Opinion
No. 70109
06-13-2017
FIRST HORIZON HOME LOANS, A DIVISION OF FIRST TENNESSEE BANK, N.A., A NATIONAL ASSOCIATION, Appellant, v. SFR INVESTMENTS POOL 1, LLC, A NEVADA LIMITED LIABILITY COMPANY, Respondent.
ORDER OF AFFIRMANCE
First Horizon Home Loans appeals from a district court order granting summary judgment in a quiet title action. Eighth Judicial District Court, Clark County; James Crockett, Judge.
First Horizon held a first deed of trust on the subject property, which respondent SFR Investments Pool 1, LLC, purchased at a homeowners' association (HOA) foreclosure sale conducted pursuant to NRS Chapter 116 after the homeowners failed to pay HOA assessments. See NRS 116.3116-.31168; Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortg., 133 Nev. ___, ___, 388 P.3d 970, 971 (2017) (recognizing that the statutory scheme grants HOAs superpriority liens for unpaid assessments and allows HOAs to nonjudicially foreclosure on those liens). After purchasing the property, SFR filed a complaint, as is pertinent here, to quiet title to the property, which First Horizon opposed. The district court ultimately granted summary judgment in SFR's favor, finding that the sale was conducted properly and that the HOA's foreclosure on its superpriority lien extinguished First Horizon's deed of trust on the property. This appeal followed.
First Horizon first argues that the statutory scheme allowing HOA foreclosures to extinguish first deeds of trust is unconstitutional because it allows parties like First Horizon to be deprived of their property without due process. However, the Nevada Supreme Court's recent opinion in Saticoy Bay specifically addressed this argument and held that the statutory scheme does not implicate due process because no state actor is involved in the HOA's foreclosure of its superpriority lien. See 133 Nev. at ___, 388 P.3d at 972-73 (recognizing that for due process to apply a state actor must be involved and concluding that the nonjudicial foreclosure process in NRS Chapter 116 does not include any state actor, thus the statutory scheme does not violate due process). Accordingly, this argument does not provide a basis to overturn the grant of summary judgment in SFR's favor.
First Horizon next argues that the district court erred in granting summary judgment because issues of material fact remained regarding whether the HOA complied with the statutory requirements for foreclosure. See Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005) (providing that summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law). Specifically, First. Horizon asserts that the foreclosure deed's recitals that the sale complied with the statutes are not conclusive evidence of compliance and, thus, material questions of fact remain regarding whether the sale was properly completed, making the grant of summary judgment in SFR's favor inappropriate. See id. In support of its argument, First Horizon relies heavily on the Nevada Supreme Court's recent decision in Shadow Wood Homeowners Ass'n, Inc. v. New York Community Bancorp, Inc., 132 Nev. ___, 366 P.3d 1105 (2016), arguing that the holding of that case rejected the notion that the recitals contained in an HOA foreclosure deed were conclusive evidence that the sale complied with the relevant statutes. We disagree.
In Shadow Wood, a bank foreclosed on a deed of trust but neither paid the HOA assessments as they became due nor paid the prior HOA assessments that remained liened against the property due to the prior owner's failure to pay and their superpriority status under NRS 116.3116. Id. at ___, 366 P.3d at 1107. The HOA thus proceeded to foreclose on its liens and sold the property to a third party at a foreclosure sale. Id. at ___, 366 P.3d at 1108. The bank moved to set aside the sale and the district court ultimately granted summary judgment in the bank's favor, set aside the sale, and vested title of the property back with the bank. Id. at ___, 366 P.3d at 1109.
On appeal from that decision, the supreme court recognized that NRS 116.31166(2) gives conclusive effect to HOA foreclosure deed recitals stating that the foreclosure sale properly complied with NRS 116.31162 through NRS 116.31164's requirements such as default, notice, and publication of the notice of sale. Id. at ___, 366 P.3d at 1110. The supreme court went on to conclude, however, that the conclusive recitals did not prevent the courts from setting aside foreclosure sales based on equity principles such as fraud, oppression, or unfairness. Id. at ___, 366 P.3d at 1111-12 ("[S]uch recitals do not defeat equitable relief in a proper case; rather, such recitals are conclusive, in the absence of grounds for equitable relief." (internal quotation marks omitted)). And because the bank raised equitable challenges, which were supported by evidence, concerning fraud, oppression, and unfairness in the sale process, the supreme court determined that the recitals could not be used as conclusive evidence resolving those issues. Id. at ___, 366 P.3d at 1110. Thus, because the recitals were not conclusive as to the issues raised by the bank, genuine issues of material fact remained and the grant of summary judgment in favor of the purchaser was reversed. Id. at ___, 366 P.3d at 1112-14.
First Horizon asserts that the recitals cannot be considered conclusive because it would allow parties such as the HOA in this case to falsely state that it provided the required notices, even if the party challenging the sale had evidence that the required notices were not sent. This is incorrect, however, as First Horizon's hypothetical scenario clearly lays out a claim for fraud, which would be an equitable challenge to the foreclosure sale that Shadow Wood states the recitals cannot conclusively resolve. 133 Nev. at ___, 366 P.3d at 1110. We note, however, that in discussing this hypothetical scenario, First Horizon never alleges that the notices of the foreclosure sale at issue in this appeal were not sent.
Rather than raise colorable equitable challenges to the foreclosure sale or point to evidence demonstrating fraud, oppression, or unfairness in the foreclosure sale as was the case in Shadow Wood, First Horizon argues that SFR failed to meet its burden on summary judgment to demonstrate that there were no genuine issues of material fact regarding the sale's compliance with the HOA foreclosure statutes. Without any equitable challenges, however, this argument fails as Shadow Wood provides that the recitals are conclusive evidence that the HOA foreclosure lien statutes were complied with. See id. at ___, 366 P.3d at 1110, 1112 (providing that, so long as there are no grounds for equitable relief, the foreclosure deed recitals are conclusive evidence that the statutory requirements for HOA foreclosures were followed). And because the recitals were conclusive evidence, the district court did not err in finding that no genuine issues of material fact remained regarding whether the foreclosure sale was proper and granting summary judgment in favor of SFR. See Wood, 121 Nev. at 729, 121 P.3d at 1029 (reviewing summary judgment orders de novo). Accordingly, we
First Horizon does make one equitable argument—that the sale price was unfair because it was commercially unreasonable. Specifically, First Horizon asserts that the fact that the property sold for only five percent of its value creates a genuine issue of material fact as to whether the sale was commercially reasonable or whether it was unreasonable and should be invalidated, thus precluding summary judgment. See Shadow Wood, 132 Nev. at ___, 366 P.3d at 1112 (recognizing that a court has the authority to set aside a foreclosure sale based on the unfairness of the sale in a quiet title action). Despite First Horizon's argument that this court should adopt a rule that a grossly unreasonable sale price alone can warrant invalidating a foreclosure sale, Nevada law is clear that sale price alone is never enough to demonstrate that the sale was commercially unreasonable; rather, the party challenging the sale must also make a showing of fraud, unfairness, or oppression that brought about the low sale price. See id. ("[D]emonstrating that an association sold a property at its foreclosure sale for an inadequate price is not enough to set aside that sale . . . ."); Long v. Towne, 98 Nev. 11, 13, 639 P.2d 528, 530 (1982) ("Mere inadequacy of price is not sufficient to justify setting aside a foreclosure sale, absent a showing of fraud, unfairness or oppression."); Golden v. Tomiyasu, 79 Nev. 503, 514, 387 P.2d 989, 995 (1963) (adopting the California rule that "inadequacy of price, however gross, is not in itself a sufficient ground for setting aside a trustee's sale legally made; there must be in addition proof of some element of fraud, unfairness, or oppression as accounts for and brings about the inadequacy of price" (internal quotation marks omitted)). And because First Horizon only argued that the sale price was commercially unreasonable without any additional allegations or evidence that fraud, oppression, or unfairness brought about that low sale price, this argument does not provide a basis to overturn the district court's grant of summary judgment. See Wood, 121 Nev. at 729, 121 P.3d at 1029 (reviewing orders granting summary judgment de novo). --------
ORDER the judgment of the district court AFFIRMED.
/s/_________, C.J.
Silver
/s/_________, J.
Tao
/s/_________, J.
Gibbons cc: Hon. James Crockett, District Judge
Akerman LLP/Las Vegas
Kim Gilbert Ebron
Eighth. District Court Clerk