Wells Fargo Bank, N.A. v. Leach Johnson Song & Gruchow

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 13, 2020
• Docket: 19-15539
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 13 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

WELLS FARGO BANK, N.A., as Trustee No. 19-15539 for Option One Mortgage Loan Trust 2007- 06, Asset-Backed Certificates, Series 2007- D.C. No. 06, 2:18-cv-00723-JCM-VCF

Plaintiff-Appellant, MEMORANDUM* v.

LEACH JOHNSON SONG & GRUCHOW, LTD.; SEVEN HILLS MASTER COMMUNITY ASSOCIATION,

Defendants-Appellees.

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

Submitted July 9, 2020** Seattle, Washington

Before: HAWKINS, D.M. FISHER,*** and M. SMITH, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable D. Michael Fisher, United States Circuit Judge for the U.S. Court of Appeals for the Third Circuit, sitting by designation. Wells Fargo Bank, N.A. (“Wells Fargo”) appeals the district court’s dismissal

of its complaint against Leach Johnson Song & Gruchow, Ltd. and Seven Hills

Master Community Association (the “HOA”) as time barred. We review de novo

dismissals based on statutes of limitations, Ventura Mobilehome Cmtys. Owners

Ass’n v. City of San Buenaventura, 371 F.3d 1046, 1050 (9th Cir. 2004), and we

affirm.

The HOA foreclosed its assessment lien on a residence in Henderson, Nevada

(“the property”) in April 2012, and pursuant to the superpriority of a portion of the

HOA lien as established by N.R.S. Chapter 116, the foreclosure extinguished Wells

Fargo’s lien on the property. See generally SFR Investments Pool 1 v. U.S. Bank,

334 P.3d 408 (2014). Wells Fargo filed this action against the HOA in April 2018,

slightly over six years from the date of the foreclosure sale.

The district court correctly concluded that the statute of limitations began to

run with the foreclosure sale in 2012. Under Nevada law, a cause of action generally

accrues when the wrong occurs or when the wronged party discovers or reasonably

should have discovered the facts giving rise to the cause of action. Bemis v. Estate

of Bemis, 967 P.2d 437, 440 (1998). The complaint alleges the HOA acted

negligently or wrongfully in its conduct of the foreclosure sale (including the manner

and content of its pre-sale notices) or that it breached its agreement in the restrictive

covenants by holding one at all. The HOA’s actions that gave rise to the complaint

2 thus occurred no later than the date of the foreclosure sale on April 5, 2012. We

agree with the numerous Nevada district courts that have reached the same

conclusion. See, e.g., Bank of New York Mellon v. Cascade Homeowner’s Ass’n

Inc., 2017 WL 3260598, at *4 (D. Nev. July 31, 2017); Bank of Am., N.A. v. Desert

Canyon Homeowners Ass’n, 2017 WL 4932912, at *2 (D. Nev. Oct. 31, 2017); Bank

of New York Mellon v. S. Terrace Homeowners Ass’n, 2017 WL 3013254, at *2 (D.

Nev. July 14, 2017); U.S. Bank v. Woodland Village, 2016 WL 7116016, at *2–3

(D. Nev. Dec. 6, 2016); Nationstar Mortgage LLC v. Amber Hills II Homeowners

Ass’n, 2016 WL 1298108, at *5–6 (D. Nev. March 31, 2016).1

As no claim had a statute of limitations longer than six years, absent tolling,

all of Wells Fargo’s claims would be time barred. However, the statute of limitations

should have been tolled during the ten months Wells Fargo and the HOA were

engaged in the mediation process required by N.R.S. § 38.310. See N.R.S. § 38.350

1 Wells Fargo argues that it was not aware that it had been injured by the foreclosure sale until the Nevada Supreme Court’s decision in the SFR case in 2014. However, the Nevada Supreme Court has specifically ruled that the SFR opinion “did not create new law or overrule existing precedent; rather, that decision declared what NRS 116.3116 has required since the statute’s inception.” K&P Homes v. Christiana Trust, 398 P.3d 292, 295 (Nev. 2017); see also S. Terrace Homeowners Ass’n, 2017 WL 3013254, at *3 (“The Nevada Supreme Court’s ruling did not cause the injury. Whether the deed of trust was extinguished or not, any injury would have occurred on the date of sale.”). Wells Fargo’s arguments for a 2018 date to trigger the statute are similarly unavailing, as it knew or should have known of the HOA’s alleged wrongs well before this date, which was not even the “final” judgment in its state court quiet title action.

3 (“Any statute of limitations applicable to a claim described in NRS 38.310 is tolled

from the time the claim is submitted to mediation or arbitration . . . until the

conclusion of mediation or arbitration of the claim and the period for vacating the

award has expired.”). The majority of Wells Fargo’s claims would still be untimely,

but tolling would make its breach of contract claims, which are subject to a six-year

statute of limitations, still viable.

Nonetheless, we may affirm on any ground supported by the record.

ASARCO, LLC v. Union Pacific RR. Co., 765 F.3d 999, 1004 (9th Cir. 2014). Wells

Fargo’s breach of contract claim is premised on the HOA’s violation of Section 7.2

of the restrictive covenants on the property. Even assuming the restrictive covenants

are a contract and that Wells Fargo is an intended beneficiary of that contract, these

provisions are invalid under Nevada law to the extent they are inconsistent with

N.R.S. Chapter 116 and would preclude foreclosure of the superpriority lien. See

SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 418–19 (2014). In the state

court quiet title action involving this property, the Nevada Supreme Court

specifically rejected Wells Fargo’s attempts to distinguish SFR. Wells Fargo Bank

v. Gabriel, 2019 WL 6119271, at *1 (Nev. Nov. 15, 2019) (“[W]e are not persuaded

that an HOA’s ‘promise’ to never exercise its superpriority lien rights can be

logically distinguished from a ‘waiver’ of those rights that is prohibited by NRS

116.1104.”). Since the relevant provisions of the restrictive covenants are

4 unenforceable under Nevada law, we alternatively affirm the dismissal of Wells

Fargo’s breach of contract claims for failure to state a claim.

AFFIRMED.