Wells Fargo Bank, N.A. v. Springs at Centennial Ranch

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 19, 2023
• Docket: 20-16342
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 19 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

WELLS FARGO BANK, N.A., as trustee for No. 20-16342 Banc of America Mortgage Securities Mortgage Pass Thru Certificates Series 2005- D.C. No. 3, 2:17-cv-01887-MMD-NJK

Plaintiff-Appellant, MEMORANDUM* v.

THE SPRINGS AT CENTENNIAL RANCH HOMEOWNERS ASSOCIATION; SFR INVESTMENTS POOL 1, LLC,

Defendants-Appellees.

Appeal from the United States District Court for the District of Nevada Miranda M. Du, Chief District Judge, Presiding

Argued and Submitted October 2, 2023 Las Vegas, Nevada

Before: RAWLINSON and OWENS, Circuit Judges, and FITZWATER,** District Judge.

Wells Fargo Bank, N.A. (“Wells Fargo”) appeals from the district court’s

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Sidney A. Fitzwater, United States District Judge for the Northern District of Texas, sitting by designation. grant of summary judgment for Defendants SFR Investments Pool 1, LLC (“SFR”)

and Springs at Centennial Ranch Homeowners Association (“Springs”). In a quiet

title action under Nev. Rev. Stat. § 40.010, Wells Fargo seeks to establish that its

lien survived Springs’ homeowners’ association (“HOA”) foreclosure sale of a

residential property to SFR. The prior homeowners—who recorded a deed of trust

on the property ultimately assigned to Wells Fargo, defaulted on their HOA fees to

Springs, and filed for bankruptcy—are not part of this case. As the parties are

familiar with the facts, we do not recount them here. We reverse and remand.

1. As an initial matter, Wells Fargo’s quiet title claim is not time-barred

because the statute of limitations was not triggered. “[T]he limitations period does

not begin to run until the lienholder receives notice of some affirmative action by

the titleholder to repudiate the lien or that is otherwise inconsistent with the lien’s

continued existence.” U.S. Bank, N.A. v. Thunder Props., Inc., 503 P.3d 299, 306

(Nev. 2022) (emphasis added). “The HOA foreclosure sale, standing alone, is not

sufficient to trigger the period.” Id. SFR, the titleholder, does not suggest that it

took any affirmative action to repudiate Wells Fargo’s lien; its general policy of

refuting the continued existence of deeds of trust on properties it purchased at

HOA foreclosure sales is not an affirmative action. Wells Fargo’s claim is

therefore timely.

2 2. We hold that the foreclosure sale is void because it violated the

automatic stay in the prior homeowners’ bankruptcy proceeding. Although Wells

Fargo did not plead this theory in its complaint, it is not forfeited because the

district court reached the issue, and the parties briefed and argued it at summary

judgment, and in this court. See Comcast of Sacramento I, LLC v. Sacramento

Metro. Cable Television Comm’n, 923 F.3d 1163, 1168-69 (9th Cir. 2019)

(explaining that forfeiture doctrine does not have “obvious application” where the

district court addressed the issue). We are not persuaded by SFR’s argument that

Wells Fargo’s failure to raise the issue earlier prejudiced SFR by preventing it

from requesting a retroactive annulment of the bankruptcy stay. SFR has not

explained why it was any less likely to receive a retroactive annulment at the time

of Wells Fargo’s motion for summary judgment than at the time the complaint was

filed.

Next, even though it is neither the debtor nor the trustee, Wells Fargo has

prudential standing to challenge a violation of the stay in the prior homeowners’

bankruptcy proceeding. After the district court’s decision, we held in another case

that a lienholder bank has prudential standing to challenge an alleged violation of a

bankruptcy stay under Nev. Rev. Stat. § 40.010 to establish the validity of its lien

after an HOA foreclosure sale. Bank of N.Y. Mellon v. Enchantment at Sunset Bay

Condo. Ass’n, 2 F.4th 1229, 1230-32 (9th Cir. 2021) (“Enchantment”). That is

3 precisely the posture here, so we hold that Wells Fargo has prudential standing and

proceed to the merits.

Upon filing a bankruptcy petition, a stay automatically applies to “any act to

create, perfect, or enforce any lien against property of the estate.” 11 U.S.C.

§ 362(a)(4). We previously have held that an HOA foreclosure sale conducted in

violation of an automatic bankruptcy stay is void under Nevada law. Enchantment,

2 F.4th at 1233-34. Here, although the foreclosure sale occurred after the

bankruptcy closed, Springs sent and recorded the foreclosure notices required by

statute, Nev. Rev. Stat. § 116.31162(1)(a)-(b), while the bankruptcy was ongoing

and the property was part of the bankruptcy estate. Because our decision in

CitiMortgage, Inc. v. Corte Madera Homeowners Ass’n, 962 F.3d 1103, 1109-11

(9th Cir. 2020), rests on the premise that recording these notices during the stay

violates the stay and because the plain language of the bankruptcy statute strongly

supports this conclusion, we hold that the foreclosure sale is void. As such, Wells

Fargo’s lien survives.

3. Because the foreclosure sale is void for violating the bankruptcy stay,

we need not reach whether it should be set aside for equitable reasons.

REVERSED AND REMANDED.