293 F. Supp. 3d 1228
D. Nev.2018Background
- Property at 247 Prestwick Court was subject to a Guild Mortgage deed of trust; owner Estrada defaulted on HOA assessments and the HOA (through Alessi & Koenig) conducted a nonjudicial foreclosure sale in November 2013.
- Prestwick purchased the property at the HOA sale for $20,100; trustee's deed upon sale was recorded, and the sale extinguished the recorded deed of trust under NRS Chapter 116.
- Guild (the mortgagee) sued the HOA and Prestwick seeking declaratory relief and quiet title, asserting constitutional, commercial-reasonableness, bona fide purchaser, FHA-insurance preemption, and fraudulent-transfer claims.
- Prior summary judgment motions were denied in 2017; after additional discovery the parties renewed cross-motions for summary judgment.
- The court applied Nevada law (NRS Chapter 116 and Nevada precedent) and equitable principles to determine whether Guild raised a colorable equitable challenge (fraud, unfairness, or oppression) to overcome the statute’s conclusive recitals and SFR Investments rule.
Issues
| Issue | Plaintiff's Argument (Guild) | Defendant's Argument (Prestwick/HOA) | Held |
|---|---|---|---|
| 1. Whether NRS Ch. 116 foreclosure was unconstitutional / violated due process (incl. Bourne Valley) | Bourne Valley renders the HOA statute facially unconstitutional and notice irrelevant; sale deprived Guild of property without due process | Guild received actual notice of the sale; Bourne Valley addressed an "opt-in" notice scheme, not the entire statute; no state action here | Court: Denied Guild — Bourne Valley inapplicable; adequate notice was given and no state action shown |
| 2. Whether the foreclosure sale was a taking under the Fifth Amendment | FHA-insured loan means sale effects federal interests; sale amounted to a taking | Extinguishment of subordinate deed via HOA sale does not violate Takings Clause; no federal party (FHA) is before the court | Court: Denied Guild — Takings claim rejected; extinguishment permissible and FHA not a party |
| 3. Whether the sale was commercially unreasonable (grossly inadequate price + fraud/unfairness/oppression) | Sale price (~9.8% of claimed FMV) was grossly inadequate and CC&R language and prior counsel relationships suppressed bidding | Price often reflects lien amount; Guild produced an appraisal dated years after sale and no competent evidence of fraud or unfairness | Court: Denied Guild — price alone insufficient; Guild failed to show fraud, unfairness, or oppression |
| 4. Bona fide purchaser status of Prestwick | Prestwick had notice of contested nature of association sales and CC&Rs disclaim rights, so not BFP | Prestwick paid value and had no reason to believe superpriority was paid; buyer status not controverted by equitable showing | Court: Granted Prestwick — BFP arguments unnecessary after Guild failed to raise equitable challenges; sale valid |
| 5. Fraudulent transfer under NRS 112 | Foreclosure sale was a transfer without reasonable equivalent value while debtor insolvent | Property was encumbered by valid liens precluding it from being an "asset" under NRS 112; no evidence of collusion or fraudulent conduct | Court: Denied Guild — sale not a fraudulent transfer under NRS 112 |
Key Cases Cited
- SFR Invs. Pool 1, LLC v. U.S. Bank, 334 P.3d 408 (Nev. 2014) (HOA superpriority lien foreclosure can extinguish a first deed of trust if statutory prerequisites met)
- Shadow Wood Homeowners Ass'n v. New York Cmty. Bancorp., Inc., 366 P.3d 1105 (Nev. 2016) (equitable power to set aside HOA foreclosure for gross inadequacy plus fraud, unfairness, or oppression; conclusive recitals explained)
- Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016) (invalidated NRS Chapter 116 "opt-in" notice scheme as facially infirm under due process, not the whole statute)
- Long v. Towne, 639 P.2d 528 (Nev. 1982) (mere inadequacy of price insufficient to set aside sale without fraud, unfairness, or oppression)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard and burden-shifting)
- Serra v. Lappin, 600 F.3d 1191 (9th Cir. 2010) (due process protects against deprivation of existing property interests)