Gonzales v. Desert Land, LLC et al
Filing
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ORDER DENYING 95 Motion for Summary Judgment; GRANTING 107 Counter-Motion for Summary Judgment; DENYING 119 Motion for Hearing. Signed by Chief Judge Robert C. Jones on 03/04/2013. (Copies have been distributed pursuant to the NEF - KR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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TOM GONZALES,
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This bankruptcy removal case arises out of the alleged breach of a settlement agreement
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that was part of a confirmation plan in a Chapter 11 bankruptcy action. The claims appear to be
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core bankruptcy claims, but the parties and the bankruptcy judge have agreed that the case should
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be withdrawn in its entirety because I issued the relevant confirmation order while sitting as a
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bankruptcy judge. Pending before the Court are cross motions for summary judgment and a
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motion for hearing. For the reasons given herein, the Court denies the motion for hearing, denies
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Plaintiff’s Motion for Summary Judgment (ECF No. 95), and grants Defendants’ Counter-motion
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for Summary Judgment (ECF No. 107).
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I.
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Plaintiff,
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vs.
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DESERT LAND, LLC et al.,
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Defendants.
3:11-cv-00613-RCJ-VPC
ORDER
FACTS AND PROCEDURAL HISTORY
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On December 7, 2000, Plaintiff Tom Gonzales loaned $41.5 million to Defendants Desert
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Land, LLC and Desert Oasis Apartments, LLC to finance their acquisition and/or development of
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land (“Parcel A”) in Las Vegas, Nevada. The loan was secured by a deed of trust. On May 31,
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2002, Desert Land and Desert Oasis Apartments, as well as Desert Ranch, LLC (collectively, the
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“Desert Entities”), each filed for bankruptcy, and I jointly administered those three bankruptcies
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while sitting as a bankruptcy judge. I confirmed the second amended plan, and the Confirmation
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Order included a finding that a settlement had been reached under which Gonzales would
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extinguish his note and reconvey his deed of trust, Gonzales and another party would convey
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their fractional interests in Parcel A to Desert Land so that Desert Land would own 100% of
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Parcel A, Gonzales would receive Desert Ranch’s 65% in interest in another property, and
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Gonzales would receive $10 million if Parcel A were sold or transferred after 90 days (the
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“Parcel Transfer Fee”). Gonzales appealed the Confirmation Order, and the Bankruptcy
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Appellate Panel affirmed, except as to a provision subordinating Gonzales’s interest in the Parcel
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Transfer Fee to up to $45 million in financing obtained by the Desert Entities.
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Gonzales sued Desert Land, Desert Oasis Apartments, Desert Oasis Investments, LLC,
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Specialty Trust, Specialty Strategic Financing Fund, LP, Eagle Mortgage Co., and Wells Fargo
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(as trustee for a mortgage-backed security) in state court for: (1) declaratory judgment that a
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transfer has occurred entitling hin to the Parcel Transfer Fee; (2) declaratory judgment that the
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lender Defendants knew of the bankruptcy proceedings and the requirement of the Parcel
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Transfer Fee; (3) breach of contract (for breach of the Confirmation Order); (4) breach of the
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implied covenant of good faith and fair dealing (same); (5) judicial foreclosure against Parcel A
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under Nevada law; and (6) injunctive relief. Defendants removed to the Bankruptcy Court. The
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Bankruptcy Court recommended withdrawal of the reference because I issued the underlying
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Confirmation Order while sitting as a bankruptcy judge. One or more parties so moved, and the
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Court granted the motion. The Court has dismissed the second and fifth causes of action. The
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first, third, fourth, and sixth claims against the Desert Entities and Eagle Mortgage Co. remain.
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Plaintiff has moved for summary judgment on the remaining causes of action, and Defendants
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have moved for summary judgment on the first cause of action.
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II.
LEGAL STANDARDS
A court must grant summary judgment when “the movant shows that there is no genuine
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dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
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Civ. P. 56(a). Material facts are those which may affect the outcome of the case. See Anderson v.
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Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there
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is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See id. A
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principal purpose of summary judgment is “to isolate and dispose of factually unsupported
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claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). In determining summary
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judgment, a court uses a burden-shifting scheme:
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When the party moving for summary judgment would bear the burden of proof at
trial, it must come forward with evidence which would entitle it to a directed verdict
if the evidence went uncontroverted at trial. In such a case, the moving party has the
initial burden of establishing the absence of a genuine issue of fact on each issue
material to its case.
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C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations
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and internal quotation marks omitted). In contrast, when the nonmoving party bears the burden
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of proving the claim or defense, the moving party can meet its burden in two ways: (1) by
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presenting evidence to negate an essential element of the nonmoving party’s case; or (2) by
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demonstrating that the nonmoving party failed to make a showing sufficient to establish an
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element essential to that party’s case on which that party will bear the burden of proof at trial. See
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Celotex Corp., 477 U.S. at 323–24. If the moving party fails to meet its initial burden, summary
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judgment must be denied and the court need not consider the nonmoving party’s evidence. See
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Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970).
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If the moving party meets its initial burden, the burden then shifts to the opposing party to
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establish a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
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475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing party
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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
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versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d
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626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid summary judgment
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by relying solely on conclusory allegations that are unsupported by factual data. See Taylor v.
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List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions
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and allegations of the pleadings and set forth specific facts by producing competent evidence that
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shows a genuine issue for trial. See Fed. R. Civ. P. 56(e); Celotex Corp., 477 U.S. at 324.
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At the summary judgment stage, a court’s function is not to weigh the evidence and
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determine the truth, but to determine whether there is a genuine issue for trial. See Anderson, 477
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U.S. at 249. The evidence of the nonmovant is “to be believed, and all justifiable inferences are
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to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party is merely
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colorable or is not significantly probative, summary judgment may be granted. See id. at 249–50.
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III.
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ANALYSIS
The facts are not disputed. Only the legal effects of those facts is at issue. The facts most
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relevant to the present motions concern Desert Land’s option under the Confirmation Order to
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purchase certain additional land (the “FLT Option”).1 After entry of the Confirmation Order,
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Desert Land transferred the FLT Option to non-Debtor Desert Oasis Investments. Desert Oasis
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Investments then exercised the FLT Option. The question is whether this series of events
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constitutes a “transfer” triggering the Parcel Transfer Fee under the Confirmation Order.
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Plaintiff argues that because of the transfer of the FLT Option from Desert Land to Desert
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Oasis Investments and Desert Oasis Investments’ later exercise of the FLT Option, Plaintiff is
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entitled to the Parcel Transfer Fee from Desert Land under the Confirmation Order, because part
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The FLT Option was originally an additional piece of collateral used to secure Plaintiff’s
$41 million loan to Desert Land, in addition to a first priority lien against Parcel A. (Settlement
Agreement 1 ¶¶ A–B, ECF No. 95-5, at 31).
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of what now constitutes Parcel A is owned by an entity other than Desert Land. Plaintiff asks the
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Court to so declare, and also to rule that Desert Land is liable for breach of contract and breach of
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the implied covenant of good faith and fair dealing for refusing to pay the Parcel Transfer Fee
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upon demand. Defendants respond that Parcel A has not been transferred under the meaning of
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the Confirmation Order, because Desert Land only transferred the FLT Option, and the land
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purchased by Desert Oasis Investments under the FLT Option only became a part of Parcel A
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after Desert Land transferred the FLT Option. Therefore, no part of Parcel A has ever been
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“transferred.”
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The Court agrees with Defendants. Although under the Settlement Agreement, which
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was ruled binding by the Confirmation Order, (see Confirmation Order 2:23–26, Apr. 21, 2003,
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ECF No. 95-5, at 2), any land purchased by exercise of the FLT Option automatically became a
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part of Parcel A, and the “sale, transfer or other conveyance of all or any part of Parcel A” would
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trigger the Parcel Transfer Fee, (Settlement Agreement defs. 58, 60, ECF No. 95-5, at 65), the
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intent of the Settlement Agreement was that the Parcel Transfer Fee would not be due until
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Bulloch and Griffin disposed of their interest in the land or of their interest in the entities that
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owned the land. It is clear from the record that the FLT Option was not exercised until after the
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Option was transferred, and thus no part of Parcel A was transferred, but only an option to
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purchase a part of Parcel A. In any case, the true intent of the plan was for the Parcel Transfer
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Fee to be triggered only upon a transfer of ownership away from Defendants and their principals.
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The transfer here was in order to allow new financing on the property and for the purpose of
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exercising the option, which Plaintiff was apparently impeding.
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CONCLUSION
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IT IS HEREBY ORDERED that the Motion for Hearing (ECF No. 119) is DENIED.
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IT IS FURTHER ORDERED that the Motion for Summary Judgment (ECF No. 95) is
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DENIED. Plaintiff shall submit a proposed form of judgment.
IT IS FURTHER ORDERED that the Counter-motion for Summary Judgment (ECF No.
107) is GRANTED.
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IT IS SO ORDERED.
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Dated this 5th day ofof March, 2013.
4th day February, 2013.
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ROBERT C. JONES
United States District Judge
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