Nationstar Mortgage, LLC v. LVDG, LLC et al

Filing 44

ORDER denying ECF No. 41 LVDG's Motion to Reconsider. Signed by Judge Robert C. Jones on 05/23/2017. (Copies have been distributed pursuant to the NEF - KW)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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______________________________________
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NATIONSTAR MORTGAGE, LLC,
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Plaintiff,
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vs.
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LVDG, LLC et al.,
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Defendants.
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2:15-cv-01636-RCJ-CWH
ORDER

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This action arises out of a homeowners association foreclosure sale. Pending before the

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Court is Defendant LVDG, LLC’s (“LVDG”) Motion for Reconsideration. (ECF No. 41.) For

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the reasons given herein, the Court denies the motion.

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I.

FACTS AND PROCEDURAL HISTORY
In November 2008, Defendants Liliana and Angelica Castellon-Moreno purchased real

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property in Las Vegas, Nevada (“the Property”), subject to the Covenants, Conditions, and

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Restrictions (“CC&Rs”) of Sutter Creek Homeowners Association (“the HOA”). (Compl. ¶¶ 8,

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13, 25, ECF No. 1). On October 30, 2013, after the Castellons had failed to pay regular

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assessments under the CC&Rs, Defendant Alessi & Koenig LLC (“Alessi”) conducted a non-

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judicial foreclosure sale on behalf of the HOA, whereby LVDG acquired the Property for

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$8,800, despite an appraised value of $117,000. (Id. at ¶¶ 16–22; Appraisal Report, ECF No. 20-

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8 at 6–31.) Thereafter, on July 24, 2014, a corporate assignment of deed of trust was executed

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purporting to assign the first deed of trust (“DOT”) on the Property to Plaintiff Nationstar

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Mortgage, LLC (“Nationstar”). (Id. at ¶ 15.) On August 25, 2015, Nationstar brought this action

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asserting various claims against Defendants, primarily seeking a declaration that the DOT was

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not extinguished by the HOA foreclosure sale.

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On March 6, 2017, the Court granted summary judgment for Nationstar on the claim of

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quiet title. (Order, ECF No. 40.) The Court held that the HOA’s foreclosure sale could not have

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extinguished the DOT because the sale was conducted pursuant to NRS 116.3116, and the Ninth

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Circuit had recently ruled in Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154

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(9th Cir. 2016), that the statute’s opt-in notice provisions are facially unconstitutional. LVDG

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now argues that the Court committed error in granting summary judgment on this basis, and asks

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the Court to reconsider its ruling. (Mot. Recon., ECF No. 41.)

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II.

LEGAL STANDARD
Granting a motion to reconsider is an “extraordinary remedy, to be used sparingly in the

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interests of finality and conservation of judicial resources.” Carroll v. Nakatani, 342 F.3d 934,

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945 (9th Cir. 2003) (quoting 12 James Wm. Moore et al., Moore’s Federal Practice § 59.30[4]

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(3d ed. 2000)). “Reconsideration is appropriate if the district court (1) is presented with newly

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discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or

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(3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, Multnomah Cnty., Or.

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v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). In some cases, “other, highly unusual,

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circumstances” may also warrant reconsideration. Id.

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However, a motion to reconsider “may not be used to raise arguments or present evidence

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for the first time when they could reasonably have been raised earlier in the litigation.” Carroll,

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342 F.3d at 945; see also United States v. Lopez-Cruz, 730 F.3d 803, 811–12 (9th Cir. 2013).

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Moreover, “[a] motion to reconsider is not a second chance for the losing party to make its

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strongest case or to dress up arguments that previously failed.” United States v. Huff, 782 F.3d

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1221, 1224 (10th Cir.), cert. denied, 136 S. Ct. 537 (2015).

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III.

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ANALYSIS
a. The Scope and Effect of Bourne Valley
In Bourne Valley, the Ninth Circuit held that the “opt-in notice scheme” of NRS

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116.3116—included in the statute until its amendment in October 2015—was facially

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unconstitutional because it violated the procedural due process rights of mortgage lenders. In its

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ruling, the Court of Appeals found the state action requirement of the petitioner’s Fourteenth

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Amendment challenge was met, because “where the mortgage lender and the homeowners’

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association had no preexisting relationship, the Nevada Legislature’s enactment of the Statute is

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a ‘state action.’” Bourne Valley, 832 F.3d at 1160. In other words, because a mortgage lender

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and HOA generally have no contractual relationship, it is only by virtue of NRS 116.3116 that

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the mortgage lender’s interest is “degraded” by the HOA’s right to foreclose its lien. Id.

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Accordingly, by enacting the statute, the Legislature acted to adversely affect the property

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interests of mortgage lenders, and was thus required to provide “notice reasonably calculated,

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under all circumstances, to apprise interested parties of the pendency of the action and afford

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them an opportunity to present their objections.” Id. at 1159 (quoting Mennonite Bd. of Missions

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v. Adams, 462 U.S. 791, 795 (1983)). The statute’s opt-in notice provisions therefore violated the

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Fourteenth Amendment’s Due Process Clause because they impermissibly “shifted the burden of

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ensuring adequate notice from the foreclosing homeowners’ association to a mortgage lender.”

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Id. at 1159.

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The necessary implication of the Ninth Circuit’s opinion in Bourne Valley is that the

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petitioner succeeded in showing that no set of circumstances exists under which the opt-in notice

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provisions of NRS 116.3116 would pass constitutional muster. See United States v. Salerno, 481

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U.S. 739, 745 (1987) (“A facial challenge to a legislative Act is, of course, the most difficult

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challenge to mount successfully, since the challenger must establish that no set of circumstances

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exists under which the Act would be valid.”); see also William Jefferson & Co. v. Bd. of

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Assessment & Appeals No. 3 ex rel. Orange Cty., 695 F.3d 960, 963 (9th Cir. 2012) (applying

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Salerno to facial procedural due process challenge under the Fourteenth Amendment); Lopez-

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Valenzuela v. Arpaio, 770 F.3d 772, 789 (9th Cir. 2014) (applying Salerno to facial substantive

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due process challenge under the Fifth and Fourteenth Amendments). The fact that a statute

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“might operate unconstitutionally under some conceivable set of circumstances is insufficient to

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render it wholly invalid.” Id. To put it slightly differently, if there were any conceivable set of

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circumstances where the application of a statute would not violate the constitution, then a facial

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challenge to the statute would necessarily fail. See William Jefferson & Co., 695 F.3d at 963 (“If

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William Jefferson’s as-applied challenge fails, then William Jefferson’s facial challenge

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necessarily fails as well because there is at least one set of circumstances where application of

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§ 31000.7 does not violate a taxpayer’s procedural due process rights.”); United States v.

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Inzunza, 638 F.3d 1006, 1019 (9th Cir. 2011) (holding that a facial challenge to a statute

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necessarily fails if an as-applied challenge has failed because the plaintiff must “establish that no

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set of circumstances exists under which the [statute] would be valid”).

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Here, the Ninth Circuit expressly invalidated the “opt-in notice scheme” of NRS

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116.3116, which it pinpointed in NRS 116.31163(2). Bourne Valley, 832 F.3d at 1158; see also

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Bank of Am., N.A. v. SFR Investments Pool 1 LLC, No. 2:15-cv-691, 2017 WL 1043286, at *9

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(D. Nev. Mar. 17, 2017) (Mahan, J.) (“The facially unconstitutional provision, as identified in

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Bourne Valley, is present in NRS 116.31163(2).”). In addition, this Court understands Bourne

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Valley also to invalidate NRS 116.311635(1)(b)(2), which also provides for opt-in notice to

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interested third parties. According to the Ninth Circuit, therefore, these provisions are

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unconstitutional in each and every application; no conceivable set of circumstances exists under

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which the provisions would be valid. The factual particularities surrounding the foreclosure

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notices in this case—which would be of paramount importance in an as-applied challenge—

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cannot save the facially unconstitutional statutory provisions. In fact, it bears noting that in

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Bourne Valley, the Ninth Circuit indicated that the petitioner had not shown that it did not

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receive notice of the impending foreclosure sale. Thus, the Ninth Circuit declared the statute’s

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provisions facially unconstitutional notwithstanding the possibility that the petitioner may have

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had actual notice of the sale.
Accordingly, the HOA foreclosed under a facially unconstitutional notice scheme, and

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thus the HOA foreclosure cannot have extinguished the DOT.

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b. LVDG’s Motion to Reconsider (ECF No. 41)
LVDG has not presented a basis for the Court to reconsider its order. There is no newly

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discovered evidence, the Court did not commit clear error, and there has been no intervening

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change in controlling law. LVDG asserts that the Nevada Supreme Court recently ruled contrary

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to Bourne Valley. See Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortg.,

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388 P.3d 970, 974 (Nev. 2017). But state court rulings on federal issues (i.e., the constitutionality

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of NRS Chapter 116 under the U.S. Constitution) are only potentially persuasive authority. The

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Ninth Circuit’s rulings are binding on this Court. Moreover, to the extent LVDG now raises

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arguments it failed to raise in response to the summary judgment motion, the Court declines to

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consider them. A motion to reconsider “may not be used to raise arguments or present evidence

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for the first time when they could reasonably have been raised earlier in the litigation.” Carroll,

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342 F.3d at 945; see also United States v. Lopez-Cruz, 730 F.3d 803, 811–12 (9th Cir. 2013).

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CONCLUSION

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IT IS HEREBY ORDERED that LVDG’s motion to reconsider (ECF No. 41) is
DENIED.
IT IS SO ORDERED.
DATED: This 23rd day of May, 2017.
_____________________________________
ROBERT C. JONES
United States District Judge

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