The Bank of New York Mellon v. Paradise Court Homeowners Association et al

Filing 63

ORDER. IT IS THEREFORE ORDERED that this case is administratively STAYED. IT IS FURTHER ORDERED THAT all pending motions are Denied without prejudice. Status Report due by 3/24/2017. See Order for further details. Signed by Chief Judge Gloria M. Navarro on 9/27/2016. (Copies have been distributed pursuant to the NEF - DL)

UNITED STATES DISTRICT COURT
1

DISTRICT OF NEVADA
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

The Bank of New York Mellon,

)
)
Plaintiff,
)
vs.
)
)
Paradise Court Homeowners Association;
)
Nevada Association Services, Inc.;
)
SFR Investments Pool 1, LLC,
)
)
Defendants.
)
)
)
SFR Investments Pool 1, LLC,
)
)
Counter/Cross Claimant,
)
vs.
)
)
Carla Saavedra; Mortgage Electronic
)
Registration Systems, Inc., The Bank of New )
York Mellon,
)
)
Counter/Cross Defendants. )
)

Case No.: 2:16-cv-390-GMN-NJK
ORDER

17
18
19
20
21
22
23
24

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
deed pursuant to Nevada Revised Statutes § 116.3116. See Freedom Mortg. Corp. v. Las Vegas
Dev. Grp., LLC, 106 F. Supp. 3d 1174, 1180 (D. Nev. 2015). The Nevada Supreme Court
seemed to have settled the debate in SFR Invs. Pool 1, LLC v. U.S. Bank, 334 P.3d 408, 419
(Nev. 2014), holding that “NRS 116.3116(2) gives an HOA a true superpriority lien, proper
foreclosure of which will extinguish a first deed of trust.” SFR, 334 P.3d at 419.

25

Page 1 of 4

However, on August 12, 2016, two members of a Ninth Circuit panel held in Bourne

1
2

Valley Court Trust v. Wells Fargo Bank that Chapter 116’s nonjudicial foreclosure scheme

3

“facially violated mortgage lenders’ constitutional due process rights” before it was amended in

4

2015. Bourne Valley Ct. Trust v. Wells Fargo Bank, 2016 WL 4254983, at *5 (9th Cir. Aug. 12,

5

2016). As a result, Bourne Valley is likely dispositive of this and the hundreds of other

6

foreclosure cases pending in both state and federal court. To save the parties from the need to

7

invest resources briefing the effect of the Bourne Valley opinion before the finality of that

8

opinion has been determined, the Court STAYS all proceedings in this case pending exhaustion

9

of all appeals of Bourne Valley.

10
11

I.

LEGAL STANDARD
“[T]he power to stay proceedings is incidental to the power inherent in every court to

12

control the disposition of the causes of action on its docket with economy of time and effort for

13

itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “A trial

14

court may, with propriety, find it is efficient for its own docket and the fairest course for the

15

parties to enter a stay of an action before it, pending resolution of independent proceedings

16

which bear upon the case.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir.

17

1979). In deciding whether to grant a stay, a court may weigh the following: (1) the possible

18

damage which may result from the granting of a stay; (2) the hardship or inequity which a party

19

may suffer in being required to go forward; (3) the orderly course of justice measured in terms

20

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

21

expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).

22

However, “[o]nly in rare circumstances will a litigant in one case be compelled to stand aside

23

while a litigant in another settles the rule of law that will define the rights of both.” Landis, 299

24

U.S. at 255. A district court’s decision to grant or deny a Landis stay is a matter of discretion.

25

Page 2 of 4

1

See Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir.

2

2007).

3

II.

DISCUSSION
At the center of this case are the HOA-foreclosure sale conducted pursuant to Nevada

4
5

Revised Statutes § 116.3116 and the competing arguments that the foreclosure sale either

6

extinguished the bank’s security interest under the SFR holding or had no legal effect because

7

the statutory scheme violates due process. Because the Ninth Circuit in Bourne Valley held that

8

the scheme was facially unconstitutional, see Bourne Valley, 2016 WL 4254983, at *5, the

9

Bourne Valley opinion and any modification of that opinion have the potential to be dispositive

10

of this case. Under this circumstance, the Landis factors weigh strongly in favor of staying this

11

action pending final resolution of the Bourne Valley decision. Indeed, the possible prejudice to

12

the parties is minimal as the only potential harm is that the parties may wait longer for

13

resolution of this case if it is stayed. However, if this case is not stayed, a delay would also

14

result from any motions for reconsideration that may be necessitated if the current decision in

15

the Bourne Valley case does not stand. Accordingly, a stay is not likely to appreciably lengthen

16

the life of this case. Further, in the absence of a stay, judicial resources may be unnecessarily

17

expended to resolve issues which may ultimately be decided by higher courts to which this

18

Court is bound to adhere. Because the Bourne Valley decision is squarely on point, the orderly

19

course of justice likewise weighs in favor of a stay. Accordingly, the Court finds that staying

20

this action pending final resolution of Bourne Valley would be efficient for the Court’s own

21

docket and the fairest course for the parties. See Leyva, 593 F.2d at 863.

22

III.

23
24

CONCLUSION
IT IS THEREFORE ORDERED that this case is administratively STAYED pending

exhaustion of all appeals of Bourne Valley Court Trust v. Wells Fargo Bank, No. 15-15233 (9th

25

Page 3 of 4

1

Cir. Aug. 12, 2016). Once exhaustion occurs, any party may move to lift the stay. Until that

2

time, all proceedings in this action are stayed.
IT IS FURTHER ORDERED that all pending motions are DENIED without prejudice

3
4

with leave to refile within twenty-one days after the stay is lifted.
IT IS FURTHER ORDERED that SFR Investments Pool 1, LLC shall care for,

5
6

preserve, and maintain the Property.
IT IS FURTHER ORDERED that, beginning on March 24, 2017, the parties must file

7
8

a joint status report updating the Court on the status of this case every one-hundred and eighty

9

days. Along with the joint status report, SFR Investments Pool 1, LLC shall submit a statement

10

affirming that all expenses necessary to maintain the property, including but not limited to,

11

timely and full payment of all homeowners association assessments, property taxes, and

12

property insurance premiums due and owing or past due at any time during the effective period

13

of this Stay are current and up to date.
IT IS FURTHER ORDERED that this Order does not prevent the parties from

14
15

continuing to engage in settlement conference negotiations with the assistance of the Magistrate

16

Judge.

17
18

27
DATED this _____ day of September, 2016.

19
20
21

___________________________________
Gloria M. Navarro, Chief Judge
United States District Court

22
23
24
25

Page 4 of 4