and Submitted June 13, 2016 San Francisco, California
from the United States District Court for the District of
Nevada, D.C. No. 2:13-cv-00649-PMP-NJK Philip M. Pro, Senior
District Judge, Presiding
M. Jacobs (argued), Snell & Wilmer L.L.P., Tucson,
Arizona; Amy F. Sorenson, Snell & Wilmer L.L.P., Salt
Lake City, Utah; Kelly H. Dove, Snell & Wilmer L.L.P.,
Las Vegas, Nevada; for Defendant-Appellant.
Michael F. Bohn (argued), Law Offices of Michael F. Bohn,
Esq., Ltd., Las Vegas, Nevada, for Plaintiff-Appellee.
Before: J. Clifford Wallace, Dorothy W. Nelson, and John B.
Owens, Circuit Judges.
panel vacated the district court's summary judgment
entered in favor of Bourne Valley Court Trust in the
Trust's action to quiet title on real property that it
had acquired after the property had been foreclosed by a
Revised Statutes section 116.3116 et seq. strips a
mortgage lender of its first deed of trust when a
homeowners' association ("HOA") forecloses on
the property based on delinquent HOA fees.
panel held that the Statute's "opt-in" notice
scheme, which required a HOA to alert a mortgage lender that
it intended to foreclose only if the lender had affirmatively
requested notice, facially violated the lender's
constitutional due process rights under the Fourteenth
Amendment to the Federal Constitution. The panel held that
the "state action" requirement for purposes of
constitutional due process was met by the Nevada
Legislature's enactment of the Statute, which
unconstitutionally degraded the mortgage lender's
interest in the property. The panel remanded for further
Wallace dissented because he would hold there was no state
action, and because the Statute satisfied due process by
incorporating another provision in the Nevada Revised Statues
that required HOAs to provide written notice to a mortgage
NELSON, Circuit Judge:
Revised Statutes section 116.3116 et seq. (the
Statute) strips a mortgage lender of its first deed
of trust when a homeowners' association forecloses on the
property based on delinquent HOA dues. Before it was amended,
it did so without regard for whether the first deed of trust
was recorded before the HOA dues became delinquent, and
critically, without requiring actual notice to the lender
that the homeowners' association intends to foreclose.
that the Statute's "opt-in" notice scheme,
which required a homeowners' association to alert a
mortgage lender that it intended to foreclose only if the
lender had affirmatively requested notice, facially violated
the lender's constitutional due process rights under the
Fourteenth Amendment to the Federal Constitution. We
therefore vacate the district court's judgment and remand
for proceedings consistent with this opinion.
case arises out of an action to quiet title to real property
located at 410 Horse Pointe Avenue (the Property) purchased
at a homeowners' association foreclosure auction in North
Las Vegas, Nevada.
Johnson, the original homeowner, purchased the Property in
2001 with a loan for $174, 000 from Plaza Home Mortgage, Inc.
(Plaza). The Property is part of a planned development
governed by the Parks Homeowners' Association (Parks).
Plaza recorded a deed of trust securing a note on the
property, and Appellant Wells Fargo was assigned all
beneficial interest in the note and deed of trust in February
fell behind on payments for her HOA dues, and Parks recorded
a Notice of Delinquent Assessment Lien on August 30, 2011.
The total amount due was $1, 298.57. On October 12, 2011,
Parks recorded a Notice of Default and Election to Sell. On
April 9, 2012, Parks recorded a Notice of Trustee/Foreclosure
Sale against the Property.
22, 2012, a Trustee's Deed Upon Sale was recorded,
reflecting that Horse Pointe Avenue Trust paid $4, 145 at the
homeowners' association foreclosure sale. Horse Pointe
Avenue Trust conveyed its interest in the Property to
Appellee Bourne Valley Court Trust (Bourne Valley).
Valley filed an action to quiet title in Nevada state court.
The action was removed to the federal district court for the
District of Nevada pursuant to 28 U.S.C. § 1441. The
district court granted summary judgment for Bourne Valley.
district court's ruling was based largely on the Nevada
Supreme Court's decision in SFR Investments Pool 1 v.
U.S. Bank, 334 P.3d 408 (Nev. 2014). There, the Nevada
Supreme Court interpreted the Statute to give a
homeowners' association a "super priority" lien
on an individual homeowner's property for up to nine
months of unpaid HOA dues. 334 P.3d at 419. As the Nevada
Supreme Court interpreted the Statute, the foreclosure of a
homeowners' association "super priority" lien
extinguished all junior interests in the property, including
even a mortgage lender's first deed of trust. Thus,
following the Nevada Supreme Court's interpretation of
the Statute, the district court held that Parks's
foreclosure extinguished Wells Fargo's interest in the
Fargo timely appealed.
AND STANDARD OF REVIEW
district court had jurisdiction pursuant to 28 U.S.C. §
1332. We have jurisdiction pursuant to 28 U.S.C. § 1291.
review a district court's order granting summary judgment
de novo. Fed. Deposit Ins. Corp. v. New
Hampshire Ins. Co, 953 F.2d 478, 485 (9th Cir.
Statute was facially unconstitutional.
explaining why the Statute's notice scheme rendered the
Statute unconstitutional, we first review how the Statute
would have otherwise permitted a homeowners' association
lien foreclosure to extinguish a mortgage lender's first
deed of trust.
116.3116(2) set forth the priority of the homeowners'
association lien with respect to other liens. Pursuant to
that section, a homeowners' association lien took
priority over all other liens except:
(a) Liens and encumbrances recorded before the recordation of
the declaration and, in a cooperative, liens and encumbrances
which the association ...