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Wells Fargo Bank, N.A. v. SFR Investments Pool 1, LLC

United States District Court, D. Nevada

November 14, 2017

WELLS FARGO BANK, NA, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF STRUCTURED ASSET MORTGAGE INVESTMENTS II, INC., BEAR STEARNS MORTGAGE FUNDING, TRUST 2007-AR5, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2007-AR5, Plaintiff,
v.
SFR INVESTMENTS POOL 1, LLC, a Nevada limited liability corporation; SILVERSTONE RANCH COMMUNITY ASSOCIATION, a Nevada non-profit corporation, Defendants.

          Diana Cline Ebron, Esq. Nevada Bar No. 10580 Jacqueline A. Gilbert, Esq. Nevada Bar No. 10593 Karen L. Hanks, Esq. Nevada Bar No. 9578 Kim Gilbert Ebron Attorney for Defendant, SFR Investments Pool 1, LLC

          MOTION TO STAY CASE

          RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE

         SFR Investments Pool 1, LLC (“SFR”) hereby moves to stay this matter.

         MEMORANDUM OF POINTS AND AUTHORITIES

         On August 12, 2016, a divided Ninth Circuit panel issued its decision in Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1159-60 (9th Cir. 2016), holding that Nevada Revised Statutes Chapter 116's Association non-judicial foreclosure scheme, as it existed before amendment in 2015, violates the Due Process Clause and is facially unconstitutional. The Bourne Valley majority opinion does not address that the Supreme Court of Nevada construed NRS 116 to require notice to the mortgage lenders. See SFR Investments Pool 1, LLC v. U.S. Bank, NA., 334 P.3d 408, 417-18 (Nev. 2014) (en banc). Even the dissenting justices in SFR agreed this was the proper interpretation of Nevada's statutory scheme. See id. at 422. Further, the Supreme Court of Nevada has already concluded that NRS 116 does not offend due process. Id. at 418. The Court of Appeals issued its mandate in Bourne Valley on December 14, 2016, vacating and remanding the judgment to the United States District Court, District of Nevada.

         On April 26, 2017, this Court certified a question regarding NRS 116's notice requirement to the Nevada Supreme Court. See The Bank of New York Mellon v. Star Hill Homeowners Association, et al., Case No. 2:16-cv-02561-RFB-PAL, [ECF No. 41]. And this question has been accepted by the Nevada Supreme Court. See SFR Investments Pool 1, LLC v. The Bank of New York Mellon, Nevada Supreme Court Case No. 72931 (Jun. 13, 2017)(Order Accepting Certified Question). Briefing is currently in process. Given the potential impact the ultimate outcome this certified question may have on the issues in this litigation, a temporary stay of litigation in this matter is appropriate.

         I. Legal Argument

         A. Background

         This is a dispute over the effect of a non-judicial foreclosure sale of a home conducted by Silverstone Ranch Community Association (“Association”). Specifically, the home's prior owner failed to pay Association assessments, the Bank failed to preserve its deed of trust by not paying the Association lien before the foreclosure sale, and a bona fide purchaser, SFR, bought the property. Subsequently, litigation ensued.

         However, despite the fact Bourne Valley has run its course on appeal, good cause exists to continue the stay. On April 26, 2017, a Certified Question was presented by your Honor to the Nevada Supreme Court regarding NRS 116's notice requirement. See The Bank of New York Mellon v. Star Hill Homeowners Association, et al., Case No. 2:16-cv-02561-RFB-PAL, [ECF No. 41]. Specifically, the Certified Question presented is as follows: “Whether NRS § 116.31168(1)'s incorporation of NRS § 107.090 requires homeowner's association to provide notices of default to banks even when a bank does not request notice?” On June 13, 2017, the Nevada Supreme Court issued an Order accepting the Certified Question. See SFR v. The Bank of New York Mellon, Nevada Supreme Court Case No. 72931 (Jun. 13, 2017)(Order Accepting Certified Question). Briefing in that matter is currently in progress.

         An affirmative answer to this Certified Question will mean that NRS 116.31168 fully incorporates NRS 107.090, and mandates notice to junior lienholders of record such as the Bank. This, in turn, will establish that NRS Chapter 116's notice provisions are constitutional based on a ruling from Nevada's highest court, and will wholly supersede Bourne Valley. As noted in the order certifying, “‘It is solely within the province of the state courts to authoritatively construe state legislation.” Star Hill Homeowners Association, No. 2:16-cv-02561 [ECF 41] at p.6. (quoting Cal. Teachers Ass'n v. State Bd. of Educ., 271 F.3d 1141, 1146 (9th Cir. 2001)). “[I]f the state court disapproves of the interpretation given by the federal court, then the federal courts must follow the interpretation by the state court. Id., citing Huddleston v. Dwyer, 322 U.S. 232, 236 (1944); Owen v. United States, 713 F.2d 1461, 1464 (9th Cir.1983) (a federal court's construction of state law is “only binding in the absence of any subsequent indication from the [state appellate] courts that our interpretation was incorrect.”)).” “[A] state supreme court can overrule [the 9th Circuit] on a question of state law, ” Henderson v. Pfizer, Inc., 285 F. App'x 370, 373 (9th Cir. 2008) (emphasis added), and “we are required to follow intervening decisions of the [Nevada] Supreme Court that interpret state law in a way that contradicts our earlier interpretation of that law.” Bonilla v. Adams, 423 F. App'x 738, 740 (9th Cir. 2011).

         If the stay is not entered into in this case, the parties will be required to brief, and the Court will have to determine issues, relating to the impact of the Bourne Valley decision. However, in the likely event the Nevada Supreme Court interpretation of NRS 116 is different and supersedes the Ninth Circuit interpretation of NRS 116.31168, this briefing will have to be completely redone and would essentially require a restart in handling these issues. A stay of this case would conserve not only the resources of the party but of this Court.

         B. Staying the Litigation at This Juncture is Beneficial to All Parties Involved and Would Promote the Efficient use of Judicial Resources.

         As this Court has previously found, relying on U.S. Supreme Court precedent, a district court has the inherent power to stay cases to control its docket and promote the efficient use of judicial resources. Landis v. North American Co., 299 U.S. 248, 254-55 (1936). When determining whether a stay is appropriate pending the resolution of another case, the district court must consider: (1) the possible damage that may result from a stay, (2) any hardship or inequity that a party may suffer if required to go forward, (3) and the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law that a stay will engender. Dependable Highway Exp., Inc. v. ...


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