Alex BEREZOVSKY v. Gregory MONIZ; Idell Moniz; Red Rock Financial Services, LLC, Wells Fargo Bank, N.A.; Garden Terrace Homeowners Association; Bank of America, N.A.; Federal Home Loan Mortgage Corporation; Federal Housing Finance Agency
No. 16-15066
United States Court of Appeals, Ninth Circuit
August 25, 2017
869 F.3d 923
CONCLUSION
For the foregoing reasons, the district court‘s judgment is AFFIRMED. Appellant shall bear costs on appeal.
Luis A. Ayon (argued), Maier Gutierrez Ayon, Las Vegas, Nevada; Michael V. Infuso and Keith W. Barlow, Green Infuso LLP, Las Vegas, Nevada; for Plaintiff-Counter-Defendant-Appellant.
Michael A.F. Johnson (argued), Matthew J. Oster, Elliott C. Mogul, Dirk C. Phillips, Asim Varma, and Howard N. Cayne, Arnold & Porter LLP, Washington, D.C.; Leslie Bryan Hart and John D. Tennert, Fennemore Craig P.C., Reno, Nevada; Darren T. Brenner, Akerman LLP, Las Vegas, Nevada; Marc James Ayers and R. Aaron Chastain, Bradley Arant Boult Cummings LLP, Birmingham, Alabama; for Defendants-Counter-Claimants-Appellees.
Before: MARSHA S. BERZON and RICHARD R. CLIFTON, Circuit Judges, and KIMBERLY J. MUELLER,** District Judge.
MUELLER, District Judge:
If a homeowners association member in Nevada misses property payments for six months, Nevada law equips the association with the ability to foreclose on a “superpriority lien,” quashing all other property liens or interests recorded after the recordation of the Covenants, Conditions, and Restrictions attached to the title. On its face, this superpriority lien has the potential to trump certain federal property interests, despite Congress‘s passage of a provision known as the Federal Foreclosure Bar, which prohibits nonconsensual foreclosure of Federal Housing Finance Agency (“Agency“) assets. This clash of state and federal law has spawned considerable litigation in Nevada. This decision resolves the clash in favor of the Federal Foreclosure Bar.
Appellant Alex Berezovsky purchased a home at a homeowners association foreclosure sale in 2013. He argues the Nevada superpriority lien provision empowered the association to sell the home to him free of
Berezovsky sued to quiet title in Nevada state court. Armed with the Federal Foreclosure Bar, Freddie Mac intervened and counterclaimed for the property‘s title, removed the case to federal district court, and moved for summary judgment. The Agency joined Freddie Mac‘s counterclaim. Together the federal entities argued that Berezovsky did not acquire “clean title” in the home because the Federal Foreclosure Bar preempts Nevada law, invalidating any purported extinguishment of Freddie Mac‘s interest through the association foreclosure sale. In resolving the parties’ cross-motions, the district court agreed with the federal entities.
On appeal, Berezovsky disputes the Federal Foreclosure Bar‘s applicability and contends Freddie Mac lacks an enforceable property interest. We are unpersuaded and affirm the district court‘s holding.
I.
The home Berezovsky purchased is located in Las Vegas, Nevada. Gregory and Idell Moniz previously owned the home, which is located in a community governed by a homeowners association. On March 5, 2007, the Monizes took out a $220,000 loan secured by a deed of trust. The deed of trust listed the Monizes as the loan borrowers and named Mortgage Electronic Registration Systems, Inc. (“MERS“) as the beneficiary under the security instrument, and as nominee for the lender, Countrywide Home Loans, Inc., and its successors and assigns. Freddie Mac purchased the Monizes’ loan in 2007 and has owned it ever since. On July 22, 2011, MERS assigned its beneficial interest under the deed of trust to Bank of America, N.A. (“BANA“), and BANA immediately recorded the assignment.
In early 2011, the Monizes missed $1,767.38 in payments they owed to the homeowners association. This lapse triggered Nevada‘s superpriority lien law, empowering the homeowners association to record a lien against the home, which it did on March 17, 2011. The association recorded a formal notice of default on May 9, 2013, and then exercised its power to foreclose on the home and extinguish all other property interests. Berezovsky acquired the home at the June 4, 2013, foreclosure sale for $10,500; he then recorded the deed in his name.
In his state action to quiet title, Berezovsky sued all those holding a property interest in the home, including the Monizes and BANA. Freddie Mac intervened, counterclaimed for title, removed the case to federal court, and moved for summary judgment. To establish its priority property interest under Nevada law, Freddie Mac produced evidence showing it had owned the Monizes’ loan since 2007, and that BANA, the recorded deed-of-trust beneficiary, had been its loan-servicing agent.
The Agency also intervened as Freddie Mac‘s conservator and joined the summary judgment motion. See Housing and Economic Recovery Act of 2008 (“HERA“),
Berezovsky timely appealed. He argues the Federal Foreclosure Bar does not apply and, even if it does, Freddie Mac lacks an enforceable property interest. We review the district court‘s decision to grant summary judgment de novo. Gordon v. Virtumundo, Inc., 575 F.3d 1040, 1047 (9th Cir. 2009) (citing Burrell v. McIlroy, 464 F.3d 853, 855 (9th Cir. 2006)).
II.
Berezovsky offers two reasons the Federal Foreclosure Bar does not apply. He says (1) the Bar does not apply to private association foreclosures generally, because it protects the Agency‘s property only from state and local tax liens; and (2) it does not apply specifically to this foreclosure, because Freddie Mac and the Agency implicitly consented to the foreclosure when they took no action to stop the sale.2
Whether the Federal Foreclosure Bar applies to private foreclosures generally is a matter of first impression. In answering the question, we turn first to the statute‘s structure and plain language. See Avila v. Spokane Sch. Dist. 81, 852 F.3d 936, 941 (9th Cir. 2017). HERA identifies the powers granted to the Agency as a conservator and the exemptions from which it benefits. A subsection of the statute entitled “Other agency exemptions”3 includes the Federal Foreclosure Bar as the third exemption, and provides as follows:
(1) Applicability
The provisions of this subsection shall apply with respect to the Agency in any case in which the Agency is acting as a conservator or a receiver.
(2) Taxation
The Agency, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Agency shall be subject to
State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, and the tax thereon, shall be determined as of the period for which such tax is imposed. (3) Property protection
No property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency.
(4) Penalties and fines
The Agency shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due.
On its face, the first provision makes clear that this subsection applies to “any case” in which the Agency serves as conservator, without limitation.
Berezovsky cites the Fifth Circuit‘s decision in F.D.I.C. v. McFarland, 243 F.3d 876 (5th Cir. 2001), to support his argument that the Federal Foreclosure Bar does not apply to private foreclosures. The court in McFarland interpreted
The court in McFarland declined to extend
As the court in McFarland observed, before FIRREA‘s passage in 1989,
Berezovsky also contends even if the Federal Foreclosure Bar applies to private association foreclosures generally, it does not apply to the sale at which he purchased the Monizes’ home because Freddie Mac and the Agency implicitly consented to the foreclosure when they took no action to stop it. Berezovsky cites no authority for the proposition that inaction in this context conveys consent, implicit or otherwise. The Federal Foreclosure Bar does not require the Agency to actively resist foreclosure. See
The Federal Foreclosure Bar applies generally to private association foreclosures and specifically to the contested foreclosure sale here.
III.
The parties dispute whether the Federal Foreclosure Bar preempts Nevada state law. The district court found the Federal Foreclosure Bar invalidated the homeowners association‘s use of a state-sanctioned superpriority lien to foreclose on the Agency‘s property without its consent. The inherent tension between the federal and state laws has triggered multiple lawsuits, the outcomes of which may depend on our resolution here.5
A court begins its preemption analysis by assessing whether the presumption against preemption applies. Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (“Consideration of issues arising under the Supremacy Clause start[s] with the assumption that the historic police powers of the States [are] not to be superseded by Federal Act unless that [is] the clear and manifest purpose of Congress.“); see also California v. ARC Am. Corp., 490 U.S. 93, 101, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989) (“[A]ppellees must overcome the presumption against finding pre-emption of state law in areas traditionally regulated by the States.“).
Real estate foreclosure traditionally is an area regulated by state law, so we begin our analysis with a presumption against pre-emption of the Nevada superpriority lien law. See BFP v. Resolution Tr. Corp., 511 U.S. 531, 544, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994); In re Bledsoe, 569 F.3d 1106, 1112 (9th Cir. 2009). The presumption against preemption is rebutted, however, where Congress makes its intent to supersede state law “clear and manifest.” See Arizona v. United States, 567 U.S. 387, 400, 132 S.Ct. 2492, 183 L.Ed.2d 351 (2012).
We assess first whether the Federal Foreclosure Bar demonstrates clear and manifest intent to preempt Nevada‘s superpriority lien provision through an express preemption clause and conclude it does not. Congress did not use sufficiently definite language to brand
The question, then, is whether the Federal Foreclosure Bar implicitly demonstrates a clear intent to preempt Nevada‘s superpriority lien law. We conclude it does. The Federal Foreclosure Bar‘s declaration that “[n]o property of the Agency shall be subject to . . . foreclosure” unequivocally expresses Congress‘s “clear and manifest” intent to supersede any contrary law, including state law, that would allow foreclo-
“[E]ven if it is possible to comply with both state and federal law, state law is conflict-preempted whenever it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.‘” Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053, 1061 (9th Cir. 2014) (quoting Arizona, 567 U.S. at 399). As the two statutes impliedly conflict, the Federal Foreclosure Bar supersedes the Nevada superpriority lien provision. The district court did not err in so concluding.
IV.
Berezovsky maintains that even if the Federal Foreclosure Bar applies to his case and is preemptive, the district court should not have granted summary judgment to Freddie Mac because Freddie Mac did not prove beyond dispute that it
Here, we look to the Nevada Supreme Court‘s resolution of these issues. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) (“Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state.“). Nevada law requires recording of a lien for it to be enforceable, but does not mandate that the recorded instrument identify the note owner by name. See
The Nevada Supreme Court has relied on the Restatement Third of Property to clarify lien enforceability when the recording document lists the deed-of-trust beneficiary, here BANA, but not the note owner, here Freddie Mac. See In re Montierth, 131 Nev. 51, 354 P.3d 648, 650-51 (2015) (citing Restatement (Third) of Property: Mortgages § 5.4 cmt. c (Am. Law. Inst. 1997)). Under these circumstances — that is, where the note is “split” from the deed of trust — an “agency relationship” with the recorded beneficiary preserves the note owner‘s power to enforce its interest under the security instrument, because the note owner can direct the beneficiary to foreclose on its behalf. See id. An agency relationship exists if the note owner has the ability to reclaim the deed of trust from the beneficiary by ordering that the beneficiary make an assignment. Id. at 651.
Nevada law thus recognizes that, in an agency relationship, a note owner remains a secured creditor with a property interest in the collateral even if the recorded deed of trust names only the owner‘s agent. Id. (noting the Restatement (Third) of Property acknowledges the note holder retains its security interest even if the beneficial interest under the deed of trust is assigned to its loan-servicing agent).
Although the recorded deed of trust here omitted Freddie Mac‘s name, Freddie Mac‘s property interest is valid and enforceable under Nevada law. Freddie Mac introduced evidence8 in the district court showing it acquired the Monizes’ loan secured by the property in 2007; BANA is identified as Freddie Mac‘s loan servicer in those documents. Freddie Mac also introduced excerpts of its Single-Family Seller/Servicer Guide (“Guide“), which defines its agency relationship with BANA.9 The
Guide provides that when Freddie Mac purchases a mortgage, the “Servicer agree[s] Freddie Mac may, at any time and without limitation, require the [ ] Servicer, at the [ ] Servicer‘s expense, to make such endorsements to and assignments and recordations of any of the Mortgage documents so as to reflect the interests of Freddie Mac.” Guide at 1301.10. The Guide also provides that “Freddie Mac may, at its sole discretion and at any time, require a Seller/Servicer, at the Seller/Servicer‘s expense, to prepare, execute and/or record assignments of the Security Instrument to Freddie Mac. . . .” Guide at 6301.6. The Guide‘s language mirrors Montierth‘s description of the requisite agency relationship. BANA is Freddie Mac‘s agent with respect to the Monizes’ loan. Freddie Mac‘s property interest is therefore valid and enforceable under Nevada law.
Berezovsky points to no evidence before the district court that created a material dispute regarding the legal import of Freddie Mac‘s exhibits concerning its interest in the property. He must have shown more than “metaphysical doubt as to the material facts” to warrant reversal, and has not done so here. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). The district court correctly found Freddie Mac‘s priority property interest enforceable under Nevada law.
V.
Because Freddie Mac possessed an enforceable property interest and was under the Agency‘s conservatorship at the time of the homeowners association foreclosure sale, the Federal Foreclosure Bar served to protect the deed of trust from extinguishment. Freddie Mac continued to own the deed of trust and the note after the sale to Berezovsky. The district court properly granted summary judgment in favor of Freddie Mac.
AFFIRMED.
KIMBERLY J. MUELLER
DISTRICT JUDGE
Notes
1. The association has a lien on a unit for any construction penalty that is imposed against the unit‘s owner pursuant to
NRS 116.310305 , any assessment levied against that unit or any fines imposed against the unit‘s owner from the time the construction penalty, assessment or fine becomes due. . . .2. A lien under this section is prior to all other liens and encumbrances on a unit except:
(a) Liens and encumbrances recorded before the recordation of the declaration and, in a cooperative, liens and encumbrances which the association creates, assumes or takes subject to;
(b) A first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent or, in a cooperative, the first security interest encumbering only the unit‘s owner‘s interest and perfected before the date on which the assessment sought to be enforced became delinquent, except that a lien under this section is prior to a security interest described in this paragraph to the extent set forth in subsection 3;
(c) Liens for real estate taxes and other governmental assessments or charges against the unit or cooperative; and
(d) Liens for any fee or charge levied pursuant to subsection 1 of
NRS 555.520 .