United States District Court, D. Nevada
C. JONES UNITED STATES DISTRICT JUDGE
case arises out of a foreclosure sale under Chapter 116 of
the Nevada Revised Statutes ("NRS"). Pending before
the Court is a motion for summary judgment.
FACTS AND PROCEDURAL HISTORY
about February 21, 2007, Defendant Darren Truong purchased
real property at 2500 E. 2nd St., Unit 1875, Reno, Nevada
("the Property"). (First Am. Compl. ¶¶ 1,
4, ECF No. 1-2). Truong financed the purchase with two loans
from non-party Soma Financial, Inc., the deeds of trust as to
which were soon released when Truong refinanced the Property
for $218, 200, giving a deed of trust ("the DOT")
to Defendant Flagstar Bank FSB ("Flagstar").
(See Id. ¶¶ 3, 5 & Ex. 7). When Truong
failed to pay assessments to non-party Grand Sierra Resort
Unit Owners' Association ("the UOA"), non-party
MEI-GSR Holdings LLC purchased the Property from the UOA at a
foreclosure sale under Chapter 116 and subsequently
transferred its title to Plaintiff AM-GSR Holdings, LLC.
(See Id. ¶¶ 2, 7-8).
sued Truong and Flagstar in state court to quiet title and
for an injunction against foreclosure under the DOT. Flagstar
removed and answered. Truong has not appeared, but Plaintiff
has not asked the Clerk to enter his default. Flagstar has
moved for summary judgment.
Court of Appeals has held that the opt-in notice scheme under
Chapter 116 in effect at the relevant time was facially
unconstitutional under the Due Process Clause of the
Fourteenth Amendment. Bourne Valley Court Tr. v. Wells
Fargo Bank, N.A., 832 F.3d 1154, 1158-60 (9th Cir.
2016). The Supreme Court denied certiorari, Bourne Valley
Court Tr. v. Wells Fargo Bank, N.A., 137 S.Ct.
2296, 2297 (2017), despite the Nevada Supreme Court's
intervening ruling to the contrary on the issue of state
action, see Saticoy Bay LLC v. Wells Fargo Home
Mortg., 388 P.3d 970, 973-74 (Nev. 2017). As in similar
cases, that ends the matter here, and Flagstar is entitled to
summary judgment as a matter of law. The Court rejects
Plaintiffs argument that Bourne Valley is not
binding precedent because it was contrary to SFR
Investments Pool 1 v. U.S. Bank, 334 P.3d 408, 411 (Nev.
2014). It is wrong that SFR Investments Pool I held
that an HOA was previously required to notify first deed of
trust holders who had not opted in:
Although the Nevada Supreme Court has noted that NRS 107.090
is incorporated by NRS 116.31168(1), when specifically citing
to NRS 107.090(3), it has concluded that notice to a first
deed of trust holder in an HOA foreclosure still requires the
first deed of trust holder to have notified the HOA of its
interest before the recordation of the NOD under NRS
116.31163, which shows that the Nevada Supreme Court either
reads NRS 116.31168 not to incorporate the automatic notice
provisions of NRS 107.090(3) or that it reads the opt-in
provision of NRS 116.31163 to supersede NRS 107.090(3)'s
automatic notice provisions as to HOA foreclosures even if
NRS 107.090 is otherwise incorporated into Chapter 116
foreclosures generally via NRS 116.31168. See U.S. Bank.,
N.A. v. SFR Invs. Pool 1, LLC, 124 F.Supp.3d 1063,
1078-80 (D. Nev. 2015) (Jones, J.) (citing SFR Invs. Pool
1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 411 (Nev.
2014)). Another possibility is that the Nevada Supreme Court
simply (and very sensibly) reads NRS 107.090(3)'s
requirement that notice be sent to "[e]ach other person
with an interest whose interest or claimed interest is
subordinate to the deed of trust," not to require notice
to deed of trust holders in HOA sales, because an interest in
a deed of trust is not subordinate to itself.
U.S. Bank, N.A. v. SFR Invs. Pool 1, LLC, No.
3:15-cv-241, 2016 WL 4473427, at *5 (D. Nev. Aug. 24, 2016).
As this Court has previously noted, even if not bound by die
Court of Appeals' ruling on the issue, the text of die
statute, as well as both die objective and subjective
legislative history, indicates diat die statute did not
previously require notice. Christiana Tr. v. K&P
Homes, No. 2:15-cv-1534, 2018 WL 456020, at *2-3 (D.
Nev. Jan. 16, 2018). The Nevada Supreme Court's later
statement that "NRS 116.31168 incorporates NRS 107.090,
which requires mat notices be sent to a deed of trust
Beneficiary" in a footnote of an opinion not deciding
diat issue is not to the contrary, particularly where the
seminal opinion cited dierein, SFR Invs. Pool 1,
LLC, noted die opt-in requirement. See Nationstar
Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow
Canyon, 405 P.3d 641, 648 n.11 (Nev. 2017).
the Court of Appeals had erred in Bourne Valley
(which it decided in light of the Nevada Supreme Court's
ruling in SFR Investments Pool I), this Court would
have no power to contradict that ruling. See Bourne
Valley Court Tr., 832 F.3d at 1158 ("Bourne Valley
argues that Nevada Revised Statute section 116.31168(1),
which incorporated section 107.090, mandated actual notice to
mortgage lenders whose rights are subordinate to a
homeowners' association super priority lien. Section
116.31168(1) stated, '[t]he provisions of NRS 107.090
apply to die foreclosure of an association's lien as if a
deed of trust were being foreclosed.' According to Bourne
Valley, this incorporation of section 107.090 means that
foreclosing homeowners' associations were required to
provide notice to mortgage lenders even absent a request.
Bourne Valley's preferred reading would impermissibly
render die express notice provisions of Chapter 116 entirely
superfluous. In particular, section 116.31163 and section
116.31165 required any secured creditor to request notice of
default from a homeowners' association before die
homeowners' association had any obligation to provide
such notice. If section 116.31 168(1)'s incorporation of
section 107.090 were to have required homeowners'
associations to provide notice of default to mortgage lenders
even absent a request, section 116.31163 and section
116.31165 would have been meaningless. We reject Bourne
Valley's argument." (citation omitted)). Plaintiffs
must ask the Court of Appeals sitting en banc or the Supreme
Court to overrule Bourne Valley.
Plaintiff asks the Court to stay the case because another
judge of this District has certified to the Nevada Supreme
Court the question of whether the pre-October 1, 2015 version
of Nevada Revised Statutes section 116.31168(1) required
notice of the sale to the first deed of trust holder. If the
answer were "yes," the argument goes, the notice
scheme would not be facially unconstitutional, and the facts
of notice would have to be litigated in each case. But die
Court has already rejected this line of argument based on the
discussion in SFR Investments Pool 1 itself, an
in-depth textual analysis of the statutes, and both me
objective and subjective legislative history. Christiana
Trust, 288 F.Supp.3d at 1042-43. Although not impossible
that the Nevada Supreme Court might agree with Plaintiff,
such a reading would contradict all commonly accepted methods
of statutory interpretation. See Id. And regardless
of any ruling by the Nevada Supreme Court on me issue, this
Court would remain bound by Bourne Valley unless and
until me Court of Appeals or me U.S. Supreme Court were to
HEREBY ORDERED that the Motion for Summary Judgment (ECF No.
27) is GRANTED, and Plaintiff shall SUBMIT a proposed