Federal Housing Finance Agency v. Las Vegas Development Group

UNITED STATES DISTRICT COURT [1] DISTRICT OF NEVADA [2] FEDERAL HOUSING FINANCE AGENCY, ) 3 in its capacity as Conservator of the Federal ) National Mortgage Association and Federal ) Case No.: 2:16-cv-01187-GMN-CWH [4] Home Loan Mortgage Corporation; FEDERAL ) 5 NATIONAL MORTGAGE ASSOCIATION; ) ORDER and FEDERAL HOME LOAN MORTGAGE ) 6 CORPORATION, ) ) 7 Plaintiffs ) vs. ) [8] ) 9 LAS VEGAS DEVELOPMENT GROUP, ) LLC; LVDG, LLC; and LAS VEGAS ) 10 DEVELOPMENT, LLC, ) ) [11] Defendants. ) [12] 13 Pending before the Court is the Motion for Summary Judgment, (ECF No. 41), filed by 14 Plaintiffs Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Housing 15 Finance Agency (“FHFA”), in its capacity as Conservator for Federal National Mortgage 16 Association (“Fannie Mae”), (collectively, “Plaintiffs”). Defendants Las Vegas Development 17 Group, LLC, LVDG, LLC, and Las Vegas Development, LLC (collectively, “Defendants”) 18 filed a Response, (ECF No. 45), and Plaintiffs filed a Reply, (ECF No. 49). 19 Also pending before the Court is Defendants’ Motion for Rule 56(d) Relief, (ECF No. 20 46). Plaintiffs filed a Response, (ECF No. 50), and Defendants filed a Reply, (ECF No. 52). 21 Also pending before the Court is Defendants’ Motion to Dismiss, (ECF No. 62). 22 Plaintiffs filed a Response, (ECF No. 66), and Defendants filed a Reply, (ECF No. 68). 23 For the reasons discussed below, the Court GRANTS Plaintiffs’ Motion for Summary 24 Judgment. The Court DENIES Defendants’ Motion for 56(d) Relief. The Court DENIES as 25 moot Defendants’ Motion to Dismiss. 1 I. BACKGROUND 2 The present action involves the interplay between Nev. Rev. Stat. (“NRS”) Chapter 116 3 and 12 U.S.C. § 4617 as the statutes relate to the parties’ respective interests in nine different 4 properties located in Nevada (collectively, the “Properties”). (Am. Compl. ¶ 28, ECF No. 16). 5 In Plaintiffs’ Amended Complaint and Motion for Summary Judgment, they provide a brief 6 history of the Properties, including the respective dates that they acquired the deeds of trust 7 (“DOTs”) that encumbered each of the Properties. (See id. ¶¶27–59); (See also Chart, Ex. 2 to 8 Pls.’ Mot. Summ. J. (“MSJ”), ECF No. 41-3); (DOTs, Ex. 1 to Pls.’ MSJ, ECF Nos. 41-1–419 2). In addition, Plaintiffs provide the date that each of the Properties were subject to 10 homeowners’ association (“HOA”) foreclosure sales under NRS Chapter 116. (Id.). Based on 11 their purported interests in the Properties, Plaintiffs seek to quiet title and obtain declaratory 12 relief that their DOTs encumbering the Properties were not extinguished by the HOA 13 foreclosure sales at which Defendants acquired title to the Properties. (Id. ¶¶ 40–59). 14 II. LEGAL STANDARD 15 The Federal Rules of Civil Procedure provide for summary adjudication when the 16 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 17 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 18 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 19 may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 20 A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to 21 return a verdict for the nonmoving party. Id. “Summary judgment is inappropriate if 22 reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict 23 in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. P’ship, 521 F.3d 1201, 1207 (9th 24 Cir. 2008) (citing United States v. Shumway, 199 F.3d 1093 , 1103–04 (9th Cir. 1999)). A [25] 1 principal purpose of summary judgment is “to isolate and dispose of factually unsupported 2 claims.” Celotex Corp. v. Catrett, 477 U.S. 317 , 323–24 (1986). 3 In determining summary judgment, a court applies a burden-shifting analysis. “When 4 the party moving for summary judgment would bear the burden of proof at trial, it must come 5 forward with evidence which would entitle it to a directed verdict if the evidence went 6 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 7 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 8 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474 , 480 (9th Cir. 2000) (citations omitted). In 9 contrast, when the nonmoving party bears the burden of proving the claim or defense, the 10 moving party can meet its burden in two ways: (1) by presenting evidence to negate an 11 essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving 12 party failed to make a showing sufficient to establish an element essential to that party’s case 13 on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 323–24. If 14 the moving party fails to meet its initial burden, summary judgment must be denied and the 15 court need not consider the nonmoving party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 16 144, 159–60 (1970). 17 If the moving party satisfies its initial burden, the burden then shifts to the opposing 18 party to establish that a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. 19 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 20 the opposing party need not establish a material issue of fact conclusively in its favor. It is 21 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 22 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 23 Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid 24 summary judgment by relying solely on conclusory allegations that are unsupported by factual 25 data. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go 1 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 2 competent evidence that shows a genuine issue for trial. Celotex Corp., 477 U.S. at 324 . 3 At summary judgment, a court’s function is not to weigh the evidence and determine the 4 truth; it is to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249 . 5 The evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn 6 in his favor.” Id. at 255 . But if the evidence of the nonmoving party is merely colorable or is 7 not significantly probative, summary judgment may be granted. Id. at 249–50. 8 III. DISCUSSION 9 Plaintiffs move for summary judgment on their quiet title and declaratory relief claims, 10 asserting that 12 U.S.C. § 4617 (j)(3) (the “Federal Foreclosure Bar”) compels the Court to find 11 that the HOAs’ foreclosure sales did not extinguish Plaintiffs’ DOTs on the Properties. (Pls.’ 12 MSJ 11:25–13:2, ECF No. 41). In response, Defendants contend that the Federal Foreclosure 13 Bar does not preserve Plaintiffs’ DOTs because: (1) the Court lacks personal jurisdiction over 14 four of the Properties; (2) Plaintiffs’ claims are time-barred; and (3) Plaintiffs fail to proffer 15 admissible evidence regarding their interests in the Properties. (See Defs.’ Resp. 6:9–10:22, 16 ECF No. 45). Defendants also seek Rule 56(d) relief to allow them to conduct further 17 discovery regarding Plaintiffs’ interests in the Properties. (Defs.’ Mot. 56(d) Rel. 10:23–13:26, 18 ECF No. 46). The Court begins its analysis with its jurisdiction. 19 A. Personal Jurisdiction 20 Defendants argue that the Court lacks jurisdiction over two of the Properties—those 21 located at 636 Vincents Dream Avenue and 7804 Quill Gordon Avenue (the “Airmotive 22 Properties”)—because they are owned by Airmotive, a non-party. (Defs.’ Resp. 6:11–14). 23 Defendants also argue that the Court lacks jurisdiction over two additional Properties—those 24 located at 675 Magrath Street and 3451 Desert Cliff Street (the “Series Properties”)—because 25 they are owned by LVDG LLC, Series 129 and LVDG LCC, Series 124, which are separate 1 limited liability companies from Defendant LVDG LLC. (Defs.’ Resp. 6:14–7:9). According 2 to Defendants, the Court does not have jurisdiction over the Airmotive Properties and the Series 3 Properties because of Plaintiffs’ failure to join the non-party owners. (Id. 6:11–7:9). 4 Plaintiffs contend that the Court has jurisdiction over the Airmotive Properties because 5 Defendants owned the Airmotive Properties at the time Plaintiffs filed the Complaint, and 6 Federal Rule of Civil Procedure 25(c) enables Plaintiffs to maintain the action against the 7 original owners. (Pls.’ Reply 7:6–24, ECF No. 49). Plaintiffs also argue that they are not 8 required to join the LVDG Series LLCs because “a series is not a separate entity under Nevada 9 law.” (Id. 7:25–8:23) (quoting Bahar A. Schippel & Zachary E. Redman, The Uncertainties of 10 Series LLCs, Nevada Lawyer (Dec. 2012), at 14) (Pls.’ emphasis omitted). 11 The Court concludes that it has jurisdiction over the Properties. Defendants’ evidence 12 indicates that they transferred their interests in the Airmotive Properties’ after the 13 commencement of this action. (See Grant Deeds, Ex. 1 to Defs.’ Resp., ECF No. 45-1) 14 (transferring title on Dec. 16, 2016); (Compl., ECF No. 1) (filed on May 26, 2016). The Court 15 has jurisdiction over the Airmotive Properties because “Rule 25(c) . . . does not require that 16 anything be done after an interest has been transferred. The action may be continued by or 17 against the original party, and the judgment will be binding on the successor in interest even 18 though the successor is not named.” See Mary Kay Kane, 7C Federal Practice and Procedure 19 (Wright & Miller) § 1958 (3d ed.). The Court has jurisdiction over the Series Properties 20 because although series limited liability companies may sue and be sued in their own names, 21 they are not separate entities that prospective plaintiffs must sue in their own names under 22 Nevada law. See NRS § 86.296(c); Bahar A. Schippel & Zachary E. Redman, The 23 Uncertainties of Series LLCs, Nevada Lawyer (Dec. 2012), at 14, n.9 (explaining that a series is 24 created under an existing limited liability company’s operating agreement, but the series is not 25 acknowledged as a separate legal entity by the Secretary of State). 1 B. Statute of Limitations 2 Defendants argue that Plaintiffs’ claims regarding seven of the Properties are time3 barred based on the three-year statute of limitations for tort claims under 12 U.S.C. § 4617 . 4 (Defs.’ Resp. 8:21–9:22). Alternatively, Defendants argue that if a longer state-law statute of 5 limitations applies, then Plaintiffs’ claims regarding five of the properties are time barred under 6 NRS § 11.220’s 4-year limitations period. (Id.) Plaintiffs reply that its claims relating to all of 7 the properties are timely because the six-year statute of limitations for contract claims applies 8 under 12 U.S.C. § 4617 . (Pls.’ Reply 3:2–7:4). [9] 12 U.S.C. § 4617 (b)(12) proscribes two different statutes of limitation for actions 10 brought by FHFA depending on whether the claims sound in contract or tort. The limitations 11 period for any contract claim is the longer of six years or “the period applicable under State 12 law;” and for any tort claim, the period is the longer of three years or “the period applicable 13 under State law.” See 12 U.S.C. § 4617 (b)(12). 14 Although the claims do not fit neatly into either category, this Court has previously held 15 that Plaintiffs’ claims sound in contract. See Ditech Fin. LLC v. SFR Invs. Pool 1, LLC, 380 F. 16 Supp. 3d 1089, 1094 (D. Nev. 2019) (reconsideration denied). At bottom, this action concerns 17 the viability of Plaintiffs’ lien interests against the Properties. As these liens were created by 18 contract, an action to enforce those liens is necessarily a “contract action.” See Fed. Hous. Fin. 19 Agency v. LN Mgmt. LLC, Series 2937 Barboursville, No. 2:17–CV–03006–JAD–GWF, 2019 20 WL 1117900 , at *5 (D. Nev. Mar. 11, 2019). Moreover, even assuming Plaintiffs’ claims 21 sounded in tort, Plaintiffs’ claims would be timely under the 5-year state law statute of 22 limitations for quiet title actions under NRS § 11.070, with the exception of the Property at 23 7709 Hardesty Court. See Deutsche Bank Nat’l Tr. Co. for Morgan Stanley ABS Capital I Inc. 24 Tr. 2006-HE8 Mortg. Pass-Through Certificates, Series 2006-HE8 v. SFR Investments Pool 1, [25] 1 LLC, No. 2:17–CV–00259–GMN–NJK, 2018 WL 615669 , at *3 (D. Nev. Jan. 26, 2018). The 2 Court therefore rejects Defendants’ statute of limitations argument. 3 C. Federal Foreclosure Bar 4 Plaintiffs request that the Court declare that 12 U.S.C. § 4617 (j)(3) preempts NRS 5 Chapter 116 such that the HOA foreclosure sales did not extinguish their interests in the 6 Properties. (See Pls.’ MSJ 11:25–13:2). The Federal Foreclosure Bar prohibits foreclosures of 7 federally owned or controlled property “without the consent of the [Federal Housing Finance 8 Agency].” 12 U.S.C. § 4617 (j)(3) (2012); see Saticoy Bay, LLC, Series 2714 Snapdragon v. 9 Flagstar Bank, FSB, 699 F. App’x 658 (9th Cir. 2017); Skylights LLC v. Fannie Mae, 112 F. 10 Supp. 3d 1145 (D. Nev. 2015). The Ninth Circuit’s decision in Berezovsky v. Moniz, 869 F.3d 11 923, 932 (9th Cir. 2017), confirmed that the Federal Foreclosure Bar preserves the property 12 interests of the Federal Housing Finance Agency, including a government-sponsored enterprise 13 of the Agency such as Fannie Mae, from an HOA’s foreclosure sale under NRS § 116.3116, if 14 that sale occurred without the affirmative consent of the Agency. Id. at 927–32. 15 Here, Plaintiffs have presented business records supported by employee declarations, 16 which show that Plaintiffs purchased the original DOT secured by the Properties and 17 maintained ownership at the time of the respective HOA foreclosure sales. (See DOTs, Ex. 1 to 18 Pls.’ MSJ, ECF Nos. 41-1–41-2); (Chart, Ex. 2 to Pls.’ MSJ, ECF No. 41-3); (Decls., Exs. 5–6 19 to Pls.’ MSJ, ECF Nos 41-6–41-7). This evidence is materially the same as the evidence 20 deemed sufficient by the Ninth Circuit in Berezovsky and exactly the same as evidence this 21 Court relied upon in Ditech Fin. LLC v. SFR Invs. Pool 1, LLC, 380 F. Supp. 3d 1089 (D. Nev. 22 2019) (reconsideration denied), appeal pending, No. 19-15910 (9th Cir.). While Defendants 23 are frustrated that they have had little opportunity to conduct discovery, they do not satisfy their 24 burden of providing, or pointing to, any evidence that raises more than a “metaphysical doubt 25 as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 , 586 1 (1986). Accordingly, the Court finds that the HOA sales did not extinguish Plaintiffs’ interests [2] in the Properties, and the DOTs continue to encumber the same.1 3 IV. CONCLUSION 4 IT IS HEREBY ORDERED that Plaintiffs’ Motion for Summary Judgment, (ECF No. 5 41), is GRANTED. 6 IT IS FURTHER ORDERED that Defendants’ Motion for 56(d) Relief, (ECF No. 46), 7 is DENIED. 8 IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss, (ECF No. 62), is 9 DENIED as moot. 10 The Clerk of Court shall close the case and enter judgment accordingly. 11 DATED this _1_9___ day of March, 2020. [12] ___________________________________ [13] Gloria M. Navarro, District Judge 14 United States District Court [24] 25 1 As the Court finds summary judgment appropriate based on the evidence in the record, the Court denies SFR’s request to extend discovery, (ECF No. 46).