Court Opinion

ID: 6322958
Source: CourtListenerOpinion
Date Created: 2022-03-14 17:00:50.640298+00
Date Added: 2024-06-11T09:21:18.214831
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 FEDERAL HOUSING FINANCE                            No. 20-17447
 AGENCY; FEDERAL NATIONAL
 MORTGAGE ASSOCIATION; FEDERAL                        D.C. No.
 HOME LOAN MORTGAGE                                2:16-cv-02242-
 CORPORATION,                                        JAD-BNW
               Plaintiffs-Appellees,

                      v.                              ORDER
                                                  CERTIFYING A
 SATICOY BAY, LLC,                                QUESTION TO
              Defendant-Appellant.                THE SUPREME
                                                    COURT OF
                                                     NEVADA

                       Filed March 14, 2022

 Before: M. Margaret McKeown and William A. Fletcher,
  Circuit Judges, and Richard D. Bennett,* District Judge.

                                Order

    *
      The Honorable Richard D. Bennett, United States District Judge for
the District of Maryland, sitting by designation.
2 FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY

                            SUMMARY**

                            Nevada Law

    The panel certified to the Supreme Court of Nevada the
following question:

         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?

                               ORDER

    We respectfully certify to the Nevada Supreme Court the
question of law set forth below, pursuant to Nevada Rule of
Appellate Procedure 5. The question of law will be
determinative of the matter pending before this court, and
there is no clearly controlling precedent in the decisions of
the Nevada Supreme Court.

                       I. Factual Background

   Plaintiffs-appellees are the Federal Housing Finance
Agency (“FHFA”), Federal National Mortgage Association
(“Fannie Mae”), and Federal Home Loan Mortgage
Corporation (“Freddie Mac”). During the subprime mortgage

    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
  FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY 3

crisis, Congress enacted the Housing and Economic Recovery
Act of 2008 (“HERA”), Pub. L. No. 110-289, 122 Stat. 2654.
HERA created the FHFA, an independent agency that serves
as the conservator of Fannie Mae and Freddie Mac (both
congressionally chartered entities that own mortgage loans
throughout the country). 12 U.S.C. § 4511. HERA prohibits
the foreclosure of FHFA property without FHFA’s consent.
The provision, known as the Federal Foreclosure Bar,
provides, “No property of the [FHFA] shall be subject to
levy, attachment, garnishment, foreclosure, or sale without
the consent of the [FHFA], nor shall any involuntary lien
attach to the property of the [FHFA].” 12 U.S.C.
§ 4617(j)(3).

    Defendant-appellant, Saticoy Bay LLC, is a Nevada
limited liability company (“LLC”) that purchases, leases, and
manages residential properties. Nevada law allows the
creation of individual series LLCs, which are LLCs organized
under an umbrella master LLC, without the necessity of filing
articles of incorporation for each series member. Nev. Rev.
Stat. § 86.296(2). This structure insulates the debts of an
individual series LLC from the assets of the other series LLCs
and the master LLC, as long as certain corporate formalities
are properly maintained. Id. § 86.296(3). Nevada law also
provides that a series LLC “may . . . [s]ue and be sued,
complain and defend, in its own name.” Id. § 86.296(2).
Additionally, the registered agent for service of process to the
master LLC is deemed to be the registered agent of each
series LLC. Id. § 86.236. Saticoy Bay LLC, the named
defendant, is a master LLC. Numerous series LLCs operate
under the master Saticoy Bay LLC and are, in general, named
Saticoy Bay LLC Series  (for example,
Saticoy Bay LLC Series 5783 Bear Springs St).
4 FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY

    The master Saticoy Bay LLC and some of its series LLCs
each own the residential real estate properties in dispute in
the case before us. The acquisition of these properties
followed a similar fact pattern. First, a borrower procured a
mortgage loan secured by a residential property, and recorded
a deed of trust listing the borrow, lender, and beneficiary.
The original lender then sold the mortgage loan to Fannie
Mae or Freddie Mac, which owned the deed of trust and a
property interest in the collateral real estate. A homeowners’
association (“HOA”) then foreclosed on a superpriority lien
on the property when the original mortgagors or their
successors failed to pay past-due HOA assessments. Under
Nevada law, a homeowners’ association has “a superpriority
lien that, when properly foreclosed upon, extinguishes a first
deed of trust.” 7510 Perla Del Mar Ave Tr. v. Bank of Am.,
N.A., 458 P.3d 348, 348 (Nev. 2020) (en banc) (citing SFR
Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 409 (Nev.
2014) (en banc)). However, as noted above, under the
Federal Foreclosure Bar, no FHFA property is subject to
foreclosure without the agency’s consent. 12 U.S.C.
§ 4617(j)(3).

     At the time of the HOA foreclosure sales of the properties
at issue, Fannie Mae or Freddie Mac owned mortgage loans
to which the properties were subject. The FHFA never
consented to any HOA foreclosure sales. Despite the lack of
consent, the HOA foreclosures resulted in the sale of each
property to either the master Saticoy Bay LLC or an
individual series LLC under the master LLC.

    Appellees FHFA, Fannie Mae, and Freddie Mac sued
Saticoy Bay LLC in the United States District Court for the
District of Nevada. Appellees named only one defendant, the
master Saticoy Bay LLC. They did not name as defendants
  FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY 5

any of the individual series LLCs that operate under the
master LLC.

    Appellees sought a declaratory judgment that the HOA
foreclosure sales did not extinguish Fannie Mae’s or Freddie
Mac’s deeds of trust on the foreclosed properties. Appellees’
complaint included a quiet-title action, seeking a
determination that the HOA foreclosure sales and subsequent
transfers did not convey the properties free and clear to
Saticoy Bay. Appellees served Saticoy Bay LLC with a
summons and a copy of the complaint through its agent for
service of process. Saticoy Bay LLC’s answer asserted as an
affirmative defense that appellees’ claims against the series
LLCs are barred as a result of appellees’ failure to name them
as indispensable parties and real parties in interest.

    Appellees moved for summary judgment as to all the
properties, contending that the foreclosure sales did not
extinguish their deeds of trust because the FHFA never
consented to the sales. Saticoy Bay LLC opposed summary
judgment on the ground that the district court lacks
jurisdiction over the properties owned by the individual series
LLCs because appellees failed to name the individual series
LLCs as defendants.

    The district court held that appellees were not required to
name the individual series LLCs as defendants, on the ground
that Nev. Rev. Stat. § 86.296(2), by providing that series
LLCs “may” be sued in their own name, uses permissive
rather than mandatory language.

   Saticoy Bay LLC timely appealed.
6 FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY

               II. Explanation of Certification

    On appeal to us, Saticoy Bay argues that under Nevada
law, series members operating under a master LLC are
independent entities, and that because appellees failed to
name the individual series LLCs as defendants, the district
court lacks jurisdiction to grant relief with respect to the
properties owned by the series LLCs. In response, appellees
argue that series LLCs are not fully separate entities under
Nevada law and need not be separately sued in a case where
the legal issue is the same as to the master LLC and all series
LLCs being sued.

    The only question on appeal concerns Nevada law. This
question will determine the outcome of the appeal, and there
is no clearly controlling precedent in the decisions of the
Nevada Supreme Court.

     We note that the Nevada Supreme Court recently decided
A Cab, LLC v. Murray, 501 P.3d 961 (2021). A Cab, LLC
characterizes Nev. Rev. Stat. § 86.296(2) as “provid[ing] a
list of optional, but not mandatory, attributes for a Series
LLC.” Id. at 977. Although this statement suggests that
series LLCs need not be sued in their own names, it does not
directly answer the question before us.

                   III. Certified Question

   We respectfully certify the following question to the
Nevada Supreme 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
  FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY 7

      jurisdiction over it, or may the master LLC
      under which the series is created be sued
      instead?

                IV. Counsel Information

   The names and addresses of counsel and of parties, as
required by Rule 5 of the Nevada Rules of Appellate
Procedure, are as follows:

      Roger P. Croteau, Esq., and Timothy E.
      Rhoda, Esq., Roger P. Croteau & Associates,
      Ltd, 2810 West Charleston Boulevard, #75,
      Las Vegas, Nevada 89102, for Defendant-
      Appellant Saticoy Bay, LLC.

      Asim Varma, Howard N. Cayne, Michael A.F.
      Johnson, and Dirk C. Phillips, Arnold &
      Porter Kaye Scholer LLP, 601 Massachusetts
      Ave., NW Washington, DC 20001, for
      Plaintiff-Appellee Federal Housing Finance
      Agency.

      Leslie Bryan Hart and John D. Tennert, III,
      Fennemore Craig, P.C., 7800 Rancharrah
      Parkway, Reno, Nevada 89511, for Plaintiffs-
      Appellees Federal Housing Finance Agency
      and Federal Home Loan Mortgage
      Corporation.

      Kelly H. Dove, Snell & Wilmer L.L.P., 3883
      Howard Hughes Parkway Suite 1100, Las
      Vegas, NV 89169, for Plaintiff-Appellee
      Federal National Mortgage Association.
8 FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY

    If the Supreme Court of Nevada accepts this request,
Saticoy Bay, LLC should be deemed the Petitioner.

                          Conclusion

    Saticoy Bay LLC’s appeal presents an issue of Nevada
state law that will be determinative of the parties’ dispute.
There is no clearly controlling precedent from the Nevada
Supreme Court. For this reason, we request that the Nevada
Supreme Court accept and decide the question herein
certified. We agree to abide by the Nevada Supreme Court’s
decision as specified by Rule 5 of the Nevada Rules of
Appellate Procedure.

    The clerk of this court is hereby directed to file in the
Nevada Supreme Court, under the official seal of the United
States Court of Appeals for the Ninth Circuit, this
certification order and any portion of the record requested by
the Nevada Supreme Court, pursuant to Rule 5 of the Nevada
Rules of Appellate Procedure.

    All further proceedings in this case are stayed pending
receipt of the answer to the certified question. This appeal is
withdrawn from submission and will be submitted after
receipt of the Nevada Supreme Court’s opinion on the
question certified. The Clerk is directed to administratively
close this docket pending further order. This panel retains
jurisdiction over further proceedings in this court. The
parties are directed to notify the Clerk of this court within one
week after the Nevada Supreme Court accepts or rejects the
  FEDERAL HOUSING FINANCE AGENCY V. SATICOY BAY 9

certification and again, if that court accepts the certification,
within one week after it renders its opinion.

  QUESTION            CERTIFIED;           PROCEEDINGS
STAYED.

                      /s/ William A. Fletcher
                      The Honorable William A. Fletcher
                      Senior United States Circuit Judge