UPDATE: Ninth Circuit Denies Rehearing of Bourne Valley Decision Holding Nevada HOA Super-Priority Lien Statute Unconstitutional

Bradley Arant Boult Cummings LLP

The Ninth Circuit denied the plaintiff’s request to rehear Bourne Valley Court Trust v. Wells Fargo Bank, N.A., in which the Ninth Circuit found NRS 116 to be unconstitutional on its face because the statute violates a first lien holder’s due process rights by impermissibly shifting the burden to mortgage lenders to affirmatively request notice of an HOA’s foreclosure proceedings. This case, which we have been following in a series of blog posts, has significant implications for numerous HOA super-priority foreclosure cases pending in Nevada’s federal courts between purchasers from HOA foreclosure sales who claim to hold title free-and-clear of the first lien holder’s deed of trust and lenders who assert that their deeds of trust remain valid.

The Ninth Circuit had already denied the plaintiff’s request to delay publication of the case, and now the case will not be re-heard. Specifically, two Ninth Circuit judges voted to deny the petition for rehearing filed by the plaintiff in Bourne Valley, while one judge voted to grant the petition. Two judges also recommended denying the petition for rehearing en banc, with one recommending rehearing. The order noted that the full court had been advised of the petition for rehearing en banc and that no active judge had requested a vote on whether to rehear the matter en banc. While the eventual decision by the Nevada Supreme Court in Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, N.A., No. 68630, which involves the same facial due process challenge considered in Bourne Valley, may ultimately affect how courts interpret Bourne Valley, the Ninth Circuit will not re-consider its decision in the case, which is binding precedent for the federal trial courts in the Ninth Circuit, including the federal trial courts in Nevada.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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