W. Sunset 2050 Trust v. Nationstar Mortg., LLC
420 P.3d 1032
Nev.2018Background
- Property at 7255 W. Sunset Rd., Unit 2015 was subject to a senior deed of trust (originally New Freedom, later assigned to Nationstar) and HOA assessments under recorded CC&Rs.
- HOA recorded a lien and a Notice of Default (NOD) for unpaid assessments in 2012; the NOD was mailed to the borrower but not to Bank of America (the then-beneficiary); the NOD was recorded before Bank of America assigned the deed of trust to Nationstar.
- The HOA sold its right to receive past-due assessment proceeds for the Property to a third party (First 100) via a factoring agreement, under which the HOA agreed to continue collection efforts and remit proceeds to First 100.
- The HOA conducted a nonjudicial foreclosure sale in 2013, where West Sunset purchased the Property for $7,800; West Sunset sued to quiet title, Nationstar counterclaimed, and both parties moved for summary judgment.
- The district court held Nationstar’s deed of trust survived the HOA sale because the HOA failed to provide foreclosure notices to the senior beneficiary; the Nevada Supreme Court reversed.
Issues
| Issue | Plaintiff's Argument (Nationstar) | Defendant's Argument (West Sunset / HOA-sale purchaser) | Held |
|---|---|---|---|
| Whether HOA sale invalid for defective preforeclosure notice because Bank of America (pre-assignment beneficiary) was not mailed the NOD | Defective notice to Bank of America invalidates the HOA sale, so Nationstar’s deed survives | HOA recorded NOD before assignment; Nationstar received foreclosure notice after assignment and cannot show prejudice from Bank of America’s lack of NOD service | Reversed: sale valid; Nationstar failed to show prejudice, and Nationstar was on record notice via the recorded NOD |
| Whether HOA lost standing to foreclose by transferring the right to collect past-due assessments (factoring agreement), invoking Edelstein’s no-splitting rule | FACTORING severed the lien from the debt analogous to splitting note and mortgage in Edelstein, depriving HOA of foreclosure standing | Factoring did not change debtor-creditor relationship; HOA retained exclusive right to collect and authority to foreclose; payments were simply assigned | Rejected: Edelstein inapplicable; factoring did not transfer the underlying debt or the HOA’s foreclosure authority |
| Whether defective notice violated Bank of America’s or Nationstar’s due process | Nationstar argued defective notice violated due process | Court declined due process claim as procedurally improper and not meritorious; constitutional rights are personal and HOA foreclosure of superpriority lien not a due-process trigger here | Rejected procedural and substantive due-process argument |
| Whether gross inadequacy of price or bona fide purchaser status invalidates sale | Allegations that price was grossly inadequate and purchaser not bona fide | Nevada precedent bars setting aside trustee’s sale for inadequacy alone; unresolved bona fide purchaser disputes unnecessary if sale valid | Not reached on facts; inadequate-price argument rejected as insufficient by precedent |
Key Cases Cited
- SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 130 Nev. 742, 334 P.3d 408 (Nev. 2014) (valid foreclosure of an HOA superpriority lien extinguishes a first deed of trust)
- Edelstein v. Bank of N.Y. Mellon, 128 Nev. 505, 286 P.3d 249 (Nev. 2012) (to foreclose nonjudicially, the holder of the deed and holder of the note must be the same)
- In re Montierth, 131 Nev. 543, 354 P.3d 648 (Nev. 2015) (explains circumstances where foreclosure may proceed notwithstanding separations between note holder and mortgage holder)
- In re Straightline Invs., Inc., 525 F.3d 870 (9th Cir. 2008) (defines factoring agreement as sale of accounts receivable and notes its commercial effects)