SFR Invs. Pool 1, LLC v. Bank of N.Y. Mellon

• Decision Date: 02 August 2018
• Docket Number: No. 72931,72931
• Citation: 422 P.3d 1248
• Parties: SFR INVESTMENTS POOL 1, LLC; and Star Hill Homeowners Association, Appellants, v. The BANK OF NEW YORK MELLON f/k/a The Bank of New York, as Trustee for the Certificateholders of the CWABS, Inc., Asset-backed Certificates, Series 2006-6, Respondent.
• Court: Nevada Supreme Court

422 P.3d 1248

SFR INVESTMENTS POOL 1, LLC; and Star Hill Homeowners Association, Appellants,

v.The BANK OF NEW YORK MELLON f/k/a The Bank of New York, as Trustee for the Certificateholders of the CWABS, Inc., Asset-backed Certificates, Series 2006-6, Respondent.

No. 72931

Supreme Court of Nevada.

FILED AUGUST 02, 2018

Alverson Taylor Mortensen & Sanders and Kurt R. Bonds and Adam R. Knecht, Las Vegas, for Appellant Star Hill Homeowners Association.

Kim Gilbert Ebron and Howard Kim, Diana Cline Ebron, and Jacqueline A. Gilbert, Las Vegas, for Appellant SFR Investments Pool 1, LLC.

Akerman LLP and Ariel E. Stern, Las Vegas, for Respondent.

Legislative Counsel Bureau Legal Division and Brenda J. Erdoes, Legislative Counsel, and Kevin C. Powers, Chief Litigation Counsel, Carson City, for Amicus Curiae Nevada Legislature.

BEFORE THE COURT EN BANC.

OPINION

By the Court, CHERRY, J.;

This case comes before us as a certified question from the United States District Court for the District of Nevada, seeking an answer to "[w]hether NRS § 116.31168(1) ’s incorporation of NRS § 107.090 required a homeowner’s association to provide notices of default and/or sale to persons or entities holding a subordinate interest even when such persons or entities did not request notice, prior to the amendment that took effect on October 1, 2015." NRS 107.090, which governs trustee sales under a deed of trust, mandates notice to those holding subordinate interests. We conclude that, by requiring application of NRS 107.090 during the homeowners' association foreclosure process, NRS 116.31168(1)¹ required notice to be provided to all holders of subordinate security interests prior to a homeowners' association foreclosure sale and thus answer the question in the affirmative.

FACTS AND PROCEDURAL HISTORY

In 2010, former homeowners became delinquent on their homeowners' association dues, and appellant Star Hill Homeowners Association recorded a notice of delinquent assessments, notice of default, and election to sell in 2010. Star Hill recorded notices of sale in 2011 and 2012. On September 14, 2012, Star Hill held the nonjudicial foreclosure sale pursuant to NRS Chapter 116. It recorded a foreclosure deed transferring the property to the purchaser, SBW Investment, Inc. The deed recitals stated that Star Hill had complied with all statutory notice requirements in conducting the sale. On April 15, 2013, SBW transferred title of the property to appellant SFR Investments Pool 1, LLC.

Respondent Bank of New York Mellon (BNYM) subsequently filed a complaint in the federal district court of Nevada, naming SFR and Star Hill as defendants and requesting a declaration that the foreclosure sale did not extinguish its deed of trust. BNYM alleged that the sale was void as violating due process because NRS Chapter 116 "lacks any pre-deprivation notice requirements." SFR answered the complaint and asserted a counterclaim, seeking the opposite declaration and to quiet title, alleging that BNYM was provided with the notice of default and sale. The federal district court then filed in this court its order certifying the question of law stated above.

DISCUSSION

NRAP 5 permits us to answer the certified question

Preliminarily, we address BNYM’s argument that we should not answer the certified question. Existing Nevada precedent does not fully resolve this legal question, and our answer may determine part of the underlying federal case. Thus, answering the question is appropriate. See SFR Invs. Pool 1, LLC v. Bank of New York Mellon , Docket No. 72931 (Order Accepting Certified Question, Directing Briefing and Directing Submission of Filing Fee, June 13, 2017) (citing NRAP 5(a) and Volvo Cars of N. Am., Inc. v. Ricci , 122 Nev. 746, 750-51, 137 P.3d 1161, 1163-64 (2006) ). Although BNYM contends that Bourne Valley Court Trust v. Wells Fargo Bank, N.A. , 832 F.3d 1154 (9th Cir. 2016), resolved the question, the Ninth Circuit’s interpretation of NRS 116.31168 does not stand in the way of our reaching the merits of the certified question.² See Owen v. United States , 713 F.2d 1461, 1464 (9th Cir. 1983) (providing that a federal court’s construction of a state statute is only binding in the continued absence of a contrary construction by that state’s highest court); see also Cal. Teachers Ass'n v. State Bd. of Educ. , 271 F.3d 1141, 1146 (9th Cir. 2001) (stating that state courts are the judicial body capable of authoritatively construing state statutes). Accordingly, we decline BNYM’s invitation to reject the question.

NRS 116.31168 required homeowners' associations to provide notice to all holders of subordinate interests in the event of foreclosure

SFR argues that this court recognized in SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 130 Nev. 742, 334 P.3d 408 (2014), that NRS 116.31168(1) mandated homeowners' associations to mail notices of default and sale to first security interest holders through incorporation of NRS 107.090.³ SFR contends that, regardless, banks such as BNYM have continued to argue in federal district court that they have been deprived of due process because notice is not required under NRS Chapter 116. SFR points out that, in so doing, banks rely on Bourne Valley , which stated that the incorporation of NRS 107.090 would "render the express notice provisions of NRS Chapter 116 entirely superfluous," and that NRS 116.31168 could not be read to require notice outside of its opt-in scheme. See Bourne Valley, 832 F.3d at 1159. SFR asserts that Bourne Valley was wrongly decided and notes that this court has since reaffirmed in unpublished orders the incorporation of NRS 107.090.

BNYM argues that NRS Chapter 116 merely required that notice be given to lienholders who had requested such notice from the HOA, as evidenced by the chapter’s continual reference to requests for notice. See NRS 116.31163(2). It seeks to invalidate Star Hill’s foreclosure on the basis that NRS Chapter 116 required notice only to parties that had opted-in to NRS Chapter 116’s notice provisions and was thus held to violate due process by the Ninth Circuit in Bourne Valley. We disagree with this interpretation of NRS 116.31168.

If a statute is unambiguous, this court interprets the statute according to its plain language. Williams v. United Parcel Servs. , 129 Nev. 386, 391-92, 302 P.3d 1144, 1147 (2013). We look beyond plain language if a statute is ambiguous or silent on the issue in question, and we read statutes within a common statutory scheme harmoniously with one another whenever possible. Allstate Ins. Co. v. Fackett , 125 Nev. 132, 138, 206 P.3d 572, 576 (2009). Where a statute’s language lends itself to conflicting interpretations, with one being constitutional and the other being unconstitutional, this court will choose the constitutional interpretation. Sheriff, Washoe Cty. v. Wu , 101 Nev. 687, 689-90, 708 P.2d 305, 306 (1985).

NRS 116.3116 to NRS 116.3117 governs homeowners' association liens and the procedures for foreclosing on them. NRS 116.31163 required homeowners' associations foreclosing on such liens to provide notice to each person who requested it pursuant to NRS 116.31168 or NRS 107.090. NRS 116.31168(1), governing "Foreclosure of liens: Requests by interested persons for notice of default and election to sell," stated "[t]he provisions of NRS 107.090 apply to the foreclosure of an association’s lien as if a deed of trust were being foreclosed. The request must identify the lien by stating the names of the unit’s owner and the common-interest community." The statute did not, however, indicate whether it incorporated all or some of NRS 107.090 ’s provisions.

NRS 107.090(1) defines a "person with an interest" as "any person who has or claims any right, title or interest in, or lien or charge upon, the real property described in the deed of trust, as evidenced by any document or instrument recorded in the office of the comity recorder." NRS 107.090(2) allows "[a] person with an interest or any other person who is or may be held liable for any debt secured by a lien on the property desiring a copy of a notice of default or ... sale under a deed of trust with power of sale upon real property" to request a copy of the notices by filing such a request in the office of county recorder where the subject property is located. NRS 107.090(3) requires, in the event of the recording of a notice of default on the property, that notice be provided to "[e]ach person who recorded a request for a copy" pursuant to NRS 107.090(2) and "[e]ach person with an interest whose interest or claimed interest is subordinate to the deed of trust." NRS 107.090(4) requires the trustee or person authorized to make the sale to mail the notice of sale to all persons entitled to notice under NRS 107.090(3).

NRS 116.31168 ’s incorporation of NRS 107.090 was previously before the Ninth Circuit in Bourne Valley , 832 F.3d 1154. The Ninth Circuit was similarly evaluating a quiet title action following nonjudicial foreclosure by a homeowners' association under NRS Chapter 116. Id. at 1156-57. Bourne Valley recognized that while a deed of trust ordinarily has priority over homeowners' association liens, NRS 116.3116(2) gave homeowners' association liens superpriority, making a portion of the homeowners' association lien senior to a deed of trust, id. at 1157 (citing SFR Invs. Pool 1, 130 Nev. at 744-50, 334 P.3d at 410-14 ), and as a result, foreclosure on a homeowners' association lien extinguished the mortgage lender’s first deed of trust. Id.

It further interpreted NRS 116.31163(2) as requiring a mortgage lender to "opt-in" to receive notice in the event of foreclosure by a homeowners' association, despite NRS 116.31168 ’s incorporation of NRS 107.090. Id. at 1157-59. The court reasoned that if NRS 107.090 ’s notice requirements were fully incorporated into NRS 116.31168, mandating that notice be given to "mortgage lenders whose rights are subordinate to a homeowners' association super priority...