                                                            130 Nev., Advance Opinion 14 ,
                                   IN THE SUPREME COURT OF THE STATE OF NEVADA


                          FIRST FINANCIAL BANK, N.A.,                          No. 62606
                          Appellant,
                          vs.
                          GORDON R. LANE AND CAROL LANE,
                          INDIVIDUALLY AND AS TRUSTEES
                                                                                     Fi En
                          OF THE LANE FAMILY TRUST; AND                                DEC 2 4 2014
                          JOHN C. SERPA, INDIVIDUALLY AND                           TRACE       1.1N1).E.Stir:',.N
                                                                                  LEA': (IF U P R            c.`;',.
                          AS TRUSTEE OF THE JOHN C. SERPA                       BY
                          TRUST,                                                     CHLF CEV0AY CLERK

                          Respondents.



                                      Appeal from a district court judgment in a deficiency judgment
                          action. Second Judicial District Court, Washoe County; Jerome Polaha,
                          Judge.
                                      Reversed and remanded.


                          Lionel Sawyer & Collins and Leslie Bryan Hart and Courtney Miller
                          O'Mara, Reno,
                          for Appellant.

                          Lemons, Grundy & Eisenberg and Douglas R. Brown, Reno; Mir Saied
                          Kashani, Los Angeles, California,
                          for Respondents.




                          BEFORE THE COURT EN BANC.




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                                                 OPINION


                By the Court, PICKERING, J.:
                            This case presents the question of whether the definition of
                "indebtedness" found in NRS 40.451 limits, through its interaction with
                NRS 40.459(1)(a) and MRS 40.459(1)(b), the amount a successor lienholder
                can recover in an action for a deficiency judgment to the amount of
                consideration such a lienholder paid to obtain its interest in the note and
                deed of trust. Specifically, we must determine the meaning of NRS
                40.451's final sentence, Isiuch amount constituting a lien is limited to the
                amount of consideration paid by the lienholder." Based on our review of
                NRS 40.451's text, context, and history, we hold that the clause simply
                ensures that a lender cannot recover in deficiency judgment for future
                advances secured but not paid at the time of default. And because the
                section therefore places no consideration-based limitation on this lender's
                recovery against the instant borrowers and guarantor, we reverse the
                district court's order to the contrary in this case and remand for further
                proceedings consistent with this opinion
                                                     I.
                            Respondent borrowers, Gordon and Carol Lane, took out a
                three million dollar loan, individually and as trustees of the Lane Family
                Trust, secured by a piece of commercial real estate. Respondent John C.
                Serpa, individually and as trustee of the John C. Serpa Trust, executed a
                personal guaranty thereupon. The Lanes defaulted on their obligation,
                and Serpa failed to fulfill his guarantor duties. But before the original
                lender exercised its right to foreclose, the Federal Deposit Insurance
                Corporation was appointed its receiver and assigned the interest in the
                Lanes' loan to appellant First Financial Bank, N.A. (FFB), in exchange for
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                  $2,256,879.90 (or 75% of the then-due balance of principal and accrued
                  interest on the loan, $3,009,166.66). FFB foreclosed and sold the property
                  in question—having a fair market value of $2,300,000.00—to itself at
                  auction for $1,890,000.00. FFB then brought a deficiency judgment and
                  breach of guaranty action against respondents, and the district court
                  entered final judgment in respondents' favor "under NRS 40.451 because
                  the fair market value of the subject property [$2,300,000.00] exceeds the
                  consideration [FFB] paid [the FDIC] to acquire a lien on the property
                  32,256,879.901." FFB appeals.


                              NRS 40.451, the statute upon which the district court based
                  its determination, delineates the categories of debt one seeking a
                  deficiency judgment may collect, that is, an obligor's "indebtedness":
                               [First Sentenced As used in [the deficiency
                              judgment statutes] "indebtedness" means the
                              principal balance of the obligation secured by a
                              mortgage or other lien on real property, together
                              with all interest accrued and unpaid prior to the
                              time of foreclosure sale, all costs and fees of such a
                              sale, all advances made with respect to the
                              property by the beneficiary, and all other amounts
                              secured by the mortgage or other lien on the real
                              property in favor of the person seeking the
                              deficiency judgment. [Limitation:] Such amount
                              constituting a lien is limited to the amount of the
                              consideration paid by the lienholder.
                  Each item in the first sentence of NRS 40.451 represents a category of
                  obligation that a mortgage or deed of trust can secure that, together,
                  comprise the "indebtedness" enforceable by an action for a deficiency
                  judgment following foreclosure. See NRS 40.455-40.459. Thus, category
                  one is the unpaid principal balance of the original obligation; category two
                  is interest accrued but unpaid on the first; category three subsumes the
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                      costs and fees associated with the foreclosure sale; and category four
                      captures expenditures that the lender makes to protect the property and
                      thus its security, such as payment of casualty insurance, needed
                      maintenance, or towards liens that would take priority over the lender's
                      security interest.   See Restatement (Third) of Property: Mortgages § 2.2
                      (1997). The fifth category concerns other secured amounts that must be
                      treated as separate and apart from the "principal balance of the
                      obligation" for the purposes of indebtedness calculation—i.e., future
                      advances. Id. § 2.1; see NRS 106.025(5), Covenant 5 (identifying future
                      advances as distinct from "mortgage debt"); Uniform Land Security
                      Interest Act (ULSIA) § 302 cmt. 1 (1975) (distinguishing between an
                      "advance" made when a security agreement first attaches and "future
                      advances").
                                    At issue is the effect on those five indebtedness categories of
                      NRS 40.451's second sentence, the limitation: "Such amount constituting a
                      lien is limited to the amount of the consideration paid by the lienholder."
                                                            A.
                                    The opening phrase "[s]uch amount" suggests that the
                      limitation "applies to the last antecedent," see Sims' Lessee v. Irvine, 3 U.S.
                      425, 444 n.2 (1799); see also Antonin Scalia & Bryan A. Garner, Reading
                      Law: The Interpretation of Legal Texts 146 (2012), that is, that it affects
                      only category five or "all other amounts secured by the mortgage or other
                      lien." NRS 40.451. Moreover, of the remaining text of NRS 40.451, the
                      language in the limitation, "amount constituting a lien" most nearly
                      mirrors that of the category directly proximate, "amounts secured
                      by. . . lien." Indeed, as NRS 40.451 was originally enacted, this pairing
                      was obvious, since the final category of indebtedness was described as

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                comprising "all other amounts secured by the mortgage or deed of trust or
                which constitute a lien," A.B. 493, 55th Leg. (Nev. 1969), using the same
                words—amounts, constitute, and lien—as the limitation sentence uses. In
                the section's original form that clause was the only appearance of the term
                "lien" in the first sentence—in its 1969 version, category one referred to a
                "mortgage or deed of trust" rather than a "mortgage or other lien," as it
                does currently. Id And when the original language was altered to its
                present state in 1989, see S.B. 479, 65th Leg. (Nev. 1989), the change was
                only intended to accomplish a "minor grammatical correction[ I to existing
                law." Remarks of Michael E. Buckley, Hearing on S.B. 479 Before the
                Senate Judiciary Comm., 65th Leg. (May 30, 1989). Thus, NRS 40.451's
                text, both as it originally existed and as it exists today, indicates that the
                limitation was intended to reach only the final category of indebtedness,
                achieving the unremarkable effect of ensuring that a lender could not
                recover in deficiency judgment for future advances secured but unpaid at
                the time of default. See also ULSIA § 302 cmt. 4 (1975) (discussing the
                priority of future advances and assuming that only advances actually paid
                to a borrower could be recovered by a lender).
                            Likewise, to the extent that the Legislature discussed the
                meaning of NRS 40.451's limitation, that discussion suggests that the
                clause merely states this proposition, so self-evident that it almost could
                have gone without saying at all. In particular, the attorney who proposed
                the definition of indebtedness now codified in NRS 40.451, Mr. Edward
                Hale, described the section's limitation as capping deficiency judgment
                according to that amount "due and owing to the party seeking money
                judgment by the party against whom the judgment is sought." Hearing on
                A.B. 493 Before the Assembly Comm. on Judiciary, 55th Leg. (March 13,

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                       1969) (emphasis added). And during the Legislature's meetings on a later
                       enacted statute limiting deficiency recovery in the context of speculation
                       in instruments—meetings that can provide insight into the common
                       understanding of NRS 40.451, if not the Legislative intent behind it—the
                       sponsor of the relevant bill addressed the state of the then-applicable law
                       of deficiency judgments, of which NRS 40.451 was a key component,
                       stating, "Under current statute, a court can award deficiency judgments
                       under Chapter 40 of the Nevada Revised Statutes (NRS) after a
                       foreclosure sale provided the sale is less than the amount that the borrower
                       owes the lender."   Hearing on A.B. 273 Before the Assembly Comm. on
                       Commerce & Labor, 76th Leg. (March 23, 2011) (emphasis added).
                                   In this way, in Interim Capital LLC v. Herr Law Group, Ltd.,
                       a federal district court held that an interpretation of NRS 40.451's
                       limitation that considered the clause in isolation to "limit [] the entire
                       indebtedness to the amount a purchaser of a note paid for that note" could
                       not be squared with the section's text or legislative history. See 2:09-CV-
                       01606-KJD-LRL, 2011 WL 7047062, at *6(2011) (unpublished disposition)
                       ("The last sentence of NRS 40.451 modifies only the last omnibus or
                       catchall category in the list of items comprising indebtedness."). First,
                       consistent with our reasoning above, the federal district court recognized
                       that "[s]uch' is an adjective meaning 'of the character, quality, or exten[t]
                       previously indicated or implied," and that the phrase "such amount"
                       therefore referred back to "all other amounts" in category five.   Id. at *7 &
                       n.8 (quoting Merriam Webster's Collegiate Dictionary 1176 (10th ed.
                       1993)). Going further, the federal district court noted that "[i]ndebtedness
                       is not defined as an 'amount,' but rather a list of types of obligations[,]"
                       and therefore, "[g]rammatically, 'such amount' [could not] reasonably

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                     reference 'indebtedness' in this context."     Interim Capital, 2011 WL
                     7047062, at *7. Confirming this reading, the federal district court
                     continued, was Assemblyman Richard Bryan's explanation that "the last
                     sentence of NRS 40.451 equates to the 'lender being limited to actual out
                     of pocket expenses that he may recover."        Interim Capital, 2011 WL
                     7047062, at *7 (quoting Hearing on A.B. 493 Before the Assembly Comm.
                     on Judiciary, 55th Sess., March 13, 1969, at 13). According to the Interim
                     Capital court, that Bryan "refer[red] to actual out of pocket expenses is
                     evidence that the statement modifies the catch-all 'other amounts' as
                     opposed to indebtedness generally." Interim Capital, 2011 WL 7047062, at
                     *8. Finding this reasoning persuasive, we adopt it here as additional
                     support. See Schuck v. Signature Flight Support of Nev., Inc., 126 Nev.
                              n.2, 245 P.3d 542, 546 n.2 (2010) (this court may rely on
                     unpublished federal district court decisions where persuasive).
                                 Thus, the meaning of NRS 40.451's limitation is plain, its
                     intended result uncomplicated. We hold that the clause affects only the
                     final category of NRS 40.451 indebtedness—namely, other amounts
                     secured by a lien on the property in question—and that it serves to limit
                     the measure of that final category for the purposes of deficiency recovery
                     to consideration actually exchanged between a lender and borrower to
                     induce said lien.
                                                          B.
                                 With the 2011 enactment of NRS 40.459(1)(c)—which
                     addresses speculation in instruments by providing that if a person seeking
                     a deficiency judgment "acquired the right to obtain the judgment from a
                     person who previously held that right," that person's judgment may not
                     exceed "the amount by which the amount of the consideration paid for that

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                        right exceeds the fair market value of the property sold at the time of sale
                        or the amount for which the property was actually sold"—respondents
                        argue that latent ambiguity was unearthed in NRS 40.451, to wit: the
                        phrase "consideration paid" in the limitation could refer to that
                        consideration paid by a third-party secondary purchaser to obtain an
                        assignment of the secured debt.'     See Sandpointe Apartments v. Eighth
                        Judicial Dist. Court, 129 Nev. , 313 P.3d 849, 854-56 (2013).
                        Under such a reading, the section would limit an element of that
                        successor-in-interest's indebtedness to the money paid to acquire the
                        relevant instruments, rather than the more straightforward reading
                        proffered above. Thus, after NRS 40.459(1)(c)'s enactment, in Sandpointe,
                        a case where the potential retroactive effect of NRS 40.459(1)(c) was in
                        issue, we discussed whether NRS 40.451's limitation denoted
                        "consideration paid" by a successor assignee without deciding the matter.
                        Id. at , 313 P.3d at 854-56. Respondents seize on language in
                        Sandpointe favoring an interpretation contrary to that adopted above and
                        by the federal district court in Interim Capital; dictum, wherein we stated
                        that NRS 40.451's final sentence may limit "one factor" for the purposes of
                        calculating indebtedness, specifically the first category or principal
                        obligation, to the amount of consideration that a "successor paid for the
                        mortgage or lien."   Id. at 855. But the proper interpretation of NRS
                        40.451 was not squarely presented in Sandpointe, and therefore principles
                        of stare decisis do not apply with the same force that they might otherwise.



                              'The parties concede that NRS 40.459(1)(c) does not itself control
                        this case's outcome because the sale in question took place prior to the
                        section's effective date.


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                See Sherman v. S. Pac. Co., 31 Nev. 285, 290, 102 P. 257, 259 (1909). 2 And
                in any case, respondents' interpretation of NRS 40.451 lacks merit.
                            First, NRS 40.451's text provides no support for the
                respondents' reading inasmuch as it makes no mention of successors-in-
                interest, and because the categories of indebtedness it describes are all
                obligations owed by a borrower to a lender, to which consideration paid by
                a successor to obtain the debt's assignment is irrelevant. And, even
                setting aside the maxim "expressio unius est exclusio alterius" and its
                application here, Galloway v. Truesdell, 83 Nev. 13, 26, 422 P.2d 237, 246
                (1967), the Legislature's failure to make any such mention is significant,
                because the respondents' interpretation of the section would amount to an
                abrogation of "the common law of most states, [which] has long recognized
                that 'an assignment operates to place the assignee in the shoes of the
                assignor, and provides the assignee with the same legal rights as the
                assignor had before assignment." Interim Capital, 2011 WL 7047062, at
                *6 (quoting Ill. Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 803
                (Minn. 2004)). This court will not read a statute to abrogate the common
                law without clear legislative instruction to do so.   See Orr Ditch & Water
                Co. v. Justice Court of Reno Twp., Washoe Cnty.,      64 Nev. 138, 164, 178
                P.2d 558, 570 (1947).
                            Second, though it was the introduction of NRS 40.459(1)(c) by
                the Legislature that awakened NRS 40.451's supposed dormant
                ambiguity, that introduction also offers persuasive evidence that NRS


                      2To the extent that the parties rely on Sandpointe to limit the value
                of a lien to the amount the successor-in-interest paid, this argument
                improperly extends Sandpointe to apply to an issue that it did not resolve
                and is thus without merit.


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                40.451's limitation does not contemplate consideration exchanged between
                an assignor and assignee. NRS 40.459(1)(c) now limits the value of the
                lien (as well as that of NRS 40.451 categories two through five) to the
                consideration paid by a successor-in-interest to the mortgagee,           so
                respondents' interpretation of NRS 40.451 would render NRS 40.459(1)(c)
                nearly obsolete where an assignment of rights is in issue. And, where no
                assignment is in play, NRS 40.451's limitation would have no practical
                effect because the "consideration paid" by the lienholder, as respondents
                interpret the phrase, will also be the "principal balance" of the loan   See
                also Interim Capital, 2011 WL 7047062 *8 (noting that the "Edlefendants
                cannot account how their interpretation would apply to a primary lender").
                            Even presented with this reality, respondents press that,
                under their interpretation, NRS 40.459(1)(c) does not leave NRS 40.451
                entirely meaningless because the former would limit the entire amount of
                the judgment to consideration paid by the assignee, while the latter would
                only limit the value of the lien, that is, the principal obligation, to
                consideration paid by the assignee (theoretically leaving categories two
                through five demarcated above unlimited for the purposes of deficiency
                judgment recovery). But, pragmatically speaking, this is a distinction
                without much difference; the effect of any limitation on the value of a lien
                in the deficiency judgment context is also to limit the total amount of the
                judgment since the allowed indebtedness is the minuend in the base
                equation. And, all of respondents' lawyerly hair-splitting aside, it is
                simply not reasonable to read the sections as accomplishing so nearly the
                same effect given the body of litigation NRS 40.459(1)(c) spurred shortly




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                   after its 2011 enactment, 3 and the relative dearth of case law involving
                   NRS 40.451, which languished in obscurity from its enactment in 1969
                   until Interim Capital was decided in 2011, during which time it was cited
                   only as the first in a sequence of statutes that governed deficiency
                   judgments.4
                                  Third, NRS 40.451's legislative history confirms the accuracy
                   of this court's current bearing—foremost in that throughout the multitude
                   of hearings to which the Legislature subjected then A.B. 493, 55th Leg.
                   (Nev. 1969), there was no mention of successors-in-interest to the note and
                   deed of trust, nor of any intent to dramatically alter the common law's
                   landscape with regard to assignors and assignees, concerns that, as
                   demonstrated above, would have likely been central if the limitation had
                   the meaning respondents contend, and which were indeed central in the
                   Legislature's conversations surrounding the later enacted NRS
                   40.459(1)(c). See, e.g., Hearing on A.B. 273 Before the Assembly Comm. on
                   Commerce & Labor, 76th Leg. (March 23, 2011) (discussing the change in
                   law NRS 40.459(1)(c) would achieve as to successors-in-interest). The
                   1969 Legislature's silence on this issue is, perhaps, unsurprising given
                   that, as respondents recognized at oral argument, it was unlikely that "the
                   Legislature [that enacted NRS 40.451] even thought about speculation in



                         3 See,
                              e.g., Branch Banking & Trust Co. v. Pahrump 194, LLC,     F.
                   Supp. 2d     , 2014 WL 3747644 (D. Nev. July 30, 2014); Branch Banking
                   & Trust Co. v. Regena Homes, LLC, 2014 WL 3661109 (D. Nev. July 23,
                   2014); Sandpointe, 129 Nev.     313 P.3d 849.

                         4See,e.g., Mfrs. & Traders Trust Co. v. Eighth Judicial Dist. Court,
                   94 Nev. 551, 556, 583 .P.2d 444, 448 (1978), overruled by First Interstate
                   Bank of Nev. v. Shields, 102 Nev. 616, 730 P.2d 429 (1986).


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                instruments, which really was not an issue in 1969." Indeed, when NRS
                40.459(1)(c) was introduced in 2011, its sponsor explained, the Legislature
                was changing the law so as to "prevent [[ a creditor from profiting from a
                judgment in excess of the amount the creditor paid for the right to pursue
                such a judgment." Hearing on A.B. 273 Before the Assembly Comm. on
                Commerce & Labor, 76th Leg. (March 23, 2011) (emphasis added).


                            We therefore hold that NRS 40.451 does not in and of itself set
                an assignor-assignee, consideration-based limit on FFB's recovery against
                respondents. The limitation speaks only to the final category of
                indebtedness, "all other amounts secured by the mortgage or other lien on
                the real property in favor of the person seeking the deficiency judgment,"
                and limits the measure of that category to consideration extended by the
                lender to the borrower.
                            In the district court, the parties stipulated to several legal
                questions—"[W]hether FFB's seeking a deficiency judgment is limited by
                the amount FFB paid when acquiring the Loan and Guarantees"; "Wit
                necessary, the balance due under the Loan at the time of the foreclosure
                sale, plus additional accrued interest, additional late charges and any
                collection costs, but after giving credit for the fair market value of the
                Property as of the date of the foreclosure"; and, "[Whether, based on
                applicable law, any deficiency is owed and if so, how much." Our reversal
                of the district court's judgment as to the first question necessarily reopens
                the latter two. Thus, remand is necessary, and we leave to the district
                court to consider in the first instance the issue respondents belatedly
                tender on appeal respecting limitations peculiar to Serpa's guarantee.



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                    Therefore, we reverse the district court's summary judgment and remand
                    this matter for further proceedings consistent with this opinion


                                                           idroAA-
                                                        Pickering    )


                                                   C.J.




                    Hardesty
                             S   ecA   teestS      J.




                                                   J.




                    D ouglas dr  7difel            J.




                                                   J.
                    Cherry


                                                   J.
                    Saitta




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             .. .
