BANK OF NEW YORK MELLON V. SFR INVESTMENT POOL, 1, LLC

Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
2 years 6 days ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

No. 22-16663 (9th Circuit, Feb 20,2024) Not Published

Tag(s):

Ruling:

The U.S. Court of Appeals for the Ninth Circuit affirmed a district court's rulings in favor of the holder of a deed of trust in a quiet title action against, inter alia, the purchaser of residential real property at a nonjudicial foreclosure sale. Among other matters, the district court did not err in finding the deed of trust holder's judicial-foreclosure claim was not time-barred. The prior owner's bankruptcy discharge did not automatically accelerate the due date on his promissory note for purposes of calculating the limitations period for that claim under Nevada law.

Procedural context:

The appellant brought five issues on appeal to the Ninth Circuit, only one of which related to bankruptcy. The Ninth Circuit resolved that issue--whether a bankruptcy discharge operated to trigger the statute of limitations on a judicial foreclosure claim--by interpreting the Nevada judicial foreclosure statute, applicable case law, and the terms of the promissory note and deed of trust at issue.

Facts:

An individual (Debtor) purchased residential real estate in Nevada in 2005 with a mortgage secured by a deed of trust; the note and deed of trust ultimately were assigned to Appellee Bank of New York Mellon. The term of the loan extended until 2035. Debtor became delinquent on payments under the note and deed of trust, filed for bankruptcy, and received a discharge in 2008. Debtor also fell behind on his monthly assessments payable to the homeowners' association (HOA). Nevada law gives homeowners' associations a superpriority lien against residential real property for failure to pay certain assessments and provides for a nonjudicial foreclosure procedure to enforce the lien. HOA gave notice of Debtor's payment default in 2009. When it learned of the impending foreclosure in 2011, Appellee's predecessor in interest tendered payment of the superpriority portion of HOA's lien. HOA rejected the check and foreclosed on Debtor's property in 2014, selling it to Appellant SFR Investments Pool 1, LLC. In 2018, Appellee sued HOA, Debtor, and Appellant in the U.S. District Court for the District of Nevada, asserting claims for quiet title and declaratory relief, challenging the effects of the nonjudicial foreclosure. The district court later permitted Appellee to amend its complaint and held the new theories related back to the original complaint. At summary judgment, it held the tender of the superpriority amount of the HOA lien preserved the deed of trust from extinguishment via the nonjudicial foreclosure sale, such that Appellant purchased the property at the sale subject to Appellee's deed of trust. It then held a bench trial on Appellee's judicial-foreclosure claim against Appellant. Appellee argued it was entitled to foreclose on Debtor's property because he had not paid his loan in accordance with the terms of the note and deed of trust. Among other defenses, Appellant argued Debtor's 2008 bankruptcy discharge extinguished the mortgage, triggering Nevada's six-year statute of limitations to bring the judicial foreclosure claim--which Appellee failed to meet. The district court rejected Appellant's argument that a bankruptcy discharge automatically accelerates a discharged debt. Appellant timely appealed multiple district court rulings, including its judicial foreclosure judgment in Appellant's favor.

Judge(s):

R. NELSON, FORREST, and SANCHEZ

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