NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HSBC BANK USA, N.A., as Trustee, In Trust for the Registered Holders of Ace Securities Corp., Home Equity Loan Trust, Series 2006

- FM2, Asset Backed Pass

Through Certificates,

Plaintiff

- Appellee,

v. SUZANNAH R. NOONAN IRA, LLC,

De fendant

- Appellant,
and
SUNRISE BAY OWNERS ’ ASSOCIATION; NEVADA ASSOCIATION SERVICES, INC.,

Defendants. No. 19

- 17181
D.C. No. 2:16

- cv - 01216

- KJD

- NJK

MEMORANDUM *

Appeal from the United States District Court for the District of Nevada Kent J. Dawson, District Judge, Presiding Argued and Submitted March 12, 2021 San Francisco, California Before: WALLACE, GOULD, and FRIEDLAND, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3. 

# FILED

APR 6 2021
MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS2

Suzannah R. Noonan IRA, LLC (Noonan) appeals from the district court’s

su mmary judgment for HSBC Bank USA, N.A. (HSBC) in an action for quiet title

. We have jurisdiction under 28 U.S.C. § 1291. We vacate and remand. In 2006, a homeowner acquired title to property in Nevada. To finance th e acquisition , the homeowner obtained a $150,300 loan from Fremont Investment & Loan (Fremont) that was secured by a deed of t rust. The deed listed Fremont as the lender, Old Republic Title as the trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as t he beneficiary. The p roperty was subject to monthly
homeowners’ association fees assessed by Sunrise Bay Owners Association (HOA)

. In 2012, the HOA ’s agent, Nevada Association Services, recorded a n otice
of d elinquent a ssessment l ien against the p roperty for unpaid HOA fees and other charges

. After the homeowner defaulted on the lien, Nevada Association Services recorded a notice of foreclosure sale against the p roperty, and the p roperty was
sold at auction to Noonan in 2014. Shortly thereafter, Noonan filed a quiet title action in Nevada state court, naming the former homeowner and Fremont as defendants. Neither defendant appeared or answered in that suit, and so on October 3, 2014, the state court entered a default judgment against them in Noonan’s favor. On March 3, 2015, a corporate assignment of deed of trust was recorded in which MERS, as nominee3

for Fremont (and its successors and assigns), assigned its b eneficial interest under
the d eed of t rust to HSBC. In 2016, HSBC brought this action for quiet title against Noonan, the HOA,
and Nevada Association Services. After discovery, HSBC and Noonan filed competing motions for summary judgment. Noonan argued that the state court’s default judgment against Fremont

— which Noonan characterized as HSBC’s predecessor in interest

— precluded HSBC from bringing this action. The district court denied Noonan’s motion and granted HSBC’s, holding that HSBC’s deed of

trust survived the HOA’s foreclosure sale and that claim preclusion did not apply

. This appeal followed. The only question before us is w hether the district court er red when it held
that claim preclusion did not bar HSB C from bringing a quiet title action against
Noonan

. 1 The district court concluded that the state court default judgment was

“ insufficient to show that the issues were actually litigated ” and thus had no preclusive effect

. But w hether an issue was “ actually and necessarily litigated” is
an element of the test for issue preclusion, not claim preclusion. Five Star Cap. Corp. v. Ruby , 194 P.3d 709, 713 (Nev. 2008) (en banc)

. This question therefore should not have been part of the analysis of whether claim preclusion applies here.

1 Noonan has not appealed from the district court’s ruling on the merits of HSBC ’s claims in this action

.4

Rather, under Nevada law , c laim preclusion applies when “(1) the parties or their privies are the same , (2) the final judgment is valid, and (3) the subsequent action is based on the same claims or any part of them that were or could have been brought in the first case.” Id. (footnote omitted)

. At oral argument, the parties agreed that th is case hinges on the first elemen t

— and , more specifically , whether HSBC was in privity with Fremont. P rivity “ encompass [ es ] a relationship in
which ‘ there is substantial identity between parties, that is, when there is sufficient commonality of interest. ’” Mendenhall v. Tassinari , 403 P.3d 364, 369 (Nev. 2017) (quoting Tahoe

- Sierra Pres. Council, Inc. v. Tahoe Reg’l Plan

. Agency , 322 F.3d 1064, 1081 (9th Cir. 2003) ).
Noonan contends that there is sufficient commonality of interest between Fremont and HSBC because, when Noonan filed its state court action for quiet title
in 2014 , public ly available records listed Fremont as the originator of the deed of

trust. But this evidence is insufficient to demonstrate conclusively that Fremont maintained any interest in the property at the time of the state court action roughly eight years after the deed’s origination

. If Fremont had no interest in the property in 2014, then it could not have represented HS BC’s interest in the state court action, and claim preclusion would not bar HSBC’s action in federal court. By contrast, i f Fremont did still have an interest in the property in 2014, HSBC would
be its successor in interest , and the two would be in privity. See Mendenhall , 4035

P.3d at 369

. Because we cannot tell from the record before us whether Fremont had an interest in the property in 2014, we remand to the district court to consider
this issue in the first instance.
W e observe that , if Fremont no longer had an interest in the property in 2014, Noonan could not have discovered this fact from publicly available records
due to Fremont’ s decision to use the MERS system

. In Nevada, MERS is typically designated as a deed of trust’s “beneficiary” so that noteholders may “eliminat[e]
the need to prepare and record assignments when trading loans.” Edelstein v. Bank of N .Y. Mellon , 286 P.3d 249, 256 ( Nev. 2012) (quoting Jackson v. Mortg. Elec. Registration Sys., Inc ., 770 N.W.2d 487, 490 (Minn. 2009)). A “side effect” of this
system “ is that a transfer of an interest in a mortgage loan between two MERS members is unknown to those outside the MERS system.” Id

. (quoting Jackson , 770 N.W.2d at 49 1 )

. It is possible that Fremont took advantage of the MERS system by transferr ing its interest to another MERS member at some point after 2006, and t he transfer was never recorded because MERS continued to act as “nominee” for Fremont’s “successors and assigns ,” thereby elim inating the need to

recor d any activities

. 2

2 Such a transfer may have become likely after Fremont filed for bankruptcy in June 2008.6

Despite t h e uncertainty created by Fremont’s use of the MERS system , we dec line to assume that Fremont maintained an interest in the property in 2014 on
the sole basis that no public records indicated otherwise. Noonan appears to suggest that we should resolve the uncertainty in its favor because there would be

no practical way for an entity in it s position t o otherwise quiet title against a
noteholde r that benefits from the opacity of the MERS system . But there is a straightforward solution : An entity in Noonan’s position could n ame MERS in t he quiet title action

. 3 I f MERS had been a defendant , it would have ensure d

— as the nominee for the lender, its successors, and its assigns

— that the noteholder’s
interests were represented even if the noteholder’s identity wa s unknowable from public documen ts. And here, MERS is clearly listed as the designated beneficiary in the deed, in addition to being named as the nominee for the lender, so Noonan cannot claim that it lacked knowledge of MERS’s interest or its role with respect to
the deed.

3 HSBC argues that the state court judgment is invalid because Noonan was required to name MERS in its quiet title actio n
. We do not consider whether the state court wrongly entered default judgment in Noonan’s favor, however, because “whether a decision is correct does not affect its preclusive effect.” Five Star Cap

. Corp. , 194 P.3d at 71 4 n.41. Our inquiry is confined to whether HSBC’s interest was represented in the state court action.7

Because the record does not contain enough information to determine
whether HSBC was in privity with Fremont , we vacate the summary judgment and
remand for further consideration

. VACATED and REMANDE D
. Each party shall bear their own costs.