Branch Banking & Trust Co. v. D.M.S.I., LLC

• Citation: 871 F.3d 751
• Decision Date: 11 September 2017
• Docket Number: Nos. 15-16933, 15-16934, 15-16935.,s. 15-16933, 15-16934, 15-16935.
• Parties: BRANCH BANKING AND TRUST COMPANY, as successor in interest on behalf of Colonial Bank, N.A., Plaintiff-Appellee, v. D.M.S.I., LLC; Noam Schwartz; NST Holding, Inc., Trustee; Yoel Iny, Individually and as Trustee on behalf of Y & T Iny Family Trust, Defendants-Appellants. Branch Banking and Trust Company, Plaintiff-Appellee, v. Regena Homes, LLC; Yoel Iny; Noam Schwartz; Y & T Iny Family Trust Dated June 8, 1994; Noam Schwartz Trust Dated August 19, 1999; D.M.S.I., LLC; Great American Capital, Defendants-Appellants. Branch Banking and Trust Company, Plaintiff-Appellee, v. Smoke Ranch Development, LLC; Yoel Iny, an individual and as Trustee on behalf of Y&T Iny Family Trust dated June 8, 1994, as amended; Noam Schwartz, individually and as Trustee on behalf of Noam Schwartz Trust Dated August 19, 1999; D.M.S.I., LLC, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

871 F.3d 751

BRANCH BANKING AND TRUST COMPANY, as successor in interest on behalf of Colonial Bank, N.A., Plaintiff-Appellee,

v.D.M.S.I., LLC; Noam Schwartz; NST Holding, Inc., Trustee; Yoel Iny, Individually and as Trustee on behalf of Y & T Iny Family Trust, Defendants-Appellants.

Branch Banking and Trust Company, Plaintiff-Appellee,

v.Regena Homes, LLC; Yoel Iny; Noam Schwartz; Y & T Iny Family Trust Dated June 8, 1994; Noam Schwartz Trust Dated August 19, 1999; D.M.S.I., LLC; Great American Capital, Defendants-Appellants.

Branch Banking and Trust Company, Plaintiff-Appellee,

v.Smoke Ranch Development, LLC; Yoel Iny, an individual and as Trustee on behalf of Y&T Iny Family Trust dated June 8, 1994, as amended; Noam Schwartz, individually and as Trustee on behalf of Noam Schwartz Trust Dated August 19, 1999; D.M.S.I., LLC, Defendants-Appellants.

Nos. 15-16933, 15-16934, 15-16935.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 21, 2017, San Francisco, California

Filed September 11, 2017

Bart K. Larsen (argued), Kolesar & Leatham, Las Vegas, Nevada, for Defendants-Appellants.

Jeremy Nork (argued), Holland & Hart LLP, Las Vegas, Nevada, for Plaintiff-Appellee.

Before: A. Wallace Tashima and Richard A. Paez, Circuit Judges, Carol Bagley Amon,^* District Judge.

OPINION

TASHIMA, Circuit Judge:

Defendants in these three actions are debtors who have failed to repay loans held by Branch Banking and Trust Company ("BB&T"). They appeal the respective judgments of the district court against them. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

I. BACKGROUND

A. The D.M.S.I . Action, No. 15-16933

On February 27, 2004, D.M.S.I., LLC, Yoel Iny, and Noam Schwartz executed and delivered a Promissory Note to Colonial Bank, N.A., for $2,000,000 ("D.M.S.I. Loan"). On the same date, Yoel Iny, acting as Trustee of the Y & T Iny Family Trust, and Ronnie Schwartz, as a Trustee of the NS 1998 Family Trust, executed and delivered guarantees of the payment of the D.M.S.I. Loan. The D.M.S.I. Promissory Note was amended in 2006, increasing the principal amount of the loan to $3,500,000. After an additional amendment in March 2009, the D.M.S.I. Loan was set to be paid in full by June 1, 2009. It is undisputed that Defendants failed to repay the D.M.S.I. Loan.

Colonial Bank, N.A., was succeeded by Colonial Bank, an Alabama banking corporation. On August 14, 2009, Colonial Bank was closed, and the Federal Deposit Insurance Corporation ("FDIC") was named as its receiver.

On the same day, the FDIC executed an agreement titled "Purchase and Assumption Agreement Whole Bank All Deposits Among Federal Deposit Insurance Corporation, Receiver of Colonial Bank, Montgomery, Alabama Federal Deposit Insurance Corporation and Branch Banking and Trust Company Winston-Salem, North Carolina" ("PAA"). The PAA assigns "all right, title, and interest of the Receiver in and to all of the assets ... of the Failed Bank [Colonial Bank]" to BB& T. The PAA goes on to state that "Schedules 3.1 and 3.1a attached hereto and incorporated herein sets forth certain categories of Assets purchased hereunder. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII." Schedules 3.1 and 3.1a to the PAA are both blank, containing only the legend "SEE ATTACHED LIST." No "attached list" was included with the PAA.

At the same time it entered the PAA, BB&T also entered a loss sharing agreement with the FDIC "for reimbursement of loss sharing expenses on certain loans and other assets." The loss sharing agreement applies "when the Assuming Bank [BB&T] purchases Shared-Loss Assets." Schedule 4.15b lists the assets subject to the loss sharing agreement. The D.M.S.I. Loan is listed in Schedule 4.15b.

On October 23, 2009, the FDIC executed an "Assignment of Security Instruments and Other Loan Documents" ("Bulk Assignment"). The Bulk Assignment assigns to BB&T

all of Assignor's [FDIC's] rights, title and interests in and to all those certain Mortgages, Security Deeds, Deeds to Secure Debt, Deeds of Trust, Assignments of Rents and Leases, UCC-1 financing statements, judgment liens, and all such other instruments and security agreements securing loans owned by Colonial Bank ... and all modifications, extensions, amendments and renewals thereto (collectively the "Security Instruments").

The Bulk Assignment also assigns "all of Assignor's [FDIC's] rights, title and interests in and to the promissory notes, loan documents and all other Indebtedness secured by the Security Instruments." The Bulk Assignment thus appears to apply only to security instruments and to secured debt.

The FDIC also produced an undated allonge¹ purporting to endorse the D.M.S.I. Loan to BB&T effective August 14, 2009.

In 2009 and 2010, BB&T engaged in discussions with Defendants about restructuring the D.M.S.I. Loan. Notwithstanding discussions over this "work-out agreement," on August 18, 2010, Defendants signed an "Acknowledgment" stating that any such discussions "are without any prejudice to the Lender [BB&T] in the exercise of its rights and remedies with respect to the Loans. Furthermore, Lender reserves the right in its sole discretion to terminate discussions at any time and thereafter exercise its right and remedies."

On November 4, 2011, BB&T filed the D.M.S.I. Action against Defendants. The district court issued a Discovery Plan and Scheduling Order on May 2, 2012. The Scheduling Order established November 2, 2012, as the deadline to file motions to amend the pleadings. The operative Second Amended Complaint was filed on June 29, 2012. It alleges breach of promissory note, breach of guaranty, and breach of the covenant of good faith and fair dealing. Defendants filed their answers to the Second Amended Complaint in July 2012. On January 14, 2013, Defendants moved to extend the deadline to amend their pleadings, which BB&T did not oppose and which the district court granted. On March 6, 2013, Defendants filed amended answers. On March 13, 2013, five days before the close of discovery and well after the deadline to amend had passed, Defendants filed a second motion to again extend the deadline to amend their pleadings for the purpose of adding several new defenses and a counterclaim against BB&T. This motion was denied.

After the close of discovery, the parties filed cross-motions for summary judgment. The district court granted BB&T's motion and denied Defendants' motion. The district court's order does not address the affirmative defenses raised by Defendants regarding the alleged work-out agreement. On August 27, 2015, the district court entered judgment against Defendants for $7,171,197.99. Defendants timely appealed.

B. The Regena Action, No. 15-16934

On September 7, 2005, Regena Homes, LLC, executed and delivered a promissory note secured by a deed of trust to Colonial Bank, N.A., in the amount of $3,377,000 ("Regena Loan"). The Regena Loan was secured by a deed of trust for real property in Clark County, Nevada ("Regena Property"). On the same date the Regena Loan was executed, Yoel Iny as an individual and as a Trustee of the Y & T Iny Family Trust, Noam Schwartz as an individual and as a Trustee of the Noam Schwartz Trust, D.M.S.I., LLC, and Great American Capital executed and delivered guarantees of the payment of the Regena Loan. After subsequent amendments, the Regena Loan was due to be paid in full by December 8, 2009. It is undisputed that Defendants failed to repay the Regena Loan.

Colonial Bank, N.A., was succeeded by Colonial Bank, which subsequently failed and went into receivership. The FDIC, as receiver, executed the PAA and loss sharing agreement described above. The Regena Loan is listed on Schedule 4.15b to the loss sharing agreement. The Bulk Assignment is as described above. Finally, the FDIC produced an undated allonge purporting to endorse the Regena Loan to BB&T, effective August 14, 2009.

Just as with the D.M.S.I. Loan, BB&T engaged in discussions with Defendants about a work-out agreement regarding the Regena Loan. Defendants executed an Acknowledgment preserving BB&T's rights and remedies. BB&T had the Regena Property assessed each year from 2009 to 2011. These assessments revealed that the value of the Regena Property was rapidly declining.

On February 29, 2012, the Regena Property was sold at a non-judicial trustee's sale to partially satisfy the Regena Loan. BB&T filed the Regena Action against Defendants on March 16, 2012. On June 8, 2012, BB&T filed the operative Amended Complaint, alleging breach of guaranty, breach of the implied covenant of good faith and fair dealing, and for a deficiency judgment.

After discovery, the parties filed cross-motions for summary judgment. The district court denied Defendants' motion and granted summary judgment to BB&T as to liability. The only remaining issue was the amount of the deficiency owed to BB&T. Defendants requested a jury to hear all issues relating to the deficiency. After briefing, the district court ruled that the fair market value of the Regena Property should be determined by the court, and the remaining issues would be left for the jury. The district court subsequently granted BB&T's motion in limine excluding all evidence of the alleged work-out agreement.

The parties stipulated to the sale price of the Regena Property. On April 13, 2015, a jury determined that the amount of debt on the Regena Loan on the date of the trustee's sale was $2,069,845.78. On May 11, 2015, the parties stipulated to the fair market value of the Regena Property on the date of the trustee's sale. The district court then entered judgment against Defendants for $1,975,766.24. Defendants timely appealed.

C. The Smoke Ranch Action, No. 15-16935

On September 26, 2005, Smoke Ranch Development, LLC, executed and delivered a promissory note in the amount of $800,000 to Colonial Bank, N.A. ("Smoke Ranch Loan"). The promissory note was secured by a Deed of Trust for certain real...