Nationstar Mortgage, LLC v. Augusta Belford and Ellingwood Homeowners Association, et al

Filing 102

ORDER SFR's Motion to Stay (ECF No. 98 ) is granted. This action is temporarily stayed until resolution of the certified question in Nev. S. Ct. Case No. 72931. The stay will be lifted upon such resolution. The parties must file a status repor t within five (5) days from such resolution. All pending motions (ECF Nos. 84 , 85 , 86 , 91 ) are denied without prejudice and may be refiled within thirty days from the Nevada Supreme Court's decision on the certified question. Signed by Judge Miranda M. Du on 12/26/2017. (Copies have been distributed pursuant to the NEF - DRM)

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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,
v.

Case No. 2:15-cv-01705-MMD-NJK
ORDER
(Def.’s Motion to Stay – ECF No. 98)

SFR INVESTMENTS POOL 1, LLC;
AUGUST BELFORD AND ELLINGWOOD
HOMEOWNERS ASSOCIATION; DOE
INDIVIDUALS I-X, inclusive, and ROE
CORPORATIONS I-X, inclusive,
Defendants.

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This case arises out of a homeowner association’s (“HOA”) foreclosure and

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involves the notice provisions applicable to foreclosure sales under Nevada Revised

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Statutes (“NRS”) Chapter 116. Before the Court is Defendant SFR Investments Pool 1,

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LLC’s (“SFR”) Motion to Stay. (ECF No. 98.) Plaintiff Nationstar Mortgage, LLC

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(“Nationstar”) has opposed (ECF No. 100), and SFR has replied (ECF No. 101).

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A district court has discretionary power to stay proceedings in its own court. Landis

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v. N. Am. Co., 299 U.S. 248, 254-55 (1936). “A trial court may, with propriety, find it is

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efficient for its own docket and the fairest course for the parties to enter a stay of an action

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before it, pending resolution of independent proceedings which bear upon the case.”

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Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 1979). In deciding

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whether to grant a stay, courts should consider “the possible damage which may result

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from the granting of a stay, the hardship or inequity which a party may suffer in being

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required to go forward, and the orderly course of justice measured in terms of the

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simplifying or complicating of issues, proof, and questions of law which could be expected

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to result from a stay.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005)

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(quoting Landis, 299 U.S. at 268). Courts should also consider “the judicial resources that

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would be saved by avoiding duplicative litigation.” Pate v. DePuy Orthopaedics, Inc., No.

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2:12-cv-01168-MMD-CWH, 2012 WL 3532780, at *2 (D. Nev. Aug. 14, 2012) (quoting

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Rivers v. Walt Disney Co., 980 F. Supp. 1358, 1360 (C.D. Cal. 1997)).

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The Court finds that significant judicial resources will be saved if the Court refrains

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from issuing a decision in this case until the Nevada Supreme Court determines whether

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NRS § 116.31168 incorporates the notice provisions of NRS § 107.090. (ECF No. 68 at

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2 (citing Nev. S. Ct. Case No. 72931).) NRS §§ 116.31168 and 107.090 prescribe two

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fundamentally different notice mechanisms. The first requires lenders to affirmatively

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request notice of foreclosure sales from HOAs. The second requires HOAs to notify

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lenders as a matter of course, regardless of whether a request was made.

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The Ninth Circuit recently held the first mechanism facially unconstitutional

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because it impermissibly shifts the burden to lenders in violation of their procedural due

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process rights. Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1156

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(9th Cir. 2016), cert. denied, 137 S. Ct. 2296 (2017). NRS § 107.090 seems to ameliorate

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this burden-shifting problem by requiring the HOAs to provide notice to lenders absent

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any request from lenders for notice; however, the Ninth Circuit has held that NRS §

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107.090 is not incorporated in NRS § 116.31168. Id. at 1159. If it were, the Ninth Circuit

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reasoned, the opt-in notice scheme would be superfluous. Id.

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The question of whether NRS § 116.31168 incorporates NRS § 107.090 is now

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pending before the Nevada Supreme Court in Case No. 72931. Moreover, that court has

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hinted it will answer the question in the affirmative. See Nationstar Mortg., LLC v. Saticoy

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Bay LLC Series 227 Shadow Canyon, 405 P.3d 641, 648 n.11 (Nev. 2017). If the Nevada

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Supreme Court holds that NRS § 107.090 is incorporated, then a factual question would

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arise in this case: did the HOA provide notice to the lender consistent with NRS §
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107.090? As the law stands currently, it is irrelevant whether the HOA provided notice to

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the lender—foreclosure sales conducted pursuant to Chapter 116 could not have satisfied

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the lenders’ constitutional due process rights. See, e.g., U.S. Bank, N.A. v. Emerald Ridge

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Landscape Maint. Ass’n, No. 2:15-cv-00117-MMD-PAL, 2017 WL 4386967, at *3 (D. Nev.

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Sept. 29, 2017). But if NRS § 116.31168 incorporated NRS § 107.090, then some

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foreclosure sales may have satisfied constitutional due process requirements (i.e., those

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in which HOAs gave lenders notice consistent with NRS § 107.090). SFR contends that

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the HOA provided such notice in this case. (See ECF No. 85 at 5.)

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Nationstar first opposes SFR’s motion on the ground that the Court can enter

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judgment based on tender alone. (ECF No. 100 at 4.) However, the Court must disregard

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the fact of tender if the statute under which the sale proceeded is facially unconstitutional,

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as it is under Bourne Valley. See, e.g., U.S. Bank, N.A. v. Emerald Ridge Landscape

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Maint. Ass’n, No. 2:15-cv-00117-MMD-PAL, 2017 WL 4386967, at *5 (D. Nev. Sept. 29,

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2017). Accordingly, the Court cannot enter judgment based on tender alone.

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Nationstar next opposes SFR’s motion on the ground that NRS Chapter 116 is

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unconstitutional even if NRS § 107.090 is incorporated. (ECF No. 100 at 5.) While the

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constitutionality of NRS § 107.090 is a serious issue that the parties will no doubt dispute

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if the Nevada Supreme Court holds that NRS § 107.090 is incorporated, that issue is not

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presently before this Court. See Clinton v. Jones, 520 U.S. 681, 690 (1997) (“[W]e have

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often stressed the importance of avoiding the premature adjudication of constitutional

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questions.”).

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Nationstar further opposes SFR’s motion on the ground that Nationstar “continues

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to be damaged by SFR’s assertion that it holds clear title.” (ECF No. 100 at 5.) Nationstar

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contends that it “cannot proceed with foreclosure” and that it is “required to pay taxes and

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insurance charges on its defaulting borrowers’ behalf to protect its interest” while “SFR

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continues to collect rent.” (Id.) Nevertheless, any damage to Nationstar from a stay will

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be outweighed by the fees that all parties will surely incur from continued litigation—the

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Nevada Supreme Court’s decision could moot a decision by this Court. Until there is
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finality on the issue of whether NRS § 116.31168 incorporates NRS § 107.090, a stay will

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benefit the parties and conserve judicial resources.

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It is therefore ordered that SFR’s Motion to Stay (ECF No. 98) is granted. This

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action is temporarily stayed until resolution of the certified question in Nev. S. Ct. Case

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No. 72931. The stay will be lifted upon such resolution. The parties must file a status

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report within five (5) days from such resolution. All pending motions (ECF Nos. 84, 85,

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86, 91) are denied without prejudice and may be refiled within thirty days from the Nevada

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Supreme Court’s decision on the certified question.

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DATED THIS 26th day of December 2017.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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