Branch Banking & Trust Co. v. 27TH & S. Holding, LLC

• Decision Date: 11 July 2016
• Docket Number: 2:12-CV-01781-LRH-PAL
• Parties: BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation, Plaintiff, v. 27th & SOUTHERN HOLDING, 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.
• Court: U.S. District Court — District of Nevada

BRANCH BANKING AND TRUST COMPANY,
a North Carolina banking corporation, Plaintiff,
v.
27^th & SOUTHERN HOLDING, 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.

2:12-CV-01781-LRH-PAL

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

July 11, 2016

ORDER

This is a final deficiency judgment entered in favor of plaintiff Branch Banking and Trust Company ("Branch Banking") and against defendants in the amount of two million forty thousand two hundred fifty-eight dollars and seventy-one cents ($2,040,258.71) plus interest at the default interest rate of 7.25% plus the one-month LIBOR Rate.

I. Facts and Procedural History

On July 28, 2006, Borrower 27^th & Southern Holding, 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 $3,056,000.00 (the "Note"). ECF No. 49, Ex. 1; ECF No. 50, Ex. 2.¹ The Note was secured by a Deed of Trust and Security Agreement and Fixture Filing with Assignment of Rents ("Deed of Trust"), dated July 28, 2006, encumbering certain real property in Maricopa County, Arizona (the "Property"). ECF No. 49, Ex. 2; ECF No. 50, Ex. 3. Also on July 28, 2006, Defendants Yoel Iny, individually and as Trustee of the Y&T Iny Family Trust; Noam Schwartz, individually and as Trustee of the Noam Schwartz Trust; and D.M.S.I., LLC (collectively "Guarantors") executed and delivered to Colonial Bank a Guarantee (the "Guarantee"). ECF No. 49, Ex. 3; ECF No. 50, Ex. 4. Pursuant to the Guarantee, the Guarantors guaranteed the payment of all indebtedness of the Borrower under the loan evidenced by the Note (the "Loan"). Id.

On February 26, 2009, the Note was amended by an Amendment to Promissory Note Secured by Deed of Trust such that the Maturity Date on the Note was extended to May 1, 2009 (the "Amendment"). ECF No. 50, Ex. 5. On June 19, 2009, the Note was again amended by an Amendment to Promissory Note Secured by Deed of Trust such that the Maturity Date on the Note was extended to August 1, 2009. Id., Ex. 6. On August 21, 2009, the Note was amended by an Amendment to Promissory Note Secured by Deed of Trust such that the Maturity Date on the Note was extended to November 1, 2009. Id., Ex. 9. On August 14, 2009, Colonial Bank was closed by the State Banking Department of the State of Alabama and the Federal Deposit Insurance Corporation ("FDIC") was named receiver in order to liquidate and distribute the assets of Colonial Bank. ECF No.469, Ex. 4; ECF No. 50, Ex. 7. On September 28, 2011, the FDIC executed an Assignment of Security Instruments, Notes and Other Loan Documents (the "Assignment"), to be deemed effective as of August 14, 2009. ECF No. 49, Ex. 4; ECF No. 50, Ex. 7. Pursuant to the terms of the Assignment, the FDIC assigned all rights, title, and interest in the Note, the Deed of Trust, and the Guarantee to Branch Banking. Id. The Assignment was recorded in Maricopa County, Arizona on November 4, 2011. Id.

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The Borrower failed to pay the outstanding principal balance of the loan due under the Note on November 1, 2009. ECF No. 50 at 5. By demand letter dated August 3, 2011 (the "Demand Letter"), Branch Banking indicated its intent to take steps to exercise its rights and remedies under the Loan on or after August 31, 2011. ECF No. 50, Ex. 10. On December 16, 2011, Branch Banking commenced a judicial foreclosure action under the Deed of Trust by filing a Verified Complaint in the Superior Court of the County of Maricopa, Arizona. ECF No. 49, Ex. 5. A Default Judgment ordering the judicial foreclosure of the Property in full or partial satisfaction of the outstanding balance due under the Loan via Sheriff's sale was entered by the Superior Court of the County of Maricopa, Arizona, on April 23, 2012. ECF No. 49, Ex. 7; ECF No. 50, Ex. 11. The Sheriff of the County of Maricopa, Arizona, sold the Property on June 21, 2012, at public auction for a cash bid of $1,080,000.00 in partial satisfaction of the Loan. ECF No. 49, Ex. 8; ECF No. 50, Ex. 13.

On October 10, 2012, Branch Banking filed a Complaint before this Court, alleging claims for deficiency, breach of guarantee, and breach of the covenant of good faith and fair dealing. ECF No. 1. On June 24, 2015, the Court granted Branch Banking's Motion for Summary Judgment, and denied Defendants' Motion for Summary Judgment. ECF No. 74. The Court also directed the parties to file briefs for a deficiency hearing pursuant to NRS § 40.457(1).

On September 18, 2015, Defendants and Branch Banking filed their opening briefs. ECF No. 81 and 82. On October 23, 2015, Defendants and Branch Banking filed their respective responses. ECF No. 87 and 88. On May 16, 2016, a hearing on fair market value was held. ECF No. 93.

II. Legal Standard

Pursuant to NRS 40.455, a court shall award a deficiency judgment to a judgment creditor upon a finding that there is a deficiency between the proceeds of a trustee's sale and the balance owed to the judgment creditor. NRS 40.455(1). However, before a court issues a 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 determining the fair market value of the property, "the court shall award a judgment against the... guarantor... who is personally liable for the debt." NRS 40.459(1). The amount of the deficiency judgment shall not be more than "[t]he amount by which the amount of the indebtedness which was secured exceeds the fair market value of the property sold at the time of...