Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-01146/USCOURTS-azd-2_10-cv-01146-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 12:1821 Default of Loan by Promissary Note

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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

Federal Deposit Insurance Corporation, )

as receiver for Irwin Union Bank, F.S.B., )

)

Plaintiff, ) 2: 10-cv-1146 JWS

)

vs. ) ORDER AND OPINION

)

Jay Dabba and Nisha Dabba, )

husband and wife, ) [Motion at docket 37]

)

Defendants. )

)

I. MOTION PRESENTED

At docket 37, the Federal Deposit Insurance Corporation, as receiver for Irwin

Union Bank, F.S.B. (“FDIC-R”) moves for summary judgment against defendants Jay

and Nisha Dabba (“Defendants”). The motion is supported by a Statement of Facts at

docket 38 and the affidavit of Mindy Albright at docket 39. Defendants’ opposition is at

docket 40, and their Controverting Statement of Facts is at docket 41. FDIC-R replies

at docket 42. Oral argument was requested but would not assist the court.

II. BACKGROUND

The relevant facts are largely undisputed. FDIC-R’s predecessor Irwin-Union

Bank made a $455,000 loan to Defendants pursuant to a business loan agreement

Case 2:10-cv-01146-JWS Document 43 Filed 01/04/13 Page 1 of 7
dated May 31, 2005. Defendants’ debt was evidenced by a promissory note and

secured by a deed of trust on a tract of land which Defendants purchased with the loan

proceeds. On June 1, 2007, Defendants executed a new promissory note which

continued the repayment date in the original promissory note from June 1, 2007, to

June 1, 2009. Defendants defaulted by failing to make the required payments. As a

consequence, FDIC-R sued Defendants seeking to recover the principal balance

remaining due, together with accrued interest, late charges, costs, and attorneys’ fees. 

According to the Affidavit of Mindy Albright submitted in support of FDIC-R’s motion,

after taking into account all payments made and offsets due to them, Defendants owed

the following amounts to FDIC-R as of October 31, 2012: Principal of $424,505.57;

accrued interest of $116,256.37, late charges of $3,051.84, and a processing/release

fee of $95.00.1

III. STANDARD OF REVIEW

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment

should be granted if there is no genuine dispute as to any material fact and the moving

party is entitled to judgment as a matter of law.2

 The moving party has the burden of

showing that there is no genuine dispute as to any material fact.3 The moving party

need not present evidence; it need only point out the lack of any genuine dispute as to

material fact.4

 Once the moving party has met this burden, the non-moving party must

1

Affidavit of Mindy Albright, doc. 39.

2

Fed. R. Civ. P. 56(a).

3

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 

4

Id. at 323-25.

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set forth evidence of specific facts showing the existence of a genuine issue for trial.5

All evidence presented by the non-movant must be believed for purposes of summary

judgment, and all justifiable inferences must be drawn in favor of the non-movant.6

However, the non-moving party may not rest upon mere allegations or denials, but must

show that there is sufficient evidence supporting the claimed factual dispute to require a

fact-finder to resolve the parties’ differing versions of the truth at trial.7

IV. DISCUSSION

Defendants oppose the motion on the grounds that there are disputed issues of

material fact. To be precise, Defendants point to two specific issues: “The FDIC-R fails

to establish . . . the rate and amount of the applicable interest owed under the

promissory note. Further, Defendants are entitled to a reduction or set-off in the FDICR’s damages based upon the fair market value of the [land securing the deed of trust.]”8

Each issue is discussed below.

A. Interest

FDIC-R relies on the loan documents and the affidavit of Mindy Albright to

establish the rate and amount of interest. The rate of interest is clearly established in

the loan documents which provide for interest at a rate equal to the Wall Street

Journal’s published prime rate [“Prime Rate”] plus one percent which increases to the 

5

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).

6

Id. at 255. 

7

Id. at 248-9. 

8

Doc. 40 at p. 2.

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Prime Rate plus four percent in the event of default.9

 Ms. Albright’s affidavit indicates

that she is the Asset Manager for FDIC-R’s loan servicing agent. Ms. Albright avers

that, based on her personal knowledge and the records kept under her supervision in

the ordinary course of business, the amount of interest accrued on the loan as of

October 31, 2012, is $116,256.37.10 Defendants do not attack Ms. Albright’s

qualifications or the validity of the underlying records. Rather, they complain that FDICR has not stated the date of default (the date when the interest rate would increase) nor

set out specific calculations of the interest accrued. Defendants point to no alternative

calculation nor any other evidence to demonstrate error in Ms. Albright’s calculation,

save this statement: “How the interest increased by approximately $80,000 in just over

2 years [the period from the time suit was filed until FDIC-R moved for summary

judgment] raises serious questions about how the interest was calculated and whether

the FDIC-R properly calculated the accrued interest.”11

Defendants do not dispute that the principal owed is, as alleged by FDIC-R,

$424,505.57. According to the complaint, the accrued interest as of May 24, 2010, was

$27,869.97, and interest was accruing at that time at the rate of 7.25% per annum or

$85.491 per day. Ms. Albright’s affidavit says the accrued interest was $116,256.37 as

of October 31, 2012. Thus, interest increased by $88,386.40, over a period of 2 years,

5 months and 7 days, a period of 892 days. At a rate of $85.491/day the increase

would be $76,257.97. Of course, the interest rate was variable, so in theory the amount

9

Promissory Note, doc. 1-1 at p. 9.

10Affidavit of Mindy Albright at doc. 39.

11Doc. 40 at p. 5.

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might be either more or less than that. However, without further explanation, the

difference of more than $12,000 casts doubt on the accuracy of Ms. Albright’s interest 

calculation.

To support their position, Defendants cite U. S. Bank of Arizona v. Allyn.12 There,

a lender sued a borrower seeking to recover what was due on a promissory note. The

motion sought interest calculated at 5%, but it was supported by a promissory note

reciting an interest rate of 4%. The borrower failed to oppose the motion which was

then granted by the trial court. Thereafter, the borrower sought a new trial based on the

rate discrepancy. The motion was denied. On appeal, the appellate court noted the

discrepancy and held that the trial court was obligated to assure that summary judgment

was appropriate. FDIC-R contends Allyn is not in point, and that because they have

presented evidence of the amount of interest due, the burden shifted to Defendants to

present contrary evidence. Although FDIC-R is correct that the burden did shift,

Defendants’ contention about the unexplained large increase in interest owed over a

period of 892 days is sufficient evidence to support an inference that Ms. Albright’s

calculation is erroneous. Thus, Allyn is instructive. Drawing a reasonable inference

based on the available facts in the record in favor of Defendants, as it must on summary

judgment, the court concludes that the amount of interest owed by Defendants has not

been established as a matter of law.

12167 Ariz. 191, 805 P.2d 1012 (App. Ct. 1990).

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B. Set-Off

Defendants do not contend that the business loan involved in this lawsuit is 

subject to an anti-deficiency provision. Nevertheless, they assert that they will be

harmed if the case at bar is pursued to judgment in advance of a foreclosure sale. As

defendants see it, “by failing to do a trustee sale before initiating its suit on the note, the

FDIC-R has deprived the Defendants the opportunity to contest whether the price paid

at an eventual trustee sale of the land truly reflects the fair market value of the

property.”13 As FDIC-R correctly points out there is nothing in the promissory note

which would require it to conduct a foreclosure sale prior to filing suit.

Defendants cite no authority to support the conclusion that without the holding of

a foreclosure sale first, they will have no ability to assure that they are credited with the

fair market value of the property once there is a foreclosure. Indeed, FDIC-R correctly

asserts that Arizona law provides them with a mechanism to pursue their concern,

A.R.S. 33-814.14

V. CONCLUSION AND DIRECTION TO COUNSEL

For the reasons above the motion at docket 37 is GRANTED in part and

DENIED in part as follows: FDIC-R may pursue this case to judgment without first 

conducting a foreclosure sale; FDIC-R shall recover principal of $424,505.57, late

charges of $3,051.84, and a processing/release fee of $95.00 from Defendants, but the

amount of accrued interest must remain for future determination.

13Doc. 40 at p. 6.

14See Resolution Trust Corp. v. Freeway Land Inv 798 F.Supp. 593, 596-97 (D. Ariz.

1992).

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Case 2:10-cv-01146-JWS Document 43 Filed 01/04/13 Page 6 of 7
The court strongly recommends that counsel confer in an effort to stipulate to the

amount of accrued interest, for the cost of a trial on that topic would be significant, and

the amount should not be that difficult to establish in a candid discussion. 

If closing papers are not sooner filed, the parties shall file a joint status report

advising the court what remains to be done before a trial date may be set and advising

of a proposed schedule.

DATED this 4th day of January 2013.

/s/ JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE

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