Pre-Sale Payments to the Foreclosing HOA Alone Satisfy Superpriority and Convert a Multi-HOA Foreclosure to Subpriority (Deed of Trust Survives)

1. Introduction

DEUTSCHE BANK NAT'L TR. CO. v. COLLEGIUM FUND LLC SER. 16 (142 Nev., Advance Opinion 1) arises from a quiet title dispute after an HOA lien foreclosure sale. Appellant Deutsche Bank National Trust Company held the first deed of trust on a residence subject to two HOAs: Aliante Master Association (the foreclosing HOA) and Autumn Ridge at Aliante Community Association (a non-foreclosing HOA that also recorded a lien). Respondent Collegium Fund LLC Series 16 purchased the property at Aliante’s HOA foreclosure sale and sued to quiet title, asserting the sale extinguished the first deed of trust.

The case presented two closely related issues central to Nevada HOA foreclosure law:

Whether a homeowner’s pre-sale payments—made without instructions—must be applied first to the HOA’s superpriority portion, thereby eliminating superpriority and converting the foreclosure to subpriority only.
Whether, when two HOAs have liens on the same property, paying off the foreclosing HOA’s superpriority portion is enough to convert the sale to subpriority, or whether the non-foreclosing HOA’s superpriority portion must also be paid to achieve that conversion.

2. Summary of the Opinion

The Nevada Supreme Court reversed the district court’s judgment for Collegium. It held:

Under Deutsche Bank Tr. Co. Ams. ex rel. Rali 2006QA5 u. SFR Inus. Pool 1, LLC (“Swaggerty”), in the absence of express direction from the homeowner, an HOA may not allocate payments in a manner that preserves superpriority to the detriment of the homeowner and the deed of trust holder; the law presumes the superpriority portion is paid first unless there is a compelling reason otherwise.
Even where two HOAs have recorded liens, paying off the foreclosing HOA’s superpriority portion alone converts that HOA’s foreclosure into a subpriority-lien-only sale; the homeowner/bank does not also need to pay the non-foreclosing HOA’s superpriority portion for the conversion to occur.

Because a subpriority lien is junior to a first deed of trust, Deutsche Bank’s deed of trust survived and Collegium took title subject to that encumbrance.

3. Analysis

3.1. Precedents Cited

(a) Split-lien framework and what superpriority includes

The court situated the dispute within the split-lien structure established in SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., which recognized that NRS 116.3116 divides an HOA lien into: (i) a superpriority piece senior to a first deed of trust, and (ii) a subpriority piece junior to a first deed of trust. The court also noted SFR Invs. Pool 1, LLC v. U.S. Bank, N.A. was “superseded by statute on other grounds as stated in Saticoy Bay LLC Series 9050 W Warm Springs 2079 u. Neu. Ass'n Servs.,” but its split-lien principle remains foundational for pre-sale payoff analysis.

To define the components of the superpriority portion, the court relied on:

Prop. Plus LLC u. Mortg. Elec. Registration Sys., Inc. (superpriority comprises, at most, nine months of unpaid assessments predating the notice of claim of lien, plus certain limited charges if shown).
Horizons at Seven Hills Homeowners Ass'n u. Ikon Holdings, LLC (superpriority does not include foreclosure fees and collection costs).

Those authorities mattered because they enabled the court to quantify Aliante’s superpriority exposure (here, modest monthly dues and only a limited number of delinquent months), and therefore to assess whether the homeowner’s payments were sufficient to satisfy it.

(b) Payment allocation rule (Swaggerty) and review standards

The district court had treated payment allocation as the HOA’s discretionary choice when the homeowner did not specify allocation. The Supreme Court rejected that legal conclusion as inconsistent with Deutsche Bank Tr. Co. Ams. ex rel. Rali 2006QA5 u. SFR Inus. Pool 1, LLC (“Swaggerty”).

The court framed its review posture using Wells Fargo Bank, N.A. u. Radecki: legal conclusions are reviewed de novo; factual findings are reviewed for clear error/substantial evidence. The reversal turned on legal error—misapplying the governing allocation rule—rather than deference-bound factfinding.

The opinion also addressed whether Swaggerty applied to a case tried earlier. Citing a general retroactivity principle (20 Am. Jur. 2d Courts § 149), it held that even assuming Swaggerty “changed the law,” it still applied to this case pending on appeal. The court further noted Swaggerty relied on 9352 Cranesbill Trust v. Wells Fargo Bank, N.A., signaling continuity rather than novelty in the underlying equitable premise.

(c) Multiple HOA liens and the limits of Southern Highlands

The district court treated Southern Highlands Community Association u. San Florentine Avenue Trust as establishing that “the foreclosure of one [HOA lien] is the foreclosure of all,” and therefore required payment of both HOAs’ superpriority portions to convert the sale to subpriority. The Supreme Court rejected that reading.

The court carefully distinguished Southern Highlands Community Association u. San Florentine Avenue Trust: it involved equal-priority HOA liens and held that when one equal priority lienholder forecloses, other equal priority liens are extinguished and lienholders share in sale proceeds. But extinguishment of an equal-priority lien is not the same as foreclosing that lien, and Southern Highlands Community Association u. San Florentine Avenue Trust did not address (i) pre-sale satisfaction of superpriority, (ii) conversion to subpriority, or (iii) the survival of a first deed of trust.

The court found persuasive the federal decision Bank of N.Y. Mellon u. Seuen Hills Master Cmty. Ass'n, which rejected the same misreading of Southern Highlands Community Association u. San Florentine Avenue Trust and held that tender/payment to the foreclosing HOA preserves the deed of trust without requiring tender to the non-foreclosing HOA.

(d) Conversion to subpriority and senior interests surviving foreclosure

Once superpriority is satisfied, the foreclosing HOA is left foreclosing a subpriority lien. The court cited Bank of Am., N.A. u. SFR Inus. Pool 1, LLC for the proposition that paying off the superpriority portion reduces what remains to subpriority.

To explain lien survival principles, the court invoked the general foreclosure rule reflected in Restatement (Third) of Property (Mortgages) § 7.1: foreclosure terminates junior interests, but not senior interests. This anchored the court’s conclusion that, after conversion to subpriority, the first deed of trust remains on title, and any remaining senior HOA superpriority lien (from the non-foreclosing HOA) also survives.

3.2. Legal Reasoning

(a) The allocation holding: payments presumptively satisfy superpriority first

The opinion’s first pillar is the allocation rule from Swaggerty. The homeowner made payments to Aliante without directing application. Aliante applied the payments “to the lien debt as a whole,” leaving a small remainder of the superpriority portion. The court held that this kind of allocation—where it preserves superpriority to facilitate extinguishment of the deed of trust—is invalid absent express homeowner direction.

Critically, the court treated the “superpriority paid first” rule as a legal presumption grounded in equity (“principles of justice and equity”) designed to prevent forfeiture of the homeowner’s and lender’s interests through an HOA’s unilateral accounting choice. Applying that presumption, the homeowner’s payments were sufficient to satisfy Aliante’s superpriority portion “as a matter of law,” converting the impending foreclosure into a subpriority-only sale.

(b) The multi-HOA holding: only the foreclosing HOA’s superpriority must be satisfied to convert the sale

The second pillar rejects the idea that the existence of a second HOA lien blocks conversion unless the second HOA is also paid. The court reasoned that once the foreclosing HOA’s superpriority is satisfied, the foreclosing HOA is no longer an “equal priority” superpriority lienholder; it is a subpriority lienholder (unless and until it rescinds/re-notices and a new superpriority component arises under the statutory scheme).

With the foreclosing HOA demoted to subpriority, the premise for Southern Highlands Community Association u. San Florentine Avenue Trust—two equal priority liens—falls away. As a result:

The foreclosing HOA’s subpriority foreclosure cannot extinguish senior interests (the first deed of trust and any other senior lien).
The non-foreclosing HOA’s superpriority lien, being senior to the foreclosed subpriority lien, likewise survives.

The court emphasized practical consequences: requiring payment to a non-foreclosing HOA to “convert” a foreclosing HOA sale would “undermine the split-lien scheme” and “disserve efficiency,” effectively doubling the price of preserving a deed of trust in multi-HOA settings.

3.3. Impact

Clarified conversion rule in multi-HOA properties: Paying (or, under the allocation presumption, having paid) the foreclosing HOA’s superpriority portion is enough to convert that foreclosure into a subpriority-lien-only sale—even if another HOA has its own superpriority lien.
Title and underwriting consequences: HOA-sale purchasers cannot assume “one HOA foreclosure wipes out everything” where pre-sale payments may have satisfied superpriority or where another HOA’s lien exists. Purchasers must evaluate whether the foreclosing HOA’s superpriority was satisfied and whether other senior encumbrances remain.
Operational constraint on HOA accounting: HOAs cannot, by internal payment application choices, preserve superpriority to engineer deed-of-trust extinguishment where the homeowner did not expressly direct that result.
Litigation framing: Quiet title disputes will increasingly turn on (i) the statutory superpriority calculation, (ii) the payment record, and (iii) whether any “express allocation” existed—rather than solely on sale notices and recitals.

4. Complex Concepts Simplified

Superpriority vs. subpriority: Nevada HOA liens are “split.” The superpriority portion (generally up to nine months of certain assessments before the notice of lien) can be senior to the first deed of trust; the subpriority portion is junior and cannot wipe out the deed of trust when foreclosed.
“Conversion” of the sale: If the superpriority portion is paid before the foreclosure sale, what remains is only subpriority. A foreclosure of only subpriority is like any junior-lien foreclosure: it does not extinguish senior liens such as a first deed of trust.
Payment allocation: If a homeowner pays the HOA but does not specify what the payment should cover, the HOA cannot apply the payment in a way that keeps superpriority alive solely to enable foreclosure to eliminate the deed of trust. The law presumes superpriority is paid first unless there is a compelling reason to depart.
“Equal priority” HOA liens (Southern Highlands): If two HOA liens truly share equal priority and one is foreclosed, the other can be extinguished and share in proceeds. But that doctrine does not mean the foreclosure “forecloses” the other lien, and it does not create a requirement to pay both HOAs to convert a foreclosing HOA’s sale to subpriority.

5. Conclusion

This decision reinforces two interlocking protections within Nevada’s HOA foreclosure regime. First, under Swaggerty, an HOA cannot manipulate payment application (absent express homeowner direction) to preserve superpriority and destroy a deed of trust; superpriority is presumed paid first. Second, where multiple HOAs exist, satisfying the foreclosing HOA’s superpriority portion alone converts its foreclosure to subpriority; the first deed of trust survives, and the non-foreclosing HOA’s superpriority lien is not required to be paid to achieve that conversion.

The court’s approach preserves the integrity of the split-lien scheme under NRS 116.3116, limits overbroad readings of Southern Highlands Community Association u. San Florentine Avenue Trust, and recalibrates risk for HOA-sale purchasers by underscoring that title-clearing effects depend on what was actually left to foreclose at the time of sale.