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Inc. v. Southern Highlands Dev. Corp.

United States District Court, D. Nevada

August 5, 2014

EAGLE SPE NV 1, INC., Plaintiff,
v.
SOUTHERN HIGHLANDS DEVELOPMENT CORPORATION, et al., Defendants

For Eagle SPE NV 1 Inc, Joseph G. Went, Nicole E. Lovelock, Holland & Hart LLP, Las Vegas, NV; Jeremy J. Nork, Holland & Hart LLP, Reno, NV.

For Southern Highlands Development Corp, Olympia Group LLC, Olympia Land Corporation, Garry Goett, Guy Inzalaco, Goett Family Trust Dated September 4, 1987, as amended and restated, Inzalaco Family Trust Dated November 7, 1997, as amended, Defendants: J. Randall Jones, Harrison, Kemp & Jones, LLP, Las Vegas, NV; Mark M. Jones, Harrison, Kemp, Jones & Coulthard, LLP, Las Vegas, NV; Mona Kaveh, Spencer H. Gunnerson, Kemp, Jones & Coulthard, LLP, Las Vegas, NV.

Page 982

ORDER (Defs.' Motion to Dismiss -- dkt. no. 15; Defs.' Motion for Hearing -- dkt. no. 20.)

MIRANDA M. DU, UNITED STATES DISTRICT JUDGE.

I. SUMMARY

This case involves the application of a statutory provision codified on June 10, 2011, at NRS § 40.459(1)(c), which places

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additional limitations upon the right of a successor-creditor to recover on a deficiency. Plaintiff and its parent company, successor-creditors by assignments, have several similar cases pending in this district. ( See dkt. no. 65. ) Indeed, this case is strikingly similar to the facts of Eagle SPE NV I, Inc. v. Kiley Ranch Communities, et al., No. 3:12-cv-245-RCJ-WGC, 5 F.Supp.3d 1238, where Plaintiff Eagle SPE NV I, Inc. (" Eagle" ) raised the same arguments against defendant Kiley Ranch Communities. In construing NRS § 40.459(1)(c), the Court is bound by the Nevada Supreme Court's decision in Sandpointe Apartments, LLC v. Eighth Judicial Dist. Ct., 313 P.3d 849 (Nev. 2013), and guided by decisions by other courts in this district.

Before the Court is Defendants' Motion to Dismiss First Amended Complaint (" Motion" ), which raises the interpretation and application of NRS § 40.459(1)(c).[1] (Dkt. no. 15.) The Court has also considered Plaintiff Eagle's response (dkt. no. 17), Defendants' reply (dkt. no. 21) and the parties' supplemental briefs (dkt. nos. 46, 48, 51, 53, 58). As the Court finds that the Motion is appropriate for disposition without oral argument under Local Rule 78-2, Defendants' Motion for Hearing (dkt. no. 20) is denied. Additionally, for the reasons discussed below, Defendants' Motion to Dismiss is granted.

II. BACKGROUND

A. Factual Background

This case arises out of a default on a line of credit. The facts as alleged in the Complaint are simple and are recited below.

On July 30, 2007, Southern Highland Development Corporation, Olympia Group, L.L.C., and Olympia Land Corporation (collectively " Borrowers" ) executed a Revolving Line of Credit Promissory Note (" Note" ) Secured by a Deed of Trust to Colonial Bank, N.A.,[2] in the original principal amount of $25,000,000.00 (the " Note" ). The Note was secured by a Deed of Trust and Security Agreement and Fixture Filing with Assignment of Rents dated July 30, 2007, and recorded August 15, 2007 (the " Deed of Trust" ), encumbering certain real property located in Clark County, Nevada (the " Property" ). The same day, Garry Goett and Guy Inzalaco (" Guarantors" ), in their individual capacities and in their positions as trustees of their respective trusts, guaranteed the payment under the Note. The Note was amended thrice thereafter, in December 2007, September 2008, and December 2008.

On August 14, 2009, Colonial Bank was closed by the State Banking Department of the State of the Alabama, and the Federal Deposit Insurance Corporation (" FDIC" ) was named receiver. On the same day, the FDIC assigned all its rights under the Note, Deed of Trust, and accompanying loan documents to Branch Banking and Trust Company (" BB& T" ) for $10.00 and other good and valuable consideration.

In November 2009, Borrowers defaulted on the Note. In August 2010, BB& T

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made a written demand for Borrowers and Guarantors to pay the $24,962,325.00 balance, but they refused payment. As a result, on March 16, 2011, BB& T recorded a Notice of Default and Election to Sell (" Notice of Default" ) to initiate foreclosure proceedings. On October 21, 2011, First American Title Insurance Company, as Trustee under the Deed of Trust, recorded a Notice of Trustee's Sale (" Notice of Trustee's Sale" ). On November 8, 2011, BB& T assigned all its rights under the Note, Deed of Trust, and accompanying loan documents to Plaintiff Eagle, BB& T's wholly owned subsidiary, for $10.00 and other good and valuable consideration.

On November 15, 2011, the Property was sold for $5,340,001.00 to AWH Ventures, Inc. As of that date, the total amount of indebtedness was $25,257,732.36,[3] and the fair market value of the property was $6,630,000.00. Accordingly, there remained an $18,627,732.36 deficiency calculated by subtracting the total amount of indebtedness from the fair market value, which was lower than the actual price for which the Property sold. On November 17, 2011, Eagle made a written demand for Borrowers and Guarantors to pay the $18,627,732.36 deficiency. However, Borrowers and Guarantors failed to pay. This lawsuit followed.

B. Procedural Background

The issues presented in Defendants' Motion have evolved over the course of the last two years as the scope and application of NRS ยง 40.459(1)(c) has been litigated. Defendants moved to dismiss Plaintiff's Complaint in June 2012. While the fully briefed motion was pending, Defendants informed the Court that there were pending cases before the Nevada Supreme Court presenting identical issues. After considering the parties' briefs ...


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