Court Opinion

ID: 4192897
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:12.993999+00
Date Added: 2024-06-11T14:40:23.132863
License: Public Domain

FILED
                                                            MAY 18 2015
 1                         NOT FOR PUBLICATION
                                                        SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    NV-14-1375-KuDJu
                                   )
 6   GWENDOLYNE F. PACK,           )      Bk. No.    13-19702
                                   )
 7                   Debtor.       )
     ______________________________)
 8                                 )
     BELLA SERA HOMEOWNERS'        )
 9   ASSOCIATION,                  )
                                   )
10                   Appellant,    )
                                   )
11   v.                            )      MEMORANDUM*
                                   )
12   GWENDOLYNE F. PACK; BANK OF   )
     NEW YORK MELLON; OCWEN LOAN   )
13   SERVICING, LLC,               )
                                   )
14                   Appellees.    )
     ______________________________)
15
                     Argued and Submitted on March 19, 2015
16                            at Las Vegas, Nevada
17                            Filed – May 18, 2015
18             Appeal from the United States Bankruptcy Court
                         for the District of Nevada
19
          Honorable Laurel E. Davis, Bankruptcy Judge, Presiding
20
     Appearances:     Huong X. Lam of Alessi & Koenig, LLC argued for
21                    appellant Bella Sera Homeowners' Association;
                      Steven L. Yarmy argued for appellee Gwendolyne F.
22                    Pack.**
23
24
          *
           This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
26   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8024-1.
27
          **
           Appellees Bank of New York Mellon and Ocwen Loan
28   Servicing, LLC did not actively participate in this appeal.
 1   Before: KURTZ, DUNN and JURY, Bankruptcy Judges.
 2
 3                              INTRODUCTION
 4        Bella Sera Homeowners’ Association appeals from the
 5   bankruptcy court’s order granting debtor Gwendolyne Pack’s motion
 6   to “strip off” Bella Sera’s wholly unsecured lien.   Bella Sera
 7   also appeals from the court’s order confirming Pack’s chapter 111
 8   plan.
 9        Both the strip off order and the confirmation order were
10   founded on an incorrect interpretation of Nevada law regarding
11   the priority of liens arising from homeowners association
12   assessments and charges under Nevada Revised Statutes (“NRS”)
13   § 116.3116.   After the bankruptcy court entered the orders on
14   appeal, the Nevada Supreme Court issued a decision interpreting
15   the priority of homeowners association liens under NRS § 116.3116
16   that is inconsistent with the bankruptcy court’s interpretation.
17   See SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408
18   (2014).   We must follow the Nevada Supreme Court’s interpretation
19   of Nevada law.   Therefore, we VACATE the bankruptcy court’s strip
20   off and confirmation orders, and we REMAND so that the bankruptcy
21   court can consider Bella Sera’s lien rights in light of SFR Invs.
22   Pool 1.
23                                  FACTS
24        Pack, an elderly widow, lives on retirement income and
25
26        1
           Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                      2
 1   income from the rental of two parcels of real property located on
 2   Notte Calma Street in Las Vegas, Nevada.   At the time of her
 3   bankruptcy filing, both properties were significantly
 4   overencumbered.   In her chapter 11 plan, Pack hoped to partially
 5   relieve herself from the economic burdens associated with these
 6   overencumbered properties, while at the same time using the
 7   rental income from the properties to fund her plan.
 8        To accomplish her goals, Pack’s plan as amended proposed to
 9   modify the rights of her creditors whose claims under applicable
10   nonbankruptcy law were secured by liens against the Notte Calma
11   properties.   In relevant part, with respect to the rental
12   property located at 11330 Notte Calma Street, the amended plan
13   proposed to modify the rights of the three lienholders of record.
14   The identity of each of these lienholders, and the amount and
15   type of lien each of them held were described in Pack’s strip off
16   motion as follows:
17        a. Wells Fargo Bank, NA as Trustee for Securitized
          Asset Backed Receivables LLC, . . . MPTC Series
18        2004-OP2 . . . (First Deed of Trust) in an estimated
          amount of $437,285.00. . . .
19
          b. US Bank, NA as Trustee for Structured Asset
20        Securities Corp, MPTC Series 2004-S4 . . . (Second Deed
          of Trust) in an estimated amount of $122,436.59. . . .
21
          c. Bella Sera Homeowners Association, (HOA Lien) in an
22        estimated amount of $12,971.34.
23   Motion to Value Collateral, “Strip Off” and Modify Rights of
24   Wells Fargo Bank, etc., et. al. (May 28, 2014) at p. 2.
25        According to Pack, Wells Fargo's security interest was the
26   senior lien on the property and was the only lien on the property
27   that was not wholly unsecured, given the value of the real
28   property collateral.   Consequently, Pack reasoned that both

                                      3
 1   U.S. Bank's second deed of trust and Bella Sera's homeowners
 2   association lien, as wholly unsecured liens, could be stripped
 3   off and avoided in their entirety in accordance with §§ 506 and
 4   1123(b)(5).
 5        In asserting that Bella Sera's lien was junior to Wells
 6   Fargo's first deed of trust, Pack relied on the mortgage savings
 7   clause in the Amended Declaration of Covenants, Conditions and
 8   Restrictions ("CC&Rs") recorded against the property and other
 9   properties within the common interest planned community of which
10   Pack's property is a part.   The mortgage savings clause indicated
11   that all homeowners association assessment liens would be
12   subordinate to any first deed of trust or mortgage held against
13   any lot or unit within the community.
14        Pack also relied on NRS § 116.3116(2), which spells out the
15   priority of homeowners association liens.   Because of the pivotal
16   role played by NRS § 116.3116(2) in this appeal, we quote that
17   provision in its entirety, as follows:
18        2. A lien under this section is prior to all other
          liens and encumbrances on a unit except:
19
          (a) Liens and encumbrances recorded before the
20        recordation of the declaration and, in a cooperative,
          liens and encumbrances which the association creates,
21        assumes or takes subject to;
22        (b) A first security interest on the unit recorded
          before the date on which the assessment sought to be
23        enforced became delinquent or, in a cooperative, the
          first security interest encumbering only the unit's
24        owner's interest and perfected before the date on which
          the assessment sought to be enforced became delinquent;
25        and
26        (c) Liens for real estate taxes and other governmental
          assessments or charges against the unit or cooperative.
27
          The lien is also prior to all security interests
28        described in paragraph (b) to the extent of any charges

                                      4
 1        incurred by the association on a unit pursuant to NRS
          116.310312 and to the extent of the assessments for
 2        common expenses based on the periodic budget adopted by
          the association pursuant to NRS 116.3115 which would
 3        have become due in the absence of acceleration during
          the 9 months immediately preceding institution of an
 4        action to enforce the lien, unless federal regulations
          adopted by the Federal Home Loan Mortgage Corporation
 5        or the Federal National Mortgage Association require a
          shorter period of priority for the lien. If federal
 6        regulations adopted by the Federal Home Loan Mortgage
          Corporation or the Federal National Mortgage
 7        Association require a shorter period of priority for
          the lien, the period during which the lien is prior to
 8        all security interests described in paragraph (b) must
          be determined in accordance with those federal
 9        regulations, except that notwithstanding the provisions
          of the federal regulations, the period of priority for
10        the lien must not be less than the 6 months immediately
          preceding institution of an action to enforce the lien.
11        This subsection does not affect the priority of
          mechanics' or materialmen's liens, or the priority of
12        liens for other assessments made by the association.
13   NRS § 116.3116(2) (West) (emphasis added).   Under Pack’s reading
14   of the statute, the last paragraph of NRS § 116.3116(2) did not
15   grant to Bella Sera a superior lien but rather merely afforded
16   Bella Sera a right to payment equal to nine months of assessments
17   in the event that Wells Fargo as the first trust deed holder
18   completed foreclosure proceedings against the property.
19        Bella Sera filed an opposition to Pack’s strip off motion.
20   In its opposition, Bella Sera construed NRS § 116.3116(2)
21   differently than Pack.   Bella Sera asserted that, under the
22   statute, the entire amount that Pack owed it (roughly $13,000,
23   plus additional collection fees and costs) was secured by a
24   statutory lien of equal priority to Wells Fargo’s first deed of
25   trust.   As Bella Sera put it, the priority between itself and
26   Wells Fargo only could be determined by a race to the auction
27   block:   whoever foreclosed first would have priority, except that
28   even if Wells Fargo successfully foreclosed first, Bella Sera

                                      5
 1   still would be entitled to “nine months worth of assessments
 2   before anyone else gets a cut of the [foreclosure sale]
 3   proceeds.”    Objection to Strip Off Motion (May 30, 2014) at
 4   3:26-27.
 5        Bella Sera further argued that an adversary proceeding was
 6   necessary under Rule 7001(2) if Pack sought to avoid Bella Sera’s
 7   lien.    Finally, Bella Sera pointed out that Pack’s reliance on
 8   the mortgage savings clause in the CC&Rs was misplaced because,
 9   to the extent the mortgage savings clause was inconsistent with
10   NRS § 116.3116(2), the statute controlled and prohibited the
11   parties from deviating from the lien rights and priorities
12   provided for in the statute.2
13        After multiple hearings and supplemental briefing, the
14   bankruptcy court granted Pack’s strip off motion, in the process
15   holding that both the second deed of trust held by U.S. Bank3 and
16   Bella Sera’s homeowners association lien were junior to Wells
17   Fargo’s first deed of trust.    Based on the agreed-upon valuation
18   of the property at $419,500, and the undisputed amount owed to
19   Wells Fargo – in excess of $437,000 – the bankruptcy court
20   further held that U.S. Bank’s and Bella Sera’s liens were wholly
21   unsecured and thus the liens could be stripped off and avoided as
22
23
          2
           Bella Sera cited NRS § 116.1206 as supporting this
24   proposition. In contrast, in SFR Invs. Pool 1 v. U.S. Bank,
334 P.3d at 419, the Nevada Supreme Court relied on NRS
25   § 116.1104 in the process of holding that a similar mortgage
26   savings clause was ineffective to the extent that clause
     conflicted with NRS § 116.3116(2).
27
          3
           U.S. Bank did not actively oppose Pack’s proposed treatment
28   of its second deed of trust.

                                       6
 1   part of Pack’s chapter 11 plan, thereby relegating both U.S. Bank
 2   and Bella Sera to the status of unsecured creditors for plan
 3   distribution purposes.
 4        In so holding, the bankruptcy court determined that NRS
 5   § 116.3116(2) does not grant to homeowners associations a
 6   superior lien for nine months’ worth of assessments or for any
 7   other amount.    Instead, the bankruptcy court construed
 8   § 116.3116(2) as merely granting to homeowners associations a
 9   limited right to payment – of up to nine months’ worth of
10   assessments – in the event the holder of the first trust deed
11   forecloses.
12        In light of these holdings, the bankruptcy court entered
13   orders granting Pack’s strip off motion and confirming Pack’s
14   amended chapter 11 plan.    Bella Sera timely filed a notice of
15   appeal.
16                               JURISDICTION
17        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
18   §§ 1334 and 157(b)(2)(K) and (L).     We have jurisdiction under
19   28 U.S.C. § 158.
20                                   ISSUE
21        Did the bankruptcy court err in determining under Nevada law
22   that Bella Sera’s lien was junior to Wells Fargo’s deed of trust
23   lien?
24                            STANDARDS OF REVIEW
25        The bankruptcy court's decision hinged on its interpretation
26   of Nevada law.    We review its interpretation of state law de
27   novo.   Trishan Air, Inc. v. Fed. Ins. Co., 635 F.3d 422, 426–27
28   (9th Cir. 2011).

                                       7
 1                               DISCUSSION
 2        In the Ninth Circuit, debtors may through a chapter 11 or a
 3   chapter 13 plan strip off wholly unsecured liens.    Zimmer v. PSB
 4   Lending Corp. (In re Zimmer), 313 F.3d 1220, 1223-27 (9th Cir.
 5   2002); BAC Home Loans Servicing, LP v. Abdelgadir
 6   (In re Abdelgadir), 455 B.R. 896, 901-02 (9th Cir. BAP 2011).      As
 7   we explained in In re Abdelgadir, before confirming a chapter 11
 8   plan proposing to avoid a creditor’s lien pursuant to §§ 506 and
 9   1123(b)(5), the bankruptcy court must determine, among other
10   things, “whether the value of the creditor's claim makes it
11   secured or wholly unsecured.”   Id. at 902.   Before it can make
12   that determination, the bankruptcy court must first know the
13   relative priority of the lien to be avoided in relation to other
14   liens held against the same property.    If there is another lien
15   senior to the lien to be avoided and if the senior lien is
16   partially undersecured because the property is of insufficient
17   value to fully satisfy the senior lien, then the lien to be
18   avoided – as the junior lien — necessarily is wholly unsecured
19   and may be avoided through the plan process.    See In re Zimmer,
20 313 F.3d at 1223-27.4
21        Under certain circumstances, the Code restricts the extent
22   to which a chapter 11 debtor can modify lien rights under §§ 506
23   and 1123(b)(5).   For example, partially undersecured creditors
24
25        4
           While In re Zimmer involved a chapter 13 plan instead of a
26   chapter 11 plan, we held in In re Abdelgadir, 455 B.R. at 901
     n.7, that §§ 1123(b)(5) and 1322(b)(2) are identical, that both
27   provisions permit debtors to modify the lien rights of secured
     creditors and hence that case law examining § 1322(b)(2) is
28   persuasive in interpreting § 1123(b)(5).

                                      8
 1   can make an election under § 1111(b) to force the debtor to treat
 2   the value of the undersecured creditor’s lien as equal to the
 3   total amount of its claim for plan confirmation purposes.   See
 4   First Fed. Bank of Cal. v. Weinstein (In re Weinstein), 227 B.R.
5   284, 294 (9th Cir. BAP 1998).    But § 1111(b) affords no relief to
 6   wholly unsecured creditors because the statute bars relief to
 7   creditors holding liens of “inconsequential value.”   In re 500
 8   Fifth Ave. Assocs., 148 B.R. 1010, 1016 (Bankr. S.D.N.Y. 1993)
 9   aff'd, 1993 WL 316183 (S.D.N.Y. May 21, 1993); see also Tuma v.
10   Firstmark Leasing Corp. (In re Tuma), 916 F.2d 488, 491 (9th Cir.
11   1990).
12        Nor does § 1111(b) improve the rights of wholly secured
13   creditors.   If the value of the real property collateral exceeds
14   the amount of the creditor’s lien, then the creditor’s entire
15   claim is secured and is entitled to the type of plan treatment
16   reserved for secured creditors.   See §§ 506(a), 1123(b)(5),
17   1129(a)(7) and 1129(b)(2)(A).5
18        In short, Bella Sera’s lien rights in Pack’s bankruptcy case
19   hinged on whether Bella Sera’s homeowners association lien was
20   junior or senior in priority to Wells Fargo’s first deed of
21
          5
           Some creditors alternately might be able to prevent
22
     avoidance of their liens by invoking the exception to lien right
23   modification set forth in § 1123(b)(5). This exception prohibits
     avoidance of “liens in real property that is the debtor’s
24   principal residence.” However, this exception does not apply to
     liens in property that is not used by the debtor as his or her
25   residence on the date of his or her bankruptcy filing.
26   In re Abdelgadir, 455 B.R. at 903. Here, it is undisputed that
     Pack was not using 11330 Notte Calma Street as her principal
27   residence on the date of her bankruptcy filing. Thus, the
     § 1123(b)(5) modification exception does not support Bella Sera’s
28   contention that its lien should not have been stripped off.

                                       9
 1   trust.   If, as the bankruptcy court determined, Bella Sera’s lien
 2   was junior to Wells Fargo’s deed of trust, then Bella Sera’s lien
 3   was wholly unsecured, and the bankruptcy court correctly
 4   confirmed Pack’s plan proposing to strip off Bella Sera’s lien.
 5   On the other hand if, as Bella Sera contends, Bella Sera’s lien
 6   was senior to Wells Fargo’s deed of trust, then Bella Sera’s
 7   lien was wholly secured, and the court erred in stripping off
 8   Bella Sera’s lien and in confirming Pack’s plan, which treated
 9   Bella Sera as an unsecured creditor for plan distribution
10   purposes.
11        In holding that Bella Sera’s lien was junior to Wells
12   Fargo’s deed of trust, the bankruptcy court relied on two
13   bankruptcy court decisions from Florida, which has a homeowners
14   association lien statute the bankruptcy court considered similar
15   to Nevada’s.   See In re Plummer, 484 B.R. 882, 887 (Bankr. M.D.
16 Fla. 2013); In re Gonzales, 2010 WL 1571172, at *2-*3 (Bankr.
17   S.D. Fla. Apr. 20, 2010).6
18        Relying on In re Plummer and In re Gonzales, the bankruptcy
19   court here held that homeowners associations do not hold any lien
20   superior in priority to the first deed of trust unless they
21   record a notice of delinquent assessments before the first trust
22
23
          6
           The bankruptcy court indicated that both Florida and Nevada
24   had adopted their homeowners association assessment statutes from
     the same source: the Uniform Common Interest Ownership Act of
25   1982. However, the adoption tables accompanying this version of
26   the Uniform Act do not indicate that Florida ever adopted it.
     Nor does the Florida statute at issue in In re Plummer and
27   In re Gonzales – Florida Statute § 781.116 – strike us as being
     that similar to the statute at issue in this appeal – NRS
28   § 116.3116(2).

                                     10
 1   deed is recorded.   In further reliance on In re Plummer and
 2   In re Gonzales, the bankruptcy court additionally held that the
 3   last paragraph of NRS § 116.3116(2) did not grant a lien to Bella
 4   Sera superior to Wells Fargo’s.    Rather, the bankruptcy court
 5   interpreted the last paragraph of NRS § 116.3116(2) as granting
 6   to Bella Sera, in the event of foreclosure by the first trust
 7   deed holder, a mere right to payment equal to nine months worth
 8   of homeowners association dues.
 9        As it turns out, the bankruptcy court’s reliance on
10   In re Plummer and In re Gonzales was misplaced.    Yet this only
11   became clear when the Nevada Supreme Court decided SFR Invs.
12   Pool 1.   That decision involved a priority dispute between a
13   homeowners association – the Southern Highlands Community
14   Association – and the holder of a first deed of trust – U.S.
15   Bank.   To enforce its homeowners association lien, Southern
16   Highlands commenced nonjudicial foreclosure proceedings and
17   completed those proceedings before U.S. Bank could complete its
18   own competing nonjudicial foreclosure sale.    SFR Invs. Pool 1,
19 334 P.3d at 409-10.   The successful bidder at Southern Highlands’
20   sale – SFR Investments Pool 1 – subsequently filed an action
21   against U.S. Bank seeking to enjoin the bank from completing its
22   nonjudicial foreclosure sale.   Id. at 410.
23        In that action, SFR asserted that Southern Highlands’ lien
24   was superior to U.S. Bank’s first deed of trust, so Southern
25   Highlands’ nonjudicial foreclosure sale extinguished U.S. Bank’s
26   lien.   The state court ultimately denied SFR any injunctive
27   relief and dismissed SFR’s action, in the process holding that
28   even if Southern Highlands’ lien was superior to U.S. Bank’s

                                       11
 1   first deed of trust, Southern Highlands should have foreclosed by
 2   way of judicial foreclosure proceedings and that Southern
 3   Highlands’ nonjudicial foreclosure sale consequently did not
 4   extinguish U.S. Bank’s first deed of trust.   Id.
 5        On appeal, the Nevada Supreme Court reversed.   In so ruling,
 6   the SFR Invs. Pool 1 court in relevant part held that NRS
 7   116.3116(2) effectively split homeowners association liens into
 8   two pieces, with each piece having a different priority in
 9   relation to a first deed of trust:
10        As to first deeds of trust, NRS 116.3116(2) thus splits
          an HOA lien into two pieces, a superpriority piece and
11        a subpriority piece. The superpriority piece,
          consisting of the last nine months of unpaid HOA dues
12        and maintenance and nuisance-abatement charges, is
          “prior to” a first deed of trust. The subpriority
13        piece, consisting of all other HOA fees or assessments,
          is subordinate to a first deed of trust.
14
15   Id. at 411 (emphasis added).
16        Based on its interpretation of NRS 116.3116(2), the
17   SFR Invs. Pool 1 court rejected U.S. Bank’s argument that the
18   statute granted Southern Highlands a mere “payment priority”
19   which arose only if U.S. Bank completed its foreclosure
20   proceedings.   Id. at 412.   After painstaking consideration of the
21   plain language of the statute, the existing case law, the
22   official comments to the Uniform Common Interest Ownership Act of
23   1982 (from which Nevada adopted its homeowners association
24   statutes) and several other secondary sources, the SFR Invs.
25   Pool 1 court ultimately concluded that the superpriority piece of
26   Southern Highlands’ lien conferred upon Southern Highlands a
27   “true priority” lien superior to U.S. Bank’s first deed of trust.
28   Id. at 413.

                                      12
 1        Here, the bankruptcy court’s interpretation of NRS
 2   116.3116(2)’s lien priority provisions is fatally inconsistent
 3   with SFR Invs. Pool 1's interpretation of the same provisions.
 4   Applying, as we must, SFR Invs. Pool 1's interpretation of the
 5   statute, we hold that the bankruptcy court should have
 6   acknowledged that Bella Sera had a (superpriority) wholly secured
 7   lien to the extent that the lien secured up to “nine months of
 8   unpaid HOA dues,” as well as any “maintenance or
 9   nuisance-abatement charges” that Pack owed Bella Sera.    See id.
10   at 412, 416.   In addition, the bankruptcy court should have
11   acknowledged that Bella Sera had a separate (subpriority) wholly
12   unsecured lien for the remainder of the charges, fees and
13   assessments that Pack owed Bella Sera.   See id. at 411-13.
14        Accordingly, we must vacate the bankruptcy court’s strip off
15   order and confirmation order.   On remand, in accordance with
16   SFR Invs. Pool 1, the bankruptcy court will need to determine how
17   much (if any) of Bella Sera’s lien qualifies for superpriority
18   (wholly secured) status and how much qualifies for subpriority
19   (wholly unsecured) status.   The bankruptcy court also will need
20   to determine whether Pack’s alternate proposed treatment of Bella
21   Sera’s lien provided for on page 21 of Pack’s plan satisfies all
22   plan confirmation requirements applicable to the wholly secured
23   portion of Bella Sera’s lien.
24        Bella Sera makes a number of arguments in its appeal brief
25   in an attempt to persuade us that the entire amount it is owed is
26   secured by a lien superior to Wells Fargo’s first deed of trust.
27   For instance, Bella Sera attempts to argue that NRS 116.31164 –
28   which governs the distribution of foreclosure sale proceeds –

                                     13
 1   somehow supports the notion that the entire amount it is owed is
 2   secured by a superpriority lien.       Bella Sera further posits that
 3   the priority dispute between itself and Wells Fargo only can be
 4   resolved by a race to the auction block.      Neither of these
 5   arguments can be reconciled with SFR Invs. Pool 1, so we reject
 6   them.
 7        Bella Sera also argues that there is something so
 8   exceptional about homeowners association liens that its lien
 9   rights should not be subject to modification under § 1123(b)(5).
10   This argument cannot be reconciled with the plain language of
11   § 1123(b)(5).   Congress obviously knew how to create exceptions
12   to the debtor’s entitlement to modify lien rights as evidenced by
13   the exception in the statute for security interests in
14   residential real property, but Congress chose not to enact any
15   exception for homeowners association liens.      On that basis, we
16   reject Bella Sera’s anti-modification argument.
17        As for Pack, she makes a number of arguments attempting to
18   support the bankruptcy court’s ruling that the entirety of Bella
19   Sera’s lien is junior to Wells Fargo’s deed of trust and hence
20   wholly unsecured.   For example, she suggests that it would be a
21   severe hardship to holders of first trust deeds if any part of a
22   homeowners association lien was granted superpriority.      But
23   SFR Invs. Pool 1 addressed this policy concern and found it
24   unpersuasive.   See id. at 414.
25        Pack also points out that the CCRs purported to give the
26   holders of first deeds of trust priority over homeowners
27   association liens in virtually all instances.      As we explained
28   above, to the extent the mortgage savings clause in the CCRs is

                                       14
 1   inconsistent with NRS § 116.3116(2), the mortgage savings clause
 2   is invalid.   See footnote 2, supra.   Simply put, none of Pack’s
 3   arguments can be reconciled with SFR Invs. Pool 1, so we reject
 4   them.
 5        Finally, at the end of her appeal brief, Pack attempts to
 6   make a conflict preemption argument in which she suggests that
 7   NRS § 116.3116(2) somehow is inconsistent with the Bankruptcy
 8   Code.   It suffices for us to say that we perceive no conflict
 9   between the Bankruptcy Code and NRS § 116.3116(2).
10        The only other issue we must address is procedural.    The
11   controlling issue in the dispute between Bella Sera and Pack was
12   the relative priority of Bella Sera’s lien and Wells Fargo’s
13   first deed of trust.   Whereas the bankruptcy court resolved this
14   priority dispute as part of its disposition of Pack’s strip off
15   motion and Pack’s confirmation proceedings, Rule 7001(2) dictates
16   that priority disputes should be resolved by adversary
17   proceeding.   Bella Sera raised the issue of whether an adversary
18   proceeding was necessary in its initial objection to Pack’s strip
19   off motion.   However, Bella Sera later abandoned this issue by
20   not addressing it in its appeal brief.   See Christian Legal Soc'y
21   v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010) (stating that
22   appellate courts generally may treat as forfeited issues “not
23   specifically and distinctly argued in appellant's opening
24   brief.”).   Even so, on remand, the bankruptcy court should
25   ascertain to what extent a priority dispute still exists between
26   the parties and, to the extent one still exists, should determine
27   whether it should be resolved by adversary proceeding.
28

                                     15
 1                              CONCLUSION
 2        For the reasons set forth above, we VACATE the bankruptcy
 3   court’s strip off order and its confirmation order, and we REMAND
 4   for further proceedings consistent with this decision.
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                                    16