Court Opinion

ID: 1043097
Source: CourtListenerOpinion
Date Created: 2013-10-03 17:30:10.817852+00
Date Added: 2024-06-11T12:39:51.365976
License: Public Domain

129 Nev., Advance Opinion    61
                       IN THE SUPREME COURT OF THE STATE OF NEVADA

                WARREN MARKOWITZ, AN                                  No. 58761
                INDIVIDUAL; AND JACQUELINE
                MARKOWITZ, AN INDIVIDUAL,
                Appellants,
                vs.
                SAXON SPECIAL SERVICING ; AND
                                                                      FILED
                DEUTSCHE BANK NATIONAL TRUST                           OCT 0_3 2013
                COMPANY,
                Respondents:                                       , Ap dritilkeci

                            Appeal from a district court order den ying a petition for
                judicial review in a Foreclosure Mediation Pro gram matter. Eighth
                Judicial District Court, Clark Count y; Jessie Elizabeth Walsh, Judge.
                           Affirmed.

                Law Office of Jacob L. Hafter & Associates and Jacob L. Hafter and
                Michael K. Naethe, Las Vegas,
                for Appellants.

                McCarthy & Holthus, LLP, and Kristin A. Schuler-Hintz, Las Vegas,
                for Respondents.

                BEFORE PICKERING, C.J., GIBBONS, HARDESTY, PARRAGUIRRE,
                DOUGLAS, CHERRY and SAITTA, JJ.

                                                OPINION

                PER CURIAM:
                            Under Nevada's Foreclosure Mediation Program Rules, the
                deed-trust beneficiar y must submit an appraisal and/or a broker's price
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                opinion prepared "no more than 60 days before the commencement date of
                the mediation" that provides a valuation for the home that is the subject of
                the mediation. Saxon Special Servicing attended the underlying
                mediation and provided a broker's price opinion that was 83 days old at
                the time of mediation. We are asked to decide whether the mediation rule
                requiring an appraisal or broker's price opinion that is no more than 60
                days old at the time of the mediation mandates strict or substantial
                compliance. We conclude that because a current appraisal or broker's
                price opinion is intended to facilitate good-faith mediation negotiations,
                the rule's content-based provision governing the appraisal's age is
                directory rather than mandatory, and thus, substantial compliance with
                the 60-day provision satisfies the mediation rule. Because the broker's
                price opinion here contained a recent appraisal of the home's value
                adequate to facilitate negotiations, and the homeowners did not
                demonstrate that they were prejudiced by the 23-day age differential
                between the price opinion provided and the rule's age provision, Saxon
                Special Servicing substantially complied with the foreclosure mediation
                rule requiring a current appraisal, and we therefore affirm the district
                court's order denying the petition for judicial review.

                                                       I.
                            Appellants Warren and Jacqueline Markowitz obtained a
                home loan from Fremont Investment & Loan, for which they executed a
                promissory note in Fremont's favor. The note was later assigned to
                respondent Deutsche Bank National Trust Company and serviced on
                Deutsche Bank's behalf by respondent Saxon Special Services. After the
                Markowitzes stopped making payments to Saxon, a notice of default was

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                recorded. The Markowitzes then elected to mediate in Nevada's
                Foreclosure Mediation Program (FMP).
                            The mediation occurred on December 28, 2010. Warren
                attended the mediation in person along with counsel, and Jacqueline
                attended by telephone. Saxon, purporting to represent Deutsche Bank,
                appeared through counsel. Saxon provided all of the required documents
                for the mediation, including an 83-day-old broker's price opinion (BP0). 1
                During the mediation, the Markowitzes raised concerns about Saxon's
                authority to participate. Saxon's counsel explained that she had the
                authority to negotiate a loan modification. The mediator spoke by
                telephone with a representative of Saxon who confirmed that Saxon was
                the servicer of the loan. Despite this confirmation, the Markowitzes were
                not convinced that Saxon had authority to negotiate a loan modification,
                and they elected to terminate the mediation.
                            The mediator issued a statement indicating that the
                Markowitzes failed to provide certain documents for the mediation and
                that Saxon failed to bring a current BPO. The mediator's statement did
                not indicate that any party lacked authority to negotiate or failed to
                attend the mediation. The Markowitzes filed a petition for judicial review,
                which, after briefing and argument, the district court denied, concluding
                that the parties had negotiated in good faith with valid authority and that
                there was no reason to withhold the FMP certificate. This appeal
                followed.

                      1A  broker's price opinion is a "written analysis, opinion or
                conclusion. . . relating to the estimated price for a specified parcel of real
                property." NRS 645.2515(8).

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                                                      A.
                            The primary issue in this appeal concerns the 83-day-old BP0
                that Saxon provided for the mediation. The relevant foreclosure rule in
                place at the time of this dispute required that
                            Mlle beneficiary of the deed of trust or its
                            representative shall produce an appraisal done no
                            more than 60 days before the commencement date
                            of the mediation with respect to the real property
                            that is the subject of the notice of default and shall
                            prepare an estimate of the "short sale" value of the
                            residence that it may be willing to consider as a
                            part of the negotiation if loan modification is not
                            agreed upon.
                FMR 8(3) (2010). The rule also permitted the mediator, in his or her
                discretion, to "accept a broker's price opinion letter (BPO) in addition to or
                in lieu of the appraisal." FMR 8(4) (2010). These rules have since been
                amended, 2 but the amendments do not change our analysis.
                            While the mediator here reported that Saxon failed to provide
                an "appraisal within 60 days of mediation," the district court, in its de
                novo review, concluded that although the BP0 was not prepared within 60
                days of the mediation, neither party acted in bad faith and there was no
                reason to withhold the FMP certificate. The Markowitzes maintain that
                document production at mediation requires strict compliance and that a

                      2FMR 8 was renumbered to FMR 11, and the relevant portion of the
                rule currently provides that the trust-deed beneficiary or its
                representative must provide an "Appraisal and/or Brokers Price Opinion
                (BPO) not more than 60 days old (prior to the date of mediation)." FMR
                11(7)(e) (2013).

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                BP0 prepared beyond the 60-day limit precludes the issuance of an FMP
                certificate and mandates the imposition of sanctions. Respondents
                counter that the purpose of providing a BP0 or appraisal is to
                "substantiate the short sale value" that the parties may agree to in the
                event that a loan modification cannot be reached. Respondents insist that
                the BP0 provided at mediation set forth the value of the property that
                they would accept in a short sale, and that the Markowitzes were not
                prejudiced by the age of the BPO. In any case, respondents argue that
                because no short sale was ever discussed, as the Markowitzes elected to
                terminate the mediation, the BPO's age was of no relevance.
                            To determine if a rule's provisions require strict or substantial
                compliance, this court looks to the rule's language, and we also consider
                policy and equity principles. Leyva v. Nat'l Default Servicing Corp., 127
                Nev.     , 255 P.3d 1275, 1278 (2011). A rule may contain both
                mandatory and directory provisions. See Leven v. Frey, 123 Nev. 399, 408
                n.31, 168 P.3d 712, 718 n.31 (2007); see also Einhorn v. BAC Home Loans
                Servicing, LP, 128 Nev. „ 290 P.3d 249, 254 (2012); 3 Norman J.
                Singer, Statutes and Statutory Construction § 57:19 (6th ed. 2001).
                Generally, a rule is mandatory and requires strict compliance when its
                language states a specific "time and manner" for performance. Leven, 123
                Nev. at 407 n.27, 408, 168 P.3d at 717 n.27, 718. Time and manner refers
                to when performance must take place and the way in which the deadline
                must be met. See Village League to Save Incline Assets, Inc. v. State Bd. of
                Equalization, 124 Nev. 1079, 1088, 194 P.3d 1254, 1260 (2008) (discussing
                statutory deadlines); Leven, 123 Nev. at 407-08, 168 P.3d at 717-18
                (addressing three-day recording statute's deadline). "[F]orm and content"
                provisions, on the other hand, dictate who must take action and what

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                information that party is required to provide, Einhorn, 128 Nev. at            ,
                290 P.3d at 254 (stating that "who brings which documents. . . is a matter
                of 'form"). Because they do not implicate notice, form and content-based
                rules are typically directory and may be satisfied by substantial
                compliance, id., "sufficient to avoid harsh, unfair or absurd consequences."
                Leven, 123 Nev. at 407, 168 P.3d at 717 (quotation omitted). When
                substantial compliance is sufficient, a party's literal noncompliance with a
                rule is excused provided that the party complies with "respect to the
                substance essential to every reasonable objective" of the rule.    Stasher v.
                Harger-Haldeman, 372 P.2d 649, 652 (Cal. 1962); see also 3 Sutherland
                Statutory Construction § 57:26 (7th ed. 2012). When a party accomplishes
                such actual compliance as to matters of substance, technical deviations
                from form requirements do not rise to the level of noncompliance. Stasher,
                372 P.2d at 652.
                            Deciding whether a rule is intended to impose a mandatory or
                directory obligation is a question of statutory interpretation.   See Village
                League, 124 Nev. at 1088, 194 P.3d at 1260 (interpreting a statutory time
                limit); see also Marquis & Aurbach v. Eighth Judicial Dist. Court, 122
                Nev. 1147, 1156, 146 P.3d 1130, 1136 (2006) (applying rules of statutory
                construction to the interpretation of a court rule). We review de novo
                issues of statutory construction. Leven, 123 Nev. at 402, 168 P.3d at 714.
                Our objective when interpreting a rule is to determine and implement its
                purpose. Village League, 124 Nev. at 1088, 194 P.3d at 1260; see Leyva,
                127 Nev. at , 255 P.3d at 1278-79.

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                                                      1.
                              FMR 8(3)'s language embraces both a mandatory time
                provision and a directory content provision related to the age of the
                appraisal used for negotiation purposes at the mediation. The rule states
                that the deed of trust beneficiary or its representative "shall prepare such
                papers and provide to the mediator, and exchange the items required to be
                exchanged with each other party . . . at least 10 days prior to the
                mediation."3 FMR 8(1) (2010). One such paper is an appraisal and/or a
                BPO, which the deed-trust beneficiary "shall produce," and in so doing,
                "shall prepare an estimate of the 'short sale' value of the residence that it
                may be willing to consider as a part of the negotiation if loan modification
                is not agreed upon." FMR 8(3) (2010). The word "shall" is generally
                regarded as mandatory. Leyva, 127 Nev. at ,255 P.3d at 1279. Here,
                the rule provides that the deed-trust beneficiary or its representative
                "shall produce an appraisal" and "shall prepare an estimate of the 'short
                sale' value," FMR 8(3) (2010), and it "shall" do so ten days in advance of
                the mediation. FMR 8(1) (2010). The purpose of FMP mediation is to
                bring the parties "together to participate in a meaningful negotiation" to
                resolve the dispute. Einhorn, 128 Nev. at , 290 P.3d at 250 (citing Holt
                v. Reg'l Tr. Servs. Corp., 127 Nev.        „ 266 P.3d 602, 607 (2011)). As
                the rule explains, the value of the home is key to the negotiation, FMR
                8(3) (2010), and providing the appraisal is one indicator that the trust-

                      3 The
                          current rule provides that "[t] he beneficiary of the deed of trust
                must prepare and submit, at least 10 days prior to the mediation" various
                documents to be provided to the homeowner and mediator. FMR 11(7)
                (2013).

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                deed beneficiary participated in the mediation in good faith.      Pasillas v.
                HSBC Bank USA, 127 Nev. „ 255 P.3d 1281, 1284 (2011). Thus,
                the rule's mandatory language weighs in favor of requiring strict
                compliance, as the appraisal is a necessary document for the mediation
                and good-faith negotiations therein.

                                                       2.
                            But the rule also provides that the appraisal or BPO shall be
                prepared "no more than 60 days before the commencement date of the
                mediation." FMR 8(3) (2010). Separating the rule into its procedural and
                substantive parts, the "shall prepare such papers . . . at least 10 days prior
                to the mediation" language refers to the time when the deed of trust
                beneficiary is required to give the mediator and the homeowners the
                appraisal or BPO. This provision governs the time and manner for the
                deed of trust beneficiary to perform one of its duties to negotiate in good
                faith. Such provisions generally must be complied with strictly.       Leven,
                123 Nev. at 408, 168 P.3d at 718. The rule's "no more than 60 days" old
                language, however, refers to the age of the appraisal or BPO, so that the
                parties may negotiate based on the home's present value, and thus,
                addresses form and content. Such requirements may generally be
                satisfied by substantial compliance. Id.
                            The policy behind providing a recent appraisal and/or BPO at
                the mediation is to ensure that the fair market value of the property is
                known to both parties to the mediation at the time when they are
                negotiating a potential loan modification or determining whether a short
                sale would be appropriate. FMR 8(3) (2010). This allows for fully
                informed negotiations to occur and ensures that offers made are based on
                the present economic reality concerning the property and are consistent
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                with the FMP's purpose of bringing the parties together for meaningful
                negotiation. Einhorn, 128 Nev. at         , 290 P.3d at 250 (citing Holt, 127
                Nev. at    , 266 P.3d at 607).
                            Requiring an appraisal or BPO to be no more than 60 days old
                facilitates informed negotiation based on accurate information, and this
                purpose may be met through substantial compliance, as a slightly older
                BP0 may be just as accurate as a 60-day-old BPO. See Leyva, 127 Nev. at
                    255 P.3d at 1279. By contrast, a 200-day-old BP0 would likely reflect
                very different market valuations than a BP0 that was reasonably close to
                the FMR's 60-day valuation window. Providing a BP0 that is so old that
                it has become inaccurate frustrates the FMP's goal. Therefore, the policy
                concern regarding the age of an appraisal or BPO is a matter of content,
                which is directory, and the requirement may be satisfied by substantial
                compliance. Leven, 123 Nev. at 408, 168 P.3d at 718.

                                                     3.
                            In terms of equity concerns, despite the fact that the
                underlying 83-day-old BPO was beyond the 60-day limit, the Markowitzes
                made no effort to demonstrate that it was inaccurate. As such, there
                appears to be no prejudice or harm to the Markowitzes in having an 83-
                day-old BPO from which to negotiate a loan modification, see Einhorn, 128
                Nev. at , 290 P.3d at 254, and the goal of providing accurate
                information to ensure meaningful negotiations was accomplished.        Id. at
                , 290 P.3d at 250. Thus, in weighing the equities, where the
                Markowitzes have not shown any prejudice in their ability to negotiate a
                loan modification based on the BP0 age, and respondents would be denied
                the ability to exercise their contractual remedy of foreclosure for want of a
                strictly compliant 60-day or younger BPO, we conclude that withholding
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                the FMP certificate would be an inequitably harsh consequence, and
                equity favors reviewing the BPO for substantial compliance. See Holt, 127
                Nev. at , 266 P.3d at 606-07 (recognizing consequences of denial of the
                ability to foreclose).
                             We therefore hold that an appraisal or BPO older than 60
                days may nevertheless substantially comply with the FMR sufficient to
                avoid the imposition of sanctions when there is no evidence that the BPO
                is so old that it would impair the FMP's policy of facilitating good-faith
                negotiations or the BPO's content is inaccurate to the extent that the
                homeowners would be prejudiced. Such is the situation in the present
                matter, and thus, the district court therefore correctly declined to impose
                sanctions and denied judicial review based on respondents' stale BPO. See
                Edelstein v. Bank of N.Y. Mellon,   128 Nev. „ 286 P.3d 249, 260
                (2012).

                                                    B.
                             One other issue remains for our consideration: whether
                respondents properly participated in the mediation session with the
                requisite authority to negotiate a loan modification. The Markowitzes
                argue that the mediation was flawed because Saxon did not establish valid
                authority to negotiate the loan. Respondents contend that Saxon, as
                Deutsche Bank's servicer, is a valid representative of Deutsche Bank for
                purposes of participating in the FMP and that the Markowitzes were
                aware of the relationship between Saxon and Deutsche Bank.
                             The deed-trust beneficiary may participate in the FMP
                mediation directly or through a representative with proper authority to
                negotiate a loan modification. NRS 107.086(5). The record before us
                establishes Saxon's status as Deutsche Bank's loan servicer and its
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                authority to modify the loan in its capacity as Deutsche Bank's
                representative. The record contains the publicly recorded substitutions of
                trustee, which the Markowitzes included as exhibits to their petition for
                judicial review, and which demonstrate Saxon's status as the loan servicer
                and Deutsche Bank's status as the beneficiary of the deed of trust.
                Further, the evidence submitted in their judicial review proceeding shows
                that, until the Markowitzes ceased paying their mortgage, they made
                payments to Saxon, and thus, they recognized Saxon's role as the loan
                servicer. And before the Markowitzes defaulted on the loan, they entered
                into a stipulation that specifically recited that Saxon was the servicing
                agent for Deutsche Bank. Saxon therefore properly attended the
                mediation as Deutsche Bank's representative.      See NRS 107.086(5); see
                also Edelstein, 128 Nev. at n.11, 286 P.3d at 260 n.11 (stating that a
                servicer is a valid representative under NRS 107.086(5)).
                            The Markowitzes also contend that respondents lacked
                authority to participate in the FMP because MERS was incapable of acting
                as a beneficiary of the deed of trust, and thus, it could not have validly
                transferred the mortgage note to Deutsche Bank. This court rejected this
                argument in Edelstein, 128 Nev. at , 286 P.3d at 260-61 (holding that a
                MERS assignment of the deed of trust validly transfers the note), and
                based on the record in this matter, we conclude that through the valid
                MERS assignment, Deutsche Bank was the beneficiary of the deed of trust
                and holder of the promissory note, with authority to participate in FMP
                mediation and modify the loan. 4 The district court therefore did not err in

                      4Appellants
                                also argue that the MERS assignment is invalid because
                it was executed in March 2009, but not notarized until June 2009.
                                                             continued on next page . . .
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                determining that respondents validly appeared at the mediation with
                authority to negotiate a loan modification. Id. at , 286 P.3d at 260
                (explaining that the district court's factual and legal conclusions are
                reviewed for error, while the choice of sanction is committed to the district
                court's discretion).

                                                      IV.
                             We discern no violation that would preclude the FMP
                certificate from issuing, and we therefore affirm the district court's order.

                                                                 , C.J.

                Gibbons                                     Hardesty

                Parr

                Cherry

                . . • continued
                Appellants do not cite to any Nevada authority that requires an
                assignment of a deed of trust to be acknowledged in front of a notary on
                the date it is generated. See Einhorn, 128 Nev. at n.4, 290 P.3d at 252
                n.4.

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