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Bourne Valley Court Trust v. Wells Fargo Bank, N.A. (2016)

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Bourne Valley Court Trust v. Wells Fargo Bank, N.A. (2016)

Citation: 832 F.3d 1154 (9th Cir. 2016) · Court: U.S. Court of Appeals for the Ninth Circuit, No. 15-15233 · Argued/Submitted: June 13, 2016 · Filed: August 12, 2016 · Panel: Wallace, D.W. Nelson, Owens, Circuit Judges (opinion by D.W. Nelson, J.; dissent by Wallace, J.)

The Ninth Circuit decision that briefly disrupted Nevada’s hoa-super-priority regime by holding the pre-2015 version of NRS 116.3116 et seq. facially unconstitutional on due process grounds. The panel held that the statute’s “opt-in” notice scheme — under which a homeowners’ association had to alert a mortgage lender of an impending foreclosure only if the lender had affirmatively requested notice — violated the lender’s Fourteenth Amendment due process rights. This holding is no longer good law (see Good-law status). See nevada, sfr-investments-pool-1-v-us-bank, saticoy-bay-v-wells-fargo-2017.

Facts

Renee Johnson bought a North Las Vegas home in 2001 with a $174,000 loan from Plaza Home Mortgage; Wells Fargo was later assigned the note and first deed of trust. Johnson fell behind on HOA dues. The HOA (Parks) recorded a Notice of Delinquent Assessment Lien ($1,298.57), a Notice of Default and Election to Sell, and a Notice of Trustee’s Sale. At the non-judicial HOA foreclosure sale, Horse Pointe Avenue Trust paid $4,145; it conveyed the property to Bourne Valley Court Trust. Bourne Valley sued to quiet title; the case was removed to federal court, which granted summary judgment for Bourne Valley based on the Nevada Supreme Court’s interpretation in sfr-investments-pool-1-v-us-bank that an HOA super-priority foreclosure extinguishes a first deed of trust. Wells Fargo appealed.

Holding

“We hold 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.”

The panel vacated the district court’s judgment and remanded.

Reasoning

  • Notice burden impermissibly shifted to the lender. Before its amendment, the statute required notice to a security-holder only if the holder had previously asked the HOA to be kept informed (e.g., NRS 116.31163(2)). The panel held this unconstitutionally shifted “the entire burden of ensuring adequate notice to an interested property owner,” citing Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983), Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950), and Small Engine Shop, Inc. v. Cascio, 878 F.2d 883 (5th Cir. 1989) (striking an analogous “opt-in” foreclosure-notice clause).
  • State action found in the statute’s enactment. Although the HOA’s sale was a private transaction, the panel located the “state action” required for due process in the Nevada Legislature’s enactment of the statute, which “unconstitutionally degraded” the lender’s interest in the property — absent the statute, Wells Fargo would have had a fully secured interest.
  • Dissent (Wallace, J.). Judge Wallace would have found no state action and would have held the statute satisfied due process because it incorporated other provisions of the Nevada Revised Statutes requiring HOAs to provide written notice to lenders. The dissent’s reading of the statute foreshadowed the analysis the Nevada Supreme Court later adopted.

Practical impact

  • For mortgage lenders / servicers: Bourne Valley temporarily gave federal litigants a powerful facial-due-process defense to argue that a pre-2015 Nevada HOA super-priority foreclosure could not extinguish a first deed of trust. That defense has since collapsed.
  • For investors / operators: A title acquired through a Nevada HOA super-priority sale was, for a period, clouded by Bourne Valley in federal court even though Nevada state courts disagreed — a classic state-court/federal-court split that complicated quiet-title strategy. See lien-survival.
  • Status now: Because Bourne Valley is no longer good law, due-process challenges to the pre-amendment statute generally fail; analysis returns to tender, notice-compliance, and commercial-reasonableness defenses under Nevada law.

Good-law status

Abrogated / no longer good law. Rehearing en banc was denied (Nov. 2016) and certiorari was denied (June 26, 2017). However, the Nevada Supreme Court subsequently rejected the Ninth Circuit’s interpretation of the statute, holding in sfr-investments-pool-1-v-bank-of-new-york-mellon-2018, 134 Nev. 483, 422 P.3d 1248 (2018) (en banc), that NRS 116.3116 incorporates mandatory notice provisions (via NRS 107.090), not merely an opt-in scheme — and in saticoy-bay-v-wells-fargo-2017, 133 Nev. 28, 388 P.3d 970 (2017), that the statute does not involve state action. Because state courts authoritatively construe state statutes, the Ninth Circuit later recognized that Bourne Valley “is no longer good law” in Bank of America, N.A. v. Arlington West Twilight Homeowners Ass’n, 920 F.3d 620, 623–24 (9th Cir. 2019). The decision is retained here for its historical and doctrinal significance, not as controlling authority.

Why it matters

Bourne Valley is the high-water mark of the federal due-process challenge to HOA super-priority foreclosure and a textbook example of how a federal court of appeals’ reading of a state statute can be displaced by the state’s own high court. Any operator relying on a Nevada HOA-sale title must understand both the case and its abrogation.

Applies in →

Federal (Ninth Circuit) — historically nevada HOA-foreclosure litigation. No longer controlling.

Legal information, not legal advice. This page summarizes a court decision for educational purposes and does not create an attorney-client relationship. Verify against the primary opinion and consult a licensed attorney in the relevant jurisdiction before acting. Last verified 2026-06-02.

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