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Wells Fargo Bank, N.A. v. Kaveh

United States District Court, D. Nevada

March 31, 2017

WELLS FARGO BANK, N.A., Plaintiff,
v.
ALIREZA KAVEH, et al., Defendants.

          ORDER

          Gloria M Navarro, Chief Judge

         This matter involves Wells Fargo Bank, N.A.'s (“Wells Fargo's”) post-foreclosure deficiency action against Alireza Kaveh, et al. (“Defendants”). (See Compl, ECF No. 1). On April 8, 2016, the Court granted Wells Fargo's Partial Motion for Summary Judgment and, in accordance with Nevada law, set a hearing to determine the fair market value of the property at the time of the foreclosure sale. (ECF No. 69).

         Beginning on September 19, 2016, the Court heard representations from the parties and their respective expert witnesses on this issue. (ECF Nos. 87, 89). At the conclusion of the hearing, the Court ordered that both parties submit closing briefs to the Court. Upon review of all relevant evidence in the record, [1] the Court now finds that the fair market value of the property at the time of the foreclosure sale was $4, 020, 000.[2]

         I. BACKGROUND

         This case arises from a guaranty obligation the Defendants entered into with Wells Fargo. On March 16, 2009, Craig 95, LLC (“Craig 95”) and Wells Fargo entered into a loan agreement (the “Loan”) in the principal amount of $7, 527, 000. (Austin Decl. ¶ 7, ECF No. 57). The Loan was secured by a plot of partially-developed commercial real property located in Clark County, Nevada, commonly known as the Craig Marketplace (the “Property”). (Compl. ¶ 17). On March 16, 2009, Defendants agreed to guaranty the Loan. (Repayment and Completion Guaranty, Ex. 4 to Austin Decl., ECF No. 57). The Loan required the Defendants or Craig 95 to satisfy its repayment terms in full by the maturity date, March 1, 2011. (Austin Decl. ¶ 17). In the Guaranty, the Defendants waived their rights under Nevada's One Action Rule, thereby allowing Wells Fargo to sue the Defendants before foreclosing on the Property. (Repayment and Completion Guaranty § 6, Ex. 4 to Austin Decl.).

         The Defendants failed to satisfy the indebtedness by the maturity date. (Austin Decl. ¶ 19). Wells Fargo filed its Complaint against the Defendants on August 16, 2013, asserting multiple claims of breach of guarantee. (Compl. pp. 9-12, ECF No. 1). On or about March 27, 2015, the Property was sold at a trustee's sale for $3, 550, 000.00. (Austin Decl. ¶ 31). However, Wells Fargo claimed that this amount failed to satisfy the full indebtedness of $10, 660, 838.65 that was owed by Defendants as of the date of the trustee's sale. (Pl.'s MSJ 2:12-15, ECF No. 56).

         On April 8, 2016, the Court granted Wells Fargo's Partial Motion for Summary Judgment. In this Order, the Court determined that: (1) Wells Fargo sufficiently applied for a deficiency judgment; (2) the Defendants are jointly and severally liable for the debt owed to Wells Fargo; and (3) any interest on a deficiency judgment would accrue at 9.5%. Pursuant to N.R.S. 40.457(1), the Court held a hearing to determine the fair market value of the property for purposes of calculating the deficiency judgment.

         II. LEGAL STANDARD

         Nevada law defines fair market value “as the price which a purchaser, willing but not obliged to buy, would pay an owner willing but not obliged to sell, taking into consideration all the uses to which the property is adapted and might in reason be applied. Unruh v. Streight, 615 P.2d 247, 249 (Nev. 1980). In the context of a foreclosure sale, however, the sale price is not necessarily an indication of a property's fair market value. See Halfon v. Title Ins. & Trust Co., 634 P.2d 660, 661 (Nev. 1981). In those cases, fair market value is determined by the court. Branch Banking & Trust Co. v. Smoke Ranch Dev., LLC, 92 F.Supp.3d 998, 1001 (D. Nev. 2015).

         Nevada Revised Statute § 40.457 governs the procedure for determining the fair market value. It states that “before awarding a deficiency judgment . . . the court shall hold a hearing and shall take evidence presented by either party concerning the fair market value of the property sold as of the date of foreclosure sale or trustee's sale.” Nev. Rev. Stat. § 40.457(1). An evidentiary hearing is mandatory. Branch Banking & Trust Co. v. Pebble Creek Plaza, LLC, 46 F.Supp.3d 1061, 1076 (D. Nev. 2014) (“In no unclear terms, NRS § 40.457(1) requires the Court to hold a hearing and consider all relevant evidence in determining the fair market value of the property.”).

         At the hearing, the court may “consider all relevant evidence in determining the value of the property.” Unruh, 615 P.2d at 249; Tahoe Highlander v. Westside Fed. Sav., 588 P.2d 1022, 1024 (Nev. 1979). Additionally, “[u]pon application of any party made at least 10 days before the date set for the hearing the court shall, or upon its own motion the court may, appoint an appraiser to appraise the property sold as of the date of the foreclosure sale or trustee's sale.” Nev. Rev. Stat. § 40.457(2). To support a calculation of fair market value, a party must provide evidence “which a reasonable mind might accept as adequate to support [its] conclusion.” State Emp't Sec. Dep't v. Hilton Hotel Corp., 729 P.2d 497, 498 (Nev. 1986).

         III. DISCUSSION

         In support of their respective valuations, each party submitted appraisal reports created by expert witnesses. Wells Fargo identified Petra Latch, MAI, as its expert valuation witness. Ms. Latch prepared both a self-contained appraisal report (the “Latch Appraisal”) and a rebuttal report (the “Latch Rebuttal”). According to Ms. Latch, the relevant fair market value of the Property at the time of the foreclosure sale was $4, 020, 000.00. (See Ex. 1, Latch Appraisal p. 145)

         Defendants identified Charles Jack, MAI, as their expert valuation witness. Mr. Jack also prepared an appraisal report (the “Jack Appraisal”). According to Mr. Jack, the relevant fair market value at the time of the foreclosure sale was $8, 450, 000.00. (See Ex. 100, Jack Appraisal p. ...


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