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Bank of New York Mellon v. Highland Ranch Homeowners Association

United States District Court, D. Nevada

May 23, 2017



          ROBERT C. JONES United States District Judge.

         This case arises from a residential foreclosure by the Highland Ranch Homeowners Association (“Highland Ranch” or “HOA”) for failure to pay HOA assessments. Now pending before the Court is a Motion to Reconsider the prior grant of summary judgment in favor of Plaintiff Bank of New York Mellon (“Plaintiff”). (Mot. Recon., ECF No. 47.) For the reasons given herein, the Court denies the motion.


         In 2004, non-party homeowners obtained a $250, 000 mortgage loan to purchase property located at 6411 Samish Court, Sun Valley, Nevada 89433 (the “Property”). Plaintiff acquired the note and Deed of Trust (“DOT”) by Corporate Assignment of Deed of Trust recorded October 7, 2009. (Compl. ¶¶ 15-16, ECF No. 1.)

         On November 1, 2011, as a result of the homeowners' failure to pay HOA fees, the HOA recorded a notice of delinquent assessment. (Id. at ¶ 17.) On June 20, 2014, Defendant Kern & Associates Ltd. (“Kern”) conducted a foreclosure sale on behalf of the HOA, at which time Defendant TBR I, LLC (“TBR”) purchased the Property for $31, 100. (Compl. ¶¶ 27-28; Mot. Dismiss 4, ECF No. 8.) The deed of sale was recorded on July 8, 2014. (Compl. ¶ 27.) Subsequently, TBR transferred its interest in the Property to Defendant Airmotive Investments, LLC (“Airmotive”) by way of quitclaim deed recorded February 29, 2016. (Id. at ¶ 29.)

         On July 22, 2016, Plaintiff brought this action for quiet title and declaratory relief, violation of NRS 116.1113, wrongful foreclosure, injunctive relief, and deceptive trade practices. On August 15, 2016, Kern moved to dismiss Plaintiff's claims against it. (ECF No. 8.) On August 29, 2016, the HOA also moved to dismiss Plaintiff's fifth cause of action for deceptive trade practices. (ECF No. 18.) On September 1, 2016, Plaintiff filed an opposition to the motions to dismiss and a countermotion for summary judgment. (ECF No. 21.) On October 5, 2016, Kern moved for sanctions against Plaintiff under Federal Rule of Civil Procedure 11 arising from the filing of the Complaint. (ECF No. 39.)

         On December 6, 2016, the Court granted summary judgment for Plaintiff on the claim of quiet title and dismissed the remaining claims as moot. (Order, ECF No. 45.) The Court held that the HOA's foreclosure sale could not have extinguished the DOT because the sale was conducted pursuant to NRS 116.3116, and the Ninth Circuit had recently ruled in Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), that the statute's opt-in notice provisions are facially unconstitutional. Airmotive now argues that the Court committed error in granting summary judgment on this basis, and asks the Court to reconsider its ruling. (Mot. Recon., ECF No. 47.)


         Granting a motion to reconsider is an “extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources.” Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003) (quoting 12 James Wm. Moore et al., Moore's Federal Practice § 59.30[4] (3d ed. 2000)). “Reconsideration is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). In some cases, “other, highly unusual, circumstances” may also warrant reconsideration. Id.

         However, a motion to reconsider “may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation.” Carroll, 342 F.3d at 945; see also United States v. Lopez-Cruz, 730 F.3d 803, 811-12 (9th Cir. 2013). Moreover, “[a] motion to reconsider is not a second chance for the losing party to make its strongest case or to dress up arguments that previously failed.” United States v. Huff, 782 F.3d 1221, 1224 (10th Cir.), cert. denied, 136 S.Ct. 537 (2015).

         III. ANALYSIS

         a. The Scope and Effect of Bourne Valley

         In Bourne Valley, the Ninth Circuit held that the “opt-in notice scheme” of NRS 116.3116-included in the statute until its amendment in October 2015-was facially unconstitutional because it violated the procedural due process rights of mortgage lenders. In its ruling, the Court of Appeals found the state action requirement of the petitioner's Fourteenth Amendment challenge was met, because “where the mortgage lender and the homeowners' association had no preexisting relationship, the Nevada Legislature's enactment of the Statute is a ‘state action.'” Bourne Valley, 832 F.3d at 1160. In other words, because a mortgage lender and HOA generally have no contractual relationship, it is only by virtue of NRS 116.3116 that the mortgage lender's interest is “degraded” by the HOA's right to foreclose its lien. Id. Accordingly, by enacting the statute, the Legislature acted to adversely affect the property interests of mortgage lenders, and was thus required to provide “notice reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Id. at 1159 (quoting Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 795 (1983)). The statute's opt-in notice provisions therefore violated the Fourteenth Amendment's Due Process Clause because they impermissibly “shifted the burden of ensuring adequate notice from the foreclosing homeowners' association to a mortgage lender.” Id. at 1159.

         The necessary implication of the Ninth Circuit's opinion in Bourne Valley is that the petitioner succeeded in showing that no set of circumstances exists under which the opt-in notice provisions of NRS 116.3116 would pass constitutional muster. See United States v. Salerno, 481 U.S. 739, 745 (1987) (“A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid.”); see also William Jefferson & Co. v. Bd. of Assessment & Appeals No. 3 ex rel. Orange Cty., 695 F.3d 960, 963 (9th Cir. 2012) (applying Salerno to facial procedural due process challenge under the Fourteenth Amendment); Lopez-Valenzuela v. Arpaio, 770 F.3d 772, 789 (9th Cir. 2014) (applying Salerno to facial substantive due process challenge under the Fifth and Fourteenth Amendments). The fact that a statute “might operate unconstitutionally under some conceivable set of circumstances is insufficient to render it wholly invalid.” Id. To put it slightly differently, if there were any conceivable set of circumstances where the application of a statute would not violate the constitution, then a facial challenge to the statute would necessarily fail. See William Jefferson & Co., 695 F.3d at 963 (“If William Jefferson's as-applied challenge fails, then William Jefferson's facial challenge necessarily fails as well because there is at least one set of circumstances where ...

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