Sfr Investments Pool

1, LLC V. U.S. BANK, N.A. 334 P.3d 408 (2014)

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Nature of the Case

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Facts

NRS 116.3116 gives a homeowners' association (HOA) a super priority lien on an individual homeowner's property for up to nine months of unpaid HOA dues. With limited exceptions, this lien is 'prior to all other liens and encumbrances' on the homeowner's property, even a first deed of trust recorded before the dues became delinquent. The property at issue was subject to Covenants, Conditions, and Restrictions (CC&Rs) recorded in 2000. P recorded a first deed of trust on the home in 2007. The homeowners were delinquent on their SHHOA dues and also defaulted on the mortgage to D. SHHOA and D each initiated nonjudicial foreclosure proceedings. P purchased the property at the SHHOA's trustee's sale, which took place on September 5, 2012. P recorded a trustee's deed reciting compliance with all applicable notice requirements. The trustee's sale on D's deed of trust had been postponed to December 19, 2012. P filed an action to quiet title and enjoin the sale. P claimed that the SHHOA trustee's deed extinguished D's deed of trust and vested clear title in P, leaving D nothing to foreclose. The district court denied P's motion for a preliminary injunction and granted D's counter-motion to dismiss holding that an HOA must proceed judicially to validly foreclose its super priority lien. SHHOA foreclosed nonjudicially, and thus D's first deed of trust survived the SHHOA's sale and was senior to the deed P received. P appealed. D maintains that NRS 116.3116(2) merely creates a payment priority as between the HOA and the beneficiary of the first deed of trust. D posits that the HOA lien does not acquire super-priority status until the beneficiary of the first deed of trust forecloses, at which, point, to obtain clear, insurable title, the foreclosure-sale buyer would have to pay off that piece of the HOA lien. If P is correct and the super-priority piece is a true priority lien, then it is senior to the first deed of trust. As such, it can be foreclosed, and its foreclosure will extinguish the first deed of trust.