Ditech Financial LLC. v. SFR Investments Pool1, LLC
2:15-cv-00630
D. Nev.Aug 5, 2016Background
- Property at 8525 Brody Marsh Ave., Las Vegas was subject to a senior deed of trust; HOA foreclosed for unpaid assessments and SFR purchased the property at the HOA sale.
- Green Tree Servicing (plaintiff) claims it is beneficiary of record and seeks to quiet title, contending the HOA sale did not extinguish its deed of trust.
- Green Tree moved to amend the complaint to allege (1) Fannie Mae owned the loan and (2) Green Tree was Fannie Mae’s servicer, and to assert that FHFA conservatorship protections prevented the HOA foreclosure without FHFA consent.
- Defendants (Spring Mountain Ranch HOA and SFR) opposed, arguing the proposed allegations contradict recorded assignments and that Green Tree lacks prudential standing to assert Fannie Mae/FHFA rights.
- Court evaluated the motion under Rule 15(a) and Ninth Circuit futility/standing standards and found the proposed amendment deficient but allowed leave to file a renewed motion correcting identified defects; also permitted HOA to renew a § 38.310 motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amended complaint plausibly alleges Fannie Mae owned the loan/deed at time of HOA sale | Green Tree: Fannie Mae purchased the loan in 2005 and remained owner; Green Tree acted as servicer with authority over the note | Defs: Recorded assignments show transfers of both note and deed; plaintiff’s allegations contradict those records and are insufficient | Denied as futile — allegations do not plausibly show Fannie Mae had an interest at HOA sale; leave to renew allowed to cure pleading defects |
| Whether Green Tree has prudential standing to assert FHFA/Fannie Mae rights under 12 U.S.C. § 4617(j)(3) | Green Tree: As servicer with close relationship, it may assert that FHFA/Fannie Mae property cannot be foreclosed without FHFA consent | Defs: Green Tree seeks to assert third-party rights belonging to FHFA/Fannie Mae; those entities can and should litigate their rights | Denied — Green Tree lacks prudential standing because it did not allege a hindrance preventing FHFA/Fannie Mae from protecting their own interests |
| Whether leave to amend should be granted under Rule 15 | Green Tree: Requested leave to add Fannie Mae/FHFA allegations; filed proposed amendment timely | Defs: Amendment would be futile and prejudicial because it conflicts with record and raises standing issues | Court denied current motion to amend as futile but granted leave to file a renewed motion correcting deficiencies |
| Whether HOA may renew motion under Nevada Revised Statutes § 38.310 | N/A (procedural) | Defs: Sought dismissal previously; court reconsideration warranted | Court granted HOA leave to renew a § 38.310 motion within 15 days |
Key Cases Cited
- Foman v. Davis, 371 U.S. 178 (1962) (Rule 15 leave-to-amend standard)
- Sonoma Cnty. Ass’n of Retired Emps. v. Sonoma Cnty., 708 F.3d 1109 (9th Cir.) (factors for leave to amend)
- Zivkovic v. Southern California Edison Co., 302 F.3d 1080 (9th Cir.) (district court’s discretion on amendment)
- Edelstein v. Bank of New York Mellon, 286 P.3d 249 (Nev. 2012) (transfer of note generally transfers deed of trust)
- Valley Forge Christian Coll. v. Americans United for Separation of Church & State, 454 U.S. 464 (1982) (prudential standing principles)
- Mills v. United States, 742 F.3d 400 (9th Cir.) (third-party rights exception—close relationship and hindrance)
- Singleton v. Wulff, 428 U.S. 106 (1976) (rationales for permitting third-party rights assertions)
- McCollum v. California Dept. of Corrections & Rehabilitation, 647 F.3d 870 (9th Cir.) (courts decline claims asserting third-party rights)
- City of Los Angeles v. County of Kern, 581 F.3d 841 (9th Cir.) (prudential standing as judicially self-imposed limit)