Legal Alert – Nevada Supreme Court Determines That a Pre-Foreclosure Guaranty Complaint Is Not a Deficiency “Application”

By Bob L. Olson and Nathan G. Kanute

In what the dissenting Justices insinuate is an elevation of form over substance, the Nevada Supreme Court denied a rehearing in Lavi v. Eighth Judicial District Court, 130 Nev. Adv. Op. 38, 2014 WL 2428749 (May 29, 2014), and held that the Plaintiff, a financial institution, was barred from pursuing a deficiency against the Guarantor even though the Plaintiff had sued the Guarantor on the debt prior to the expiration of time for filing deficiency actions. In making that determination, the Court held that a complaint filed against a guarantor four months prior to a foreclosure sale could not be considered an “application” for a deficiency, which NRS 40.455 requires a party to file “within 6 months after the date of the foreclosure sale or the trustee’s sale [emphasis added].” Since the financial institution in Lavi did not seek partial summary judgment until nearly a year after the foreclosure sale and had not amended its complaint, the Court determined that an “application” for a deficiency had not been filed within the statutory six month period. The Court held that this was true, even though the guarantor had waived the application of the one-action rule (NRS 40.430) and the financial institution had proceeded under NRS 40.495(2).

[Read the full alert.]