Holland & Hart recently obtained another important decision concerning deficiency law in Nevada. As a matter of first impression, the Nevada Supreme Court held that creditors in Nevada can recover deficiency judgments based on out-of-state non-judicial foreclosures.
The case, Branch Banking & Trust Co. v. Windhaven & Tollway, LLC, involves a multimillion-dollar loan secured by a deed of trust over property in Texas. When the borrower defaulted, BB&T conducted a trustee’s sale on the property under Texas’s trustee’s sale procedure. After BB&T brought an action in Nevada state court to recover the remaining debt, the district court held that NRS 40.455(1)’s plain language bars the recovery of deficiencies based on other states’ trustee’s sale procedure. In a heavily contested 4–3 decision, the Nevada Supreme Court reversed the decision, opening the way for creditors of Nevada debts to recover deficiencies based on out-of-state trustee’s sales.
The import of the decision goes beyond the case at hand to a number of other pending cases in Nevada. The decision also will shape how creditors transact Nevada loans secured by real property in other states. While many creditors in Nevada have been cautiously using the judicial foreclosure procedure concerning out-of-state collateral, which is slow and expensive, the Windhaven decision clears the way for such creditors to now conduct trustee’s sales in the same circumstances.
This is the third seminal decision Holland & Hart has obtained on behalf of creditors since last year. In March 2014, Holland Hart won decision from a federal court in Eagle SPE NV I, Inc. v. Kiley Ranch Communities holding that NRS 40.459(1)(c) violates the Contract Clause of the U.S. Constitution when applied to pre-enactment mortgage assignments. Then, in June 2014, Holland & Hart secured a separate federal decision in Branch Banking & Trust Co. v. Jarrett holding that NRS 40.495(4) does not apply retroactively to guaranties executed before that provision’s enactment.