Branch Banking v. Windhaven & Tollway, LLC , 2015 NV 20 ( 2015 )

131 Nev., Advance Opinion 2.0
IN THE SUPREME COURT OF THE STATE OF NEVADA
BRANCH BANKING AND TRUST No. 59638
COMPANY, A NORTH CAROLINA
BANKING CORPORATION,
Appellant,
vs. FILED
WINDHAVEN & TOLLWAY, LLC, A APR 30 2015
NEVADA LIMITED LIABILITY
COMPANY; STANLEY H.
WASSERKRUG, AN INDIVIDUAL;
SUSAN S. WASSERKRUG, AN
INDIVIDUAL; STANLEY HOWARD
WASSERKRUG AND SUSAN
SCHWARTZ WASSERKRUG, AS
TRUSTEES OF THE WASSERKRUG
FAMILY TRUST DATED NOVEMBER
13, 2003; KEITH K. LYON, AN
INDIVIDUAL; KEITH K. LYON, AS
TRUSTEE OF THE KEITH K. LYON
LIVING TRUST, DATED OCTOBER 29,
2003; STACY M. RUSH, AN
INDIVIDUAL; ADRIENNE J. RUSH, AN
INDIVIDUAL; STACY M. RUSH AND
ADRIENNE J. RUSH, AS TRUSTEES
OF THE STACY AND ADRIENNE
RUSH FAMILY TRUST DATED
MARCH 22, 1993; THOMAS B.
ACEVEDO, AN INDIVIDUAL; AND
GREENSTREET PROPERTIES, LLC, A
NEVADA LIMITED LIABILITY
COMPANY,
Respondents.
BRANCH BANKING AND TRUST No. 60527
COMPANY,
Appellant,
vs.
WINDHAVEN & TOLLWAY, LLC, A
NEVADA LIMITED LIABILITY
COMPANY; STANLEY H.
1/2-1 CArrreekLei -fer p.d21;-sher-5,
WASSERKRUG, AN INDIVIDUAL;
SUSAN S. WASSERKRUG, AN
INDIVIDUAL; STANLEY HOWARD
WASSERKRUG AND SUSAN
SCHWARTZ WASSERKRUG, AS
TRUSTEES OF THE WASSERKRUG
FAMILY TRUST DATED NOVEMBER
13, 2003; KEITH K. LYON, AN
INDIVIDUAL; KEITH K. LYON, AS
TRUSTEE OF THE KEITH K. LYON
LIVING TRUST, DATED OCTOBER 29,
2003, A TRUST; STACY M. RUSH, AN
INDIVIDUAL; ADRIENNE J. RUSH, AN
INDIVIDUAL; STACY M. RUSH AND
ADRIENNE J. RUSH, AS TRUSTEES
OF THE STACY AND ADRIENNE
RUSH FAMILY TRUST DATED
MARCH 22, 1993; THOMAS B.
ACEVEDO, AN INDIVIDUAL; AND
GREENSTREET PROPERTIES, LLC, A
NEVADA LIMITED LIABILITY
COMPANY,
Respondents.
Consolidated appeals from a district court summary judgment
in a deficiency action and from a post-judgment district court order
awarding attorney fees and costs. Eighth Judicial District Court, Clark
County; Linda Marie Bell, Judge.
Reversed and remanded.
Holland & Hart, LLP, and Frank Z. LaForge and Jeremy J. Nork, Reno,
for Appellant.
Bogatz Law Group and I. Scott Bogatz, Charles M. Vlasic, III, and
YanXiong Li, Las Vegas,
for Respondents Windhaven & Tollway, LLC; Stanley H. Wasserkrug;
Susan S. Wasserkrug; Keith K. Lyon; Stacy M. Rush; Adrienne J. Rush;
and Greenstreet Properties, LLC.
2
Law Offices of John M. Netzorg and John M. Netzorg, Las Vegas,
for Respondent Thomas B. Acevedo.
O'Mara Law Firm, P.C., and David C. O'Mara, Reno, for Amicus Curiae
Nevada Bankers Association.
BEFORE THE COURT EN BANC.
OPINION
By the Court, HARDESTY, C.J.:
NRS 40.455(1) permits a creditor or deed-of-trust beneficiary
who is unable to fully recover its investment through foreclosure to bring
an action for a deficiency judgment after "the foreclosure sale or the
trustee's sale held pursuant to NRS 107.080, respectively." In this appeal,
we determine whether NRS 40.455(1) precludes a deficiency judgment
when the beneficiary nonjudicially forecloses upon property located in
another state and the foreclosure is conducted pursuant to that state's
laws instead of NRS 107.080. We hold it does not, and we therefore
reverse the district court's order and remand for further proceedings
consistent with this opinion.
FACTS
In 2007, respondent Windhaven & Tollway, LLC, borrowed
nearly $17 million from appellant Branch Banking and Trust Company's
predecessor-in-interest.' The loan was secured by various assets,
'The predecessor-in-interest, Colonial Bank, is not a party to these
appeals.
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including real property located in Texas. The parties agreed that Nevada
law would govern the note and that the courts in Clark County, Nevada,
and Collin County, Texas, would have jurisdiction over future disputes.
The remaining respondents to this action (collectively referred to as the
Guarantors) entered into a guaranty agreement to pay any debt remaining
if Windhaven defaulted.
Windhaven defaulted on the loan, and Branch Banking sent it
and the Guarantors a demand letter requesting repayment. Four months
later, Branch Banking mailed Windhaven and the Guarantors a notice of
trustee's sale, stating that it would foreclose on the Texas property if
payment was not received. Windhaven and the Guarantors failed to remit
payment and the property was sold at a nonjudicial foreclosure sale under
Texas law for $14,080,000. At that time, the total indebtedness remaining
on the loan was $16,675,218.61. Branch Banking then sought a deficiency
judgment against Windhaven and the Guarantors under Nevada law,
asserting claims for breach of guaranty and breach of the implied covenant
of good faith and fair dealing.
Following discovery, Branch Banking moved for summary
judgment, but before the district court could rule on the motion,
Windhaven and the Guarantors also moved for summary judgment, on the
ground that Branch Banking's deficiency action was precluded by NRS
40.455(1) because that statute requires all nonjudicial trustee's sales to be
conducted pursuant to NRS 107.080. 2 The district court granted summary
judgment in favor of Windhaven and the Guarantors, finding that Branch
2The parties do not dispute that the Texas foreclosure did not
comply with NRS 107.080.
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4
Banking's nonjudicial foreclosure in Texas did not comply with the terms
of NRS 107.080 because Branch Banking did not record a notice of breach
and election to sell or provide notice in accordance with NRS 107.080. The
district court also concluded that Branch Banking could have sought a
deficiency judgment in Texas or conducted the Texas trustee's sale in a
manner that complied with NRS 107.080. 3 Further, the district court
ruled that because NRS 40.455(1) prohibited Branch Banking from
seeking a deficiency award against Windhaven, Branch Banking could not
seek a deficiency judgment against the Guarantors. Branch Banking
appeals.
DISCUSSION
The primary issue before this court is whether the district
court erred by granting summary judgment in favor of Windhaven and the
Guarantors on the basis that NRS 40.455(1) prohibits deficiency
judgments following a nonjudicial foreclosure not conducted in accordance
with NRS 107.080.
NRS 40.455(1) provides, in pertinent part, that
upon application of the judgment creditor or the
beneficiary of the deed of trust within 6 months
after the date of the foreclosure sale or the
trustee's sale held pursuant to NRS 107.080,
respectively, and after 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 sheriffs return or the
recital of consideration in the trustee's deed that
3 The
district court also denied Branch Banking's motion for
summary judgment.
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there is a deficiency of the proceeds of the sale and
a balance remaining due to the judgment creditor
or the beneficiary of the deed of trust, respectively.
Each party argues that the language of the statute clearly supports its
interpretation and that the contrary interpretation would lead to absurd
results. Primarily, they argue over the interpretation of the phrase "held
pursuant to NRS 107.080."
Statutory interpretation "is a question of law, which this court
reviews de novo." Kay v. Nunez, 122 Nev. 1100, 1104, 146 P.3d 801, 804
(2006). In interpreting a statute, this court looks to the plain language of
the statute and, if that language is clear, this court does not go beyond it.
Great Basin Water Network v. State Eng'r, 126 Nev. 187, 196, 234 P.3d
912, 918 (2010). Each section of a statute should be construed to be in
harmony with the statute as a whole. Smith v. Kisorin USA, Inc., 127
Nev. Adv. Op. No. 37, 254 P.3d 636, 639 (2011); 2A Norman J. Singer &
J.D. Shambie Singer, Statutes and Statutory Construction § 46:5 (7th ed.
2014). We presume that a statute does not modify common law unless
such intent is explicitly stated. See 3 Norman J. Singer & J.D. Shambie
Singer, Statutes and Statutory Construction § 61:1 (7th ed. 2008).
Statutes that operate in derogation of the common law should be strictly
construed, and, if there is any doubt as to the statute's meaning, the court
should interpret the statute in the way that least changes the common
law. Id. Additionally, this court reviews a district court order granting
summary judgment de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729,
121 P.3d 1026, 1029 (2005).
6
NRS 40.455(1) does not require an out-of-state trustee's sale to comply with
NRS 107.080, nor does it preclude a deficiency judgment in Nevada when a
nonjudicial foreclosure sale is conducted pursuant to the laws of another
state
The parties dispute whether NRS 40.455(1)'s phrase "trustee's
sale held pursuant to NRS 107.080" permits a deficiency judgment in
Nevada when a nonjudicial foreclosure takes place in another state and
the beneficiary of the deed of trust does not comply with the requirements
of NRS 107.080. Windhaven argues that the clause requires that a
trustee's sale comply with Nevada law before the beneficiary of the deed of
trust may seek a deficiency judgment. Branch Banking argues that the
clause is merely illustrative, that the statutory scheme does not support
Windhaven's interpretation, and that to interpret the statute to require
out-of-state nonjudicial foreclosures to comply with NRS 107.080 would
lead to absurd results. 4
Thus, we turn to whether NRS 40.455(1) precludes deficiency
judgments in Nevada when a nonjudicial foreclosure sale is conducted
pursuant to the laws of another state. In U.S. Bank National Ass'n v.
Palmilla Development Co., we recognized NRS 40.455(1) as applicable
when one is seeking a deficiency judgment. 131 Nev. Adv. Op. No. 9, 343
P.3d 603, 604 (2015). However, while we addressed whether "foreclosure
sale" encompasses a receiver sale of real property securing a loan, we did
not address the extent of the definition of "foreclosure sale" as it applies
here.
4Theparties also disagree about the effect of the lack of offsetting
commas in the phrase "trustee's sale held pursuant to NRS 107.080."
However, as this effect is not essential to our determination, we do not
address it here.
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NRS 40.455 governs applications for deficiency judgments by
"the judgment creditor or the beneficiary of the deed of trust," made within
six months "after the date of the foreclosure sale or the trustee's sale held
pursuant to NRS 107.080, respectively." Windhaven argues that
"foreclosure sale" refers only to a judicial foreclosure. With respect to the
use of that term in NRS 107.080, we agree. The word "respectively" is
used to pair words or phrases in the correct order. Merriam-Webster's
Collegiate Dictionary 1061 (11th ed. 2007) (defining respectively as "WTI
the order given"); Merriam-Webster's Dictionary of English Usage 816
(1994) (noting that respectively is commonly used to join "two words in
matching sets of things in the correct order"); Black's Law Dictionary 1311
(6th ed. 1990) (defining respective as Id elating to particular persons or
things, each to each"). The use of "respectively" in the first part of NRS
40.455(1) pairs "foreclosure sale" with "judgment creditor" and "trustee's
sale held pursuant to NRS 107.080" with "beneficiary of the deed of
trust."5 Because "foreclosure sale" is specifically tied to "judgment
creditor," the foreclosure sale described here is a judicial foreclosure. 6
5A second such pairing occurs at the end of NRS 40.455(1) when
"respectively" is used to tie together "judgment creditor" with "sheriffs
return," and "the beneficiary of the deed of trust" with "the recital of
consideration in the trustee's deed."
6 Moreover, were we to hold that "foreclosure sale" could reference all
judicial and nonjudicial foreclosures, we would negate the purpose of the
phrase "trustee's sale held pursuant to NRS 107.080," a result that would
run contrary to well-established rules of statutory construction. See In re
Parental Rights as to S.M.M.D., 128 Nev. Adv. Op. No. 2, 272 P.3d 126,
132 (2012) (stating that statutes should not be interpreted to "render[
language meaningless or superfluous" (internal quotations omitted)).
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However, we disagree that the statute limits deficiency
judgments to judicial foreclosures and trustee's sales held in accordance
with NRS 107.080. NRS 40.455(1) has no such limiting language. While
it clearly governs deficiencies arising from judicial foreclosures and those
trustee's sales that are held pursuant to NRS 107.080, it does not indicate
that it precludes deficiency judgments arising from nonjudicial foreclosure
sales held in another state. In fact, the statutory scheme contemplates
that a party may nonjudicially foreclose in another state and still bring an
action in Nevada to recover the deficiency. Specifically, NRS 40.430,
Nevada's one-action rule, creates an exception for proceedings "[t]o enforce
a mortgage or other lien upon any real or personal collateral located
outside of the State [of Nevada] which does not, except as required under
the laws of that jurisdiction, result in a personal judgment against the
debtor." NRS 40.430(6)(c).
Moreover, NRS 40.455(1) is an antideficiency statute that
"derogate [s] from the common law," and this court construes such
provisions narrowly, in favor of deficiency judgments. Key Bank of Alaska
v. Donnels, 106 Nev. 49, 53, 787 P.2d 382, 385 (1990). Common law allows
a lienholder to seek a deficiency judgment against the person(s) liable on
the lien, see, e.g., Restatement (Third) of Prop.: Mortgs. § 8.4 (1997), and
we decline to interpret NRS 40.455 in such a way that would interfere
with this common-law right, when the statute does not expressly limit
deficiency suits arising from nonjudicial foreclosures conducted pursuant
to the laws of another state. Furthermore, since the purpose of NRS
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40.455 is to create fairness for both creditors and debtors, 7 see First
Interstate Bank of Nev. v. Shields, 102 Nev. 616, 618, 730 P.2d 429, 431
(1986) ("Nevada's deficiency legislation is designed to achieve fairness to
all parties to a transaction secured in whole or in part by realty."),
interpreting NRS 40.455(1) to deny deficiency judgments to creditors who
nonjudicially foreclose on out-of-state property pursuant to another state's
law would undermine the purpose of the statute. Because NRS 40.455
does not prohibit deficiency judgment actions from being brought in
Nevada when the nonjudicial foreclosure in another state did not comply
with NRS 107.080, we conclude that the district court erred in precluding
Branch Banking from pursuing a deficiency judgment against Windhaven
and the Guarantors. 8
7Although the legislative history is silent concerning out-of-state
nonjudicial foreclosures, it reveals that the Legislature was concerned
about protecting unsuspecting debtors from creditors who sought large
deficiency judgments years after the foreclosure sale occurred. Hearing on
A.B. 493 Before the Assembly Judiciary Comm., 55th Leg. (Nev., March
13, 1969). Moreover, the Legislature enacted NRS Chapter 40's debtor
protections so that debtors would not have to undergo the timely and
expensive judicial foreclosure process. Id.
8The question of whether a court should, in such situations, apply
Nevada law or the law of the state where the foreclosure was held is a
conflict-of-laws question that will depend upon the particular facts of the
case. See Restatement (Second) of Conflict of Laws § 229 (1971); Robert A.
Brazener, Annotation, Conflict of Laws as to Application of Statute
Proscribing or Limiting Availability of Action for Deficiency After Sale of
Collateral Real Estate, 44 A.L.R. 3d 922 (1972). Here, however, the parties'
agreement allows them to litigate future disputes under either Texas or
Nevada law, and because there is no argument or evidence that the
parties acted in bad faith or to evade Texas law by filing suit in Nevada,
Nevada law may govern the deficiency judgment. See Key Bank of Alaska
v. Donnels, 106 Nev. 49, 52, 787 P.2d 382, 384 (1990) ("We have held that
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Accordingly, we reverse the district court's judgment in favor
of Windhaven and the Guarantors and remand this matter for further
proceedings consistent with this opinion. 9
Hardesty
We concur:
Parraguirre
J.
Douglas
Pickering
...continued
lilt is well settled that the expressed intention of the parties as to the
applicable law in the construction of a contract is controlling if the parties
acted in good faith and not to evade the law of the real situs of the
contract." (alteration in original) (quoting Ferdie Sievers & Lake Tahoe
Land Co. v. Diversified Mortg. Investors, 95 Nev. 811, 815, 603 P.2d 270,
273 (1979)
9 Based on our decision to reverse the district court's summary
judgment, we conclude that the district court's order awarding costs to
Windhaven and the Guarantors is premature. Accordingly, we reverse the
district court's award of costs and attorney fees.
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GIBBONS, J., with whom CHERRY and SAITTA, JJ., join, dissenting:
In my view, the critical issue on appeal—what is meant by the
phrase "trustee's sale held pursuant to NRS 107.080" in NRS 40.455(1)—is
fairly straightforward.
To address this issue, two facts warrant rehashing. First,
Branch Banking sued Windhaven for a deficiency judgment under NRS
40.451-40.463. Second, as pointed out by the district court, the parties
agreed that "Branch Banking was a beneficiary of a deed of trust, and not
a judgment creditor, as the property was sold at a trustee's sale and not
through a judicial foreclosure sale." See also Branch Banking's Complaint
("Plaintiff is the successor in interest and holder of the Note, the
beneficiary under the Deed of Trust . . . . [T]he Property was sold at a non-
judicial foreclosure sale to Plaintiff. . . in partial satisfaction of the
indebtedness secured by the Deed of Trust.").
Once competing motions for summary judgment were filed,
the district court naturally looked for what requirements Branch
Banking's deficiency judgment claim needed to satisfy under Nevada law.
This inquiry led the district court to NRS 40.455.
NRS 40.455 "governs the award of deficiency judgments."
U.S. Bank Nat'l Ass'n v. Palmilla Dev. Co., 131 Nev. Adv. Op. No. 9, 343
P.3d 603, 604 (2015). Specifically, NRS 40.455(1) states:
[U]pon application of the judgment creditor or the
beneficiary of the deed of trust within 6 months
after the date of the foreclosure sale or the
trustee's sale held pursuant to NRS 107.080,
respectively, and after 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 sheriffs return or the
recital of consideration in the trustee's deed that
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there is a deficiency of the proceeds of the sale and
a balance remaining due to the judgment creditor
or the beneficiary of the deed of trust, respectively.
(Emphasis added.) As pointed out by the majority, NRS 40.455 splits into
two categories: (1) foreclosure sale and (2) trustee's sale, as delineated by
the statute's consistent use of "respectively."
Because the parties agreed that "Branch Banking was a
beneficiary of a deed of trust, and not a judgment creditor, as the property
was sold at a trustee's sale and not through a judicial foreclosure sale," the
district court properly looked to NRS 40.455's trustee's sale requirements:
namely, what is the effect of 1VRS 40.455's language, "trustee's sale held
pursuant to NRS 107.080."
To solve this quandary, only the most basic rule of statutory
interpretation is necessary: "[When the language of a statute is plain and
unambiguous, a court should give that language its ordinary meaning and
not go beyond it." Emp'rs Ins. Co. of Nev. v. Chandler, 117 Nev. 421, 425,
23 P.3d 255, 258 (2001).
As found by the district court, I conclude that this language—
"trustee's sale held pursuant to NRS 107.080"—means that before Branch
Banking could obtain a deficiency judgment from a trustee's sale pursuant
to Nevada law, it would have to satisfy the requirements of NRS 107.080.
Branch Banking fell well short of fulfilling NRS 107.080's requirements.
Thus, Branch Banking's deficiency claim under NRS 40.451-40.463 failed
as a matter of law. Justice Elena Kagan recently stated in her dissent in
Yates v. United States that:
Resolution of the pros and cons of whether a
statute should sweep broadly or narrowly is for
Congress. If judges disagree with Congress's
choice, we are perfectly entitled to say so—in
lectures, in law review articles, and even in dicta.
2
But we are not entitled to replace the statute
Congress enacted with an alternative of our own
design.
574 U.S. , 135 S. Ct. 1074, 1101 (2015) (Kagan, J., dissenting)
(internal quotation omitted). The majority undertook its own design of
NRS 40.455. The district court interpreted the statute as written and, in
my view, did so correctly. Therefore, I respectfully dissent.
J.
Gibbons
We concur:
J.
J.
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