By the Court, PICKERING, J.:
Since 2009 Nevada law has required loan-modification mediation on homeowner request before a nonjudicial foreclosure sale can proceed on an owner-occupied residence. Compliance is evidenced by a Foreclosure Mediation Program (FMP) certificate that mediation has concluded or been waived. This certificate must be recorded for a valid foreclosure sale to occur.
On this appeal, we consider whether a lender who has been denied an FMP certificate for failing to mediate in good faith can reinitiate foreclosure by means of a new notice of default and election to sell and rescission of the original, thereby restarting the FMP process. In the circumstances of this case, we conclude that it can. We therefore affirm the district court's refusal to enjoin the nonjudicial foreclosure initiated by the second notice of default and election to sell and its further order directing the parties to return to FMP mediation.
Appellants Karl and Frances Holt signed a $2,350,000 note secured by a first deed of trust on their home. Respondents Regional Trustee Services Corporation (RTSC) and One West Bank, FSB are the trustee and beneficiary, respectively, of the deed of trust.
RTSC initiated nonjudicial foreclosure on July 16, 2009, by recording a notice of default and election to sell (the 2009 NOD). The Holts elected mediation under the then-new FMP. When no one from the lender's side appeared at the scheduled mediation, the mediator declared RTSC in bad faith. The Holts then filed a petition for judicial review in district court pursuant to NRS 107.086(5) to redress RTSC's bad faith non-participation in the FMP process. The petition named only RTSC as respondent and sought loan modification as sanctions, specifically, reduced principal (from $2,345,000 to $1,300,000), lower interest (from 6.5% to 2%), and a change in terms (from "interest only" to fully amortized over 30 years).
The matter was assigned to Judge Donald M. Mosley, who ordered a rescheduled mediation at RTSC's expense. Once again, no one from the lender's side appeared, and the Holts returned to district court, where they renewed their request for sanctions. After hearing argument but without taking evidence, Judge Mosley declined the Holts' request for court-ordered loan modification. He also rejected RTSC's excuses (miscommunication and an incompetent agent) for missing the rescheduled mediation and declared RTSC in bad faith. As sanctions, he directed that RTSC be denied the FMP certificate needed to conduct a valid foreclosure sale and awarded the Holts their attorney fees.
Orally, Judge Mosley limited his order to the foreclosure sale initiated by the 2009 NOD. He emphasized that denying the FMP certificate "doesn't mean that [RTSC] can't go through the process again of trying to foreclose." The Holts' counsel acknowledged the point ("I understand that you're not allowing an issuance of the certification, so the foreclosure cannot proceed unless they start over again"), and the hearing ended with this recap:
Terse "findings of fact, conclusions of law and order" followed. These do not mention the oral limitation Judge Mosley put on his order, stating only: (1) "the Respondent, Regional Trustee Services, Corp. was in bad faith in that they failed to attend the [rescheduled] mediation"; (2) the Holts "are to be reimbursed for costs and expenses in the amount of $3,144.20"; and (3) "Letter of Certification shall not issue." Neither side appealed.
Meanwhile, the Holts continued to live in their house without making payments, and on March 1, 2010, RTSC reinitiated nonjudicial foreclosure by recording a second notice of default and election to sell (the 2010 NOD), The 2010 NOD encompassed the monthly payment defaults declared in the 2009 NOD (September 2008 to July 2009) and added those that had occurred since (from July 2009 forward). RTSC also recorded a notice of rescission of the 2009 NOD that stated, "this rescission shall not in any manner be construed as waiving or affecting any breach or default—past, present or future—under said Deed of Trust, . . . but is, and shall be deemed to be, only an election, without prejudice, not to cause a sale to be made pursuant to said [2009] Notice of Default. . . ."
The Holts responded to the 2010 NOD by filing a second action in district court, seeking to enjoin RTSC and One West from pursuing foreclosure under it. They argued that the order denying the FMP certificate carries claim- and issue-preclusive effect and permanently prevents foreclosure, even though they continue to default on their monthly house payments. In addition, the Holts elected FMP mediation as to the 2010 NOD "out of an abundance of caution," to
This second suit, which gives rise to this appeal, was assigned to Judge Michelle Leavitt. After briefing and argument, she denied the Holts' application for injunctive relief and ordered FMP mediation to take place within 90 days before the originally assigned mediator. The Holts appealed. Mediation has been stayed pending briefing, argument, and decision of the matter. While three loan modification mediations have been scheduled, therefore, none has actually occurred.
Denial of an FMP certificate does not, without more, permanently preclude foreclosure. The judicial review proceeding before Judge Mosley halted the foreclosure sale noticed by the 2009 NOD, but it did not preclude RTSC and One West from restarting the nonjudicial foreclosure process via the 2010 NOD. The Holts' contrary argument misapprehends the claim and issue-preclusion doctrines, as well as the nature of nonjudicial foreclosure and FMP-mediation and judicial-review proceedings. Additionally, claim and issue preclusion cannot enlarge an order that the rendering judge expressly limited. Given the limitations Judge Mosley placed on his sanction order, to the extent the order carries preclusive effect, it inhibits the Holts' challenge to the 2010 NOD, not the 2010 NOD itself. Because Judge Leavitt neither committed an error of law nor abused her discretion in denying the Holts' application for injunctive relief, see University Sys. v. Nevadans for Sound Gov't, 120 Nev. 712, 721, 100 P.3d 179, 187 (2004), we affirm.
Claim and issue preclusion "`protect the finality of decisions and prevent the proliferation of litigation,' but do not apply unless specific requirements are met." Redrock Valley Ranch v. Washoe County, 127 Nev. ___, ___, 254 P.3d 641, 646 (2011) (quoting Littlejohn v. United States, 321 F.3d 915, 919 (9th Cir.2003)). "Among other requirements, for [claim] preclusion to attach. . . `the subsequent action [must be] based on the same claims or any part of them that were or could have been brought in the first case.'" Id. (third alteration in original) (quoting Five Star Capital Corp. v. Ruby, 124 Nev. 1048, 1054-55, 194 P.3d 709, 713 (2008)). For "issue preclusion to attach, the issue decided in the prior [proceeding] must be identical to the issue presented in the current [proceeding]," id. (alterations in original) (quotation omitted), and have been "`actually litigated and determined by a valid and final judgment [in which] the determination [was] essential to the judgment.'" In re Sandoval, 126 Nev. ___, ___, 232 P.3d 422, 424 (2010) (quoting Restatement (Second) of Judgments § 27 (1982)). Claim and issue preclusion can apply in the administrative context "[w]hen an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate," United States v. Utah Constr. Co., 384 U.S. 394, 421-22, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966),
The Holts argue that the judicial review proceedings before Judge Mosley extinguished RTSC's and One West's "claim" to a nonjudicial foreclosure remedy for the Holts' defaults on the note. But as the name implies, nonjudicial foreclosure is not a judicial "action," giving rise to a claim or defense of foreclosure based on a mediation election and the subsequent institution of FMP judicial
Ordinarily, a lender pursuing nonjudicial foreclosure has the option under the loan documents "whether to declare a default, whether and when to accelerate, and whether, having chosen to take advantage of any of its [nonjudicial] remedies, to rescind the process before its completion." Trident Center v. Connecticut General Life Ins., 847 F.2d 564, 567 (9th Cir.1988). A notice of rescission renders moot disputes concerning the notice of default or its timing. Coley v. Accredited Home Lenders, Inc., No. 4:10CV01870 JLH, 2011 WL 1193072, at *4 (E.D.Ark. Mar. 29, 2011) ("Whether the Notice of Default was valid is moot because the nonjudicial foreclosure sale described in the notice was cancelled. Thus, [the party exercising the power to sell] would be required by law to file a new Notice of Default and Intention to Sell before a sale could take place."); Sakugawa v. Mortgage Electronic Registration Systems, Inc., No. 10-00028 JMS/BMK, 2011 WL 776051, at *6 (D.Haw. Feb. 25, 2011) ("the Notice of Rescission moots Plaintiff's claims for equitable relief— there is no existing controversy regarding the Notice of Foreclosure because it was rescinded. . . . Although nothing prevents anyone from seeking foreclosure on the subject property again . . ., any defects in that subsequent action would give rise to a separate claim from what is alleged in the Complaint, which is based on this particular Notice of Foreclosure."); Tabb v. One West Bank, FSB, No. 3:10-CV-855-ST, 2011 WL 4448752, at *8 (D.Or. Aug. 26, 2011) (quoting Coley and Sakugawa with approval). Rescission and renotice are not, as the Holts declaim, without lender consequence. Taking this path resets the right-to-cure and other time periods provided by law for the debtor's protection, causing delay and additional losses, to the extent the property is financially under water, at the lender's expense. See NRS 107.080(2)(b), (3).
NRS 107.086 adds mediation and procurement of an FMP mediation certificate to the statutory prerequisites for a valid nonjudicial foreclosure sale under NRS 107.080, when owner-occupied residential property is involved. See NRS 107.086(2)(c) (a "trustee shall not exercise a power of sale . . . unless the trustee . . . [c]auses to be recorded [an FMP certificate stating either] that no mediation is required [or that] mediation has been completed in the matter"). If the homeowner elects mediation, the beneficiary of the deed of trust must participate in mediation in good faith and produce the documents and information specified in NRS 107.086(4) and (5) and FMR 11 to earn a certificate permitting foreclosure sale.
Nothing in the FMP statutes or rules suggests that denial of an FMP certificate permanently
Because we do not equate denial of an FMP certificate with loss of the right to exercise a power of sale under a new notice of default, the Holts' claim- and issue-preclusion arguments fail. RTSC's and One West's
An additional basis exists for upholding Judge Leavitt's refusal to enjoin RTSC and One West from pursuing foreclosure under the 2010 NOD: "[T]he general rule of claim preclusion does not apply if the court in the first action expressly reserves the right to maintain a second action" or defense, 18 Federal Practice and Procedure, supra, § 4413, at 314 (citing Restatement (Second) of Judgments § 26(1)(b)); "[t]he
Because sanction proceedings tend to be summary, courts proceed cautiously in attributing preclusive effect to them. See Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1197 (3d Cir.1993); Cohen v. Lupo, 927 F.2d 363, 365 (8th Cir.1991); but see Reilly v. Natwest Markets Group, Inc., 178 F.Supp.2d 420, 425-26 (S.D.N.Y.2001) (applying claim preclusion to bar subsequent litigation requesting expanded sanctions for conduct for which lesser Fed.R.Civ.P. 37 sanctions had been awarded in prior litigation). To the extent the judicial review proceedings before Judge Mosley may command preclusive effect, the limits he placed on his order defeat the Holts' position on this appeal. Claim- and issue-preclusion doctrines are not concerned with whether the decision in the prior proceeding was right or wrong.
The Holts' final argument contests Judge Leavitt's order directing that FMP mediation occur. Given that the Holts specifically requested mediation as to the 2010 NOD, albeit "out of an abundance of caution," we find no error in this order. We therefore dissolve the stay and affirm.
We concur: SAITTA, C.J., and DOUGLAS, CHERRY, GIBBONS, HARDESTY, and PARRAGUIRRE, JJ.