RICHARD F. BOULWARE, II, District Judge.
Before the Court are three motions: 732 Hardy Way Trust's motion to dismiss, ECF No. 34; 732 Hardy Way Trust's motion for summary judgment, ECF No. 37; and The Bank of New York Mellon's renewed motion for summary judgment, ECF No. 38.
Bank of New York Mellon sued defendants and filed a notice of lis pendens on July 13, 2017. ECF Nos. 1, 4. This matter was stayed on March 23, 2018, pending the Nevada Supreme Court's decision on a certified question, which was later answered in
Hardy Way now moves to dismiss the complaint, ECF No. 34, and moves for summary judgment, ECF No. 37. Both motions were fully briefed. 42, 43, 45, 47. Bank of New York Mellon also moves for summary judgment. ECF No. 38. The motion was also fully briefed. ECF Nos. 44, 46, 48, 49. The Court held oral arguments on the motions on July 18, 2019. ECF No. 55.
The Court finds the following facts to be undisputed. Harold Hill obtained a loan from First Community Mortgage to purchase the property at 732 Hardy Way #F, Mesquite, Nevada. The loan was secured by a deed of trust that was recorded in 2005. In November 2013, the note and the deed of trust were assigned to Bank of New York Mellon.
The property is subject to the covenants, conditions, and restrictions ("CC&Rs") of the Enchantment at Sunset Bay Condominium Association (the "Association"). The Association recorded the CC&Rs, which state in part: "Notwithstanding any other provisions of this Declaration, no amendment or violation of this Declaration shall operate to defeat or render invalid the rights of the Beneficiary under any Deed of Trust...."
After Hill failed to timely pay homeowners' association dues to the Association, the Association, through its agent Nevada Association Services ("NAS"), began a nonjudicial foreclosure process under Nevada Revised Statute ("NRS") Chapter 116 by recording a notice of delinquent assessment in January 2014. In February 2014, the Association, through NAS, recorded a notice of default and election to sell. Neither notice specified the superpriority amount of the Association's lien, but the notices referenced the CC&Rs.
In March 2014, Hill filed for Chapter 13 bankruptcy in Utah, listing the property as an asset in his schedules and in the Chapter 13 plan. But Hill did not list the Association as a creditor. The bankruptcy remained open until 2017, and neither the Association nor NAS moved for relief from the automatic stay.
While the bankruptcy was pending, the Association, through NAS, recorded a notice of trustee's sale in July 2014. The notice did not identify the superpriority amount of the Association's lien. Further, the notice of sale states that the "sale will be made without covenant or warranty, express or implied regarding, but not limited to, title or possession, or encumbrances, or obligations to satisfy any secured or unsecured liens." The Association sold the property to Hardy Way at a public auction on September 19, 2014 for $6,072.29.
The foreclosure deed states that the Association, through NAS, "grant[s] and convey[s], but without warranty express or implied," the property to Hardy Way.
The parties do not dispute the facts, only the legal consequences of the facts.
Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a);
The parties seek to determine whether the foreclosure sale extinguished the deed of trust held by Bank of New York Mellon. Bank of New York Mellon contends that the sale could not have extinguished the deed of trust because: (1) NRS Chapter 116 violates due process; (2) the sale violated the automatic stay imposed by the bankruptcy action; (3) the Association intended to foreclose on a subpriority lien only; and (4) the sale was inequitable given the inadequate sale price in conjunction with the unconstitutionality of the statutory scheme, the violation of the bankruptcy stay, and the representations in the CC&Rs. The Court disagrees with each assertion, as explained in turn below, and finds that the deed of trust was extinguished as a result of the foreclosure sale.
Bank of New York Mellon first asserts that NRS Chapter 116 violates the Due Process Clause of the U.S. Constitution as found by
Bank of New York Mellon next argues that the NRS Chapter 116 notices violate due process because the statutory scheme did not require homeowners' associations to clarify the amount of the superpriority component of the lien or explicitly state that the first deeds of trust were at risk. The Court has previously considered and dismissed these arguments.
Bank of New York Mellon next argues that the foreclosure must be set aside as void since it was conducted during the automatic stay imposed by the bankruptcy matter without the Association or NAS first seeking relief from the stay. But the Association does not have standing to challenge the sale as a violation of the automatic stay.
In a bankruptcy action, a petitioner creates a bankruptcy estate on the filing of the petition.
Bank of New York Mellon cites
The Court also dismisses Bank of New York Mellon's argument that the Association intended to foreclose on a subpriority lien as evidenced by the representations in the CC&Rs and the lack of any reference to a superpriority lien in the recorded notices. The Court is not persuaded by either point.
As to the first point, NRS 116.1104 states that provisions of NRS Chapter 116 "may not be varied by agreement, and rights conferred by it may not be waived" absent express statutory language to the contrary. Nev. Rev. Stat. § 116.1104. NRS Chapter 116 does not expressly provide that a declaration can set forth additional notice requirements that, unless satisfied, negate the status of the superpriority portion of an homeowners association's lien or alter the application of NRS 116.3116(2). Thus, the representations in the Association's CC&Rs, or its failure to abide by the CC&Rs, is not a basis upon which Bank of New York Mellon may prevail.
Likewise, the second point has no merit. As previously explained, NRS Chapter 116 did not require the Association to explicitly state that the Association was foreclosing on a superpriority lien or to provide the superpriority amount.
Finally, the Court denies Bank of New York Mellon's arguments that the sale was commercially unreasonable. Bank of New York Mellon bases its argument that the sale was commercially unreasonable on the sale violating due process, violating the bankruptcy stay, and concerning a subpriority lien only. The Court dismissed each of these arguments above. The Court therefore dismisses Bank of New York Mellon's commercial reasonableness argument accordingly based on the reasoning in