Court Opinion

ID: 3186642
Source: CourtListenerOpinion
Date Created: 2016-03-17 20:04:34.17822+00
Date Added: 2024-06-11T12:20:46.929492
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       MAR 17 2016
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

 OREO CORP., an Ohio corporation, as             No. 14-15515
 Successor-In-Interest to KeyBank National
 Association,                                    D.C. No. 2:10-cv-00352-PMP-
                                                 VCF
               Plaintiff - Appellee,

     v.                                          MEMORANDUM*

 LAWRENCE J. WINNERMAN,
 SANFORD B. WINNERMAN, and WW
 CENTENNIAL HILLS, LLC, a Delaware
 limited liability company,

               Defendants - Appellants.

                   Appeal from the United States District Court
                            for the District of Nevada
                  Philip M. Pro, Senior District Judge, Presiding

                            Submitted March 14, 2016**
                             San Francisco, California

Before: FERNANDEZ, GOULD, and FRIEDLAND, Circuit Judges.

      Lawrence and Sanford Winnerman, Guarantors on a defaulted real estate

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
loan, and WW Centennial Hills (collectively “Appellants”) appeal from the district

court’s orders granting KeyBank National Association’s (KeyBank’s) motion to

substitute OREO Corp. (OREO) as plaintiff, denying summary judgment to

Appellants on OREO’s claim for a deficiency judgment, valuing the property in

accordance with OREO’s expert’s testimony, and granting OREO post-judgment

interest at 8.25% per annum.

      We affirm the district court’s grant of KeyBank’s motion to substitute, its

denial of Appellants’ motion for summary judgment, and its determination of fair

market value. We vacate the district court’s award of post-judgment interest.

      Pursuant to Federal Rule of Civil Procedure 15(c),1 “[i]n the Ninth Circuit,

‘[a]n amendment adding a party plaintiff relates back to the date of the original

pleading only when: 1) the original complaint gave the defendant adequate notice

of the claims of the newly proposed plaintiff; 2) the relation back does not unfairly

prejudice the defendant; and 3) there is an identity of interests between the original

1
  If the “limitations period derives from state law, Rule 15(c)(1)[(A)] requires [the
court] to consider both federal and state law and employ whichever affords the
‘more permissive’ relation back standard.” Butler v. Nat’l Cmty. Renaissance of
Cal., 766 F.3d 1191, 1201 (9th Cir. 2014). Because we conclude that relation
back is appropriate under the federal rules, whether it would also be permissible
under a potentially more lenient Nevada rule need not be addressed.

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and newly proposed plaintiff.’”   Immigrant Assistance Project of the Los Angeles

Cty. Fed’n of Labor (AFL-CIO) v. INS, 306 F.3d 842, 857 (9th Cir. 2002) (quoting

Rosenbaum v. Syntex Corp. (In re Syntex Corp. Sec. Litig.), 95 F.3d 922, 935 (9th

Cir. 1996)).2

      There is no question that the First Amended Complaint (FAC) gave

Appellants “adequate notice of the claims of the newly proposed plaintiff.”

Immigrant Assistance Project, 306 F.3d at 857 (quoting Rosenbaum, 95 F.3d at

935)). The FAC and Second Amended Complaint (SAC) are identical, aside

from the substitution of OREO as plaintiff. Appellants were thus fully on notice

at the time of the FAC that a deficiency judgment claim on the Property had been

leveled against them—the exact same claim alleged in the SAC.      Appellants have

not explained how relation back prejudices them in any way. Nor have

Appellants argued that OREO and KeyBank did not share an identity of interests in

obtaining a deficiency judgment, which they did.   See id. at 858 (identity-of-

interest requirement is met when “[t]he circumstances giving rise to the claim

2
  Although Rule 15(c) rule speaks specifically only about changing defendants, the
rule “applies by analogy to the substitution of plaintiffs.” Raynor Bros. v. Am.
Cyanimid Co., 695 F.2d 382, 384 (9th Cir. 1982) (citing Fed. R. Civ. P. 15
advisory committee’s note).

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remained the same [under the amended complaint] as under the original complaint”

(alterations in original) (quoting Raynor Bros. v. Am. Cyanimid Co., 695 F.2d 382,

384 (9th Cir. 1982))). The district court, accordingly, did not abuse its discretion

in allowing the SAC to relate back to the FAC.     See Besig v. Dolphin Boating &

Swimming Club, 683 F.2d 1271, 1278-79 (9th Cir. 1982) (“An amendment

changing plaintiffs may relate back when the relief sought in the amended

complaint is identical to that demanded originally.”).

      The district court’s fair market value determination was not clearly

erroneous. Under Nevada law, “[f]air market value is generally defined as the

price which a purchaser, willing but not obliged to buy, would pay an owner

willing but not obliged to sell, taking into consideration all the uses to which the

property is adapted and might in reason be applied.”      Unruh v. Streight, 615 P.2d
247, 249 (Nev. 1980) (per curiam). The court can “properly consider all relevant

evidence in determining the value of the property.”      Id.

      Although it is undisputed that OREO’s expert used the definition of fair

market value provided by the Financial Institutions Reform, Recovery, and

                                           4
Enforcement Act (FIRREA)3 rather than the Unruh definition, Appellants fail to

establish that an appraisal using the FIRREA definition is inconsistent with Unruh.

Appellants first contend that the FIRREA definition requiring the buyer and seller

to be “motivated,” 12 C.F.R. Part 34.42(g), is contrary to Unruh’s assumption that

buyers and sellers be “willing but not obliged” to buy or sell, Unruh, 615 P.2d at

249. But being “motivated” does not mean being “obliged.” Compare

Motivated, Oxford English Dictionary, http://www.oed.com/view/Entry/244070 (

“enthusiastic, stimulated”), with Obliged, Oxford English Dictionary,

http://www.oed.com/view/Entry/129698 ( “compelled, necessitated”).

      Appellants next cite to their expert appraiser’s testimony that valuation

under FIRREA often assumes a specific purpose for the land in question because

banks will make a loan only when they know the property will be developed in a

certain manner. The market value definition under Unruh, he testified, is broader

because that definition takes into consideration all the uses the property may be

3
  FIRREA implementing regulations define “market value” as “the most probable
price which a property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition [are] . . . conditions whereby: (1) Buyer and seller are
typically motivated.” 12 C.F.R. § 34.42(g).

                                          5
“adaptable to.” Even accepting this as true, Appellants point to no evidence

showing that the potential uses their expert contemplated were any more valuable

than the uses OREO’s expert contemplated. In fact, both experts stated that the

best use for the property was to hold it for future commercial development.

     Appellants also argue that because OREO’s expert’s appraisal of the Property

was as of February 18, 2010, it cannot support a valuation of the Property as of the

March 31, 2010 trustee’s sale. The district court, however, was free to consider

that pre-sale valuation, in conjunction with and in light of all the available

evidence, to arrive at “the most viable” valuation as of the date of the sale.   See

Unruh, 615 P.2d at 249 (“The district court could properly consider all relevant

evidence in determining the value of the property.”).

      Finally, we agree with Appellants that the district court erred in awarding

post-judgment interest at the contractual rate of 8.25% (the “Default Rate”) instead

of at the statutory rate mandated by 28 U.S.C. § 1961.

      In diversity actions like this one, “state law determines the rate of

prejudgment interest, and postjudgment interest is governed by federal law.”

Citicorp Real Estate, Inc. v. Smith, 155 F.3d 1097, 1107-08 (9th Cir. 1998)

(quoting Am. Tel. & Tel. Co. v. United Comput. Sys., 98 F.3d 1206, 1209 (9th Cir.

                                           6
1996)). Section 1961 is “mandatory in cases awarding post judgment interest.”

Van Asdale v. Int’l Game Tech., 763 F.3d 1089, 1092 (9th Cir. 2014) (quoting

Ford v. Alfaro, 785 F.2d 835, 842 (9th Cir. 1986)). “An exception to § 1961

exists when the parties contractually agree to waive its application.”   Fid. Fed.

Bank, FSB v. Durga Ma Corp., 387 F.3d 1021, 1023 (9th Cir. 2004).

       In order to contract around the otherwise mandatory provisions of § 1961,

there must be a “specific agreement” “on this specific issue.”    Durga Ma, 387
F.3d at 1023. Here, there was no “specific agreement” as to the specific issue of

post-judgment interest sufficient to manifest an intent to override § 1961. Unlike

in Citicorp, where the parties expressly agreed that the contractual rate would

apply “after judgment until collection,” Citicorp, 155 F.3d at 1108, none of the

contract provisions cited by OREO even allude to post-judgment interest. The

district court therefore abused its discretion in applying the Default Rate instead of

the statutory rate.

                                   CONCLUSION

       The grant of the motion for leave to substitute plaintiff and denial of the

motion for summary judgment are affirmed. The district court’s fair market value

determination is affirmed. The district court’s award of post-judgment interest is

                                           7
vacated. On remand, the district court shall recalculate the interest and amend the

judgment accordingly.

      The parties shall bear their own costs.

      AFFIRMED IN PART and VACATED AND REMANDED IN PART.

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