How the courts handle foreclosure is an important point for underwater homeowners trying to avoid Las Vegas bankruptcy. In judicial foreclosures, the plaintiff-creditor must obtain a judgment by a court to initiate a foreclosure, eviction, and sale. In nonjudicial foreclosures, the creditor can simply enter a notice of default in the property registry and then initiate foreclosure. Abuse of nonjudicial foreclosures is what caused the “robo-signing” scandal, which resulted in needless foreclosures and bankruptcies.
Even in judicial mortgages, though, the defendant homeowner can sometimes wind up not arguing his or her case before a judge but instead doing so in arbitration. A recent Nevada Supreme Court opinion sided with the plaintiff creditor in an appeal brought by a defendant homeowner who had lost at arbitration. Here is what you need to know:
(1) The defendant homeowner borrowed two home loans in 2008 and then defaulted on them. The bank sued for breach of contract and judicial foreclosure, but the mortgage agreement required that the parties proceed to arbitration. So point one: Know what’s in your mortgage, especially if arbitration is compelled.
(2) The arbitrator sided with the defendant creditor and the Nevada District Court entered the sale. The defendant homeowner appealed, claiming the creditor employed “undue means” in procuring the award because it claimed that a witness the homeowner wanted to cross-examine was unavailable when in fact he was, and the arbitrator “manifestly disregarded the law” by refusing to void one of the loans. Homeowners facing arbitration over their mortgages should know that the decisions can be vacated if they were procured by fraud, corruption, or undue means.
(3) The Nevada Supreme Court noted that Nevada law did not define “undue means,” so the court declared that its meaning is similar to fraud and corruption but not identical—something like an intentional action by one of the parties to undermine the outcome, like threatening the arbitrator. Undue means must not be discoverable before arbitration, be materially related to the issue in arbitration, and it must be proven by clear and convincing evidence. Homeowners facing arbitration should be aware of this definition.
(4) The state supreme court did not find that the homeowner’s situation might the standard. The homeowner did not show that the misrepresentation about the witness’s availability was intentional, and the homeowner could have discovered that this was the case by doing its due diligence. When the homeowner found out, he could have stayed the proceeding until the witness was available. Finally, the homeowner failed to show that the witness’s presence at the trial would have changed the outcome.
(5) The Nevada Supreme Court also declined to overturn the district court’s ruling that the arbitrator manifestly disregarded the law because the defendant, a national bank, unknowingly failed to properly comply with a recording requirement. This isn’t the same thing as an arbitrator knowing what the law required and disregarding it.
The case is Sylver v. Regents Bank. The bottom line is that homeowners should beware if their mortgages have arbitration clauses, do their due diligence, and carefully argue when they think the arbitrator wantonly disregarded the law. For these situations, hiring an experienced Las Vegas bankruptcy lawyer is crucial to ensuring a favorable outcome.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-803-9251 to set up your free consultation.