You're viewing Docket Item 36 from the case Bank of the West v. Monument Capital, Inc. et al. View the full docket and case details.

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Case 2:09-cv-01889-ECR-PAL Document 36 Filed 12/30/10 Page 1 of 4

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UN ITED STATES DI STRICTI

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Plaintiff,

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banking corporation .

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MONUMENT CAPITAL, INC., a Nevada )
corporation; THOMAS H. MCCORMICK, )
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an individual; CRISTEN J.
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MCCORMICK, an individual; THE '
MCCORMICK FAMILY TRUST, a trust
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situated in the State of Nevada;
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and DOES I-X, inclusive,
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Defendants.

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MINUTES OF THE COURT

DATE : December 29, 2010

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PRESENT :

EDWARD C . REED. JR .

U . S. DISTRICT JUDGE

Deputy Clerk:

COLLEEN LARSEN

Reporter:

NONE APPEARING

Counsel for Plaintiffts)

NONE APPEARING .

Counsel for Defendant ts)

NONE APPEARING

MINUTE ORDER IN CHAMBERS

Plaintiff made a loan to a third party, A storia Lone Mountain , for

which Defendants served as guarantors. The loan was secured by a Deed of
Trust , Assignment of Leases and Rents, Security Agreement and Fixture
Filing in favor of Plaintiff . The loan is in default, and on May 27 , 2010 ,
Plaintiff foreclosed on the property . Now pending are two motions for
summary judgment filed by Plaintiff (#24) and Defendants (#23)
respectively .

Defendants seek summary judgment on the grounds that Plaintiff failed

to apply for a deficiency judgment as required under Nevada law. The
deadline to amend the pleadings under the scheduling order (#20) was
February 18, 2010 . However, Plaintiff was unable to seek a deficiency
judgment by February 18, 2010, because Plaintiff could not apply for a

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Case 2:09-cv-01889-ECR-PAL Document 36 Filed 12/30/10 Page 2 of 4

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, a rkght to a hearing with respect tp the f air market value of

deficiency judgment until after the foreclosure sale, which occurred on May
27, 2010. NEv. REv. STAT. 5 40.455. Plàihtiff 'also objects to: theranti-
deficiency defense asserted by Defendants in light of exprqssf.waivers:
contairiéd ' in the ' Uuàzialttk' âgreerientb pur'porEing to waive *1 U ( à') n# 'riMht'
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Guarantpr E s), may have under the applicable law including, . .witholpt J.
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limitation
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any security npw or hereaf ter .held , f or the Obligations . '' (.Pl . ''s . Opp.. ' ... . , , .
Exhibit 5, 6, 7 %4.l(k) (#28-7,8,9).) In the event that w'e find the waiver
invalid r Plaintiff requests that we convert the proceedings into a
deficiency action, or allow Plaintiff to amend its pleadings to assert a
cause of action for a 'deficiency judgment.

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Under Nev . Rev . Stat . 5 40 .453, it is uagainst public policy for any

document relating to the sale of real property to contain any provision
whereby a mortgagor or the grantor of a deed of trust or a guarantor or
surety of the indebtedness secured thereby, waives any right secured to the
person by the laws of this state .
'' The guaranty agreements in this case 1
recite that the purpose of the loan was uto finance the construction of
certain improvements on the Real Property.'' (Id. % A.) Defendants
contend, however, that the purpose of the loan was ''to pay off the previous
loan utilized to acquire the Property and to finance thi improvement of the
Property and construction of 135 homes to be sold . Proceeds from the sale
of each home were to be used to repay the Loan.'' (Ds' Reply at 5 (#34).)
The Loan Agreement states, in relevant part r that ''the Loan is for the
purpose of financing for-sale new housing only'' and that the Borrower must
diligently market the lots and units for sale, and to furnish Plaintiff

with reports on a1l sales activities on the property.

The broad language urelating to the sale of real property'' is

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t d to be used in paying of f the loan . The loan , theref ore, is not

satisfied in the case of the loan here and the waiver is invalid . NEv. REv.
STAT . 5 4 0 . 4 53 . Whether the loan was made to pay of f the previous loan
made to acquire the prbperty is not apparent f rom the record, but it is '
apparent that the loan was made f or the purpose of constructing real estate
units to be sold as new housing, and the proceeds of such sales were
expec e
essentially dif f erent f rom the typical loan by a mortgagee to a .mortgagor
in the case of commercial real estate . Fuçthermore , the purpose and policy
behind the statute declaring waivers of . def iciency .def enses invalid are . .
f ully relevant here . Plaintif f held the real property as collateral , and
f oreclosed on the property when the loan wënt into def ault . . Plaintif f
should not be allowed to seek the f u11 amount of the loan f rom guarantors
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f air market value or the actual sales price of the property . See First
Interstate Bank of Nevada v . Shields , 7 30 P . 2d 429, 4 30-31 (Nev . 1986 ) .
Even if the quarantv aoreement here does not satisfy the statutory

f ter f oreclosing and selling the property without a deduction based on the

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Case 2:09-cv-01889-ECR-PAL Document 36 Filed 12/30/10 Page 3 of 4

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requirement of nrelating to the sale of real property,'? it satisfies '

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: '' Shields , in ' Which' thë bevàda Suprepe 'Court . acknowledged that .'TNevad'a ''s . '
. . :'2 def icienc# legislation is designed to '.achieye f airness to ':11 p#cties to 'a

l'transaction sècufed' qiri whole or in part 115/ lrealty . '' Id .' dt 4 31': ' 'To do
other.wi se here would aive P1a int i f f .. the ,abi l itv N'to 'manipulate 'sovrces . of
recovery in order to realize debt satisf acti6n in ramouflts subitahtialiy

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kk ' g<eater than the balance of the debt . due . .'' Id . . . . ' - . ' ' ; . , ' 2 ' .

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We shall , therefore, grant Plaintiff time in which to amend its '

pleadings to assert a cause of action for a deficiency judgment. While th
statute of limitations on a deficiency action is six months after
foreclosure, Plaintiff requested such leave within the statutory period , 1
and was unable to amend its pleadings because of the scheduling order untiù
we granted such leave. Defendants' argument that they have been prejudicez
because discovery is closed in this case is without merit. Discovery can 1
be reopened upon amendment of the pleadings . Nevada law expressly permits.
amendments of pleadings or conversion into a deficiency action when
judicial proceedings have been commenced in violation of the statute
requiring, inter alia, that a borrower must seek a deficiency judgment
after foreclosing on real property . NEv. REv. STAT. 5 40 .435 .1.1

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Plaintiff's motion for summary judgment (#24) is moot in light of our

decision here .

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IT IS , THEREFORE , HEREBY ORDERED that Defendants' motion for summary
judgment (#23) is DENIED on the grounds that while Defendants are correct
in asserting that a deficiency action is the proper manner in which to
proceed, Defendants are not entitled to summary judgment on that basis.

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1 Paradise Homes v. Eichth Jpdicial Dist. Court of Nevadacdoes
not requir: a dismissal in this case. 491 P.2d 1277 (Nev . 1971).
Paradise Homes w:s decided before the enactment of Nev : Rqv. Stat.
5 40.435, which plainly states that ugtlhe commenctment of or
participation in a judicial proceeding in violation of NRS 40.430
does not forfeit any of the rights of a secured creditor in any
real or personal collateral . . . if the judicial proceeding is .
. (b ) Converted into an action which does not violate NRS

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Case 2:09-cv-01889-ECR-PAL Document 36 Filed 12/30/10 Page 4 of 4

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IT IS FURTHER ORDERED that. Plaintiff's motion for summarv judqment

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LANCE S. WILSON, CLEXK

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oeputy clerk

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