Shirehampton Drive Trust v. Jpmorgan Chase Bank

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 28, 2020
• Docket: 19-17253
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 28 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

SHIREHAMPTON DRIVE TRUST, No. 19-17253

Plaintiff-Appellee, D.C. No. 2:16-cv-02276-RFB-EJY v.

JPMORGAN CHASE BANK, N.A., MEMORANDUM*

Defendant-Appellant,

and

UNITED STATES DEPARTMENT OF THE TREASURY; et al.,

Defendants.

Appeal from the United States District Court for the District of Nevada Richard F. Boulware II, District Judge, Presiding

Argued and Submitted September 2, 2020 Seattle, Washington

Before: HAWKINS and McKEOWN, Circuit Judges, and KENDALL, ** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Virginia M. Kendall, United States District Judge for the Northern District of Illinois, sitting by designation. JPMorgan Chase Bank, N.A. (“Chase”) appeals the district court’s entry of

summary judgment in favor of Shirehampton Drive Trust. We have jurisdiction

under 28 U.S.C. § 1291. We review the district court’s entry of summary judgment

de novo, LN Mgmt., LLC v. JPMorgan Chase Bank, N.A., 957 F.3d 943, 949 (9th

Cir. 2020), and we reverse.

Nevada resident Louisa Oakenell borrowed $340,407 from MetLife Home

Loans in order to purchase a property located at 705 Shirehampton Drive, Las Vegas,

Nevada 89178. The deed of trust lists Oakenell as the borrower, MetLife Home

Loans as the lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”)

as the beneficiary.

Oakenell became delinquent on her monthly payments to the Huntington

Homeowners Association (“HOA”). Red Rock Financial Services, LLC, a debt

collector working on behalf of the HOA, sent her a letter via certified mail,

explaining that it would impose a lien on her property if she failed to make her

payments. The HOA, through Red Rock, recorded with the Clark County Recorder’s

Office a delinquent assessment lien on the Oakenell property.

Red Rock recorded a Notice of Default and Election to Sell Pursuant to the

Lien for Delinquent Assessments, copies of which Red Rock, on behalf of the HOA,

mailed to Oakenell, the HOA, MetLife Home Loans, Republic Services (a utility

company), and the IRS. Red Rock did not mail a copy to MERS. Red Rock

2 subsequently mailed a letter to MetLife Home Loans explaining that the HOA’s lien

is “Junior only to the Senior Lender/Mortgage Holder.”

Red Rock later recorded a Notice of Foreclosure Sale under the Lien for

Delinquent Assessments. Red Rock mailed this Notice to Oakenell, the HOA,

MetLife Home Loans, Republic Services, the IRS, and the State of Nevada

Ombudsman for Common-Interest Communities. A public auction was held

pursuant to Nevada Revised Statues Chapter 116, at which Shirehampton Drive

Trust purchased the property for $9,700. MERS later assigned its interest in the deed

of trust to Chase and recorded the assignment.

Shirehampton filed this action in Nevada State Court to quiet title to the

property. Relying heavily on the Nevada Supreme Court’s decision in West Sunset

2050 Tr. v. Nationstar Mortg., LLC, 420 P.3d 1032, 1035 (Nev. 2018), the district

court granted Shirehampton’s Motion for Summary Judgment and denied Chase’s

Cross-Motion, holding that the foreclosure sale extinguished Chase’s deed of trust.1

On appeal, Chase contends that the foreclosure sale did not extinguish the

deed of trust and that the sale was voidable because: (1) Red Rock failed to provide

1 Under Nevada law applicable at all relevant times, an HOA’s assessment lien was a superpriority lien that, “when properly foreclosed, extinguished a first deed of trust and vested title in the foreclosure sale purchaser without equity or right of redemption.” Saticoy Bay LLC Series 9050 W Warm Springs 2079 v. Nev. Ass’n Servs., 444 P.3d 428, 430 (Nev. 2019) (internal citation and quotation omitted).

3 MERS (Chase’s predecessor-in-interest) with the statutorily required notice of

foreclosure sale, (2) the grossly inadequate auction purchase price of $9,700

(compared to a fair market value of approximately $270,000) made the sale voidable,

and (3) the letter Red Rock sent to MetLife Home Loans (the lender on the deed of

trust) explaining that the mortgage holder’s interest was senior to that of the HOA

was a misrepresentation.

In order to justify setting aside a foreclosure sale, the court must find that the

sale suffered from irregularities that rise to the level of fraud, unfairness, or

oppression. Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow

Canyon, 405 P.3d 641, 646 (Nev. 2017). “[M]ere inadequacy of price is not in itself

sufficient to set aside the foreclosure sale, but it should be considered together with

any alleged irregularities in the sales process to determine whether the sale was

affected by fraud, unfairness, or oppression.” Id. at 648. Examples of irregularities

that may rise to the level of fraud, unfairness, or oppression include “an HOA’s

failure to mail a deed of trust beneficiary the statutorily required notices; an HOA’s

representation that the foreclosure sale will not extinguish the first deed of trust;

collusion between the winning bidder and the entity selling the property; a

foreclosure trustee’s refusal to accept a higher bid; or a foreclosure trustee’s

misrepresentation of the sale date.” Id. at 648 n.11 (internal citations omitted).

4 Here, the sale price was exceptionally low, 3.5 percent of the fair market

value. This low price alone does not condemn the sale. In Shadow Canyon, for

example, the price garnered at the foreclosure sale was 11 percent of the property’s

fair market value, but the court did not void the sale because it found no evidence of

fraud, unfairness, or oppression. Id. at 649–51. However, there are two irregularities

that the Nevada Supreme Court has specifically stated may rise to the level of fraud,

unfairness, and oppression, and which, when combined with a low sale price, make

the sale here voidable.

First, the HOA’s representative, Red Rock, did not mail the statutorily

required notices to the deed of trust beneficiary (MERS). The Nevada Supreme

Court has specifically held that deed of trust beneficiaries are entitled to such notice.

U.S. Bank, Nat’l Ass’n ND v. Res. Grp., LLC, 444 P.3d 442, 448 (Nev. 2019) (citing

Shadow Canyon, 405 P.3d at 648 n.11, for the proposition that a deed of trust

beneficiary is entitled to statutorily required notices and that failure to provide that

notice can render a sale voidable). Second, Red Rock falsely represented in its letter

to MetLife that the HOA’s lien is “Junior only to the Senior Lender/Mortgage

Holder,” which suggests that an eventual foreclosure sale by the HOA would not

extinguish the deed of trust when, in fact, it would under Nevada law. See SFR Invs.

Pool 1 v. U.S. Bank, 334 P.3d 408, 413 (Nev. 2014) (explaining that NRS 116.3116

establishes a “true priority lien” in favor of the HOA such that when the HOA

5 properly enforces its lien, it has the effect of extinguishing an otherwise senior

mortgage lien), abrogated on other grounds by Saticoy Bay LLC Series 350 Durango

104 v. Wells Fargo Home Mortg., 388 P.3d 970 (Nev. 2017).

This case is thus distinguishable from West Sunset, in that in addition to the

grossly inadequate price and the lack of statutory notice, the HOA here also

misrepresented the effect of foreclosure in a way that did not occur in West Sunset.

C.f. U.S. Bank, Nat’l Ass’n ND, 444 P.3d at 449 (“The grossly inadequate price,

combined with the problems with the notice of default presents

a classic claim for equitable relief under Shadow Canyon. . . .”). Pursuant to Shadow

Canyon and its progeny, the grossly inadequate sales price, combined with Red

Rock’s misrepresentation of the effect of foreclosure and the failure to provide

statutorily required notice, render the sale voidable for unfairness.

Accordingly, we reverse the grant of summary judgment in favor of

Shirehampton and remand for further proceedings consistent with this disposition.

REVERSED AND REMANDED.