121 Sourcing & Supply LLC v. Bank Of New York Mellon

• Court: District Court, D. Nevada
• Decided: June 9, 2021
• Docket: 2:19-cv-01466
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *

7 121 SOURCING & SUPPLY LLC Case No. 2:19-cv-01466-RFB

8 Appellants, ORDER

9 v.

10 BANK OF NEW YORK MELLON, et al.

11 Appellees.

12 13 I. INTRODUCTION 14 This case was taken on appeal from the Bankruptcy Court on August 21, 2019. ECF 1. 15 Appellants filed their Opening Brief on October 1, 2019. ECF No. 6. Appellees filed their 16 Answering Brief on October 15, 2019. ECF No. 9. Appellants filed their Reply Brief on October 17 29, 2019. ECF No. 10. The Court held a hearing on the appeal on January 28, 2021. 18 19 II. BACKGROUND 20 Appellee Bank of New York Mellon (“BNYM”) is the holder of the first Deed of Trust 21 recorded against real property located at 5504 Riverwood Court, Las Vegas, Nevada 89147 22 (“Property”) owned by Appellant 121 Sourcing & Supply, LLC (“121 Sourcing”). BNYM 23 recorded a Notice of Default on March 25, 2016 for failure to pay the monthly installment due on 24 July 1, 2008. BNYM also recorded a Notice of Recission on May 20, 2016 for the Notice of Default 25 recorded on March 25, 2016. The former owner of the Property, David Riggi, transferred title of 26 the Property to 121 Sourcing on December 27, 2018. 121 Sourcing also filed for bankruptcy on 27 that same date. 28 The case is an appeal from a final order of the United States Bankruptcy Court for the 1 District of Nevada issued on July 23, 2019, whereby the Bankruptcy Court denied Appellant 121 2 Sourcing’s Plan of Reorganization (the “Plan”) because it improperly attempted to extinguish 3 BNYM’s lien pursuant to NRS § 106.240. Specifically, the Bankruptcy Court found that a plain 4 reading of NRS § 106.240 did not support 121 Sourcing’s argument that the loan had been 5 accelerated on July 1, 2008 which is more than ten years prior to the bankruptcy petition, and 6 therefore the lien was extinguished. The Bankruptcy Court found that a plain reading of NRS § 7 106.240 only applies to loan documents for term setting the maturity date of the loan. 8 9 III. LEGAL STANDARD 10 On appeal to the District Court, the Bankruptcy Court’s conclusions of law are reviewed 11 de novo, and its factual findings are reviewed for clear error. In re Summers, 332 F.3d 1250, 1252 12 (9th Cir. 2003). Interpretation of statutes, and standing issues, are issues of law, which are reviewed 13 by the appellate court de novo. In re Mike Hammer Prod., Inc., 294 B.R. 752, 753 (9th Cir. B.A.P. 14 2003). The Court must accept the Bankruptcy Court’s findings of fact “unless, upon review, the 15 court is left with the definite and firm conviction that a mistake has been committed by the 16 bankruptcy judge.” In re Greene, 583 F.3d 614, 618 (9th Cir. 2009). 17 18 IV. DISCUSSION 19 The Appellant 121 Sourcing challenges the Bankruptcy Court’s ruling denying the Plan 20 Confirmation and asserts that the Bankruptcy Court abused its discretion and erred on the 21 application of NRS § 106.240. The Appellant also argues that the Bankruptcy Court erred in not 22 making a finding of fact regarding Appellee’s argument that BNYM is entitled to equitable tolling 23 under NRS § 106.240. This Court remands the Bankruptcy Court’s decision for the reasons below. 24 a. NRS § 106.240 25 NRS § 106.240 states that a lien created by a recorded deed of trust “shall[,] at the 26 expiration of 10 years after the debt secured by the mortgage or deed of trust according to the terms 27 thereof or any recorded written extension thereof become wholly due, terminate, and it shall be 28 conclusively presumed that the debt has been regularly satisfied and the lien discharged.” This 1 section “creates a conclusive presumption that a lien on real property is extinguished ten years 2 after the debt becomes due,” and it is not a statute of limitation. 3 Appellee BNYM asserts that NRS § 106. 240 does not apply to a loan that is accelerated 4 due to a notice of default. This Court disagrees. Under NRS § 106.240, a deed of trust terminates 5 ten years after the deed of trust is “wholly due” according to “the terms [of the debt] or any 6 recorded written extension.” NRS § 106.240. The statute does not define “wholly due” Id. The 7 Nevada Supreme Court, however, has endorsed by implication the finding that acceleration of a 8 note serves to make the full amount “wholly due.” Recently, the Nevada Supreme Court affirmed 9 a state district court's determination that the rescission of a notice of default effectively decelerated 10 the loan, and therefore the loan was not presumed satisfied under NRS § 106.240. Glass v. Select 11 Portfolio Servicing, Inc., No. 78325, 2020 WL 3604042 at * 2 (Nev. July 1, 2020).1 In Glass the 12 Nevada Supreme Court found the bank through the notice of recission decelerated the loan when 13 it clearly stated in the recession that it “does herby rescind, cancel and withdraw the Notice of 14 Default and Election to Sell.” Id. at * 3. This meant by implication that the notice of default 15 effectively accelerated the loan, since there could be no deceleration if there had not been a 16 previous acceleration. Based upon Glass, this Court finds that a Notice of Default accelerates a 17 loan, making it wholly due under NRS § 106.240 and that a Notice of Recession can decelerate 18 that same loan so long as the Recession expressly indicates that it is doing so. Id. Here, when 19 BNYM filed a Notice of Default on March 25, 2016 for failure to pay since July 1, 2008, it 20 triggered the ten-year period under NRS § 106.240 and accelerated the loan. 21 Once a loan is accelerated it can be, as noted, decelerated with a notice of recission. Glass, 22 2020 WL 3604042 at *2-*3.; see also Bank of America N.A. v. Estrella III Homeowner's 23 Association, No. 2:16-cv-02835-APG-DJA, 2020 WL 419004, at *3 (D. Nev. Jul. 21, 2020) 24 (finding that a recission to a notice of default cancels the acceleration for the purposes of NRS § 25 106.240). Here BNYM unequivocally decelerated the loan when it filed a Notice of Recission on 26 May 20, 2016. And while BNYM filed other notices of default with the identical failure to pay

27 1 Appellant submitted supplemental authority, Glass v. Select Portfolio Servicing, Inc., No. 78325, 2020 28 WL 3604042 (Nev. July 1, 2020), a recent Nevada Supreme Court decision, that this Court finds provides sufficient persuasive authority to the instant appeal. See ECF No. 14. date of July 1, 2008 after BYNYM’s May 2016 Notice of Recission, the Court finds that this does not change the fact that the loan was clearly decelerated in accordance with Glass. As such, BNYM 3 | decelerated the loan, and it was not extinguished under NRS § 106.240. See Glass, 2020 WL 4} 3604042, at *1. 5 The Court thus finds that the Bankruptcy Court ultimately reached the proper legal 6 | conclusion that the lien pursuant to the Deed of Trust had not been extinguished. (The Bankruptcy 7 | Court did not have the benefit of the Nevada Supreme Court’s ruling in Glass.) This Court 8 | therefore affirms the Bankruptcy Court’s ruling on other grounds as indicated in this order.’ 9 10 Vv. CONCLUSION 11 IT IS HEREBY ORDERED that the Bankruptcy Court’s Order is AFFIRMED, and this 12 | case is REMANDED back to the Bankruptcy Court for any further ruling or determinations 13 | consistent with this order. The Clerk of Court is ordered to close this case. 14 15 DATED: June 9, 2021 1 CIWS 7 RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 ? Given this Court’s determination regarding NRS 106.240’s application and the fact that BNYM 28 | rescinded the loan, the Court does not need to address Appellant’s argument regarding the Bankruptcy Court’s failure to make findings of fact about Appellee’s equitable tolling arguments. -4-