Branch Banking and Trust Company v. Sossaman & Guadalupe Plaza, LLC et al

Filing 146

ORDER directing clerk to enter a final deficiency judgment in favor of plaintiff Branch Banking, and against Defendants, in the amount of $509,495.93, plus interest at the Note rate of 2.49% per annum; and directing clerk to enter awar d of attorneys fees for the Judicial Foreclosure Action in favor of plaintiff Branch Banking and against Defendants in the amount of $5,664.47. Signed by Judge Larry R. Hicks on 7/11/16. (Copies have been distributed pursuant to the NEF - JC)

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UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

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BRANCH BANKING AND TRUST
COMPANY, a North Carolina banking
corporation,

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Plaintiff,

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2:12-CV-01775-LRH-PAL

v.

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ORDER

SOSSAMAN & GUADALUPE PLAZA, LLC,
a Nevada limited liability company; YOEL
INY, individually and as Trustee of the Y&T
INY FAMILY TRUST dated June 8, 1994;
NOAM SCHWARTZ, individually and as
Trustee of the NOAM SCHWARTZ TRUST
dated August 19, 1999; D.M.S.I., LLC, a
Nevada limited liability company; and DOES 1
through 10, inclusive,
Defendants.

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This is a final deficiency judgment entered in favor of plaintiff Branch Banking and Trust

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Company (“Branch Banking”) and against defendants in the amount of five hundred nine

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thousand four hundred ninety-five dollars and ninety-three cents ($509, 495.93) plus interest at

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the Note rate of 2.49% per annum.

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I. Facts and Procedural History

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On July 28, 2006, Borrower Sossaman & Guadalupe Plaza, LLC (“Borrower”) executed
and delivered a Promissory Note Secured by Deed of Trust to Colonial Bank, N.A. (“Colonial
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Bank”), in the original amount of $3,826,000.00 (the “Note”). ECF No. 69, Ex. 1A; ECF No.

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99, Ex. 1. 1 The Note was secured by a Deed of Trust and Security Agreement and Fixture Filing

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with Assignment of Rents (“Deed of Trust”), dated July 28, 2006, encumbering certain real

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property in Maricopa County, Arizona (the “Property”). ECF No. 69, Ex. 1B; ECF No. 99, Ex.

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2. Also on July 28, 2006, Defendants Yoel Iny, individually and as Trustee of the Y&T Iny

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Family Trust; Noam Schwartz, individually and as Trustee of the Noam Schwartz Trust; and

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D.M.S.I., LLC (collectively “Guarantors”) executed and delivered to Colonial Bank a Guarantee

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(the “Guarantee”). ECF No. 69, Ex. 1C; ECF No. 99, Ex. 3. Pursuant to the Guarantee, the

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Guarantors guaranteed the payment of all indebtedness of the Borrower under the loan evidenced

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by the Note (the “Loan”). Id.
On February 26, 2009, the Note was amended by an Amendment to Promissory Note

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Secured by Deed of Trust such that the Maturity Date on the Note was extended to May 2, 2009

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(the “Amendment”). ECF No. 69, Ex. 1D; ECF No. 99, Ex. 4. Also on February 26, 2009, a

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Modification to the Deed of Trust was executed and recorded in Maricopa County, Arizona.

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ECF No. 99, Ex. 5. On July 19, 2009, the Note was again amended by an Amendment to

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Promissory Note Secured by Deed of Trust such that the Maturity Date on the Note was

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extended to August 2, 2009. ECF No. 69, Ex. 1E; ECF No. 99, Ex. 6. On August 14, 2009,

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Colonial Bank was closed by the State Banking Department of the State of Alabama and the

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Federal Deposit Insurance Corporation (“FDIC”) was named receiver in order to liquidate and

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distribute the assets of Colonial Bank. ECF No. 69, Ex. 1F; ECF No. 99, Ex. 7. On September

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7, 2011, the FDIC executed an Assignment of Security Instruments, Notes and Other Loan

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Documents (the “Assignment”), to be deemed effective as of August 14, 2009. Id. Pursuant to

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the terms of the Assignment, the FDIC assigned all rights, title, and interest in the Note, the Deed

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of Trust, and the Guarantee to Branch Banking. Id. The Assignment was recorded in Maricopa

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County, Arizona on November 4, 2011. Id.

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Refers to the court’s docket number.

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The Borrower failed to pay the outstanding principal balance of the loan due under the

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Note on August 2, 2009. ECF No. 93, Ex. 2 (Schwartz Depo.), 12:25-13:4. By demand letter

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dated August 3, 2011 (the “Demand Letter”), Branch Banking indicated its intent to take steps to

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exercise its rights and remedies under the Loan on or after August 3, 2011. ECF No. 69, Ex. 1G.

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On December 19, 2011, Branch Banking commenced a judicial foreclosure action under the

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Deed of Trust by filing a Verified Complaint in the Superior Court of the County of Maricopa,

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Arizona. ECF No. 99, Ex. 8. A Default Judgment ordering the judicial foreclosure of the

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Property in full or partial satisfaction of the outstanding balance due under the Loan via Sheriff’s

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sale was entered by the Superior Court of the County of Maricopa, Arizona, on April 23, 2012.

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ECF No. 69, Ex. 1H; ECF No. 100, Ex. 12. The Sheriff of the County of Maricopa, Arizona,

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sold the Property on June 21, 2012, at public auction for a cash bid of $816,000.00 in partial

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satisfaction of the Loan. ECF No. 69, Ex. 1I; ECF No. 100, Ex. 13.

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On October 10, 2012, Branch Banking filed a Complaint before this Court, alleging

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claims for deficiency, breach of guarantee, and breach of the covenant of good faith and fair

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dealing. ECF No. 1. On September 15, 2014, the Court granted Branch Banking’s Motion for

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Summary Judgment, and denied Defendants’ Motion for Summary Judgment. ECF No. 119.

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The Court also directed the parties to file briefs for a deficiency hearing pursuant to NRS §

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40.457(1).

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On November 25, 2014, Defendants and Branch Banking filed their opening briefs. ECF

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No. 131 and 132. On December 30, 2014, Defendants and Branch Banking filed their respective

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responses. ECF No. 140 and 141. On May 13, 2016, the parties stipulated that the fair market

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value of the property on June 21, 2012 was $450,000. ECF No. 145.

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II. Legal Standard

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Pursuant to NRS 40.455, a court shall award a deficiency judgment to a judgment

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creditor upon a finding that there is a deficiency between the proceeds of a trustee’s sale and the

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balance owed to the judgment creditor. NRS 40.455(1). However, before a court issues a

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deficiency judgment, the court must take evidence “concerning the fair market value of the

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property sold as of the date of foreclosure sale or trustee’s sale.” NRS 40.457(1). After

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determining the fair market value of the property, “the court shall award a judgment against the...

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guarantor... who is personally liable for the debt.” NRS 40.459(1). The amount of the

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deficiency judgment shall not be more than “[t]he amount by which the amount of the

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indebtedness which was secured exceeds the fair market value of the property sold at the time of

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the sale, with interest from the date of the sale.” NRS 40.459(1)(a).

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III. Discussion

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This is a fair market valuation determination pursuant to NRS 40.457. The issues before

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the court are (1) what was the fair market value of the underlying property at the date of the sale,

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and (2) what amount should be entered as a deficiency judgment, if any. The court shall address

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both issues below.

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A. Fair Market Valuation

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The parties have stipulated that the fair market value of the property on June 21, 2012

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was $450,000. ECF No. 145. As this is the only evidence of fair market value, the court shall

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accept this figure and values the underlying property at $450,000.

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B. Deficiency Judgment Amount

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Branch Banking contends that the amount of indebtedness on June 21, 2012, the date of

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the Sheriff’s sale was $1,325,495.93. In response, Defendants argue that Branch Banking cannot

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competently prove the amount of indebtedness and that Defendants are entitled to off-sets, which

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would result in a finding that there is no deficiency.

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First, Defendants argue that Branch Banking cannot prove the amount of the principal

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balance of the loan because Branch Banking is relying on the declaration of Peter Nugent, a

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senior vice president at Branch Banking. Defendants argue that Mr. Nugent does not have

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personal knowledge and cannot lay a sufficient foundation for the books and records of Branch

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Banking in order to establish the facts of his declaration. This Court has already rejected such an

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argument. ECF No. 119. Further, as the court has already noted, Defendants have independently

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authenticated the loan documents. Ronnie Schwartz, Defendants’ Person Most Knowledgeable,

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acknowledged and authenticated each of the loan documents at issue. See ECF No. 93, Ex. 2

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(Schwartz Depo.), 4:23-5:1, 6:17-12:24. Thus, the declaration and related loan documents

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establish an amount of indebtedness of $1,325,495.93.

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Second, Defendants argue that Branch Banking has failed to prove that taxes paid,

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appraisals, environmental reviews, costs, late fees, and attorney’s fees related to the foreclosure

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action should be included in the indebtedness. However, Branch Banking is entitled to recover

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these amounts. See, e.g., Branch Banking & Trust Co. v. Jarrett, No. 3:13-CV-00235-RCJ, 2014

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WL 2573483, at *13 (D. Nev. June 9, 2014), appeal dismissed (Dec. 17, 2014); Woori Am. Bank

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v. Sahara Westwood Hotel, LLC, No. 2:10-CV-00358-KJD, 2011 WL 2295072, at *7 (D. Nev.

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June 8, 2011).

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Third, Defendants argue that Branch Banking has not established the correct interest rate

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to be applied to the loan, which the loan stated would be an annual rate equal to 2.25% plus the

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one-month LIBOR rate. ECF No. 1, Ex. 1. Defendants argue that Branch Banking provides no

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evidence of what the LIBOR was at all relevant times of the subject loan. However, the LIBOR

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rate is readily determinable information, and Branch Banking has provided the amount of

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accrued interest.

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Fourth, Defendants argue that Branch Banking is not entitled to an award of attorney’s

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fees and costs related to the foreclosure action because Branch Banking did not seek those fees in

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the Arizona judicial foreclosure action, Branch Banking violated the Work-Out Agreement, and

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Branch Banking has not established that the fees and costs are reasonable pursuant to Nevada

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law. As to the first argument, this Court has already held that Branch Banking’s failure to

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request or obtain a money judgment in the judicial foreclosure action in Arizona does not affect

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its right to pursue a deficiency in Nevada. ECF No. 119. As to the second argument, this Court

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has already rejected Defendants’ position as to any alleged breach of an oral “Work-Out

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Agreement.” ECF No. 112. Finally, as to the third argument, the Deed of Trust establishes

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liability for “attorneys’ fees incurred in any bankruptcy or judicial or nonjudicial foreclosure

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proceeding.” ECF No. 1, Ex. 2. The Court has reviewed the submitted invoices accrued in the

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Arizona judicial foreclosure action and determines they are reasonable. Therefore, the Court will

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award Branch Banking $5,664.47 for the attorneys’ fees that were accrued in the Arizona judicial

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foreclosure action.

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Finally, Defendants argue that they are entitled to off-sets due to Branch Banking’s delay

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in foreclosing and in relation to the Work-Out Agreement. However, Branch Banking had no

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duty to immediately foreclose. See, e.g., Fed. Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706

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(Tex. 1990). Further, Defendants executed an acknowledgment letter acknowledging that any

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acceptance of payments by Branch Banking after Defendants’ default did not prejudice Branch

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Banking with respect to any of its rights and remedies under the subject loan documents. ECF

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No. 141, Ex. 1. Next, to the extent Defendants request off-sets on the basis of Branch Banking’s

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alleged breach of an oral “Work-Out Agreement” to forebear enforcing certain rights under the

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Loan documents, the Court has already rejected Defendants’ position. ECF No. 112. Therefore,

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Defendants are not entitled to any off-sets.

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Thus, the amount of indebtedness as of June 21, 2012, was $1,325,495.93. Subtracting

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$816,000, the actual price of the sale, which was higher than the fair market value of the

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Property on that date, Branch Banking is entitled to a deficiency judgment of $509,495.93 plus

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interest at the Note rate of 2.49% per annum. Accordingly, the court shall enter a final

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deficiency judgment in this amount. In addition, Defendants owe Branch Banking $5,664.47 for

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the attorneys’ fees in the Judicial Foreclosure Action.

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IV. Conclusion

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IT IS THEREFORE ORDERED that the clerk of court shall enter a final deficiency
judgment in favor of plaintiff Branch Banking, and against Defendants, in the amount of five

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hundred and nine thousand four hundred and ninety-five dollars and ninety-three cents

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($509,495.93), plus interest at the Note rate of 2.49% per annum.

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IT IS FURTHER ORDERED that the clerk of court shall enter an award of attorney’s

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fees for the Judicial Foreclosure Action in favor of plaintiff Branch Banking and against

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Defendants in the amount of five thousand six hundred sixty-four dollars and forty-seven cents

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($5,664.47).

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IT IS SO ORDERED.

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DATED this 11th day of July, 2016.

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LARRY R. HICKS
UNITED STATES DISTRICT JUDGE

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