SFR INVS. POOL 1, LLC v. U.S. BANK, N.A. , 2022 NV 22 ( 2022 )

138 Nev., Advance Opinion 22
IN THE SUPREME COURT OF THE STATE OF NEVADA
SFR INVESTMENTS POOL 1, LLC, A No. 81293
NEVADA LIMITED LIABILITY
COMPANY,
Appellant/Cross-Respondent,
vs.
FL
r"..4
tr.
U.S. BANK N.A., A NATIONAL
BANKING ASSOCIATION; AND
NATIONSTAR MORTGAGE, LLC, A
FOREIGN LIMITED LIABILITY
COMPANY, AS TRUSTEE FOR THE
CERTIFICATEHOLDERS OF THE LXS
2006-4N TRUST FUND,
ERRONEOUSLY PLEADED AS U.S.
BANK, N.A.,
Respondents/Cross-Appellants.
Petition for rehearing of an order affirming a district court
judgment in a quiet title action.
Rehearing denied.
Hanks Law Group and Karen L. Hanks and Chantel M. Schimming, Las
Vegas,
for Appellant/Cross-Respondent.
Kravitz Schnitzer Johnson Watson & Zeppenfeld, Chtd., and Gary E.
Schnitzer, Las Vegas; Troutman Pepper Hamilton Sanders LLP and Aaron
D. Lancaster, Atlanta, Georgia,
for Respondents/Cross-Appellants.
Fennemore Craig P.C. and Leslie Bryan Hart and John D. Tennert, Reno,
for Amicus Curiae Federal Housing Finance Agency.
SUPFIEME COURT
OF
NEVADA
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19 TO 7
BEFORE THE SUPREME COURT, HARDESTY and STIGLICH, JJ., and
GIBBONS, Sr. J.
OPINION
By the Court, HARDESTY, J.:
NRS 106.240 provides a means by which liens on real property
are automatically cleared from the public records after a certain period of
time. In particular, NRS 106.240 provides that 10 years after the debt
secured by the lien has become "wholly due" and has remained unpaid, "it
shall be conclusively presumed that the debt has been regularly satisfied
and the lien discharged."
During the financial crisis that began in the 2000s, thousands
of Nevada homeowners defaulted on their home loans, and their lenders
recorded notices of default. Those notices accelerated the homeowners loan
balance, thereby arguably making the loan "wholly due" for purposes of
NRS 106.240.2 Now, roughly 10 years after the notices of default were
recorded and the loans have remained unpaid, disputes have arisen
between property owners (such as appellant) and lenders (such as
respondents) over whether NRS 106.240 extinguishes the deeds of trust
securing those loans, such that the lenders no longer have any security
interest in the properties.
The specific question presented in this case is what effect a
notice of rescission has on NRS 106.240s 10-year time frame when it is
1The Honorable Mark Gibbons, Senior Justice, participated in the
decision of this matter under a general order of assignment.
2Given the procedural posture of this case, we decline to definitively
resolve whether acceleration of a loan makes the loan "wholly due' for
purposes of triggering NRS 106.240s 10-year time frame. This opinion
assumes that acceleration makes the loan "wholly due."
2
recorded after a notice of default. We previously answered this question in
an unpublished decision in Glass v. Select Portfolio Servicing, Inc., No.
78325, 2020 WL 3604042 at *1 (Nev. July 1, 2020) (Order of Affirmance),
reasoning that because a notice of rescission rescinds a previously recorded
notice of default, the notice of rescission "effectively cancelled the
acceleration" triggered by the notice of default, such that NRS 106.240s 10-
year period was reset. Consistent with Glass, we affirmed the district
court's judgment in this case in an unpublished decision. SFR Invs. Pool 1,
LLC v. U.S. Bank NA., No. 81293, 2021 WL 4238769 (Nev. Sept. 16, 2021)
(Order of Affirmance). Appellant now seeks rehearing, arguing that we
misapprehended material facts. As explained below, we disagree and
therefore deny rehearing.
FACTS AND PROCEDURAL HISTORY
The subject property was previously owned by nonparty
Magnolia Gotera, who, in 2005, obtained a loan from nonparty Countrywide
Home Loans. That loan was secured by a deed of trust, which included a
paragraph relating to Countrywide's right to accelerate the unpaid balance
of the loan if Gotera defaulted. In 2007, Gotera stopped making payments
on her loan, and in 2008, Countrywide's trustee recorded a notice of default.
This notice explained that Countrywide "has declared and hereby does
declare all sums secured [by the deed of trust] immediately due and payable
and has elected and does hereby elect to cause the trust property to be sold
to satisfy the obligations secured thereby." Later that year, Countrywide's
trustee recorded a notice of rescission, which stated, among other things,
that the notice of default was being rescinded. After the notice of rescission
was recorded, ownership of Gotera's loan was assigned to respondent U.S.
Bank, which remains the loan's owner. The loan is serviced by respondent
SUPREME COURT
OF
NEVADA
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Nationstar Mortgage (U.S. Bank and Nationstar are collectively referred to
as "the bank").
Around the time that Gotera defaulted on her mortgage
payments, she also defaulted on her homeowners association (HOA) dues.
From 2008 to 2013, the HOA sent Gotera and others various foreclosure
notices. In 2011, Countrywides agent tendered the superpriority portion of
the HOA's lien to the HOA's agent, thereby curing the superpriority default.
See generally Bank of Am., N.A. v. SFR Inv& Pool 1, LLC, 134 Nev. 604,
605, 612-13, 427 P.3d 113, 116, 121 (2018) (holding that tendering the
superpriority portion of an HOA's lien cures the default as to that portion
of the HOA's lien by operation of law and that an ensuing HOA foreclosure
sale does not extinguish a first deed of trust). When the HOA's remaining
balance was not paid, the HOA held a foreclosure sale in 2014. At the sale,
appellant SFR Investments placed the winning bid in the amount of
$59,000.
Following the sale, the HOA's agent filed the underlying
interpleader action, seeking direction from the district court as to how the
foreclosure proceeds should be distributed. SFR and the bank filed answers
and asserted claims against each other for quiet title, in essence disputing
whether SFR owned the property free of the bank's deed of trust. The
district court held a bench trial in 2020, at which evidence was introduced
showing that Countrywide had made a superpriority tender.
At the close of the bank's case in chief, SFR filed a motion for
judgment on partial pleadings under NRCP 52(c). In particular, SFR
argued that it was entitled as a matter of law to a judgment that the bank's
deed of trust no longer encumbered the property based on NRS 106.240.
SFR argued that the 2008 notice of default had accelerated the loan balance
4
and made it "wholly due" for purposes of triggering NRS 106.240s 10-year
time frame. It further argued that because neither the bank nor its
predecessor took an affirmative step to decelerate the loan, NRS 106.240
dictated that the deed of trust securing that loan was "conclusively
presumed [to be] discharge& in 2018, i.e., 10 years after the notice of default
was recorded.
The district court denied SFR's NRCP 52(c) motion and
ultimately granted judgment for the bank, reasoning that the superpriority
tender preserved the deed of trust and that SFR owned the property subject
to the deed of trust. In so doing, the district court rejected SFR's arguments
regarding NRS 106.240 on alternative grounds. First, the district court
reasoned that NRS 106.240s 10-year time frame was tolled by virtue of the
bank asserting its claim for quiet title. Second, the district court reasoned
that the statute does not apply in cases like this one—outside the
borrower/lender context—because SFR wa.s not personally liable for paying
the loan that the bank's deed of trust secured.
SFR appealed, taking issue with both grounds upon which the
district court denied its motion based on NRS 106.240. In response, the
bank argued that this court could affirm on a different ground, namely that
consistent with Glass, the notice of rescission effectively reset NRS
106.240s 10-year time period. SFR replied that Glass was not only a
nonbinding unpublished decision, see NRAP 36(c)(2)-(3), but was also
wrongly decided. Finding SFR's latter argument unpersuasive, we affirmed
the district court's judgment consistent with Glass and did not address
either of the district court's two grounds.3 See SFR Invs. Pool I, LLC v. U.S.
3Based on our resolution of this rehearing petition, we need not
address those grounds here, either.
5
Bank, N.A., No. 81293, 2021 WL 4238769 (Nev. Sept. 16, 2021) (Order of
Affirmance). This petition for rehearing followed.
DISCUSSION
This court will consider a petition for rehearing "[w]hen the
court has overlooked or misapprehended a material fact in the record or a
material question of law in the case." NRAP 40(c)(2)(A). Alternatively, this
court will consider a rehearing petition "[w]hen the court has overlooked,
misapplied or failed to consider a statute, procedural rule, regulation or
decision directly controlling a dispositive issue in the case." NRAP
40(c)(2)(B).
SFR makes two arguments that this court misapprehended
material facts in the record, one of which primarily focuses on language in
the notice of default, the other of which primarily focuses on language in
the notice of rescission. As explained below, we are not persuaded by either
of SFR's arguments.
SFR's first argument is based on the notice of default's
statement that Countrywide "has declared and hereby does declare all sums
secured [by the deed of trust] immediately due and payable and has elected
and does hereby elect to cause the trust property to be sold to satisfy the
obligations secured thereby." (Emphasis added.) SFR contends that the
"has declared" phrase means that Countrywide accelerated the loan before
it recorded the notice of default, meaning that rescinding the notice of
default did not decelerate the loan. We disagree. Assuming Countrywide
was legally permitted to accelerate the loan before it recorded the notice of
default,4 we conclude that the ensuing language "and hereby does declare"
4SFR observes that NRS 107.080(3) permits a bank to accelerate the
loan after the notice of default is recorded. Because the statute does not
6
served to redeclare Countrywides acceleration of the loan. See Streck v. Bd.
of Educ. of the E. Greenbush Cent. Sch. Dist., 408 F. App'x 411, 414 (2d Cir.
2010) (holding that the "Writerpretation of a legal document is [an issue] of
law"); Sanders v. Dias, 947 A.2d 1026, 1031 (Conn. App. Ct. 2008) ("Intent
as expressed in deeds and other recorded documents is a matter of law."
(emphasis added) (internal quotation marks omitted)). Thus, we reject
SFR's argument that some prior unidentified acceleration remained intact
after the bank rescinded the notice of default.
SFR's second argument is based on the first sentence in the
notice of rescission. In a lengthy sentence, the notice of recission provided
that
[Countrywide] does hereby rescind, cancel and
withdraw the Notice of Default and Election to Sell
hereinafter described, provided, however, that
this rescission shall not be construed as waiving,
curing, extending to, or affecting any default,
whether past present or future, . . or as impairing
any right or remedy thereunder, and it shall be
deemed to be only an election zvithout
prejudice not to cause a sale to be made
pursuant to such [Notice of Default] , and it
shall not in any way alter or change any of the
rights, remedies or privileges secured to the
Beneficiary and/or Trustee under such Deed of
Trust, nor modify, nor alter in any respect any of
the terms, covenants, conditions or obligations
contained therein.
expressly prohibit a bank from accelerating the loan before the notice of
default is recorded, SFR contends that Countrywide was legally permitted
to do so here. In light of our disposition, we need not address this
contention.
SUPREME COURT
OF
NEVADA
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(Emphasis added.) SFR correctly observes that this sentence is
substantively identical to the sentence in the notice of rescission at issue in
Glass. SFR also correctly observes that the Glass decision quoted only the
introductory, non-emphasized portion of this sentence. See Glass, 2020 WL
3604042 at *1 ("SPS's rescission clearly states that it 'does hereby rescind,
cancel and withdraw the Notice of Default and Election to Sell.). From
there, SFR contends that when the emphasized language is taken into
consideration, the notice of rescission states that the only thing being
rescinded is the election to sell the property at foreclosure, not the
acceleration of the loan. Accordingly, SFR contends that we overlooked or
misapprehended the effect of the emphasized language.
We are not persuaded by SFR's argument, as we did not
overlook or misapprehend the effect of this language.5 We concluded in this
case that the relied-upon language did not have the effect SFR proffers. The
statement, "this rescission . . . shall be deemed to be only an election
without prejudice not to cause a sale to be made pursuant to such [notice of
default]" does not change the fact that the bank rescinded the notice of
default—the document that accelerated the loan. Nor is it self-evident from
any of the remaining language that Countrywide was trying to rescind the
document that accelerated the loan while also keeping the loan accelerated.
5This is not to say that SFR's argument is wholly meritless, as we
recognize that SFR has provided for comparison an example of a notice of
rescission from an unrelated matter that expressly states the loan's
acceleration is being rescinded, and we also recognize that Nevada's federal
district court has agreed with SFR. See Bank of Am., N.A. v. Madeira
Canyon Homeowners Asen, 423 F. Supp. 3d 1029, 1033 (D. Nev. 2019), rev'd
and remanded sub nom. Bank of Am., NA v. SFR Invs. Pool 1, LLC, 849 F.
App'x 211 (9th Cir. 2021) (reversing based on Glass). Nonetheless, we
conclude that rehearing is unwarranted.
8
Such an intent would make Gotera (or anyone else obligated under the loan)
perpetually liable for the full loan balance even without the bank recording
a subsequent notice of default. This would in essence eliminate NRS
107.080(3)s 35-day right to "make good of the deficiency in performance or
payment" following the recordation of a notice of default, because under
SFR's view, the entire loan balance would continually be due. We decline
to adopt such a reading of the notice of rescission in this case. Cf. 17A Am.
Jur. 2d Contracts 335 (2021) ("Courts are obligated to construe contracts
that are potentially in conflict with a statute, and thus void as against
public policy, where reasonably possible, to harmonize them with the
statute.").6
In sum, we did not overlook or misapprehend any material facts
in the record. NRAP 40(c)(2)(A). We therefore deny SFR's petition for
rehearing.
Hardesty
We concur:
J.
Stiglich o
6We recognize that a notice of rescission is not necessarily a contract.
Nonetheless, we see no reason why principles of contract interpretation
should not apply to the interpretation of publicly recorded documents.
9