Branch Banking & Trust Co. v. Frank
| Decision Date | 17 December 2013 |
| Docket Number | 2:11-CV-1366 JCM (CWH) |
| Parties | BRANCH BANKING AND TRUST COMPANY, Plaintiff, v. DAVID M. FRANK, et al., Defendants. |
| Court | United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada |
Presently before the court is defendants' motion for the court to reconsider its order granting partial summary judgment in favor of plaintiff. (Doc. # 138). Plaintiff filed a response in opposition (doc. # 143), and defendants filed a reply (doc. # 147).
This case arises out of a loan transaction which occurred on or about April 19, 2005 by and between Station Plaza Partners, LLC ("Station Plaza") and Colonial Bank, plaintiff's predecessor-in-interest.1 Station Plaza requested $29,260,700.00 to purchase and develop approximately 20.16 acres of raw land near the intersection of Lake Mead Blvd. and Rancho Drive in North Las Vegas, Nevada. A deed of trust was executed on the subject property to secure repayment. The loan was evidenced by a promissory note, and each of the defendants in this action individually guaranteed repayment.
On or about August 19, 2008, with the consent of Colonial Bank, Station Plaza, and defendants, the maximum amount committed under the loan was reduced to $19,885,000.00. On July 23, 2009, Station Plaza defaulted on the loan. As a result, on June 22, 2011, plaintiff declared the entire balance due in accordance with the terms of the loan.
Plaintiff initiated this action on August 24, 2011, after neither Station Plaza nor any of the defendants attempted to pay the balance of the loan. On March 23, 2012, a trustee's sale of the property occurred in which plaintiff acquired the property by placing a credit bid of $7.6 million.
On January 22, 2013, plaintiff and defendants each filed motions for summary judgment. (Docs. # 106 & 107). In their motion, defendants argued that they were entitled to judgment as a matter of law because plaintiff had not provided sufficient evidence regarding inter alia (1) the fair market value of the property at the time of the trustee's sale and (2) the amount of consideration paid to acquire the loan, both of which are required under Nev. Rev. Stat. § 40.459(1). In its own motion, plaintiff argued that it was entitled to judgment in its favor, as it had provided sufficient evidence regarding all essential elements of its claim and defendants did not present evidence which raised any genuine issues of material fact.
On September 26, 2013, the court granted plaintiff's motion for summary judgment as to all issues except as to the fair market value of the property at the time of the trustee's sale. The court reserved judgment on this final matter as the Nevada statutory scheme specifically requires that the court hold a hearing on the issue before awarding a deficiency judgment. See Nev. Rev. Stat. § 40.457(1). On the issues of fair market value and consideration, the court found that the credit bid constituted prima facie evidence of the property's value at the time of the trustee's sale and that deposition testimony and documentary evidence presented by plaintiff was sufficient to establish the consideration paid by plaintiff for the right to obtain a judgment on the loan. The court also found that the "loss-sharing agreement" between plaintiff and the FDIC would not reduce the "amount of indebtedness" considered when determining the value of a deficiency judgment.
A motion for reconsideration "should not be granted, absent highly unusual circumstances."Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Reconsideration "is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law." School Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).
Rule 59(e) "permits a district court to reconsider and amend a previous order," however "the rule offers an extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003) (internal quotations omitted). "A Rule 59(e) motion may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised in the earlier litigation." Id. (citing Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 887, 890 (9th Cir. 2000)).
Under Nevada law, following a trustee's sale, a creditor is entitled to a deficiency judgment "if it appears from the sheriff's return or the recital of consideration in the trustee's deed that there is a deficiency of the proceeds of the sale and a balance remaining due to the judgment creditor or the beneficiary of the deed of trust, respectively." Nev. Rev. Stat. § 40.455(1). This statutory scheme also requires that the court, prior to awarding a deficiency judgment, hold a hearing regarding the fair market value of the property as of the date of the trustee's sale. Nev Rev. Stat. § 40.457(1).
The statute provides that the amount of a resulting deficiency judgment be no more than:
Nev. Rev. Stat. § 40.459(1). Additionally, the statute provides that the "amount of indebtedness" referred to in 40.459(1)(a) "does not include any amount received by, or payable to, the judgment creditor or beneficiary of the deed of trust pursuant to an insurance policy to compensate the judgment creditor or beneficiary for any losses incurred with respect to the property or default on the debt." Nev. Rev. Stat. § 40.459(2).
Defendants request that the court reconsider its order pursuant to Federal Rule of Civil Procedure 59(e). In their motion, defendants put forward four separate grounds which they argue warrant reconsideration of the court's order granting partial summary judgment. Defendants double down on their argument that plaintiff's credit bid cannot serve as substantial evidence of the property's fair market value. Additionally, defendants again question the sufficiency of plaintiff's consideration evidence, stating inter alia that "self-contradictions" in plaintiff's statements raise genuine issues of material fact. Defendants also claim that "newly discovered evidence," in the form of a 10Q form filed with the SEC in 2009, creates a genuine issue of material fact that would have prevented summary judgment if it had been timely disclosed. Finally, defendants now point to quotations from the legislative history of Nev. Rev. Stat. § 40.459(2) and argue that these statements indicate that the "amount of indebtedness" considered by the court should be reduced.
In the instant motion, defendants rehash an argument that was examined thoroughly in the court's prior order, that plaintiff's credit bid does not constitute substantial evidence of the property's fair market value at the time of the trustee's sale. Defendants argue that the credit bid is not sufficient evidence because: (1) the trustee's sale did not have a willing seller and (2) the statutory scheme uses the terms "fair market value" and "sale price" separately. In addition, defendants argue (3) that plaintiff's testimony regarding the value of its own property cannot be considered by the court.
(1) "Willing seller" requirement
Defendants correctly observe that under Nevada law "[f]air market value is generally defined as the price which a purchaser, willing but not obliged to buy, would pay an owner willing but notobliged to sell, taking into consideration all the uses to which the property is adapted and might in reason be applied." Unruh v. Streight, 615 P.2d 247, 249 (Nev. 1980). Defendants claim that because the present case lacks a willing seller, and instead involves property that was sold following a foreclosure, that the sale price does not reflect the property's fair market value.
While defendants are correct that forced sales can result in property being sold at a price below its fair market value, the court's order was not based upon a finding that all credit bids serve as evidence of fair market value, only that, because plaintiff used an established, habitual process of collecting independent appraisals within a set time span in order to develop its valuation of the property, that this particular credit bid was sufficient to establish prima facie proof of the property's fair market value. In cases such as this one, in which a property was not transferred by a willing seller, the court is forced to turned to evidence reflecting what the fair market value would have been if the sale had involved a willing buyer and willing seller freely negotiating the terms of sale. See Unruh, 615 P.2d at 248-49.
In fact, reference to such evidence to determine fair market value is necessary in eminent domain cases, where, by definition, there is no willing seller. See State ex rel. Dep't of Highways v. Campbell, 388 P.2d 733, 737 (Nev. 1964). Because plaintiff provides substantial evidence to support its claims regarding the property's fair market value, the fact that there was no willing seller in this case is not material to the adequacy of plaintiff's...
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