Court Opinion

ID: 4383702
Source: CourtListenerOpinion
Date Created: 2019-04-03 17:00:27.939795+00
Date Added: 2024-06-11T14:50:10.570631
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BANK OF AMERICA, N.A.,                   No. 17-15796
              Plaintiff-Appellant,
                                           D.C. No.
                 v.                     2:16-cv-00650-
                                          JCM-CWH
ARLINGTON WEST TWILIGHT
HOMEOWNERS ASSOCIATION;
THOMAS JESSUP, LLC; THOMAS                 OPINION
JESSUP, LLC, SERIES IV; ALESSI &
KOENIG, LLC,
              Defendants-Appellees.

      Appeal from the United States District Court
               for the District of Nevada
       James C. Mahan, District Judge, Presiding

        Argued and Submitted March 11, 2019
             San Francisco, California

                  Filed April 3, 2019

     Before: William A. Fletcher, Paul J. Watford,
       and Andrew D. Hurwitz, Circuit Judges.

                  Per Curiam Opinion
2        BOFA V. ARLINGTON WEST TWILIGHT HOA

                          SUMMARY *

                   Nevada Foreclosure Law

    The panel reversed the district court’s summary
judgment entered in favor of a homeowners’ association
(“HOA”) in a diversity action brought by Bank of America,
N.A., after the HOA conducted a foreclosure on residential
real property in Las Vegas, Nevada.

    The property was in a neighborhood governed by the
defendant HOA, and the original owners purchased the
property using a mortgage insured by the Federal Housing
Administration. The deed of trust securing the loan was later
assigned to Bank of America.

    The State of Nevada grants HOAs a lien with
superpriority status on property governed by the association.
The portion of the lien with superpriority status consists of
the last nine months of unpaid HOA dues and any unpaid
maintenance and nuisance-abatement charges. Nev. Rev.
Stat. § 116.3116(2).

   Concerning Bank of America’s quiet title claim, the
panel held that pursuant to the Nevada Supreme Court’s
decision in Bank of America, N.A. v. SFR Invs. Pool 1, LLC,
427 P.3d 113 (Nev. 2018), the bank’s tender of $423, based
on the ledger provided by the HOA, plainly satisfied the
superpriority portion of the HOA’s lien. The panel rejected

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
        BOFA V. ARLINGTON WEST TWILIGHT HOA                3

the HOA’s argument that it had a good-faith basis for
rejecting the tender.

    The panel rejected Bank of America’s argument that the
Nevada HOA lien statute violated the Due Process Clause.
The panel held that Bourne Valley Court Trust v. Wells
Fargo Bank, NA, 832 F.3d 1154 (9th Cir., 2016) (holding
that Nev. Rev. Stat. § 116.3116 et seq. was facially
unconstitutional because it contained an impermissible opt-
in notice scheme), no longer controlled the issue in light of
the Nevada Supreme Court’s decision in SFR Invs. Pool 1,
LLC v. Bank of N.Y. Mellon, 422 P.3d 1248, 150-53 (Nev.
2018), which clarified that Nev. Rev. Stat. § 116.31168(1)
incorporated the mandatory notice requirements of Nev.
Rev. Stat. § 1107.090. The panel concluded that Nev. Rev.
Stat. § 116.3116 et seq. was not facially unconstitutional on
the basis of an impermissible opt-in scheme, and Bank of
America received actual notice in this case.

    The panel agreed with the Nevada Supreme Court’s
decision in Renfroe v. Lakeview Loan Servicing, LLC, 398
P.3d 904 (Nev. 2017), which held that Nev. Rev. Stat.
§ 116.3116 et seq. was not preempted by the federal
mortgage insurance program.

                        COUNSEL

Ariel E. Stern (argued) and William S. Habdas, Akerman
LLP, Las Vegas, Nevada, for Plaintiff-Appellant.

John William Ebert (argued) and David A. Markman, Lipson
Neilson Cole Seltzer & Garin P.C., Las Vegas, Nevada, for
Defendant-Appellee Arlington West Twilight Homeowners
Association.
4         BOFA V. ARLINGTON WEST TWILIGHT HOA

Karen L. Hanks (argued) and Richard L. Tobler, Las Vegas,
Nevada, for Defendants-Appellees Thomas Jessup LLC and
Thomas Jessup LLC, Series IV.

No appearance for Defendant-Appellee Alessi & Koenig
LLC.

                              OPINION

PER CURIAM:

    The State of Nevada has established a statutory scheme
that grants a homeowners association (HOA) a lien with
superpriority status on property governed by the association.
See SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408,
409–14 (Nev. 2014). The portion of the lien with
superpriority status consists of the last nine months of unpaid
HOA dues and any unpaid maintenance and nuisance-
abatement charges. Nev. Rev. Stat. § 116.3116(2). 1 The rest
of the lien, consisting of all other outstanding fees, does not
get superpriority status. With a few exceptions, the
superpriority portion is superior to all other liens on the
property, including the first deed of trust held by the
mortgage lender. This means that an HOA can extinguish
the first deed of trust by foreclosing on its superpriority lien.
See SFR Invs. Pool 1, 334 P.3d at 412–14.

   This case involves residential real property in Las Vegas,
Nevada. The property is a single-family home located in a

    1
      This opinion refers to the version of the Nevada provisions in effect
in 2010–2012, when the foreclosure proceedings in this case took place.
The Nevada legislature made significant amendments to these provisions
in 2015.
        BOFA V. ARLINGTON WEST TWILIGHT HOA                  5

neighborhood governed by defendant Arlington West
Twilight Homeowners Association. The original owners of
the home purchased the property in 2008 using a mortgage
insured by the Federal Housing Administration (FHA). The
deed of trust securing the loan was later assigned to plaintiff
Bank of America, N.A.

    In 2010, the original owners fell behind on their monthly
HOA dues to Arlington West. Arlington West, acting
through a trustee, defendant Alessi & Koenig, LLC, initiated
foreclosure proceedings, recording a notice of delinquent
assessment lien and a notice of default and election to sell.
After receiving the notice of default, Bank of America asked
Arlington West to identify the superpriority portion of its
lien, seeking to pay that amount and thereby protect the
bank’s first deed of trust. Arlington West instead only
provided the bank with a ledger, which showed the total
amount due to the HOA but did not specify the superpriority
amount. Based on the ledger, Bank of America determined
that the monthly HOA dues were $47 and calculated the
superpriority amount as $423. The bank then tendered that
amount to Arlington West. However, Arlington West
rejected the payment as insufficient and held a foreclosure
sale. Defendant Thomas Jessup, LLC, bought the property
and later assigned its interest to defendant Thomas Jessup,
LLC, Series IV.

    Bank of America sued Arlington West, Alessi & Koenig,
and the Jessup entities, asserting claims for: (1) quiet title
and declaratory judgment against all defendants; (2) breach
of Nev. Rev. Stat. § 116.1113 against Arlington West and
Alessi & Koenig; and (3) wrongful foreclosure against
Arlington West and Alessi & Koenig. The district court
dismissed the claims for breach of § 116.1113 and wrongful
foreclosure. The court later granted summary judgment to
6       BOFA V. ARLINGTON WEST TWILIGHT HOA

Arlington West and Thomas Jessup, LLC, Series IV, on the
quiet title claim. Bank of America appeals from the
summary judgment.

                                I

    In order to prevail on its quiet title claim, Bank of
America must prove that its interest in the property is
superior to that of every other party in the suit. See Chapman
v. Deutsche Bank Nat’l Tr. Co., 302 P.3d 1103, 1106 (Nev.
2013). The district court concluded that Bank of America
did not establish that its tender of $423 was sufficient to
satisfy Arlington West’s superpriority lien and thereby
establish the bank’s superior interest as the holder of the first
deed of trust. The court therefore granted summary
judgment to defendants on the quiet title claim. We disagree
and reverse.

    The Nevada Supreme Court’s decision in Bank of
America, N.A. v. SFR Investments Pool 1, LLC, 427 P.3d 113
(Nev. 2018), issued after the district court ruled, resolves the
question before us. In that case, the Nevada Supreme Court
held that the holder of the first deed of trust can establish the
superiority of its interest by showing that its tender satisfied
the superpriority portion of the HOA’s lien. See id. at 117–
18. The full superpriority amount consists of nine months of
unpaid HOA dues and any unpaid charges for maintenance
and nuisance abatement. See id. If the HOA’s ledger does
not show any charges for maintenance or nuisance
abatement, a tender of nine months of HOA dues is
sufficient. See id. at 118.

    Under the Nevada Supreme Court’s decision, the bank’s
tender plainly satisfied the superpriority portion of Arlington
West’s lien. Based on the ledger provided by Arlington
West, the bank tendered what it calculated to be nine months
          BOFA V. ARLINGTON WEST TWILIGHT HOA                             7

of HOA dues ($423), and Arlington West does not dispute
that this amount was correctly calculated. The ledger did not
indicate that the property had incurred any charges for
maintenance or nuisance abatement, which are the only other
fees that could have been included in the superpriority
amount. See id. The tender thus was sufficient. Therefore,
Bank of America was entitled to insist on the condition it
imposed in its tender, which was that acceptance would
satisfy the HOA’s superpriority lien. See id.

    Arlington West argues that it had a good-faith basis for
rejecting the tender, even if the bank’s tender was sufficient
and valid. According to Arlington West, it believed at the
time of tender that the superpriority amount consisted of
more than nine months of HOA dues and charges for
maintenance and nuisance abatement. We reject that
argument. As the Nevada Supreme Court has held, a plain
reading of Nev. Rev. Stat. § 116.3116 indicates that the
superpriority portion of the lien includes only those amounts.
See id. at 117–19. Arlington West therefore had no basis for
believing that Bank of America’s tender was insufficient. 2

                                    II

    Relying on our decision in Bourne Valley Court Trust v.
Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), Bank
of America argues that the Nevada HOA lien statute violates
the Due Process Clause. In that case, we held that Nev. Rev.
Stat. § 116.3116 et seq. is facially unconstitutional because
it contains an impermissible opt-in notice scheme. Id. at
1156. We interpreted the statutory scheme as requiring an

    2
       Arlington West also argues that it is not a proper party to the quiet
title claim. The district court did not address that issue in the first
instance, so we do not reach it here.
8       BOFA V. ARLINGTON WEST TWILIGHT HOA

HOA to provide notice to a junior interest holder about the
HOA’s intent to foreclose only if the interest holder has
requested notice. Id. at 1158. The district court in this case
nonetheless rejected Bank of America’s due process
argument on the ground that Arlington West had provided
actual notice to the bank.

    We affirm the district court’s ruling but for different
reasons. The bank’s due process argument fails because the
Nevada Supreme Court later rejected Bourne Valley’s
interpretation of the Nevada statutory scheme. See SFR Invs.
Pool 1, LLC v. Bank of N.Y. Mellon, 422 P.3d 1248 (Nev.
2018). There, the Nevada Supreme Court clarified that Nev.
Rev. Stat. § 116.31168(1) incorporates the mandatory notice
requirements of Nev. Rev. Stat. § 107.090. Id. at 1250–53.
Thus, an HOA must give notice to all junior interest holders
regardless of any request. In light of that decision, Bourne
Valley no longer controls the analysis, and we conclude that
Nev. Rev. Stat. § 116.3116 et seq. is not facially
unconstitutional on the basis of an impermissible opt-in
notice scheme. Bank of America does not dispute that it
received actual notice in this case. Its due process rights
were therefore not violated.

                             III

    Bank of America also argues that the Nevada lien statute
is preempted by the federal mortgage insurance program.
The district court rejected the bank’s argument on the ground
that the FHA, which carries out the insurance program, is not
a party to the case. As Bank of America correctly contends,
the district court erred in suggesting that the FHA must be
joined as a party before a preemption argument can be
raised. Nevertheless, we agree with the Nevada Supreme
Court’s decision in Renfroe v. Lakeview Loan Servicing,
        BOFA V. ARLINGTON WEST TWILIGHT HOA                9

LLC, 398 P.3d 904 (Nev. 2017), which held that Nev. Rev.
Stat. § 116.3116 et seq. is not preempted.

    The FHA insurance program allows the Department of
Housing and Urban Development (HUD) to insure home
loans made by private lenders. Two of the program’s goals
are to help homeowners avoid foreclosure when possible and
to protect the lender’s (and thus HUD’s) interest in the
property in the event of a foreclosure. See Renfroe, 398 P.3d
at 906–08; 24 C.F.R. §§ 203.501, 291.1(a)(2).

    The Nevada statutory scheme does not conflict with
these goals. Under Nevada law, a private lender can
preserve its first deed of trust on a property and help
homeowners explore alternatives to foreclosure by paying
off the superpriority portion of the HOA’s lien. See Bank of
Am., 427 P.3d at 117–18, 121. In fact, HUD has
recommended use of this course of action to satisfy both the
federal mortgage insurance program and state HOA lien
statutes. See HUD, Mortgagee Letter 13-18, Updated
Clarification Regarding Title Approval at Conveyance, 2013
WL 2448985, at *1–2 (May 31, 2013); HUD, Mortgagee
Letter 2002-19, Clarification Regarding Title Approval
Issues, Property Condition at Conveyance, Administrative
Offsets and a New Process for Lender Appeal of Conveyance
Issues, 2002 WL 32083150, at *1–2 (Sept. 20, 2002). We
therefore conclude that Nev. Rev. Stat. § 116.3116 et seq. is
not preempted.

   REVERSED and REMANDED.