Deutsche Bank National Trust Company v. REO Investments Advisors V, LLC et al

Filing 40

ORDER Granting 13 Motion to Stay Case. This case is STAYED for all purposes. The pending 19 and 21 Motions to Dismiss are DENIED without prejudice to their refiling within 20 days of an Order lifting the stay. Signed by Judge Jennifer A. Dorsey on 11/21/2017. (Copies have been distributed pursuant to the NEF - SLD)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 Deutsche Bank National Trust Company, 5 2:17-cv-00694-JAD-PAL Plaintiff Order Staying Case and Denying Motions Without Prejudice 6 v. 7 REO Investment Advisors V, LLC, et al., 8 [ECF Nos. 13, 19, 21] Defendants 9 Deutsche Bank brings this quiet-title and wrongful-foreclosure action to challenge the 10 11 2014 nonjudicial foreclosure sale of the home located at 2776 Jupiter Creek Street in Las Vegas, 12 Nevada.1 Although the bank sues under a dozen theories ranging from breach of contract to 13 negligence to due-process violation, it primarily seeks a declaration that, despite the operation of 14 NRS 116.3116 as interpreted by the Nevada Supreme Court in SFR Investments Pool 1, LLC v. 15 U.S. Bank,2 its first deed of trust was not wiped out by the foreclosure sale, and the purchaser 16 REO Investment Advisors V, LLC bought the property subject to the bank’s interest.3 But this property is also the subject of an earlier-filed lawsuit in state court. Deutsche 17 18 Bank started its challenge by filing a similar suit for quiet title in Nevada’s Eighth Judicial 19 District Court almost two years before it filed this lawsuit.4 REO now moves to stay this case 20 pending the completion of the earlier-filed state-court case.5 Because it appears that the state 21 court has exclusive jurisdiction over this case, I grant the motion, stay this action, and deny the 22 23 1 ECF No. 1. 2 SFR Investments Pool 1, LLC v. U.S. Bank, 334 P.3d 408, 419 (Nev. 2014). 3 See ECF No. 1 at 22–23. 4 I take judicial notice of the existence of and filings in Case No. A-15-719261-C. 5 ECF No. 13. 24 25 26 27 28 1 pending motions to dismiss without prejudice. 2 Discussion 3 In Chapman v. Deutsche Bank Nat’l Trust Co. (“Chapman I”), the Ninth Circuit 4 explained the “mandatory jurisdictional limitation” known as the “prior exclusive jurisdictional 5 doctrine.”6 The doctrine “holds that when one court is exercising in rem or quasi in rem 6 jurisdiction over a res, a second court may not assume in rem or quasi in rem jurisdiction over 7 the same res,” and the second court must dismiss or stay.7 And in response to a certified question 8 in Chapman I, the Nevada Supreme Court clarified that quiet-title proceedings challenging 9 nonjudicial foreclosures are either in rem or quasi in rem in nature.8 With that clarification, the 10 Ninth Circuit in Chapman II held that the federal court lacked jurisdiction over a quiet-title 11 action about the same property that was the subject of an earlier-filed unlawful-detainer suit in 12 state court. The panel remanded, instructing: “If the Unlawful Detainer Action remains pending, 13 the Quiet Title Action should be dismissed for lack of subject matter jurisdiction over the res. If 14 the state action has terminated, the district court may elect to proceed with the instant action.”9 15 This federal action is the second quiet-title action that Deutsche Bank has filed about this 16 property and this foreclosure sale.10 Deutsche Bank argues that the doctrine should not apply 17 here because the earlier-filed state-court case was dismissed the day after this action was filed.11 18 And because “jurisdiction in state court has already terminated[,] this Court has exclusive in rem 19 20 21 6 Chapman v. Deutsche Bank Nat’l Trust Co. (“Chapman I”), 651 F.3d 1039, 1043 (9th Cir. 2011). 22 7 23 24 Chapman v. Deutsche Bank Nat’l Trust Co. (“Chapman II”), 531 F. App’x 832, 833 (9th Cir. 2013). 8 Chapman v. Deutsche Bank Nat’l Trust Co., 302 P.3d 1103, 1108 (Nev. 2013). 9 Chapman II, 531 F. App’x at 833 (citing Knaefler v. Mack, 680 F.2d 671, 675 (9th Cir. 1982)). 25 26 10 See ECF No. 13-1 (state-court complaint). 11 ECF No. 16 at 4. 27 28 2 1 jurisdiction over the subject Property.”12 2 Except that the state-court case is still active. Minutes from a July 25, 2017, hearing on 3 REO’s motion to reopen that case reflect that “the case was never closed because” Deutsche 4 Bank did not take the final steps necessary to close it, so the court denied as moot the motion to 5 reopen the still-open case. And the docket reflects that REO has filed an answer and 6 counterclaim, and Deutsche Bank has moved to strike that pleading. After a handful of 7 continuances, the hearing on that motion is scheduled for December 5, 2017.13 8 Because the state court exercised jurisdiction over this property via Deutsche Bank’s first- 9 filed quiet-title action before this federal lawsuit was filed, “the federal court is precluded from 10 exercising its jurisdiction over the same res to defeat or impair the state court’s jurisdiction.”14 11 The proper remedy, it appears, is not a stay—but dismissal because the pending state-court action 12 precludes this court from exercising jurisdiction.15 But because REO moves now only for a stay 13 “subject to dismissal for lack of subject matter jurisdiction” if the state-court action proceeds, 14 and the parties have not briefed me on the plans for, or anticipated course of, that case now that 15 the judge has found that it was never closed, I find that the prudent course is to grant the stay 16 under Landis v. North American Company, which recognizes the district court’s inherent power 17 to stay cases to control its docket and promote the efficient use of judicial resources.16 When 18 determining whether a stay is appropriate pending the resolution of another case—often called a 19 “Landis stay”—the district court must weigh: (1) the possible damage that may result from a 20 12 21 22 Id. 13, last visited on 11/21/17. 23 14 24 Chapman I, 651 F.3d at 1044 (quoting Kline v. Burke Constr. Co., 260 U.S. 226, 229 (1922)). 15 26 Id. at 1043 (quoting State Eng’r v. S. Fork Bank of Te-Moak Tribe of W. Shoshone Indians, 339 F.3d 804, 810 (9th Cir. 2003) and noting that the prior exclusive jurisdiction doctrine “is no mere discretionary abstention rule. Rather, it is a mandatory jurisdictional limitation.”). 27 16 25 28 Landis v. North American Co., 299 U.S. 248, 254–55 (1936); Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). 3 1 stay, (2) any “hardship or inequity” that a party may suffer if required to go forward, (3) “and the 2 orderly course of justice measured in terms of the simplifying or complicating of issues, proof, 3 and questions of law” that a stay will engender.17 Having weighed these considerations, I find 4 that a Landis stay is appropriate here because there have been developments in the state-court 5 action since the motion to stay was filed, those developments may deprive this court of 6 jurisdiction over this action, but the parties have not fully briefed the question of dismissal. A 7 stay will avoid complicating the issues in this case while the state-court judge considers the 8 viability of the earlier-filed case. 9 Conclusion 10 IT IS THEREFORE ORDERED that the Motion to Stay [ECF No. 13] is GRANTED. 11 This case is STAYED for all purposes. Once the state-court judge has resolved pending 12 motion to strike REO’s Answer and Counterclaim and for Order Closing Case, any party 13 may move to lift this stay or to dismiss it for lack of jurisdiction based on the Chapman 14 cases or the Colorado River doctrine. 15 16 IT IS FURTHER ORDERED that the pending motions to dismiss [ECF Nos. 19, 21] are DENIED without prejudice to their refiling within 20 days of an order lifting the stay. 17 DATED: November 21, 2017 18 _______________________________ _________________ _ _ _ __ Jennifer A. Dorsey r A Dorsey or United States District Judge St t Di t i t J d 19 20 21 22 23 24 25 26 27 28 17 Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005). 4

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