HSBC Bank USA National Association v. Fidelity National Title Group, Inc ( 2024 )

2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 HSBC BANK USA NATIONAL Case No. 2:18-cv-02162-MMD-DJA ASSOCIATION, MORTGAGE LOAN 7 TRUST PASS-THROUGH CERTIFICATES ORDER 8 SERIES 2007-OA3, AS AGENT OF DEUTSCHE ALT-A SECURITIES, INC., 9 10 Plaintiff, 11 v. 12 CHICAGO TITLE INSURANCE 13 COMPANY, 14 Defendant. 15 I. SUMMARY 16 This is a title insurance dispute stemming from litigation over a homeowners’ 17 association’s (“HOA”) foreclosure sale. Before the Court are several motions: (1) Plaintiff 18 HSBC Bank USA National Association, Mortgage Loan Trust Pass-Through Certificates 19 Series 2007-OA3, agent of Deutsche Alt-A Securities, Inc. (“HSBC”)’s motion for partial 20 summary judgment that Defendant Chicago Title Insurance Company breached its duty 21 to defend (ECF No. 101);1 (2) Chicago Title’s alternative motion for relief under Federal 22 Rule of Civil Procedure 56(d) (ECF No. 108);2 and (3) Chicago Title’s motion for leave to 23 file a surreply to HSBC’s motion (ECF No. 119).3 Two requests for judicial notice (ECF 24 Nos. 129, 138) and two supplemental briefs (ECF Nos. 136, 137) are also before the 25 1Chicago Title responded (ECF No. 105) and HSBC replied (ECF No. 117). 26 2HSBC responded to this motion as part of its reply in support of its motion. (ECF 27 No. 117 at 21.) 28 3HSBC responded (ECF No. 121) and Chicago Title replied (ECF No. 130). 1 Court. As further explained below, Deutsche Bank Nat’l Tr. Co. as Tr. for Registered 2 Holders of Morgan Stanley ABS Cap. I Tr. 2004-HE8, Mortg. Pass-Through Certificates, 3 Series 2004-HE8 v. Fid. Nat’l Title Ins. Co., 536 P.3d 915 (Nev. 2023) (“Deutsche Bank”) 4 compels the Court to reconsider the key prior order it issued in this case, HSBC is 5 foreclosed from the relief it seeks in its motion, the Court will deny both of Chicago Title’s 6 pending motions and the requests for judicial notice as moot, and the Court will dismiss 7 this case, directing entry of judgment in Chicago Title’s favor. 8 II. BACKGROUND 9 The Court previously found that the CLTA 100.2(1)(a) endorsement covers 10 HSBC’s loss that led to this case, but neither the CLTA 100.2(2)(a) nor ALTA 5 11 endorsements do.4 (ECF No. 86.) HSBC’s motion seeks to build on that order, seeking a 12 declaration that Chicago Title beached its duty to defend when it denied coverage under 13 the CLTA 100.2(1)(a) endorsement. (ECF No. 101.) Chicago Title’s two pending motions 14 essentially seek more materials to respond to HSBC’s motion; one seeks to reopen 15 discovery and another seeks the Court’s leave to raise more arguments in response to 16 HSBC’s reply. (ECF Nos. 108, 119.) 17 However, the legal landscape shifted under the parties’ feet when the Nevada 18 Supreme Court issued the Deutsche Bank opinion.5 There, the Nevada Supreme Court 19 ruled that a title insurance policy accompanied by the CLTA 115.2, CLTA 100(1)(a), and 20 CLTA 100(2)(a) endorsements did not cover Deutsche Bank National Trust Company’s 21 loss in the form of quiet title litigation ending with a declaration that Deutsche Bank’s 22 deed of trust encumbering a property had been extinguished by a foreclosure sale 23 conducted by the pertinent homeowners’ association’s foreclosure sale. See generally 24 4Neither party contests the Court’s prior ruling that neither the CLTA 100.2(2)(a) 25 nor ALTA 5 endorsements provide coverage. (ECF Nos. 136 at 2, 137 at 2 n.2.) And as explained below, the Nevada Supreme Court ruled consistently with the Court as to 26 these two endorsements. 27 5Chicago Title asked for a stay because this might happen (ECF No. 97), but the Court declined to stay the case (ECF No. 100). 28 1 536 P.3d 915. This, of course, differs from the Court’s prior ruling in this case that the 2 CLTA 100.2(1)(a) endorsement covers HSBC’s loss that led to this case.6 (ECF No. 86.) 3 The Court accordingly directed supplemental briefing from the parties on the 4 impact, if any, of Deutsche Bank on this case (ECF No. 131), and then gave the parties 5 more time to file that supplemental briefing until the Nevada Supreme Court issued 6 remittitur in Deutsche Bank (ECF Nos. 133, 135). The parties then filed those 7 supplemental briefs (ECF Nos. 136, 137), and HSBC filed a request for judicial notice 8 that accompanies its supplemental brief (ECF No. 138). 9 III. DISCUSSION 10 In its supplemental brief, Chicago Title argues that this case has become simple 11 following Deutsche Bank—that the Court should reconsider its prior order, vacate the 12 portion of it finding coverage under the CLTA 100.2(1)(a) endorsement, deny HSBC’s 13 motion, dismiss HSBC’s amended complaint, and enter judgment in Chicago Title’s 14 favor. (ECF No. 136.) HSBC basically argues in its supplemental brief that this case 15 remains complicated—that this case is distinguishable from Deutsche Bank and the duty 16 to defend would be triggered even if its loss is not covered under the applicable policy. 17 (ECF No. 137.) The Court agrees with Chicago Title. 18 Deutsche Bank dictates the outcome of this case. The reasoning of Deutsche 19 Bank is not compatible with the Court’s prior reasoning in this case, so the Court must 20 now follow the Nevada Supreme Court’s pertinent reasoning. See Indus. Indem. Ins. Co. 21 v. United States, 757 F.2d 982, 985 (9th Cir. 1985) (finding that state law controls the 22 interpretation of insurance contracts); CRST Van Expedited, Inc. v. Werner Enterprises, 23 Inc., 479 F.3d 1099, 1106 n.6 (9th Cir. 2007) (noting that the United States Court of 24 Appeals for the Ninth Circuit’s interpretation of a California statute does not control over 25 the California Supreme Court’s subsequent interpretation of that statute because “a 26 State’s highest court is the final judicial arbiter of the meaning of state statutes....”) 27 6HSBC alleges in this case “that the CLTA 100.2 endorsements are equivalent to the CLTA 100 endorsements.” (ECF No. 86 at 4 (citing ECF No. 62 at 5).) 28 1 (quoting Gurley v. Rhoden, 421 U.S. 200, 208 (1975)). Indeed, while the Court found 2 that the pertinent statute worked together with the conditions, covenants, and restrictions 3 (“CC&Rs) of a particular HOA to cut off or subordinate the interest of a holder of a first 4 deed of trust when an HOA sale is properly conducted, see Wells Fargo Bank, N.A. v. 5 Fidelity National Title Insurance Company, Case No. 3:19-cv-00241-MMD-CSD, ECF 6 No. 52 at 14-17 (D. Nev. Sept. 20, 2022), the Deutsche Bank court found that the 7 superpriority lien “was a product of NRS [§] 116.3116.” Deutsche Bank, 536 P.3d at 926. 8 For this reason, the Deutsche Bank court similarly found that any applicable CC&Rs 9 could and would not cut off, impair, or subordinate a deed of trust that encumbered the 10 pertinent property—the lien was entirely statutory. See id. And the Deutsche Bank court 11 found that the CLTA 100(1)(a) endorsement did not cover Deutsche Bank’s loss that led 12 to that case. See id. The Court’s order finding coverage under the CLTA 100.2(1)(a) 13 endorsement is accordingly no longer tenable considering Deutsche Bank. Moreover, 14 the Deutsche Bank court found that the duty to defend never arose in that case because 15 there was never any potential for coverage. See id. at 927. 16 HSBC’s attempts to convince the Court not to take Chicago Title’s proposed 17 approach in view of Deutsche Bank are unpersuasive. HSBC first suggests that 18 Deutsche Bank is distinguishable because the Nevada Supreme Court did not address 19 any policy exclusions in it (ECF No. 137 at 2-3), but the Nevada Supreme Court did not 20 because it determined that the endorsements did not cover Deutsche Bank’s losses, see 21 Deutsche Bank, 536 P.3d at 927 n.8. The Court accordingly does not need to address 22 either side’s arguments regarding exclusions either. HSBC next argues that the CC&Rs 23 applicable to this case contain provisions rendering Deutsche Bank distinguishable (ECF 24 No. 137 at 3-5), but Deutsche Bank turns on the key holding that the NRS Chapter 116 25 lien is entirely statutory, so the particularities of specific CC&Rs are irrelevant because 26 CC&Rs never cause the losses at issues in this and similar cases. See 536 P.3d at 926. 27 HSBC finally argues that Chicago Title still could have breached its duty to defend even 28 though there is no coverage under Deutsche Bank (ECF No. 137 at 5-8), but the Court 1 rejects that argument in the same way that the Nevada Supreme Court rejected it in 2 Deutsche Bank: because there has “never been a potential for coverage[,]” “the duty to 3 defend did not arise[.]” 536 P.3d at 927. 4 In sum, Deutsche Bank compels the conclusion that there was never coverage for 5 HSBC’s loss that led to this case, and that Chicago Title did not breach its duty to 6 defend. The Court will accordingly reconsider its key prior order, dismiss the amended 7 complaint, deny HSBC’s motion, and deny both Chicago Title’s motions and the requests 8 for judicial notice as moot.7 See, e.g., Amarel v. Connell, 102 F.3d 1494, 1515 (9th Cir. 9 1996), as amended (Jan. 15, 1997) (“the interlocutory orders and rulings made pre-trial 10 by a district judge are subject to modification by the district judge at any time prior to final 11 judgment”) (citation omitted). 12 IV. CONCLUSION 13 The Court notes that the parties made several arguments and cited several cases 14 not discussed above. The Court has reviewed these arguments and cases and 15 determines that they do not warrant discussion as they do not affect the outcome of the 16 pending motions. 17 It is therefore ordered that HSBC’s motion for partial summary judgment (ECF No. 18 101) is denied. 19 It is further ordered that Chicago Title’s motion for relief under Federal Rule of 20 Civil Procedure 56(d) (ECF No. 108) is denied as moot. 21 It is further ordered that Chicago Title’s motion for leave to file a surreply (ECF 22 No. 119) is denied as moot. 23 It is further ordered that both parties’ requests for judicial notice (ECF Nos. 129, 24 138) are denied as moot. 25 7Chicago Title’s motions and the requests for judicial notice are moot because the 26 Court must resolve this case in Chicago Title’s favor, so Chicago Title does not need the various materials it seeks and the Court need not—and does not—consider the further 27 arguments in Chicago Title’s proposed surreply or supported by the materials that both sides ask the Court to take judicial notice of. 28 1 It is further ordered that the Court vacates only the portion of its prior order finding 2 || that the CLTA 100.2(1)(a) endorsement covers HSBC’s loss that led to this case (ECF 3 || No. 86 at 4, 7). 4 It is further ordered that, for clarity and consistent with Deutsche Bank, neither the 5 || CLTA 100.2(1)(a), CLTA 100.2(2)(a), nor ALTA 5 endorsements cover HSBC’s loss that 6 || led to this case. 7 It is further ordered that HSBC’s amended complaint (ECF No. 62) is dismissed in 8 || its entirety. 9 The Clerk of Court is directed to enter judgment accordingly—in Chicago Title’s 10 || favor—and close this case. 11 DATED THIS 26" Day of January 2024. 13 ew MIRANDA M. DU 14 CHIEF UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28