Wilmington Trust, N.A. v. Saticoy Bay LLC, Case No. 2:17-cv-00460-JAD-NJK

• Decision Date: 26 September 2019
• Docket Number: Case No. 2:17-cv-00460-JAD-NJK
• Citation: 416 F.Supp.3d 1077
• Parties: WILMINGTON TRUST, N.A., AS TRUSTEE OF ARLP SECURITIZATION TRUST, SERIES 2014-2, Plaintiff v. SATICOY BAY LLC SERIES 206 VALERIAN; Cinnamon Ridge Community Association ; and Nevada Association Services, Inc., Defendants All Other Parties and Claims
• Court: U.S. District Court — District of Nevada

416 F.Supp.3d 1077

WILMINGTON TRUST, N.A., AS TRUSTEE OF ARLP SECURITIZATION TRUST, SERIES 2014-2, Plaintiff

v. SATICOY BAY LLC SERIES 206 VALERIAN; Cinnamon Ridge Community Association ; and Nevada Association Services, Inc., DefendantsAll Other Parties and Claims

Case No. 2:17-cv-00460-JAD-NJK

United States District Court, D. Nevada.

Signed September 26, 2019

Dana Jonathon Nitz, Edgar C. Smith, R. Samuel Ehlers, Christopher A.J. Swift, Paterno C. Jurani, Wright, Finlay & Zak, LLP, Natalie C. Lehman, Fidelity National Law Group, Las Vegas, NV, for Plaintiff.

Adam R. Trippiedi, Michael F. Bohn, Law Office of Michael F. Bohn, Nikoll Nikci, Bohn Law Offices, Henderson, NV, Amber M. Williams, J. William Ebert, Lipson, Neilson, Cole, Seltzer & Garin, P.C., Las Vegas, NV, Karen Kao, Gordon Rees Scully Mansukhani, LLP, Las Vegas, NV, for Defendants.

Order Granting in Part and Denying in Part Motions for Summary Judgment and to Dismiss

[ECF Nos. 35, 39, 49, 50, 52]

Jennifer A. Dorsey, U.S. District Judge

Wilmington Trust, N. A. brings this action to challenge the effect of the 2014 non-judicial foreclosure sale of a home on which it claims a deed of trust.¹ Wilmington sues the Cinnamon Ridge Community Association (the HOA), which conducted the foreclosure sale, and foreclosure-sale purchaser Saticoy Bay, LLC Series 206 Valerian, primarily seeking a declaration that the sale was invalid or that Saticoy Bay purchased the property subject to Wilmington's security interest.² Saticoy Bay and the HOA move to dismiss Wilmington's claims, and all parties cross-move for summary judgment on various claims.³

Because Wilmington has demonstrated that the original homeowner paid all outstanding assessments, thereby satisfying the full superpriority piece of the HOA's lien before the foreclosure sale, I find that the foreclosure sale did not involve a superpriority component that could have extinguished the deed of trust. So, I grant partial summary judgment in Wilmington's favor on the quiet-title claims and dismiss its remaining quiet-title theories as moot. I grant the HOA's motion to dismiss Wilmington's claims for negligence, negligence per se, and misrepresentation, but I deny the motions in all other respects. This case thus proceeds on Wilmington's unjust-enrichment claim against Saticoy Bay and the HOA, and on Wilmington's claims against the HOA for breach of contract and breach of the implied covenant of good faith and fair dealing, and I order the parties to a settlement conference with the magistrate judge.

Background

Daniel A. Acosta purchased the home at 206 Valerian Street in Henderson, Nevada, in 2007 with a $435,600 loan from EquiFirst Corporation, secured by a deed of trust.⁴ After two assignments, Wilmington now holds that deed of trust.⁵ The home is located in the Cinnamon Ridge planned-unit development and subject to the governing documents for its homeowners' association.⁶

The Nevada Legislature gave homeowners' associations a superpriority lien against residential property for certain delinquent assessments and established in Chapter 116 of the Nevada Revised Statutes a non-judicial foreclosure procedure for them to enforce that lien.⁷ When the assessments on this home became delinquent, the HOA commenced non-judicial foreclosure proceedings on it under Chapter 116 by recording a notice of delinquent assessment lien on March 19, 2012.⁸ The notice stated that the "TOTAL delinquent assessments through" that date were "the amount of $881.69," which "include[d] attorney's fees (if any), late fees, collection fees[,] and interest in the amount of $673.98."⁹ The HOA followed that up with a notice of default and election to sell under homeowners association lien, recorded on May 17, 2012.¹⁰

The HOA ultimately foreclosed on the home more than two years later on August 1, 2014.¹¹ But more than a year before that, on April 30, 2013, the homeowner paid the HOA $536.14. The HOA applied that payment to the outstanding monthly assessment balance. The HOA's FRCP 30(b)(6) representative, Sharon Taylor Bergeron, testified at her deposition that Acosta's payment "cured all of the assessments before that May 17, 2012, recorded date."¹²

As the Nevada Supreme Court held in SFR Investments Pool 1 v. U.S. Bank ("SFR I ") in 2014, because NRS 116.3116(2) gives an HOA "a true superpriority lien, proper foreclosure of" that lien under the non-judicial foreclosure process created by NRS Chapters 107 and 116 "will extinguish a first deed of trust."¹³ But the court also explained that an HOA's lien has two parts—superpriority and subpriority—and in cases since SFR I , the Nevada Supreme Court has held that satisfaction of the superpriority portion of the lien before the foreclosure sale will save the first deed of trust from extinguishment.

Wilmington filed this suit against Saticoy Bay in February 2017¹⁴ but amended to add claims against the HOA in January of this year. In its amended complaint, Wilmington pleads eleven claims: five for quiet title,¹⁵ and individual claims for unjust enrichment, negligence, negligence per se, breach of contract, breach of the implied covenant of good faith and fair dealing, and misrepresentation. Saticoy Bay counterclaims for quiet title.¹⁶ The parties' quiet-title claims are the type recognized by the Nevada Supreme Court in Shadow Wood Homeowners Association, Inc. v. New York Community Bancorp —an action "seek[ing] to quiet title by invoking the court's inherent equitable jurisdiction to settle title disputes."¹⁷ Wilmington's quiet-title claims (and defenses to Saticoy's counterclaims) are grounded in a handful of theories including that the statutory scheme violated due process, the superpriority portion of the lien had been satisfied, and the sale was not commercially reasonable or was otherwise wrongfully conducted.¹⁸

Discovery has closed,¹⁹ and Wilmington moves for summary judgment on the quiet-title claims, arguing that the homeowner's payment satisfied the superpriority portion of the HOA's lien, so the foreclosure sale could not have extinguished its deed of trust.²⁰ The HOA moves to dismiss and for summary judgment, contending that Wilmington's claims are barred by applicable statutes of limitations or the doctrine of laches, and that its quiet-title theories fail for a handful of other reasons.²¹ Saticoy Bay also moves to dismiss and for summary judgment, offering the same slate of boilerplate arguments that it has made in the scores of nearly identical cases like this one pending in this district. I consider each party's positions in turn.

Discussion

A. Standards for crossmotions for summary judgment

The principal purpose of the summary-judgment procedure is to isolate and dispose of factually unsupported claims or defenses.²² The moving party bears the initial responsibility of presenting the basis for its motion and identifying the portions of the record or affidavits that demonstrate the absence of a genuine issue of material fact.²³ If the moving party satisfies its burden with a properly supported motion, the burden then shifts to the opposing party to present specific facts that show a genuine issue for trial.²⁴

Who bears the burden of proof on the factual issue in question is critical. When the party moving for summary judgment would bear the burden of proof at trial (typically the plaintiff), "it must come forward with evidence [that] would entitle it to a directed verdict if the evidence went uncontroverted at trial."²⁵ Once the moving party establishes the absence of a genuine issue of fact on each issue material to its case, "the burden then moves to the opposing party, who must present significant probative evidence tending to support its claim or defense."²⁶ When instead the opposing party would have the burden of proof on a dispositive issue at trial, the moving party doesn't have to produce evidence to negate the opponent's claim; it merely has to point out the evidence that shows an absence of a genuine material factual issue.²⁷ The movant need only defeat one element of the claim to garner summary judgment on it because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."²⁸

B. Wilmington is entitled to partial summary judgment because the homeowner's tender of the superpriority amount cured the default and satisfied the lien, saving the deed of trust from extinguishment.

Wilmington argues that homeowner Acosta's April 30, 2013, $536.14 payment cured all unpaid assessments and satisfied the entire superpriority portion of the HOA's lien. So, when the HOA ultimately foreclosed, the only thing it could have foreclosed on was a subpriority lien, which had no effect on the deed of trust. Saticoy Bay argues that only the lender can satisfy the superpriority piece of an HOA lien with a partial payment.²⁹ It reasons that the super/sub-priority dichotomy is "a specially devised mechanism designed to strike an equitable balance between the need to enforce collection of unpaid assessments and the obvious necessity for protecting the priority of the security interest of lenders."³⁰ It further suggests that "to allow" lenders "to benefit from homeowner payments, while" sitting on their hands "would fly in the face of" the goal of an "equitable sharing of the costs of preserving the value of the mortgagee's security."³¹

1. A homeowner's tender of the full superpriority amount, when applied to the charges that comprise the superpriority amount, discharges that portion of the lien and saves the deed of trust.

Saticoy Bay's fairness concern about making the lender feel the pain of payment before earning the reward of deed-of-trust preservation ignores how these HOA liens work. " NRS 116.3116(1) gives an HOA a lien on its homeowners' residences" for "any assessment levied against that unit or any fines imposed against the unit's owner...."³² NRS 116.3116(2) "elevates the priority of th[at] HOA lien over other...