Gordon Rees Scully Mansukhani Las Vegas partner Rob Larsen and senior counsel Brian Walters obtained a complete summary judgment victory in federal court in favor of the firm's client Log Cabin Manor Homeowners Association (“Log Cabin HOA”) in a superpriority lien case. In this case, Log Cabin HOA foreclosed on a property due to delinquent assessments. At the foreclosure sale, the successful bidder purchased the property for $49,000. At the time of the sale, Bank of New York Mellon held the mortgage which interest was purportedly extinguished by the foreclosure sale.
Bank of New York Mellon sued Log Cabin HOA and the purchaser alleging a variety of claims against Log Cabin HOA including declaratory relief/quiet title, violation of due process, tortious interference with contract, breach of the duty of good faith, wrongful foreclosure and deceptive trade practices. Bank of New York Mellon argued it was entitled to more than $285,000 in damages against Log Cabin HOA. The court rejected Bank of New York Mellon’s competing summary judgment motion and granted Log Cabin HOA’s summary judgment on all claims giving Log Cabin HOA a complete victory.
Background of Superpriority Liens in Nevada
Nevada has a unique law related to liens of homeowners associations. The law grants priority to a portion of a homeowners association assessment lien over all other liens, including a deed of trust/mortgage which would otherwise be in first position. This is commonly described as the superpriority lien. Foreclosure of the superpriority lien can extinguish a mortgage. During the recent recession, home values plummeted and many homeowners stopped paying their mortgages and homeowners association assessments. Several thousand foreclosure sales were conducted by homeowners associations from 2012-2015.
In 2014, the Nevada Supreme Court validated the statute establishing the superpriority lien and held that a foreclosure of a homeowners association lien which includes a superpriority lien operates to extinguish the deed of trust. See SFR Inv. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 411 (Nev. 2014).
This led to race to the courthouse by banks claiming wrongful foreclosure in an effort to protect the interest in the now extinguished mortgages.
Gordon Rees Scully Mansukhani Las Vegas attorneys Rob Larsen, Dave Gluth, Brian Walters, and Wing Wong have defended homeowners associations in more than 200 cases involving superpriority liens.