SFR Investments Pool 1, LLC v. Wells Fargo Bank, National Association

1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA [3] SFR INVESTMENTS POOL 1, LLC, ) 4 ) Plaintiff, ) Case No.: 2:22-cv-00655-GMN-EJY 5 vs. ) ) ORDER GRANTING SUMMARY [6] WELLS FARGO BANK, NATIONAL ) JUDGMENT AND DENYING MOTION 7 ASSOCIATION, ) TO CERTIFY QUESTIONS OF LAW ) 8 Defendant. ) ) [9] 10 Pending before the Court is Defendant Wells Fargo Bank, National Association’s 11 Motion for Summary Judgment (“MSJ”), (ECF No. 53).1 Plaintiff SFR Investments Pool 1, 12 LLC, filed a Response and Counter Motion for Summary Judgment, (ECF Nos. 61, 63). Wells 13 Fargo filed a Reply to its Motion for Summary Judgment, (ECF No. 69), as well as a Response 14 to the Counter Motion for Summary Judgment, (ECF No. 70). SFR filed a Reply to the 15 Counter Motion for Summary Judgment, (ECF No. 71).2 [18] 1 SFR asserts that Wells Fargo’s Motion is late because dispositive motions were due on July 7, 2023. (Resp. 19 2:20–3:4, ECF No. 61). On March 3, 2023, the Magistrate Judge granted a motion to extend discovery and dispositive motion deadlines to June 9, 2023, and July 7, 2023, respectively. (Disc. Deadline Order, ECF No. 20 27). After this deadline was set, however, the parties stipulated to stay discovery until a decision was made on certain then-pending motions. (Order Granting Stip. to Stay Disc., ECF No. 45). The Magistrate Judge 21 continued a limited stay on discovery after ruling on the motions. (6/30/2023 Hearing Tr. 32:4, ECF No. 52). The dispositive motions deadline could not have passed before the end of discovery. See LR 26-1(b)(4) (“Unless 22 the discovery plan otherwise provides and the court so orders, the deadline for filing dispositive motions is 30 days after the discovery cut-off date.”). Accordingly, the Court finds that the Motion for Summary Judgment is 23 timely. 2 Wells Fargo objected to SFR’s filing of a reply in support of its Countermotion because it “would serve as a de 24 facto sur-reply to Wells Fargo’s Motion, given that SFR’s Countermotion is a carbon-copy of the SFR Response.” (Resp. Counter MSJ 3:6–8, ECF No. 70). Although the Court agrees that SFR’s joint Response and 25 Counter Motion violate the local rules, which require a separate document for each type of relief requested or purpose of the document, to further judicial efficiency, the Court interprets the motions as cross motions for summary judgment and considers all filings. 1 Also pending before the Court is SFR’s Motion to Certify Questions of Law to the 2 Nevada Supreme Court, (ECF No. 60). Defendant Wells Fargo Bank filed a Response, (ECF 3 No. 67), to which SFR filed a Reply, (ECF No. 68). 4 For the reasons discussed below, the Court GRANTS Wells Fargo’s Motion for 5 Summary Judgment, DENIES SFR’s Counter Motion for Summary Judgment, and DENIES 6 the Motion to Certify Questions of Law. 7 I. BACKGROUND 8 This case arises from Wells Fargo’s alleged pursuit of foreclosure on the property 9 located at 3409 Yorkminster, Las Vegas, Nevada, 89129, Parcel No. 138-08-322-040 (the 10 “Property”). (Compl. ¶ 5, ECF No. 1). Jose and Paula Herrera, the Borrowers, purchased the 11 property in 2001. (Grant Deed, Ex. 1 to MSJ, ECF No. 53-1). In 2007, the Borrowers financed 12 the purchase of the Property with a loan secured by a deed of trust. (First Deed of Trust, Ex. 2 13 to MSJ, ECF No. 53-2). After several reassignments, Wells Fargo was assigned all beneficial 14 interest in the First Deed of Trust in 2008. (Id.); (Assignments of Deed of Trust, Ex. 3 & 4 to 15 MSJ, ECF Nos. 53-3–4). 16 On or about June 20, 2007, the HOA Trustee recorded a Notice of Lien (“NOL”) 17 evidencing $1,920.00 owed in violation fines and collection charges. (NOL, Ex. 7 to MSJ, ECF 18 No. 53-7). The HOA Trustee later recorded a Notice of Default and Election to Sell Under 19 Homeowners Association Lien on February 17, 2009, a Notice of Trustee’s Sale on December 20 20, 2012, and finally, a Foreclosure Deed on January 16, 2013. (Not. Default, Ex. 8 to MSJ, 21 ECF No. 53-8); (Not. Trustee’s Sale, Ex. 9 to MSJ, ECF No. 53-9); (Foreclosure Deed, Ex. 10 22 to MSJ, ECF No. 53-10). SFR entered the highest bid of $11,900.00 for the Property at the 23 HOA foreclosure sale on January 11, 2013. (Foreclosure Deed, Ex. 10 to MSJ). 24 Wells Fargo began the foreclosure process in 2021 based on non-payment under the 25 First Deed of Trust. (Not. Default and Election to Sell Real Property, Ex. 11 to MSJ, ECF No. 1 53-11). The Deed of Trust sale was set for April 29, 2022. (Not. Trustee’s Sale, Ex. 12 to MSJ, 2 ECF No. 53-12). SFR filed suit in this Court for one cause of action: Quiet Title/Declaratory 3 Relief under NRS 40.010. (Compl. ¶¶ 16–23). The parties stipulated to enjoin the foreclosure 4 sale pending resolution of this case. (Order Granting Stip., ECF No. 13). Following discovery, 5 the parties now move for summary judgment. (MSJ, ECF No. 53); (Counter MSJ, ECF No. 63). 6 II. LEGAL STANDARD 7 A. Certify Questions of Law 8 This Court may certify questions to the Nevada Supreme Court if the proceedings before 9 it raise “questions of law of this state which may be determinative of the cause then pending in 10 the certifying court and as to which it appears to the certifying court there is no controlling 11 precedent in the decisions of the Supreme Court or Court of Appeals of this state.” Nev. R. 12 App. P. 5(a). Certification is not mandatory even where state law is unclear on a particular 13 issue, but is rather within the federal court’s sound discretion. Lehman Bros. v. Schein, 416 14 U.S. 386 , 391 (1974); see also Carolina Cas. Ins. Co. v. McGhan, 572 F. Supp. 2d 1222 , 1225 15 (D. Nev. 2008) (“[W]hen a federal court confronts an issue of state law which the state’s 16 highest court has not addressed, the federal court’s task typically is to predict how the state’s 17 highest court would decide the issue.”). “Factors a federal court should consider in exercising 18 this discretion include whether the state law question presents a significant question of 19 important state public policy, whether the issue involved has broad application, whether law 20 from other states is instructive, the state court’s case load, and comity and federalism 21 concerns.” Carolina Cas. Ins. Co., 572 F. Supp. 2d at 1226 (citing Kremen v. Cohen, 325 F.3d 22 1035, 1037–38 (9th Cir. 2003)). The certifying court may also consider “the timing of the 23 certification, and whether certification will achieve savings to time, money, and resources or 24 promote cooperative judicial federalism.” Id. at 1226 (citing Complaint of McLinn, 744 F.2d 25 677, 681 (9th Cir. 1984)). 1 B. Summary Judgment 2 The Federal Rules of Civil Procedure provide for summary adjudication when the 3 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 4 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 5 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 6 may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 7 A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to 8 return a verdict for the nonmoving party. Id. “The amount of evidence necessary to raise a 9 genuine issue of material fact is enough ‘to require a jury or judge to resolve the parties’ 10 differing versions of the truth at trial.’” Aydin Corp. v. Loral Corp., 718 F.2d 897, 902 (9th Cir. 11 1983) (quoting First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253 , 288–89 (1968)). “Summary 12 judgment is inappropriate if reasonable jurors, drawing all inferences in favor of the nonmoving 13 party, could return a verdict in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. 14 P’ship, 521 F.3d 1201, 1207 (9th Cir. 2008). A principal purpose of summary judgment is “to 15 isolate and dispose of factually unsupported claims or defenses.” Celotex Corp. v. Catrett, 477 16 U.S. 317 , 323–24 (1986). 17 In determining summary judgment, a court applies a burden-shifting analysis. “When 18 the party moving for summary judgment would bear the burden of proof at trial, it must come 19 forward with evidence which would entitle it to a directed verdict if the evidence went 20 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 21 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 22 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474 , 480 (9th Cir. 2000) (internal citation and 23 quotation marks omitted). In contrast, when the nonmoving party bears the burden of proving 24 the claim or defense, the moving party can meet its burden in two ways: (1) by presenting 25 evidence to negate an essential element of the nonmoving party’s case; or (2) by demonstrating 1 that the nonmoving party failed to make a showing sufficient to establish an element essential 2 to that party’s case on which that party will bear the burden of proof at trial. Celotex Corp., 477 3 U.S. at 323–24. If the moving party fails to meet its initial burden, summary judgment must be 4 denied, and the court need not consider the nonmoving party’s evidence. Adickes v. S.H. Kress 5 & Co., 398 U.S. 144 , 158–60 (1970). 6 If the moving party satisfies its initial burden, the burden then shifts to the opposing 7 party to establish that a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. 8 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 9 the opposing party need not establish a material issue of fact conclusively in its favor. It is 10 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 11 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 12 Ass’n, 809 F.2d 626, 630 (9th Cir. 1987). However, the nonmoving party “may not rely on 13 denials in the pleadings but must produce specific evidence, through affidavits or admissible 14 discovery material, to show that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404 , 15 1409 (9th Cir. 1991), and “must do more than simply show that there is some metaphysical 16 doubt as to the material facts,” Orr v. Bank of Am., 285 F.3d 764, 783 (9th Cir. 2002). “The 17 mere existence of a scintilla of evidence in support of the plaintiff's position will be 18 insufficient.” Anderson, 477 U.S. at 252 . In other words, the nonmoving party cannot avoid 19 summary judgment by relying solely on conclusory allegations that are unsupported by factual 20 data. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go 21 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 22 competent evidence that shows a genuine issue for trial. See Celotex Corp., 477 U.S. at 324 . 23 At summary judgment, a court’s function is not to weigh the evidence and determine the 24 truth but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249 . 25 The evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn 1 in his favor.” Id. at 255 . But if the evidence of the nonmoving party is merely colorable or is 2 not significantly probative, summary judgment may be granted. See id. at 249–50. 3 “[W]hen simultaneous cross-motions for summary judgment on the same claim are 4 before the court,” like they are here, “the court must consider the appropriate evidentiary 5 material identified and submitted in support of both motions, and in opposition to both motions, 6 before ruling on each of them.” Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, [7] 249 F.3d 1132 , 1134 (9th Cir. 2001). 8 III. DISCUSSION 9 The Court begins by addressing SFR’s Motion to Certify Questions to the Nevada 10 Supreme Court. Because the Court exercises its discretion to deny this motion, the Court then 11 turns to the parties’ arguments on summary judgment. 12 A. The Court Declines to Certify Questions to the Nevada Supreme Court 13 SFR requests the Court certify two questions to the Nevada Supreme Court: (1) Whether 14 repeated actions i.e. filing lawsuits, sending cease a desist letters, asserting affirmative 15 defenses, and filing counterclaims, by a purchaser against a lienholder constitutes an 16 affirmative act under Thunder Properties for purposes of triggering the statute of limitations; 17 and (2) Whether the statute of limitations applies to a lienholder’s defense where the defense is 18 a mirror image of the time-barred claim. (Mot. Certify Questions, ECF No. 60). The Ninth 19 Circuit has already denied SFR’s nearly identical motion in a different case requesting 20 certification of the same two questions. (See U.S. Court of Appeals Case No. 22-16472 at ECF 21 No. 40, Mot. Certify Question of Law, Ex. 1 to Resp., ECF No. 67-1); (U.S. Court of Appeals 22 Case No. 22-16472 at ECF No. 49, Memorandum at 5 n.2, Ex. 2 to Resp., ECF No. 67-2). 23 Moreover, existing precedent governs the issues SFR raises. Namely, Thunder 24 Properties and various cases interpreting it govern the triggering of the relevant statute of 25 limitations. See, e.g., Wells Fargo Bank, N.A. as trustee for Banc of Am. Mortg. Sec. Mortg. 1 Pass Thru Certificates Series 2005-3 v. Springs at Centennial Ranch Homeowners Ass’n, No. 2 20-16342, 2023 WL 6890086 , at *1 (9th Cir. Oct. 19, 2023) (rejecting SFR’s argument that its 3 “general policy of refuting the continued existence of deeds of trust it purchased at HOA 4 foreclosure sales” is an affirmative action triggering the statute of limitations under Thunder 5 Properties in an unpublished memorandum decision). And it is well settled under Nevada law 6 that “[l]imitations do not run against defenses.” Dredge Corp. v. Wells Cargo, Inc., 389 P.2d 7 394, 396 (Nev. 1964). Though there are some exceptions to this general rule, the Court finds 8 itself capable of applying existing case law to the facts of this case. Therefore, the Court, in its 9 discretion, DENIES SFR’s Motion to Certify Questions to the Nevada Supreme Court. 10 B. Wells Fargo is Entitled to Summary Judgment 11 Wells Fargo argues that there was no superpriority component of the HOA’s foreclosure 12 lien that could have extinguished Wells Fargo’s Deed of Trust, and further, no statute of 13 limitations issues are at play. (MSJ 2:15–3:3). SFR argues that the HOA foreclosed on a lien 14 containing superpriority amounts, Thunder Properties should apply prospectively only and not 15 apply here, and Wells Fargo—the Defendant in this matter—is time-barred or otherwise barred 16 by laches.3 The Court agrees with Wells Fargo that there was no superpriority component of 17 the HOA foreclosure lien and no statute of limitations applies, and GRANTS summary 18 judgment for Wells Fargo. 19 1. Superpriority4 20 At issue in this case is whether the HOA’s Foreclosure Lien extinguished Wells Fargo’s 21 First Deed of Trust. “NRS 116.3116(1) confers to an HOA a lien on a homeowner’s unit for [22] 23 3 Because SFR filed a joint Response and Counter MSJ, it is unclear which arguments are made in opposition to summary judgment in favor of Wells Fargo and which arguments are made in favor of summary judgment for 24 SFR. Nonetheless, the Court has considered all arguments and finds SFR’s arguments unpersuasive. 4 To the extent SFR argues that Wells Fargo failed to plead a superpriority component affirmative defense, the 25 Court notes that Wells Fargo’s Answer does assert a priority defense, stating, “If SFR took title to the Property, it was subject to [Wells Fargo’s] first priority Deed of Trust, thereby forestalling any enjoinment/extinguishment of the Deed of Trust in the Property.” (Ans. 4:10–13, ECF No. 16). 1 unpaid assessments, construction penalties, and fines levied against the unit. NRS 116.3116(2) 2 establishes the priority of that lien, splitting the lien into two pieces—‘a superpriority piece and 3 a subpriority piece.’” Horizons at Seven Hills v. Ikon Holdings, 373 P.3d 66 , 69 (Nev. 2016) 4 (quoting SFR Invs. Pool 1 v. U.S. Bank, 334 P.3d 408 , 411 (Nev. 2014), holding modified by 5 Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortg., a Div. of Wells Fargo 6 Bank, N.A., 388 P.3d 970 (Nev. 2017)). “The superpriority piece, consisting of the last nine 7 months of unpaid HOA dues and maintenance and nuisance-abatement charges, is ‘prior to’ a 8 first deed of trust,” whereas the “subpriority piece, consisting of all other HOA fees or 9 assessments, is subordinate to a first deed of trust.” SFR, 334 P.3d at 411. That is, “NRS 10 116.3116(2) gives an HOA a true superpriority lien, proper foreclosure of which will extinguish 11 a first deed of trust.” Id. at 419; see also Deutsche Bank Nat’l Tr. Co. as Tr. for Registered 12 Holders of Morgan Stanley ABS Cap. I Tr. 2004-HE8, Mortg. Pass-Through Certificates, 13 Series 2004-HE8 v. Fid. Nat’l Title Ins. Co., 536 P.3d 915 , 923–25 (Nev. 2023). The Nevada 14 Supreme Court has determined that “the superpriority lien granted by NRS 116.3116(2) does 15 not include an amount for collection fees and foreclosure costs incurred; rather it is limited to 16 an amount equal to the common expense assessments due during the nine months before 17 foreclosure.” Horizons at Seven Hills v. Ikon Holdings, 373 P.3d 66 , 72 (Nev. 2016). 18 Here, the HOA foreclosed under HOA violations. (HOA Trustee Collection File, Ex. 13 19 to MSJ, ECF No. 53-13) (indicating balance due for rules violations). Because HOA violations 20 are not part of the last nine months of unpaid HOA dues and maintenance and nuisance21 abatement charges, HOA violations fall under “all other HOA fees or assessments,” and a lien 22 based on such violations is subordinate to a first deed of trust. See SFR, 334 P.3d at 411. 23 SFR does not respond to Wells Fargo’s argument that a lien based on HOA violations is 24 subordinate to a first deed of trust. SFR nonetheless argues that the HOA foreclosed on a lien 25 containing super-priority amounts. (Resp. 11:8–13:5). Specifically, SFR contends that prior to 1 2015, a notice of delinquent assessment triggers the super-priority, not a notice of lien, and a 2 2009 letter to the Borrower contained amounts for unpaid assessments. (Id. 11:10–12:4). But 3 the 2009 letter is not related to the Notice of Default or Notice of Sale and is therefore 4 immaterial here. (See Not. Default, Ex. 8 to MSJ); (Not. Sale, Ex. 9 to MSJ, ECF No. 53-9); 5 (2009 Letter, Ex. A to Resp. at 4, ECF No. 61-1). And to the extent SFR argues that an 6 assessment in the amount of $132.00 was due and owing and part of the notice of lien, a status 7 report from the HOA Trustee includes an entry stating, “Lien recorded for Violations Only,” 8 indicating that the lien was unrelated to unpaid assessments. (HOA Trustee Collection File at 9 580, Ex. 13 to MSJ). Moreover, SFR does not explain how or why the $132.00 assessment is 10 part of the notice of lien. Accordingly, the HOA lien is subordinate to the first deed of trust, 11 Wells Fargo’s deed of trust is not extinguished, and Wells Fargo is entitled to summary 12 judgment on SFR’s quiet title claim.5 13 2. Statute of Limitations 14 Wells Fargo notes that “[d]uring the course of discovery in this litigation, SFR, as the 15 Plaintiff in this matter, has bizarrely attempted to advance a statute of limitations theory as an 16 alternative means of prevailing on its quiet title action.” (MSJ 10:5–7). Namely, SFR contends 17 that “Wells Fargo is really masquerading its time-barred quiet title claim through [an] unpled 18 defense, and therefore the statute of limitations should apply.” (Resp. 4:23–24). This Court has 19 already rejected SFR’s statute of limitations theory in another case. See SFR Invs. Pool 1, LLC 20 v. Fed. Nat’l Mortg. Ass’n, No. 2:23-cv-001348-GMN-NJK, 2024 WL 1540822 , at *2 (D. Nev. 21 Apr. 8, 2024) (dismissing SFR’s quiet title claim because statutes of limitations do not run 22 against defenses). Because any affirmative defense raised by Wells Fargo is not subject to a 23 statute of limitations, SFR cannot prevail on this theory. See Dredge Corp. v. Wells Cargo, Inc., [25] 5 The Court has considered SFR’s arguments that (1) Thunder Properties can only apply prospectively and (2) Wells Fargo is barred by the doctrine of laches and finds them unpersuasive. 1 P.2d 394 , 396 (Nev. 1964); Cf City of Saint Paul, Alaska v. Evans, 344 F.3d 1029 , 1035 2 || (9th Cir. 2003) (applying statute of limitations to plaintiffs “time-barred claims masquerading 3 defenses” to counterclaims filed in response to plaintiffs claims). 4 ||IV. CONCLUSION 5 IT IS HEREBY ORDERED that Wells Fargo’s Motion for Summary Judgment, (ECF 6 || No. 53), is GRANTED. 7 IT IS FURTHER ORDERED that SFR’s Countermotion for Summary Judgment, g || (ECF No. 63), is DENIED. 9 IT IS FURTHER ORDERED that SFR’s Motion to Certify Questions of Law to 10 || Nevada Supreme Court, (ECF No. 60), is DENIED. ll The Clerk’s Office is kindly instructed to close this case and enter judgment for Wells 12 || Fargo. 13 DATED this _3] day of May, 2024. 14 Ly, Vf, . Alm 6 Gloria M. shes District Judge UNITED ES DISTRICT COURT [25] Page 10 of 10