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Naylon v. Wittrig

United States District Court, D. Nevada

May 3, 2017

DOMINIQUE NAYLON, et al., Plaintiffs,
JOHN WITTRIG, et al., Defendants.



         Before the court is Plaintiffs' motion for reconsideration to clarify and enforce settlement agreement (ECF No. 150). Defendants have filed three separate responses (ECF Nos. 155-57), to which Plaintiffs replied. ECF No. 160. Because Plaintiffs' requested relief stems from multiple conflicting interpretations of the settlement agreement at issue rather than its repudiation or complete frustration, this case does not present the "extraordinary circumstances" required to grant relief from the final order dismissing the case. And because there is no basis for this court's continued jurisdiction over the settlement agreement, Plaintiffs' only recourse is to file a new action. The court will therefore deny Plaintiffs' motion.

         I. Background

         A. The original dispute

         The instant motion relates to a case formerly before this court that settled in 2013. The case stems from a dispute between two groups of investors over priority under a deed of trust that secured their respective promissory notes. The plaintiffs in this case are some of the investors in the first promissory note: Dominique Naylon, an individual, and Daniel B. O'Dell and Linda D. Hess, as Trustees of the O'Dell Family Trust dated May 15, 1999. In the summer of 2005, Defendant John Wittrig, a mortgage broker, solicited Plaintiffs and other investors with the opportunity to make an investment loan to develop a 412.5 acre parcel of real property located in Lyon County, Nevada, and owned by Defendant Geothermal Rail Industrial Development, LLC ("GRID").

         On July 29, 2005, GRID executed a promissory note secured by deed of trust ("the First Note") in the principal sum of $450, 000 in favor of Plaintiffs and other non-party initial investors. The same day, a short form deed of trust and assignment of rents was recorded against the GRID property to secure the note. The terms of the First Note called for GRID to make monthly repayments of the loan with interest and complete repayment of the remaining balance on September 1, 2007 (i.e., the maturity date). It appears that in 2006, Plaintiffs and GRID agreed to modify this maturity date to September 1, 2008.[1] ECF No. 156 at 12.

         Nearly a year after the First Note's formation, Wittrig began soliciting other investors to make an additional loan on the GRID property. On May 26, 2006, GRID executed a promissory note ("the Second Note") in the principal sum of $700, 000 in favor of a second group of investors ("Individual Defendants").[2] Like the earlier note, the Second Note called for GRID'S monthly repayments, with the complete remaining balance being due on September 1, 2008. A second deed of trust was not recorded. Instead, in June 2006, an additional advance to deed of trust and assignment of rents was recorded to secure the Second Note as a future advance under the first deed of trust and to add the Individual Defendants as beneficiaries.

         The dispute between the two groups of investors (i.e., Plaintiffs and Individual Defendants) began in August 2008, when Individual Defendants and GRID executed a modification of both notes, extending the due dates of both loans until March 10, 2010. ECF No. 150 at 6; ECF No. 156 at 12. Plaintiffs have asserted that they never agreed to this modification and have continuously referred to the decision as "unilateral." ECF No. 150 at 6. Conversely, Defendants have maintained that more than a majority of the investors supported this decision, and thus, pursuant to Nevada's 51% rule, [3] Individual Defendants were entitled to modify the loan's terms, including its maturity date. See, e.g., ECF No. 155 at 5; ECF No. 156 at 12. This argument stems from the disputed premise that, because the Second Note was formed as a future advance under the first deed of trust that secured the First Note, the two notes merged into a single loan. See ECF No. 107 at 3; ECF No. 150-14 at 3. Under this argument, Individual Defendants would be the majority beneficial-interest holders for the combined $1, 150, 000 loan and Plaintiffs would therefore no longer have management control of their individual loan. See, e.g., ECF No. 150-7 at 10.

         The following month, Plaintiffs served GRID, the issuer of both notes, with a notice of default for failing to repay the First Note's remaining balance by the 2008 maturity date- thereby refusing to recognize the modified 2010 maturity date. However, Defendant Wittrig informed Plaintiffs that they were no longer majority interest holders of the purportedly combined loan and thus, under the 51% rule, could not declare a default. ECF No. 150-7 at 10.

         Plaintiffs subsequently filed suit against Individual Defendants, GRID, and Wittrig (collectively "Defendants") in this court in November 2008. One of the primary issues in the suit was whether the Second Note's formation not only combined both loans but also granted both groups of investors equal priority under the deed of trust, a position that Defendants had asserted. ECF No. 150-7 at 10-11; see also ECF No. 107. After the court denied Defendants summary judgment on this precise issue (ECF No. 107), the parties entered settlement negotiations.

         B. The settlement agreement

         Magistrate Judge William G. Cobb held a settlement conference with the parties on July 16, 2012, at which point the parties agreed to settle the case.[4] ECF No. 134. After the parties placed the settlement agreement's terms on the record, Judge Cobb informed the parties that he would retain jurisdiction only for the limited purpose of resolving any disputes while the parties reduced these terms to writing. ECF No. 159 at 34. He further clarified that the court would not retain jurisdiction to enforce the settlement agreement after its execution. Id. No disputes over the settlement agreement's terms were raised at the time, and the parties, pursuant to the agreement, filed a stipulation dismissing Plaintiffs' claims with prejudice (ECF Nos. 138, 147), which the court granted (ECF Nos. 139, 148).

         Under the agreement, Plaintiffs conceded that both groups of investors are entitled to equal priority under the deed of trust (ECF No. 150-10 at 7), a position that, even in light of the instant motion, remains undisputed. Additionally, Plaintiffs consented to a loan modification that Individual Defendants and GRID had agreed to several weeks before the settlement agreement's execution, which extended the loan's maturity date until December 31, 2013. ECF No. 150-10 at 6, 17-22. The parties also agreed that, "[i]n the event of default under the [First Note], as modified, [Plaintiffs] and [Individual Defendants] will be entitled to utilize any remedies available to them under the [First Note], the [Second Note], the [First Note deed of trust], and/or Nevada law ...." ECF No. 150-10 at 6.

         C. The current dispute ...

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