Markowitz v. Saxon Special Servicing

129 Nev., Advance Opinion 61
IN THE SUPREME COURT OF THE STATE OF NEVADA

WARREN MARKOWITZ, AN No. 58761
INDIVIDUAL; AND JACQUELINE
MARKOWITZ, AN INDIVIDUAL,
Appellants,
vs.
SAXON SPECIAL SERVICING ; AND
FILED
DEUTSCHE BANK NATIONAL TRUST OCT 0_3 2013
COMPANY,
Respondents: , Ap dritilkeci

Appeal from a district court order den ying a petition for
judicial review in a Foreclosure Mediation Pro gram matter. Eighth
Judicial District Court, Clark Count y; Jessie Elizabeth Walsh, Judge.
Affirmed.

Law Office of Jacob L. Hafter & Associates and Jacob L. Hafter and
Michael K. Naethe, Las Vegas,
for Appellants.

McCarthy & Holthus, LLP, and Kristin A. Schuler-Hintz, Las Vegas,
for Respondents.

BEFORE PICKERING, C.J., GIBBONS, HARDESTY, PARRAGUIRRE,
DOUGLAS, CHERRY and SAITTA, JJ.

OPINION

PER CURIAM:
Under Nevada's Foreclosure Mediation Program Rules, the
deed-trust beneficiar y must submit an appraisal and/or a broker's price
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 opinion prepared "no more than 60 days before the commencement date of
the mediation" that provides a valuation for the home that is the subject of
the mediation. Saxon Special Servicing attended the underlying
mediation and provided a broker's price opinion that was 83 days old at
the time of mediation. We are asked to decide whether the mediation rule
requiring an appraisal or broker's price opinion that is no more than 60
days old at the time of the mediation mandates strict or substantial
compliance. We conclude that because a current appraisal or broker's
price opinion is intended to facilitate good-faith mediation negotiations,
the rule's content-based provision governing the appraisal's age is
directory rather than mandatory, and thus, substantial compliance with
the 60-day provision satisfies the mediation rule. Because the broker's
price opinion here contained a recent appraisal of the home's value
adequate to facilitate negotiations, and the homeowners did not
demonstrate that they were prejudiced by the 23-day age differential
between the price opinion provided and the rule's age provision, Saxon
Special Servicing substantially complied with the foreclosure mediation
rule requiring a current appraisal, and we therefore affirm the district
court's order denying the petition for judicial review.

I.
Appellants Warren and Jacqueline Markowitz obtained a
home loan from Fremont Investment & Loan, for which they executed a
promissory note in Fremont's favor. The note was later assigned to
respondent Deutsche Bank National Trust Company and serviced on
Deutsche Bank's behalf by respondent Saxon Special Services. After the
Markowitzes stopped making payments to Saxon, a notice of default was

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 recorded. The Markowitzes then elected to mediate in Nevada's
Foreclosure Mediation Program (FMP).
The mediation occurred on December 28, 2010. Warren
attended the mediation in person along with counsel, and Jacqueline
attended by telephone. Saxon, purporting to represent Deutsche Bank,
appeared through counsel. Saxon provided all of the required documents
for the mediation, including an 83-day-old broker's price opinion (BP0). 1
During the mediation, the Markowitzes raised concerns about Saxon's
authority to participate. Saxon's counsel explained that she had the
authority to negotiate a loan modification. The mediator spoke by
telephone with a representative of Saxon who confirmed that Saxon was
the servicer of the loan. Despite this confirmation, the Markowitzes were
not convinced that Saxon had authority to negotiate a loan modification,
and they elected to terminate the mediation.
The mediator issued a statement indicating that the
Markowitzes failed to provide certain documents for the mediation and
that Saxon failed to bring a current BPO. The mediator's statement did
not indicate that any party lacked authority to negotiate or failed to
attend the mediation. The Markowitzes filed a petition for judicial review,
which, after briefing and argument, the district court denied, concluding
that the parties had negotiated in good faith with valid authority and that
there was no reason to withhold the FMP certificate. This appeal
followed.

1A broker's price opinion is a "written analysis, opinion or
conclusion. . . relating to the estimated price for a specified parcel of real
property." NRS 645.2515(8).

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 A.
The primary issue in this appeal concerns the 83-day-old BP0
that Saxon provided for the mediation. The relevant foreclosure rule in
place at the time of this dispute required that
Mlle beneficiary of the deed of trust or its
representative shall produce an appraisal done no
more than 60 days before the commencement date
of the mediation with respect to the real property
that is the subject of the notice of default and shall
prepare an estimate of the "short sale" value of the
residence that it may be willing to consider as a
part of the negotiation if loan modification is not
agreed upon.
FMR 8(3) (2010). The rule also permitted the mediator, in his or her
discretion, to "accept a broker's price opinion letter (BPO) in addition to or
in lieu of the appraisal." FMR 8(4) (2010). These rules have since been
amended, 2 but the amendments do not change our analysis.
While the mediator here reported that Saxon failed to provide
an "appraisal within 60 days of mediation," the district court, in its de
novo review, concluded that although the BP0 was not prepared within 60
days of the mediation, neither party acted in bad faith and there was no
reason to withhold the FMP certificate. The Markowitzes maintain that
document production at mediation requires strict compliance and that a

2FMR 8 was renumbered to FMR 11, and the relevant portion of the
rule currently provides that the trust-deed beneficiary or its
representative must provide an "Appraisal and/or Brokers Price Opinion
(BPO) not more than 60 days old (prior to the date of mediation)." FMR
11(7)(e) (2013).

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 BP0 prepared beyond the 60-day limit precludes the issuance of an FMP
certificate and mandates the imposition of sanctions. Respondents
counter that the purpose of providing a BP0 or appraisal is to
"substantiate the short sale value" that the parties may agree to in the
event that a loan modification cannot be reached. Respondents insist that
the BP0 provided at mediation set forth the value of the property that
they would accept in a short sale, and that the Markowitzes were not
prejudiced by the age of the BPO. In any case, respondents argue that
because no short sale was ever discussed, as the Markowitzes elected to
terminate the mediation, the BPO's age was of no relevance.
To determine if a rule's provisions require strict or substantial
compliance, this court looks to the rule's language, and we also consider
policy and equity principles. Leyva v. Nat'l Default Servicing Corp., 127
Nev. , 255 P.3d 1275, 1278 (2011). A rule may contain both
mandatory and directory provisions. See Leven v. Frey, 123 Nev. 399, 408
n.31, 168 P.3d 712, 718 n.31 (2007); see also Einhorn v. BAC Home Loans
Servicing, LP, 128 Nev. „ 290 P.3d 249, 254 (2012); 3 Norman J.
Singer, Statutes and Statutory Construction § 57:19 (6th ed. 2001).
Generally, a rule is mandatory and requires strict compliance when its
language states a specific "time and manner" for performance. Leven, 123
Nev. at 407 n.27, 408, 168 P.3d at 717 n.27, 718. Time and manner refers
to when performance must take place and the way in which the deadline
must be met. See Village League to Save Incline Assets, Inc. v. State Bd. of
Equalization, 124 Nev. 1079, 1088, 194 P.3d 1254, 1260 (2008) (discussing
statutory deadlines); Leven, 123 Nev. at 407-08, 168 P.3d at 717-18
(addressing three-day recording statute's deadline). "[F]orm and content"
provisions, on the other hand, dictate who must take action and what

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 information that party is required to provide, Einhorn, 128 Nev. at ,
290 P.3d at 254 (stating that "who brings which documents. . . is a matter
of 'form"). Because they do not implicate notice, form and content-based
rules are typically directory and may be satisfied by substantial
compliance, id., "sufficient to avoid harsh, unfair or absurd consequences."
Leven, 123 Nev. at 407, 168 P.3d at 717 (quotation omitted). When
substantial compliance is sufficient, a party's literal noncompliance with a
rule is excused provided that the party complies with "respect to the
substance essential to every reasonable objective" of the rule. Stasher v.
Harger-Haldeman, 372 P.2d 649, 652 (Cal. 1962); see also 3 Sutherland
Statutory Construction § 57:26 (7th ed. 2012). When a party accomplishes
such actual compliance as to matters of substance, technical deviations
from form requirements do not rise to the level of noncompliance. Stasher,
372 P.2d at 652.
Deciding whether a rule is intended to impose a mandatory or
directory obligation is a question of statutory interpretation. See Village
League, 124 Nev. at 1088, 194 P.3d at 1260 (interpreting a statutory time
limit); see also Marquis & Aurbach v. Eighth Judicial Dist. Court, 122
Nev. 1147, 1156, 146 P.3d 1130, 1136 (2006) (applying rules of statutory
construction to the interpretation of a court rule). We review de novo
issues of statutory construction. Leven, 123 Nev. at 402, 168 P.3d at 714.
Our objective when interpreting a rule is to determine and implement its
purpose. Village League, 124 Nev. at 1088, 194 P.3d at 1260; see Leyva,
127 Nev. at , 255 P.3d at 1278-79.

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 1.
FMR 8(3)'s language embraces both a mandatory time
provision and a directory content provision related to the age of the
appraisal used for negotiation purposes at the mediation. The rule states
that the deed of trust beneficiary or its representative "shall prepare such
papers and provide to the mediator, and exchange the items required to be
exchanged with each other party . . . at least 10 days prior to the
mediation."3 FMR 8(1) (2010). One such paper is an appraisal and/or a
BPO, which the deed-trust beneficiary "shall produce," and in so doing,
"shall prepare an estimate of the 'short sale' value of the residence that it
may be willing to consider as a part of the negotiation if loan modification
is not agreed upon." FMR 8(3) (2010). The word "shall" is generally
regarded as mandatory. Leyva, 127 Nev. at ,255 P.3d at 1279. Here,
the rule provides that the deed-trust beneficiary or its representative
"shall produce an appraisal" and "shall prepare an estimate of the 'short
sale' value," FMR 8(3) (2010), and it "shall" do so ten days in advance of
the mediation. FMR 8(1) (2010). The purpose of FMP mediation is to
bring the parties "together to participate in a meaningful negotiation" to
resolve the dispute. Einhorn, 128 Nev. at , 290 P.3d at 250 (citing Holt
v. Reg'l Tr. Servs. Corp., 127 Nev. „ 266 P.3d 602, 607 (2011)). As
the rule explains, the value of the home is key to the negotiation, FMR
8(3) (2010), and providing the appraisal is one indicator that the trust-

3 The
current rule provides that "[t] he beneficiary of the deed of trust
must prepare and submit, at least 10 days prior to the mediation" various
documents to be provided to the homeowner and mediator. FMR 11(7)
(2013).

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 deed beneficiary participated in the mediation in good faith. Pasillas v.
HSBC Bank USA, 127 Nev. „ 255 P.3d 1281, 1284 (2011). Thus,
the rule's mandatory language weighs in favor of requiring strict
compliance, as the appraisal is a necessary document for the mediation
and good-faith negotiations therein.

2.
But the rule also provides that the appraisal or BPO shall be
prepared "no more than 60 days before the commencement date of the
mediation." FMR 8(3) (2010). Separating the rule into its procedural and
substantive parts, the "shall prepare such papers . . . at least 10 days prior
to the mediation" language refers to the time when the deed of trust
beneficiary is required to give the mediator and the homeowners the
appraisal or BPO. This provision governs the time and manner for the
deed of trust beneficiary to perform one of its duties to negotiate in good
faith. Such provisions generally must be complied with strictly. Leven,
123 Nev. at 408, 168 P.3d at 718. The rule's "no more than 60 days" old
language, however, refers to the age of the appraisal or BPO, so that the
parties may negotiate based on the home's present value, and thus,
addresses form and content. Such requirements may generally be
satisfied by substantial compliance. Id.
The policy behind providing a recent appraisal and/or BPO at
the mediation is to ensure that the fair market value of the property is
known to both parties to the mediation at the time when they are
negotiating a potential loan modification or determining whether a short
sale would be appropriate. FMR 8(3) (2010). This allows for fully
informed negotiations to occur and ensures that offers made are based on
the present economic reality concerning the property and are consistent
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 with the FMP's purpose of bringing the parties together for meaningful
negotiation. Einhorn, 128 Nev. at , 290 P.3d at 250 (citing Holt, 127
Nev. at , 266 P.3d at 607).
Requiring an appraisal or BPO to be no more than 60 days old
facilitates informed negotiation based on accurate information, and this
purpose may be met through substantial compliance, as a slightly older
BP0 may be just as accurate as a 60-day-old BPO. See Leyva, 127 Nev. at
255 P.3d at 1279. By contrast, a 200-day-old BP0 would likely reflect
very different market valuations than a BP0 that was reasonably close to
the FMR's 60-day valuation window. Providing a BP0 that is so old that
it has become inaccurate frustrates the FMP's goal. Therefore, the policy
concern regarding the age of an appraisal or BPO is a matter of content,
which is directory, and the requirement may be satisfied by substantial
compliance. Leven, 123 Nev. at 408, 168 P.3d at 718.

3.
In terms of equity concerns, despite the fact that the
underlying 83-day-old BPO was beyond the 60-day limit, the Markowitzes
made no effort to demonstrate that it was inaccurate. As such, there
appears to be no prejudice or harm to the Markowitzes in having an 83-
day-old BPO from which to negotiate a loan modification, see Einhorn, 128
Nev. at , 290 P.3d at 254, and the goal of providing accurate
information to ensure meaningful negotiations was accomplished. Id. at
, 290 P.3d at 250. Thus, in weighing the equities, where the
Markowitzes have not shown any prejudice in their ability to negotiate a
loan modification based on the BP0 age, and respondents would be denied
the ability to exercise their contractual remedy of foreclosure for want of a
strictly compliant 60-day or younger BPO, we conclude that withholding
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 the FMP certificate would be an inequitably harsh consequence, and
equity favors reviewing the BPO for substantial compliance. See Holt, 127
Nev. at , 266 P.3d at 606-07 (recognizing consequences of denial of the
ability to foreclose).
We therefore hold that an appraisal or BPO older than 60
days may nevertheless substantially comply with the FMR sufficient to
avoid the imposition of sanctions when there is no evidence that the BPO
is so old that it would impair the FMP's policy of facilitating good-faith
negotiations or the BPO's content is inaccurate to the extent that the
homeowners would be prejudiced. Such is the situation in the present
matter, and thus, the district court therefore correctly declined to impose
sanctions and denied judicial review based on respondents' stale BPO. See
Edelstein v. Bank of N.Y. Mellon, 128 Nev. „ 286 P.3d 249, 260
(2012).

B.
One other issue remains for our consideration: whether
respondents properly participated in the mediation session with the
requisite authority to negotiate a loan modification. The Markowitzes
argue that the mediation was flawed because Saxon did not establish valid
authority to negotiate the loan. Respondents contend that Saxon, as
Deutsche Bank's servicer, is a valid representative of Deutsche Bank for
purposes of participating in the FMP and that the Markowitzes were
aware of the relationship between Saxon and Deutsche Bank.
The deed-trust beneficiary may participate in the FMP
mediation directly or through a representative with proper authority to
negotiate a loan modification. NRS 107.086(5). The record before us
establishes Saxon's status as Deutsche Bank's loan servicer and its
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 authority to modify the loan in its capacity as Deutsche Bank's
representative. The record contains the publicly recorded substitutions of
trustee, which the Markowitzes included as exhibits to their petition for
judicial review, and which demonstrate Saxon's status as the loan servicer
and Deutsche Bank's status as the beneficiary of the deed of trust.
Further, the evidence submitted in their judicial review proceeding shows
that, until the Markowitzes ceased paying their mortgage, they made
payments to Saxon, and thus, they recognized Saxon's role as the loan
servicer. And before the Markowitzes defaulted on the loan, they entered
into a stipulation that specifically recited that Saxon was the servicing
agent for Deutsche Bank. Saxon therefore properly attended the
mediation as Deutsche Bank's representative. See NRS 107.086(5); see
also Edelstein, 128 Nev. at n.11, 286 P.3d at 260 n.11 (stating that a
servicer is a valid representative under NRS 107.086(5)).
The Markowitzes also contend that respondents lacked
authority to participate in the FMP because MERS was incapable of acting
as a beneficiary of the deed of trust, and thus, it could not have validly
transferred the mortgage note to Deutsche Bank. This court rejected this
argument in Edelstein, 128 Nev. at , 286 P.3d at 260-61 (holding that a
MERS assignment of the deed of trust validly transfers the note), and
based on the record in this matter, we conclude that through the valid
MERS assignment, Deutsche Bank was the beneficiary of the deed of trust
and holder of the promissory note, with authority to participate in FMP
mediation and modify the loan. 4 The district court therefore did not err in

4Appellants
also argue that the MERS assignment is invalid because
it was executed in March 2009, but not notarized until June 2009.
continued on next page . . .
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 determining that respondents validly appeared at the mediation with
authority to negotiate a loan modification. Id. at , 286 P.3d at 260
(explaining that the district court's factual and legal conclusions are
reviewed for error, while the choice of sanction is committed to the district
court's discretion).

IV.
We discern no violation that would preclude the FMP
certificate from issuing, and we therefore affirm the district court's order.

, C.J.

Gibbons Hardesty

Parr

Cherry

. . • continued
Appellants do not cite to any Nevada authority that requires an
assignment of a deed of trust to be acknowledged in front of a notary on
the date it is generated. See Einhorn, 128 Nev. at n.4, 290 P.3d at 252
n.4.

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