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

Filing 124

ORDER denying ECF No. 118 Motion to Certify. Signed by Judge Robert C. Jones on 1/4/2017. (Copies have been distributed pursuant to the NEF - KR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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______________________________________
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WELLS FARGO BANK N.A.,
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Plaintiff,
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vs.
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SFR INVESTMENTS POOL 1, LLC,
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Defendant.
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2:13-cv-01231-RCJ-GWF
ORDER

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This case arises out of a homeowners’ association (“HOA”) foreclosure sale. Pending

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before the Court is a motion to certify a question of law to the Nevada Supreme Court.

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I.

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FACTS AND PROCEDURAL HISTORY
On or about February 9, 2005, Anthony V. Roybal gave Plaintiff Wells Fargo Bank, N.A.

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(“Wells Fargo”) a $270,000 promissory note (“the Note”) in exchange for proceeds in that

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amount to purchase real property at 2280 Laramine River Dr., Henderson, NV 89502 (“the

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Property”), as well as a first deed of trust (“the DOT”) against the Property. (See Am. Compl.

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¶¶ 4, 8–9, ECF No. 79). Wells Fargo became the assignee of the Note and DOT on or before

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May 24, 2010, when the assignment was recorded. (See id. ¶ 10). When Roybal became

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delinquent on his HOA dues, Nevada Association Services, Inc., as agent for Sunrise Ridge

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Manor HOA (“the HOA”), recorded an HOA lien against the Property and conducted a

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foreclosure sale at which Defendant SFR Investments Pool 1, LLC (“SFR”) purchased the

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Property for $18,000. (Id. ¶¶ 11–14).

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Wells Fargo sued SFR in this Court for declaratory relief that the HOA foreclosure did

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not extinguish the first mortgage, and to quiet title to that effect. Defendant filed counterclaims

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and third-party claims against Wells Fargo, Roybal, and Bank of America, N.A. (“BOA”) for

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declaratory relief that the HOA foreclosure extinguished Plaintiff’s first mortgage, BOA’s

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second mortgage, and any interest of Roybal in the Property, to quiet title to that effect, and for

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unjust enrichment. Wells Fargo and SFR filed cross motions for summary judgment. The Court

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granted Wells Fargo’s motion and denied SFR’s. SFR and BOA later filed a stipulation that

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BOA’s second deed of trust was extinguished by the HOA foreclosure sale and that BOA

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claimed no interest in the Property. SFR asked the Clerk to enter default against Roybal as to its

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third-party claims, but the Court denied the motion because there was no evidence of service

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upon Roybal. The Clerk entered default after SFR submitted proof of service. The Court

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granted a stipulation to vacate its previous summary judgment order when the Nevada Supreme

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Court decided SFR Investments Pool I, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014), ruling

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that HOA foreclosures extinguished first deeds of trust under Nevada Revised Statutes section

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(“NRS”) 116.3116.

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In the meantime, Wells Fargo had conducted a non-judicial foreclosure sale of the

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Property under Chapter 107 at which it purchased the Property itself. (See Am. Compl. ¶¶ 18–

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21). Wells Fargo filed the Amended Complaint (“AC”) for declaratory relief, quiet title, and

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unjust enrichment. SFR filed the Counterclaim for quiet title, declaratory relief, wrongful

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foreclosure, unjust enrichment, injunctive relief, and intentional interference with contractual

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relations.

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Wells Fargo filed two summary judgment motions, and SFR filed one. The Court

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granted Wells Fargo’s motions and denied SFR’s, ruling that the notice procedure under Chapter

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116 was facially unconstitutional under the Due Process Clause of the Fourteenth Amendment,

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see Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1160 (9th Cir. 2016),

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that the common law wrongful foreclosure counterclaim therefore necessarily also failed, that

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any action under Chapter 107 was untimely, and that the counterclaims for unjust enrichment

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and intentional interference with contractual relations would fail even if SFR had not withdrawn

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them. The Court solicited a proposed judgment from Wells Fargo. Wells Fargo complied, and

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the Court has entered judgment. After Wells Fargo submitted the proposed judgment, but before

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the Court entered it, SFR asked the Court to certify a question of law to the Nevada Supreme

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Court.

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II.

CERTIFICATION STANDARDS
The Court may certify a question to the Nevada Supreme Court if the answer to the

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question will be “determinative of the cause.” See Nev. R. App. Proc. 5(a); Volvo Cars of N.

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Am., Inc. v. Ricci, 137 P.3d 1161, 1164 (Nev. 2006) (adopting the Arkansas–California–New

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Mexico interpretation of “determinative of the cause” as meaning that the answer will be

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determinative of at least part of the federal case).

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III.

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ANALYSIS
SFR asks the Court to certify the following question to the Nevada Supreme Court:

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“Does NRS 116.31168(1)’s incorporation of NRS 107.090 require homeowners’ associations to

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provide notices of sale to banks even when a bank does not request notice?” The Court will not

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certify the question. As the Court has ruled in a previous case after careful analysis of the

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language of the statute, the statute’s legislative history, and the Nevada Supreme Court’s own

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language interpreting the statute’s operation, the answer is “no.” See U.S. Bank, N.A. v. SFR Invs.

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Pool 1, LLC, 124 F. Supp. 3d 1063, 1079–80 (D. Nev. 2015) (citing SFR Invs. Pool 1, LLC v.

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U.S. Bank, N.A., 334 P.3d 408, 411 (Nev. 2014)). The Court of Appeals has since ruled in

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accord. See Bourne Valley Court Tr., 832 F.3d at 1159 (reasoning that NRS 116.31168’s

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incorporation of NRS 107.090(3)–(4) would render NRS 116.31163 and 116.311635

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superfluous). Absent intervening, contrary, binding authority, i.e., from the U.S. or Nevada

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Supreme Courts, this Court is bound by the Court of Appeals’ rulings as to Nevada law. See

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Mohamed v. Uber Techs., Inc., 836 F.3d 1102, 1111 (9th Cir. 2016).
Even assuming that the Nevada Supreme Court were to rule that the statutes as they

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existed at the relevant time required notice of sale to first deed of trust holders, SFR would still

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have to show compliance. SFR does not even appear to claim any party’s attempt to mail the

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notice of sale to Wells Fargo, and any conclusive presumption of notice under state law would

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itself be facially infirm under the Due Process Clause. Reasonable notice under the Due Process

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Clause is a factual inquiry “under all the circumstances” that cannot be obviated by legal

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presumptions under state (or federal) law. See Jones v. Flowers, 547 U.S. 220, 226–27 (2006)

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(quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)); Mennonite Bd. of

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Missions v. Adams, 462 U.S. 791, 799 (1983); see also United States v. Simmons, 476 F.3d 33,

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36–37 (9th Cir. 1973) (holding that regulations establishing irrebuttable or conclusive

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presumptions of receipt of mailed notices violate due process). A statute that explicitly

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disregarded the actual factual circumstances of notice in favor of a conclusive presumption

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would be facially infirm under the Due Process Clause, at least where the thing to be noticed is

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an impending loss of property rights.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Certify (ECF No. 1118) is DENIED.

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IT IS SO ORDERED.

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January 4, of December, 2016.
Dated this 8th day2017.

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_____________________________________
ROBERT C. JONES
United States District Judge

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