Grady et al v. Federal Deposit Insurance Corporation et al

Filing 213

ORDER, Plaintiff's Motion for Reconsideration 206 is denied; the Court's Stay of the release of the Bond proceeds 203 is hereby lifted as follows: the Bond in the amount of $268,330.00 is released to Plaintiffs, Michael and Jennifer Grady (to be sent to their counsel). Signed by Senior Judge James A Teilborg on 8/5/14.(REW)

Download PDF
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Michael Grady, et al., Plaintiffs, 10 11 ORDER v. 12 No. CV-11-02060-PHX-JAT Federal Deposit Insurance Corporation, et al., 13 Defendants. 14 15 16 Pending before the Court is third-party Tri City National Bank’s (TCNB) Motion 17 for Reconsideration pursuant to LRCiv 7.2(g) (Doc. 206) of the Court’s June 30, 2014 18 Order (Doc. 199) exonerating the Bond1 in favor of Plaintiffs, Michael and Jennifer 19 Grady. Additionally, at the Court’s request2 (Doc. 207), TCNB filed a Supplemental 20 1 21 22 23 24 Originally ordered by the Maricopa County Superior Court in two separate bond orders (collectively, the “Bond”), Plaintiff posted a total amount of $268,330.00. (June 30, 2014 Order, Doc. 199 at 2–3). By the Bond’s explicit terms, this amount consisted of $218,400.00 in missed mortgage payments (24 months multiplied by $9,100.00 per month), $28,500.00 in costs, and $21,430.00 in due property taxes. (Id.). Also by the Bond’s explicit terms, the Bond did not include a provision for TCNB’s attorneys’ fees. (Id. at 8–9). 2 25 26 27 28 In a text-only Order (Doc. 207), the Court explained that TCNB’s motion [for reconsideration] does not appear to address the issue of how or why Plaintiffs’ unpaid principal and interest on the Note (Doc. 206 at 3:1–2) is distinct from Plaintiffs’ debt on the note (id. at 3:15–18) extinguished by the Trustees Sale and language in the Trustees Deed Upon Sale. Accordingly, IT IS ORDERED that TCNB may file a 2-page (exclusive of captioning) supplemental brief on this issue[.] 1 Memorandum (Doc. 208) regarding the essential character of the funds secured by the 2 Bond. The Court has not requested that Plaintiffs respond to TCNB’s motion. See 3 LRCiv 7.2(g)(2). 4 I. LEGAL STANDARD 5 Generally, motions for reconsideration are appropriate only if: (1) the movant 6 presents newly discovered evidence; (2) the Court committed clear error or the initial 7 decision was manifestly unjust; or (3) an intervening change in controlling law has 8 occurred. School Dist. No. 1J, Multnomah Cnty., Or. v. AC and S, Inc., 5 F.3d 1255, 1263 9 (9th Cir. 1993). A party should not file a motion to reconsider to ask a court “to rethink 10 what the court had already thought through, rightly or wrongly.” Above the Belt, Inc. v. 11 Mel Bohannon Roofing, Inc., 99 F.R.D. 99, 101 (E.D. Va. 1983). “No motion for 12 reconsideration shall repeat in any manner any oral or written argument made in support 13 of or in opposition to the original motion.” Motorola, Inc. v. J.B. Rodgers Mech. 14 Contractors, Inc., 215 F.R.D. 581, 586 (D. Ariz. 2003). The Court ordinarily will deny “a 15 motion for reconsideration of an Order absent a showing of manifest error or a showing 16 of new facts or legal authority that could not have been brought to its attention earlier 17 with reasonable diligence.” LRCiv 7.2(g)(1). 18 II. ANALYSIS 19 Here, TCNB does not contend that there is newly discovered previously 20 unavailable evidence or that there has been an intervening change in controlling law. 21 Rather, TCNB argues that “[r]econsideration is appropriate here because there was clear 22 error in the Order based on undisputed facts relating to the credit bid at the Trustee’s 23 Sale, as well as the timing of the motions seeking to exonerate the [B]ond.” (Doc. 206 at 24 2). More specifically, TCNB argues that the Court: erred by (1) “premis[ing] its ruling on 25 the mistaken belief that TCNB made a ‘full credit bid’ at the Trustee’s Sale,” when the 26 bid was actually “merely a credit bid” (id.); and (2) “finding that TCNB’s damages were 27 extinguished . . . because the damages it incurred, and its right to those damages, arose 28 prior to the Trustee’s Sale” (id. at 5). The Court addresses each claim of error in turn. -2- 1 2 A. 3 TCNB argues that its $1,900,000 credit bid at the Trustee’s Sale was not a “full 4 credit bid” because the Plaintiff’s debt obligation under the Note exceeded $2,258,220.36 5 at the date of the Trustee’s Sale. (Doc. 206 at 3). The Court was aware of this fact at the 6 time of its Order, but nonetheless determined that TCNB’s credit bid had the effect of a 7 full credit bid because TCNB asserts that its credit bid extinguished Plaintiffs’ debt under 8 the Note. (Doc. 199 at 7 (citing TCNB’s papers)). As TCNB’s motion adroitly explains, 9 the full credit bid rule exists so that 10 “Full Credit Bid” lenders can make a rational choice: bid in the full debt and let the matter rest, or bid a lesser amount and preserve any rights that may exist to seek a deficiency judgment or to pursue others for insurance, tort damages, and so forth. [M&I Bank, FSB v. Coughlin, 805 F. Supp. 2d 858, 866 (D. Ariz. 2011)]. This is exactly what TCNB did here—it elected to bid less than the full amount of the debt[.] 11 12 13 14 (Doc. 206 at 4). In fact, the Court agrees with TCNB that, to the extent that TCNB credit 15 bid less than the total debt obligation at the time of the Trustee’s Sale,3 TCNB did not 16 submit a “full credit bid” here. As explained in Coughlin, TCNB’s less-than-full credit 17 bid preserved TCNB’s “rights that may exist to seek a deficiency judgment” against 18 Plaintiffs. 805 F. Supp. 2d at 866. 19 Practically speaking, however, TCNB vitiated these possibly-existing rights 20 against Plaintiffs by repeatedly and expressly representing to the Court that TCNB’s 21 (apparently less-than-full) credit bid extinguished Plaintiffs’ debt obligations under the 22 Note: 23  “In this case, the fact that TCNB was the successful bidder for the Property at the 24 Trustee’s Sale, through a credit bid, means that Plaintiffs’ debt under the Note was 25 extinguished.” (Doc. 180 at 3 (citing Coughlin, 805 F. Supp. 2d at 858)). 26  “[Extinguishment of the debt under the Note] also does not mean that Plaintiffs 27 could not be held liable to TCNB for any other actions apart from their debt on the 28 3 And to the extent that the note-holder can submit a “partial” credit bid at a Trustee’s Sale. -3- 1 Note.” (Doc. 180 at 3). 2  “The only thing which [Arizona’s anti-deficiency statute,] A.R.S. § 33-814(G)[,] 3 does is prevent TCNB from seeking the balance of debt owed on the Property after 4 the Trustee’s Sale of the Property.” (Doc. 180 at 3 (citing Coughlin, 805 F. Supp. 5 2d at 858)). 6  “Through its Reply in Support of the Motion to Exonerate the Bond, TCNB 7 acknowledged that as a result of being the successful bidder, it made a ‘credit bid’ 8 which thereby extinguished Plaintiffs’ debt on the Note.” (Doc. 206 at 3 (citing 9 Doc. 180 at 3)). 10  “In other words, TCNB cannot seek a deficiency judgment against Plaintiffs for 11 the remaining balance due and owing on the Note after the Trustee’s Sale.” (Doc. 12 206 at 3). 13 As TCNB repeatedly and expressly concedes, Plaintiffs’ debt obligations under the Note 14 have been extinguished. Thus, with respect to Plaintiffs, TCNB’s less-than-full credit bid 15 has the same operative effect as a full credit bid—extinguishing Plaintiffs’ debt 16 obligations under the Note. Consequently, regardless of the precise character of TCNB’s 17 credit bid, TCNB has no legal right or entitlement to any damages or judgment seeking 18 the unpaid portion of Plaintiffs’ debt under the Note, including debt under the Note 19 masquerading as damages for wrongful enjoinment.4 20 21 22 23 24 25 26 27 28 4 Indeed, TCNB appears to agree that, in this case, the operative effect of a full credit bid is to extinguish all of TCNB’s damages attributable to Plaintiffs and stemming from the Note, including those for wrongful enjoinment: In the Order, the Court concludes that “TCNB extinguished its damages resulting from Plaintiffs’ debt obligations . . . .” [(Doc. 199 at 6– 7)]. However, this conclusion is premised on the faulty assumption that TCNB made a full credit bid, which would have extinguished its damages. Because TCNB merely made a credit bid, the damages which it felt at the hand of Plaintiffs as a result of being wrongfully enjoined from proceeding with the Trustee’s Sale [were] not extinguished.” (Doc. 206 at 4 (emphasis added)). Although, obviously, TCNB disagrees with the Court’s conclusion that TCNB’s less-than-full credit bid had the same operative effect as a full credit bid because of TCNB’s repeated and express representations to the Court (as well as, perhaps, Arizona’s anti-deficiency statute, A.R.S. § 33-814(G)). -4- 1 Nonetheless, TCNB attempts to circumvent the consequences of extinguishing 2 Plaintiffs’ debt obligations under the Note by mischaracterizing the Bond proceeds as 3 some nonspecific thing other than a debt obligation under the Note. (Doc. 180 at 3–4 4 (“exoneration of the bond is premised on a Rule of Civil Procedure, separate and apart 5 from the efforts of TCNB to enforce the Note”); Doc. 208 at 2–3 (“The Note and the 6 damages suffered by wrongful enjoinment are distinct and separate.”). While the Court 7 agrees with TCNB that extinguishment of the debt under the Note “does not mean that 8 any other debt Plaintiffs had to TCNB also magically disappeared” (Doc. 180 at 3), 9 TCNB has failed to adequately explain how the damages the Bond secures (i.e. damages 10 for wrongful enjoinment) are something other than a debt obligation under the Note—and 11 therefore the type of debt that does magically disappear. 12 Here, it is beyond dispute that the quanta of damages for wrongful enjoinment 13 contemplated by the Bond consisted of Plaintiffs’ missed mortgage payments otherwise 14 due under the Note. At the Exoneration stage, TCNB explained5 that, 15 16 17 18 [o]n the most basic level, the damages incurred by TCNB in being wrongfully enjoined since 2009 are the payments on the Note not being made by the Plaintiffs from the time TCNB owned the Note through the date the injunction was dissolved, as well as the attorneys’ fees TCNB incurred in seeking to conduct the Trustee’s Sale and have the Court find Plaintiffs’ claims were futile.6 19 (TCNB Reply in Supp. of Mot. to Exonerate Bond and Resp. to Pls.’ Cross-Mot. to 20 Exonerate Bond, Doc. 180 at 5 (emphasis and footnote added)). At the instant 21 Reconsideration stage, TCNB again explained the relation between the Note and the 22 wrongful enjoinment damages: “[t]he Superior Court elected to multiply the time TCNB 23 24 25 26 27 5 TCNB is reminded of the doctrine of judicial estoppel: “where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” New Hampshire v. Maine, 532 U.S. 742, 742–43 (2001) (citing Davis v. Wakelee, 156 U.S. 680, 689 (1895)). 6 28 In the Court’s June 30, 2014 Order, the Court determined that the Bond did not secure TCNB’s attorneys’ fees (Doc. 199 at 8–9); TCNB has not asked the Court to reconsider this ruling (see Docs. 206, 208). -5- 1 was delayed by the monthly payment amount as its reasonable estimate of damages.” 2 (TCNB’s Supplemental Br., Doc. 208 at 2 (citing Superior Ct. Orders, Doc. 208 at Ex. 3 A)). Moreover, TCNB has consistently proffered a simplistic wrongful enjoinment 4 damages calculation: the amount required to pay-off the Note at the time of the Trustee’s 5 Sale minus the $1,900,00.00 credit bid (which results in an amount exceeding the Bond 6 amount). (See Docs. 176, 180, 206, 208). Given that TCNB, itself, clearly believes the 7 quanta of its wrongful enjoinment damages is the missed mortgage payments, TCNB 8 cannot expect the Court to come to a different conclusion. 9 By definition, missed mortgage payments are a debt under the Note—a debt 10 TCNB acknowledges that it extinguished by effect of its credit bid. Consequently, the 11 Court cannot agree with TCNB that “[t]he Bond was not designed to reimburse TCNB 12 for missed payments on the Note, but instead, to compensate TCNB for damages it 13 suffered from the delayed enforcement of its legal rights.” (Doc. 208 at 2). Rather, 14 because the essence and quanta of these wrongful enjoinment damages are the missed 15 mortgage payments (a debt under the Note), the damages secured by the Bond and the 16 debt under the Note are neither separate nor distinct. Here, the Superior Court’s Orders 17 and TCNB’s representations to the Court establish that this Bond was designed to 18 compensate TCNB for damages it suffered from the delayed enforcement of its legal 19 rights by reimbursing TCNB for missed payments on the Note. Unfortunately for TCNB, 20 the extinguishment of Plaintiffs’ outstanding debt obligations under the Note 21 extinguished TCNB’s rights to the outstanding balance of the Note, regardless of whether 22 TCNB pursued the balance through a deficiency action or through exoneration (via 23 entitlement to wrongful enjoinment damages) of this7 Bond. 24 In sum, the Court finds that regardless of whether or not TCNB made a full or 25 7 26 27 28 To be clear, the Court does not hold that every wrongfully-enjoined note-holder who extinguishes a debtor’s obligations under the note is not entitled to wrongful enjoinment damages secured by an injunction bond. The result here may have been different if the essence and quanta of these wrongful enjoinment damages were something other than a debt under the Note (for example, the fair-market rental value of the home secured under the Note and wrongfully possessed by Plaintiffs during the pendency of the wrongful injunction, see Ariz. R. Eviction P. 17(c)). -6- 1 partial credit bid, TCNB extinguished Plaintiffs’ debt obligations under the Note, 2 including entitlement to the wrongful enjoinment damages at issue here. Accordingly, 3 with regard to the full credit bid rule, the Court does not find clear error or manifest 4 injustice in its June 30, 2014 Order. 5 B. Timing of TCNB’s Motion to Exonerate the Bond 6 Alternatively, TCNB argues (Doc. 206 at 5–7) that “the Order finding that 7 TCNB’s damages were extinguished should be reconsidered because the damages it 8 incurred, and its right to those damages, arose prior to the Trustee’s Sale” (id. at 5). More 9 specifically, TCNB argues that the Bond was held in “trust” for TCNB, the wrongly 10 enjoined party, because the injunction was dissolved prior to the Trustee’s Sale (and 11 therefore prior to the extinguishment of Plaintiffs’ debt obligations under the Note). The 12 Court finds that this is a new argument raised for the first time in TCNB’s Motion for 13 Reconsideration. (Compare Docs. 176, 180 (never using the word “trust”—or concept— 14 outside of the context of the Deed of Trust and Trustee’s Sale) and June 30, 2104 Order, 15 Doc. 199 (not addressing the instant “trust” argument), with Doc. 206 at 5–7). 16 Consequently, the Court will not consider the “trust” argument. Motorola, Inc. v. J.B. 17 Rodgers Mech. Contractors, 215 F.R.D. 581, 582 (D. Ariz. 2003) (“Motions for 18 reconsideration are disfavored, however, and are not the place for parties to make new 19 arguments not raised in their original briefs.”) (citing Northwest Acceptance Corp. v. 20 Lynnwood Equip., Inc., 841 F.2d 918, 925–26 (9th Cir. 1988). 21 III. CONCLUSION 22 TCNB must show more than a disagreement with the Court’s decision; the Court 23 should not grant a motion for reconsideration unless there is need to correct a clear error 24 of law or prevent manifest injustice. See Motorola, Inc, 215 F.R.D. at 586. Such is not the 25 case here. TCNB has failed to present the Court with cause to reconsider its June 30, 26 2014 Order exonerating the Bond at issue in favor of the Plaintiffs. For the reasons set 27 forth above, TCNB’s Motion for Reconsideration is denied. 28 Accordingly, -7- 1 2 IT IS ORDERED that Plaintiff’s Motion for Reconsideration (Doc. 206) is DENIED. 3 IT IS FURTHER ORDERED that the Court’s Stay of the release of the Bond 4 proceeds (Doc. 203) is hereby lifted as follows: the Bond in the amount of $268,330.00 is 5 released to Plaintiffs, Michael and Jennifer Grady (to be sent to their counsel). 6 Dated this 5th day of August, 2014. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8-

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?