Case Title: Federal Housing Finance Agency v. Saticoy Bay LLC

Citation: 139 Nev. Adv. Op. No. 15

Docket Number: 

State: nevada

Court: Nevada Supreme Court

Date: 2023-07-06T00:00:00Z

Document:
1499 New, Advance Opinion (5

IN THE SUPREME COURT OF THE STATE OF NEVADA

FEDERAL HOUSING FINANCE, No. 84370
AGENCY; FEDERAL NATIONAL
MORTGAGE ASSOCIATION; AND

 

  

FEDERAL HOME LOAN MORTGAGE.

CORPORATION, Fi L E
Appellants, iUL 06 2023
SATICOY BAY LLC, Sous
Respondent. er eT

 

Certified question under NRAP 6 concerning jurisdiction over
series LLCs. United States Court of Appeals for the Ninth Circuit; M
Margaret McKeown and William A. Fletcher, Circuit Judges, and Richard
D. Bennett, District Judge.!

Certified question answered.

Arnold & Porter Kaye Scholer LLP and Michael A.F. Johnson and Dirk
Phillips, Washington, D.C.
for Appellant Federal Housing Finance Agency.

 

Fennemore Craig, P.C., and Leslie Bryan Hart and John D. Tennert, III,
Reno,

for Appellants Federal Home Loan Mortgage Corporation and Federal
Housing Finance Agency.

Snell & Wilmer L.L.P. and Kelly H. Dove, Las Vegas,
for Appellant Federal National Mortgage Association.

‘Phe Honorable Richard D. Bennett, United States District Judge for
the District of Maryland, sitting by designation

23-udde

 

 
 

Roger P. Croteau & Associates, Ltd., and Roger P. Croteau and Timothy E.
Rhoda, Las Vegas,
for Respondent.

BEFORE THE SUPREME COURT, EN BANC.

OPINION

By the Court, BELL, J.

This case comes to us as a certified question under NRAP 5 from
the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit
certified the following question to this court:

Under Nevada law, must a series LLC created
pursuant to Nev. Rev. Stat. § 86.296 be sued in its
‘own name for a court to obtain jurisdiction over it,
or may the master LLC under which the series is
created be sued instead?

We conclude a series LLC created pursuant to NRS 86.296 must
be sued in its own name for the court to obtain jurisdiction over it, provided
the series LLC has observed the corporate formalities provided for in NRS
86.2963).

BACKGROUND

We accept the facts of the underlying case as stated in the
certification order. See In re Fontainebleau Las Vegas Holdings, LLC, 127
Nev. 941, 956, 267 P.3d 786, 795 (2011). Appellants Federal National
Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac), over which Appellant Federal Housing Finance
Agency (FHFA) acts as conservator (collectively FHFA), purchased
mortgage loans secured by residential real property. When the original

 

 
mortgagors failed to pay the homeowner association assessments affiliated
with the secured properties, the homeowner associations foreclosed on their
superpriority liens on the properties. The properties were sold to
Respondent Saticoy Bay LLC.

Saticoy (the master LLC) operates numerous series LLCs
pursuant to NRS 86.296. Saticoy’s series LLCs are generally named Saticoy
Bay LLC Series . ‘The master Saticoy LLC or individual
series LLCs purchased the properties in question at HOA foreclosure sales.

Saticoy maintains it currently owns only one of the subject properties and

 

the remaining properties are owned by series LLCs.

Because the FHFA must consent to any foreclosure of its
property, see 12 U.S.C. § 4617())(3); Saticoy Bay LLC Series 9641 Christine
View v. Fed. Nat'l Mortg. Ass'n, 134 Nev. 270, 272-74, 417 P.3d 363, 367-68,
(2018) (holding that 12 U.S.C. § 4617G)(3), the federal foreclosure bar,
prevents an unconsented-to HOA foreclosure sale from extinguishing a deed

 

 

of trust when the subject loan is owned by Freddie Mac or Fannie Mae), the

FHEFA sued Saticoy in the United States District Court for the District of

 

Nevada for quiet title based on a lack of consent to the foreclosure. ‘The
FHFA named the master LLC, Saticoy, as defendant but did not name any
of the series LLCs as defendants.

‘The FHFA moved for summary judgment based on the federal
foreclosure bar. Saticoy opposed, arguing the federal district court lacked
jurisdiction to decide the matter because the FHPA failed to name the series
LLCs as defendants. The district court granted the FHFA’s summary
judgment motion. In doing so, the district court rejected Saticoy’s argument
that the FHFA needed to name the series LLCs as defendants. Because
RS 86.296(2) provides a series LLC “may” sue or be sued in its own name,

 

 
 

the district court reasoned FHFA was not required to name individual
series LLCs as defendants.

Saticoy appealed to the Ninth Cireuit. Before resolving the
appeal, the Ninth Circuit certified the above-quoted question to this court,
noting the only question on appeal concerns Nevada law and there is no
controlling precedent.

DISCUSSION

“In 2005, Nevada amended NRS 86.296 to allow for the creation
of Series LI.Cs,’a relatively new form of corporate entity that exists only in
certain states.” A Cab, LLC v. Murray, 187 Nev. 805, 821, 501 P.3d 961,
976 (2021). In 2017, the Legislature further amended NRS 86.296(2) to
“expand{] the powers of a series (LLC].” Hearing on A.B, 123 Before the
Assemb. Judiciary Comm., 79th Leg. (Nev., Apr. 14, 2017) (statement of
Diane C. Thornton, Comm, Policy Analyst). ‘The Legislature allowed for a
series to:

(a) Have separate powers, rights or duties
with respect to specified property or obligations of
the company or profits and losses associated with
specified property or obligations;

(b) Have a separate business purpose or
investment objective;

(©) Sue and be sued, complain and defend, in
its own name:

(d) Make contracts in its own name;

(©) Purchase, take, receive, lease or otherwise
acquire, own, hold, improve, use and otherwise deal
in and with real or personal property, or an interest
in it, wherever situated; and

(Sell, convey, mortgage, pledge, lease,
exchange, transfer and otherwise dispose of all or
any part of its property and assets,

NRS 86.296(2).

 

 
Interpreting the provisions of NRS Chapter 86, this court noted
NRS 86,296(2) “provides a list of optional, but not mandatory, attributes for
a Series LLC.” A Cab, 137 Nev. at 822, 501 P.3d at 97. The FHFA contends
this language from A Cab and the statutory language from NRS 86.296(2)
demonstrate naming a series LLC as a party is always optional. We
disagree,

In interpreting a statute, this court looks to the statute's plain
language. Smith v. Zilverberg, 137 Nev. 65, 72, 481 P.3d 1222, 1230 (2021).
If the statute's language is clear and unambiguous, this court enforces the
statute as written. Id. “[TJhis court will interpret a rule or statute in
harmony with other rules and statutes.” Albios v. Horizon Communities,
Inc., 122 Nev. 409, 418, 132 P.34 1022, 1028 (2006).

Here, the plain language of NRS 86.296(2) does not allow a

 

party to sue a master LLC in lieu of a series LLC at the party's discretion,
Rather, the word “may” allows the series LLC to determine whether it will
be sued in its own capacity by following the corporate formalities outlined
in NRS 86.296(3)

Requiring a series LLC to be named as a party aligns with
other statutes within NRS Chapter 86. NRS 86.281 notes the “general
powers” concerning LLCs. In language identical to NRS 86.296, the
statute provides that “fal limited-liability company ...or any series
thereof... may ... [sJue and be sued, complain and defend, in its name.”
NRS 86.281(1),

‘The FHFA’s interpretation that a series LLC is not a legal
entity separate from the master LLC ignores several relevant provisions of
NRS Chapter 86. First, NRS 86.1255 defines a series LLC as a “limited-
liability company.” This coincides with NRS 86.296(2), which provides “[a)

 

 
series [LLC] may be created as a limited-liability company.” Second, the
operating agreement of a series LLC “may provide that any member
associated with the series has voting rights that differ from other members
or series, or no voting rights at all.” NRS 86.296(2). Third, if'@ series LLC
follows certain corporate formalities, “[t}he debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series are enforceable against the assets of that series only, and
not against the assets of the company generally or any other series.” NRS
86.296(3) (emphasis added). When these statutory provisions are met,
series LLCs are treated as entities separate from the master LLC for
purposes of suing and being sued.

Both the FHFA and Saticoy point to other states’ statutes that
include express language indicating whether a series LLC is a separate
entity. Nevada has no such equivalent, Consequently, this court must rely
upon the plain language of the statute, which defines a series LLC as a
NRS 86.1255; see NRS 86.281 (noting that both

 

“limited-liability compan:
the master LLC and the series LLC “may exercise the powers and privileges
granted” by NRS Chapter 86); see also Zilverberg, 137 Nev. at 72, 481 P.3d
‘at 1230 (noting that this court looks to the plain language of the statute and
enforces the statute as written),

‘This court's prior jurisprudence has also recognized a series
LLC as a separate legal entity from the master entity. In A Cab, this court
emphasized the separate legal nature of series LLCs that follow the
corporate formalities outlined in NRS 86.296(3). 137 Nev. at 824, 501 P.3d
at 978 (‘Series entities under the umbrella of a Series LLC either exist or

not based on their compliance with NRS 86.296."). ‘This court went on to

 

 
state “[t]he only way to assess the existence of the individual series entities
for the purpose of judgment collection is through examining the operating
agreements,” Id.

Finally, under Nevada law, a master LLC may have different
members and different voting rights than the series LLC. The master LLC
may not be legally responsible for the acts of the series LLC. Logic dictates
if.a series LLC has observed corporate formalities, the series should be the
named entity in a lawsuit against the series LLC.

CONCLUSION

We answer the certified question as follows: A series LLC
created pursuant to NRS 86.296 must be sued in its own name for the court
to obtain jurisdiction over it, provided the series LLC has observed the
corporate formalities provided for in NRS 86.296(3).

 

 

 

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