United States District Court, D. Nevada
LARRY R. HICKS, District Judge.
This is an order entering a prospective deficiency judgment in favor of plaintiff FH Partners, LLC ("FH Partners") and against substituted defendant Mark D. Rich ("Rich"), the identified successor trustee of the Lynn M. Leany Family Trust, in the amount of five hundred ninety-eight thousand four hundred sixty-four dollars and twenty-two cents ($598, 464.22) plus interest at the contracted default rate of prime plus five and one-half percent.
I. Facts and Background
In December 2007, 600 N. Airport Road, LLC ("Borrower"), entered into a $2, 400, 000 business loan agreement with Silver State Bank ("Silver State") for the purchase of real property in Cedar City, Utah. Defendants Lynn M. Leany, individually and as trustee of the Lynn M. Leany Family Trust; Todd L. Leany, individually and as trustee of the Todd Lee Leany Irrevocable Trust; and Tamra Mae L. Hunt, individually and as trustee of the Tamra Mae L. Hunt Irrevocable Trust, (collectively "defendants") signed commercial guaranty contracts for the business loan agreement. Pursuant to the business loan agreement, the original loan maturity date was December 13, 2010. Doc. #26, Exhibit 2.
In September 2008, Silver State was placed under the receivership of the Federal Deposit Insurance Corporation ("FDIC"). In March 2009, the FDIC assigned all rights, title and interest in the business loan agreement and accompanying commercial guarantees to FH Partners. Doc. #26, Exhibit 1.
On May 17, 2011, after the loan had matured, FH Partners filed a complaint against defendants for breach of the guaranty agreements. Doc. #1. Thereafter, FH Partners filed a motion for summary judgment seeking a deficiency judgment of $1, 948, 803.80, representing remaining principal ($1, 907, 138.65), interest ($28, 486.54), and other associated costs ($13, 178.61). Doc. #26. In response, defendants filed a cross-motion for summary judgment arguing that the commercial guaranties were null and void. Doc. #37.
On May 14, 2012, the court heard argument on the parties' motions. Doc. #54. After the hearing, Borrower filed a petition for bankruptcy. In the bankruptcy action, case no. 12-14766-LBR, Borrower sought to auction off the underlying real property. In response, FH Partners, who previously had not taken any action against the secured property, filed a motion with the bankruptcy court to enforce its lien against the property. As a result of FH Partner's filings in the bankruptcy action, defendants filed a supplemental opposition to FH Partner's motion for summary judgment. Doc. #55.
On March 19, 2013, the court issued an order granting in-part and denying in-part FH Partners' motion for summary judgment and denying defendants' cross-motion for summary judgment. Doc. #58. In that order, the court held that the defendants' commercial guarantees were valid and enforceable. Id. p. 5-6. The court further held that defendants breached their commercial guarantees and entered a finding of liability for a deficiency judgment against the defendants. However, as a determination of the actual amount of the deficiency judgment could not be made without first establishing the fair market value of the property, the court requested additional briefing on that issue. Id. p.6-7.
Subsequently, the parties filed their briefs regarding the fair market value of the property. See Doc. ##60, 61, 64. During the parties' briefing, FH Partners entered into stipulations to dismiss both defendant Todd L. Leany, individually and as trustee of the Todd Lee Leany Irrevocable Trust; and defendant Tamra Mae L. Hunt, individually and as trustee of the Tamra Mae L. Hunt Irrevocable Trust, from this action with prejudice. See Doc. ##65, 67. Also during this time, defendant Lynn Leany died. See Doc. #66. Defendant Rich, the successor trustee of the Lynn M. Leany Family Trust, filed a motion for substitution (Doc. #70) which was granted by the court (Doc. #71).
This valuation order and prospective deficiency judgment follows this extensive history. As FH Partners has already successfully established liability, all that remains is for this court to determine the fair market value of the underlying property and, from that, determine the amount of the deficiency judgment to be entered in favor of FH Partners and against remaining defendant Rich, as the successor trustee of the Lynn M. Leany Family Trust.
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 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 the sale, with interest from the date of the sale." NRS 40.459(1)(a).
This is a fair market valuation determination pursuant to NRS 40.457. The issues before the court are (1) what was the fair market value of the underlying property at the date of the sale, and (2) what amount should be entered as a ...