United States District Court, D. Nevada
January 4, 2017
WELLS FARGO BANK N.A., Plaintiff,
SFR INVESTMENTS POOL 1, LLC, Defendant.
C. JONES United States District Judge
case arises out of a homeowners' association
(“HOA”) foreclosure sale. Pending before the
Court is a motion to certify a question of law to the Nevada
FACTS AND PROCEDURAL HISTORY
about February 9, 2005, Anthony V. Roybal gave Plaintiff
Wells Fargo Bank, N.A. (“Wells Fargo”) a $270,
000 promissory note (“the Note”) in exchange for
proceeds in that amount to purchase real property at 2280
Laramine River Dr., Henderson, NV 89502 (“the
Property”), as well as a first deed of trust
(“the DOT”) against the Property. (See
Am. Compl. ¶¶ 4, 8-9, ECF No. 79). Wells Fargo
became the assignee of the Note and DOT on or before May 24,
2010, when the assignment was recorded. (See Id.
¶ 10). When Roybal became delinquent on his HOA dues,
Nevada Association Services, Inc., as agent for Sunrise Ridge
Manor HOA (“the HOA”), recorded an HOA lien
against the Property and conducted a foreclosure sale at
which Defendant SFR Investments Pool 1, LLC
(“SFR”) purchased the Property for $18, 000.
(Id. ¶¶ 11-14).
Fargo sued SFR in this Court for declaratory relief that the
HOA foreclosure did not extinguish the first mortgage, and to
quiet title to that effect. Defendant filed counterclaims and
third-party claims against Wells Fargo, Roybal, and Bank of
America, N.A. (“BOA”) for declaratory relief that
the HOA foreclosure extinguished Plaintiff's first
mortgage, BOA's second mortgage, and any interest of
Roybal in the Property, to quiet title to that effect, and
for unjust enrichment. Wells Fargo and SFR filed cross
motions for summary judgment. The Court granted Wells
Fargo's motion and denied SFR's. SFR and BOA later
filed a stipulation that BOA's second deed of trust was
extinguished by the HOA foreclosure sale and that BOA claimed
no interest in the Property. SFR asked the Clerk to enter
default against Roybal as to its third-party claims, but the
Court denied the motion because there was no evidence of
service upon Roybal. The Clerk entered default after SFR
submitted proof of service. The Court granted a stipulation
to vacate its previous summary judgment order when the Nevada
Supreme Court decided SFR Investments Pool I, LLC v. U.S.
Bank, N.A., 334 P.3d 408 (Nev. 2014), ruling that HOA
foreclosures extinguished first deeds of trust under Nevada
Revised Statutes section (“NRS”) 116.3116.
meantime, Wells Fargo had conducted a non-judicial
foreclosure sale of the Property under Chapter 107 at which
it purchased the Property itself. (See Am. Compl.
¶¶ 18- 21). Wells Fargo filed the Amended Complaint
(“AC”) for declaratory relief, quiet title, and
unjust enrichment. SFR filed the Counterclaim for quiet
title, declaratory relief, wrongful foreclosure, unjust
enrichment, injunctive relief, and intentional interference
with contractual relations.
Fargo filed two summary judgment motions, and SFR filed one.
The Court granted Wells Fargo's motions and denied
SFR's, ruling that the notice procedure under Chapter 116
was facially unconstitutional under the Due Process Clause of
the Fourteenth Amendment, see Bourne Valley Court Tr. v.
Wells Fargo Bank, N.A., 832 F.3d 1154, 1160 (9th Cir.
2016), that the common law wrongful foreclosure counterclaim
therefore necessarily also failed, that any action under
Chapter 107 was untimely, and that the counterclaims for
unjust enrichment and intentional interference with
contractual relations would fail even if SFR had not
withdrawn them. The Court solicited a proposed judgment from
Wells Fargo. Wells Fargo complied, and the Court has entered
judgment. After Wells Fargo submitted the proposed judgment,
but before the Court entered it, SFR asked the Court to
certify a question of law to the Nevada Supreme Court.
Court may certify a question to the Nevada Supreme Court if
the answer to the question will be “determinative of
the cause.” See Nev. R. App. Proc. 5(a);
Volvo Cars of N. Am., Inc. v. Ricci, 137 P.3d 1161,
1164 (Nev. 2006) (adopting the Arkansas-California-New Mexico
interpretation of “determinative of the cause” as
meaning that the answer will be determinative of at least
part of the federal case).
asks the Court to certify the following question to the
Nevada Supreme Court: “Does NRS 116.31168(1)'s
incorporation of NRS 107.090 require homeowners'
associations to provide notices of sale to banks even when a
bank does not request notice?” The Court will not
certify the question. As the Court has ruled in a previous
case after careful analysis of the language of the statute,
the statute's legislative history, and the Nevada Supreme
Court's own language interpreting the statute's
operation, the answer is “no.” See U.S. Bank,
N.A. v. SFR Invs. Pool 1, LLC, 124 F.Supp.3d 1063,
1079-80 (D. Nev. 2015) (citing SFR Invs. Pool 1, LLC v.
U.S. Bank, N.A., 334 P.3d 408, 411 (Nev. 2014)). The
Court of Appeals has since ruled in accord. See Bourne
Valley Court Tr., 832 F.3d at 1159 (reasoning that NRS
116.31168's incorporation of NRS 107.090(3)-(4) would
render NRS 116.31163 and 116.311635 superfluous). Absent
intervening, contrary, binding authority, i.e., from the U.S.
or Nevada Supreme Courts, this Court is bound by the Court of
Appeals' rulings as to Nevada law. See Mohamed v.
Uber Techs., Inc., 836 F.3d 1102, 1111 (9th Cir. 2016).
assuming that the Nevada Supreme Court were to rule that the
statutes as they existed at the relevant time required notice
of sale to first deed of trust holders, SFR would still have
to show compliance. SFR does not even appear to claim any
party's attempt to mail the notice of sale to Wells
Fargo, and any conclusive presumption of notice under state
law would itself be facially infirm under the Due Process
Clause. Reasonable notice under the Due Process Clause is a
factual inquiry “under all the circumstances”
that cannot be obviated by legal presumptions under state (or
federal) law. See Jones v. Flowers, 547 U.S. 220,
226-27 (2006) (quoting Mullane v. Cent. Hanover Bank
& Tr. Co., 339 U.S. 306, 314 (1950)); Mennonite
Bd. of Missions v. Adams, 462 U.S. 791, 799 (1983);
see also United States v. Simmons, 476 F.3d 33,
36-37 (9th Cir. 1973) (holding that regulations establishing
irrebuttable or conclusive presumptions of receipt of mailed
notices violate due process). A statute that explicitly
disregarded the actual factual circumstances of notice in
favor of a conclusive presumption would be facially infirm
under the Due Process Clause, at least where the thing to be
noticed is an impending loss of property rights.
HEREBY ORDERED that the Motion to Certify (ECF No. 1118) is