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Branch Banking & Trust Co. v. Regena Homes, LLC

United States District Court, District of Nevada

February 18, 2015

BRANCH BANKING AND TRUST COMPANY, Plaintiff,
v.
REGENA HOMES, LLC, et al., Defendants.

ORDER

ANDREW P. GORDON, UNITED DISTRICT JUDGE

The parties dispute whether the defendants are entitled to a jury trial on the amount of the deficiency following a trustee’s sale of property that secured payment on a promissory note. Based on the Nevada statutory scheme and the Seventh Amendment, I conclude defendants are entitled to a jury trial on the amount of the debt owed and the price paid at the trustee’s sale, but defendants are not entitled to a jury trial on the fair market value of the property at the time of the trustee’s sale.

I. Background

The predecessor to plaintiff Branch Banking and Trust Company (“BBT”) loaned money to the defendants as evidenced by a promissory note, with the indebtedness being secured by a deed of trust encumbering real property. (Dkt. #1 at 3.) The loan was personally guaranteed. (Id. at 3-4.) The borrowers defaulted, leading BBT to sell the property through a trustee’s sale under the deed of trust. (Id. at 5-6.) BBT then brought suit in this court, asserting claims for breach of the guaranties and breach of the covenant of good faith and fair dealing, and for a deficiency judgment under Nevada Revised Statutes § 40.451, et seq. (Id. at 7.)

Judge Jones granted summary judgment on defendants’ liability for breach of the guaranties and breach of the covenant of good faith and fair dealing, leaving only a determination of the deficiency as the remaining issue to be resolved. (Dkt. #110.) The case thereafter was transferred to me. (Dkt. #129.) The parties now dispute whether the defendants are entitled to a jury trial at the deficiency hearing. (Dkt. #127, #130.)

II. Discussion

The parties raise two main issues: (1) whether defendants have a right to a jury trial under the Nevada statutory scheme governing deficiency judgments and (2) if not, whether the Seventh Amendment of the United States Constitution nevertheless requires a jury trial when the action is brought in federal court.

A. Nevada Law

BBT argues that by the statute’s plain language, the Nevada Legislature intended the court to make the deficiency findings and enter the deficiency judgment. BBT also contends the statute did not contemplate juries being involved because the hearing can be held in as little as fifteen days. BBT notes that the statute refers to a jury elsewhere, thus demonstrating the Legislature was distinguishing between the court and a jury. Defendants respond that although the statute mentions the “court” holding a hearing, the statute does not specify whether a judge or a jury is the trier of fact. Additionally, they argue case law often assigns to the jury the question of property’s fair market value.

The Supreme Court of Nevada has not addressed whether a judge or jury determines a deficiency under Nevada Revised Statutes § 40.451, et seq. I look to Nevada rules of statutory construction to determine the meaning of a Nevada statute. In re First T.D. & Inv., Inc., 253 F.3d 520, 527 (9th Cir. 2001). Under Nevada law, a court should construe a statute to give effect to the legislature’s intent. Richardson Constr., Inc. v. Clark Cnty. Sch. Dist., 156 P.3d 21, 23 (Nev. 2007). If the statute’s plain language is unambiguous, that language controls. Id. If the statute’s language is ambiguous, the Court “must examine the statute in the context of the entire statutory scheme, reason, and public policy to effect a construction that reflects the Legislature’s intent.” Id.

Nevada statutorily provides that there 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.” Nev. Rev. Stat. § 40.430(1). “The purpose behind the one-action rule in Nevada is to prevent harassment of debtors by creditors attempting double recovery by seeking a full money judgment against the debtor and by seeking to recover the real property securing the debt.” McDonald v. D.P. Alexander & Las Vegas Boulevard, LLC, 123 P.3d 748, 751 (Nev. 2005). The rule thus requires a creditor to first exhaust the security for the debt or legally forfeit its security interest in the collateral. Id.; Bonicamp v. Vazquez, 91 P.3d 584, 586 (Nev. 2004).

Nevada requires the one action “be in accordance with the provision of NRS 40.430 to 40.459, inclusive.” Nev. Rev. Stat. § 40.430(1). Pursuant to § 40.455(1), the creditor must apply for a deficiency judgment within six months of the foreclosure or trustee’s sale. The court must hold a hearing on the creditor’s application for a deficiency judgment, at which the court takes evidence from the parties concerning the property’s fair market value. Id. § 40.457(1). “[A]fter the required hearing, the court shall award a deficiency judgment to the judgment creditor or the beneficiary of the deed of trust if it appears from the sheriff’s return or the recital of consideration in the trustee’s deed that there is a deficiency of the proceeds of the sale and a balance remaining due. . . .” Id. § 40.455(1); see also Id. § 40.459(1) (providing that following the hearing, “the court shall award a money judgment against the debtor, guarantor or surety who is personally liable for the debt.”). Section 40.459 directs “[t]he court” to “render judgment” in the amount of the difference between (1) the amount of the secured indebtedness and (2) the greater of (a) the property’s fair market value at the time of the sale or (b) the actual sale price.[1] Id.

By the statute’s plain language, the court holds a hearing and renders a deficiency judgment. There is no reference to a jury, a trial, or a verdict. See e.g., Nev. Rev. Stat., Ch. 6 (referring to “trial jurors”); id. § 16.170 (discussing a verdict by a jury and referring separately to the “court”); id. § 40.310 (directing that in summary proceedings, issues of fact may be “tried by a jury”). Every reported case involving a deficiency judgment under the statutory scheme has been rendered by a judge, not a jury. See, e.g., Unruh v. Streight, 615 P.2d 247, 248 (Nev. 1980); Tahoe Highlander v. Westside Fed. Sav. & Loan Ass’n, 588 P.2d 1022, 1024 (Nev. 1979).

Defendants do not cite a deficiency case where a jury made the deficiency determination. Instead, they rely on cases where juries have determined the fair market value of property in other contexts. See Nev. Power Co. v. 3 Kids, LLC, 302 P.3d 1155 (Nev. 2013) (en banc) (eminent domain); McCarran Int’l Airport v. Sisolak, 137 P.3d 1110 (Nev. 2006) (en banc) (regulatory taking); Yount v. Bliss Entm’t, LLC, No. 57023, 2012 WL 6195212 (Nev. Dec. 10, 2012) (breach of contract). None of these cases involves a deficiency judgment under Chapter 40 following a foreclosure or trustee’s sale. ...


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