Court Opinion

ID: 2825281
Source: CourtListenerOpinion
Date Created: 2015-08-11 06:03:22.957551+00
Date Added: 2024-06-11T09:46:36.634008
License: Public Domain

on their loan, and Wells Fargo later recorded a notice of default and
                  election to sell, upon which the Renslows elected to mediate under NRS
                  107.086.
                              Wells Fargo brought with it to the mediation the deed of trust
                  that reflected it was the original lender and a sworn affidavit that it
                  owned the Renslows' note. However, at some point before the mediation—
                  the exact timing is apparently unknown—Wells Fargo had transferred the
                  Renslows' note to Federal Home Loan Bank (hence the FHLB initials
                  previously given to the Renslows), though no assignment was recorded or
                  has ever been produced. In any event, during the mediation the Wells
                  Fargo representative admitted that they could not tell who the investor
                  was but offered the Renslows a lesser modification than that previously
                  agreed to under HAMP loan trial period, which they rejected. The
                  mediator's statement found that Wells Fargo "did not have the authority
                  to fully negotiate and modify the loan," and the accompanying notes stated
                  that though Wells Fargo provided the mediator with a certification that it
                  owned the note, Wells Fargo did not own the note or know who did. The
                  mediator's notes further recognized Wells Fargo's previous offer to modify
                  the Renslows' loan, the Renslows' payments made under that modification
                  agreement, and Wells Fargo's later withdrawal of that modification offer
                  because it "had no authority to make the offer."
                              In their petition for judicial review before the district court,
                  the Renslows asked for various forms of relief, including that the district
                  court impose sanctions upon Wells Fargo by modifying their loan to a term
                  of 15 years with reduced interest rates. After full briefing and an
                  evidentiary hearing, the district court concluded that Wells Fargo failed to
                  present to the mediator or the court its assignment to FHLB and thus "did

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                not meet the documentary requirements of NRS 107.086(4) [now section
                (5)]." 1 The district court further found that when Wells Fargo transferred
                the note to FHLB it also transferred its interest in the property, but that
                Wells Fargo, who could only then have been acting as FHLB's servicer
                representative, could still face sanctions. And because Wells Fargo's
                representative did not know the investor he represented at the mediation,
                the district court found he did not have authority to negotiate a
                modification of the loan or have access "at all times" to a person with such
                authority as also required by NRS 107.086(5). The district court also
                found that Wells Fargo failed to demonstrate its good faith participation in
                the mediation and its conduct—including its failure to know who
                controlled the loan, which resulted in the Renslows not being able to speak
                to FHLB or a legitimate representative of FHLB—actually prevented a
                good faith negotiation. Therefore, the district court modified the
                Renslows' loan and ordered that Wells Fargo pay $30,000 in monetary
                sanctions.
                             The bulk of Wells Fargo's appeal is a request that this court
                consider de novo its several constitutional challenges to NRS 107.086 even
                though it failed to raise those challenges before the district court.    See
                Awada v. Shuffle Master, Inc., 123 Nev. 613, 618, 173 P.3d 707, 711 (2007)
                (de novo review for constitutional challenges); Nevadans for Nev. v. Beers,
                122 Nev. 930, 939, 142 P.3d 339, 345 (2006) ("Statutes are presumed to be

                      'In 2013 the Legislature amended NRS 107.086 to include a new
                section (4). 2013 Nev. Stat., ch. 536, §§ 3, 6(2), at 3480, 3484. The
                sections of NRS 107.086 pertinent to resolving this appeal did not
                substantively change, thus we use the current numbering.

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                valid, and the challenger bears the burden of showing that a statute is
                unconstitutional."). But "a de novo standard of review does not trump the
                general rule" that a party is deemed to have waived those points it fails to
                urge before the district court. Schuck v. Signature Flight Support of Nev.,
                Inc., 126 Nev. 434, 436, 245 P.3d 542, 544 (2010). And we decline to
                exercise our discretion to entertain these constitutional arguments raised
                for the first time on appeal. State v. Hughes, 127 Nev., Adv. Op. 56, 261
P.3d 1067, 1070 n. 4 (2011).
                            Instead, we review for an abuse of discretion Wells Fargo's
                preserved objection that the district court erred in sanctioning Wells Fargo
                under NRS 107.086(6). Jacinto v. PennyMac Corp., 129 Nev., Adv. Op. 32,
                300 P.3d 724, 727 (2013). Wells Fargo does not contest the district court's
                findings that it failed to bring the original or certified copy of the
                assignment of the loan to FHLB to the mediation or that it did not have
                authority to negotiate a modification of the loan. These findings in
                themselves support the imposition of sanctions against Wells Fargo. NRS
                107.086(6) (the representative may have sanctions imposed if it does not
                bring a certified or original copy of each assignment of the loan, or have
                authority to negotiate a loan modification or have access to someone who
                can at all times during the mediation); Pasillas v. HSBC Bank USA, 127
                Nev., Adv. Op. 39, 255 P.3d 1281, 1287 (2011) (reversing and remanding
                for imposition of sanctions where the bank beneficiary representative
                failed to provide the required documents and secure the requisite
                negotiation authority). Therefore, notwithstanding that the district court
                considered Wells Fargo's pre-mediation conduct concerning the HAMP
                modification to place the mediation conduct in context, which is Wells

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                   Fargo's main challenge to the imposition of sanctions, the district court
                   acted within its discretion in sanctioning Wells Fargo.
                               However, while sanctioning Wells Fargo for its mediation
                   conduct was within the district court's discretion, not all of the sanctions
                   imposed accomplished that end. Neither party challenges the district
                   court's finding that Wells Fargo transferred its interest in the property
                   when it assigned the note to FHLB.        See Edelstein v. Bank of New York
                   Mellon, 128 Nev., Adv. Op. 48, 286 P.3d 249, 257-58, 260 (2012) (adopting
                   the Restatement (Third) of Property § 5.4 (1997), under which "a
                   promissory note and a deed of trust are automatically transferred together
                   unless the parties agree otherwise"). Thus, unlike the monetary sanction
                   imposed, modifying the Renslows' loan was not a sanction against Wells
                   Fargo because it no longer held the deed of trust or accompanying note to
                   the property. See Emerson v. Eighth Judicial Dist. Court, 127 Nev., Adv.
                   Op. 61, 263 P.3d 224, 228 (2011) (sanctions are meant to deter and punish
                   the bad actor); Khan v. Valliant, 439 S.W.3d 528, 533 (Tex. App. 2014)
                   ("The sanction . . . must be visited upon the offender. . . .") (emphasis
                   added). And there is nothing in the record before this court that would
                   support what is effectively the imposition of sanctions against FHLB, the
                   entity that now holds the Renslows' note and deed of trust. The district
                   court therefore abused its discretion in ordering that the Renslows' loan be
                   modified and we must reverse that portion of the judgment.        Greiner v.
                   Jameson, 865 S.W.2d 493, 501 (Tex. App. 1993) (holding that district court
                   abused its discretion when sanctioning companies that were not party to
                   the case by ordering them to release various persons and entities from
                   liability), writ denied (Mar. 23, 1994).     Cf. Clark County Sch. Dist. v.
                   Richardson Const., Inc., 123 Nev. 382, 398, 168 P.3d 87, 98 (2007)

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                    (defendant's discovery actions warranted sanctions but the scope of the
                    sanctions actually imposed was overbroad and required reversal).
                    Accordingly, we
                               ORDER the judgment of the district court AFFIRMED IN
                    PART AND REVERSED IN PART.

                                                                                , C.J.
                                                     Hardesty

                                                     Parraguirre

                                                                                   J.

                                                                                   J.

                                                                                   J.

                                                                                   J.

                                                                                   J.

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                 cc: Hon. Patrick Flanagan, District Judge
                      Snell & Wilmer, LLP/Tucson
                      Snell & Wilmer, LLP/Las Vegas
                      Carole Pope
                      Attorney General/Carson City
                      Brooks Hubley LLP
                      Philip A. Olsen
                      Washoe District Court Clerk

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