Ditech Financial LLC v. SFR Investments Pool 1, LLC et al

Filing 80

ORDER Case stayed pending appeals. All pending motions Denied without prejudice. Parties must file a joint status report beginning 3/17/2017. Signed by Chief Judge Gloria M. Navarro on 10/17/16. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT 1 DISTRICT OF NEVADA 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 DITECH FINANCIAL, LLC, ) ) Plaintiff ) vs. ) ) SFR INVESTMENTS POOL 1, LLC; ) BOULDER RANCH MASTER ) ASSOCIATION; TWILIGHT ) HOMEOWNERS ASSOCIATION; ) HOMEOWNER ASSOCIATION SERVICES, ) INC.; HARMESH SINGH; KULJIT KAUR; ) DOES 1-10, INCLUSIVE, ) ) Defendants. ) ______________________________________ ) SFR INVESTMENTS POOL 1, LLC, ) ) Counter/Cross-Claimant, ) vs. ) ) DITECH FINANCIAL, LLC; BANK OF ) NEW YORK MELLON, FKA THE BANK ) OF NEW YORK as Trustee for ) CERTIFICATEHOLDERS CWABS, INC. ) ALTERNATIVE LOAN TRUST 2005-J12 ) ASSET-BACKED CERTIFICATE SERIES ) 2005-17; HOUSEHOLD FINANCE REALTY ) CORPORATION OF NEVADA; HARMESH ) SINGH, an individual; and KULJIT KAUR, an ) individual, ) ) Counter/Cross-Defendants. ) ) Case No.: 2:16-cv-00127-GMN-NJK ORDER 23 24 25 Lenders and investors have been at odds over the legal effect of a homeowners’ association’s (“HOA”) nonjudicial foreclosure of a superpriority lien on a lender’s first trust Page 1 of 4 1 deed pursuant to Nevada Revised Statutes § 116.3116. See Freedom Mortg. Corp. v. Las Vegas 2 Dev. Grp., LLC, 106 F. Supp. 3d 1174, 1180 (D. Nev. 2015). The Nevada Supreme Court 3 seemed to have settled the debate in SFR Invs. Pool 1, LLC v. U.S. Bank, 334 P.3d 408, 419 4 (Nev. 2014), holding that “NRS 116.3116(2) gives an HOA a true superpriority lien, proper 5 foreclosure of which will extinguish a first deed of trust.” SFR, 334 P.3d at 419. However, on August 12, 2016, two members of a Ninth Circuit panel held in Bourne 6 7 Valley Court Trust v. Wells Fargo Bank that Chapter 116’s nonjudicial foreclosure scheme 8 “facially violated mortgage lenders’ constitutional due process rights” before it was amended in 9 2015. Bourne Valley Ct. Trust v. Wells Fargo Bank, 2016 WL 4254983, at *5 (9th Cir. Aug. 12, 10 2016). As a result, Bourne Valley is likely dispositive of this and the hundreds of other 11 foreclosure cases pending in both state and federal court. To save the parties from the need to 12 invest resources briefing the effect of the Bourne Valley opinion before the finality of that 13 opinion has been determined, the Court STAYS all proceedings in this case pending exhaustion 14 of all appeals of Bourne Valley. 15 16 I. LEGAL STANDARD “[T]he power to stay proceedings is incidental to the power inherent in every court to 17 control the disposition of the causes of action on its docket with economy of time and effort for 18 itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “A trial 19 court may, with propriety, find it is efficient for its own docket and the fairest course for the 20 parties to enter a stay of an action before it, pending resolution of independent proceedings 21 which bear upon the case.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 22 1979). In deciding whether to grant a stay, a court may weigh the following: (1) the possible 23 damage which may result from the granting of a stay; (2) the hardship or inequity which a party 24 may suffer in being required to go forward; (3) the orderly course of justice measured in terms 25 of the simplifying or complicating of issues, proof, and questions of law which could be Page 2 of 4 1 expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 2 However, “[o]nly in rare circumstances will a litigant in one case be compelled to stand aside 3 while a litigant in another settles the rule of law that will define the rights of both.” Landis, 299 4 U.S. at 255. A district court’s decision to grant or deny a Landis stay is a matter of discretion. 5 See Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 6 2007). 7 8 9 II. DISCUSSION At the center of this case are the HOA-foreclosure sale conducted pursuant to Nevada Revised Statutes § 116.3116 and the competing arguments that the foreclosure sale either 10 extinguished the bank’s security interest under the SFR holding or had no legal effect because 11 the statutory scheme violates due process. Because the Ninth Circuit in Bourne Valley held that 12 the scheme was facially unconstitutional, see Bourne Valley, 2016 WL 4254983, at *5, the 13 Bourne Valley opinion and any modification of that opinion have the potential to be dispositive 14 of this case. Under this circumstance, the Landis factors weigh strongly in favor of staying this 15 action pending final resolution of the Bourne Valley decision. Indeed, the possible prejudice to 16 the parties is minimal as the only potential harm is that the parties may wait longer for 17 resolution of this case if it is stayed. However, if this case is not stayed, a delay would also 18 result from any motions for reconsideration that may be necessitated if the current decision in 19 the Bourne Valley case does not stand. Accordingly, a stay is not likely to appreciably lengthen 20 the life of this case. Further, in the absence of a stay, judicial resources may be unnecessarily 21 expended to resolve issues which may ultimately be decided by higher courts to which this 22 Court is bound to adhere. Because the Bourne Valley decision is squarely on point, the orderly 23 course of justice likewise weighs in favor of a stay. Accordingly, the Court finds that staying 24 this action pending final resolution of Bourne Valley would be efficient for the Court’s own 25 docket and the fairest course for the parties. See Leyva, 593 F.2d at 863. Page 3 of 4 1 III. 2 CONCLUSION IT IS THEREFORE ORDERED that this case is administratively STAYED pending 3 exhaustion of all appeals of Bourne Valley Court Trust v. Wells Fargo Bank, No. 15-15233 (9th 4 Cir. Aug. 12, 2016). Once exhaustion occurs, any party may move to lift the stay. Until that 5 time, all proceedings in this action are stayed. 6 7 IT IS FURTHER ORDERED that all pending motions are DENIED without prejudice with leave to refile within twenty-one days after the stay is lifted. 8 9 IT IS FURTHER ORDERED that SFR Investments Pool 1, LLC, shall care for, preserve, and maintain the Property. 10 IT IS FURTHER ORDERED that, beginning on March 17, 2016, the parties must file 11 a joint status report updating the Court on the status of this case every one-hundred and eighty 12 days. Along with the joint status report, SFR Investments Pool 1, LLC, shall submit a 13 statement affirming that all expenses necessary to maintain the property, including but not 14 limited to, timely and full payment of all homeowners association assessments, property taxes, 15 and property insurance premiums due and owing or past due at any time during the effective 16 period of this Stay are current and up to date. 17 IT IS FURTHER ORDERED that this Order does not prevent the parties from 18 continuing to engage in settlement conference negotiations with the assistance of the Magistrate 19 Judge. 20 21 17 DATED this _____ day of October, 2016. 22 23 24 ___________________________________ Gloria M. Navarro, Chief Judge United States District Judge 25 Page 4 of 4

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