Bank of New York Mellon v. SFR Investments Pool 1, LLC et al
Filing
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ORDER Case stayed pending appeals. Joint Status Report due by 4/25/2017. All pending motions Denied without prejudice. Signed by Chief Judge Gloria M. Navarro on 10/25/2016. (Copies have been distributed pursuant to the NEF - JM)
UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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THE BANK OF NEW YORK MELLON FKA )
THE BANK OF NEW YORK, AS TRUSTEE )
FOR THE CERTIFICATEHOLDERS OF THE )
CWABS, INC. ASSET-BACKED
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CERTIFICATES, SERIES 2004-7,
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Plaintiff,
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vs.
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SFR INVESTMENTS POOL 1, LLC;
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MONTAGNE MARRON COMMUNITY
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ASSOCIATION; ALESSI & KOENIG, LLC, )
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Defendants.
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______________________________________ )
SFR INVESTMENTS POOL 1, LLC, a
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Nevada limited liability company,
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Counter/Cross Claimant. )
vs.
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THE BANK OF NEW YORK FKA THE
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BANK OF NEW YORK AS TRUSTEE FOR )
THE CERTIFICATEHOLDERS OF THE
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CWABS, INC., ASSET-BACKED
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CERTIFICATES, SERIES 2004-7; and JOHN )
EDWARD BOSTAPH, JR., an individual,
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Counter/Cross Defendants. )
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Case No.: 2:16-cv-00847-GMN-CWH
ORDER
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Lenders and investors have been at odds over the legal effect of a homeowners’
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association’s (“HOA”) nonjudicial foreclosure of a superpriority lien on a lender’s first trust
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deed pursuant to Nevada Revised Statutes § 116.3116. See Freedom Mortg. Corp. v. Las Vegas
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Dev. Grp., LLC, 106 F. Supp. 3d 1174, 1180 (D. Nev. 2015). The Nevada Supreme Court
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seemed to have settled the debate in SFR Invs. Pool 1, LLC v. U.S. Bank, 334 P.3d 408, 419
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(Nev. 2014), holding that “NRS 116.3116(2) gives an HOA a true superpriority lien, proper
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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
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Valley Court Trust v. Wells Fargo Bank that Chapter 116’s nonjudicial foreclosure scheme
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“facially violated mortgage lenders’ constitutional due process rights” before it was amended in
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2015. Bourne Valley Ct. Trust v. Wells Fargo Bank, 2016 WL 4254983, at *5 (9th Cir. Aug. 12,
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2016). As a result, Bourne Valley is likely dispositive of this and the hundreds of other
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foreclosure cases pending in both state and federal court. To save the parties from the need to
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invest resources briefing the effect of the Bourne Valley opinion before the finality of that
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opinion has been determined, the Court STAYS all proceedings in this case pending exhaustion
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of all appeals of Bourne Valley.
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I.
LEGAL STANDARD
“[T]he power to stay proceedings is incidental to the power inherent in every court to
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control the disposition of the causes of action on its docket with economy of time and effort for
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itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “A trial
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court may, with propriety, find it is efficient for its own docket and the fairest course for the
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parties to enter a stay of an action before it, pending resolution of independent proceedings
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which bear upon the case.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir.
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1979). In deciding whether to grant a stay, a court may weigh the following: (1) the possible
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damage which may result from the granting of a stay; (2) the hardship or inequity which a party
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may suffer in being required to go forward; (3) the orderly course of justice measured in terms
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of the simplifying or complicating of issues, proof, and questions of law which could be
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expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).
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However, “[o]nly in rare circumstances will a litigant in one case be compelled to stand aside
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while a litigant in another settles the rule of law that will define the rights of both.” Landis, 299
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U.S. at 255. A district court’s decision to grant or deny a Landis stay is a matter of discretion.
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See Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir.
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2007).
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II.
DISCUSSION
At the center of this case are the HOA-foreclosure sale conducted pursuant to Nevada
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Revised Statutes § 116.3116 and the competing arguments that the foreclosure sale either
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extinguished the bank’s security interest under the SFR holding or had no legal effect because
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the statutory scheme violates due process. Because the Ninth Circuit in Bourne Valley held that
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the scheme was facially unconstitutional, see Bourne Valley, 2016 WL 4254983, at *5, the
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Bourne Valley opinion and any modification of that opinion have the potential to be dispositive
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of this case. Under this circumstance, the Landis factors weigh strongly in favor of staying this
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action pending final resolution of the Bourne Valley decision. Indeed, the possible prejudice to
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the parties is minimal as the only potential harm is that the parties may wait longer for
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resolution of this case if it is stayed. However, if this case is not stayed, a delay would also
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result from any motions for reconsideration that may be necessitated if the current decision in
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the Bourne Valley case does not stand. Accordingly, a stay is not likely to appreciably lengthen
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the life of this case. Further, in the absence of a stay, judicial resources may be unnecessarily
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expended to resolve issues which may ultimately be decided by higher courts to which this
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Court is bound to adhere. Because the Bourne Valley decision is squarely on point, the orderly
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course of justice likewise weighs in favor of a stay. Accordingly, the Court finds that staying
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this action pending final resolution of Bourne Valley would be efficient for the Court’s own
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docket and the fairest course for the parties. See Leyva, 593 F.2d at 863.
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III.
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CONCLUSION
IT IS THEREFORE ORDERED that this case is administratively STAYED pending
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exhaustion of all appeals of Bourne Valley Court Trust v. Wells Fargo Bank, No. 15-15233 (9th
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Cir. Aug. 12, 2016). Once exhaustion occurs, any party may move to lift the stay. Until that
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time, all proceedings in this action are stayed.
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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.
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IT IS FURTHER ORDERED SFR Investments Pool 1, LLC, shall care for, preserve,
and maintain the Property.
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IT IS FURTHER ORDERED that, beginning on April 25, 2017, the parties must file a
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joint status report updating the Court on the status of this case every one-hundred and eighty
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days. Along with the joint status report, SFR Investments Pool 1, LLC, shall submit a
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statement affirming that all expenses necessary to maintain the property, including but not
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limited to, timely and full payment of all homeowners association assessments, property taxes,
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and property insurance premiums due and owing or past due at any time during the effective
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period of this Stay are current and up to date.
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IT IS FURTHER ORDERED that this Order does not prevent the parties from
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continuing to engage in settlement conference negotiations with the assistance of the Magistrate
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Judge.
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DATED this _____ day of October, 2016.
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___________________________________
Gloria M. Navarro, Chief Judge
United States District Judge
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