Branch Banking and Trust Company vs Jones/Windmill, LLC, et al.

Filing 97

ORDER Granting 68 Motion for Summary Judgment as to all issues except the fair market value of the property at the time of the trustees sale. Denying 69 Motion for Hearing. Denying 70 Motion for Summary Judgment. Denying 93 Motion to certify questions of law. Opening brief due within 30 days. Reply brief due within 10 days of the filing of the opening brief. Signed by Judge James C. Mahan on 8/5/2014. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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BRANCH BANKING AND TRUST
COMPANY,

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2:12-CV-452 JCM (GWF)

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Plaintiff(s),

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v.

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JONES/WINDMILL, LLC, et al.,

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Defendant(s).

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ORDER

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Presently before the court are cross motions for summary judgment (docs. # 68, 70) by the

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plaintiff and the collective defendants. Both sides have responded (docs. # 79, 80) and replied (docs.

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# 88, 89).

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Also before the court is plaintiff’s motion for a hearing. (Doc. # 69).

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Finally before the court is defendants’ motion to certify questions of law. (Doc. # 93).

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Plaintiff has responded (doc. # 94) and defendants have replied (doc. # 95).

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I.

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Background
Plaintiff Branch Banking is the successor in interest to non-party Colonial Bank by

acquisition of assets from the FDIC as receiver for the bank.

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Branch Banking’s claims arise out of a January 18, 2006,1 promissory note secured by a deed

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of trust executed by defendant Jones/Windmill, LLC (“Jones/Windmill”). The note secured a loan

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James C. Mahan
U.S. District Judge

On July 22, 2008, the note was amended to, among other things, extend the maturity date to July 24, 2009.

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from Colonial Bank in the original principal amount of $1,100.000. The deed of trust encumbered

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certain real property located in Clark County, Nevada (“the property”). The individual and corporate

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defendants executed guaranties, promising to repay the present and future indebtedness of

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Jones/Windmill. Those guarantors are defendants Yoel Iny, individually and as trustee of the Y&T

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Iny Family Trust; Noam Schwartz, individually and as trustee of the Noam Schwartz Trust; and

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D.M.S.I., LLC.

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On August 14, 2009, Colonial Bank was closed and the FDIC was named as receiver. That

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same day, the FDIC assigned all of its rights, title, and interest in, to, and under the loan documents

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to Branch Banking.

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On August 3, 2011, Branch Banking served a demand letter upon Jones/Windmill and the

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individual guarantors. Jones/Windmill and the guarantors failed to pay the balance due by the

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demanded date of August 31, 2011.

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On February 29, 2012, a trustee’s sale was held, and the property was sold to Branch Banking

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for a credit bid in the amount of $296,000 in partial satisfaction of the note. According to Branch

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Banking, the principal balance remaining under the note is $1,099,917.66, with accrued interest at

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the time of filing in the amount of $28,724.32, for a total of $1,128,641.98.

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complaint asserts claims for breach of guaranty, breach of the covenant of good faith and fair

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dealing, and seeks a deficiency judgment. (Doc. # 6).

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II.

The amended

Legal Standard

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The Federal Rules of Civil Procedure provide for summary adjudication when the pleadings,

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depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,

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show that “there is no genuine issue as to any material fact and that the movant is entitled to a

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judgment as a matter of law.” Fed. R. Civ. P. 56(a). A principal purpose of summary judgment is

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“to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317,

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323–24 (1986).

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In determining summary judgment, a court applies a burden-shifting analysis. “When the

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party moving for summary judgment would bear the burden of proof at trial, it must come forward

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James C. Mahan
U.S. District Judge

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with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial.

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In such a case, the moving party has the initial burden of establishing the absence of a genuine issue

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of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213

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F.3d 474, 480 (9th Cir. 2000) (citations omitted).

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In contrast, when the nonmoving party bears the burden of proving the claim or defense, the

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moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential

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element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed to

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make a showing sufficient to establish an element essential to that party's case on which that party

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will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If the moving party

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fails to meet its initial burden, summary judgment must be denied and the court need not consider

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the nonmoving party's evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970).

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If the moving party satisfies its initial burden, the burden then shifts to the opposing party

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to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith

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Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing

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party need not establish a material issue of fact conclusively in its favor. It is sufficient that “the

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claimed factual dispute be shown to require a jury or judge to resolve the parties’ differing versions

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of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 (9th

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Cir. 1987).

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In other words, the nonmoving party cannot avoid summary judgment by relying solely on

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conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045

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(9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the

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pleadings and set forth specific facts by producing competent evidence that shows a genuine issue

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for trial. See Celotex Corp., 477 U.S. at 324.

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At summary judgment, a court’s function is not to weigh the evidence and determine the

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truth, but to determine whether there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc.,

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477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all justifiable

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inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party is

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James C. Mahan
U.S. District Judge

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merely colorable or is not significantly probative, summary judgment may be granted. See id. at

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249–50.

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III.

Discussion

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A.

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Defendants ask this court to certify the following questions of law to the Nevada Supreme

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Defendants’ motion to certify questions of law

Court:

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1. How is the “amount of the consideration paid” calculated
pursuant to the newly enacted NRS 40.459(1)(c) for a specific
loan, not purchased individually for cash, but rather as part of
a portfolio of assets in exchange for an assumption of certain
liabilities?

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2. Is the calculation of the “amount of the consideration paid”
adjusted based on subsequent reimbursements made to an
assignee creditor pursuant to a loss-sharing agreement?

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12 (Doc. # 93, p. 2).
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For the reasons discussed below, the court finds that NRS 40.459(1)(c) is not applicable to

14 the instant assignment. Accordingly, the “amount of the consideration paid” is not a factor here and
15 certification as to both questions is unnecessary.
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B.

Deficiency scheme

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Following a trustee’s sale, Nevada law entitles a creditor to a deficiency judgment “if it

18 appears from the sheriff’s return or the recital of consideration in the trustee’s deed that there is a
19 deficiency of the proceeds of the sale and a balance remaining due to the judgment creditor or the
20 beneficiary of the deed of trust, respectively.” NRS 40.455(1). This statutory scheme also requires
21 that the court, prior to awarding a deficiency judgment, hold a hearing regarding the fair market value
22 of the property as of the date of the trustee’s sale. NRS 40.457(1).
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Following the hearing, the court must award a judgment for the lowest amount amongst the

24 following calculations:
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(a) the amount by which the amount of indebtedness which
was secured exceeds the fair market value of the property sold
at the time of the sale, with interest from the date of the sale;
(b) the amount which is the difference between the amount for
which the property was actually sold and the amount of the

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James C. Mahan
U.S. District Judge

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indebtedness which was secured, with interest from the date of
the sale; or

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(c) if the person seeking the judgment acquired the right to
obtain the judgment from a person who previously held that
right, the amount by which the amount of the consideration
paid for that right exceeds the fair market value of the property
sold at the time of sale or the amount for which the property
was actually sold, whichever is greater, with interest from the
date of sale and reasonable costs.

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7 See NRS 40.459(1)(a)-(c).
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C.

Liability under the loan and guaranty agreements

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As a preliminary matter, plaintiff asserts, and defendants do not refute, that the loan

10 documents and guaranty agreements are valid contracts, and that defendants failed to pay the agreed11 upon amount. Instead, defendants assert that Branch Banking has failed to demonstrate it has
12 standing to enforce payment on this particular loan. The court disagrees.
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The purchase and assumption agreement executed between the FDIC and Branch Banking was

14 essentially a “bulk assignment” which transferred to Branch Banking the FDIC’s interest in a
15 multitude of assets it received from Colonial Bank. The kinds of assets excepted from the assignment
16 are described in section 3.5 of the purchase and assignment agreement. (See doc. # 80, ex. 2). The
17 Jones/Windmill loan is clearly not an asset that the agreement intended to except, and there is no basis
18 for defendants’ suggestion that this particular loan was not contemplated by the assignment.
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The court also rejects defendants’ argument that Branch Banking is collaterally estopped from

20 relying on the purchase and assumption agreement as evidence it has standing to enforce this loan.
21 In support of this argument, defendants point to a case in Nevada state court where Judge Gonzalez
22 found that the agreement was not sufficient to demonstrate that Branch Banking held the right to a
23 specific asset in that case.
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The doctrine of issue preclusion “prevents re-litigation of issues actually litigated and

25 necessarily decided, after a full and fair opportunity for litigation, in a prior proceeding.” Shaw v.
26 Hahn, 56 F.3d 1129, 1131 (1995). The Jones/Windmill loan was not at issue in that case, and Branch
27 Banking’s right to collect on it was not “actually and necessarily” litigated. Branch Banking is clearly
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U.S. District Judge

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1 not estopped from asserting it holds the right to pursue a deficiency judgment on this loan.
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In addition to the fact that this argument fails as a matter of law, Judge Gonzalez’s holding

3 was based on her finding that the purchase and assumption agreement was not previously disclosed,
4 and there was no supporting documentation. Here, Branch Banking has timely disclosed the
5 agreement, and has further supported it through a declaration from its corporate designee, Thomas
6 Brent Hicks. Specifically, Mr. Hicks confirms that the purchase and assignment agreement
7 transferred the instant loan as part of the bulk assignment. He has further confirmed that the
8 Jones/Windmill loan was included by producing a redacted schedule 4.15B, which lists it as an asset
9 that was transferred as part of the bulk assignment.
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Mr. Hicks’ declaration authenticates those documents, and the court may consider them.

11 Although defendants assert the schedule 4.15B cannot be relied upon, they fail to proffer any evidence
12 contradicting its contents.2 Notably, defendants do not argue that the schedule or the purchase and
13 assumption agreement have been forged or otherwise altered in a manner which would render them
14 inadmissable.3
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Accordingly, the court finds Branch Banking has satisfied its burden in proffering evidence

16 demonstrating its right to pursue the instant loan, and rejects defendants’ “standing” argument.
D.

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Applicability of NRS 40.459(1)(c)

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Defendants argue next that, even if the court finds Branch Banking has standing, it has failed

20 to provide evidence of the consideration paid as required by NRS 40.459(1)(c), which is fatal to its
21 claims.
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This court and others within this district have held that this particular subsection cannot apply

23 retroactively to assignments made prior to the statute’s effective date of June 10, 2011. See, e.g.,
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James C. Mahan
U.S. District Judge

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Mr. Hicks’ testimony and the schedule 4.15B have been repeatedly relied upon by this court and others in
sister proceedings and the court finds no reason now to question their veracity or reliability. See, e.g., Branch Banking
& Trust Co. v. Frank, et al., 2013 WL 5428112 (D. Nev. Sept. 26, 2013).
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These are the same arguments defendants’ counsel put forth in Branch Banking & Trust Co. v. Regena
Homes, LLC, et al, 2:12-cv-451-RCJ-GWF (D. Nev. July 23, 2014) which Judge Jones rejected, finding that they were
not made in good faith but were instead made for purposes of delay. (Id. doc. # 110 at p. 5).

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1 Branch Banking & Trust Co. v. Desert Canyon Phase II, LLC, et al, 2014 WL 2468610 (D. Nev. June
2 2, 2014)(retroactive application to assignments made pre-enactment would violate the Contracts
3 Clause and likely the Due Process Clause of the United States Constitution); Eagle SPE NV I, Inc.
4 v. Kiley Ranch Communities, et al, 2014 WL 1199595 (D. Nev. Mar. 24, 2014); Branch Banking &
5 Trust Co. v. Pahrump 194, LLC, et al, case no. 2:12-cv-1462-JCM-VCF (D. Nev. July 30, 2014).
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Because the effective date of the assignment here was August 14, 2009, section (1)(c) does

7 not apply. Accordingly, the parties’ arguments regarding the amount paid in consideration of the loan
8 and the sufficiency of the evidence in support thereof are moot and need not be resolved.
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Conclusion
The court finds that plaintiff has provided sufficient evidence to establish all essential

11 elements of its claims. However, the court recognizes that it may not make a ruling regarding the fair
12 market value at the time of the trustee’s sale prior to holding a hearing under NRS 40.457(1). Am.
13 Gen. Fin. Corp. v. First Commercial Title, Inc., 524 P.2d 1270, 1271 (1974). Therefore plaintiff’s
14 motion for summary judgment will be granted except as to the issue of fair market value at the time
15 of sale.
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In addition, the court finds that NRS 40.459(1)(c) does not apply retroactively to these facts.

17 As a result, the deficiency amount will be determined as calculated under only NRS 40.459(1)(a) and
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Though NRS 40.457(2) allows the court to appoint an appraiser, the court is within its

20 discretion to decline to do so and instead require the parties themselves to submit sufficient evidence
21 on the issue. See Unruh v. Streight, 615 P.2d 247, 249 (1980). The court declines to appoint an
22 appraiser at this time.
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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, and DECREED that plaintiff’s motion for

25 summary judgment (doc. # 68) be, and the same hereby is, GRANTED as to all issues except the fair
26 market value of the property at the time of the trustee’s sale.
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James C. Mahan
U.S. District Judge

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IT IS FURTHER ORDERED that plaintiff’s motion for a deficiency hearing (doc. # 69) be,

2 and the same hereby is, GRANTED to the extent it requests a valuation hearing.
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IT IS FURTHER ORDERED that defendants’ motion for summary judgment (doc. # 70) be,

4 and the same hereby is, DENIED.
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IT IS FURTHER ORDERED that defendants’ motion to certify questions of law (doc. # 93)

6 be, and the same hereby is, DENIED.
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IT IS FURTHER ORDERED that the parties shall have thirty (30) days from entry of this

8 order to file opening briefs of not more than ten (10) pages concerning the fair market value of the
9 property at issue at the time of the trustee’s sale. The parties shall then have ten (10) days after the
10 filing of opening briefs to file response briefs of not more than five (5) pages. Thereafter, the court
11 will set a fair market valuation hearing pursuant to NRS 40.457(1).
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DATED August 5, 2014.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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