This is an unofficial transcript of the hearing made by www.gotranscript.com
I spent several hours correcting it.
This transcript does not contain the social security number of any natural person.
Jed Margolin
United States Bankruptcy Court
District of Nevada
Judge: Bruce T. Beesley
Case No.: 16-50644-btb Canet Chapter 15 Petition
Adversary No.: 17-05016-btb Sadri et al v. Margolin et al
Hearing held on 6/13/2018.
Judge: Then we have Sardi versus Margolin, 1705016.
Jeff Hartman: Jeff Hartman on behalf of Patrick Canet, Your Honor.
Arthur Zorio: Good afternoon, Your Honor, Arthur Zorio, on behalf of Jed Margolin.
Michael Li: Good afternoon, Your Honor, Michael Li on behalf of Star Living Trust and Koroghli Management Trust. 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.
Judge: Ok. So this is about -- Okay, I'm sorry, go ahead.
Matthew Francis: Your Honor, Matthew Francis on behalf of Jed Margolin from the Brownstein Law Firm.
Judge: Ok, 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 judgments. Mr. Hartman.
Hartman: The original motion for summary judgment was filed by Mr.--
Judge: I'm sorry, go ahead. What? No, go ahead.
Zorio: We filled the motion for summary judgment.
Hartman: That’s right, I'm sorry, the complaint was filed by Sadri, the motion was filed by Margolin.
Judge: Okay, sorry. As I said, this is confusing.
Zorio: Would you like me to ...
Judge: Yes, please.
Zorio: Would you like me to go to the podium, Your Honor or--?
Judge: I prefer you go to the podium, but if it's cumbersome with the stuff, you can keep it there.
Zorio: 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.
Judge: 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 NRS 17 point something which required 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 complied with.
Now I do understand that there's case authority in Nevada which talks about when, if it's a Sheriff's sale, when the bid goes in, that transfers the property, but it appears to me if you have case law that is in part superseded by a statute, but that probably is not the case any longer. One of the things I thought about doing was referring this to the Supreme Court to decide for us. I don't know how people feel about that, but it occurs to me that maybe they are the ones who need to decide that issue.
Zorio: The thought had occurred to us under Rule 5 of the Nevada Rules of Appellate Procedure Your Honor certainly has the authority sua sponte to do that, to certify the question. I agree that the procedure here is a little bit confusing. Let me back up just a little bit.
Judge: Sure.
Zorio: I'll certainly address that, because I think that's one of the several issues that were brought in the motion for partial summary judgment, that Sadri and Koroghli parties, their trust filed. The motion for summary judgment that we filed, however, was related to Mr. Canet's cross-claim against Mr. Margolin. And Mr. Canet's cross-claim against Mr. Margolin only alleges two legal issues. One, it seeks to void transfers made of properties in Washoe County. Those transfers were made April 3rd, 2015, greater than 13 months before the Petition For Chapter 15 was filed on May 19th, 2016.
There's been no legal authority provided to support that those transfers should be voided and there was no response to our claim that they are proper and therefore cannot be voided under the bankruptcy code in Canet's response to our Motion For Summary judgment. Additionally, Canet's crossclaim claims that there was a violation of the automatic stay by recording the Sheriff's deed in Clark County.
[5:04]
Judge: But that's incorrect.
Zorio: It’s a ministerial act.
Judge: Yes, it's a ministerial act. It's not a violation of the stay.
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 counter motion which we feel is improper under the local rule 7056E 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 Request for Production, never responded to Interrogatories. So, therefore, we've never been informed of these new contentions being made by Mr. Canet.
Judge: And he is not here.
Zorio: Well, Mr. Hartman represents him.
Judge: I'm sorry, okay.
Zorio: I'm sorry, I'm referring to the parties Your Honor, instead of Counsel.
Judge: That's fine.
Zorio: So, the first we saw that Mr. Canet was going to make those claims was in the improper countermotion. 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 NRS 17.150(4), 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. NRS 17.150 says specifically that upon recording a judgment, "It becomes a lien."
Judge: I have the statute in front me so what portion are you looking at?
Zorio: Sure. NRS 17.150 sub 2.
Judge: It starts with a transcript of the original?
Zorio: It starts, "A transcript of the original docket or an abstract or a copy of any judgment" which is what we have here "Or a decree of a district court of the State of Nevada or district court or other court in 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." 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 comes into existence upon recording the judgment. Very clear. That's what the statute says. Now in 2011, Your Honor is absolutely correct, section 4 of the statute was added. Now the legislature knows how to make a condition precedent to something being established. The legislature knows how to say, "In order to perfect a lien, you must do one, two, three, four, five." Certainly, we see it in the mechanics lien statute, It's a very complicated statute and it states specifically what has to be done for that lien to be perfected.
In this particular statute, NRS 17.150 makes it crystal clear in section 2, "The lien is effective upon recording the judgment." Again, the language, "When so recorded 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 the 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."
[9:56]
Judge: So what does the failure to file the affidavit do?
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.
Judge: I didn't see anything in the legislative history that persuaded me one way or the other.
Zorio: Right, the legislative history talks about the mortgage crisis and say that you record a judgment and there are five John Smiths from the county, and 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 whatsoever. The purpose of the statute is to make sure you foreclose on the wrong property or establish the lien on the right property, then the purpose of the statute isn't affected in this case. We've got the right property. There's no contention that we've got the wrong property.
And beyond what is stated in the minutes from legislative history, 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 the lien comes into being. It didn't do that. We must, therefore, presume that section 2 means what it always has meant since the legislature did not change it. Can I get some water, Your Honor?
Judge: Certainly, please.
Zorio: And again, this is an important issue of Nevada law. If Your Honor believes that's something that you'd like to certify, certainly, like I said, the Nevada Rules of Appellate Procedure, I think it's subsection B, allows the court (5B) to respond and certify that.
Judge: The only problem with that is I've certified two or three matters there. A couple of them came back and they gave us some clarification. One of them came back and gave no clarification at all and answered a question which hadn't been asked. 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.
Zorio: I understand. 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.
Judge: This issue has been discussed?
[12:58]
Zorio: Yes. 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.
Judge: Give Mr. Hartman a copy. Give me a copy. I'll mark this as an exhibit.
Female Speaker: Exhibit one.
Judge: Exhibit one in this hearing. Yes, please.
Female Speaker: [inaudible 00:13:15].
Judge: Thanks.
Female Speaker: [inaudible 00:13:25].
Judge: Give one to these gentlemen over here if you have one.
Female Speaker: [inaudible 00:13:29].
Judge: Counsel, give one to these gentlemen over here who've done lots of work on this if you have an extra.
Zorio: I think I have another copy, Your Honor.
Judge: Or if you don't, well, then we'll just make them get it back.
Zorio: I do have another copy, Your Honor.
Judge: Okay.
Zorio: This is the Secure Holdings Inc vs Eighth Judicial District Court of Nevada case, Nevada Court of Appeals, July 11, 2017. 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.”
[silence]
[14:56]
Judge: Okay, thank you.
Zorio: Moving to the next set of contentions by Mr. Canet. Again, we believe the counter-motion for summary judgment should not be considered for violating the local rule. However, the other contentions are that notices of a sale were not appropriate under NRS 21.130 and NRS 21.075 and 21.076.
Judge: And why is that?
Zorio: The sheriff's office apparently did not comply with every single notice provision of the statute. Our contention as we stated in the briefs is, that's not our problem. Mr. Jed Margolin did not sell these properties.
Judge: He bought them.
Zorio: He bought them. The sheriff sold these properties. NRS 21.140(1) says, "Any officer selling without the notice presented by NRS 21.075, 21.076, and 21.130 ...”
Judge: It's like $500 I think.
Zorio: It's $500 to the aggrieved party in addition to the party’s actual damages.
Judge: Your contention is there were no actual damages because nobody got hurt. Nobody else bid on it.
[16:26]
Zorio: My recollection of the record, Your Honor, is the notices were all published in the newspapers, so fair notice was given to anybody who wanted to bid. There's been no contention that the bid was invalid, was too low or somehow fraudulently done, but our contention is more than that. The aggrieved party here, the debtor and allegedly the Sadri/Koroghli parties have no way to void the transfers based upon the sheriff's selling the properties and not giving them proper notice. Again, that's the sheriff's liability. There are cases on point discussing, essentially, the same statute that we have.
[17:20]
I discuss these in my briefs, that’s the Nixon versus Triber case where the Idaho Supreme Court held that you cannot claim the sheriff’s selling the 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 Idaho's analog to NRS 21.140. I can filter back into the papers, but if you want the Idaho code, Your Honor ...
Judge: No, that's fine. It's a similar thing, they want to protect the sheriff department. The legislature does, apparently, for not doing the sale properly.
Zorio: What it does, it protects the purchaser of the property.
Judge: Them too.
Zorio: Again, this is the sheriff selling the property. It’s not Mr. Margolin.
Judge: It's the sheriff.
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. The Nevada statute seems also to be almost right on, especially the $500 part which is interesting, with the statute that exists in California where the California Supreme Court, Helen Smith versus Randall, it’s 6 Cal 47 at 50. That 1856 case saying, again, the sheriff's sale and not giving proper notice to the sale is not a reason to invalidate the sale, rather the exclusive remedy is to go after the sheriff if there are any damages claimed.
[19:20]
The only other contention made by Mr. Canet in the inappropriate cross-motion is that Mr. Zandian still has his right 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. These sales took place in April 2015. He also filed a notice of inability to pay his debts in June of 2014.
Your Honor, I’ll conclude on that point. If you have any other questions for me with regards 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 complaints.
Judge: Okay. Is it Mr. Hartman?
[20:58]
Hartman: Thank you, Your Honor. I understand Mr. Zorio's argument. I can’t agree with it in its entirety. The provision in paragraph four regarding the affidavit of judgment of the judgment creditor is designed to provide information for noticing purposes. In the case that I cited in the brief which was the Pawlik versus Deng decision, the Supreme Court talks extensively about the rights that are being protected and those things that go to notice. 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 four, specifically as a result of the affidavit, makes the ultimate transfer of the deed to be void because of the lack of the notice that the affidavit is designed to provide. I don’t want to take the court’s time to go through the Pawlik versus Deng decision, but that was one that was entered by the Supreme Court in March of this year I believe it was. Although I don’t have firsthand knowledge of how the rules work, I think the decisions from the Court of Appeals are specifically not subject to be being cited to the Court. I don’t know that because I don’t practice in state court.
Judge: I don’t either and I don’t exactly understand the jurisdiction of the Appellate Court and we’ve only had it for what? Two years or something like that.
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 whether or not it’s even subject to being a 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. 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 the 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. That’s why I believe that 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. It may be that that’s an issue that has to be certified to the Supreme Court.
[24:35]
Judge: 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 is going to appeal, 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. It’s something I’ve thought about, I don’t know, you probably thought about it too. Does that make more sense and if you guys want to caucus and talk about that when you’re finished into it, I would be interested in doing that. Yes.
Li: Your Honor, may I have my two cents on this issue?
Judge: Certainly, yes. I’m not deciding, I’m just sorting this out here. I’m not cutting anybody off.
Li: And then, let's see if Your Honor changes your mind after that because I believe there’s a couple of things that weren’t exactly accurate, I'd like to correct the record.
Judge: No, I’m not going to cut you off.
Hartman: Now, the other thing has to do with redemption rights and I know this is sort of a esoteric argument, but the ninth circuit case that I cited which is Bialac which goes back to right after the act went by the wayside, and the code was coming into effect. It says that the trustee in the case succeeds to the rights of redemption. 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 more, but I think that if the court ultimately rules on primary issue which is the 17.150 argument that will determine how the rest of these things may fall out. Other than that, do you have any questions?
Judge: I really don’t.
Hartman: Thank you.
[26:44]
Judge: Why do you give me these difficult cases?
Hartman: What?
Judge: I said why do you give me these difficult cases? I guess is my question.
Hartman: Well, you picked the job.
Judge: [laughs] Yes, sir.
Zorio: Is it my turn?
Judge: Yes.
Li: My answer to that would be, well, because of Your Honor's brilliance and I think Your Honor is well equipped with everything we presented to really resolve this issue as to the void lien. 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. What it essentially said is that any Court of Appeal decision that are unpublished are not citable. If Your Honor wishes us to supplement that ...
Judge: No, that’s fine. I was sort of generally aware of that, but I can’t cite the ADKT.
[27:56]
Li: My iPad isn’t cooperating fully here.
Judge: No problem, take your time.
Li: I apologize.
Judge: Do you need a plug? Would that help or--?
[28:07]
Li: No, I don’t. Okay, there we go. All right. It is our position, Your Honor, and first of all, we filed a motion for partial summary judgment. And the gist of all we’re asking the court to do is to issue an order saying that the trust have two thirds undivided interest in the nine properties free and clear of Mr. Margolin's claim. This issue arose because we discovered through various filings including an 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 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 was not the attorney that was handling this case from the beginning. It was actually Mr. Adam McMillan who, in my understanding, is no longer with the office of Brownstein Hyatt. I had to reach out to Mr. McMillan to try to resolve this issue and confirm that there’s no challenge to the trust 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. We're here today and we’re asking the court to issue an order confirming our two-thirds interest based on at 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 subsection 4. Alternatively, and ...
[30:47]
Judge: Let me ask you this, the contention that's being made here is that 17.150 subsection 4, which is really a notice provision but doesn't have teeth in it particularly, since it wasn't filed, your client didn't receive notice, did your client have notice otherwise?
Li: I don't have that information, Your Honor. Based on my conversations with the client and as a matter of fact, based on the position that Mr. Margolin is taking right now, there shouldn't be notice for my client because my clients aren't affected by this sale.
Judge: Because they {indistinct}.
Li: That's the position they have now taken through their opposition is that all they sold was the chapter 15 debtor's interest. My client wasn't entitled to notice if all they were executing against was the chapter 15 debtor's interest.
Judge: That would be the one-third interest basically.
Li: That would be the one-third interest, Your Honor. 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 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 about the privacy issue of having to have a judgment debtor’s Social Security Number in a publicly recorded document.
Judge: That seems like a problem.
Hartman: Right. They changed this so that only the last four digits will 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 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 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.
Your Honor, I submit to you that you do. It's clear from the statute, the language and the statute, as amended, says that, "In addition to recording the information described in subsection 2." Subsection 2 provides essentially a form requirement. What 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 be stayed on appeal. Second, you have to record it in a county recorder's office. What do we have to include in the judgment? Sub 2 doesn't tell us about the content of the judgment.
[35:35]
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. Then you go to sub 4. 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 the language that was added in 2011. We have, in addition to recording the information described in sub 2, that’s 2011 language, we have, for the purpose of creating the lien upon the property, the real property of the judgment debtor pursuant to sub 2, that’s 2011 language. Then, in addition to personal identification numbers such as the driver 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, so here is 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 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 judgment debtor is the legal owner of that real property, that’s additional statement 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.
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, the judgment creditor, record at the time of the judgment.
Judge: Okay, wait, I'm sorry. I'm looking at sub 4.
Li: A judgment creditor who records a judgment or a decree, shall record, at that time, an affidavit of the judgment statement.
Judge: Ok, thank you.
Li: 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 Nevada Legislature in '95. Then it said, "The judgment creditor who records the judgment shall record at that time an affidavit stating-" et cetera. We do agree 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-- As Mr. Hartman and opposing counsel are nominating the representation that they sent this already, 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 then NRS 17.214 which is the statute that was used to renew a judgment. What was the issue there?
[40:45]
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. 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 I'm not positing to the court that Leven applies to what our analysis here, if it were to apply, the analysis in Leven favors the position of voiding the lien because there’s no disputed fact here Your Honor. Other than the judgment debtor's name, none of the information under sub four is included in the judgment itself. In our position, we believe Alcove and that’s at 331 Bankruptcy Reporter 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 seven debtor can challenge the judgment creditor's, the validity of the judgment creditors’ lien. The court wasn't looking at NRS 17.150 sub 4 as we are here today. However, the court was looking at essentially an identically worded statute 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 documents that were 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 it -- 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 that voids the sale because it's possible that you could have recorded the information in the judgment itself. And all Secure Holdings says is that "Well, there's no affidavit but we don't find that that to be necessarily a fatal defect in the lien.
[44:50]
That's great, but the opinion doesn't say anything about what was actually included in the judgment itself. To the extent that Your Honor even finds this helpful, 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 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.
[45:51].
Judge: Thank you very much. Reply.
Zorio: Thank you, Your Honor. First, I take my obligations very seriously to the court. I did[n’t] say that I didn't mention the case, I said I can't cite it as a non-published opinion from the Nevada Court of Appeal and I can’t-
Judge: I'm not going to do anything with it.
Zorio: Again, I didn't want that to be misunderstood. There was some discussion about what the Nevada Rules of Appellate Procedure is. I was very clear when I started that presentation, Your Honor, that I was not citing to it, can’t rely on it.
Judge: It will not in any way affect what I decide.
Zorio: Thank you, Your Honor. As a reply to oral argument goes, unfortunately I might be a little disjointed. I apologize.
Judge: Go ahead.
Zorio: It was just stated to you that 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 Sadri/Koroghli parties are making to you saying you have to strictly comply with the statute because section four says it has to be an affidavit made on personal knowledge. That's not going to be in the judgment. Those arguments don't make much sense. It's interesting as we pointed out in our brief that the September 25th, 2017 stipulated judgment that was recorded by the Sadri/Koroghli parties was not accompanied by an affidavit. But yet they are coming to this court and saying an affidavit is necessary in order to create a lien.
We have never stated that we've satisfied section 17.150 by recording the 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 NRS 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 two 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 is 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 versus Frey case, the case that's been cited with regard to the renewal judgment, in that very case at 123 Nevada, page 403, 168 Pacific third 715, 2007. So that is after section four 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 versus 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.
Judge: I'm sorry. What is that case cite again?
Zorio: Sure, Your Honor. It was Leven L-E-V-E-N versus Frey F-R-E-Y.
Judge: That's the 123 Nevada 403. Is that what it was?
Zorio: 123 Nevada, 399 pinpoint cite is 403.
Judge: Okay, thanks.
Zorio: Do you want the Pacific as well?
Judge: No.
Zorio: Counsel for Sadri/Koroghli is coming to this court saying that-- Well, we had a fight over whether they have two-thirds interest because there was an initial position that Margolin owned 100%. That was the initial position and it changed. Your Honor, there was a discussion about some negotiations with Mr. McMillen trying to resolve the issue. Let me present to you the truth of the fact of what occurred early this year.
Judge: You probably ought not to tell me what's happened in the settlement.
[50:52]
Zorio: Well, Your Honor, they are saying that we discussed with Mr. McMillen to not have to go forward with this, they filed an Adversary Complaint because they wouldn't concede that they owned two-thirds and they now they concede we have two-thirds. We've been trying to resolve this case. For months we said you can have the two-thirds, but they decided to go forward with this motion. Why? It's very curious. Once we conceded and we have in our papers that they have the two-thirds interest there is no longer a case in controversy. Yet, what do they want to do? They want to proceed to try and invalidate the sales and the lien. Why?
They got what they needed. They got what they want. There's no additional case in controversy going on. 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. Zadri [Zandian?] We don't know. Your Honor, seeing the file here, there are some interesting things that have gone on that they 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 the two-thirds interest. They can have that declaratory relief. Their alternative is moot.
Judge: Let me ask you this, does everyone concede that we are only talking about a one-third interest?
Zorio: Yes.
Judge: Counsel?
Li: Yes, Your Honor.
Judge: Mr. Hartman.
Mr. Hartman: Yes.
Judge: Okay, so the two-thirds are gone. Okay.
[52:56]
Li: Your Honor, I’d like to qualify that just in one little respect because-
Judge: That's fine, go ahead.
Li: -because Mr. Francis or Mr. Zorio (I apologize, first time I 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.
Judge: What's the case cite?
Li: That's 20 Nevada Reporter 105 at pincite 121 and 17 Pacific Reporter, 751 at pincite 759. It is an old case and also, Your Honor we cited Northern Mining Corporation v Trunz the citation being 124 f2d 14 at pincite page 18 and Tonapa Banking which was a Nevada Supreme Court case 31 Nevada Reporter 295, 103 Pacific reporter 230 at pincite 231.
Judge: That's an old case.
Li: Yes, 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 interest that was acquired at 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 for this.
[55:44]
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 from a Stipulation For Final Resolution that might be enforced against Zandian. As I understood that, Your Honor, because the entire thing we are talking about here is the two-thirds interest that they are claiming, was not that that will 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 are now making Your Honor, we can subsequently brief that, but that's not an issue--
Judge: I don't think we need to brief it. We are talking about Margolin's interest, period, which is one-third.
Zorio: I believe that's it, Your Honor. Again, I want to make our position clear, if it's Sadri/Koroghli's contention that Mr. Margolin is subject to the Stipulated Judgment where they say that they are going to pay each other, Mr. Zandian, Sadri, Koroghli, they are going to pay each other money, we strongly object to any orders saying we are 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 have never said that if Mr. Margolin gets these properties he's going to owe XYZ in their Motion for Summary Judgment. If that's going to be considered by the court then I certainly would like the opportunity to brief that.
57:41
Judge: If they have claims against Mr. Margolin, they can file proof of claim in this bankruptcy.
Zorio: Margolin is not the Debtor.
Judge: I apologize. I am not deciding this issue. I am deciding this issue, not whether there are other claims against Mr. Margolin.
Zorio: Right.
Judge: I am not deciding those.
Zorio: Your Honor, I think the only issue that we are discussing is whether or not, they get the two-thirds and we get the one-third.
Judge: That's what we are talking about. That's it.
Zorio: That's it.
Judge: Okay. All right, anything further? Have a seat, sir.
Li: May I have some reply time, Your Honor?
Judge: Sure, let him finish though.
Hartman: I would like some as well.
Judge: I understand. [crosstalk] No, no, let him finish.
Zorio: Since this will probably be 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 the favor of Margolin and dismissed on the merits as a matter of law. Again the counter-motion that Canet brought is procedurally improper. We believe that the sales were valid. The liens are valid and we have already discussed these issues. Thank you, Your Honor.
Judge: Okay, Mr. Hartman?
Mr. Hartman: I'll let Mr. Li go first.
Judge: Counsel go ahead.
[59:03]
Li: I will be extremely brief, Your Honor.
Judge: Thank you.
Li: I apologize.
Judge: No, no reason to apologize.
Li: 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 single, that singular statement essentially is dicta in Leven because again, the issue there was, the interpretation on entirely different statutes about renewing the judgment. So we don't believe Leven applies, we believe Alcove is exactly on point and that the court should find that very persuasive although understanding that Nevada law applies to this issue and we simply don't have any at this point. 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 would be subject to the Stipulated Judgment. I found it very surprising that Mr. Margolin is comparing our Stipulated Judgment to his default judgment which is a lien, which no one disputes is a lien. Liens run with the land and at the same time, you saying that, "Well, no, it's not a lien, it doesn't run with the land. This is a contractual obligation." I find those inconsistent.
[1:01:05]
With that said, I'll lay aside, Your Honor, I believe in conclusion that the parties don't dispute that my client’s two-thirds interest in the nine parcels. That should be decided as matter of law and also with respect to the validity of the sale, we believe that the sale is invalid. Thank you.
Judge: Thank you. Mr. Hartman.
[1:01:30]
Hartman: Your Honor, first procedurally, in my paper on behalf of Mr. Canet, it was filed as an opposition to the Margolin Motion for Summary Judgment and counter. 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. 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 as was stated, you have to-- The filing of the affidavit and language in sub part 4, said that it basically has to be filed contemporaneously. That information would be contained in that affidavit, is designed to provide the appropriate notes.
[1:01:51]
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. 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 court, to the Supreme Court.
Judge: I understand that and l just threw it out there because it's a realistic issue.
Hartman: It's a realistic issue. With that said I’ll sit down.
Judge: Here's what I'm going to do-- 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 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 then get to figure this out. I start working on it later this week and we'll see what we get, but just let me know in the next several days if you want it to be referred to the Supreme Court. Okay? Gentlemen, thank you very much. We'll be in recess.
Female Speaker: All rise.
[01:04:34] [END OF AUDIO]