U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF ML-CFC COMMERCIAL MORTGAGE TRUST 2007-7 COMMERCIAL MORTGAGE PASSTHROUGH CERTIFICATES SERIES 2007-7, BY AND THROUGH MIDLAND LOAN SERVICES, AS ITS SPECIAL SERVICER, Appellant,
PALMILLA DEVELOPMENT CO., INC., A NEVADA CORPORATION; AND HAGAI RAPAPORT, AN INDIVIDUAL, Respondents
Appeal from a district court order granting summary judgment in a deficiency judgment action. Eighth Judicial District Court, Clark County; Jerome T. Tao, Judge.
Lewis Roca Rothgerber LLP and Joel D. Henriod, Daniel F. Polsenberg, and Robert M. Charles, Jr., Las Vegas, for Appellant.
Deaner, Malan, Larsen & Ciulla and Brent A. Larsen, Las Vegas; Law Offices of Thomas D. Beatty and Thomas D. Beatty, Las Vegas, for Respondents.
BEFORE HARDESTY, C.J., DOUGLAS and CHERRY, JJ.
This case presents the question of whether NRS 40.455, which governs the award of deficiency judgments, applies when a court-appointed receiver sells real property securing a loan. More specifically, the parties dispute whether MRS 40.455(1)'s six-month filing deadline bars the mortgagee's recovery of any deficiency after such a receiver's sale when the application for a deficiency judgment is made more than six months after a purchase and sale agreement is entered into and judicial approval of said agreement is sought and given. We hold that a receiver sale of real property that secures a loan is a form of judicial foreclosure, and thus, to the extent that proceeds from such a sale are deficient, MRS 40.455 applies. We further hold that the relevant triggering event for the purposes of NRS 40.455(1)'s six-month time frame, when a receiver sale of real property securing a loan is at issue, is the date of the close of escrow rather than the date a purchase and sale agreement is formed or judicially sanctioned. And because, here, the mortgagee applied for a deficiency judgment within six months from when escrow closed on the sale in question, that application was timely. We therefore reverse the district court's grant of summary judgment and remand for further proceedings consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
Respondent borrower, Palmilla Development Co., took out a loan for $20.15 million from the predecessor-in-interest of appellant U.S. Bank. The loan was secured by a deed
of trust on a development of townhomes and personally guaranteed by respondent Hagai Rapaport, Palmilla's president. U S Bank became the legal holder of the loan note and all beneficial interest under the deed of trust, following which Palmilla defaulted and Rapaport failed to fulfill his guarantor obligations. U.S. Bank then instituted the underlying action seeking to appoint a receiver in order to collect rents from, to market, and to sell the secured property.
Following the district court's approval of this request, the receiver, through a real estate marketing company, listed the subject property and, over the course of several months, obtained 31 offers to purchase the property. From these offers, the receiver identified what it believed to be the best offer and entered into a purchase and sale agreement with that third-party purchaser for $9.5 million on February 5, 2010. U.S. Bank filed a motion to approve the sale, which the district court granted on March 26, 2010. Escrow closed on June 7, 2010, when the purchaser paid the agreed upon price and obtained the deed to the property.
On November 24, 2010, U.S. Bank filed an amended complaint, which sought to recover the amount of Palmilla's indebtedness that the net proceeds of the receiver sale did not satisfy. Respondents filed a motion for summary judgment, arguing that the relief sought in the amended complaint was, in essence, an application for a deficiency judgment under NRS 40.455(1), which U.S. Bank was precluded from seeking because (1) the receiver sale was not a " foreclosure sale or trustee's sale held pursuant to NRS 107.080," and absent either of those two types of sales, NRS 40.455(1) does not permit a deficiency judgment; and (2) even if NRS 40.455(1) could be used to seek a deficiency judgment following a receiver sale of real property securing a loan, U.S. Bank failed to comply with the section's time frame for so seeking. The district court granted respondents' motion, holding that, although U.S. Bank could utilize NRS 40.455(1) to seek a deficiency judgment following a receiver sale of real property securing a loan, U.S. Bank had ...