McCarty et al v. GCP Management, LLC et al

Filing 60

ORDER ADOPTING Magistrate Judge's FINDING AND RECOMMENDATION That Defendant/Counterclaim Plaintiff GCP Management, LLC's Motion For Confirmation of Sale, For Deficiency Judgment, And For Writ of Possession Be Granted re 57 . Signed by JUD GE J. MICHAEL SEABRIGHT on 5/23/11. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

JAMES RICHARD McCARTY and
VICTORIA L. McCARTY,

)
)
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Plaintiffs,
)
)
vs.
)
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GCP MANAGEMENT, LLC, a Utah )
Limited Liability Company,
)
GATEWAY CAPITAL PARTNERS, )
JOHN DOES 1-10, and DOE
)
ENTITIES 1-10,
)
)
Defendants.
)
_______________________________ )
GCP MANAGEMENT, LLC,
)
)
Counterclaim Plaintiff, )
)
vs.
)
)
JAMES RICHARD McCARTY,
)
VICTORIA L. McCARTY,
)
)
Counterclaim Defendants. )
_______________________________ )

CIVIL NO. 10-00133 JMS/KSC
ORDER ADOPTING MAGISTRATE
JUDGE’S FINDING AND
RECOMMENDATION THAT
DEFENDANT/COUNTERCLAIM
PLAINTIFF GCP MANAGEMENT,
LLC’S MOTION FOR
CONFIRMATION OF SALE, FOR
DEFICIENCY JUDGMENT, AND FOR
WRIT OF POSSESSION BE
GRANTED

ORDER ADOPTING MAGISTRATE JUDGE’S FINDING AND
RECOMMENDATION THAT DEFENDANT/COUNTERCLAIM
PLAINTIFF GCP MANAGEMENT, LLC’S MOTION FOR
CONFIRMATION OF SALE, FOR DEFICIENCY JUDGMENT, AND FOR
WRIT OF POSSESSION BE GRANTED

I. INTRODUCTION
Plaintiffs/Counterclaim Defendants James and Victoria McCarty
(“Plaintiffs”) object under Local Rule (“LR”) 74.2 and 28 U.S.C. § 636(b)(1) to an
April 20, 2011 Findings and Recommendation (“F&R”) of United States
Magistrate Judge Kevin Chang.1 The F&R addressed Defendant/Counterclaim
Plaintiff GCP Management, LLC’s (“GCP”) Motion for Confirmation of Sale, for
Deficiency Judgment, and for Writ of Possession (“Motion”) [Doc. No. 49], made
factual findings, and recommended that the Motion be granted. The court now
OVERRULES the objections and ADOPTS the F&R. The Motion is GRANTED
according to the terms set forth in the F&R.
II. BACKGROUND
On November 17, 2010, this court granted GCP’s Motion for
Summary Judgment on Plaintiffs’ claims against GCP, primarily seeking to void
GCP’s note and mortgage. The court also granted GCP’s affirmative Motion for
Summary Judgment on its counterclaim for foreclosure on the subject property (an
approximately 4,000 square foot house on approximately 1.5 acres located at 0
Honokohau Bay between Mileposts 36 and 37, Maui, Hawaii) as described in

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The F&R was signed on April 20, 2011 but was filed and served on April 22, 2011.
Doc. No. 57.
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Exhibit A, attached to the F&R. Given the November 17, 2010 Order, GCP was
entitled to a decree of foreclosure on the subject property. Doc. No. 38.
Accordingly, on December 9, 2010, this court granted a decree of
foreclosure that, among other things, appointed a foreclosure Commissioner (Gary
Robert, Esq., of Lahaina, Maui, Hawaii) to take steps to sell the property at public
auction according to state law and terms set forth in the decree. Plaintiffs did not
object to the form of the foreclosure decree, and agreed in the selection of the
Commissioner. Doc. No. 40.
Commissioner Robert conducted the sale according to the terms of the
foreclosure decree, and filed a Commissioner’s Report on February 16, 2011. Doc.
No. 48. Meanwhile, on January 5, 2011 Plaintiffs appealed to the Ninth Circuit
Court of Appeals from the Order Granting GCP’s Motion for Summary Judgment,
and corresponding Rule 54(b) Judgment. Doc. No. 41. Plaintiffs, however, did not
seek a stay of the foreclosure proceedings, and did not post or seek approval of a
bond in accordance with Rule 8 of the Federal Rules of Appellate Procedure and
Rule 62 of the Federal Rules of Civil Procedure.
On February 23, 2011, GCP filed the instant Motion for Confirmation
of Sale, for Deficiency Judgment, and for Writ of Possession. Doc. No. 49. The
matter was referred to Magistrate Judge Chang under LR 72.4 and 28 U.S.C.
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§ 636(b). On April 7, 2011, Magistrate Judge Chang held an oral hearing on the
matter, and also allowed further bidding on the property, but no interested bidders
were present. Doc. No. 56. On April 22, 2011, Magistrate Judge Chang entered
his written F&R that, among other things, (1) deemed GCP’s winning bid of $1.5
million to be fair and reasonable and “as high as any that can be obtained under the
circumstances,” F&R ¶ 5, (2) determined that the proceedings were conducted in
accordance with the foreclosure decree, (3) and found that the total principal,
interest, and charges were $4,190,769.55 as of April 7, 2011, with default interest
accruing at $1,863.75 per day, costs of $47,699.30, and fees of $727.15, id. ¶ 7.
Magistrate Judge Chang recommended, among other matters, (1) approval of the
Commissioner’s Report, (2) confirmation of the sale, (3) transfer of title to the
property within thirty-five days after the order of confirmation is filed, and (4)
issuance of a writ of possession. Id. ¶¶ 8A, 8B, 8C, 8D. He also recommended
disbursement of sale proceeds and entry of a deficiency judgment against
Plaintiffs. Id. ¶¶ 8F, 8H.
On May 2, 2011, Plaintiffs filed their “Opposition to Proposed
Findings and Recommendations,” Doc. No. 58, which this court construes as an
Objection under LR 74.2. On May 4, 2011, GCP filed a Response to the
Objection. The matter is suitable under LR 7.2(d) for decision without a hearing.
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III. STANDARD OF REVIEW
When a party objects to a magistrate judge’s findings or
recommendations, the district court must review de novo those portions to which
the objections are made and “may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge.” 28 U.S.C.
§ 636(b)(1); see also United States v. Raddatz, 447 U.S. 667, 673 (1980); United
States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (“[T]he
district judge must review the magistrate judge’s findings and recommendations de
novo if objection is made, but not otherwise.”). Under a de novo standard, this
court reviews “the matter anew, the same as if it had not been heard before, and as
if no decision previously had been rendered.” Freeman v. DirecTV, Inc., 457 F.3d
1001, 1004 (9th Cir. 2006); United States v. Silverman, 861 F.2d 571, 576 (9th Cir.
1988). The district court need not hold a de novo hearing; however, it is the
court’s obligation to arrive at its own independent conclusion about those portions
of the magistrate judge’s findings or recommendation to which a party objects.
United States v. Remsing, 874 F.2d 614, 616 (9th Cir. 1989).
IV. DISCUSSION
Plaintiffs’ primary argument is the same as was made to Magistrate
Judge Chang: the $1.5 million bid is too low. They assert that the amount is much
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lower than an appraisal from November 2008 that estimated the property’s value at
$6.5 million, and a November 2007 appraisal of $4.24 million. Pls.’ Obj. Exs. A &
B, Doc. Nos. 52-2 & -3. They contend there is no foundation for the
Commissioner’s opinion that the bid of $1.5 million is fair and reasonable. They
offer the opinion of co-Plaintiff Victoria McCarty (a licenced real estate
salesperson who is familiar with the East Maui real estate market) analyzing a
“Comparative Market Analysis Summary Report,” compiled by the Realtors
Association of Maui. Victoria McCarty concludes that the present market value of
the subject property is “a minimum of $6,350,000.” Decl. of Victoria McCarty
(May 1, 2011) ¶ 26, Doc. No. 52-1. They contend the bid is “grossly inadequate as
to shock the conscience.” Industry Mortg. Co. v. Smith, 94 Haw. 502, 510, 17 P.3d
851, 859 (Haw. App. 2001) (quoting Hoge v. Kane, 4 Haw. App. 533, 540, 670
P.2d 36, 40 (1983)).
The court disagrees. The foreclosure proceedings occurred in
complete accordance with the foreclosure decree. The Commissioner complied
with the terms for published notices, open houses, and a public sale. Plaintiffs
have not challenged these procedures. They did not challenge the form of the
foreclosure decree. No effort was made, for example, to require special
notification or advertising for a “high end” property. Magistrate Judge Chang re6

opened bidding at the April 7, 2011 hearing, but no interested persons made a new
bid. And, as GCP argues, Plaintiffs have had every opportunity in the past year to
obtain a buyer.
As GCP points out, the 2008 appraisals relied upon by Plaintiffs are
outdated (particularly given the upheaval in the real estate market since late 2008)
and were estimates done before construction was completed. Doc. No. 52-2, at 10.
Plaintiffs do not have a current appraisal. GCP also argues that the property is yet
to be landscaped, and now has an adverse claim to ownership recorded on it. Resp.
at 6, Doc. No. 59, at 6. GCP also emphasizes that the opinion of Victoria McCarty
is suspect because seven of the ten properties on her “Comparative Market
Analysis” were sold over two years ago -- today’s market may be different -- and
are located in more accessible areas of Maui, whereas the subject property is
located in a “conservation district” in a relatively remote area of Maui. In short,
the appraisals are not binding and depend on a variety of variables that limit their
utility in this court’s task of assessing whether the $1.5 million bid “shocks the
conscience” as being too low. In this regard, the Commissioner’s Fact Sheet
indicated that the current assessed value for purposes of Maui County real property
taxes is $1,204,400 -- nearly $300,000 less than the bid price -- and so there is
certainly a foundation for the Commissioner’s opinion of market value.
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Commissioner’s Report, Ex. A at 2; Doc. No. 48-1 at 2.
Given no irregularities in the foreclosure proceedings, and the
ambiguous information regarding market value, the court agrees with Magistrate
Judge Chang’s findings that (1) Plaintiffs have presented no credible evidence that
GCP’s bid is “so grossly adequate as to shock the conscience,” F&R ¶ 4, (2) the
bid is “fair, equitable, and as high as any that can be obtained under the
circumstances,” id. ¶ 5, and (3) the GCP’s winning bid of $1.5 million should be
confirmed.
Plaintiffs have also presented no valid reason to delay the transfer of
title so to allow another auction. There is no indication that another bidder is
interested in buying the property for a higher price. And indeed, as GCP contends,
a future bid could be less. See Sugarman v. Kapu, 104 Haw. 119, 126, 85 P.3d
644, 651 (2004) (“[A] republication of the notice of sale and a second public
auction . . . would not guarantee that greater interest in the property would be
generated, or that a higher bid would be obtained. Rather, a second public auction
might reduce the efficiency of the judicial sale process by increasing costs of the
sale.”) (citations omitted).
It is true that, over five months ago, Plaintiffs filed an appeal from the
foreclosure decree and judgment. See City Bank v. Abad, 106 Haw. 406, 412-13,
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105 P.3d 1212, 1218-19 (Haw. App. 2005) (“[F]oreclosure cases are bifurcated
into two separately appealable parts: (1) the decree of foreclosure and the order of
sale, if the order of sale is incorporated within the decree; and (2) all other
orders.”) (citations omitted). But they did not file a motion to stay foreclosure
proceedings. They did not post a supersedeas bond, nor cite to any exception, as
appears to be required in this situation under Rule 8 of the Federal Rules of
Appellate Procedure and Rule 62 of the Federal Rules of Civil Procedure. The
court thus finds no reason to delay transfer of title, or to delay issuance of a writ of
possession.2
V. CONCLUSION
For the foregoing reasons, the court OVERRULES Plaintiffs’
objections, and ADOPTS the April 20, 2011 Findings and Recommendation that
Defendant/Counterclaim Plaintiff GCP Management, LLC’s Motion for
Confirmation of Sale, for Deficiency Judgment, and for Writ of Possession be
Granted, as the opinion and order of this court. The Motion for Confirmation of
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2

A 14-day automatic stay would appear to apply to a judgment entered on the present
order. Fed. R. Civ. P. 62(a).
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Sale, for Deficiency Judgment, and for Writ of Possession [Doc. No. 49] is
GRANTED as stated in the April 20, 2011 Findings and Recommendation.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, May 23, 2011.

/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge

McCarty, et al. v. GCP Mgm’t, LLC, et al., Civ. No. 10-00133 JMS/KSC, Order Adopting
Magistrate Judge’s Finding and Recommendation that Defendant/Counterclaim Plaintiff GCP
Management, LLC’s Motion for Confirmation of Sale, for Deficiency Judgment, and for Writ of
Possession be Granted

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