Saticoy Bay decision
On January 26, 2017, the Nevada Supreme Court issued a decision in Saticoy Bay 305 Durango #104 v. Wells Fargo Home Mortgage, NSC Case 68630. The Nevada Supreme Court directly addressed and contradicted the Ninth Circuit’s opinion in Bourne Valley Court Tr. v. Wells Fargo Bank, NA, 2016 U.S. App. LEXIS 14857 (9th Cir. Nev. Aug. 12, 2016) regarding the constitutionality of NRS 116.3116. The District Court dismissed the action and ruled that Chapter 116 of the Nevada Revised Statutes violated Wells Fargo’s due process rights and was facially unconstitutional. The Nevada Supreme Court rejected this finding and reversed and remanded back to the District Court.
The Nevada Supreme Court declared on a 5-0 decision that the Due Process Clauses of theUnited States and Nevada Constitutions are not implicated in an HOA's non-judicial foreclosure of an HOA Lien. In addition, the Nevada Supreme Court held that the extinguishment of a subordinate deed of trust through an HOA's non-judicial foreclosure does not violate the Takings Clauses of the United States and Nevada Constitutions. Directly contradicting the majority opinion of the Ninth Circuit Panel, the Nevada Supreme Court concluded that an HOA acting pursuant to NRS 116.3116 et seq. cannot be deemed a state actor because action by a private party pursuant to a statute, without something more, is not sufficient to justify a characterization of that party as a state actor and that non-judicial foreclosure does not involve significant state action. Additionally the Nevada Supreme Court rejected Wells Fargo’s argument that the enactment of the statute by the Legislature was sufficient to trigger state deprivation of rights. Because the right to foreclosure is optional to the HOA and not mandated or compelled by statute, the state is not participating in the non-judicial foreclosure.
Secondarily the Nevada Supreme Court ruled that non-judicial foreclosure sales do not amount to a taking under the Takings Clause. The Nevada Supreme Court ruled that the State of Nevada had not directly appropriated Wells Fargo’s lien or the property subject to the lien. Likewise NRS 116.3116 was not a regulatory taking, in that there is no necessary economic impact to Wells Fargo because Wells Fargo’s deed of trust could have been paid from the sales proceeds and the HOA was not required to foreclose. Secondarily there was no interference with any legitimate investment-backed expectation because Wells Fargo knew or should have known when it made its Deed of Trust that Chapter 116 might create a superpriority interest in the HOAs. Merely because the Nevada Legislature decided to statutorily alter the priority of liens does not implicate a taking.
The Nevada Supreme Court also issued a decision in Saticoy Bay 2021 Gray Eagle v. JP Morgan Chase, NSC Case 68431, which held that the three-year limit in NRS 116.3116(6) is not a statue of limitations for actions related to foreclosure of HOA liens but merely is an expiration date for what past due assessments are included in the lien as of the date of sale.