Skip to main content

Nevada Supreme Court and District Court Issue Decisions Regarding Nevada’s Limitations on Deficiency Judgments.

| 2 min read | Tagged: , , , , ,
BO
  • Email
  • Linkedin

By:  Bob Olson and Nathan Kanute

In 2011 the Nevada Legislature enacted Assembly Bill 273 (“AB 273”) which amended NRS 40.459 by limiting deficiency judgments to the difference between the amount the lender paid to acquire the loan or obligation and the larger of the market value of the property or the amount paid for the property at a foreclosure sale.  As one can imagine, a large number of borrowers and guarantors have tried to take advantage of this recent law to limit or in some cases eliminate their liability for deficiencies.  Creditors, on the other hand, have cried foul by arguing that, among other things, the law cannot be applied retroactively, it impairs the value of their pre-enactment paper and violates the Contracts Clauses of both the United States and Nevada Constitutions.  The Nevada Supreme Court and the United States District Court for the District of Nevada recently issued three decisions addressing the retroactive application of AB 273.

In Sandpointe Apartments, LLC v. Eighth Judicial District Court, 129 Nev. Adv. Op. 87 (Nov. 14, 2013), and Branch Banking and Trust Co. v. Neilson, (Nov. 14, 2013) (unpublished), the Nevada Supreme Court held that the deficiency limitations contained in AB 273 did not apply to deficiency actions arising from foreclosure sales which were conducted before AB 273’s June 10, 2011, effective date.  The Sandpointe decision left open a number of issues, one of which is whether AB 273 applies to loans that are sold before AB 273’s effective date but the sale occurs after that date.

The United States District Court for the District of Nevada in Eagle SPE NV I, Inc. v. Kiley Ranch Comms. et. al, (3:12-cv-00245-RCJ-WGC (March 24, 2014)), addressed an issue not resolved by Sandpointe: whether AB 273 applies to loans sold before AB 273’s effective date.   The District Court held that AB 273 did not apply to loans sold or transferred before its effective date because such an application would significantly impair the value of pre-enactment assignments and violate the Contracts Clause of the U.S. Constitution.  In what appears to be dicta, the District Court also stated that AB 273’s limitations would apply to transfers of a loan from a parent to a subsidiary.

For a more detailed discussion of these cases, click here:

Sandpointe Legal Alert 

Eagle SPE Legal Alert