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UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

COLLEGIUM FUND, LLC, SERIES 5, a Nevada limited liability company,

Plaintiff, vs. WELLS FARGO BANK, N.A.; SHAUN DONOVAN, SECRETARY OF THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; ADELE KADANS; DOROTHY L. KEMP; DONALD R. KEMP; RAFAEL GIRALDO; LEONA MARTIN; and DOES I through X inclusive,

Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No.: 2:13-cv-01550-GMN-VCF

ORDER

Pending before the Court is the Motion for Injunction Pending Appeal (ECF No. 43)

filed by Plaintiff Collegium Fund, LLC, Series 5 (“Plaintiff”). Defendant Housing and Urban

Development filed a Response. (ECF No. 44.) Plaintiff has not yet filed a Reply, although the

deadline by which to do so has not yet passed.

I. BACKGROUND

This case arises from the foreclosure sale based on a homeowners association lien

recorded against real property located at 324 Wild Plum Ln., Las Vegas, Nevada 89107.

(Notice of Removal Ex. A (“Compl.”) ¶ 1, 9, ECF No. 1-2.) Plaintiff initially filed an action in

state court alleging two causes of action: (1) Quiet Title as to All Defendants; (2) Declaratory

Relief; (3) Unjust Enrichment; and (4) Injunctive Relief . (Id. ¶¶ 29-71.) The state court

granted Plaintiff’s request for a Temporary Restraining Order and set the matter for a hearing

on the Motion for Preliminary Injunction to be held on August 28, 2013. (Notice of Removal

Collegium Fund, LLC v. Wells Fargo Bank, NA et al Doc. 45

Dockets.Justia.com

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Ex. A at 16-19, ECF No. 1-2.) However, prior to that date, on August 27, 2013, Defendant

Housing and Urban Development (“HUD”) removed the case to this Court. (Notice of

Removal, ECF No. 1.)

After removal, the Court extended the temporary restraining order and ordered briefing

on Plaintiff’s Motion for Preliminary Injunction. (ECF No. 6.) Based on the briefing, the Court

denied Plaintiff’s Motion. (ECF No. 14.) Subsequently, Plaintiff filed a timely Notice of

Appeal as to the Court’s denial of the Motion for Preliminary Injunction. (ECF No. 19.)

More recently, Defendant noticed a foreclosure sale of the subject property to take place on

December 19. (ECF No. 43.) In response, Plaintiff filed the instant Motion for Injunction

Pending Appeal to stay the foreclosure sale until after the Ninth Circuit decides the appeal.

(ECF No. 43.)

II. JURISDICTION

Although a notice of appeal generally acts to deprive the district court of jurisdiction

over the subject of the appeal, Rule 62(c) of the Federal Rules of Civil Procedure recognizes an

exception which allows the district court to retain jurisdiction to “suspend, modify, restore, or

grant an injunction during the pendency of the appeal . . ..” Mayweathers v. Newland, 258 F.3d

930, 935 (9th Cir. 2001) (citing Fed. R. Civ. P. 62(c)); see Fed. R. Civ. P. 62(c) (“While an

appeal is pending from an interlocutory order or final judgment that grants, dissolves, or denies

an injunction, the court may suspend, modify, restore, or grant an injunction.). Thus, under

Rule 62(c), “[t]he district court retains jurisdiction during the pendency of an appeal to act to

preserve the status quo.” Mayweathers, 258 F.3d at 935 (quotation marks omitted). However,

this rule does not permit a district court to “materially alter the status of the case on appeal.” Id.

Here, HUD has noticed a foreclosure sale that will be held on December 19, 2013. (Mot.

2:24–27, ECF No. 43.) In response, Plaintiff now requests that the Court “stay the foreclosure

during this action and pending appeal.” (Id. at 2:27–28.) In opposition, Defendants first assert

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that the Court lacks jurisdiction to grant the relief that Plaintiff requests. Defendants are

partially correct. True enough, the Court lacks jurisdiction to grant an injunction to maintain

the status quo during the entire pendency of this action. Plaintiff previously requested this

relief and the Court denied that motion. Thus, Plaintiff’s appeal of the Court’s denial of

Plaintiff’s Motion for Preliminary Injunction deprives the Court of jurisdiction to reconsider

that order. However, under Rule 62(c), the Court retains jurisdiction to maintain the status quo

during the pendency of an appeal. Enjoining the December 19, 2013 foreclosure sale would

certainly maintain the status quo until the Ninth Circuit determines whether this Court erred in

denying Plaintiff’s motion for preliminary injunction.

III. RULE 62(C) INJUNCTION

Granting the requested injunction is “an exercise of judicial discretion that is dependent

upon the circumstances of the particular case.” Lair v. Bullock, 697 F.3d 1200, 1203 (9th Cir.

2012) (internal quotation marks omitted). A court may issue an injunction or stay if the party

requesting the relief establishes each of four prongs:

(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.

Id. (quoting Nken v. Holder, 556 U.S. 418, 433-34 (2009)).

A. Strong Showing that Success is Likely on the Merits

The Ninth Circuit has held that the party seeking relief is not required “to show that it is

more likely than not that they will win on the merits.” Lair, 697 F.3d at 1204. Rather, the

petitioner need only show “that there is a substantial case for relief on the merits.” Id. The

Ninth Circuit has further recognized that one interchangeable formulation of this standard is

whether there are “serious legal questions raised.” Id. “Serious questions are substantial,

difficult and doubtful, as to make them a fair ground for litigation and thus for more

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deliberative investigation.” Republic of the Phil. v. Marcos, 862 F.2d 1355, 1362 (9th Cir.

1988).

In this case, given the developing split on the interpretation of section 116.3116, the

Court concludes that Plaintiff has carried this burden. Compare SFR Investments Pool 1, LLC v.

Wells Fargo Bank, N.A., No. 2:13-cv-01153-APG-PAL (D. Nev. July 25, 2013) (concluding

that the HOA had established a likelihood of succeeding on the merits of its claim that

foreclosure of the super priority portion of the HOA lien extinguished a first recorded Deed of

Trust) (attached as Exhibit 1), and First 100, LLC v. Burns, No. A677693 (8th Judicial D. Ct.

Clark Cnty., Nev. May 30, 2013) (concluding that, pursuant to Chapter 116 of the Nevada

Revised Statutes, the non-judicial foreclosure of an HOA lien extinguishes prior recorded

security interests) (attached as Exhibit 2), with Bayview Loan Servicing, LLC v. Alessi &

Koenig, LLC, No. 2:13-cv-00164-RCJ-NJK, 2013 WL 2460452 (D. Nev. June 6, 2013)

(granting summary judgment in favor of lender’s assignee and holding that the foreclosure of

an HOA lien did not extinguish the first mortgage) (attached as Exhibit 3). See also

CitiMortgage, Inc. v. Country Gardens Owners’ Ass’n, 2:13-cv-02039-GMN-VCF, 2013 WL

6409951, at *3 (D. Nev. Dec. 5, 2013). Accordingly, this factor favors granting the requested

relief because Plaintiff established a substantial case for relief on the merits by showing the

existence of serious legal questions.

B. Irreparable Injury to the Plaintiff

The second prong of the Rule 62(c) analysis requires the petitioner “to show . . . that

there is a probability of irreparable injury.” Lair, 697 F.3d at 1214; see also Leiva-Perez v.

Holder, 640 F.3d 962, 968 (9th Cir. 2011) (recognizing that a petitioner’s “burden with regard

to irreparable harm is higher that it is on the likelihood of success prong, as [it] must show that

an irreparable injury is the more probable or likely outcome”).

Here, Plaintiff asserts that this prong is satisfied by virtue of the fact that this case

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involves real property. “It is well-established that the loss of an interest in real property

constitutes an irreparable injury.” Park Vill. Apartment Tenants Ass’n v. Mortimer Howard

Trust, 636 F.3d 1150, 1159 (9th Cir. 2011). However, in Park Village, the irreparable harm

resulted from the probable eviction of the residents absent the requested injunction. Id. (“[T]he

individual Plaintiffs were likely to suffer irreparable harm absent preliminary relief because

they faced eviction from their rental units.”). Plaintiff has not provided the Court with similarly

compelling facts. Plaintiff’s motion lacks any allegation that a current resident of the subject

property will be evicted if the Court were to deny the requested injunction and allow the

foreclosure sale to proceed. (See generally Mot. 4:18–5:12, ECF No. 43.)

Furthermore, Plaintiff has failed to persuade the Court that its potential injuries could

not be compensable through money damages. See Herb Reed Enters., LLC v. Fla. Entm’t

Mgmt., Inc., 12-16868, 2013 WL 6224288, at *8 (9th Cir. Dec. 2, 2013) (finding an abuse of

discretion where the district court’s finding of irreparable injury was “grounded in platitudes

rather than evidence, and relate[d] neither to whether irreparable injury [wa]s likely in the

absence of an injunction nor to whether legal remedies, such as money damages, [we]re

inadequate” (internal quotation marks and citation omitted)). Plaintiff merely asserts that it will

be “denied the ability to protect is [sic] property rights” and that “after HUD’s foreclosure sale

there may be another person and/or entity claiming title to the property.” (Mot. 5:5–8, ECF No.

43.) Plaintiff also acknowledges that it could incur additional litigation costs as a result of the

foreclosure sale. (Id. at 5:7–9.) Each of these potential sources of harm is compensable with

legal remedies and Plaintiff’s motion lacks any evidence to prove otherwise.

Additionally, Plaintiff previously recorded a lis pendens pursuant to section 14.010 of

the Nevada Revised Statutes. Section 14.010(3) expressly provides that “[f]rom the time of

recording . . . the pendency of the action is constructive notice to a purchaser or encumbrancer

of the property affected thereby.” By virtue of the lis pendens, any purchaser at the foreclosure

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sale will be deemed to have notice of this pending litigation.

Finally, Plaintiff argues that the Court should issue the requested injunction because

“Plaintiff will suffer substantial harm if the sale is allowed to proceed . . ..” (Id. at 5:11–12.)

However, “substantial harm” is not necessarily irreparable harm. The Court finds that Plaintiff

has failed to carry its burden of establishing that irreparable harm is probable.

C. Substantial Injury to Other Parties Interested in the Proceeding & Public Interest

Having determined that Plaintiff failed to establish the second prong, the Court need not

address the remaining two prongs of the Rule 62(c) analysis.

IV. CONCLUSION

IT I S HEREBY ORDERED that the Motion for Injunction Pending Appeal filed by

Plaintiff Collegium Fund, LLC is DENIED .

DATED this 17th day of December, 2013.

___________________________________ Gloria M. Navarro United States District Judge

Exhibit 1

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UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

SFR INVESTMENTS POOL 1, LLC, a Case No. 2:13-cv-01153-APG-PAL 5 Nevada limited liability company,

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Plaintiff,

vs.

WELLS FARGO BANK, N .A., a national association; JOSEPH A. HOLMES, an individual; SONJA J. PALMER, an individual; and DOES I through X; and ROE CORPORATIONS I through X, inclusive,

Defendants.

ORDER GRANTING PRELIMINARY INJUNCTION

Plaintiff's motion for preliminary injunction was heard on July 23, 2013 at 2:00 p.m.

Diana S. Cline, Esq. and Jacqueline A. Gilbert of Howard Kim & Associates appeared on

behalf of Plaintiff SFR Investments Pool 1, LLC ("SFR"). Chelsea A. Crowton, Esq. of Wright

Finlay & Zak LLP appeared on behalf of Defendant Wells Fargo Baok, N.A. ("Wells Fargo").

The court has considered the motioo, the pleadings and papers on file herein, and the argumeots

of counsel.

The court hereby finds that SFR has met its burden for injunctive relief. Plaintiff has a

substantial likelihood of success on the merits and will suffer irreparable harm if Wells Fargo

continues with the non-judicial foreclosure proceedings before the conclusion of this litigation.

Before Wells Fargo filed its notice of removal, Plaintiff filed an application for

temporary restraining order and motion for preliminary injunction, seeking to enjoin Defendant

Wells Fargo, its successors, assigns and agents from continuing foreclosure proceedings, selling,

transferring, or otherwise conveying the real property commonly koown as 2650 Upland Bluff

Drive, Las Vegas, NV 89142 Parcel No. 161-11-112-032 (the "Property"). On July 10, 2013,

- 1 -

1 this Court issued a temporary restraining order enjoining the trustee's sale scheduled for Friday,

2 July 12, 2013 and required Plaintiff to post a $5,000 bond.

3 Plaintiff acquired title to the Property through a quit claim deed dated March 6, 2013

4 from Sunrise Highlands Community Association (the "Association"). According to a

5 foreclosure deed recorded on February 14,2013, the Association acquired title to the Property

6 on June 27, 2012 at a publicly-held foreclosure auction pursuant to tlle powers conferred by the

7 Nevada Revised Statutes 116 et seq. and a Notice of Delinquent Assessment (Lien), recorded on

8 November 24,2010.

9 Defendants Joseph A. Holmes and Sonja J. Palmer obtained title to the Property in

10 August of 2007 through a Grant, Bargain, Sale Deed. On August 10, 2007, Wells Fargo

11 recorded a deed of trust against the Property to secure a loan to Holmes and Palmer ("Deed of

12 Trust"). A Notice of Default and Election to Sell pursuant to the terms of Deed of Trust was

13 recorded on December 10, 2012. A Notice of Sale pursuant to the terms of the Deed of Trust

14 was recorded on June 11, 2013.

15 Plaintiff argues that Wells Fargo's foreclosure of its Deed of Trust is improper because

16 the July 27, 2013 foreclosure of the Association's lien containing super priority amounts

17 extinguished the Deed of Trust. Wells Fargo argues that NRS 116.3116(2) establishes a

18 "payment priority" that requires payment to the Association if a first security interest forecloses,

19 but does not give the Association tlle ability to extinguish a first security interest through

20 foreclosure of an Association's lien.

21 The court finds that NRS 116.3116 is clear, not ambiguous; therefore, the court need not

22 look to the legislative history to interpret the statute.! Under NRS 116.3116(1), the Association

23 has a lien on the Property for amounts including delinquent assessments. Pursuant to NRS

24 116.3116(4), the recording of the Association's declaration of covenants, conditions and

25

26 1 Even if the court were to consider legislative history and other sources, the result would be the same. The court has considered the May 30, 2013 order issued by the Honorable Judge Jerome

27 Tao in First 100, LLC v. Burns, et ai, (Eighth Judicial District Court Case No. A-13-677693-C), which contains a detailed analysis of NRS 116.3116. The Court fmds Judge Tao's analysis in

28 that order persuasive.

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restrictions on August 1, 2006 constituted perfection and record notice of the Association's lien.

NRS 116.3116(2) provides that the entire Association Lien

is prior to all other liens and encumbrances of 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 subj ect 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 fust 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; and (c) Liens for real estate taxes and other governmental assessments or charges against the unit or cooperative.

NRS 116.3116(2) further provides that a portion of the Association Lien has priority over

a fIrst security interest in the Property:

[the Association Lien] is also prior to all security interests described in paragraph (b) to the extent of any charges incurred by the association on a unit pursuant to NRS 116.310312 and to the extent of the assessments for cornman expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115 which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien[.]

The Association may foreclose on its lien, including the portion of its lien that has

priority over a fIrst security interest, through the procedures outlined in NRS 116.31162 through

NRS 116.31168.

In this case, the Deed of Trust held by Wells Fargo is inferior to any super priority

portion of the Association's lien. Therefore, the proper foreclosure of the Association's lien

containing super priority amounts would have extinguished the Deed of Trust. Accordingly,

Plaintiff has demonstrated a likelihood of success on the merits.

It is up to the Nevada Legislature, not this court, to decide whether the statutory scheme

that allows a homeowners association lien to have priority over a fust security interest is sound

public policy. This court's obligation is to enforce the law as written, absent some statutory or

constitutional infumity.

IT IS HEREBY ORDERED that Defendant Wells Fargo Bank, N.A. and its agents are

restrained and enjoined from continuing with foreclosure proceedings regarding (and from

selling, transferring, or otherwise conveying) the real property commonly known as 2650

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Upland Bluff Drive, Las Vegas, NY 89142 Parcel No. 161-11-112-032 (the "Property") until

the conclusion of this litigation or further order of this court.

IT IS FURTHER ORDERED that the $5,000.00 bond posted by Plaintiff on July 11,

2013 as security for the temporary restraining order issued by this court on July 10, 2013 shall

remain in place as security for this preliminary injunction. Plaintiff also shall post an additional

security bond in the amount of $500.00 per month for each month that this injunction remains in

place. The parties may stipulate to have the bond amounts deposited into an interest-bearing

escrow or similar account, rather than into the court.

IT IS FURTHER ORDERED that Plaintiff shall maintain the Property including, but not

limited to, paying all homeowners association assessments and taxes, and carrying hazard

insurance in an appropriate amount. Plaintiff shall disclose to Wells Fargo the amount and

coverage of that insurance. If, during the litigation, Wells Fargo believes the Property is not

being properly maintained or protected, or that an additional bond amount is needed, it may seek

appropriate relief from this court.

Dated this 25th day of July, 2013 at 8:15 a.m.

UNITED STATES DISTRICT JUDGE

-4-

Exhibit 2

5'

6, 7

ORDD

J 101 filRST 100, LLC,

II

1 1'.

13 RONALD BURNS, et al.,

14

F-Ieclronlcally Flleej 05/31/201308:00:14 AM

CLERK OF THE COURT

DISTRICT COURT

CLARK COUNTY, NEVAJ)A

Plaintiff, CASE NO.: A677693 DEPARTMENT NO. XX

ORJ)RR J)RNYING DEFENDANT'S MOTION IO DISMISS .

Defendants. 1511-__ ｾｾｾ＠ _____ -----.J

This ｬＱＱ｡ｴｴｾｊＧ＠ having COllle on fur hearing 011 the 8th day of May, 20 [3; Luis A.

17 AYOll, Esq., and Margaret E. Schmidt, Esq., appearing for and on behalf of Plaintiff;

18 Chelsea A. Cl'Owton, Esq., appearing tor and on behalf ofDelelldant, U.s. Bank; Kml

191 L. Nielson, Esq., appearing for and Oil behalf of DeHmdanl, Ronald· Bums; Gregory L.

2 I Wilde, Ssq., appearing for and on behall' of De1'endant, National Default Servicing

211 Corporntion; and the Com! having hearing arguments of counsel, and being full),

ndvised in the premises, finds:

23 (I) This mllttel' r.omes bef'on: the Court 011 a Motion by Defendant U.S. J3lltlk

24 NA to dismiss the Compluint purSlIunl to Rule 12(b)(5) of the Nevadn Rules of Civil

25 Procedure ("NRCI"').

26 (2) This dispute arises lrOUl roreclosure proceedings conducted ngainst n

27 rosi<iolltinl propel'ty located at 3055 Key LUl'go Drive, Unit It 1 01, Lns Vegas, Nevmla

2 89120, identi lied by Al'N 162·25·614·153 ("the ｓｬｉｾｩ･｣ｴ＠ Properly"). The Subject

ｊｴＺｬｉｖｾｈＺﾷｉ＠ .... tl Dlsrnlt:)'JUOOIl nRP,\iI.U1F.:if ｾｸ＠

Propcl'ty is located within a common·interest cOl1l1llunity govel'l1ed by a homeowners'

2 associliHon as dcfined in NRS Chaptcr 116, known as the Canyon Willows Owncrs

3 Association (I-lOA), The prior owners of the property (who nre not pm'lics to this

" action) litilcd to pay all monthly assessments duc under the operating documents of the

51 common-interest cOllllllllnity, In response, the !-lOA lIsserted n lien lIgail1st the Suhject

1 Property Gild initiated !'oreclosure proceedings pursuant to NRS 116.3116 et seq, which

781 culminated ill a foreclosure sale conducted on februury 2, 2013,

(3) The Plaintiff is First 100 LLC, a Nevmla limited·liability corpomtiotl,

:l which alleges that it acquired the ｓｵｾｩ･｣ｴ＠ Property at the Febl'uary 2., 2.013 public

10 auctioll, According to the ullegaliolls ol'the Complaint, the PlainUrf properly recorded

11 a Deed on Pcbnmry 4, 2013 refleoting its purclwse of the Subject Property, However,

12J two days later, on Fcbrunry 6, 20 [3, the Subject Property was re-sold hy way of

13! !orcelostll'c ami Trustee's Sale initiated by I)cfcndant National Delimit Servicing

14 C()l'Poratioll, who asserted that it was the nmncd tl'ustee under Deed ofTrtlst prcviously

15, recordcd against the Subject PI'opert)' 011 October 30, 2006, as Instrument No,

161

I 171 1&

191

200610300002548 (and referrcd to in the pleadings liS the "BNC Mortgage Deed of

Trust"), Defendant Robert I3l11'ns purchased the Subject Property at the February 6,

2013 Trustee's Sale,

('I) The Plainliff's Complaint asserts three causes of action: (first) Wronglhl

20 Foreclosure against Dcl'cndnlll National Default Servicing CorjJoratioll; (Second)

21 Deelm'atol'Y Reliof/Quiet Titlc against all Defendants; and (Third) Injunctive Rclief

22 aguinst Delcndant n UI'l1S,

23 (5) As !l'omed by the partics' bricl1ng and oral arguments, Ihe issue betorc the

2 COIl!'t is II stl'oightfol'wnrd question oflaw, The Plointiff contends that the Febl'Uury 2

25 foreclosurc sale conducted pursuant to NRS 116,3116 ct seq, and based \Ipon a Hen

261

asserted by 1I homeowner's association tor unpaid aSsessmonts outomatically

271 extinguished, b}' operution of Inw, IIny and all prior encumbrances upon the SubJcct

2 Property, Thus, lIccording to the Plainlilf, the subsequent Trustee's Sale conducted on

ＮＱｴＺｬｴｏＩＧｊｗｉｾ｜ＨＩ＠ 2 VIS1l\1Cl' ,U/lOH IlHP.\R1Mf.N'(XX

February 6 was unlawful because the October 30,2006 Deed of Trust ngnil1st the

2. Subjeetl'roptll'ty had been extinguished in its entirety by the FcbI'lUl\'Y 2 foreclosure

31 sale. Therefore, lhe Pinintitfllllcgcs thnt it is the rightful and legal ownel' of the Subject

4 Property via its purchase or the Subject Pl'operty 011 Pebruary 2 ti'eo and clear of un

5 prior encllmbnmccs,

l 81

91 ,

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IS

161

171

:J 2d

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2S

2'

21 28'

ｊｾＺｉＱＨＩＺ｜ｮＺﾷｲＮ｜ｯ＠

.mmUCr JUOOlj PlJMRn.mur xx

(6) In considering a Molion to Dismiss pursuant to NRCI' 12(b)(5), (he Court

musl accept ulllhctuui u/legatiolls ofthe pieadings to be true and view those allegations

both libcmlly and in the lightll10st ravornble to the nOll-moving party_ However, the

Court need nOI accept the parties' aSSCl'tlrlllS of law as true, The Court's ami lysis is

limited to the I1lct\ml ,11legntiolls contained within the Ibul' corners ofthe Complaint und

all inlcrcncc$ reasonably arising thercn'olll, A claim can only be dismissed if it is clem'

beyond uny I'easonable doubl thaI the plainti ff cannot prove lin)' set of facts at trinl that

would cntitle it to I'clief, FlI1'thel'lllorc, n complaint can be dismissed even if all of the

elemenls of u calise oj' actioll hove been technically pled so long us the Court, relying

on "judicial experience and common scnse," I1nds thnt the allegations ofthe complaint

nre "conclusoI'Y" 01' "impltillsible." Ashcroft-\', Iqbal, 129 S,C!_ 1937 (2009)',

(7) In this case, the parties do not appeal' to dispute that the febmary 2;20 13

toreciosul'C sale WlIS properly condllctcd ill accordance with all of the legal

requirements of'NRS Chaptcl' 116, The pm'ties uiso <in not appeal-to dispute that the

13NC Mortgage Deed ofTl'llst wus a perfected legal encumbrance upon the ｓｵｾｩ･｣ｬ＠

Property proJlerly recorded on Octobcl' 30, 2006, The ーｦｬｬＧｴｩ･ｾ＠ also do not IIppcar to

dispute thnttlle lien nsscrtcd against the Subject Properly by the BOA W!lS propel' and

legal under (he provisions ofNRS Chapter 116, The parties also do lIot ai1peal' to

dispute thut. il'the Plnilltif('s inlcrprC(ation of tile legal ｣ｯｮｾ･ｱｬｊ｣ｬｉｃｃｓ＠ ofNRS Chapter

1 I 6 ｩｾ＠ eOl'l'ect, the I'lainlilT has properly pled the clements supporting its cnuses of

I A,hel"/II lI'a, decided plII'Mlnnl \0 FIleI' 12(b)(6), ｈＨＩ｜ｾｯＢ｣ｲＬ＠ wboro 11," Nc"udu RIlles ofCt"lIl'fIlcedllrc paraliel lho Pedel'lll Rilles "I'Civil ｐｲｯ｣･､ｵｲｾＬ＠ mlings of foeloml courl. inlerpreting und applying Ihe lcelcrnl rules arc persuasive iUllhurily for Ｇｨｩｾ＠ CQlIr1 in npJllylng the NeVAda Rules, E.g., Rx{!culll'cJ A'/mUlJ.!QmIJJlII..I(/. \', "/1C(JJ' 711"/ /1/.\'" liS Nev_ «6, 5_1 (2002), NRCI' 12(b)(5) 15 idenlical (0 mcr 12(b)(6).

J

ＭＭＭＭＭＭＭＭＭｾＭＭＭＭＭＭＭＭＭＭＭＭ -------------.-.-- ＭＭＭＭＮＭＭＮＭＮＭＭＭＭＭＭＭＭＭｾ＠

1 nction.

2 (8) Thcre!()1'{::, the question b()fore the COIII't i$ a strnighllorward question of

31 statutory interpretation: whether a tbrcclosure sale properly initiated Hnd conducted

4 pursuant to NRS Chuptcl' f 16 automatically extinguishes atl priot· encumbt'llllccs on the

5'

61

property such that a bona I1de purchaset' at the foreclosure sale acquires the properly

Ike and clear or atl prim' cllclIllllmmec3.

7 (9) In interpreting the scope and meaning of a statute, the Court looks first to

8, the words urthe stalute. The words 01'11 statute nrc assigned their ordinary meaning

9 unless it is clear frolll the nICe or the statute that the Legislature intended otherwisc.

101 When "the languuge of a statute is plain and unmistakablc, there is no room for

II construction, und the courls arc not permitted 10 seurch for ils meaning beyond the

12 shltute ilscl t:" Estat(1 of Sill it It v. Maholley's Si/wll' Nugget, 127 Nev. Adv. Op. 76

13 (November 23, lOll). lrlhe Legislaturc has independently defined any word or IJhrnse

14 eontained within 1\ statute, tho Courtlllust apply the dctinition cl'eated by the :'.

15 Lcgislutul'c. ｉｉｾ＠ nnd only if; the Comt determines thut the words of the statute nrc

ambiguous when given their (ll'dinar)' nnd plain meaning, then reference may be made

171 to other sources such as the legislative history of the statute in order to clarity the

18- Ilmbiguity. I\n "mnbiguity" exists wherc II provisioJl is susceptible to two rC<lsonnblc

IJ

201

inLcrpre(lIl ions.

Ｚｾ＠(10) A threshold qucslion in this cnse is whether the socurity interest

23

25

ｊＧＺｒｯＺ｜ｬＧｾｔＬＧｾＱ＠1>ISTRl<.i JUOOIi ＱＧｉＡｲＧａｒｮｬｬＡｾＨ＠ ｘｾ＠

rcpresented by the 13NC ｍｏｲＨｧｾｬｧ｣＠ Deed ofTl'Ilsl is scnior orjullior to the licil asserted

by the !-lOA. NRS 116.3116 ｾｉｵｴ･ｳ＠ in part !IS follows:

2. A . lien under ｴｨｩｾ＠ section is prior to nil olher liens 1IIId

encumbrallces on a unit except ... (b) A nrst sccuril}' interest 011 the unit recorded befol'e the date on which the assessment s()ught to be enforced beeamo delinquent or, in n cooperativc, the lirst sceut'ity interest encumbering only the unit's owner's interest and pcdccted before the <lntc on which the assessment sllught to be enforced beclIllle delinquent ....

2

3

4

5

6

7

8

J 101

1;1 I]

'" The lien is also prior to all security interests described in paragruph (b) to thc cxtenl ol' ... the ass()ssmenls tor common expenses bascd on the pcriodic hudget Hdopted by the Hssociutioll pursuant to NItS 116.3115 which would have become due in the absence of accelerutioll during the 9 ll10nlhs immediately preceding institution of an !lction LO entorcc the lien, unless federal regulatkllls adopted by the Federal Home Lmlll Mortgage COJ'pOl'lltion 01' the Federal National Mor(gage Association requit·c a shorter pcriod of' priority for the lien. If federnll'cgulations adopted by the Federul HOllie Loan 1viortgnge Corporation or the Federal Natiollul MOl'tgage Association requirc a shortcl' period of priority for Ihe lien, the period durinB which the lien is prior to nil security interests desct'ibcd in paragraph (0) lllust be determined in accordance with those l'adoral regulations, exccpt that notwithstanding the provisions or the !'cderal I'cgulutioll3, Ihe period of priol'i!y for thc lien must 1I0t be less than the 6 months immedialely preceding institution of an action to cnlorcc the IiCII,

This subsection. does not ulTcct the priority of mechanics' 01'

mntcrinlmcn's licns, or the priorit)' of liens for othel' assessments made by the association.

(I I) ThllS, under NRS I 16,3116, a previously pertected first security interesl

[3 retains its scniorit)' over II subsequent licil asserted by l\ homeowners' associnlioll

14 exce/l.l to the eXtent thul the subseqltCntllssociutioll liclI is based UpOll' unpaid regular

151

periodic assessments for common expenses, In that event, notwithstnnding that the

161

association's licli was asserted subsequently ill tillie, n portion of tile hOllleowners'

17 ｵｾｳｯ｣ｩｮＨｩｯｮ＠ lien (limited to what was unpaid d\II'ing the nine months immediately

18' p)'()ce<iing the lien) is given al'lilicial priority over 11 previously pcrfccted firs! security

191

interest. The portion ol'thc !lssodalion lien equnting to what was unpaid during (hose

20 nine months is cOllllllonly said to have "super-priority" status over other prior

21 encumbrances. I f the associatioll claims that more thun nine Illonths' Itsscssments siand

22 unpaid, then Ihe UIllOUlit unpaid during the nino l11onlh8 Immediately preceding the lien

23 is cntitled to "super priority" SlUIUS ovcr other encumbrances, but any assesSlllents

24 ｬＧ･ｭＡｬｩｬＱｩｮｾ＠ unpaid tnl' 1ll000C than nino months would be subordinate to other previously

25 pcrlCCled cnclIlllbrunces.

2 (12) The parties do not appeur to dispute that the lien lIssertcd by the BOA in

27 this elise WIlS based upon regulnr periodic assessments (hut were unpaid during the nine

28

JJ:l(o.\n: 1'.\0 IJlSlRlcr lunOR I)ltMItTMP.r-.7 xx

5

1110nths immediatcly prcceding the imposition of'tlw lien, Thel'clul'c, os <) matter of

2 law, the lien ｡ｾｾ｣ｬＧｬ･､＠ by the HOA is decmed to be scnior to the security interest created

3 by the BNe Mortgage Deed OrTfUsl CI'Cfl' though the BOA lien was asserted

4 subsequently intimc, The parties do not appoar to dispute this legal <:ooclusion.

5 (13) ThllS, tllc parties IIJlpear to agree that the HOA lien W/IS senior to the

BNC lvIllI'tgugc Deed ol'Trust ut the instant in time imlllediu(cly beJbrc the property

'

was sold I'ia Ibrcciosurc sale to the PluintilTon February 2, 2013. However, whlltthe

parties vigorollsly dispute is whether the Junior security interest (thc BNC Mortgage

))"ed O/"l'mst) was extinguished by opcration unaw liS a result orthe Fclmmry 2

foreclosure sule.

II (14) N ｉｾｓ＠ 116.3 I 162 ｾｴ｡ｴ｣ｳ＠ (hnt, Il/kr n I ien is asserted by II homcowner's

12 ｮｾｳｯ｣ｩ｡ｴｩＨＩｮ＠ and certain procedures m't) Ihllowcd, the ussociution "muy loreclosc its lien

13 by sak," If the US50ciutioll chooses to proceed with It non-judicial foreclosure sale,

I

19

then NRS 116.31164 govcl'Ils how the Ihreclosure sale. is to occur. After the

lorcclosure sale is cOlllpleted, NRS IIG::!) 164 govcl'I1s how the proceeds or the sale

mllst be allocated, In particular, NRS 116.31164(3) states:

3, A Iler the sale, thc person conducting the sale shall.. .. (c) Apply the proceeds of the sale for the tbllowing purposes in the Ihllowing MeIer: (I) The reasonable expenses of snlc; (2) The rensollablc expcnses of scelll'ing possession before sale,

20 holding, Illllintainh1g, and prepllring tilu l\lll! 101' sale, including paymcnt of' ta;,:cs lllld other governmental charges, premiullls 011 hazard and Iiuhility insurUllce, and, to the extcnt provided for by the decianltiol1, ｲ｣｡ｾｯｬｬ｡｢ｬ｣＠ attorney's Ices und othl;lr legal expenses incurred by (he u$sociutioll;

21

22

(3) SutisJ'uction ol'thc IIssociution's lien; (4) Sutjsthclion in the order or jll'jot'ity or ally subordinate elaim of rccord; (Iud

23

24

25 (5) Remittance oj' UIlY excess to the unit's owner,

26 (I 5) Thus, the plain 11IIlgungc ofNRS 116.3/164 cxpressly contemplates that

? I the proceeds must lirstusc<i to pay thc c,-;penses of (he sale, taxes and othcr

ｾＦ＠ govel'llillental charges, legul CXP(;)IISCS, lind the ussocilltion's lien, IllJd thcnto satisfy

ｊＢＢｭｾｉｊＭＡＧＱｾ｜ｏ＠UlstRlGI JlJllflH {)I:I'AII.UlfiW xx

21

31

4

5

1 9

IJ II

12

13

.. '. 14

15

16

17

18

191

201

21

22

23

2

25

26

2

28

ｊｽＺｮｏｾｕＺｬｾ｜ｏ＠

O[S1"ftlcr JUOGli ｭＢＧａｒｔｾｕＺｘｉＧ＠ ｾＡ｜＠

"subordinulC c1aim[,] ol'rccol'd."

(16) lnthi5 case, the parties agree that Ihe proceeds oflhesalc IOlalcdonly

apPl'Oxinllltcly $?,OOO.OO, 11I1' less thlm WIHlI would have been required to pay off all of

the liens nnd security il1lcrCSls lhut existed againsl the Subject Property prior to the

torcclosure sale. Accordingly, the question before Ihe COllrt can be phl'llscd as follows:

when thc proceeds Ii'om u Ihreclnsurc sale conductcd pursuunt to NRS 116.31164 lire

inadeCjuate to satisfy all oflhc "U!'iOllS lienholders when distribuled as required in NRS

116.31164(3), docs the Jilillll'c to Salis!V the subordinate inlcrcsis IIlcanlhnl those . '.

subordinate inlcrcsts survi\'\) Ihe IhreciosUl'c sale to the extent Ihnt they rClIluill

unsnlistied, or inslcnd thai Ihose suhol'dinlllc intcrcsis arc ｣ｸｬｩｮｧｵｩｾｨ･､＠ by opcl'!Ilion of

law such Ihal a bonn Ii de Ihirll-purly purchaser at the foreclosure sale takes the property

li'ce lind clem' oruny ｬｬｬｬｾｵｬｩｳｬｩ･､＠ suhoJ'dimllc encumbranccs'/

(17) Thc I'lainlil'ful'ers that Ihc IlIIler cusc istrllc. Consequently, the Phlinliff

asserts Ihal becallse all subor<iil1ulC inlerctlls wcre extinguished on Fcbl'llllr), 2 when it

acquired the Subject Pn)jlGl'ly, the subsequent forc;closurc snle conducted on [lebl'll""y 6

based upon ullunpaid subordinnlc security. inlcrcsi was lInluwfill. Onlhe olhel' hand,

the !)c!endulIl avers Ihat lhe former tIlllSI be true. Consequcntly, the Defendant avers

lhal ils subordinate sccurily inlel'csl slIrvived the February 2 sale becHuse Ihe inlcrest

relllained ullsatislied Ii'()m the pmcccds or Ihat sak, uud uccordingly it possessed Ihe

Icgall'igh{ to foreclose tl)lllll (he Subjcc\ Property and Irigger a second torcclosUl'c sillc

in order to satisfy ils subordinate illlcrcsis. In cried, the Defendant <)I'gues llmtthe

Plaintirt; by plIl'cllHsing Ihe SUDjccl I)ropcr{)' 1'01' UIllll\loUlll insufHcicnt to pay offall

existing encumbrallces, only acquired the property "Sllbjcel 10" Ihose unsatisfied

｣ｮ｣ｵｬＱｬ｢ｬＧ｡ｮ｣｣ｾＬ＠

(18) The COllrt ｨｮｾ＠ reviewer/lhe entil'ety ol'NRS Chaplet' 116, and Ihere

appears 10 be no stalluory provisioll that expressl)' stutes Ihlll an unsmislied junior lien

either is, 01' is not, ｾｸｴｩｮｧｵｩｳｨ･､＠ by operation of lull' as a COllseqU()I1Ce of u foreclosure

sale conducted pmsuantlO NRS 116.31164. In their bricJii, Ihe parlies are also u/lublc

7

ｾＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＮＭＮＭＭＮＭＭＭＭＭＭＮｾＭＭＮＭＭＭＭＭＭＭ .. ---.. --.---.•.. __ ....... __ . .._ .. _ ... _._----

to idcnlil)' any particular provision ･ｸｰｬＧＨＩｾｳｬｹ＠ on point. Thereli)1'll, in Hilulyzing the ,

a\lswer to this question, thc Comt must considcr other SOtlrCCS, sllch as thc legislative

3 history of NRS 116.31164. 1111d other similar statutos contained within the NRS.

(19) NRS Chapter 116 was originally introduced in 1991 as Assembly Bill

", 51 221, with the statcd plll'IJtlSe ol"'adopt[inglthc Unitonl1 Comll1on-Interest Ownership

6' Act," or IJCLOA (I'n:lIIllhlc of Ai3 221, introduGed January 24, 1991; statement of I

71 8·

91

intl'Oduction of A 13 221: Ivlinl1tcs oJ'the Assembly COl11ll1iltec on .Iudiciury, February

20,1991). At the time, the VelOA had already heen ndopted ill sevei'll I othcl'stntes

Hnd was HildeI' cOl\sideration in HI least 3 others. (Momorandum dated March 13, 199!

(\'0111 Unilill'ln Comll1on ｉｬｬｴ･ｲ･ｾｬ＠ Ownership Act Subcommiuct·, in the legislative record

II as lin exhibit to Minut<,s ol'lhc ａｾｳ｣ｭ｢ｬｹ＠ COl11ll1illCC on Judiciary, ivlarch 20, 1991).

!2 NRS 116.3116 originlllly corresponded to Section 100 of Al3 22 t, and NRS 116.31164

13 originally corrcspo1H.led to Section 102 01' AI3 221. The "stlpor priority" lien verbiage

14) included within Section IOOofMl2211sirlcnticailO NRS ＱＱＶＮＳＱＱＶＱＱｾ＠ it exists toda)',

: ｾ＠ :::.: :::,:,:::: ［ＺＺＺｾＺＺＺＺＧＺＺＺＧ［ＺＺＺＺＬＺＺｾＺＺ＠ ＧＺＺＺＺＺＧＺ［ＺＺＺＺＺＧＺＺＺＺＺＧＺＺＧ［ＺＺＺＺＺＧｾＺＺＺＧＺＧＺＺＺＺＮＺＺ､＠171 was expanded to nine months in 2009 by Ass()l11bly Bill 204.

18' (20) NRS 116.3116 was subjected to vurious technicnl amcndlllcnts ill 1993

191

201

through AB 612 (which did not ul'l'cctthc "super priority" languuge ot issue here).

During ｬｃｾｬｩｬＱｬｯｮｹ＠ in support or tile technicnl ulJ1cll<illlcnls, one orthe drafters ol'the

21 original bill testified thal:

2

:j 25

1 26

27

28

U:UOll1C'(,\t) IIISTRlcr IIlJ!(ut

1>1!I'.\R1Mt'..W.'Ii;':

"As a genei'll! p\'())lllsilion, it mal(cs good scnse 10 follow a unifbnn lnw ns closely us ｰｯｾｳｩ｢ｬ｣Ｌ＠ utilizing the optionnl suggestions in the nnilbnll act LO ｣ｕｾｬｏｬｬｬｩｺＨＡ＠ the law us nccessary. The corresponding bcnefit -- especially im)Jo)'hmt in n Rlllnil shlLc like Nevada 0- is onr own version of a unifol'lll law with precedcnt in other 1111 i 101'111 law ｪｵｲｩｾ､ｩ｣ｬｩｯｬｬＧＮ＠ Mnintllinlng the unilonn Inw also Illukcsuvnilnhlc the I'l'ry hdplhl cxplanatory comments, some o('which cllntain illustrulivc ｣ｬＨ｡ｬｬｬｰｬ｣ｾ＠ .. nnd nil of which, like the nct ｩｴｳ｣ｬｬｾ＠ represent IIOt only very carenll drullslllUllShip, but the input ol'nll of the differellt groups involved in lhe hOllleowller association process; thal is, developers, consumers, lenders, local govcl'Ilmcnlul authorities, stutc I'cgul!lLOrs, l1lunagcl's and other

8

---_ ... -._ .... _-- .. _ ... __ .... __ .. __ ._._-_ .... _--_._ .. - ....... _.-.----_._-----------

professionals, as well us homeowners llssocilltions themselves." (Testimony of Michael Buckley. Chairman 01' the Uni 1'01'111 COllllllon-lnterest Ownership Aet Subeommiuce. beforc the Assclllbly Judiciary COl11llli!!cc Oil May 20, 1993).

3 (21) Thus, OIH! al'lhe principal drallel's (lfthc bill expressly urged thntlhc

4 Nevudu Legisllllurc udlicl'c as closely liS pnlcticnhlc to the uniform vcrsion ol'lho

5 UCIOA, and the Nevada ｌ｣ｧｩｾｬ｡ｴｬｩｲ･＠ did so by ellaeting the "supcr priority" lunguage

originally included in the UCIOA into NRS 116.3116 without any !Ul1Clldlllcnt (and

7 with virtually no debate). ConsGqucntlY,the legislative history surrounding AB 221

ｾ＠ contuins vil'lually nothing IIscilll to the Court's unulysis in the case at halHI. Howevcl',

J the ｌ｣ｧｩｳｬ｡ｴｵｲｾ＠ nppurcntly contcll1pluted that adoption of the uniform languuge wltholll

10111lllcIHhncnt w(luld cnuble Nevada courts to look to "prccedent in other uniform law

II jurisdictions" us well (IS the bnckgroul1Il nnd explanatory comments uccompunying Ihe

12 UCIOA in resolving qucstioll$ relating wthe scope llnd meaning ofNRS 116.3116.

13 (22) Indecd, thc Nevada Snpremc COtll'll'cgularly looks outside the confines

14 ofNRS ChattIer 116 and to the Unitol'l1l Act (as well as othcrsoul'c,cs) in intcrprcting

15 various ｊｬｲｯｶｩｾｩｯｮｳ＠ of NRS Chupl.;r 116. E.g., Holcomb CondolllilliuiJI f/OA v. Stell'(lI't

16 Vell/lIl'e U.c. ,129 Nc\,. l\c1v. Op. 18 (April 4, 2013) ("the tcrlll 'separate instrument' is

17 nol denned in NRS Chnplel' 116 ()I' tbe Uniform Common··lnterest Ownership Act

18 (UCIOA)"); /Je(tzel' HOllieS Holdillg Corp. l'. District COllrt, 128 Nel'. Ad\,. Op. 66

19 (Dec: 27, 2(12) (ciling u(he COlll!llcntary I\)·thc RC$/lttclllcnt (Third) of Properly,

20 section 6.1 I, which minot's section 3-102 or the Uniform Common Interest Ownership

21 Aet, upon which NRS 116.3102 is bused"); BOllldel Oaks CO/llJllul1ity As.we/alion v.

22 R&.J Andrews, 169 P.3d 1155 (2007) (unpuhlished) ("NRS Chapter 116 is Nel'llda's

23 versioll of the Unilbrl11 COI11Ill@-lntcrest Ownership Act lind largely mirrors the

241 uniform net [and cilingto] the commentary 10 [the UCIOA]").

(23) NR3 116.3116 is modeled upon Section 3-116 ofthe 1982 version of the 25 261 UCIOA, which ｉｉＧｕｾ＠ originall)' drnfted by the Nati(lIHlI Conlbrence o('ColTImissioners

27 011 Ullifhnl1 State Laws. NRS 1 16.3116 ､･ｬＧｩｮｴ･ｾ＠ !i'om Section 3·116 in expullding (he

28 period or "super priority" 10 include unpaid Ilsscssmcnts occurring during thc preceding

JI:f<O!lh:'(.\U nlSlKICr JIJ1XJI!. Hur.\kTMI\XrNX

9

9 months instcnd ofmcrcly 6 months, but ｯｴｨ｣ｲｷｩｾ｣＠ NRS 116.3116 is iclclltiCflllo

2 lJCIOA Sectioll 3-11<;.

3 (24) Ofliciul Comlllcnt I \() Scctioll 3-116 describes the purp<>sc of the sectioll

4 as lollows:

5

12

"To ＼ｭｾｵｲ｣＠ prolllpt lind efficient cnforcemcnt o"the association's lien for unpaid asscssm.mts, sHch ｬｩ｣ｮｾ＠ should ｣ｮｪＨＩｾＧ＠ stnliitory pl'iol'ily over most other liens .... A signil1cant departure n'om existing pl'II<:ticc. the 6 Il\onths' priority tor the ＼ｬｳｳｾｳｳｮｷｮｬ＠ Ikn strikes lIl1 equitable bulllllCC between the need to enforce colkction ()("unpuid lISSCSSl11cnts and the obvious necessity ot'protceting thc pdorit)' of the security interests or lenders. As u practicullllatler, mortgage lendcrs will most likely 1)<lY the 6 1110l\ths' assessmcnts demanded by the associution mther than having the ｴｬｳｾｮ､ｦｴｴｫｬＯ｜＠ foreclose on the unit. If the lender ｷｩｾｨ･ｳＬ＠ un escrow for assessments cun be required. Since this provision may connict with thc provision orsome state statutes which rorbid sOllle lending institutions n'om ll1uking loulls not sceured by lirst priority liens [state lnw should be consllltt!d]."

I 14'" (25) Thlls. the dmncrs of the UCIOA ･ｸｰｲ｣ｾｾｬｹ＠ contemplated (hnt, us n

practicnimntlcr inlllost ｣ｵｳｾｳＮ＠ the holdel' ni'the lirst security interest would seek to 15 16 protect ｩＨｾ＠ interest Ii'olll subordinutillnto u "super pI"iOl:ity" lien by simpl)' paying the

17 unpaid assessmcnts, 1-low<;l'ol', the COlllmcnt does not expressly specifY whether, if a

Icndm' chooses not to do SO and instead pc I'm its the properly 10 JlI:oceed to foreclosure,

2

the lender's (-irst security interest b thereby extinguished. Furthcnnon:, nothing elsc in

either the plain text 01' ｣ｯｭｭ･ｬｬｴｾ＠ or UC10A appear to reln!e specifically to the quostion

of whether !I loreclosure ｾｵｬ･＠ iniliutcd due to unpnid ｡ｳｳ･ｾｓｬｬｬ｣ｮｴｳ＠ extinguishes all other

Junior liens, including a lirst security interest I"Cndered junior because or the "super

23 priority" provi5ion. Quite to Ihe contrary. COllllllcnt I sugg(Osts that the drallers of the

UCIOA intended to leUY': thi$ '1l1l'stioll to state lull' ruther thlln establishing 11l1iftll'tn 24

Ilationul stlU1dnrd5. 25 2 (26) In Opposition to the Motion, the Pluintil'fnotes thllt, as it general

27 principle of Nevadu law, Ibreclosurc ()f II sliperior sceul'ity interest c:<tinguishcs all

28 juniol' interests thlll did not participlIl"c in the forccloslIn: proc\:ss. E.g .. IlrllJ17.efl v.

JJ:KU.'U:1·'\O OISTRlcr JUlXltJ DnI'AR.n.n:NT ,",x

HI

----- -------_._------------------------

,

Lall:l'el'.\' 'i'ilfe Ins. Co .. I () J Nev. 395 (19&5); Ai'icksoll COllstrllction Cn. v. Navada

2 N(i1io//allJallk,1l9 Nev. 350 (197:\). Thl: Plaintirrulso Ilotes thut the Nevada

3 Department ol'Business and Industry has issued an ndministralivc opinion, dated

4 December 12,201:'\, that inlcl'pwlS NRS Chapter 116.3116 stich thnt n foreclosure

5 based upon a "super priorily" Ikn extinguished a lirsl security inlerest Illade Junior only

6 dlle to the "super priority" stutute. The I'I1Iinlil'l'aiso cites 10 un opinion by a

7 WlIshinglllll Slatt:: uppellate court (inlCrpreting a ｾｴｬｬｴｵｴ･＠ identical to the !JCIOA) finding

thal II forcclosure ｨ｡ｾ･､＠ upon a "supet' priority" lien extinguished 0 first security interest

thalll'as givcn Ill)ticc 0 r the pending tOI'<!t:!osurc nnd yel chose not to }lUl·ticipale.

10

II

12

13

l4

15

161

171 18'

I ｾｉ＠20

1

21

2

23

24

25

26

27

SlIIllIJlel'ftill Vii/age NOli v. HOl/ghly, 27() 1'.2<1 639 (Wash.Cl.App. 2012). The Pill inti I'f

also notes Ihut some Judg.es ol'll1i$ .Iudiciul District have resolved this question in thvor

ofthc Plainlil't's argument. The COll1'l also notes thaI !It leost onc schoillrly

commentator ｨｈｾ＠ opined thlll a tllln-judicini foreclosure gule under the UCIOA

extinguishes !llIjuni!)1' liells that did nol'pHI'licipatc in the luwclosure process os

Ｂｮ｣｣･ｳｳｦｬｲｾＧ＠ parties." See, WinokUl'. "Meaner Lienor Conllllllilily Associations: The

'Super Priority' I..illnllllt! Relnted Rclbrms Under The t)CIOA," 27 Wake Forest Law

Rcview 353, ,3'/8 n.106 (1992) ("fbrccJosure cxlinguish[es] the Less-Prioritized Lien").

(27) In supporlo(' its Motion, the J)cl\:ndant cites to !Ill opinion issued by

Judge Dawson ofthe U.S. ｄｩｾｴｲｩ｣ｬ＠ COllrt, Dlakollos Holdings Ll,C v. CO/llIllJllvlde

HOllie. LO(/IIS, :W 13 WL 531092 (I). Nt'\,. FebnlHry 11,2013), rejecting the reltsoning or

the Washington court in SIIIIIIIIIJI'IIiIl. The Delcndllnt also cites lO val'io\ls unpublished,

non-preccdcntinl ｏｲ､･ｲｾ＠ ｩｓｾｬｬ･､＠ by other ＮｉｬＱ､ｧ｣ｾ＠ of this Judicial Districilhat have found

Ihm a foreclosure sale bused upon a "super priol·ity" Iicn ｜ｫＩ･ｾ＠ no! extinguish a ill'S!

security inlcl'cstnpon the property, (SUIJ .• Defendant's Motion, pages 11-14).

28

(21;1) In short, the sitnnlion before this Court appears to be as follows, l3y this

Motion, this Conl't is asked to interpret the scope lind meanillg of II statuto thut was

cnucled by the Nevada Legislature nl1l:1' virtuully no IllclIIlillgfld debute, tlmt was

modeled Oil a broad ullifhrlll nct (hilt specil1cu!ly len unllnswerc<! the question l'l1ised by

ｊＮ［ｋｕｾｉｾＺｬＧＬ｜ｉＩ＠ II 1)I!I'fN.lC't ]UIJO/1 ｬＩｴｪｲａｒｔｍｴｾｎｲ＠ .'-:X

1 this MOlion, ｜ｖｨｯｳｾ＠ legislaliw sponsor mgcd the Legishll\1l'1;: not to deviate from the

text of thc unilbrm ael so thut the courts of Ihis Slllte could rely UPOll precedent from

3 other states, nnd upon whieh th", courts of diiTercnl states, and Ihe Judges of this

4 Judicial Dislrict, haw taken diJ'icrcnl positions,

5 (29) In the nbs.:ncc of CIcIH' guidance tj'OIl1 Ihe lext of the ｾｴ｡ｴｵｴ･＠ or its

6 legislative history, this Courl is lelllo examine olher sources lor guidance, One such

7 source consists of othcr statutes Ihat rclllle to mntlcrs similar to those addressed by NRS

8 116.3116,

9 (30) In Ncvadu, holdel'$ of'seelll'it)' intercsts ngHinst rcal property may initiatc

Id foreclosure through lIIultiple stalutory "venues. For example, Ihe hohler of a mortgage

11 may initiate a,ludiciallill'cciosurc via NRS 40,430 el seq. The holder ofa deed oftl'llst

12 may also initiale a lloll-ju<iiciul ti.wccloslIl'e (commonly known ｡ｾ＠ a "Tmslee's Sale")

13 pursufinllll N RS J 07 .080 ct seq, A lundlOl'd (01' other assignee of the right to receive

rent n'olll rcal propel'ty) ilmy also seek thc appointment of n receiver to initiule il

foreclosure uJlon a security instnllncnl pursuant lo NRS 107 A,260.

(3) It is well-settled that ,my tOt'cciosure sale COI\dllcted pursuant to NRS

40,462, 107,080. oj' 10'/ {\ ,260 automatically (!xlillgnishes a Iljulliol' secul'ily interests

Ilgainsl the propet'ty, E.g,. /Jrlllmdi v. ｬＬｭｬｾｬＧ･ｬＧＮｉＧ＠ rille 1ns, Co" 101 Nev, 395 (1985);

Erickson COIII>'lJ'Uc(iml Co, v. Navar/a !VC/(ioflal /Jank, 89 Nev, 350 (1973). Thus, the

Dctcndal\( i, ･ｳｳｾｮＨｩ｡ｬｬｹ＠ lll'guing thut !l IDrccloSII!'0 conducted pursuant to NRS

21 llG.3116 ｩｾ＠ gOl\1cthing wholly unique un de.)' Ncvadall1w, becausc it would represent

22 the only tYIlt! 0(' IOI'cc!o,lIrc P{!I'Illith)d ill Nevada under which juniOl' liens would not be

23 aulomalic,ll1y extinguished,

24 (32) Howcvcr, if the Delcndanl is correct thnt tOl'Cc[OSUI'CS conducted pUl'sunlil

25 to NRS 116,3116 lIl'C unique under Ncvndll Inw, then thore I11USt exist something in the

JI',UO/lU:iAO DISTR!CT ｊｬＱｬｊＨＺｩＱｾ＠UEjI,\ltDm:<:f.':X

text or legislative ｨｩｳｴｾｬｲｹ＠ o/' NRS I 16.31 ) (} that SlIYS so. Undcr soUled I'Ules of

slatutol'Y illlCrpl'dation. the COUJ'l cunno( rend NRS 116.3116 ns II unique,

ullpl'ecCcielllcd, and .\'111 gel1eris departure II'om loug-estnblished norms rclating to

12

---------------_._-- ---... ＭＭＬＬＭｾ＠ -.. --.----.-----.--.-.. ＭＮＭＭＭＭｾ＠

foreclosure ｳ｡ｬｾｳ＠ ill Nevada unless (here is some indication in the text 01' legislative

J3

hislory thol the Legislntul'c inlcnciedthis (0 he the case. There is not. Quite to the

ｾｉ＠ contrary, the c(lmph:tc absence of anything within NRS Chapter 116 regarding the

4' question oi'extinguishmcnt suggests thntlllo Legislallll'c intended that Chaptet' J 16

5 foreclosurcs would be hundlcd us !Iny other' type or foreclosure.

(33) Notnhly. NRS 40.'162 was cllnctcd in 1989, nnd NRS 107.080 wus 61

7i originally eIH1\:tcd in 1927. 'tn other words. both NRS 40.46211lld (07.080 pre-date the

enaetmcnt orNRS 116.3116, tiS ､ｯＨｾｳ＠ Ihe opinion of' the Nevada Supreme Court in

9 Erickson Consl/'ueflon Co. 1'. Nevada Naliol1allillllk, 89 Nev. 350 (1973) (holding that

to nOll-judicial Ibrecloslll'c sales automatically cxtinguish junior liens). T!Ius, the

11 Legislature must be ーｲ｣ｾｵｭ｣､＠ tolHive known when NRS 116.3116 WlIS cnacted that the

12 normal consequcnce or a Ibrcclosurc sok in Nevada would be thnt all junior Iiells nfC

,13 autmlloticully ｣ｸｴｩｮｾｵｩｾｨ･､Ｎ＠ Had lhe Legilill\turc intended thaI NRS 116.3116 represent

I' a singulm' deparltlrc 1i'<1I11 established Icgnlnorllls, the Legislatlrl'<:,ccl'tainly could have

15 inehJ(lcd hmgllage to lhut cnce!. The Court notes that the Legislatw'e ｬｉｴｩｬ｢ｾ･ｳ＠ a variety

16 of common plmlscs throughout the NRS when it intends to Cl'eatc exceptions to other

171 statutes; see, pJI' eX{llIIple, NRS 7S.090( 1) ("Notwithstanding the provisions ofNRS

I&' 7'1.300 ... H); NRS 62B.390( I) ("Except n, o!hcl'\\'isc provided in NRS 62B.400 ... ");

191

201

NRS 62E,O I 0(2) ("Exccpt as (ltherll'ige provided by speciJic statute .... "); NRS

n.120( J) Ｈｈｓｬｉ｢Ｎｩｾ｣ｬＧ＠ (lilly to such ｬｩｬｬｬｩｴ｡ｬｩｯｮｾ＠ as nm)' be provided by thb chapter ... ");

21 NRS 48.025 ("All n:lcvant evidence is admissihle, except as otherwise provided by this

22i title ... "); NRS 51.075(:>.) (",(,he pl'llvisions nfNRS 51.085 to 51.305, inclusive, nI'C ... not

23 restrictive of the exception provided by th is section"). Yet llOllC of these phruse.q arc

2 contuincd HIl)'whel'c withiu NRS Chnptcl' 116 in au)' corllext thut suggests flll intention

25 to depart Jj'omthe ordinHry rule thaI. in Nevada, I'(,lt'cclosurc salcs cx.til1BlIishjuniol'

liens. The obsellce of any language to this cncel ｾｵｧｧ｣ｳｴｳ＠ that this W(lS not the

intention of the ｌ｣ｧｩｾｉｈｴｵｲ･Ｌ＠

13

(34) MIlI'COVel'. NRS I 16.3116 CI ｾ･＼ｊＮ＠ ｣ｏｬｬｴ｡ｩｬｬｾ＠ It series of specific depm'lLll'cs

2 and dcvintiolls li'OIlI the 1'(lI'celnsure proceedings ･ｾｬｬｬ｢ｬｩｳｨ･､＠ in NRS 40.462 nnd

3 107.080. bUI nOlle lhUlrcllllc lo the ･ｘｬｩｮｧｬｬｩｾｨｬｬｬ･ｮｴ＠ 01' nOIl-extingllishment of junior

4 Iicns. For c1(lIIlIple;, the; idea or "sllper priority" exists nowheJ'<) in NRS Chapler 40 01'

5/ 107, Similarly. lleither NRS 40.462 Iwr 107.0110 include the kinds ofspccific nolice

provisions required by ｎｒｾ＠ Chaptel' 116 belll1'c u foreclosure sale can be inilialed. Yet

7 the Lcgislalurc Inehtdcd nlllallguHgc in NRS 116.3 116 that CUll be rend ｈｾ＠ depurting

8 from Ihe principle of extinguishmen(. It is II'cll-settkd lhallhc ine!usi\1II ofonc lhing

IllIISI be rcnd liS the implying the omission of (mother ＨｈＨＧＮ｜ＱＩｊＧ･Ｎｾｳｩｯ＠ III/illS (1St exc{l(sio

((fleril/.'·"). Thus, whell llll) I..cgisluLUrc ｣ｨＨＩｾ｣＠ 10 inclttde language designcd to deviate in

II certain spccillc ways f'rom cstublisilctlltlrcclosttrc prnctices, bUlll()\ lungungc thaI

I' ､ｭｴｴｧ･ｾ＠ whether junior liens me eXlinguished, thaI choice must be deemed by this

13 COII!'1 to have heen inlcntinnnlnnd deliberute.

14 (35) Furthermore, I)ot nnly did the LcgislH1Ut'c itlclude 110 IUl1guugc dcparting

15 Irom the principle of c .... linguishmclll lInd':I' NRS Chnplcr 40 und 107, il included

161

I 171 18'

191

ｉｮｮｧｬｬｬｬｧｬｾ＠ in NRS Chaptct' 116 highly similut' to Inngllllgc contained in NitS ｃｨ｡ｰｴ･ｴｾ＠

107 that expressly ｲ｣｣ｩｴＬＬｾ＠ thaI junior liens :l1'(' exlinguished. NRS 107.080(5) l'Celles

thal u Trustee's Sale "\'Cst's in tho ｰｵｲ｣ｨｵｾ｣ｲ＠ lhe title or lhe gl'lllllo[· ... Wilh()ltl equity 0['

right of redemplion." NRS 116.31166(3) recites lilal n foreclosul'e sale initiated

20 plll'SllUnllo ｎｒｾ＠ 116.3 116 Ｂｶ･ｾｬｳ＠ in lite Jllll'dHlser Ill(; title or lite unit's owner without

21 equity or right or redemption." This similurity ｳｵｧｧ｣ｾｴｾ＠ thul lhe Legislalure intended

22 lhal n pl1l'chnser ttl a NRS Chapter 116 Ihl'<:clowl'e sale acquil'cs cxaclly the salll\l title

23 ItS he w(luld have !lequired had the ｉ｢ｲ｣ｬＧｬｬＩｾｬＱｉＬＨＩ＠ bc('nll NRS Chnplcr 107 Trustee's Sale,

24, i.e., tillt: !i'ee anti deal' (lI'Junior enculllbrnnc(:x. MOl'eOvel', Ill(! words "without equity

25 orrighl ot're<tcmption" werc <telincd long agn by the Nevada Supreme Court, which

26 held lllllt a sale "without t;lluily or right of'r.:delllplion" is one llmt vcsts the purchaser

27 wilh "absolule It,gllilitie ｴｉｾ＠ complete. perlec! lind indeleasible liS can exist."ond l\ sale,

upon duc llo1ic<! ttl tho ll11lrlgllgor. whelher al pulllic or pl'ivnlc snle, forecloses atl

1'1

equity oi'rc<icillption ｮｾ＠ cOll1pktcly ＼ｉｾ＠ a decrce oi'court." IJ/:}lOfli v. Carson River

·2 Lumbering Co., 3 Nev. 3 J 3,317-1 H (J l!(7). quoted in {l1re Gralll, 303 B.R. 205, 209

3 (l3unkr.D.Ne\'. 20(3).

4 (36) TIlliS, till' operation uf NRS 1 16.311 () nppears to be ns 1()lIows. NRS

5 116.316 CreHH!s a S(!I'lCS 01' specific and IIniqlle ｲ｣ｱｵｪｲ｣ｭ･ｬｬｴｾ＠ when III! BOA imposes n

lien against n properly I1l1d wishes to initiate n i'oreciosw'c ｾＱｉＱ｣＠ to salisfY unpaid

7 assessments. Whel'c NRC Chapter 116 is silCllt, the Comt Illust preslime thnt (he

8 Legislature intel1ded thaI the mdillary and cstublishc<i principles governing (he conduct

9 offorccioslIl'c snles in Nevada apply to "1111 in the gaps."

101 (37) A(!cunlillgly, whcn a hOIllCllIl'llCrS' association imposes a lien for unpaid

II assessments,1\ portion 01' the ul1J1l1id assessillents (notexcccding ninc months) <Ire

12 entitled to ｮｾｕｰｾＱＧ＠ priority" stll!IIS over existing ｬｩ･ｮｾ＠ unci mortgages. NRS 116.3116(2).

13 How(;>vcl', in onler to perfect this "suJler priorilY" lien. the llssociutioll mllst give proper

14: notice to all pnl·tics including un)' holdcrs of I1rs( secul'ily interests whose priol'ity will

15 have hccn adl'crsely nI'JI.:cted. NR!:l 116,31163(2). Furthermore .. iflhe associntion

16 wishes to tOl'cc1ose u)lonthe prop>.!rt)' in order tn slItisl'y its Iicn, illlla), do so, but only

17 uncI' givcn spccllk nollee 10 ull ｾｵｨｏｬＧ､ｩｮｵｴ｣＠ IicnlR)lders of record. NRS

18' 116.31163 S( I )(u)(2). ,\s C:-;I)l'os$l), contcmplated by Coml1lent I to UCIOA Section 3-

191

201

116, most subordinatc lienholders would likdy protccltheir interest n'om

cxtingllis!lI11cllt h>' simply pllying olTthc unpaid llSSCSSlllcnts. Indeed. that appears to

21 be the spccitic purpose of ｮｾｱｵｩｬＧｩｬｬｌ｜＠ Ihutthosc lienholders be givcnl10tiee \II1UCI' NRS

22 116.31163(2) and NI{S 1 16.3 II 635( I )(11)(2). Bill j rthosc subordinate lienholders fail

23 10 stuve off li)rcdoslIre hy paying offthc assessillent, thcn their slIbonlinotc olaims nrc

24 paid Ilff'wilh uny ｳｵｲｰｬｵｾ＠ proceeds ol'ihc till'cdoSlll'c stile. NRS 116.31164(3)(c)(4).

25 After the sale is completed. any subordinute citlims ilre autoll1tltioally o:-;tingllishc<l by

26 operation of' luw. Eric/i.wl/l COII.l'/mcIiOIl Co. v. NC!vada N((/lollal Balik, 89 Nev. 350

27 (1973) (holding Ihtlt ｬＱｯｮｾｪｬｬ､ｩ｣ｩ｡ｬ＠ lill'cCltlSUI'C sales ulitollllllicnily extinguish juniot·

28 liens). If the I\:ndcr's Illortgage remains unsalbfic<l uncI' [he i()rcdoslIl'c sale, il ｭｾｹ＠ be

J}:I(ml.:TA() VlsnU(,,. JUoon m!M.lu:.mm x,\:

------_._----------------_.-------

ｉｾ＠

---.-----------------

I able to pursue II <tefidency actiol1 against (he mortgagor of record (the originul

ｾＲ＠ def\mlling purl)'), bUIIlO( any claim ｡ｧ｡ｩｮｾｬ＠ the property itself OJ' agninstnew bona fide

third-purty who purchnscd the properly uttho ｉＨｬｬＧ＼［｣ｬｯｾｵｲ･＠ sale.

(38) In lheir briefS. bolh partics advllIlce various policy and "I'ilil'llcss"

5 argulllcnts in supporl 0]" their respectiw ｰＨＩｾｬｬｩＨｬｬＱｳＮ＠ For example, the Defendant argues

6, that perillilling a bona-nde third-purt), pmchuscr to procure a property fbI" a mere

71 $2,000 while ｣ｸｴｩｬｬｧｬＱｩｾｨｩｮｧ＠ lllllorlgngc worth many times that amount is "11ntilit·".

81 However, ilny junior Ｑｩ＼ＺｬｉｨｯｬＨｨｾｲ＠ hU$ II simJlIt; I"Cmedy Ihr this llnl!lirness -- as expressly

conteillplutcd by Commcnt I to UCIOA Section ]-1 f 6, lllcndcr cun avoid foreclosure

1 and protcct its ｩｮｴ｣ｲｴ［ｾｴ＠ li'olll cxt"illguishl1lcnt hy ｾｩｬＱＱｰＡｹ＠ ｩｮｴ･ｲｶ･ｮｩｮｾ＠ to payoff the

II ｡ｳｳ･ＮｾｓｬｬＱｮｬｬｴｾＮ＠

12 (39) rvIOI'COVCI\ the ｃｏｬＱｬＧｴｬｬｯｴｃｾ＠ thatthc Dcfel\dnnt's m'gument would lend to

13 an eqllally "lInlilir" rcsull. In this CHKO, i['tile Ddcndllnt's lIrglllllcnt were adopted, then

I'I the net rcsult would be that tho I'lnintlif will hlll'C puid $2,000 to sntis!')' the

15 association's Iiell, yet does IKlt own the ｾｬｉ｢ｪ｣｣ｴ＠ Property. In effcet, the Pluintiffpuid

16

1

otfthc lien asserted by tho IIOA ami acquired nothing in return, because imillediately

171 uftcr it acquired the Suhject I'rojlCl·ty, tile property WM lUkol1 by the Delcl1danl and sold

1 g to someOlle clse fbi' more I1lnncy. i'his ｲｃｾｬｬｬｴ＠ appear:; nll1damcntally unfair to bona fide

191

201

thircl"pat·ty purchasers who will Imv!) paid olTthe assessments thM the lender failed to

pay despite having heen given specilk nOlice orthe l'xislcllce ofthc unpaid

21 assessmcnls. !lnd ､｜Ａｾｰｩｴ｣＠ Ihe obvkltl$ ink.1I1 ol'the drnlkrs oJ'lhe UCIOA Ihul, in most

22 cases, the l<:n<icr would prolect ils own interest by paying orfthe assessmenls. This

231 result would achieve the perverse ouleollle oJ"lIcluulfy rewarding sloth and inaction on

24 the part of' the lender, wilo, us expressly recognized by Comment Ito UCIOA ｓｾｃｴｩｏｉｬ＠

25' 3-116, is the one purl)' (olher thnn the dclhulling owner) ill II position to Slop Ihe

26 foreclosure, protect its OWll intert'sts, and make the nssoc·ialiol1 whole by paying the

27 assessments. InslclId. the ｄ｣ＯＧｾｮ､ｬｬｮｴＧｳ＠ interprclatilm of NRS I 16.3116 would result in

28' the associution and thc lender being made whole at the expense of bOll !I tide third-party

ＱｲＮＢｏＺ｜Ｈｾﾷｉｾｏ＠

niSIlH(.f JI)U<ili V11 ... \RTMr:NT xx

ＭＭｾｾＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＧＭＭＭＭＭＭＭ

ｾＢ＠

2

3

" 5

J ) 8

91

101

II

12

13

14

15

16

purchasers, a ｉＧｃｾｬｉｬｬｴｨｵｴ＠ is quile obviously tlbsut'll.

(/10) The Defendan( nppcal'$ to'suggest lhis OliLCOlllC, however unfair, is the

nalul'Ill ()onscqucnec or (hc file( lhnt (he Pluinli fr allcllIpled 10 purchase the Subject

Propert)' Ihl' less limn the ｣ｕｬＱＱｬＱｬ｡ｴｩｬＧｾ＠ totHI of all exisling cllculllllJ'llllCeS upon the

Subjecl Propel't)', and "bllYC1' ｢ｾ｜｜ＧｕｬＧ･Ｂ＠ hCcIllISC, had the Plainti ff propcl'ly done lis

homework. it should hnve kmllvn (hat it might stllnd to l(lSC the S\lbject Propetty unless

it purchased the Subjecl Property fbI' an 1II110unt sunicicnt to payoff al! existing liens,

(4 I) !lut, ｮｾ＠ Iloted, lhe part)' bcst'-positioned to protect its interesls (and

incidentally 10 pl'O!Ccl any innocclIllhird parties) is the Icndel' whose interests are

directly (It stake. II is a wdl-recognized pl'inciplc or Nevada Inw that when both

pOlenlial illterpI'C\al\olls or a slatule ｬＩ｜ﾷＱＧｴｬｉｾ＠ arc 1II)111il' 10 someone, lhe bl'Ullt of lillY

Ulllllil'llCSS ｾｨｯｵｩ､＠ nOI nl11 Oil il1l1oct:nt third pflrlics. E.g .• NC-{)S'H ItIC. Jl. Gamel', 125

Nev. 647.656 (2009) (in Chlll)3ing who should suffer Ii'om lhe rruudl1lent actions OfUll

agent, "or<lilHll'i1y. the ｾｩｮｳ＠ 01' an agent nrl)\'lsilCd upon his principal, not the innocent :.

third party with whom the dishonesl agent dt'ult"); /lO/IIIIIUII Jl, Fillet/e, 4691\.2d 543,

545 (Pa, 1983) (cited approvingly in NC-f)Slf 111(.',1'. Gal'l1er, 125 Nev. 647, 656

(2009» ("a principal a()(ing. through !1I1 agent in dealing with an innocent (hird purly

18 must bear the cOllseqllmces or the Hgcnt's Ihllld" ｢ｾ｣ｮｬｬＤ｣＠ oj' "the long recognized

19

1

principle that where one 01' two innocent persons must sul'lel' ｨ･･｡ｴｴｾ･＠ ol'the Ihllid or n

20 third ... thc Joss should be borne by him who pUllhe wrongdocl' ill a posilioll of' (rust and

2J confidence and thus enabled him to perpetrute the wrong"). S(l(l a/so, Tl'i-COIlI1/Y

22 Eqllipmcllf & Leasing \I, Klillke, 128 Nev.l\d\', Op. 33 (June 28, 2012) (Gibbons, .1"

23 concurring) (when om; purty is likely toreeeive 1\ wimlfall, i\ ｾｨｬｬｵＡ､＠ b", \h'" pur!y who

lacks nny responsibility Ih!' the sitll!1tkm) (rdcvnnt citnlions omil!c(I). III this case, it is

true lhnt the londe!' (;nnl1()t be said to bellI' respollsihility 1()l'lhe non-payment of

26

1

assessments by tl1(l record owner. Hmwvcl'. the k'nder is in II till' hellel' position 10

27 ｰｬＧＨＩｦ｣Ｈｾｴ＠ its intel'()sts, I1lllkc Ihe Hssochlliollll'holc, tmel climinate the need for forcclosllrc

lhun 1\ third-pHr(y purchm;cr at \he lbrccl()s\tl'c sale with no c()nllection to the lcndel', lhe

17

I·IOA, or {he previolls OWlll!r. Yet. accepting the 1)1.)1<:ndan{'s argument in (his case

1I'01lid result in the I'lain{itl'hdng, ｴｨｾ＠ only part)' who surfers lIll)' mOtl(.'tllry loss from

3 the non·paymellt orasscssllll.)nts. m; hoth the HO,,\ lind the Detendant have been 1I111de

4 whole. ,/,tlllt r<.!slllt is lillldullIl'lItully lIul\lir !llId could not hlll'C bccn what the

5 Legislnllll'e intl.)nticd.

6 (42) Inll scns\.', this (lUIC\lIHC cun be secn as unlilir (0 the lender whose interest

7 in this elise \VIIS extinguished by the }lUrdlllsl.) Mthe Subject Property for II mere

8

1

$2,000. However, ComnJ(.'nt I t(> UCIOA Sl:etion 3·116 proposes two simple

9 solutions. ｆｩｲｾｉＮＡｉ｜ＨＡ＠ lender (hal'ing be,'n giwu spceilk not icc or the nssoeilltion's

[01 "super pl'iol'it)''' lien) clIn proteCl its intel'est b)1 paying the unpaid ｯｾｳ｣ｳｳｭ｣ｮｴｳ＠ before

II Ibreclv$lu'c is iniliulcd by thc HssoGiatinn. thereby removing the "supel' priority" lien

12i[ !Ind cnslIring Ilmt its ｾ･｜Ｚｵｲｩｴｹ＠ ｩｬｬｴ･ｬＬ＼ｾｳｴ＠ is tlte; most scnilll' one remaining. Allernatively,

13

1

and mOl'e proactively. ｡ｾ＠ noted by COIllll1cnt I the Icndcr clln ensure thnt there can

ＱＱｾＵ＠ never be a delimit or u "super prilll'ity" lien hy simply impounding money in mll'lll)Ce

:1 and paying Ihe aS$C$Slllcnts il$I)II', much HH lenders no\\' COlllmonly Impound money to

1

1

61

pity tax hills in unler to prcv.cntlux Il<:ns llllt! government tax forcclosurcs. III eillwr

7i case, the nssodatiull will have bccn made whole, (hus IICCllll1plishillg tho JillldamentaI

18 purpose or NRS 1 16.31 16. lind the lender elill scck 10 satisl)' ils own securily by

19

1

initiating its own ｉｾｬｲ＼Ｚ､＼ｬｳｬｬｲ｣＠ lit which its ｳｾＧ｣ｬｬｬＧｩｴｹ＠ int()l'cst would bc the most senior

2Q cnclllnhnlllcc.

21 (43) In g<:I1"I'<lI, hm\'<:vcl', ｱｬｷｾｴｩｯｊＱｾ＠ rcgnr<iing the ｊ｜ｬｩｬＧｬｬｴ｜ｾｳ＠ of any public policy

22 arc fol' tlw ｌｾｧｩｳｬｵｬｬｬｴﾷ｣＠ 1<) l'esl)I,,\!. nOI 1i)I'thc Judiciary. lite Legislalure is cntitled to

23 cIHlellcgislntionthHt ma)" in Sllll1e instances, he lInlilir 10 somo parties. But the

24 JlIdicinry cannot substitute its o\\'n judgment Ihl' thut urtlte Ccgisluturc and rcad a

25 statulo ill U Il1Ulmer othel' than as it b dralled lllerely hecallse the applicntiol! or tho

statutc might seem UlJwis\), III this case, the disposition ol'this MotiolJ is buscclupoll

lho llpplicution ofcleul' ＩｬｬＧｩｮ｣ｩｊｬＢｾｧ＠ orstatlllol'Y iutcrpl'elatioll. In tho complete absence

28 of ally language in NRS Chuptcr 1 J(j rellacting II Legistative intcnllo depurl from the

ｊｬｾｒｏｾｉＮＺｬﾷＬ｜ｃｊ＠

ＩＩｉｾｴｐＮＱｃｔ＠ JUoot! ｭ［ｐａｒｦｾｬｲＮｴｮ＠ x>;

IX

--------.. ＭＭＭｾＭＮＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭＭ

established principlc thai subordinate liens an.' c;.;lingllishl·:d by Ibrcc/oslIrc sales, the

2 COllrt must USSUlllC Ihm till) LcgislUHll'e intended tlm( Chllplcr 116 IbrccloSlll'CS operate

ｾＬｉ＠ precisely in Ihe SlIlIle IllUllllcr •

." (44) For the lill'cgoing ｮＺｵｾ｜ｬｮｳＮ＠ thl' J)clcndHIl('s Motion III Dismiss is

5 ｄｅｎｉｉｾｉＩＮ＠

6

9

1°1

11

\:b

13

23

24

251

2d

ｊｬＺ｡ｏＮＧｬｴ［Ｇｾ｜ＨＱ＠ｕＡｾｔｒＮｻｃｔ＠ SI1IKII! ｉｬｬｩｲｾｒｔｍｲＮｎｔｸＮＧｻ＠

DATED: iVluy 30, 2013

ＧｾＢ＠

---_._-_ .. _._---_._---

ＮｵＺｾｒ＠ ') :: T. TAO 1)1.' 1'1 leT COURT JUDGE

Ｇｾ＠ ..

19

ClmTIFICATE 0\1 ｓｬｭｖｉｃｉｾ＠

2 I hereby cCl'li(1' Ihm I servcd n copy llf the foregoing. by muiling, hy placing

3 copk's in Ihe aliOl'l\cy Itll<kl"s ill the Clerk's Ofli<.:.: (>1' l\tl"ing as Ｑｾｉｊ｜ｏｗｓＺ＠

4

5

6

10

II

12

13

14

IS

16,

17

:J 201

21

22

23

241

2S!

26

27

Ｇｾ＠ ..

ｌｬｉｩｾ＠ /\, AY<lll, Esq .. nnd (Vlul'gnl'cl E, Schmidt. Esq. - Viu Fncsilllilc: 792-9002 Karl I... Nidsol1. [:sq. - Via Fucsimik: 692-R099 Gregory L. Wildt;, Esq .• Vin ｆＡｬ｣ｾｩｬＱｬｩｬＨＡＺ＠ 25S-iln7 Chelsea 1\, CI'O\I'IOll,I;:$(I. - Via Fucsimilc: 946-1345

0;,-,k vJ",LL Pnuhl Wulsh, E)(eemivc Assistunt

20

---- .. -.----.---... ＭＭＭＭＭＭＭｾ＠ ＭＮＭＭＭＮＭｾＭＭ -------.

Exhibit 3