Petition for rehearing of this court's May 24, 2013, order granting a petition for a writ of mandamus and directing the district court to award summary judgment to petitioner in a breach of guaranty action.
Marquis Aurbach Coffing and Frank M. Flansburg, III, and Jason M. Gerber, Las Vegas; Baker & Hostetler LLP and Michael Matthias, Los Angeles, California, for Petitioner.
Sylvester & Polednak, Ltd., and Allyson R. Noto and Jeffrey R. Sylvester, Las Vegas, for Real Parties in Interest.
BEFORE THE COURT EN BANC.
Real party in interest Branch Banking and Trust Company (BB& T) has petitioned for rehearing of our earlier decision to grant a writ of mandamus in this case, based on the district court's failure to dismiss a breach of guaranty action after the property securing the underlying commercial real estate loan was sold at a trustee's sale. In that order, we concluded that BB& T was barred from recovering under the guaranty because it failed to apply for a deficiency judgment under NRS 40.455 within six months after the property's sale. On rehearing, BB& T asserts that we misapprehended the legal effect of the guarantor's waiver of certain statutory protections under NRS 40.430, otherwise known as the one-action rule. BB& T argues that the waiver effectively nullified NRS 40.455's requirements. We deny rehearing because we considered and resolved BB& T's arguments in our order granting mandamus relief, and because we are not convinced that we misread or misapplied the pertinent law.
In addition to others not party to this proceeding, petitioner Simon Lavi personally guaranteed a commercial real estate loan that BB& T eventually purchased. After the borrowers defaulted on the loan, BB& T filed a complaint seeking full recovery of the loan's balance from Lavi and the other guarantors.
While the case against the guarantors was pending, BB& T foreclosed and took ownership of the property through a credit bid at a trustee's sale. At that time, the property was worth less than what the borrowers owed BB& T under the loan.
Nearly one year later, BB& T moved for summary judgment regarding Lavi's liability for breach of the loan guaranty. In response, Lavi filed a countermotion for summary judgment, asserting that NRS 40.455 precluded BB& T from obtaining a judgment for the deficiency on the loan balance arising after the trustee's sale. In pertinent part, NRS 40.455 requires a party who is seeking a deficiency judgment to file an application for the judgment within six months after the trustee's sale. The district court determined that NRS 40.455 did not bar BB& T's action because BB& T sufficiently notified Lavi that it intended to seek a deficiency judgment. Accordingly, the district court granted BB& T's motion for summary judgment as to Lavi's liability and denied Lavi's countermotion.
Lavi then filed a petition for a writ of mandamus or a writ of prohibition in this court, challenging the district court's order. Lavi asserted that BB& T was barred from recovering a deficiency judgment because BB& T did not apply for it within six months after the trustee's sale. We agreed and issued a writ of mandamus compelling the district court to dismiss the guaranty action against Lavi. BB& T has now petitioned this court for rehearing of our decision.
Under NRAP 40(c)(2), this court may consider petitions for rehearing when " a material fact in the record or a material question of law in the case" has been overlooked or misapprehended, or when we have misapplied a controlling decision. A petition for rehearing will not be considered when it raises a point for the first time, or when it merely reargues matters previously presented to the court. NRAP 40(c)(1).
Our order granting the writ of mandamus was based on the conclusion that per NRS 40.455 and Walters v. Eighth Judicial District Court, 127 Nev.
__, 263 P.3d 231 (2011), a party seeking a deficiency judgment must file the application particularizing the reasons for the requested judgment within six months after selling the property at a trustee's sale, regardless of any purported waiver of the one-action rule. We explained that under NRS 40.495(3), Lavi was allowed to assert BB& T's failure to comply with NRS 40.455 as a defense to the breach of guaranty action. In Walters, a lender filed a summary judgment motion on a breach of guaranty claim, seeking to recover the unpaid balance on a loan, after the lender sold the real property that secured the loan at a trustee's sale. Id. at __, 263 P.3d at 232-33. There, we considered whether the lender's failure to apply for a deficiency judgment within six months after the trustee's sale entitled a guarantor, who waived the one-action rule, to partial summary judgment. Id. at __, 263 P.3d at 233. Ultimately, we concluded--without addressing the waiver issue--that the summary judgment motion in Walters sufficed as an application for a default judgment because it was written, set forth the particular grounds for the relief sought, and was filed within NRS 40.455(1)'s six-month time frame after the trustee's sale. Id. at __, 263 P.3d at 234.
In seeking rehearing of our decision, BB& T argues that we mistook the applicability of both NRS 40.495(3) and Walters to this case. According to BB& T, when Lavi waived the one-action rule, he also released BB& T from the obligation of satisfying NRS 40.455. BB& T also argues that Walters does not control here because, in that case, we expressly refused to consider whether any waiver of the one-action rule impacted NRS 40.455's applicability. BB& T's arguments are meritless because we neither misunderstood nor ignored these authorities. Nevertheless, we issue this opinion addressing BB& T's rehearing petition because our explanation may prove useful beyond the facts of this case. NRAP 36(c)(3).
Generally, " there may be but one action for the recovery of any debt, or for the enforcement of any right secured by a mortgage or other lien upon real estate. That action must be in accordance with the provisions
of NRS 40.430 to 40.459, inclusive." NRS 40.430(1). We have interpreted this statute to require an obligee, who seeks to recover a debt secured by real property, to recover on the property through foreclosure before attempting to recover from the loan's guarantor personally. See McDonald v. D.P. Alexander & Las Vegas Boulevard, L.L.C., 121 Nev. 812, 816, 123 P.3d 748, 750 (2005). If a guarantor waives the NRS 40.430 protections, the obligee may maintain an action to recover from the guarantor prior to completing the foreclosure process. See NRS 40.495(2). BB& T's interpretation that waiving the one-action rule also frees an obligee from complying with the provisions of NRS 40.455 is unreasonable. NRS 40.495(2) focuses on maintaining a separate action; nothing in the subsection implies that it also terminates the procedural requirements for that action.
Additionally, NRS 40.495(3) allows a guarantor to assert any defenses provided under NRS 40.451 to 40.4639 if an " obligee maintains an action to foreclose or otherwise enforce a mortgage or lien and the indebtedness or obligations secured thereby." In our order granting Lavi's petition, the dissent suggested that allowing a guarantor to assert a defense against a breach of guaranty claim based on the obligee's foreclosure action effectively reads " separately and independently" out of NRS 40.495(2). The dissent's concerns are reasonable, but unjustified. If an obligee seeks a deficiency judgment from a guarantor in an action separate from a foreclosure action, the two actions are undeniably and inextricably connected because the foreclosure sale necessarily impacts the deficiency judgment award. See Carrillo v. Valley Bank of Nev., 103 Nev. 157, 159, 734 P.2d 724, 725 (1987) (a party who buys a property at foreclosure may seek a deficiency judgment only to the extent that the debts exceed the property's fair market value). If we disregard this fact, a party could possibly receive an excess recovery. See id. Also, the Legislature has shown a strong inclination towards protecting an obligor's rights under the antideficiency statutes. See Lowe Enters. Residential Partners, L.P. v. Eighth Judicial Dist. Court, 118 Nev. 92, 103-04, 40 P.3d 405, 412-13 (2002). Allowing a guarantor to assert a defense to a deficiency action is consistent with both legislative intent and NRS 40.495(2) because it preserves the obligor's rights under the antideficiency statutes and it does not prevent an obligee from maintaining that action separately from a foreclosure action. Further, this interpretation can be fairly harmonized with NRS 40.495's 2011 amendment adding subsection 4. The subsection does not deny applicability of the deficiency judgment defenses or the six-month deadline; rather, it governs the amount due from the guarantor and implements a fair market value determination regardless of whether the property has been foreclosed. See 2011 Nev. Stat., ch. 311, § 5.5, at 1743-44.
When Lavi waived the one-rule action, BB& T was allowed to bring an action against him prior to completing the foreclosure on the secured property, but that waiver did not terminate the procedural requirements for asserting that separate action. Although BB& T commenced an action on the guaranty first under NRS 40.495(2), once it foreclosed on the property and sought a deficiency judgment, it was required to satisfy NRS 40.455. Thus, Walters' holding that timely application for a deficiency judgment must be made under NRS 40.455 applies here as well. While the guaranty action is being maintained separately from any other action to recover the debt, the defenses against a deficiency judgment nonetheless apply after the property is sold at foreclosure. So, under NRS 40.495(3), Lavi was entitled to raise any defenses to BB& T's attempt to recover a deficiency judgment.
BB& T also asserts that even if Walters applies, its complaint met the same standards for being considered a deficiency judgment application as did the pre-foreclosure counterclaim in Walters, which the district court in that case concluded sufficed as a deficiency judgment application under NRS 40.455. But, in Walters, this court affirmed on the ground that the summary judgment motion met the deadline because it was filed within six months after the foreclosure sale, thus we did not consider the counterclaim argument. See id. Here, we have determined
that BB& T's complaint could not have met NRS 40.455's requirements because BB& T filed it before the trustee's sale. A right to deficiency judgment does not vest until the secured property is sold. Sandpointe Apartments v. Eighth Judicial Dist. Court, 129 Nev.
__, __, 313 P.3d 849, 856 (2013). Therefore, a complaint filed before the foreclosure sale cannot sufficiently put an obligor on notice that the deed of trust beneficiary intends to seek further ...