Green Tree Servicing LLC v. Rainbow Bend Homeowners Association
3:15-cv-00297
D. Nev.Apr 12, 2016Background
- In 2004 Shanna Carpenter purchased a condominium in an HOA and took out a mortgage secured by a deed of trust; Fannie Mae later purchased the loan and Green Tree services it.
- Carpenter defaulted on HOA assessments; the HOA conducted a nonjudicial foreclosure under NRS § 116.3116 and bought the property for $837; title later transferred to Daniel and Diana Hall.
- Plaintiffs (Green Tree, Fannie Mae, and FHFA as conservator) sued seeking declaratory relief and quiet title, challenging the effect of the HOA foreclosure on the first deed of trust.
- Defendants (the HOA and the Halls) moved to dismiss or for summary judgment; Plaintiffs cross-moved for summary judgment.
- The court considered whether NRS § 116.3116 is preempted by 12 U.S.C. § 4617(j)(3), whether Plaintiffs had a property interest at the time of sale, and whether the statute violated due process.
- After briefing and oral argument, the court: (1) held that 12 U.S.C. § 4617(j)(3) preempts Nevada law to the extent it permits extinguishment of FHFA/Fannie Mae’s DOT without FHFA consent; (2) denied summary judgment to Plaintiffs on other grounds; and (3) dismissed Plaintiffs’ due process claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preemption — whether federal conservator statute prevents HOA sale from extinguishing Fannie Mae/FHFA's DOT | 12 U.S.C. § 4617(j)(3) bars state law that extinguishes Fannie Mae’s interest without FHFA consent | State HOA foreclosure law valid; no federal preemption of state property law | Court: federal statute preempts Nevada law insofar as it permits extinguishment of FHFA/Fannie Mae’s DOT without FHFA consent (Plaintiffs granted limited relief) |
| Existence of Fannie Mae’s property interest at time of sale | Fannie Mae (via Curcio decl.) claims an interest in the loan/property at foreclosure | Defendants challenge sufficiency of Fannie Mae’s evidence to show an interest at sale | Court: genuine factual disputes exist; Plaintiffs did not prove property interest as a matter of law — summary judgment denied on this basis |
| Due process — whether nonjudicial HOA sale constitutes state action requiring notice to protect DOT holders | Plaintiffs: statute’s notice scheme (opt‑in) denied constitutionally adequate notice to protect their property rights | Defendants: nonjudicial foreclosure is private action, not state action; no federal due process violation | Court: follows Ninth Circuit precedent — nonjudicial foreclosure is not state action; Plaintiffs’ due process claim dismissed |
| Relief/Procedural disposition — scope of rulings on motions | Plaintiffs seek broad declaratory relief and quiet title; summary judgment on preemption and other claims | Defendants seek dismissal or summary judgment on all claims | Court: grants Plaintiffs limited declaratory relief on preemption; denies remaining Plaintiff summary judgment requests; grants Defendants’ motion dismissing due process claim; denies Defendants’ motion in other respects |
Key Cases Cited
- SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014) (Nevada Supreme Court holding HOA lien has a nine‑month "superpriority" and that nonjudicial HOA foreclosure can extinguish a first deed of trust when statutory notice requirements are met)
- Charmicor v. Deaner, 572 F.2d 694 (9th Cir. 1978) (nonjudicial foreclosure does not constitute state action for due process purposes)
- Apao v. Bank of New York, 324 F.3d 1091 (9th Cir. 2003) (reaffirming that nonjudicial foreclosures are private actions not subject to constitutional due process)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard — movant bears initial burden to show absence of genuine issue of material fact)