Wells Fargo Bank, National Association v. Garner

Opinion

2 UNITED STATES DISTRICT COURT 3

DISTRICT OF NEVADA 4

* * * 5 6 WELLS FARGO BANK, NATIONAL Case No. 3:17-cv-00735-MMD-WGC ASSOCIATION AS TRUSTEE FOR 7 OPTION ONE MORTGAGE LOAN ORDER TRUST 2007-2, ASSET-BACKED 8 CERTIFICATES, SERIES 2007-2,

9 Plaintiff, v. 10 LEMMIE GARNER; SUSAN CARLILE; 11 WOODLAND VILLAGE HOMEOWNER’S ASSOCIATION, 12 Defendants. 13 LEMMIE GARNER AND SUSAN 14 CARLILE,

15 Counterclaimants, v. 16 WELLS FARGO BANK, N.A., AS 17 TRUSTEE FOR OPTION ONE MORTGAGE LOAN TRUST 2007-2, 18 ASSET-BACKED CERITIFACTED, SERIES 2007-2, 19 Counter-Defendant. 20

21 I. SUMMARY 22 This dispute arises from the foreclosure sale (“HOA Sale”) of real property to satisfy 23 a homeowners’ association lien. Before the Court is Plaintiff/Counter-Defendant Wells 24 Fargo Bank’s (“Wells Fargo”) motion for summary judgment (“Motion”) on its quiet 25 title/declaratory relief claims (ECF No. 42). The Court has reviewed Defendant Woodland 26 Village Homeowner’s Association’s (“HOA”) response (ECF No. 45) as well as Wells 27 Fargo’s reply (ECF No. 48). Defendants/Counterclaimants Lemmie Garner and Susan 28 Carlile (“Buyers”) did not file an opposition to Wells Fargo’s Motion. For the following 2 claims as moot. 3 II. BACKGROUND 4 The following facts are undisputed unless otherwise indicated. 5 Yanira Maldonado (“Borrower”) purchased real property located at 17710 Fairfax 6 Court, Reno, Nevada 89508 (“Property”) on September 28, 2006. (ECF No. 1-1 at 2.) The 7 Borrower financed the purchase of the Property with a loan secured by a first deed of trust 8 (“DOT”) that was recorded against the Property in November 2006. (See ECF No. 1-2 at 9 2.) The DOT identified Option One Mortgage Corporation (“Option One”) as the Lender 10 and Beneficiary and secured repayment in the amount of $218,250. (Id.) 11 American Home Mortgage Servicing, Inc. (as successor-in-interest to Option One) 12 assigned all beneficial interest in the DOT to Wells Fargo in an assignment recorded in 13 December 2008. (ECF No. 1-3 at 2.) Sand Canyon Corporation f/k/a Option One assigned 14 the beneficial interest again to Wells Fargo in an assignment recorded July 2014. (ECF 15 No. 1-4 at 2.) 16 The Borrower became delinquent on her HOA assessments, and the HOA’s 17 trustee, Hampton & Hampton, P.C. (“Trustee”), instituted a notice of delinquent 18 assessment lien against the Property in February 2012. (ECF No. 42-1 at 10-12.) The 19 notice was not recorded. (ECF No. 42 at 3; see ECF No. 45 at 3-5, 8-10.) The Trustee 20 then recorded a notice of default and election to sell on April 13, 2012. (ECF No. 1-5 at 2- 21 3.) Wells Fargo was the beneficiary of the DOT at that time. (ECF No. 42 at 4; see ECF 22 No. 45 at 3-5.) The notice of default was mailed only to the Borrower—not Wells Fargo. 23 (ECF No. 42 at 4 (quoting ECF No. 42-2 at 4-5); see ECF No. 45 at 3-5.) The Trustee 24 recorded a notice of trustee’s sale on December 23, 2013. (ECF No. 1-6 at 2-4.) The notice 25 of trustee’s sale was mailed to the Borrower, Option One, and the Nevada Real Estate 26 Division Ombudsman’s Office, but not Wells Fargo. (ECF No. 42 at 5 (quoting ECF No. 27 42-2 at 6-7); see ECF No. 45 at 3-5, 8-10.) The Trustee then recorded a trustee’s deed 28 /// 2 Sale”) on March 11, 2014, for $19,000. (ECF No. 1-7 at 2-4.) 3 Wells Fargo asserts the following claims in the Complaint: (1) quiet title/declaratory 4 relief under 28 U.S.C. § 2201, NRS § 30.010 et seq., and NRS § 40.010 against all 5 defendants; (2) declaratory relief under the Fifth and Fourteenth Amendments against all 6 defendants; (3) quiet title under the Fifth and Fourteenth Amendments against all 7 defendants; (4) permanent and preliminary injunction against the Buyers; (5) unjust 8 enrichment against the Buyers; and (6) fraud in the inducement, or alternatively 9 promissory estoppel and breach of contract against the HOA. (ECF No. 1 at 9-16.) 10 The Buyers assert a counterclaim for unjust enrichment related to alleged 11 improvements they made to the Property. (ECF No. 16 at 4.) 12 III. LEGAL STANDARD 13 “The purpose of summary judgment is to avoid unnecessary trials when there is no 14 dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t of Agric., 18 15 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the pleadings, 16 the discovery and disclosure materials on file, and any affidavits “show that there is no 17 genuine issue as to any material fact and that the moving party is entitled to a judgment 18 as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue is 19 “genuine” if there is a sufficient evidentiary basis on which a reasonable fact-finder could 20 find for the nonmoving party and a dispute is “material” if it could affect the outcome of the 21 suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 22 The moving party bears the burden of showing that there are no genuine issues of 23 material fact. Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). Once the 24 moving party satisfies Rule 56’s requirements, the burden shifts to the party resisting the 25 motion to “set forth specific facts showing that there is a genuine issue for trial.” Anderson, 26 477 U.S. at 256. The nonmoving party “may not rely on denials in the pleadings but must 27 produce specific evidence, through affidavits or admissible discovery material, to show 28 that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991), 2 material facts.” Orr v. Bank of Am., NT & SA, 285 F.3d 764, 783 (9th Cir. 2002) (quoting 3 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). “The mere 4 existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient.” 5 Anderson, 477 U.S. at 252. Moreover, a court views all facts and draws all inferences in 6 the light most favorable to the nonmoving party. Kaiser Cement Corp. v. Fischbach & 7 Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986). 8 IV. DISCUSSION 9 Wells Fargo argues that it is entitled to summary judgment on its quiet 10 title/declaratory relief claims because the HOA failed to comply with the statutory notice 11 requirements of NRS Chapter 116. (ECF No. 42 at 7.) The Court agrees. The HOA was 12 required to send notices to “all holders of subordinate interests, even when such persons 13 or entities did not request notice” because NRS § 116.31168 incorporated NRS § 14 107.090’s notice requirements. SFR Invs. Pool 1, LLC v. Bank of N.Y. Mellon, 422 P.3d 15 1248, 1253 (Nev. 2018); see also NRS § 107.090(3)(b) & (4) (requiring notice of default 16 and notice of sale to be mailed to “[e]ach other person with an interest whose interest or 17 claimed interest is subordinate to the deed of trust”); West Sunset 2050 Tr. v. Nationstar 18 Mortg., LLC, 420 P.3d 1032, 1035 (Nev. 2018) (acknowledging a failure to serve notice of 19 default as defective notice). Such persons with interest undoubtedly include the holder of 20 a first security interest like the DOT here. See, e.g., SFR Invs. Pool 1, LLC v. U.S. Bank, 21 N.A., 334 P.3d 408, 418 (Nev. 2014) (observing that NRS § 116.31168 incorporates NRS 22 § 107.090, which requires that notices be sent to a deed of trust beneficiary); see also 23 Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow Canyon (“Shadow 24 Canyon”), 405 P.3d 641, 648 n.11 (Nev. 2017). 25 “Compliance with NRS Chapter 116’s provisions with respect to default, notice, and 26 publication of the notice of sale is a ‘statutory prerequisite[ ] to a valid HOA lien foreclosure 27 sale as stated in NRS [§] 116.31162 through NRS [§] 116.31164.’” Christiana Tr. v. SFR 28 Invs. Pool 1, LLC, No. 2:16-cv-00684-GMN-CWH, 2018 WL 6603643, at *4 (D. Nev. Dec. 2 (Nev. 2016)); see also id. (noting that since Shadow Canyon, “the Nevada Supreme Court 3 has confirmed that an HOA’s failure to mail the Chapter 116 notices to parties entitled to 4 such notice is a sufficient ground for voiding the foreclosure sale and granting summary 5 judgment in favor of the holder of the senior deed of trust”). 6 Here, Wells Fargo’s evidence establishes that the HOA failed to mail the notice of 7 default and notice of sale to Wells Fargo. (See ECF No. 41-1 at 1-12; ECF No. 42-2 at 1- 8 8.) The HOA does not dispute that it failed to mail the notices to Wells Fargo. (See ECF 9 No. 45 at 3-5, 8-10.) Instead, the HOA requests relief under Federal Rule of Civil 10 Procedure 56(d) and an order requiring Wells Fargo to produce a title report that may have 11 provided Wells Fargo with notice of the default or impending foreclosure sale. (Id. at 8-9.) 12 The Court denies the HOA’s request because Wells Fargo produced evidence that it does 13 not possess the title report in question. (ECF No. 48-1 at 4.) Plus, the requested 14 information is irrelevant. Wells Fargo would have received the title report mere days before 15 the foreclosure sale at the earliest. (See ECF No. 45 at 8 (“The witness testified that the 16 report was generated in early March of 2014, though the exact date was unknown.”); ECF 17 No. 1-7 at 2-4 (indicating that the HOA Sale occurred on March 11, 2014).) That would not 18 have given Wells Fargo sufficient time to “cure, compromise, or contest the default.” See 19 U.S. Bank, Nat’l Ass’n ND v. Res. Grp., LLC, 444 P.3d 442, 447 (Nev. 2019) (citing NRS 20 § 107.090(3)) (noting that “the legislatively determined minimum grace period following a 21 notice of default . . . is 80 days” for the first deed of trust holder). 22 The Court finds that the HOA’s defective noticing is sufficient ground to void the 23 HOA Sale to the extent the sale extinguished Wells Fargo’s DOT. However, the HOA 24 argues that the Court should not grant summary judgment against the HOA because the 25 HOA claims no ownership interest in the Property. (ECF No. 45 at 6-7.) Wells Fargo is 26 willing to dismiss the HOA from this claim. (See ECF No. 48 at 7 (“However, if the HOA 27 contends there will be no prejudice to it if the Court enters an order voiding the sale and/or 28 declaration the Deed of Trust as a lien on the Property, then Wells Fargo is fine dismissing 1 || it from the quiet title/declaratory judgment claim only.”).) Accordingly, the Court will dismiss 2 || Wells Fargo’s first claim against the HOA and grant summary judgment on that claim 3 || against the Buyers. The Court declares that the HOA Sale did not extinguish the DOT, 4 || which is Wells Fargo’s requested relief.’ 5 Wells Fargo’s remaining claims are moot as is Wells Fargo’s request for a 6 || permanent and preliminary injunction “prohibiting Buyer, its successors, assigns, and 7 || agents from conducting any sale, transfer or encumbrance of the Property if it is claimed 8 || to be superior to Plaintiff's Deed of Trust or not subject to that Deed of Trust.” (ECF No. 1 9 || at 14.) Accordingly, the Court will dismiss Wells Fargo’s remaining claims as moot. 10 || V. CONCLUSION 11 The Court notes that the parties made several arguments and cited to several cases 12 || not discussed above. The Court has reviewed these arguments and cases and determines 13 || that they do not warrant discussion as they do not affect the outcome of the motion before 14 || the Court. 15 It is therefore ordered that Wells Fargo’s motion for summary judgment (ECF No. 16 || 42) is granted because the Court finds that the HOA Sale is void as to the superpriority 17 || portion of the HOA’s lien for failure to mail the statutorily required notices to Wells Fargo. 18 || The Court therefore declares that the HOA Sale did not extinguish Wells Fargo’s DOT. 19 It is further ordered that Wells Fargo’s remaining claims are dismissed as moot. 20 The parties are instructed to file a status report in 14 days regarding the Buyers’ 21 || remaining counterclaim for unjust enrichment. 22 DATED THIS 17* day of September 2019. 23 aA 24 f{ SQ MIRANDA M. DU 25 CHIEF UNITED STATES DISTRICT JUDGE 26 27 1The HOA Sale is only void as to the superpriority portion of the HOA’s lien. See 28 || Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 121 (2018), as amended on denial of reh’g (Nov. 13, 2018).