Leany v. San Diego Steel Holdings Grp., Inc.

• Decision Date: 29 August 2018
• Docket Number: Case No. 2:15-cv-01349-MMD-CWH
• Parties: TODD LEE LEANY, Trustee of the TODD LEE LEANY IRREVOCABLE TRUST, et. al. Plaintiffs, v. SAN DIEGO STEEL HOLDINGS GROUP, INC., a California corporation; DAVID PERKINS, individually; ERIC B. BENSON, individually; and DOES I through X, inclusive; and ROE CORPORATIONS I through X, inclusive, Defendants. SAN DIEGO STEEL HOLDINGS GROUP, INC., a California corporation; DAVID PERKINS, individually; ERIC B. BENSON, individually, Counterclaimants/Third Party Plaintiffs, v. TODD LEE LEANY, Trustee of the TODD LEE LEANY IRREVOCABLE TRUST; CENTURY PROPERTIES HENDERSON 18, LLC, a Nevada limited liability company, UINTAH LAND INVESTMENTS, LLC, a Limited Liability Company, DON F. AHERN and DFA, LLC, a Nevada Limited Liability Company, Counter-defendants and Third Party Defendants.
• Court: U.S. District Court — District of Nevada

TODD LEE LEANY, Trustee of the

TODD LEE LEANY IRREVOCABLE TRUST, et. al. Plaintiffs, v. SAN DIEGO STEEL HOLDINGS GROUP,

INC., a California corporation; DAVID PERKINS, individually;

ERIC B. BENSON, individually; and DOES I through X, inclusive;

and ROE CORPORATIONS I through X, inclusive, Defendants.

SAN DIEGO STEEL HOLDINGS GROUP,

INC., a California corporation; DAVID PERKINS, individually;

ERIC B. BENSON, individually, Counterclaimants/Third Party Plaintiffs, v. TODD LEE LEANY, Trustee of the

TODD LEE LEANY IRREVOCABLE TRUST;

CENTURY PROPERTIES HENDERSON 18, LLC,

a Nevada limited liability company,

UINTAH LAND INVESTMENTS, LLC,

a Limited Liability Company, DON F. AHERN and DFA, LLC,

a Nevada Limited Liability Company, Counter-defendants and Third Party Defendants.

Case No. 2:15-cv-01349-MMD-CWH

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

August 29, 2018

ORDER

(ECF Nos. 89, 90, 91)

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I. SUMMARY

This action arises from an arm's length transaction for the sale of certain real estate property. Before the Court are two motions for summary judgment ("MSJ"): the first by Defendants San Diego Steel Holdings Group, Inc. ("SDSHG"), David Perkins ("Perkins"), and Eric Benson ("Benson") (collectively, "SDSHG Parties") (ECF No. 89), and the other by Third Party Defendants Don F. Ahern ("Ahern") and DFA, LLC ("DFA") (hereinafter collectively, "Ahern/DFA") (ECF No. 91). Also before the Court is a partial motion for summary judgment ("PMSJ") by Plaintiff Todd Lee Leany ("Leany")—who has improperly joined Century Properties Henderson, 18, LLC ("Century 18") as a plaintiff, and Uintah Land Investments, LLC ("Uintah") (collectively, "Counter-defendants"). (ECF No. 91.) The Court has reviewed these motions, the respective responses (ECF Nos. 96, 97, 98), and replies (ECF Nos. 101, 102, 103).

For the reasons discussed below, the Court grants the SDSHG Parties MSJ (ECF No. 89) on Leany's Amended Complaint (ECF No. 47) in its entirety. Counter-defendants' PMSJ (ECF No. 90) and Ahern/DFA's MSJ (ECF No. 91) are denied in part, and granted in part.

II. RELEVANT BACKGROUND¹

A. The Parties

Perkins and Benson are officers or directors of SDSHG. (ECF No. 1 at 11.) Leany is the Trustee of the Todd Lee Irrevocable Trust (ECF No. 59 at 7) and a manager of Century 18 (ECF No. 1 at 11). Leany also owns Uintah. (ECF No. 59 at 7, 10.) Ahern is the President of DFA. (ECF No. 91 -1 at 2.)

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B. The Henderson Property and Pertinent Agreements

Century 18 owned real property in Henderson, NV, consisting of an 18-acre portion of industrial property ("Industrial Portion"), and an adjacent undeveloped five acres ("Five Acres") (collectively, "Henderson Property"). (ECF No. 41 at 2; ECF No. 91-15 at 25-26.) Pursuant to a settlement agreement, an entity called Gerdau Reinforcing Steel (formerly Pacific Coast Steel, or herein "Gerdau"²) acquired a $26 million lien against the Henderson Property, among other properties.³ (ECF No. 96-1 at 10-11; ECF No. 91-15 at 210-12, 220-221; ECF No. 91-13 at 2; ECF No. 90 at 3-4.) Additionally, upon the sale of the Henderson Property, Gerdau was to receive all equity therein in excess of the amount of a senior bank debt Century 18 owed. (ECF No. 91-13 at 2; ECF No. 91-15 at 25-26, 45-46; ECF No. 41 at 2.) The SDSHG Parties contend that Leany had personally guaranteed the debt ($7.5 million) to the bank—GE Capital. (ECF No. at 96 at 4; ECF No. 96-3 at 4; see also ECF No. 91-15 at 45; ECF No. 90-3 at 5.)

As part of the settlement, Gerdau was also to continue leasing the Industrial Portion through March 31, 2015, and was given an option to purchase the entire Henderson Property by paying off the senior debt owed to GE Capital. (ECF No. 91 -15 at 25-28; ECF No. 90-3 at 4-5.) Leany testified that "about six months" before the maturity date of a portion of the senior debt, Gerdau informally informed Leany that it would not exercise its option to obtain the Henderson Property by paying off the senior debt. (ECF No. 90-3 at 5; see also ECF No. 90 at 4.) Leany then began looking for opportunities to sell the Henderson Property to avoid default and foreclosure. (ECF No. 90-3 at 5.)

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C. Leany Found a Buyer & Gerdau Transfers its Option to SDSHG

Through an associate, Leany found a potential buyer to purchase the Henderson Property—Third Party Defendant Ahern. (ECF No. 91-14 at 21-24.) During their first meeting, Leany represented that he owned or controlled the Henderson Property and was looking for a buyer because GE Capital needed to be "paid off." (Id. at 27-28.) Leany and Ahern began negotiating the sale price for the Henderson Property. (Id. at 28.)

Leany testified as follows about his discussions with Ahern regarding the value of the Henderson Property:

Q. In any case, you were talking with [Ahern] about—at least in part about the value of the property, and I think you said that you took the appraisal that Gerdau had commissioned in connection with the settlement agreement, at least as a discussion point with him?

[Leany:] Yes

Q. And that appraisal showed a value of, what, about $ 16 million dollars or so?

[Leany:] Yes.

Q. Isn't it true that you, in that meeting, discussed with him the possibility of you getting him a property worth $16 million for about $5 million less if he would work with you? Isn't that what happened?

[Leany:] Well, he knew full well that he was getting a good value for the property.

Q. And you insisted that he work with you and permit you to personally receive what would otherwise be equity that would have gone to Gerdau? Isn't that what happened?

[Leany:] Insisted, no.

Q. You did suggest that?

[Leany:] Absolutely.

(ECF No. 89-1 at 213) (emphasis added). Leany ultimately suggested a purchase price of $9.75 million. (ECF No. 91-14 at 8 (Ahern Depo. at 28).) Ahern avers that "[f]rom the beginning" Leany told him that the Five Acres was not part of the $9.75 million acquisition—that it was only included in the transaction to properly clear titles because the bank's lien was on both parcels—and Leany would retain it. (ECF No. 91 at 3, 7; 91-14 at11-13 (Ahern Depo. at 41-42, 48).) Ahern agreed to the $9.75 million purchase price, which was later reduced to $9.7 million. (ECF No. 91-14 at 10-11 (Ahern Depo. at 35-36, 38-40); see also ECF No. 91-16 at 8 (Perkins Depo. at 22).)

In November or December 2014, Leany and Ahern entered into a "non-binding" letter of understanding ("LOU") in furtherance of Ahern's potential purchase of the property. (ECF No. 91-3; ECF No. 91-14 at 16-17 (Ahern Depo. at 58, 62-63); ECF No. 91-15 at 211.) The LOU documents an understanding consistent with Ahern's statements. (See ECF No. 91-3 at 2-3.) Particularly, the LOU provides:

Buyer [Ahern/DFA] acknowledges that the adjacent parcel to the west of the acquired property [,178-14-602-006,] known as APN 178-14-602-005 is currently encumbered under the same GE Capital notes as the acquired property but is not part of the property being acquired by Buyer.

Immediately following the close of escrow for APN 178-14-602-005 [sic] will be transferred to an LLC yet to be formed by Todd Leany for the express purpose of owning APN 178-14-602-005.⁴

(ECF No. 91-3.) At the time Ahern and Leany entered the LOU, SDSHG had no interest in the Henderson Property, and Leany understood Gerdau to be "the lien-right holder" of the Henderson Property. (ECF No. 91-15 at 210-12.) As of January 2015, Gerdau "had expressed, at most, lukewarm interest in retaining an equity interest or equity position in the Henderson [P]roperty." (ECF No. 91-15 at 211.)

On March 9, 2015, Perkins on behalf of SDSHG informed Leany that SDSHG was attempting to acquire Gerdau's interest in the Henderson Property. (ECF No. 91-15 at 211-12.) Perkins testified that Leany mentioned, during a call from Perkins, that "Gerdau had waived [its] rights to the [Henderson Property,]" but Perkins represented such waiver had not occurred. (Id. at 213-14, 217.) Perkins testified that at some point during the conversation, Leany disclosed that he had brokered a deal to sell the Henderson Property to Ahern or Ahern's company Xtreme Manufacturing—replaced in the PSA by DFA, whereby Leany would also

///receive the Five Acres as his compensation for putting the deal together. (ECF No. 96-1 at 14.) Leany did not disclose the specific details of the LOU to Perkins. Perkins additionally testified that he told Leany "in no uncertain terms" that such a deal regarding the Five Acres would not be honored. (Id.) In any event, Perkins had called Leany to let him know not to proceed with the sale of the Henderson Property to Ahern/DFA because SDSHG was acquiring Gerdau's rights and SDSHG intended to purchase the Henderson Property. (ECF No. 91-15 at 217; see also ECF No. 96-1 at 14.)

Later in March 2015, Gerdau assigned its interest in the Henderson Property to SDSHG. (91-13 at 2; 91-15 at 221-23.) While SDSHG had intended to hold the Henderson Property for an indefinite period, in early April 2015 Perkins, on behalf of SDSHG, contacted Leany to "revive the Ahern deal." (ECF No. 91-16 at 8 (Perkins Depo. at 21-22).) This was after local brokers represented to SDSHG that the Henderson Property was worth less than the 15 to 16 million it thought the property was worth and was "more like 10 million, 11 million, $12 million in value." (Id.) In April or May 2015, Leany ultimately reported to SDSHG that Ahern would only pay $9.7 million for the Henderson Property. (Id. at 8-9 (see Perkins Depo. at 23 & 25).) It is uncontested that at no point after the deal was "revive[d]" did the SDSHG Parties speak with Ahern/DFA or otherwise relay to Ahern/DFA that Leany was not to receive the Five Acres.

A. Closing on the Henderson Property

During closing on the Henderson Property, an "Agreement of Purchase and Sale and Joint Escrow Instructions" ("PSA"—effective as of March 31, 2015, but signed on April 7, 2015—was provided to the title company. (ECF No. 91-4; ECF No. 91-13 at 3.) The PSA created confusion for the title agent leading the...