Eagle Spe NV I, Inc. v. Communities

• Decision Date: 24 March 2014
• Docket Number: No. 3:12–CV–00245–RCJ–WGC.,3:12–CV–00245–RCJ–WGC.
• Court: U.S. District Court — District of Nevada
• Parties: EAGLE SPE NV I, INC., Plaintiff, v. KILEY RANCH COMMUNITIES et al., Defendants.

5 F.Supp.3d 1238

EAGLE SPE NV I, INC., Plaintiff,

v.KILEY RANCH COMMUNITIES et al., Defendants.

No. 3:12–CV–00245–RCJ–WGC.

United States District Court, D. Nevada.

Signed March 24, 2014.

Limited on Constitutional Grounds

West's NRSA 40.459(1)(c)Frank Z. Laforge, Jeremy J. Nork, Holland & Hart LLP, Kent R. Robison, Robison, Belaustegui, Sharp & Low, Reno, NV, for Plaintiff.

Jeremy J. Nork, Holland & Hart LLP, Kent R. Robison, Kristen L. Martini, Robison, Belaustegui, Sharp & Low, Reno, NV, for Defendants.

ORDER

ROBERT C. JONES, District Judge.

This case arises out of the default of four commercial loans. Pending before the Court is a Motion to Dismiss Counterclaim and Defense (ECF No. 52). For the reasons given herein, the Court grants the motion.

I. FACTS AND PROCEDURAL HISTORY

Between April 2007 and February 2008, non-party Colonial Bank gave Defendant Kiley Ranch Communities (“Kiley Ranch”) four loans totaling $45 million (the “Loans”) in order to build Kiley Ranch North (the “Development”) in Sparks, Nevada. ( See Am. Compl. ¶ 14, June 7, 2012, ECF No. 5). Each of the Loans was made via its own promissory note and was secured by a Common Deed of Trust (the “CDOT”) against the Development. ( Id. ¶ 15). The Loans were further secured by separate guaranties (the “Guaranties”), all of which were signed by Defendants Matthew N. Kiley, individually and as trustee of the Matthew N. Kiley Trust; Megan L. Kiley, individually and as trustee of the Megan L. Kiley Trust; L. David Kiley, as trustee of the Matthew N. Kiley Trust and as trustee of the Megan L. Kiley Trust; and Michael and Kellee Kiley, both individually and as trustees of the Michael P. Kiley and Kellee Kiley Living Trust Instrument (collectively, “Guarantors”). ( See id. ¶¶ 4–9, 16).¹

Repayment on each of the Loans was originally due within one year, but Colonial Bank granted Kiley Ranch three extensions on the $20 million, $2 million, and $13 million loans and one extension on the $10 million loan via separate Loan Modifications. ( Id. ¶ 17).² When the last of the Loans matured on July 20, 2009, Kiley Ranch owed Colonial Bank $41,023,667.99 under the Loans. ( Id. ¶ 18).

On August 14, 2009, the FDIC put Colonial Bank into receivership after the State Banking Department of the State of Alabama closed it. ( Id. ¶ 21). The FDIC transferred the rights to the Loans to non-party BB & T the same day, recording an “Assignment of Security Instruments, Notes and Other Loan Documents” (the “FDIC Assignment”) in Washoe County. ( Id. ¶ 22).³

On September 14, 2009, counsel for BB & T sent Kiley Ranch and Guarantors demand letters as to each of the Loans. ( Id. ¶ 19).⁴ On March 2, 2010, after Kiley Ranch and Guarantors refused to honor the Notes and Guaranties, BB & T executed a Notice of Default and Election to Sell (the “NOD”), which it recorded in Washoe County on March 4, 2010. ( Id. ¶¶ 24–25). ⁵ On July 15, 2010, the trustee under the CDOT, non-party Western Title Co., noticed a trustee's sale for August 12, 2010 via a Notice of Trustee's Sale (the “NOS”). ( Id. ¶ 26).⁶ In August 2010, however, before either the trustee's sale or the effective date of Nevada Revised Statutes (“NRS”) section 40.459(1)(c), BB & T assigned its rights to the Notes, CDOT, Guaranties, and other loan documents to Plaintiff Eagle SPE NV I, Inc. (“Eagle”) via an Assignment of Deed of Trust (the “BB & T Assignment”), which it recorded in Washoe County. ( See id. ¶ 27).⁷ The Development was eventually sold to non-party Rising Tides LLC via trustee's sale on November 8, 2011 for $9.8 million, after NRS section 40.459(1)(c) had taken effect. ( See id. ¶ 28).⁸ The fair market value of the Development on the date of the trustee's sale was approximately $10.5 million, ( id. ¶ 30), leaving a a deficiency of approximately $35,682,908.60, ( id. ¶ 31).

Plaintiff sued Defendants in this Court on three causes of action: (1) Deficiency (against Kiley Ranch); (2) Breach of Guaranty (against Guarantors); and (3) Breach of the Implied Covenant of Good Faith and Fair Dealing (against Guarantors). Defendants included with their Answer a Counterclaim listing four causes of action: (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Intentional Interference with Prospective Economic Advantage; and (4) Declaratory Judgment.

Plaintiff moved to dismiss certain counterclaims and affirmative defenses as precluded by a previous state court action. Plaintiff also moved to dismiss Defendants' affirmative defense and counterclaim under NRS section 40.459(1)(c), arguing that it did not apply retroactively to the Loans. Defendants asked the Court to certify the latter issue to the Nevada Supreme Court or at least stay the case until the Nevada Supreme Court ruled in two pending consolidated appeals, Sandpointe Apartments, LLC v. Dist. Ct., No. 59507 and Nielsen v. Dist. Ct., No. 59823, that were expected to determine the issue or at least inform a resolution. The Court denied the motions to dismiss, without prejudice, and granted the motion to stay. The Nevada Supreme Court has now ruled on the merits in Sandpointe and denied the writ petition in Nielsen, and Plaintiff has filed a new motion to dismiss the counterclaim and strike the related defense under NRS section 40.459(1)(c).

II. LEGAL STANDARDS

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir.1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). The court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts pertaining to his own case making a violation plausible, not just possible. Ashcroft v. Iqbal, 556 U.S. 662, 677–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955) (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”). In other words, under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a cognizable legal theory ( Conley review), but also must plead the facts of his own case so that the court can determine whether the plaintiff has any plausible basis for relief under the legal theory he has specified or implied, assuming the facts are as he alleges them to be ( Twombly– Iqbal review).

“Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990) (citation omitted). Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). Moreover, under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir.1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.2001).

III. ANALYSIS

The Court will first address the applicability of NRS section 40.459(1)(c) to the present case. That section was added to the NRS by § 5 of Assembly Bill 273 (“AB 273”). Prior to AB 273, the statute read:

After the hearing, the court shall award a money judgment against the debtor, guarantor or surety who is personally liable for the debt. The court shall not render judgment for more than:

1. The amount by which the amount of the indebtedness which was secured exceeds the fair market value of the property sold at the time of the sale, with interest from the date of the sale; or 2. The amount which is the difference between the amount for which the property was actually sold and the amount of the indebtedness which was secured, with interest from the date of sale,

whichever is the lesser amount.

Nev.Rev.Stat. § 40.459(1)-(2) (1993). AB 273 amended the statute, in relevant part, to read:

1. After the hearing, the court shall award a money judgment against the debtor, guarantor or surety who is personally liable for the debt. The court shall not render judgment for more than:

(a) The amount by which the amount of the indebtedness which was secured...