Nevada Homeowners Win Against Foreclosing Bank in Nevada Supreme Court

Many Las Vegas homeowners are either underwater on their mortgages or they have already defaulted on them. The result is usually foreclosure, unless the homeowners can strike a deal with the lender like a short-sale or a deed-in-lieu of foreclosure agreement. Sometimes, though, a foreclosure goes forward, and in some of these instances, it might be unlawful, particularly in Nevada, which allows nonjudicial foreclosures that do not require a judge to approve the process. This might be what happened to one pair of Nevada homeowners, whose victory at the state supreme court will allow them another chance to stay in their home. Here is what happened.

George P. Chapman and Brenda J. Gully Chapman bought a house, they fell on hard times, and Deutsche Bank National Trust Company foreclosed on them. It then bought the home at a trustee’s sale, but the Chapman’s did not vacate, prompting Deutsche Bank to file an “unlawful detainer” action against them in Reno. Unlawful detainer is an eviction proceeding. The Chapmans responded by countersuing Deutsche Bank on a “quiet title” theory and alleging that it foreclosed on them even though it did not own either the promissory note or the deed of trust securing it and that the trustee’s sale was thus invalid.

In a clever move, Deutsche Bank removed the case from Nevada state court to federal district court. The Chapmans moved the district court to remand their counterclaim to state court because Deutsche Bank’s decision to file its unlawful detainer action there gave the state court exclusive jurisdiction over the dispute. The district court denied the Chapmans’ motion to remand the case to state court and granted Deutsche Bank’s motion to dismiss their counterclaim.

The Chapman’s appealed to the Ninth Circuit Court of Appeals arguing that the “prior-exclusive-jurisdiction doctrine” required the federal courts to abstain from deciding the lawsuits. The federal appeals court held that Nevada law did not define whether “unlawful detainer” and “quiet title” actions are in rem or quasi in rem actions, which center on real estate and are subject to the “prior-exclusive-jurisdiction doctrine,” so it asked the Nevada Supreme Court to clarify the issue.

Somewhat predictably, the Nevada Supreme Court held that unlawful detainer and quiet title actions are in rem or quasi in rem, invalidating the federal district court’s dismissal of the Chapmans’ quiet title action. The ultimate result is that the Chapmans will have their day in state court against Deutsche Bank over whether the foreclosure was lawful. It is, however, a victory for Nevada homeowners against banks that try to use procedural tactics to dismiss homeowners’ valid legal claims in federal court.

As exciting as the Chapmans’ victory is, an ounce of prevention is worth a pound of cure. If you are facing foreclosure, or are having trouble making mortgage payments, it’s in your interest to discuss your situation with an experienced Las Vegas bankruptcy lawyer before your case goes to federal and state appellate courts.

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.