Wells Fargo Financial Nevada 2, Inc. v. Haddad
2:17-cv-01511
| D. Nev. | Mar 31, 2019Background
- Property at 3658 Death Valley Dr., Las Vegas, was subject to a 2006 deed of trust in favor of Wells Fargo (Plaintiff).
- HOA recorded notices of delinquent assessment, notice of default, and notice of sale in 2014–2015 that did not state they concerned a “super-priority” lien or that they would extinguish the deed of trust.
- HOA foreclosure sale occurred March 25, 2015; defendant Eddie Haddad purchased the property and a trustee’s deed was recorded April 20, 2015.
- Wells Fargo sued asserting six claims including facial and as-applied due process and takings challenges, wrongful foreclosure, violation of NRS Chapter 116, quiet title, and unjust enrichment; lis pendens was filed.
- District court previously stayed the case pending Nevada Supreme Court guidance; stay lifted after Nevada decisions and Defendant moved to dismiss again.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Facial due process/unconstitutionality of NRS Ch. 116 | Statute is facially unconstitutional for insufficient notice scheme | Nevada law forecloses facial challenge; statute provides adequate notice under Nevada Supreme Court construction | Dismissed: facial challenge not plausible; as-applied challenge survives |
| As-applied due process (notice defects) | Recorded notices were misleading and failed to inform of super-priority risk to deed of trust | Notices complied with statutory requirements and gave required information | Allowed to proceed: complaint plausibly alleges misleading notice for as-applied claim |
| Takings (Fifth Amendment) | Foreclosure extinguishing deed of trust is a taking requiring compensation | Statutory lien priority does not amount to governmental taking | Dismissed: no per se taking; no Penn Central factors show a compensable taking |
| Commercial reasonableness / set-aside of sale | Sale was commercially unreasonable and should be set aside | NRS Ch. 116 does not require commercial reasonableness; inadequacy of price alone insufficient | Dismissed: commercial-reasonableness theory not legally cognizable to set aside HOA sale |
Key Cases Cited
- Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir.) (criticized Nevada statutory notice scheme under Ninth Circuit analysis)
- Shadow Wood Homeowners Ass'n v. New York Cmty. Bancorp, 366 P.3d 1105 (Nev. 2016) (recognizes equitable jurisdiction to resolve title disputes and defines bona fide purchaser inquiry)
- Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, 388 P.3d 970 (Nev. 2017) (holding HOA nonjudicial foreclosure extinguishing subordinate deed does not constitute a governmental taking)
- SFR Investments Pool 1, LLC v. Bank of New York Mellon, 422 P.3d 1248 (Nev. 2018) (Nevada Supreme Court construing NRS 116.31168 to incorporate NRS 107.090 notice requirements)
- Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow Canyon, 405 P.3d 641 (Nev. 2017) (commercial-reasonableness standard from the UCC inapplicable to HOA foreclosure sales)
- Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (U.S.) (due process requires notice reasonably calculated to apprise interested parties)
- Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (U.S.) (framework for regulatory takings analysis)
- Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (U.S.) (multi-factor test for regulatory takings)