BREAKING NEWS:
The United States Supreme Court Denies Cert. in
Bourne Valley Court Trust
v.
Wells Fargo Bank, N.A.
By Michael McKelleb, Esq.
Attorney at Angius & Terry LLP
This morning, the United States Supreme Court filed its most recent list of cases in which it denied Certiorari. Included on the list was
Bourne Valley Court Trust v. Wells Fargo Bank, N.A.
(Dock. 16-1208). In
Bourne Valley,
Wells Fargo filed a complaint in the United States District Court for the District of Nevada against the Bourne Valley Court Trust, an investor-trust that purchased a unit at an HOA foreclosure sale. In the complaint Wells Fargo alleged the HOA foreclosure sale: (i) did not comply with the notice requirements of NRS Chapter 116; (ii) was not commercially reasonable and therefore was void; (iii) that Bourne Valley was not a bona-fide purchaser because it purchased the property knowing of a mortgage savings clause in the CC&Rs; and (iv) that Bourne Valley failed to provide evidence sufficient to show the HOA complied with all the statutory notice requirements of NRS Chapter 116.
See Bourne Valley Court Trust v. Wells Fargo Bank, N.A.
, 80 F. Supp. 3d 1131, 1133 (D. Nev. 2015). Though not stated in the district court's order granting Bourne Valley's motion for summary judgment, among Wells Fargo's arguments was its claim that a mortgage was a legally protected interest that could not be extinguished without due process of law.
See Bourne Valley Court Trust v. Wells Fargo Bank, N.A.,
2:13-cv-00649-JCM-GWF (Doc. 48) (D. Nev. Nov. 3, 2014). The district court failed to find any of Wells Fargo's arguments compelling, granting summary judgment in favor of Bourne Valley. Wells Fargo appealed to the Ninth Circuit, where it reiterated its due process argument, adding the claim that the Nevada legislature's enactment of NRS Chapter 116.3116 through 116.31168 was sufficient state action to make the foreclosure a taking, thereby invoking the due process clause of the United States Constitution. Thus, according to Wells Fargo, even though an HOA foreclosure sale is conducted by a private party, enactment of the statute met the state action requirement for a taking, thereby requiring notice under the due process clause.
Id.
Contrary to this, Wells Fargo argued that the "opt-in" provision of the HOA foreclosure statute (NRS 116.31163(2)) (amend. 2015) did not mandate notice because the statute required the holder of a deed of trust to first "opt in" by notifying an association that it wished to receive notice. In other words, because NRS 116.31163(2) did not required a lender holding a deed of trust be given notice of a foreclosure in all circumstances, the taking violated the due process clause.
Id.
The Ninth Circuit three-judge panel agreed with Wells Fargo and reversed the district court by a 2-1 vote, finding the "opt-in" provision of the statute was facially unconstitutional.
See Bourne Valley Court Trust v. Wells Fargo Bank, N.A.,
832 F.3d 1154, 1160 (9th Cir. 2016). Bourne Valley then requested a "en-banc" review, which sought to have the matter reheard by all nine judges of the Ninth Circuit. The request was denied, leading Bourne Valley to appeal the decision to the United States Supreme Court, which is accomplished by filing a Petition for a Writ of Certiorari.
See:
While this was ongoing, the Nevada Supreme Court heard the appeal in Saticoy Bay, LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage. See Saticoy Bay, LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, a Division of Wells Fargo Bank, N.A., 388 P.3d 970 (Nev. 2017). In Saticoy Bay, Wells Fargo made the same arguments before the Nevada Supreme Court that it had in the Ninth Circuity in Bourne Valley, as outlined above. However, contrary to the holding of the Ninth Circuit, the Nevada Supreme Court held that Nevada's HOA foreclosure statute did not constitute a governmental taking, meaning the due process of the United States and Nevada Constitutions was not invoked. Id. at 975.
The disparate holdings created significant confusion in the Nevada Courts, leading many judges to stay their cases while the Petition for Writ of Certiorari was pending before the United States Supreme Court. Appealing a case to the United State Supreme Court is generally understood to be a "long-shot," so to speak. The highest court in the land receives between 7,000 and 8,000 petitions for a writ of certiorari each term (year). However, the Court only grants a writ in about 80 of those cases, meaning the chance of the High Court accepting a petition is between 1% and 1.1%. Some legal scholars believed the writ in Bourne Valley would be accepted because the holding of the Ninth Circuit was in direct conflict with the Nevada Supreme Court in Saticoy Bay. One of the factors that often leads to the U.S. Supreme Court accepting a petition is when the decision creates a split in authority between the various Federal Circuits, meaning a split between a federal district and the state it resides was seemingly compelling. Others, on the other hand, pointing to the limited impact of the conflict, which is isolated to Nevada, believed this was insufficient to draw SCOTUS's attention. In addition, because the Nevada legislature amended the foreclosure statute in 2015 to remove the offending "opt in" provision, it appeared the conflict would naturally resolve itself rather quickly through disposition of the pre-2015 foreclosure cases.
Today, the Supreme Court of the United States answered the question by denying the Petition for a Writ of Certiorari, meaning the Supreme Court will not hear the case, leaving the decision of the Ninth Circuit, finding the statute facially unconstitutional intact. See Bourne Valley Cert. Denied attached hereto. This naturally begs the question, what now? Angius & Terry LLP is reviewing the impact of this decision and will provide additional insight regarding its impact and import, including how this recent development will likely result in a "race to the courthouse," meaning a flurry of new complaints in both state and federal court, including a discussion on what, if any, impact this decision will have on those state and federal court cases.
