Court Opinion

ID: 8045991
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:58:10.225196+00
Date Added: 2024-06-11T16:37:29.718450
License: Public Domain

Cherry, J.,
with whom Parraguirre, J.,
joins, dissenting:
I respectfully dissent from my colleagues in the majority. I would grant the original petition for a writ of mandamus or prohibition because, to date, the real party in interest has not obtained a deficiency judgment. I believe that when a deficiency judgment is lawfully obtained from a court of competent jurisdiction, it is at that time that NRS 40.459(1)(c) would apply. This is, of course, contrary to the majority holding that the limitations in NRS 40.459(1)(c) apply to foreclosure or trustee’s sales occurring on or after the effective date of the statute.
*830Although I am deeply troubled by the majority’s rejection of Sandpointe’s and Yahraus-Lewis’s argument that NRS 40.459(1)(c) merely clarified existing limitations on a creditor’s recovery set forth in NRS 40.451, even if I were to accept this determination, in my view, NRS 40.459(1)(c)’s protections would nonetheless act to limit the amount of CML-NV’s recovery. Before a final deficiency judgment can be obtained, a creditor must comply with the various requirements of Nevada’s deficiency legislation and overcome any defenses asserted by the borrower and/or the guarantor. As Sandpointe and Yahraus-Lewis correctly assert, until such a judgment has been obtained, a creditor merely has a “contingent remedy for a potential deficiency,” not a vested right to a deficiency judgment. As a result, the application of NRS 40.459(1)(c) in cases, like the one presented here, in which a deficiency judgment had not yet been obtained by the statute’s effective date cannot be viewed as having a retroactive effect on a creditor’s right to recover. See Pub. Emps.’ Benefits Program v. Las Vegas Metro. Police Dep’t (PEBP), 124 Nev. 138, 155, 179 P.3d 542, 553-54 (2008) (concluding that ‘“[a] statute has retroactive effect when it takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past’ ” (alteration in original) (quoting Immigration & Naturalization Serv. v. St. Cyr, 533 U.S. 289, 321 (2001))).
That the Legislature intended NRS 40.459(1)(c) to operate in this fashion is made clear by the Legislative Counsel Digest’s pronouncement that the relevant provisions of Assembly Bill 273 would not only “become effective upon passage and approval” but would also “apply to a deficiency judgment awarded on or after that effective date.” 2011 Nev. Stat., ch. 311, Legislative Counsel’s Digest, at 1741. This statement is instructive in that it confirms that it is the act of obtaining a deficiency judgment, not the holding of a foreclosure or trustee’s sales, that triggers the application of NRS 40.459(1)(c). The majority declines to consider this language because they conclude that resorting to legislative intent is unnecessary. The Legislature, however, concerned that this court might improvidently interpret this statute in light of the arguments advanced by real party in interest, unequivocally emphasized and declared in its amicus curiae brief its clear intent that NRS 40.459(1)(c) “apply to every deficiency judgment awarded on or after its effective date.” (Emphasis added.) But in resolving the important issues presented here, the majority fails to acknowledge the Legislature’s participation in this matter, much less address the statement of intent contained in its brief as to the statute’s correct operation.
While the Great Recession from which our state has only just begun to emerge began in 2008, it was not until June 10, 2011, *831that the Governor signed Assembly Bill 273 into law, codifying the limitation on deficiency judgment recoveries at issue here as NRS 40.459(1)(c). This statute was specifically designed to put a stop to profiteering activities brought on by the emergence during the Great Recession of a secondary market for distressed loans in which third parties swooped in to purchase these loans at deeply discounted prices, exercised their power of sale or judicial foreclosure on the property securing the loans, and then sought deficiency judgments against the debtors and guarantors with the blind hope that there still may be a solvent target. See Hearing on A.B. 273 Before the Assembly Commerce and Labor Comm., 76th Leg. (Nev., March 23, 2011). In order to encourage creditors to negotiate with the borrowers of these loans, rather than sell them to third parties for “pennies on the dollar,” Hearing on A.B. 273 Before the Senate Judiciary Comm., 76th Leg. (Nev., May 3, 2011), NRS 40.459(1)(c) greatly limits the amount of a deficiency judgment that a successor party can recover.
This court has long recognized that “Nevada’s deficiency legislation is designed to achieve fairness to all parties to a transaction secured in whole or in part by realty.” First Interstate Bank of Nev. v. Shields, 102 Nev. 616, 618, 730 P.2d 429, 431 (1986). In Shields, we explained that for obligors, fairness was accorded by ensuring that “creditors in Nevada may not reap a windfall at an obligor’s expense by acquiring the secured realty at a bid price unrelated to the fair market value of the property and thereafter proceeding against available obligors for the difference between such a deflated price and the balance of the debt.” Id. To that end, Shields recognized that “[fit is irrefutably clear that the salutary purposes of the legislative scheme for recovering legitimate deficiencies would be attenuated, if not entirely circumvented ... by denying guarantors, or any other form of obligors, the protection provided by the deficiency statutes.” Id. at 618-19, 730 P.2d at 431. This is so, the Shields court concluded, because in Nevada lenders are not permitted to “manipulate sources of recovery in order to realize debt satisfaction in amounts substantially greater than the balance of the debt due.” Id. at 619, 730 P.2d at 431.
While the creditor activities at issue here are obviously different than those addressed in Shields, the policy rationale underlying Nevada’s deficiency legislation, including the newly enacted NRS 40.459(1)(c), remains the same—achieving “fairness to all parties to a transaction secured ... by realty.” Id. at 618, 730 P.2d at 431 (emphasis added). But in denying the petition for extraordinary relief brought by Sandpointe and Yahraus-Lewis, the majority turns this policy on its head. By limiting NRS 40.459(1)(c)’s protections so that they apply only when a foreclosure or trustee’s sale had not taken place prior to the statute’s effective date, rather than allowing their application in cases where a deficiency judgment had not *832been obtained by that date, the majority denies these protections not only to Sandpointe and Yahraus-Lewis, but to innumerable similarly situated borrowers and guarantors, the individuals and entities that this statute was specifically designed to assist.
In essence, the majority’s decision serves to produce a windfall for collection agencies and other third-party purchasers of distressed loans through the very activities—the sale and purchase of such loans for pennies on the dollar, followed by the sale of the property securing the loans and efforts to recover the full indebtedness through a deficiency judgment—that the Legislature sought to address with the passage of Assembly Bill 273. And in so doing, the majority abrogates the clear intent of Nevada’s Legislature in passing Assembly Bill 273 (NRS 40.459(1)(c)), which was to encourage lenders to negotiate with the borrowers and, by extension, the guarantors of these loans, rather than sell them to collection agencies and other third-party purchasers for far less than their original value.
The facts of this case are illustrative of why it is so important that the act of obtaining a deficiency judgment be the trigging event for the application of NRS 40.459(1)(c). Here, the original lender, Silver State Bank, was closed in 2008, with the FDIC appointed as receiver. As a result, when Sandpointe’s loan matured and subsequently went into default in 2009, the FDIC was effectively the lender for this loan, meaning that, rather than having a local lender to negotiate with, Sandpointe and Yahraus-Lewis had only the negligible prospect of reaching out to this monolithic government entity. The FDIC, however, quickly shuttled the Sandpointe loan off to Multibank in 2010, and Multibank then transferred it to its wholly owned subsidiary, CML-NV, which foreclosed on the loan and sold the collateral securing it at a trustee sale in early 2011. Under the position adopted by the majority, the occurrence of the trustee sale at this point meant that Sandpointe and Yahraus-Lewis would not receive the protections afforded by NRS 40.459(1)(c), even though the prospect of negotiations on their loan had been all but eliminated by the failure of their original lender and the resulting scenario in which three separate entities, including the FDIC, had control of the loan over the course of a few years.
And one last thought. Even if NRS 40.459(1)(c) was applied, as I believe it should be, to limit a successor’s recovery to the difference between the fair market value of the property and the amount the successor paid to acquire its interest, Sandpointe and Yahraus-Lewis, along with similarly situated borrowers and guarantors, would still be liable for a great amount of money to the successor to the loan.
For the above reasons, I dissent.