Court Opinion

ID: 2714524
Source: CourtListenerOpinion
Date Created: 2014-08-06 16:04:31.404084+00
Date Added: 2024-06-11T13:21:29.487632
License: Public Domain

ORDER OF AFFIRMANCE

                             These are consolidated appeals from a district court judgment
                 in a deficiency action, a post-judgment order awarding attorney fees and
                 costs, and post-judgment charging orders. Second Judicial District Court,
                 Washoe County; Janet J. Berry, Judge.
                             Appellants Nathan L. Topol, Virginia B. Topol, and Tami
                 Topol (collectively, the Topols) argue that the district court erred in (1)
                 impliedly concluding that Nevada law governed respondent First
                 Independent Bank of Nevada's (FIBN) right to a deficiency judgment, (2)
                 awarding the deficiency judgment to FIBN, and (3) issuing an NRS 86.401
                 charging order against appellant Tami Topol's interest in a limited
                 liability corporation (LLC) without making the LLC a party to the action.
                 We disagree with these contentions.
                 The law that governed FIBN's right to a deficiency judgment
                             Against a guarantor, a deficiency judgment action is an action
                 for the breach of the guaranty agreement, not an action on the deed of
                 trust. Walters v. Eighth Judicial Dist. Court, 127 Nev. „ 263 P.3d
231, 232-34 (2011) (engaging in an analysis that indicates that although
                 guarantors are protected by Nevada's anti-deficiency statutes, a deficiency
                 judgment against a guarantor is premised on the breach of the underlying
                 guaranty agreement); cf. Dobron v. Bunch, 125 Nev. 460, 464, 215 P.3d 35,
                 37 (2009) ("[G]eneral contract interpretation principles apply to interpret
                 guaranty agreements."). The parties' business loan agreements,
                 promissory notes, and the guaranty agreements designated Nevada law as
                 the governing law. Thus, even though the deeds of trust in this matter
                 provided that California law governed FIBN's rights against the real
                 property in California, Nevada law controls FIBN's right to a deficiency

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                 judgment, and the district court did not err in applying Nevada law. See
                 Costanzo v. Marine Midland Realty Credit Corp., 101 Nev. 277, 279, 701
P.2d 747, 748 (1985) ("[T]he 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." (internal quotation omitted)).
                 The award of the deficiency judgment to FIBN
                             The Topols argue that FIBN was not entitled to a deficiency
                 judgment because FIBN entered into a participation agreement with
                 another bank regarding the 2006 loan, under which the other bank agreed
                 to fund roughly half of that loan. Accordingly, the Topols argue that FIBN
                 was not entitled to a deficiency judgment because "FIBN's recovery must
                 be limited to the . . . percent it contributed to fund the loan" and the fair
                 market value of the real property "exceeded this amount." In so arguing,
                 the Topols rely on the last sentence of NRS 40.451, which defines
                  indebtedness" and states that "a lien is limited to the amount of the
                 consideration paid by the lienholder."
                             We agree with the district court's conclusion that the
                 participation agreement had no bearing on the Topols' express contractual
                 obligations under the 2006 promissory note and guaranty agreements.
                 Bielar v. Washoe Health Sys., Inc., 129 Nev. 306 P.3d 360, 364
                 (2013) (providing that issues of contract interpretation are reviewed de
                 novo). The 2006 promissory note and guaranty agreements stated that
                 FIBN was the lender from whom Topol Development Company would
                 receive the loan proceeds and to whom the Topols would be contractually
                 bound to repay the loan proceeds in the event of Topol Development's
                 default. The fact that FIBN contracted with another party regarding the

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                   source of these loan proceeds did not affect the contractual relationship
                   between FIBN, Topol Development, and the Topols. Thus, even if the
                   Topols' proffered interpretation of NRS 40.451 were correct,                see
                   Sandpointe Apartments, LLC v. Eighth Judicial District Court, 129 Nev.
313 P.3d 849, 855 (2013) (reaching a different conclusion as to the
                   meaning of NRS 40.451's last sentence), the Topols have cited to no salient
                   authority in support of their stance that such an interpretation would
                   supersede their express obligations under the promissory note and
                   guaranty agreements. Accordingly, we do not disturb that determination
                   by the district court.
                   The charging order against Tami Topol
                                  Tami Topol contends that the district court improperly entered
                   a charging order against her interest in an LLC, arguing that the charging
                   order went beyond the scope of what a charging order can do and that it
                   was entered without having made the LLC a party to the action. We
                   disagree.
                                  NRS 86.401 governs the collection rights and remedies against
                   a member's interest in an LLC. It permits a court to "charge the [LLC]
                   member's interest with payment of the unsatisfied amount of the
                   judgment with interest" and clarifies that when the interest is charged
                   "the judgment creditor has only the rights of an assignee of the member's
                   interest." NRS 86.401(1). Essentially, a charging order requires the LLC
                   to make payments to the judgment creditor that it would have made to the
                   member, but it does not give a judgment creditor an interest in the LLC's
                   assets or a right to participate in the LLC's affairs.    Weddell v. H20, Inc.,
                   128 Nev. , 271 P.3d 743, 750 (2012).
                                  Here, the charging order against Tami Topol's interest in the
                   LCC required the LLC to (1) Idlistribute all membership distributions,
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                  profits, cash, assets, and other monies due or •that shall become due
                  directly to Ms. Topol, or on her behalf, directly to FIBN until the
                  Judgment has been fully paid" and (2) "Nefrain from distributing to any
                  other person or entity any membership distributions, profits, cash, assets,
                  loans, or other monies due or that shall become due to Ms. Topol,
                  including any payments to third party creditors of Ms. Topol." Beyond
                  that, the order required the disclosure of records that concern the nature
                  and extent of Tami Topols interest and the amounts that would be
                  distributed to her by the LLC. The order did not give FIBN an interest in
                  the LLC's assets or a right to participate in its affairs. Thus, it did not
                  impact the LLC's rights or interests to a degree that would have required
                  the LLC to be a party. Accordingly, to the extent that Tami Topol has
                  raised a cogent argument to this effect, see Edwards v. Emperor's Garden
                  Restaurant, 122 Nev. 317, 330 n.38, 130 P.3d 1280, 1288 n.38 (2006), the
                  charging order did not violate NRS 86.401(1). Therefore, we conclude that
                  the district court did not err in issuing the charging order.
                              In light of the above, and after considering the remaining
                  contentions in these consolidated appeals and concluding that they lack
                  merit, we
                              ORDER the judgments of the district court AFFIRMED.

                                                                                  ,   J.

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                 cc:   Hon. Janet J. Berry, District Judge
                       Jill I. Greiner, Settlement Judge
                       Sterling Law, LLC
                       Lionel Sawyer & Collins/Reno
                       Washoe District Court Clerk

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