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UNITED STATES BANKRUPTCY COURT
DISTRICT
OF NEVADA (
Case No. 16-50644-btb
Chapter 15
Adv. No. 17-05016-btb
Wednesday, June 13, 2018
2:15 p.m.
IN RE:
PATRICK CANET and JAZI GHOLAMREZA ZANDIAN,
Debtors.
FRED SADRI, as Trustee for the Star Living Trust, dated April 14, 1997, SATHSOWI T. KOROGHLI, as Managing Trustee for Koroghli Management Trust, and RAY KOROGHLI, as Managing Trustee for Koroghli Management Trust,
Plaintiffs, .
v.
JED MARGOLIN and JAZI GHOLAMREZA ZANDIAN,
Defendants.
TRANSCRIPT OF PARTIAL MOTION FOR SUMMARY JUDGMENT WITH CERTIFICATE OF SERVICE FILED BY YANXIONG LI ON BEHALF OF RAY KOROGHLI, SATHSOWI T. KOROGHLI, FRED SADRI [39]; MOTION FOR SUMMARY JUDGMENT AGAINST CROSS-CLAIMANT PATRICK CANET WITH CERTIFICATE OF SERVICE FILED BY MATTHEW D. FRANCIS ON BEHALF OF JED MARGOLIN [23]; OPPOSITION AND COUNTER MOTION FOR SUMMARY JUDGMENT WITH CERTIFICATE OF SERVICE FILED BY JEFFREY L. HARTMAN ON BEHALF OF PATRICK CANET [34] BEFORE THE HONORABLE BRUCE T. BEESLEY UNITED STATES BANKRUPTCY COURT JUDGE
APPEARANCES CONTINUED.
Audio Operator: David Lindersmith, ECR
Transcription Company:
Access Transcripts, LLC
Fishers, IN 46038
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www.accesstranscripts.com
Proceedings recorded by electronic sound recording, transcript produced by transcription service.
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APPEARANCES (Continued):
For Patrick Canet: Hartman & Hartman
By: JEFFREY L. HARTMAN, ESQ.
(775) 324-2800
For Jed Margolin: Brownstein Hyatt Farber Schreck
By: ARTHUR A. ZORIO, ESQ.
MATTHEW D. FRANCIS, ESQ.
(775) 324-4100
For Star Living Trust Wright, Finlay & Zak, LLP and Koroghli Management By: YANXIONG LI, ESQ. Trust:
(702) 475-7964
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(Proceedings commence at 2:15 p.m.)
THE COURT: And then, we have Sadri v. Margolin, 17-05016.
MR. HARTMAN: Jeff Hartman on behalf of Patrick Canet, Your Honor.
MR. ZORIO: Good afternoon, Your Honor. Arthur Zorio on behalf of Jed Margolin.
MR. LI: Good afternoon, Your Honor. Michael Li on behalf of Star Living Trust and Koroghli Management Trust, and just for the record, Your Honor, those are the only entities or persons that I'm appearing on behalf of today because those are the only persons for which the motions today involve.
THE COURT: Okay. So this is about --oh, I'm sorry.
MR. FRANCIS: Your Honor, Matthew Francis on behalf of Jed Margolin from the Brownstein Law Firm.
THE COURT: Okay. This is about as confusing a case as I've ever had, so --let's see, the first matter I have is the motion for partial summary judgment. Mr. Hartman.
MR. HARTMAN: Well, the original motion for summary judgment was filed by Mr. Steven.
THE COURT: I'm sorry, go ahead. No, go ahead, I'm -
MR. ZORIO: We filed a motion for summary judgment. Mr. Hartman -
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MR. HARTMAN: That's right, I'm sorry. The complaint was filed by Sadri. The motion was filed by Margolin.
THE COURT: Okay. Sorry.
MR. ZORIO: Everyone will get there.
THE COURT: As I said, this is confusing.
MR. ZORIO: Would you like me to proceed?
THE COURT: Yes, please.
MR. ZORIO: Okay. Would you like me at the podium, Your Honor, or -
THE COURT: I'd prefer you go to the podium, but if it's cumbersome with the stuff, you can keep it there.
MR. ZORIO: We filed a --first of all, I want to be efficient with the time. If you have specific questions, I'd be happy to answer them before I just give a presentation and
THE COURT: Well, let me --the motion for summary judgment, here is my read of it, and please feel free to correct me if I've got this wrong. There were some parcels sold at a sheriff's sale, and basically, there was a deficiency in that process because it didn't comply with N.R.S. 17-point-something, which required the actually filing of a declaration as a requirement. It's a relatively recent requirement. It came in October of 2011. But as I read this, and please feel free to challenge me if you think I'm incorrect, I don't think the sale was proper if this wasn't
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complied with.
Now, I do understand that
there's case authority in
MR. ZORIO: The thought had occurred to under Rule 5 of Nevada Rules of Appellate Procedure. Your Honor certainly has the authority sua sponte to do that to certify the question. I agree that the procedural --the procedure here is a little bit confusing, and let me back up just a little bit.
THE COURT: Sure.
MR. ZORIO: I'll certainly address that because I think that's one of the seminal issues that were brought in the motion for partial summary judgment, that Sadri Koroghli parties, their trust, filed.
The motion for summary judgment that we filed, however, was related to Mr. Canet's cross-claim agains Mr. Margolin. And Mr. Canet's cross-claim against Mr. Margolin only alleges two legal issues. One, it seeks to void transfers
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made of
properties in
Additionally,
Canet's cross-claim claims that there was a violation
of the automatic stay by recording a sheriff's deed in
THE COURT: But that's incorrect.
MR. ZORIO: It's a ministerial act.
THE COURT: Yeah, it's a ministerial act. It doesn't --it's not a violation of the stay.
MR. ZORIO: And again, there was no opposition to that particular argument in Mr. Canet's opposition to our motion for summary judgment. Instead, what Mr. Canet did is Mr. Canet brought a countermotion, which we feel is improper under Local Rule 7056(e) because it presents new claims and new arguments that were not raised in the motion for summary judgment, and furthermore, claims that were not made in the cross-claim. In addition, Mr. Canet has conceded that he's never issued initial disclosures under Rule 26, never responded to requests for production, never responded to interrogatories.
So therefore, we've never been informed of these new
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contentions being made by Mr. Canet until -
THE COURT: And he is not here.
MR. ZORIO: Well, Mr. Hartman represents Mr. Canet.
THE COURT: I'm sorry, okay.
MR. ZORIO: Yeah. Sorry, I'm referring to the parties, Your Honor, instead of counsel.
THE COURT: That's fine.
MR. ZORIO: Okay. So, you know, the first we saw that Mr. Canet was going to make those claims was in the improper countermotion. Now, we responded to that countermotion. That countermotion makes the claim, as Your Honor was beginning to discuss, that an affidavit was not filed pursuant to N.R.S. 17.1504, and the contention is that voids the sale. And they're also claiming that it invalidates the lien.
However, there are several problems with that construction. N.R.S. 17.150 says specifically that upon recording the judgment, quote, "it becomes a lien." And I have -
THE COURT: I have the statute in front of me, so what portion are you looking at?
MR. ZORIO: Sure. N.R.S. 17.150(2).
THE COURT: Starting "a transcript of the original"?
MR. ZORIO: It starts: "A transcript of the original docket or an abstract
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or a copy of any judgment" -
--which is what we have here ---
"or decree of a district court of the State of Nevada or the district court or other court of the United States in and for the District of Nevada, the enforcement of which has not been stayed on appeal, certified by the clerk of the court where the judgment or decree was rendered" -
--and here's the important two clauses, Your Honor ---
"may be recorded in the office of the county recorder in any county, and when so recorded it becomes a lien upon all the real property of the judgment debtor not exempt from execution in that county."
The statute clearly, unambiguously states the lien is
--comes
into existence upon recording the judgment.
Very clear. That's what the statute says.
Now, in 2011, Your Honor's absolutely correct, section 4 of this statute was added. Now, the legislature knows how to make a condition precedent to something being established. The legislation knows how to say, in order to perfect a lien, you must do one, two, three, four, five. Certainly, we see it in mechanic's lien statutes. It's a very complicated statute, and it states specifically what has to be done for that lien to be perfected.
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In this particular statute, N.R.S. 17.150 makes it crystal clear in section 2, the lien is effective upon recording the judgment. Again, the language, "when so reported, it becomes a lien upon all the real property of the judgment debtor not exempt from execution in that county."
Section 4 does say what it says. It says: In addition to recording the information described in section 2, a judgment creditor who records a judgment or decree for the purpose of creating a lien upon the property of the judgment debtor pursuant to section 2 shall record at that time an affidavit. It does say that, Your Honor. But nowhere in this statute does it say that that's a condition precedent to establishing a lien. Section 2 clearly, unambiguously, without question, says recording a judgment establishes it as a lien.
THE COURT: So what does the failure to file the affidavit do?
MR. ZORIO: The legislature left that open, Your Honor. Now, I've looked at the legislative history, and frankly, I don't think it's very helpful to either party looking at the legislative history.
THE COURT: I didn't see anything in the legislative history that persuaded me one way or the other, but -
MR. ZORIO: Right . In legislative history, it talks about the mortgage crisis and that, you know, say, they record a judgment and there's five John Smiths in the county and, you
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know, you get the wrong guy and you foreclose on the property. This was intended to make sure you got the right property when you foreclose. Here, there's no contention whatever. You know, the purpose of the statute is to make sure you foreclose on the wrong property [sic] or establish the lien on the right property, then the purpose of the statute isn't effective in this case. We've got the right property. There's no contention that we've got the wrong property.
You know, and beyond what is stated in the minutes for legislative history, you know, perhaps one could claim that this establishes a basis for punitive damages if someone commits the tort of slander of title and executes a lien on the wrong property, knowingly failing to comply with the statute. But when it comes to the validity of the lien, whether a lien comes into existence is clearly stated in section 2. It's unambiguous. And the legislature has the power, authority, and the knowledge how to change the circumstance of when a lien comes into being. It didn't do that. And we must, therefore, presume that section 2 means what it always has meant since the
legislature did not change it.
May I get some water, Your Honor? Apologize.
THE COURT: Oh, sure. Please.
MR. ZORIO: And again, this is
an important issue of
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Appellate Procedure, I think it's subsection (b), allows the Court --5(b) would allow the Court sua sponte to certify that.
THE COURT: Well, the only problem with that is I've certified two or three matters there. A couple of them came back, and they gave out clarification, and one of them came back and gave no clarification at all and answered a question which hadn't been asked. So maybe I could send it to them and call one of the justices and say, here, here's what you'd have to look at, but I don't know if that's effective or not.
MR. ZORIO: I understand, Your Honor. I can say that the issue has been addressed by the appellate court, but I can't discuss the opinion because it's not published.
THE COURT: This issue has been discussed?
MR. ZORIO: Yeah.
THE COURT: I have copies of it, but I don't want to present it to the Court as precedential value. The Nevada Rules of Appellate Procedure prohibit that.
THE COURT: Give Mr. Hartman a copy. Give me a copy.
I'll mark this as an exhibit.
THE CLERK: Exhibit 1, Your Honor.
THE COURT: Okay. Exhibit 1 for this hearing.
MR. ZORIO: May I approach, Your Honor?
THE COURT: Yes, please. Thanks
(Counsel and clerk confer)
THE COURT: Give one to these gentlemen over here if
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you have one.
(Counsel and clerk confer)
THE COURT: So counsel, give one to these gentlemen over here who've done lots of work on this if you have an extra.
MR. ZORIO: I think I have another copy in my -
THE COURT: Well, if you don't, well, then we'll just make them give it back, and that would be good.
MR. ZORIO: I do have another copy, Your Honor.
THE COURT: Okay.
MR. ZORIO: This is the Secured Holdings, Inc. v. Eighth Judicial District Court of Nevada case, (Nev. Ct. App. July 11, 2017). And if you look at the bottom of the first page of the printed opinion where it says, turning to petitioner's 17.150(4) argument.
(Pause)
THE COURT: Okay, thank you.
MR. ZORIO: And moving to the next set of contentions by Mr. Canet, again, we believe the countermotion for summary judgment should not be considered for violating the local rule. However, the other contentions are that notices of the sale were not appropriate under N.R.S. 21.130, N.R.S. 21.075, and 21.076.
THE COURT: And why is that?
MR. ZORIO: The sheriff's office apparently did not
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comply with every single notice provision of the statute. And our contention, as we've stated in the briefs, is that's not our problem. Mr. Jed Margolin did not sell these properties.
THE COURT: He bought them.
MR. ZORIO: He bought them. The sheriff sold these properties. N.R.S. 21.140(1) says, quote: "Any officer selling without the notice presented by N.R.S. 21.075, 21.076, and 21.130" -
THE COURT: Gets fined $500, I think.
MR. ZORIO: --"forfeits $500 to the aggrieved party, in addition to the party's actual damages."
THE COURT: So your contention is there were no actual damages because it was --nobody got hurt. Nobody else bid at it.
MR. ZORIO: Well, the --my recollection of the record, Your Honor, is the notices were all published in newspapers.
THE COURT: Right.
MR. ZORIO: So, you know, fair notice was given to anybody who wanted to bid, and there's been no contention that the bid was invalid, you know, was too low or somehow fraudulently done. But our contention is more than that. The aggrieved party --here, the debtor and, allegedly, Sadri and Koroghli parties --have no way to void the transfers based upon the sheriff's selling the properties and not giving proper
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notice.
Again, that's the sheriff's liability. And there are cases on point discussing
essentially the same statute that we have, and I've discussed these in the
briefs. That's the Nixon v. Triber case, where the
Idaho Supreme Court held that you cannot claim sheriff's sale of property and
failing to give notice of the sale invalidates the sale. The remedy --in fact,
the court in that case says the exclusive remedy is to go after the sheriff
pursuant to
THE COURT: No, that's fine. I mean, it's a similar thing. They want to put that --the sheriff's department, the legislature does, apparently, for not doing the sale properly.
MR. ZORIO: Well, what it does is it protects the purchaser of the property, and if the -
THE COURT: Them, too, but --yeah.
MR. ZORIO: Right. So if the sheriff --again, this is the sheriff selling the property. It's not Mr. Margolin.
THE COURT: It's the sheriff.
MR. ZORIO: Right. So the sheriff is keenly aware of whether or not the sheriff did the proper notices, and the statute is crystal clear that it is the sheriff's office that
is liable
to the aggrieved party for failing to give the proper notice and going forward
with the sale. And the
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on, especially the $500 part,
which is interesting, with the statute that exists in
The only other contention made by Mr. Canet in the inappropriate crossmotion is that Mr. Zandian still has his rights of redemption. We go at some length to discuss that Mr. Zandian was very well aware of the sales of property. He was represented by counsel at the time. He attempted to prevent the writ of execution from going forward. We cited that he was represented all the way through, I believe, January of 2016, when his counsel was provided leave to withdraw. And, you know, these sales took place in April of 2015. He also filed a notice of inability to pay his debts in June of 2014.
And so, Your Honor, I'll conclude on that point. If you have any other questions for me with regard to our motion and Mr. Canet's countermotion, I'll be happy to address them. And I'll let my adversary talk about his motion, and then if I can respond to his contentions.
THE COURT: Okay. Is it Mr. Hartman?
MR. HARTMAN: Thank you, Your Honor. So I understand Mr. Zorio's argument. I can't agree with it in its entirety.
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The provision in paragraph 4 regarding the affidavit of judgment of the judgment creditor is designed to provide information for noticing purposes. And in the case that I cited in the brief, which was the Pawlik v. Deng decision, the Supreme Court talks extensively about the rights that are being protected and those things that go to notice. And I think that the distinction that I must draw is that it may be that Section 1 allows the lien to stand, but I think failure to comply with the provisions of 4, specifically as a result of the affidavit, makes the ultimate transfer of the deed void because of the lack of the notice that the affidavit is designed to provide.
So I don't want to take the Court's time to go through the Pawlik v. Deng decision, but that was one that was entered by the Supreme Court is March of this year, I believe it was. And although I don't have firsthand knowledge of how the rules work, I think decisions from the court of appeals are specifically not subject to being cited to the Court. I don't know that because I don't practice in state court, but I think that's -
THE COURT: Well, I don't either, and I don't exactly understand the jurisdiction of the appellate court. We've only had it for, what, two years or something like that, and -
MR. HARTMAN: Right. So I'm not sure that the Secured Holdings decision says exactly what they say it does because I haven't had time to study it, and I don't know
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whether or not it's even subject to being part of the citation.
But the information that's included in subsection 4 of 17.150 obviously is designed for trying to give appropriate notice, and the Pawlik decision certainly contemplates that when talking about the two prongs of the analysis, if you will, in that case. The statute, number --or the case, number one, says, we recognize that a statute must be construed as to give meaning to all of its parts and language, and it should not be read in a manner that renders a part of the statute meaningless.
The noticing portion, I think, is part of the strict compliance requirement of applying the statute, and that's why I believe that even --my contention on behalf of Mr. Canet in that issue is that the lien can remain valid, but I don't believe the execution sale should stand. And it may be that that's an issue that has to be certified to the Supreme Court.
THE COURT: Let me ask both of you this. My guess is this, and I'm not trying to tell you what I'm going to decide, but I'm guessing that whatever I decide, somebody's going to appeal. And --which is fine. I have no problem with that. But probably less expensive for your clients and at least arguably quicker than going through an appeal. It might make sense to send it to the Supreme Court. I don't --I mean, that's something I thought about. I don't know, you probably thought about it, too. Does that make more sense, and if you
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guys want to caucus and talk about that when you're finished into it, I would be interested in doing that. But -
Yes?
MR. LI: Your Honor, may I have sort of my two cents on this issue?
THE COURT: Oh, certainly, yes.
MR. LI: And then -
THE COURT: I'm not deciding. I'm just throwing this out here. I'm not cutting anybody off.
MR. LI: And then, let's see if Your Honor changes your mind after that because I believe there's a couple things that weren't exactly accurate. I'd like to just correct the record for you.
THE COURT: Okay, no. I'm not trying to cut you off.
MR. HARTMAN: Now, the other thing has to do with the redemption rights. And I know this is sort of an esoteric argument, but the Ninth Circuit case that I cited, which is Bialack (phonetic), which goes back to when --right after the act went by the wayside and the code was coming into effect, says that the trustee in the case succeeds to the rights of redemption. And if the --if there was a defect in the notice in connection with this execution sale that cut off any rights of redemption, I think that that would be inappropriate and also, in my estimation, a potential violation of the automatic stay. That issue probably needs to be fleshed out a little bit
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more, but I think that if the Court --how the Court ultimately rules on the primary issue, which is the 17.150 argument, that will determine how the rest of these things may fall out.
So other than that, do you have any questions?
THE COURT: I really don't.
MR. HARTMAN: Thank you.
THE COURT: Why do you give me these difficult cases?
MR. HARTMAN: Pardon?
THE COURT: I said, why do you give me these difficult cases, I guess is my question.
MR. HARTMAN: Well, you picked the job.
THE COURT: Yes, sir.
MR. LI: Is it my turn?
THE COURT: Yes.
MR. LI: My answer to that will be, well, because of Your Honor's brilliance, and so --and I think Your Honor is well equipped with everything presented to really resolve this issue as to the void lien. And just to kind of very, very quickly --the uncitable rule, while I understand may not exactly apply in this Court, that's in ADKT 504. That's an administrative order. And what it essentially says is that any court of appeals decisions that are unpublished are not citable. And so if Your Honor wishes us to supplement that -
THE COURT: No, no, that's fine. I -
MR. LI: Absolutely.
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THE COURT: I was sort of generally aware of that, but -
MR. LI: Okay. So -
THE COURT: I can't cite you the ADKT, but -
MR. LI: And my iPad isn't cooperating fully.
THE COURT: No problem, take your time.
MR. LI: I apologize.
THE COURT: Do you need a plug? Would that help or -
MR. LI: No, I don't. Okay. There we go. All right.
So it is our position, Your Honor --and first of all, we filed a motion for partial summary judgment, and the gist of what we're asking the Court to do is to issue an order saying that the trusts have two-thirds' undivided interest in the nine properties, free and clear of Mr. Margolin's lien. Well, this issue arose because we discovered, through various filings, including a objection to the Chapter 15 petition that was filed in the underlying case, that Mr. Margolin had been taking the position that the trust never had an interest at the time that --or did not have an interest at the time that Mr. Margolin executed his judgment against the property.
That became an issue for us. What happened was we filed an adversary. We did try to resolve it. And with all due respect --and I understand that Mr. Zorio and Mr. Francis
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was not the attorney that was handling this case from the beginning. It was actually Mr. Adam McMillen, who is no longer --my understanding is no longer with the office of Brownstein & Hyatt. And so I had reached out to Mr. McMillen to try to resolve this issue and confirm that there's no challenge to the trusts' interest. He wasn't agreeable, and he filed an answer essentially saying that Mr. Margolin, in fact, had all the interest in the property. If you take a look at the prayer that's filed in the answer in this adversary proceeding, it's abundantly clear from that.
So we're here today, and we're here asking the Court to issue a order confirming our two-thirds interest based on one of two reasons: Either Mr. Margolin's sale is invalid -and really, the only reason we're asking this Court to invalidate the sale is based on the failure to comply with 17.150(4). Alternatively --and as -
THE COURT: Let me ask you this. I mean, the contention that's being made is that 17.150(4) is really a notice provision, but doesn't have teeth in it, particularly. Did your client --well, I mean, since it wasn't filed, your client didn't receive notice. Did your client have notice otherwise?
MR. LI: I don't have that information, Your Honor. And my client basically --based on my conversations with the client, and as a matter of fact, based on the position that
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Mr. Margolin's taking right now, there shouldn't be notice to my clients because my clients aren't affected by the sale. That's the position -
THE COURT: Because they have a --okay.
MR. LI: That's the position they have now taken through their opposition. It is that all they sold was the Chapter 15 debtors' interest, and so my client wasn't entitled to notice if all they were executing against was the Chapter 15 debtors' interest.
THE COURT: And that would be the one-third interest, basically.
MR. LI: That would be the one-third interest, Your Honor. And so getting back to the void versus valid sale issue. The requirements under subsection 4, Your Honor, actually came about in a 1995 amendment. In 1995, the legislature added the requirement that the judgment creditor who records a judgment or decree shall record, at that time, an affidavit stating the name and address of the judgment debtor, the judgment debtor's driver's license number, the state of issuance, the judgment debtor's Social Security Number, and the judgment debtor's date of birth, if known to the judgment creditor. If any of the information is not known, the affidavit must include a statement of fact.
Moving forward, in 2007, the legislature made a limited change to that. All they did was, being concerned
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about the privacy issue of having to have a judgment debtor's Social Security Number in a publicly recorded document -
THE COURT: Seems like a problem.
MR. LI: Right. They changed it so that only the last four digits would be required. That's how they amended the statute then.
Then, fast-forward to 2011 by SB 186 and keeping in mind that the sale here took place in April 2015, that then means the sale was operating under this amended statute. The amendment to the language was to make clear that this information has to be in the judgment or the affidavit. Mr. Margolin makes the issue here as being whether or not he has to record --or he had to record an affidavit. That's not really the issue, Your Honor.
To be clear, the issue is whether or not you have to include the information under subsection 4 in either the affidavit or the judgment itself. And, Your Honor, I submit to you that you do. It's clear from the statute. The language in the statute, as amended, says that in addition to recording the information described in subsection 2, subsection 2 provides essentially a form requirement.
What do you have to do to create a valid lien? Subsection 2 tells us, first, it has to be one of the three instruments prescribed. And if you choose to do it by a judgment, it has to be certified and the judgment has to not
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be stayed on appeal, okay. Second, you have to record it in the county recorder's office.
Well, what do we have to include in the judgment? Sub (2) doesn't tell us about the content of the judgment. At most, it can be interpreted as, well, we expect the judgment to be what it is, findings, conclusions, an order from the Court as to what the relief is. And then, you go to sub 4, okay. Here's the information that we need to include in the judgment or the affidavit. I don't care where you include it. It has to be in there somewhere. "for the purpose of creating a lien" --by the way, that's language that was added in 2011. So we have --in addition to recording the information described in sub 2 --that's 2011 language --we have for the purpose of creating a lien upon the real property of the judgment debtor pursuant to sub 2 --that's 2011 language.
And then, in addition to personal identification numbers, such as the driver's license number or the Social Security Number, in 2011, the legislature says that, we're concerned about you just recording this in the county recorder's office, okay, so here's what you have to do if you're trying to assert a lien against real property. If the lien is against the real property, which the judgment debtor owns at the time of the affidavit a judgment is recorded, the assessor parcel number and the address of the real property and a statement that the judgment creditor has confirmed that the
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judgment debtor is the legal owner of that real property. That's additional statements, information that has to be in the judgment or the affidavit or whatever is recorded in order to create a lien.
Temporally, when you look at the language in sub 2 and in sub 4, when you consider the temporal requirement, I have to record this at the same time, concurrently, contemporaneously, okay. So it doesn't make sense to say that I can record a judgment that's automatically a lien and then later record the information, although the information in sub 4 says that you shall, judgment creditor, record at the time of the judgment.
THE COURT: Okay. Show me where that is. I'm sorry.
MR. LI: Okay. So -
THE COURT: Looking at sub 4.
MR. LI: A judgment creditor who records a judgment or decree shall record, at that time, an affidavit of judgment stating -
THE COURT: Okay, thank you.
MR. LI: --the information. And
by the way, that's not amended language, Your Honor. That was true at the time that
this additional affidavit requirement was added to the statute by the
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plain language applies here.
And the way to reconcile sub 2 and sub 4 so that they're read harmoniously is very obvious from the language of the statute itself. One provides that you have to record a judgment. The other provides that, well, in addition to whatever information you have in the judgment, here's the additional information that you have to include in order --for the purpose of creating a lien.
There's one case --and as Mr. Hartman and -opposing counsel is not making the representation that they've sent this or they've used it in their briefs, but there's one case that was cited by Mr. Margolin on this issue, and it's the Leven case. In Leven, the Nevada Supreme Court was looking at 17.214, which is the statute that was used to renew a judgment. What was the issue there? The issue there was, does the judgment creditor have to strictly comply with the statute with respect to three acts: filing the renewed judgment, serving the renewed judgment, and recording the renewed judgment, okay. The court said, yes, you have to timely file and serve, and as to recording, yes, if the original judgment is recorded. The original judgment, by the way, was recorded in '96. The court decided that strict compliance actually is required with a statute like this.
So while we're not --I'm not positing to the Court that Leven applies to what --our analysis here, if it were to
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apply, the analysis in Leven favors the position of voiding the lien because there's no disputed fact here, Your Honor, that other than the judgment debtor's name, none of the information under sub 4 is included in the judgment itself.
And in our position, we believe Alcove --and that's at 331 B.R. 885, starting at page 894. That's a Ninth Circuit Appellate --excuse me, bankruptcy appellate panel decision from the Ninth Circuit. The issue there was whether or not the Chapter 7 debtor can challenge the judgment creditor's --the validity of the judgment creditor's lien. The court wasn't looking at N.R.S. 17.150(4), as we are here today. However, the court was looking at, essentially, an identically worded statute that --in California Civil Procedure Code 697.310.
The court noted that based on the California case law and based on the plain language of that statute and the fact that it's undisputed in that case, that the debtor's Social Security Number wasn't included in the affidavit or the judgment or the mechanism, the document that's used to create the lien, we conclude that the judgment did not create a lien. We think the facts in Alcove is exactly on point. We think the Court should find that very persuasive.
The only other thing I'll mention about the void or valid sale issue is just from glancing at, like --the distinction I'm trying to make, Your Honor, is we're not trying to say that just because you don't record an affidavit, then
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that voids the sale because it's possible that you could have recorded the information in the judgment itself, okay. And all Secured Holdings says is that, well, there's no affidavit, but we don't find that to be necessarily a fatal defect in the lien. That's great, but the opinion doesn't say anything about what was actually included in the judgment itself.
So to the extent that Your Honor even finds this helpful is --well, it's not helpful, Your Honor. It's not persuasive. It doesn't contain sufficient information for Your Honor to resolve this issue.
Alternatively, if Your Honor, at the end of the day, finds that despite missing all of that information, that that is still a valid lien and the sale is valid, the parties don't dispute and Your Honor may issue an order as a matter of law confirming that the trust had two-third undivided interest in the property.
With that said, unless Your Honor has any questions, I will go ahead and submit the rest on my briefs.
THE COURT: Thank you very much. Reply.
MR. ZORIO: Thank you, Your Honor. First, I take my obligations very seriously to the Court. I did say that I didn't mention the case. I said I can't cite it. It's an unpublished opinion from the Nevada Court of Appeal and I can't cite it.
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THE COURT: I'm not going to do anything with it.
MR. ZORIO: So I --and I didn't
want that to be misunderstood. You know ,there was
some discussion about what the
THE COURT: It will not, in any way, affect what I decide.
MR. ZORIO: Thank you, Your Honor. As reply to oral argument goes, unfortunately, I might be a little disjointed. I apologize.
THE COURT: Go ahead.
MR. ZORIO: It was just stated to you that, you know, perhaps the affidavit doesn't have to be filed if the information is in the judgment. Well, that kind of dissolves the whole argument that the Sadri and Koroghli parties are making to you, saying you have to strictly comply with the statute, because section 4 says it has to be an affidavit made on personal knowledge. That's not going to be in the judgment. So it doesn't make --those arguments don't make much sense.
You know, it's interesting, as we've pointed out in our brief, that the September 25th, 2017 stipulated judgment that was recorded by the Sadri and Koroghli parties was not accompanied by an affidavit, but yet they're coming to this Court and saying an affidavit is necessary in order to create a
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lien. We have never stated that we've satisfied Section 17.150 by recording a judgment. That's never been our position. Our position is, in order to perfect the lien and have a valid sale, you don't need that affidavit.
And counsel reminded us that
N.R.S. 17.150 has been amended three times, three times, and yet the
legislature has never said that in order to create a lien, you must file the affidavit.
They've left section 2 the same. The statement of the renewal statute, the
renewal statute specifically requires conditions precedent to renewing the
judgment. Saying that strict compliance with the renewal statute also was an
argument that applies to Section 17.150 doesn't make a lot of sense because
17.150(2) --and I'll quote from the Leven v. Frey case, the case that has been
cited with regard to the renewal judgment. In that very case at 123
715 (2007) --so that is after section 4 was added in '95 -the Supreme Court says:
"NRS 17.150(2) creates a lien on a debtor's real property in a particular county when a judgment is recorded in that county."
Leven v. Frey did not say, in order to create a lien on debtor's property, you have to record the lien and the affidavit. It didn't say that because the statute doesn't say that.
THE COURT: I'm sorry, what was the case cite again?
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MR. ZORIO: Sure, Your Honor. It was Leven, L-E-V-E-N, versus Frey, F-R-E-Y.
THE
COURT: That's 123
MR.
ZORIO: 123
THE COURT: Okay, thanks.
MR. ZORIO: Do you want the Pacific, as well?
THE COURT: No.
MR. ZORIO: Counsel for Sadri and Koroghli is coming to this Court saying that, well, we had to fight over whether they have two-thirds interest because there was initial position that Margolin owned 100 percent. That was the initial position, and it changed. And, Your Honor, there was discussion about settlement negotiations with Mr. McMillen,trying to resolve the issue. Let me present you the truth of the fact of what occurred earlier this year.
THE COURT: You probably ought not tell me what's happened in settlement.
MR. ZORIO: Well, Your Honor, they're saying that, well, we discussed with Mr. McMillen to not have to go forward with this. We've filed an adversary complaint because they wouldn't concede that we have two-thirds, and now they're conceding we have two-thirds. We've been trying to resolve this case and --you know, for months, we've said, you can have the two-thirds, but they've decided to go forward with this
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motion. Why is very curious.
Once we conceded, and we have in our papers, that they have the two-thirds interest, there's no longer a case in controversy. But yet, what do they want to do? They want to proceed to try and invalid the sales and the liens. Why? They got what they need. They got what they want. There's no additional case in controversy there, Your Honor. They don't have standing to assert that the liens are invalid or the sales are void. It seems odd. Are they trying to make the argument for Mr. Sadri? We don't know. Your Honor's seen the file here. There's some interesting things that have gone on that have been put in the record.
But the important thing to know is with regard to the motion for partial summary judgment, we've conceded that the record indicates they have two-thirds interest. They can have their two-thirds interest. They can have that declaratory relief. Their alternative is moot.
THE COURT: Let me ask you this.
MR. ZORIO: Yes, Your Honor.
THE COURT: Does everyone concede that we're only talking about a one-third interest?
MR. ZORIO: Yes.
THE COURT: Counsel?
MR. LI: Yes, Your Honor.
THE COURT: Mr. Hartman?
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MR. HARTMAN: Yes.
THE COURT: Okay. So the two-thirds are gone, okay.
MR. LI: Your Honor, I'd like to qualify that just, you know, one little respect because -
THE COURT: That's fine. Go ahead.
MR. LI: --because Mr. Francis -
MR. ZORIO: Zorio.
MR. LI: I apologize, sorry.
MR. ZORIO: No worries.
MR. LI: First time I've met him. Mr. Zorio reminded me of the stipulated judgment. And as a matter of fact, we cited in our brief the case of Rosina v. Trowbridge. That's on page 8 of our motion for summary judgment.
THE COURT: What's the case cite?
MR. LI: That's 20
THE COURT: That's an old case.
MR. LI: Yeah, that is a very old case, Your Honor. And unfortunately, I didn't locate through my research any better case. That essentially says that when you have an execution sale, the doctrine of caveat emptor applies. What that means in this context is that the sale --the interest
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that was acquired as such sale is subject to any rights and equities of third parties which are capable of being enforced against the judgment debtor. It is our position that we have the two-thirds interest free and clear. And additionally, if this Court finds that Mr. Margolin's sales are valid and he has one-third interest of the three parcels that were sold, those are subject to the stipulated judgment pursuant to this doctrine and these cases.
Your Honor, unless Mr. Zorio can refresh my memory, I don't remember any briefing in opposition to this. So -
MR. ZORIO: As I understood the contention regarding, in their brief, any interest Margolin acquired through his execution sales must be subject to the rights of plaintiff and the stipulation for final resolution that might be enforced against Zandian. As I understood that, Your Honor, because the entire thing we're talking about here is two-thirds interest that they're claiming, was not that we be subject to the personal claims that are in that stipulated judgment. Certainly, personal obligations to pay one another according to that stipulated judgment are not covenants that run with the land. They are not covenants that are going to bind a successor to the property. And if that's an argument that they're now making, Your Honor, you know, we can subsequently brief that, but that's not an issue that I saw raised here.
THE COURT: I don't think we need to brief it. And
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we're talking about Margolin's interest, period, which is one-third.
MR. ZORIO: I believe that's it, Your Honor. Again, I want to make our position clear. If it's Sadri and Koroghli's contention that Mr. Margolin is subject to, you know, the stipulated judgment where they say they're going to pay each other --Mr. Zandian, Sadri, Koroghli, they're going to pay each other money, we strongly object to any order saying we're subject to that because we cannot be subject to that. That is not a condition running with the land. We have not agreed to be subject to that. And that's not something that was raised in the briefs. They've never said that if Mr. Margolin gets these properties, he's going to owe X, Y, Z in their motion for summary judgment. And if that's going to be considered by the Court, then I certainly would like the opportunity to brief that.
THE COURT: And if they have claims against Mr. Margolin, they can file a proof of claim in this bankruptcy.
MR. ZORIO: Margolin is not the debtor.
THE COURT: Oh, I apologize.
MR. ZORIO: That's okay, Your Honor.
THE COURT: They can --I am not deciding this issue. I'm deciding this issue, not whether there are other claims against Mr. Margolin.
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MR. ZORIO: Right.
THE COURT: I'm not deciding those.
MR. ZORIO: That's my understanding, Your Honor. I think the only issue that we're discussing is whether or not they get the two-thirds and we get the one-third, and I think -
THE COURT: That's what we're talking about. That's it.
MR. ZORIO: And that's it.
THE COURT: Okay. All right. Anything further? Have a seat, sir.
MR. LI: May I have some reply time, Your Honor?
THE COURT: Sure. Let him finish, though.
MR. HARTMAN: And I'd like some, as well, Your Honor.
THE COURT: I understand.
MR. LI: And I -
THE COURT: No, no, let him finish.
MR. ZORIO: Yeah. Since this is probably my last time up, Your Honor, just in conclusion, our motion for summary judgment was not substantively replied to by Canet, and it should be granted. The cross-claim against Margolin should be adjudicated in favor of Margolin and dismissed on the merits as a matter of law. Again, the countermotion that Canet brought is procedurally improper, and we believe that the sales were valid, the liens are valid, and we've already discussed these
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issues. Thank you, Your Honor.
THE COURT: MR. Hartman?
MR. HARTMAN: I'll let Mr. Xi [sic] go first.
THE COURT: Counsel, go ahead.
MR. LI: I will be extremely brief, Your Honor. I apologize.
THE COURT: No, no. No reason to apologize.
MR. LI: The --Mr. Zorio's argument confused me a little bit because he seems
to be now attributing us as relying upon the Leven case. We're not saying Leven
applies. We believe Leven doesn't apply. And really, there's no other authority
in Mr. Zorio's opposition that supports their interpretation.
And as a matter of fact, that citation, that singular statement essentially is
dicta in Leven because, again, the issue there was the interpretation of an
entirely different statute about renewing the judgment. And so we don't believe
Leven applies. We believes Alcove is exactly on point, and the Court should
find that very persuasive, although understanding that
So with that said, just very briefly, I believe our motion for summary judgment adequately addressed the fact that --it's our position, as well, that whatever interest Mr. Margolin obtained, that will be subject to the stipulated judgment. I found it very surprising that Mr. Margolin is
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comparing our stipulated judgment to his default judgment, which is a lien, which no one disputes is a lien, and liens run with the land. And at the same time, he's saying that, well, no, it's not a lien, it doesn't run with the land. This is a contractual obligation. And so I find those inconsistent.
So with that said, I'll --like I said, Your Honor, I believe, in conclusion, that the parties don't dispute that my clients' two-thirds interest in the nine parcels, that should be decided as a matter of law. And also, with respect to the validity of the sale, we believe that the sale is invalid.
Thank you.
THE COURT: Thank you. Mr. Hartman.
MR. HARTMAN: Your Honor, first, procedurally, the -in my paper on behalf of Mr. Canet, it was styled as an opposition to the Margolin motion for summary judgment and counter. And in the paper, I said, from my perspective, the issues were essentially the same, and that comes down to the very simple question of whether or not there was compliance with 17.150 in its entirety. And so I think that we've certainly fully fleshed out the issues.
Both Sadri and Koroghli and me, on behalf of Canet, take the position that you --as was stated, you have to --the filing of the affidavit and the language in subpart 4 says that it basically has to be filed contemporaneously. And that
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information that would be contained in that affidavit is designed to provide the appropriate notice. And although Mr. Zandian may have had the notice that Mr. Zorio referred to, we're standing in the shoes of Mr. Canet at this point. And I believe he's entitled to take the position that there wasn't compliance with the statute. So with that, if the Court would require any supplemental briefing from either Mr. Zorio or --from me and Mr. Zorio, I'd be happy to provide that. I haven't had time to converse with Mr. Canet, obviously, with respect to certifying the matter to the Supreme Court.
THE COURT: And I understand that. And I just kind of threw it out there because -
MR. HARTMAN: Well, no, it's -
THE COURT: It's a realistic issue.
MR. HARTMAN: It's a realistic issue. So with that said, I'll sit down.
THE COURT: So here's what I'm going to do. I'm going to --I hate taking stuff under advisement, but this is, by far, in a long time, the most convoluted case I've had. And that's not any of your fault. That's kind of the process that went through to get us all here.
I'm going to order a transcript of this. I'm going to review this. If you decide you wish to have it sent to the Nevada Supreme Court, you don't offend me if you do that. They
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then get to figure this out. But I'll start working on it later this week, and we'll see where we get. So --but just let me know in the next several days if you want it to be referred to the Supreme Court.
MR. HARTMAN: Sure.
THE COURT: Okay?
MR. HARTMAN: Thank you, Your Honor.
THE COURT: Gentlemen, thank you very much.
MR. ZORIO: Thank you, Your Honor.
MR. LI: Thank you, Your Honor.
THE COURT: We'll be in recess.
THE CLERK: All rise.
(Proceedings concluded at 3:19 p.m.)
* * * * *
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C E R T I F I C A T I O N
I, Alicia Jarrett, court-approved transcriber, hereby certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-entitled matter.
____________________________
ALICIA JARRETT, AAERT NO. 428
DATE: June 21, 2018
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