Gonzales v. Desert Land, LLC et al

Filing 165

ORDERED that the # 155 Motion to Stay Proceedings and Judgment Pending Appeal is DENIED. Signed by Judge Robert C. Jones on 1/10/2014. (Copies have been distributed pursuant to the NEF - DRM)

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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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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

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that was part of a confirmation plan in a Chapter 11 bankruptcy action. Pending before the Court

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is Plaintiff’s Motion to Stay Proceedings and Judgment Pending Appeal (ECF No. 155). For the

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reasons given herein, the Court denies the motion.

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I.

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.

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The Court dismissed the second and fifth causes of action. The first, third, fourth, and

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sixth claims against the Desert Entities and Eagle Mortgage Co. remained at that stage, and the

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Court later granted Defendants’ counter-motion for summary judgment. Plaintiff asked the Court

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to reconsider and to clarify which, if any, of its claims remained, and Defendants asked the Court

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to certify its March 4, 2013 summary judgment order under Rule 54(b) and to enter judgment in

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their favor on all claims. The Court denied the motion to reconsider, clarified that it had

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intended to rule on all claims, certified the March 4, 2013 ruling for immediate appeal, and
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invited Defendants to submit a proposed judgment, as Plaintiffs had not yet done so. Defendants

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submitted a proposed judgment, and Plaintiff asked the Court to enjoin Defendants from further

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encumbering Parcel A with loans or mechanic’s liens until the Court of Appeals rules. The

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Court denied that motion. Plaintiff has asked the Court to stay the proceedings and judgment

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pending appeal.

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II.

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DISCUSSION
The Court denies the motion. Plaintiff has not shown a strong likelihood of success on

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appeal, and the loss of the immediate right to the Parcel Transfer Fee is plainly reparable via

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money damages.

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The Court rejects Plaintiff’s attempt to characterize his interest as one in real property in

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order to invoke the doctrine that the loss of real property is irreparable. First, the fact that the

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Parcel Transfer Fee would be triggered by Defendants’ transfer of Parcel A does not mean that

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Plaintiff’s own interest is in that real property. Plaintiff’s interest is only in the Parcel Transfer

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Fee. Second, although Plaintiff alleges an equitable lien against Parcel A for the amount of the

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Parcel Transfer Fee, his alleged interest in the real property in this regard (which the Court has

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found does not apply in this case) arises under the law only for the purpose of satisfying the lien,

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not for the purpose of obtaining the property for continued ownership or use. In other words, as

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contradistinguished from a frustrated purchaser of real property, Plaintiff’s interest is not an

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interest in the land qua land but rather an interest in the money value of the land. Plaintiff clearly

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has no interest in the unique nature of the land, because the law of foreclosure requires him to

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sell it. Indeed, the right to sell the land to satisfy the debt out of which the lien arises is a lienor’s

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only interest in the land. If Plaintiff were found on appeal to have an equitable lien in Parcel A,

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and if he insisted upon enforcing it by foreclosure, his legal duty to Defendants would be to sell

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the land in a commercially reasonable manner, satisfy his lien out of the proceeds, and then

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distribute any surplus to Defendants. But he has no interest in the unique nature of the land, even
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assuming he has an equitable lien against it. He therefore cannot argue that the unique nature of

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land supports his argument of irreparable harm in the context of a motion for an injunction or to

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stay the judgment. Plaintiff’s interest in the Parcel Transfer Fee, even assuming that it has been

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triggered and that it gives him an equitable lien against Parcel A, is reparable via money

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damages.

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CONCLUSION
IT IS HEREBY ORDERED that the Motion to Stay Proceedings and Judgment Pending

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Appeal (ECF No. 155) is DENIED.

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IT IS SO ORDERED.

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Dated this 3rdthday of January, 2014.
Dated this 10 day of January, 2014.

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_____________________________________
ROBERT C. JONES
United States District Judge

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