Inc.

• Decision Date: 03 February 2022
• Docket Number: 81129
• Citation: 503 P.3d 299
• Parties: U.S. BANK, N.A., AS TRUSTEE FOR the SPECIALTY UNDERWRITING AND RESIDENTIAL FINANCE TRUST MORTGAGE LOAN ASSET-BACKED CERTIFICATES SERIES 2006-BC4, Appellant, v. THUNDER PROPERTIES, INC.; and Westland Real Estate Development and Investments, Respondents.
• Court: Nevada Supreme Court

503 P.3d 299

U.S. BANK, N.A., AS TRUSTEE FOR the SPECIALTY UNDERWRITING AND RESIDENTIAL FINANCE TRUST MORTGAGE LOAN ASSET-BACKED CERTIFICATES SERIES 2006-BC4, Appellant,

v.THUNDER PROPERTIES, INC.; and Westland Real Estate Development and Investments, Respondents.

No. 81129

Supreme Court of Nevada.

FILED FEBRUARY 03, 2022

Akerman LLP and Melanie D. Morgan, Ariel E. Stern, and Lilith V. Xara, Las Vegas, for Appellant.

Kim Gilbert Ebron and Jacqueline A. Gilbert, Las Vegas; Roger P. Croteau & Associates, Ltd., and Roger P. Croteau and Timothy E. Rhoda, Las Vegas, for Respondent Thunder Properties, Inc.

Kim Gilbert Ebron and Diana S. Ebron and Jacqueline A. Gilbert, Las Vegas, for Amicus Curiae SFR Investments Pool 1, LLC.

BEFORE THE SUPREME COURT, EN BANC.

OPINION

By the Court, STIGLICH, J.:

The United States Court of Appeals for the Ninth Circuit certified questions to this court concerning the statute of limitations in a declaratory relief and quiet title matter arising out of an HOA foreclosure sale. The Ninth Circuit asks two questions:

(1) When a lienholder whose lien arises from a mortgage for the purchase of a property brings a claim seeking a declaratory judgment that the lien was not extinguished by a subsequent foreclosure sale of the property, is that claim exempt from statute[s] of limitations under City of Fernley v. [State ,] Department of Taxation, 132 Nev. 32, 366 P.3d 699 (2016) ?

(2) If the claim described in (1) is subject to a statute of limitations:

(a) Which limitations period applies?

(b) What causes the limitations period to begin to run?

We respond to the Ninth Circuit that declaratory relief actions are not categorically exempt from statutes of limitations under City of Fernley v. State, Department of Taxation, 132 Nev. 32, 366 P.3d 699 (2016). We next determine that the four-year catch-all statute of limitations, NRS 11.220, applies to an action (like this one) to determine the validity of a lien under NRS 40.010. And finally, the statute of limitations does not begin to run until the titleholder affirmatively repudiates the lien, which does not necessarily happen at the foreclosure sale.

FACTS

Because this is a certified question, the court takes the facts as stated in the Ninth Circuit's order certifying the questions, U.S. Bank, N.A. v. Thunder Properties, Inc., 958 F.3d 794 (9th Cir. 2020).

Briefly, appellant U.S. Bank, N.A., holds a first deed of trust on the subject residential real property. Based on unpaid HOA assessments, the HOA foreclosed on the property in 2011, and the bank made no effort to challenge the foreclosure sale at that time. The property was subsequently transferred to respondent Thunder Properties, Inc. In 2016, five years after the sale, U.S. Bank sued for a declaration to quiet title. It stated that this claim was made pursuant to the state and federal declaratory judgments acts, as well as Nevada's quiet title statute. It also asserted other claims that are not at issue here. The bank argued that it is entitled to a declaration that its deed of trust was not extinguished by the sale and remains a present interest in the property. Thunder Properties argued that the statute of limitations began to run when the property was sold and has since expired, such that the bank's suit must be dismissed. The federal district court dismissed the bank's claim as time-barred. The bank appealed, and the Ninth Circuit Court of Appeals certified the above-stated questions of law to this court.

DISCUSSION

City of Fernley does not hold that declaratory relief actions are categorically exempt from statutes of limitations

As to the Ninth Circuit's first certified question, we respond that our holding in City of Fernley does not necessarily allow declaratory relief in an action that is otherwise time-barred, because framing an action as seeking declaratory relief does not provide a categorical exception to the statute of limitations.

In City of Fernley v. State, Department of Taxation, the city challenged the constitutionality of a 1997 tax statute (the C-Tax) that provided a new system for distributing tax revenues among cities. 132 Nev. 32, 36-37, 366 P.3d 699, 702-03 (2016). After Fernley incorporated as a city in 2001, it did not meet criteria to receive increased C-Tax distributions. Id . at 39, 366 P.3d at 704. Thus, the city received less tax revenue than other cities with comparable populations. Id. at 39, 366 P.3d at 705. Eleven years later, Fernley filed suit, seeking retrospective money damages, a declaration that the C-Tax was unconstitutional, and an injunction barring its future enforcement. Id. at 40 & n.4, 366 P.3d at 705 & n.4. The district court granted summary judgment, however, after concluding that the complaint was time-barred under NRS 11.220 ’s four-year catch-all limitations period. Id. at 41, 366 P.3d at 705-06.

In resolving Fernley's subsequent appeal, this court observed that the "[t]he statute of limitations applies differently depending on the type of relief sought," noting "two types of relief: retrospective relief, such as money damages, and prospective relief, such as injunctive or declaratory relief." Id. at 42, 366 P.3d at 706. Relying on the principle that statutes must accord with constitutions, we recognized that permitting a statute of limitations to bar challenge to an allegedly unconstitutional statutory provision would undermine the constitutional supremacy doctrine. Id. at 42-44, 366 P.3d at 706-07. In City of Fernley, we thus concluded that "the failure to file a claim within the statute of limitations period does not render all relief time-barred because claimants retain the right to prevent future violations of their constitutional rights." Id. at 44, 366 P.3d at 708 (emphasis added). And therefore, "the statute of limitations does not bar Fernley's claims for injunctive and declaratory relief from an allegedly unconstitutional statute." Id. at 44, 366 P.3d at 707. Accordingly, City of Fernley held that declaratory or injunctive relief to prevent future constitutional violations is not subject to statutes of limitations based on when the violation first began. It does not provide that declaratory relief is categorically exempt from statutes of limitation.

Consistent with City of Fernley, a claim for declaratory relief cannot be used to circumvent the statute of limitations absent an alleged ongoing violation of a party's constitutional rights. If a statute of limitations would bar a legal remedy based on the same substantive claim as underlies a request for declaratory relief, the limitations period will apply "[t]o prevent plaintiffs from making a mockery of the statute of limitations."

Levald, Inc. v. City of Palm Desert, 998 F.2d 680, 688 (9th Cir. 1993) (quoting Gilbert v. City of Cambridge, 932 F.2d 51, 57 (1st Cir. 1991) ); see also Taxpayers Allied for Constitutional Taxation v. Wayne County, 450 Mich. 119, 537 N.W.2d 596, 601 (1995) ("Declaratory relief may not be used to avoid the statute of limitations for substantive relief."). In sum, declaratory relief does not exempt a time-barred claim from the statute of limitations where there is not an ongoing violation of a party's constitutional rights.¹

This is a quiet title action under NRS 40.010

Before reaching the Ninth Circuit's next question, we must determine the nature of the relief sought to determine what limitations period should apply. The bank's complaint asserted a claim for "Quiet Title/Declaratory Judgment." It claimed an entitlement to a declaration under 28 U.S.C. § 2201 (the federal Declaratory Judgments Act), NRS 30.040 (the state-law Uniform Declaratory Judgments Act), and NRS 40.010 (the quiet title statute).² The nature of the claim, however, is that the bank retained a valid first priority interest on the property via its deed of trust because the HOA foreclosure sale, through which Thunder Properties’ predecessor-in-interest acquired its interest, did not extinguish the deed of trust.

Whether characterized as seeking declaratory relief or quiet title, this court examines the nature of the substantive claim, as "[t]he nature of the claim, not its label, determines what statute of limitations applies." Perry v. Terrible Herbst, Inc., 132 Nev. 767, 770, 383 P.3d 257, 260 (2016). NRS 40.010 permits an action by a party that claims an interest in real property against another party claiming an interest in that property to resolve the competing claims. Rather than any particular elements, parties must prove their interests in the property at issue and demonstrate superiority of title. Chapman v. Deutsche Bank Nat'l Tr. Co., 129 Nev. 314, 318, 302 P.3d 1103, 1106 (2013). The parties here agree that Thunder Properties’ title is not in dispute and that they only dispute the validity of a lien on that title. We have recognized that actions to resolve competing claims to title and clouds on title are quiet title actions brought under NRS 40.010. Shadow Wood Homeowners Ass'n v. N.Y. Cmty. Bancorp, Inc., 132 Nev. 49, 58, 366 P.3d 1105, 1111 (2016). That the claim has been framed as seeking declaratory relief does not change the applicable statute of limitations; instead, courts generally apply the limitations period for the substantive "claim on which the relief is based," because "[l]imitations statutes do not apply to declaratory judgments as such." Luckenbach S.S. Co. v. United States, 312 F.2d 545, 548 (2d Cir. 1963) ; see also Int'l Ass'n of Machinists & Aerospace Workers v. Tenn. Valley Auth., 108 F.3d 658, 668 (6th Cir. 1997) ("A request for declaratory relief is barred to the same extent that the claim for substantive relief on which it is based would be barred."). In this context, a declaration to quiet title resolving the status of the bank's interest in the property is the substantive relief sought.

The four-year catch-all statute of limitations applies

Having determined that the bank seeks to quiet title and determine that its lien was not extinguished, we answer the...