million and hold it for a year. During that time, Centex could exercise its
purchase option and buy the Property from St. Rose for $54 million.
St. Rose's acquisition money came from three sources: (1) a
promissory note payable to Colonial Bank, N.A. (Colonial) in the amount
of $29 million secured by a first-priority deed of trust against the Property
(the Purchase Loan); (2) nonrefundable deposits in the amount of $8
million from Centex; and (3) a promissory note payable to R&S Lenders in
the amount of $12 million secured by a deed of trust against the Property
that was recorded after the Colonial Bank deed of trust (R&S Lenders
Deed of Trust).
Rad and Nourafchan obtained the financial backing for R&S
Lenders by soliciting funds from private investors, including Eckley M.
Keach and Robert E. Murdock. Keach agreed to loan $500,000, and
Murdock agreed to loan $100,000. Keach and Murdock obtained
individual promissory notes to secure their loans. Both promissory notes
required St. Rose to pay monthly interest on the principal amounts at a
rate of 12.5% per annum, due on the first day of each month, and
contained late-fee provisions. However, these notes were not secured by a
beneficial interest in a deed of trust.'
When Centex decided not to exercise its purchase option, St.
Rose needed additional money to hold and develop the Property. In 2007,
St. Rose obtained an additional loan from Colonial not exceeding $43
million (the Construction Loan). The Construction Loan was intended to
pay off the Purchase Loan and provide funding for improvements on the
1 Keach
and Murdock subsequently assigned their judgment against
R&S Lenders to respondent Commonwealth Title Insurance Company.
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Property. A deed of trust in favor of Colonial secured the Construction
Loan (the 2007 Deed of Trust). As part of the Construction Loan
transaction, Nevada Title Company issued Colonial a title insurance
policy for $44 million. This title policy insured that the 2007 Deed of
Trust was in first priority position against the Property and that the R&S
Lenders Deed of Trust was removed as an exception to marketable title.
Funds from the Construction Loan were used to pay off the amount due
under the Purchase Loan. However, Nevada Title did not obtain a release,
reconveyance, or a subordination agreement for the R&S Lenders Deed of
Trust.
When St. Rose defaulted on the Construction Loan and
stopped making payments to R&S Lenders, Colonial and R&S Lenders
recorded notices of default. Both foreclosure proceedings were enjoined
pending the outcome of this dispute between R&S Lenders and Colonial
regarding the priority of the deeds of trust. During the litigation, the
Alabama State Banking Department closed Colonial and named the
Federal Deposit Insurance Corporation (FDIC) as receiver. The same day,
Branch Banking and Trust (BB&T) and the FDIC entered into a
"Purchase and Assumption Agreement, Whole Bank All Deposits" (the
PAA) to transfer Colonial's assets to BB&T.
R&S Lenders appeals from a district court order granting
summary judgment in favor of Murdock and Keach on their claims for
breach of the promissory notes. R&S Lenders alleges that the district
court erred when it calculated the interest due under Murdock and
Keach's promissory notes. BB&T appeals the district court's
determination that the R&S Lenders Deed of Trust had priority over the
2007 Deed of Trust because BB&T did not prove that it received a valid
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assignment of the Construction Loan from the FDIC. BB &T alleges that
the district court improperly analyzed its ownership of the Construction
Loan.
The district court did not err in its interest calculations on Murdock and
Keach's promissory notes
We review an order granting a motion for summary judgment
de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029
(2005). Prejudgment interest awards are reviewed for error. Schiff v.
Winchell, 126 Nev. „ 237 P.3d 99, 100 (2010).
On appeal, R&S Lenders challenges the district court's
calculation of interest in its order granting Murdock and Keach's motion
for summary judgment. Specifically, R&S Lenders argues that allowing a
5% monthly late fee to accrue on the total amount owed after the maturity
date was not provided for in the notes and is contrary to law. R&S
Lenders also argues that the imposition of the 25% default rate on the
entire prejudgment amount owed to Murdock and Keach is improper
compound interest.
We conclude that the district court did not err when it
determined that the calculations attached to Murdock and Keach's motion
for summary judgment accurately set forth the amount owed by R&S
Lenders under the promissory notes. The plain language of the
promissory notes allows a 5% monthly charge as liquidated damages in
two amounts: first, on delinquent monthly interest payments, and second,
on the entire amount due under the promissory notes if not paid by the
maturity date. Further, we conclude that the district court's provision for
a 25% default rate does not equate with ordering compound interest
because the interest is not being added back into the principal. See 44B
Am. Jur. 3d Interest and Usury § 54 (2007) (compound interest occurs
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when "accrued interest is added periodically to the principal, and interest
is then computed upon the new principal thus formed," and is not the
mere "allowance of interest on overdue installments of interest").
The district court's conclusion that BB&T did not prove ownership of the
loan was supported by substantial evidence
On cross-appeal, BB&T challenges the district court's rulings
relating to its claims against St. Rose for failure to pay under the
Construction Loan and the respective priorities of the 2007 Deed of Trust
and the R&S Lenders Deed of Trust. Specifically, BB&T argues that the
district court erred in determining that it lacked standing to assert the
claims it raised in its complaint. BB&T further contends that the district
court should not have concluded that the R&S Lenders Deed of Trust had
priority over the 2007 Deed of Trust. R&S Lenders responds that the
district court properly granted its NRCP 52(c) motion because BB&T
failed to prove that it owned the Construction Loan, which was an implied
element of its claim.
We will not set aside a district court's findings of fact and
conclusions of law unless clearly erroneous. Sheehan & Sheehan v. Nelson
Malley & Co., 121 Nev. 481, 486, 117 P.3d 219, 223 (2005). Generally, a
merger transfers all assets and liabilities, while in an asset purchase,
assets and liabilities are not assumed unless otherwise specified. See Viii.
Builders 96, L.P. v. U.S. Labs., Inc., 121 Nev. 261, 268, 112 P.3d 1082,
1087 (2005); Caires v. JP Morgan Chase Bank, 745 F. Supp. 2d 40, 48-49
(D. Conn. 2010) ("the FDIC [has the] ability to designate specific assets
and liabilities for purchase and assumption . . . [and] a Court should look
to the purchase and assumption agreement governing the transfer of
assets between the FDIC and a subsequent purchaser of assets of a failed
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bank to determine which assets and corresponding liabilities are being
assumed").
The PAA was an asset purchase and therefore the district
court looked to its language in order to determine which assets and
corresponding liabilities were transferred to BB&T. However, due to the
omission of the schedules of assets, the district court found that PAA did
not transfer the Construction Loan to BB&T. We agree, and therefore
conclude that the district court's decision to grant R&S Lenders' NRCP
52(c) motion after BB&T failed to carry its evidentiary burden to prove its
ownership of the Construction Loan was not clearly erroneous. 2
Further, we conclude that the district court's decision to
exclude two documents relating to BB&T's interest in the Construction
Loan was not an abuse of discretion because the documents were not
properly produced in accordance with the disclosure requirements of
NRCP 16.1(a)(1) or NRCP 26(3)(a). See MC. Multi-Family Dev. v.
Crestdale Assocs., 124 Nev. 901, 913, 193 P.3d 536, 544 (2008) (we review
a district court's decision to deny admission of evidence for abuse of
discretion).
2 BB&T urges us to adopt the reasoning in Branch Banking & Trust
Co. v. Navarre 33, Inc., No. 3:10CV10/MCR/EMT, 2012 WL 2377851 (N.D.
Fla. May 21, 2012), but we conclude the reasoning of that case is
unpersuasive. Although Navarre involved the same PAA between the
FDIC and BB&T, the case concerned a breach of contract relating to a
promissory note. Id. at *1. The Federal District Court for the Northern
District of Florida concluded that the no genuine issues of material fact
existed regarding whether the PAA excluded the promissory note at issue.
Id. at *5-6. Therefore, not only did Navarre deal with a different
procedural posture, it also involved the negotiation of a promissory note,
not the assignment of a deed of trust.
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We have considered the parties' remaining arguments and
conclude they are without merit. Accordingly, we
ORDER the judgment of the district court AFFIRMED.
J.
Gibbons
1,;;Dz kla_ J.
Douglas
J.
Saitta
cc: Elizabeth Goff Gonzalez, District Court Judge
Larry J. Cohen, Settlement Judge
David J. Merrill, P.C.
Early Sullivan Wright Gizer & McRae, LLP
Gerrard Cox & Larsen
Meier & Fine, LLC
Eighth District Court Clerk
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