Bank of America, N.A. v. Peppertree Homeowners Association et al

Filing 27

ORDER denying 10 Motion to Dismiss; ORDER denying 14 Motion to Dismiss; Signed by Judge Kent J. Dawson on 1/31/2018.; Case stayed. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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BANK OF AMERICA, N.A.,

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Plaintiff,

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v.

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Case No. 2:17-cv-01857-KJD-GWF

PEPPERTREE HOMEOWNERS
ASSOCIATION and TOW PROPERTIES,
LLC IV,

ORDER
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Defendants.

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Presently before the Court is Defendant Tow Properties, LLC IV’s Motion to Dismiss

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Complaint (#10). Plaintiff filed a response (#12) to which Defendant Tow Properties, LLC IV replied

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(#13). Also before the Court is Defendant Peppertree Homeowners Association’s Motion to Dismiss

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with Prejudice (#14). Plaintiff filed a response (#16).

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I. Background

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This case emerges from Peppertree Homeowners Association’s November 20, 2013 non-

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judicial foreclosure sale of the property located at 729 Nectarine Court, Henderson, Nevada 89014

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(“the Property”). Both motions presently before the Court center in whole or in part around the

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question of what notice of default Peppertree Homeowners Association was required to provide

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Plaintiff prior to its foreclosure sale on the Property. This case shares a similar fact pattern with many

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cases currently pending before this Court. In the words of Defendant Peppertree Homeowners

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Association, it is “one of the hundreds of Homeowners Association lawsuits filed in this District

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following the Nevada Supreme Court’s decision in SFR Investments Pool 1 LLC, v. U.S. Bank, 334

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P.3d 408 (Nev. 2014) where the Nevada Supreme Court held that ‘NRS 116.3116(2) gives an HOA a

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true superpriority lien, proper foreclosure of which will extinguish a first deed of trust.’” However,

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after the Nevada Supreme Court’s decision in SFR Investments Pool 1 LLC v. U.S. Bank, the Ninth

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Circuit decided Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154, 1160 (9th Cir.

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2016), holding NRS 115.3116(2)’s statutory notice scheme was facially unconstitutional. In light of

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Bourne Valley, what notice an HOA must provide prior to foreclosing on a superpriority lien remains

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uncertain.

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A. Certified Question

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On April 21, 2017, in Bank of New York Mellon v. Star Hills Homeowners Association, this

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Court certified the following question to the Nevada Supreme Court: “Whether NRS §

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116.31168(1)’s incorporation of NRS § 107.090 requires homeowners associations to provide

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notices of default to banks even when a bank does not request notice?” Bank of New York Mellon v.

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Star Hill Homeowners Assoc., 2017 WL 1439671, at *5 (D. Nev. April 21, 2017).

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In granting certification, the Court reasoned the following: In Bourne Valley, the Ninth

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Circuit definitively answered the question that the statute’s “opt-in” framework was unconstitutional.

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Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154, 1160 (9th Cir. 2016). However,

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that leaves this Court with the unresolved question of what notice must be provided. “It is solely

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within the province of the state courts to authoritatively construe state legislation.” Cal. Teachers

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Ass’n v. State Bd. of Educ., 271 F.3d 1141, 1146 (9th Cir. 2001). As such, state law questions of

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first impression like this one should be resolved by the state’s highest court. See Huddleston v.

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Dwyer, 322 U.S. 232, 237 (1944). Allowing the Nevada Supreme Court to answer this question

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before considering any other motions will provide this Court the necessary guidance as to how to

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handle the issues of notice and actual notice in light of Bourne Valley.

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In Bank of New York Mellon, the Court did not and could not rely upon any controlling state

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law as to the requirements of notice. This Court faces the same predicament here. An answer to the

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above already certified question will provide much needed clarity, and may be dispositive of many of

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the issues currently before the Court in this case.

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B. Sua Sponte Stay of the Case

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The pending motions to dismiss in this case implicate the previously certified question

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regarding what notice state law requires. To save the parties from the need to invest further resources

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into the issues surrounding the notice requirement, the Court sua sponte stays all proceedings in this

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case and denies all pending motions without prejudice.

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A district court has the inherent power to stay cases to control its docket and promote the

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efficient use of judicial resources. Landis v. North Am. Co., 299 U.S. 248, 254-55 (1936);

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Dependable Highway Exp., Inc., v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). When

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determining whether a stay is appropriate pending the resolution of another case — often called a

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“Landis stay” — the district court must weigh: (1) the possible damage that may result from a stay;

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(2) any “hardship or inequity” that a party may suffer if required to go forward; and (3) “the orderly

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course of justice measured in terms of the simplifying or complicating of issues, proof, and questions

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of law” that a stay will engender. Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005).

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Weighing these considerations, the Court finds that a Landis stay is appropriate.

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1. Damage from a stay

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The only potential damage that may result from a stay is that the parties will have to

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wait longer for resolution of this case and any motions that they have filed or intend to file in the

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future. But a delay would also result from any rebriefing or supplemental briefing that may be

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necessitated pending the Nevada Supreme Court’s answer to the certified question. It is not clear that

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a stay will ultimately lengthen the life of this case.

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Additionally, a stay of this case pending resolution of the certified question is

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expected to be reasonably short. This Court certified the question approximately nine months ago,

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and briefing on the pending petition in Nevada’s Supreme Court is completed. Because the length of

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this stay is directly tied to the petition proceedings in that case, it is reasonably brief, and not

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indefinite. Thus, the Court finds only minimal possible damage that this stay may cause.

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2. Hardship and inequity

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Both parties equally face hardship or inequity if the Court resolves the claims or

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issues before the certified question has been resolved. And in the interim both parties stand to benefit

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from a stay, regardless of the outcome of the question. A stay will prevent any additional,

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unnecessary briefing and premature expenditures of time, attorney’s fees, and resources.

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3. Orderly course of justice

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A focal point of this case is the question of what notice is now required under NRS

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Chapter 116 in light of the Ninth Circuit decision Bourne Valley. The jurisprudence in this area of

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unique Nevada law continues to evolve, causing parties in the scores of foreclosure-challenge actions

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to file new motions or supplement the ones that they already have pending, resulting in

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“docket-clogging entries and an impossible-to-follow chain of briefs in which arguments are

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abandoned and replaced.” Nationstar Mortg., LLC v. Springs at Spanish Trail Assoc., 2017 WL

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752775, at *2 (D. Nev. Feb. 27, 2017). Staying this case pending the Nevada Supreme Court’s

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disposition of the certified question in Bank of New York Mellon will permit the parties to evaluate,

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and the Court to consider, viability of the claims under the most complete precedent. This will

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simplify and streamline the proceedings and promote the efficient use of the parties’ and the Court’s

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resources.

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Therefore, the Court orders this action stayed. Once the Nevada Supreme Court has

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resolved the question certified in Bank of New York Mellon, either party may move to lift the stay.

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Accordingly, IT IS HEREBY ORDERED that Defendant Tow Properties, LLC IV’s Motion
to Dismiss Complaint (#10) is DENIED;
IT IS FURTHER ORDERED that Defendant Peppertree Homeowners Association’s Motion
to Dismiss with Prejudice (#14) is DENIED;

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IT IS FURTHER ORDERED that all pending motions are DENIED without prejudice;

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IT IS FURTHER ORDERED that this action is STAYED.

10 DATED this 31st day of January, 2018.
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______________________________
Kent J. Dawson
United States District Judge

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