HSBC Bank USA v. Green Valley Pecos Homeowners

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 23, 2019
• Docket: 17-16800
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 23 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

HSBC BANK USA, N.A., as Trustee for the No. 17-16800 Holders of the Deutsche Alt-A-Securities Mortgage Loan Trust, Series 2007-1 Pass- D.C. No. Through Certificates, 2:16-cv-00242-JCM-GWF

Plaintiff – Appellant, MEMORANDUM* v.

GREEN VALLEY PECOS HOMEOWNERS ASSOCIATION, INC.,

Defendant – Appellee;

ABSOLUTE COLLECTIONS SERVICES, LLC,

MIKE SHORT,

Defendant – Counter- Claimant – Appellee.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Submitted December 10, 2019**

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Pasadena, California

Before: BEA, COLLINS, and BRESS, Circuit Judges. HSBC Bank USA, N.A. (“HSBC”) appeals the district court’s grant of

Green Valley Pecos Homeowners Association, Inc.’s (“Green Valley”) motion to

dismiss HSBC’s quiet title claim as to Green Valley, as well as the district court’s

grant of summary judgment to Mike Short on both HSBC’s quiet title claim and

Short’s counterclaims for quiet title and declaratory relief.1 We assume familiarity

with the facts and procedural history and discuss them only as necessary to explain

our decision.

Nevada law permits a homeowners association (“HOA”) to collect unpaid

HOA dues by attaching liens on properties. See SFR Invs. Pool 1, LLC v. U.S.

Bank N.A., 334 P.3d 408, 409 (Nev. 2014). Under Nevada law, a portion of these

liens is given “superpriority” status, and if an HOA forecloses on a superpriority

lien, the foreclosure extinguishes all junior liens—including a mortgage lender’s

first deed of trust. See id. But a lender can preserve its deed of trust by tendering

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). 1 The district court’s quieting title in Short necessarily meant that HSBC’s quiet title claim failed as a matter of law as to additional defendant Absolute Collection Services, LLC. The district court’s summary judgment order therefore disposed of all claims in the case, thereby giving us jurisdiction under 28 U.S.C. § 1291. That jurisdiction is not affected by the fact that the clerk subsequently entered “judgment” on a separate document only as to the claims between Short and HSBC. See Fed. R. App. P. 4(a)(7)(B).

2 the amount of the HOA’s superpriority lien to the HOA prior to foreclosure. Bank

of Am., N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 116 (Nev. 2018) (en banc).

Invoking the doctrine of “unclean hands,” the district court granted Green

Valley’s motion to dismiss HSBC’s quiet title claim based on the failure of

HSBC’s predecessor-in-interest to tender the amount set forth in the notice of

default in advance of the HOA foreclosure sale at which Short purchased the

property in question. The district court subsequently granted Short’s motion for

summary judgment on the basis of what it characterized as “an insufficient tender”

that was “rejected” prior to the foreclosure sale.

Intervening Nevada law has established that the rejection by an HOA of a

lender’s offer to tender the amount of the HOA’s superpriority lien operates to

preserve the lender’s interest. Bank of Am., N.A. v. Thomas Jessup, LLC Series

VII, 435 P.3d 1217, 1218 (Nev. 2019), reh’g en banc granted, Order Granting En

Banc Reconsideration, No. 73785 (Sept. 24, 2019), Doc. No. 19-39646. HSBC’s

complaint alleged that Green Valley’s agent “reject[ed] . . . HSBC’s predecessor’s

attempt to tender the super-priority component of the lien.” Given that the district

court has not had an opportunity to address this allegation in light of Thomas

Jessup, and given the unclear state of the record regarding the alleged rejection, we

conclude that these issues are best addressed in the first instance by the district

court on remand. We note, however, that the district court erred in concluding that

3 a failure to make an adequate tender implicates the “unclean hands”

doctrine. Whether or not the HOA’s alleged rejection of the bank’s attempt to

tender the superpriority portion of the lien warrants relief to the bank under Jessup,

any inadequacy in that tender does not amount to the sort of “egregious[] . . .

misconduct” necessary to constitute unclean hands. Las Vegas Fetish & Fantasy

Halloween Ball, Inc. v. Ahern Rentals, Inc., 182 P.3d 764, 767 (Nev. 2008).

To the extent that HSBC raises a separate due process challenge to the

foreclosure sale, the district court erred in holding that HSBC lacked standing to

raise that challenge. “Many cases reflect the premise that a valid assignment

confers upon the assignee standing to sue in place of the assignor.” Misic v. Bldg.

Serv. Emps. Health & Welfare Tr., 789 F.2d 1374, 1378 (9th Cir. 1986) (per

curiam); see also Nev. Rev. Stat. § 104.3203(2). To the extent that HSBC attempts

to raise a due process challenge that has not been foreclosed by our precedents, see

Bank of Am., N.A. v. Arlington W. Twilight Homeowners Ass’n, 920 F.3d 620,

623–24 (9th Cir. 2019) (citing SFR Invs. Pool 1, LLC v. Bank of New York Mellon,

422 P.3d 1248, 1250–53 (Nev. 2018)), it may do so on remand. HSBC also raises

other arguments for setting aside the foreclosure sale that the district court did not

address. Those too may be addressed on remand.

Accordingly, the judgment of the district court is VACATED and the case is

REMANDED for further proceedings consistent with this memorandum.