-CWH Greystone Bank, a North Carolina chartered bank v. Rosenson et al, No. 2:2011cv00838 - Document 28 (D. Nev. 2011)
Court Description: ORDER Denying 10 Motion to Dismiss Counterclaims. FURTHER ORDERED that 17 Motion for Leave to File First Amended Answer and Counterclaim is GRANTED. FURTHER ORDERED that Defendants/Counterclaimants Bernard Rosenson and Cynthia Rosenson shall file their first amended answer and counterclaim within 10 days of the date of this order. Signed by Judge Philip M. Pro on 9/15/11. (Copies have been distributed pursuant to the NEF - MMM)
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-CWH Greystone Bank, a North Carolina chartered bank v. Rosenson et al Doc. 28 1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 6 7 8 9 10 11 *** ) GREYSTONE BANK, ) ) Plaintiff, ) ) v. ) ) BERNARD ROSENSON and CYNTHIA ) ROSENSON, ) ) Defendants. ) ) 2:11-CV-00838-PMP-CWH ORDER 12 13 Presently before the Court is Plaintiff/Counterdefendant Greystone Bank’s 14 Motion to Dismiss Counterclaims (Doc. #10), filed on June 30, 2011. 15 Defendants/Counterclaimants Bernard Rosenson and Cynthia Rosenson filed an Opposition 16 (Doc. #11) on July 18, 2011. Plaintiff filed a Reply (Doc. #14) on July 28, 2011. 17 Also before the Court is Defendants/Counterclaimants Bernard Rosenson and 18 Cynthia Rosenson’s Motion for Leave to File First Amended Answer and Counterclaim 19 (Doc. #17), filed on August 9, 2011. Plaintiff/Counterdefendant Greystone Bank filed an 20 Opposition (Doc. #25) on August 26, 2011. Defendants/Counterclaimants Bernard 21 Rosenson and Cynthia Rosenson filed a Reply (Doc. #27) on September 6, 2011. 22 I. BACKGROUND 23 Plaintiff Greystone Bank is a North Carolina chartered bank. (Pet. for Removal 24 (Doc. #1), Ex. B [“Compl.”] at 1.) In November 2007, Greystone Bank extended a 25 $15 million loan to non-party BR Summerlin Property, LLC (“BR Summerlin”), a Nevada 26 limited liability company, to fund a refinance of a nursing facility in Las Vegas, Nevada. Dockets.Justia.com 1 (Id. at 1-2.) To secure the loan, in addition to other collateral, Defendants Bernard and 2 Cynthia Rosenson executed guarantees in favor of Greystone Bank. (Id. at 4-5.) The initial 3 guarantees were for twenty-five percent of the loan amount. (Id. at 5.) 4 Greystone Bank and BR Summerlin agreed to several extensions of the maturity 5 date and other amendments to the various loan documents. (Id. at 5-7.) In January 2010, 6 the fourth amendment required the Rosensons to increase their guarantees from twenty-five 7 percent to one hundred percent of the amount owed to Greystone Bank. (Id. at 7.) 8 9 10 11 On September 8, 2010, Greystone Bank recorded a Notice of Breach and Election to Sell Under Deed of Trust with the Clark County Recorder. (Id. at 8.) In January 2011, BR Summerlin filed for bankruptcy. (Id.) Greystone Bank thereafter brought this suit in Nevada state court against the 12 Rosensons on the guarantees. The Rosensons answered and counterclaimed. In their 13 counterclaim, the Rosensons allege that Bernard Rosenson created BR Summerlin to 14 facilitate his business of purchasing skilled nursing facilities and leasing them to third party 15 operators. (Ans. & Countercl. (Doc. #6) at 12.) BR Summerlin initially financed the 16 nursing facility at issue in this case through the original seller. (Id.) However, BR 17 Summerlin needed long term financing, and BR Summerlin wished to obtain a Department 18 of Housing and Urban Development (“HUD”) loan. (Id. at 13.) Bernard Rosenson 19 therefore sought out the assistance of a HUD loan expert. (Id.) 20 The Rosensons allege that in 2007, Greystone Bank, through its sales agent, 21 Ephraim Kutner (“Kutner”), offered to assist in obtaining a HUD loan. (Id.) The 22 Rosensons allege that Kutner made various representations to them, including that 23 Greystone Bank had a special relationship with HUD and that BR Summerlin would qualify 24 for HUD refinancing. (Id.) Based on these promises, the Rosensons and BR Summerlin 25 chose to forego other traditional financing and obtained a short-term loan from Greystone 26 Bank to tide them over until the HUD loan was approved. (Id.) According to the 2 1 Rosensons, Greystone Bank represented to Bernard Rosenson that it could obtain HUD 2 financing within a year and it could extend the maturity date if HUD financing was not 3 obtained within that time. (Id.) The Rosensons allege that based on these promises, BR 4 Summerlin took out the loan and the Rosensons personally guaranteed the loan. (Id. at 14.) 5 The Rosensons allege that the HUD financing never went through and Greystone 6 Bank knew or should have known that BR Summerlin was ineligible for HUD financing. 7 (Id.) According to the Rosensons, Greystone Bank nevertheless continued to represent that 8 it would extend the loan maturity date until HUD financing was obtained, but in January 9 2010, Greystone Bank threatened to foreclose after the February 1 maturity date. (Id. at 10 15.) BR Summerlin requested an extension of the maturity date, at which point Greystone 11 Bank agreed only if BR Summerlin assigned its rents to Greystone Bank and the Rosensons 12 increased their personal guarantees from twenty-five to one hundred percent. (Id. at 16.) 13 According to the Rosensons, they had no choice but to agree to these terms because they 14 could not sell the property or obtain alternative financing in the short time before the 15 maturity date. (Id.) 16 The Rosensons allege that by March 2010, it became clear that Greystone Bank 17 was not going to be able to obtain HUD financing for BR Summerlin, and Greystone Bank 18 began demanding BR Summerlin obtain alternative financing or sell the property by the 19 new maturity date in June 2010. (Id.) In April 2010, the Rosensons obtained an offer for 20 $12 million in refinancing, but they allege Greystone Bank refused to finance the remaining 21 $3 million, and thus the $12 million loan offer failed. (Id.) 22 As stated above, Greystone Bank subsequently initiated foreclosure proceedings, 23 and BR Summerlin filed for bankruptcy. BR Summerlin’s bankruptcy filing imposed the 24 automatic stay on Greystone Bank’s foreclosure filing. (Id. at 17.) The bankruptcy case is 25 proceeding in this district. (Id.) Based on these allegations, the Rosensons assert 26 counterclaims in this action for negligence, professional negligence, breach of fiduciary 3 1 duty, negligent misrepresentation, constructive fraud, and breach of the covenant of good 2 faith and fair dealing in both tort and contract. 3 Plaintiff/CounterDefendant Greystone Bank now moves to dismiss the 4 Rosensons’ counterclaims. First, Greystone Bank argues that the Court should dismiss all 5 of the counterclaims for lack of subject matter jurisdiction because the Rosensons have 6 named the wrong party as counterdefendant. According to Greystone Bank, a 2009 7 engagement letter demonstrates a separate company, Greystone Servicing Corp., Inc. 8 (“Greystone Servicing”), promised to obtain HUD financing for BR Summerlin. Greystone 9 Bank thus argues it is not the proper counterdefendant. Second, Greystone Bank argues that 10 the counterclaims fail to state a claim because the claims seeking affirmative relief against 11 Greystone Bank belong to BR Summerlin, not the Rosensons. 12 II. MOTION TO DISMISS (Doc. #10) 13 In considering a motion to dismiss, “all well-pleaded allegations of material fact 14 are taken as true and construed in a light most favorable to the non-moving party.” Wyler 15 Summit P’ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998) (citation 16 omitted). However, the Court does not necessarily assume the truth of legal conclusions 17 merely because they are cast in the form of factual allegations in the plaintiff’s complaint. 18 See Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). There is a 19 strong presumption against dismissing an action for failure to state a claim. Ileto v. Glock 20 Inc., 349 F.3d 1191, 1200 (9th Cir. 2003). A plaintiff must make sufficient factual 21 allegations to establish a plausible entitlement to relief. Bell Atl. Corp. v Twombly, 550 22 U.S. 544, 556 (2007). Such allegations must amount to “more than labels and conclusions, 23 [or] a formulaic recitation of the elements of a cause of action.” Id. at 555. 24 A. Subject Matter Jurisdiction 25 Greystone Bank relies on two contentions for its position that it is not the proper 26 defendant: (1) the 2009 engagement letter shows it was Greystone Servicing, not Greystone 4 1 Bank, that agreed to obtain HUD financing for BR Summerlin; and (2) Kutner was not 2 employed by Greystone Bank. As to the first contention, even if the Court considered the 3 unauthenticated 2009 engagement letter attached to Greystone Bank’s motion to dismiss, it 4 does not support dismissal of the Rosensons’ claims. The Rosensons allege 5 misrepresentations dating back to 2007. A 2009 engagement letter thus would have little 6 bearing on those allegations. Further, even if Greystone Servicing made misrepresentations 7 to BR Summerlin, that does not preclude the possibility that Greystone Bank also made 8 misrepresentations. Additionally, Greystone Bank provides no argument or evidence about 9 the relationship between Greystone Bank and Greystone Servicing. Thus, the Court cannot 10 determine at this stage of the proceedings whether Greystone Bank is liable for any 11 misrepresentations made by Greystone Servicing. With respect to the second contention, 12 Greystone Bank states that Kutner was never its employee, but it provides no evidence to 13 that effect. Consequently, the Court will disregard this statement. Viewing the facts pled in the counterclaims in the light most favorable to the 14 15 Rosensons, the Rosensons have pled facts sufficient to support a plausible entitlement to 16 relief against Greystone Bank. The Court therefore will deny the motion to dismiss on this 17 basis. 18 B. Lack of Standing 19 Greystone Bank next argues the Rosensons lack standing to bring the asserted 20 counterclaims because those claims belong to the debtor, BR Summerlin, not the Rosensons 21 individually as members of the limited liability company. Greystone Bank contends that 22 any representations made to Bernard Rosenson were made to him in his capacity as 23 manager of BR Summerlin. Greystone Bank notes that in the bankruptcy proceeding, BR 24 Summerlin has retained its causes of action. Greystone Bank thus contends BR Summerlin 25 is the real party in interest. Greystone Bank argues the Rosensons can raise affirmative 26 defenses to Greystone Bank’s claims against them, but cannot assert independent causes of 5 1 2 action against Greystone Bank. The Rosensons respond that they have both direct and derivative claims against 3 Greystone Bank. As for direct claims, the Rosensons contend that they are not bringing suit 4 as members of the LLC, but as guarantors based on misrepresentations made directly to 5 them based on their own personal contracts with Greystone Bank. The Rosensons note that 6 Greystone Bank made the alleged misrepresentations to Bernard Rosenson, both as manager 7 of BR Summerlin and as a personal guarantor. The Rosensons also contend they can bring 8 BR Summerlin’s claims derivatively because they are BR Summerlin’s sole members and 9 BR Summerlin is insolvent. 10 Viewing the facts pled in the counterclaims in the light most favorable to the 11 Rosensons, the Rosensons have alleged sufficient facts to support a plausible entitlement to 12 relief against Greystone Bank. The counterclaims allege Greystone Bank made 13 misrepresentations to Bernard Rosenson that induced the Rosensons to agree to the loan as 14 managers for or members of BR Summerlin, and also to enter into personal contracts 15 directly with Greystone Bank as guarantors. (Ans. & Countercl. at 14 (“Based on 16 Greystone’s representations that the HUD application would be successful, the Rosensons 17 signed a personal guarantee for 25% of the Bridge Loan.”); see also id. at ¶¶ 53, 56, 58-59, 18 67, 69-71, 76, 81-83, 90-92, 95, 99-100, 104-06, 113, 117-19.) The Rosensons thus allege a 19 direct injury to themselves independent of harm to BR Summerlin. Mid-State Fertilizer Co. 20 v. Exch. Nat’l Bank of Chicago, 877 F.2d 1333, 1336-37 (7th Cir. 1989) (“When 21 [guarantors] suffer direct injury–injury independent of the firm’s fate–they may pursue their 22 own remedies.”). Greystone Bank’s arguments that Bernard Rosenson was acting only as 23 manager of BR Summerlin, or that the Rosensons seek damages only as members of the 24 limited liability company for harm to the company, are meritless. Each of the Rosensons’ 25 counterclaims are directed at their personal liability under the guarantees. The Court 26 therefore will deny the motion to dismiss. 6 1 2 III. MOTION TO AMEND (Doc. #17) The Rosensons move to amend their Answer and Counterclaim, seeking to add 3 Greystone Servicing as a party, to assert intentional misrepresentation claims, and to add 4 affirmative defenses of offset, non-disclosure, and failure of consideration. Greystone Bank 5 does not oppose amendment to add the affirmative defenses. (Opp’n to Mot. for Leave to 6 File First Am. Ans. & Countercl. (Doc. #25) at 11.) However, Greystone Bank opposes 7 amendment to add Greystone Servicing and intentional misrepresentation claims because 8 Greystone Bank will have to litigate the same issues in two forums, here and in BR 9 Summerlin’s bankruptcy proceeding. Greystone Bank also argues the motion is made in 10 bad faith because the Rosensons knew that BR Summerlin was proposing a reorganization 11 plan under which it would retain its own causes of action in the underlying bankruptcy 12 proceeding. Finally, Greystone Bank argues amendment is futile because the Rosensons 13 lack standing, as argued above. 14 The Rosensons respond that the Court should reject Greystone Bank’s complaints 15 about having to defend in two forums because Greystone Bank initiated this action after the 16 bankruptcy proceeding had commenced, and thus it created the situation of litigation in two 17 forums. The Rosensons also argue they have acted in good faith because Greystone Bank 18 made the alleged misrepresentations directly to Bernard Rosenson as a guarantor, and also 19 because it was Greystone Bank’s own arguments in moving to dismiss which led the 20 Rosensons to move to add Greystone Servicing as a new party. The Rosensons argue there 21 is no undue delay or prejudice, as this case is in its infancy. Finally, the Rosensons argue 22 their new claims are not futile, reiterating their above arguments that they have direct and 23 derivative claims against Greystone Bank and Greystone Servicing. 24 Generally, a party may amend his or her pleading once “as a matter of course” 25 within twenty-one days after serving it, or twenty-one days after service of a responsive 26 pleading or motion. Fed. R. Civ. P. 15(a)(1). In all other cases, a party may amend its 7 1 pleading only by leave of court or by written consent of the adverse party. Fed. R. Civ. P. 2 15(a)(2). “The Court should freely give leave when justice so requires.” Id.; see also 3 Foman v. Davis, 371 U.S. 178, 182 (1962) (“Rule 15(a) declares that leave to amend ‘shall 4 be freely given when justice so requires’; this mandate is to be heeded.”). Courts consider 5 five factors to assess whether to grant leave to amend: (1) bad faith, (2) undue delay, (3) 6 prejudice to the opposing party, (4) futility of amendment, and (5) whether the moving party 7 previously has amended his pleading. Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 8 637 F.3d 1047, 1058 (9th Cir. 2011). Whether to grant leave to amend lies within the 9 district court’s discretion. Zivkovic v. So. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 10 2002). 11 The Court, in its discretion, will grant leave to amend. The Rosensons have not 12 amended their counterclaims previously. The Court concludes there is no evidence of bad 13 faith. Although the Rosensons knew when they moved to amend in this action that BR 14 Summerlin’s proposed plan of reorganization calls for BR Summerlin to retain certain 15 litigation claims, the Rosensons have presented non-frivolous arguments as to why they 16 nevertheless may assert direct and derivative claims in this action. They therefore have not 17 acted in bad faith by moving to amend. 18 Additionally, there is no undue delay, as this action is in its early stages. 19 Greystone Bank has identified no prejudice other than having to litigate in two forums, but 20 Greystone Bank chose to bring this action in this Court after the bankruptcy petition already 21 was filed. It was Greystone Bank that initiated litigation in a second forum, not the 22 Rosensons, and the Rosensons are entitled to assert any available defenses and 23 counterclaims to claims brought against them. As discussed above, the Rosensons claims 24 are not futile because they sufficiently have pled facts supporting a plausible entitlement to 25 relief on claims against Greystone Bank and Greystone Servicing. The Court therefore will 26 grant the motion to amend. 8 1 2 3 4 IV. CONCLUSION IT IS THEREFORE ORDERED that Plaintiff/Counterdefendant Greystone Bank’s Motion to Dismiss Counterclaims (Doc. #10) is hereby DENIED. IT IS FURTHER ORDERED that Defendants/Counterclaimants Bernard 5 Rosenson and Cynthia Rosenson’s Motion for Leave to File First Amended Answer and 6 Counterclaim (Doc. #17) is hereby GRANTED. 7 IT IS FURTHER ORDERED that Defendants/Counterclaimants Bernard 8 Rosenson and Cynthia Rosenson shall file their first amended answer and counterclaim 9 within ten (10) days of the date of this Order. 10 11 12 13 DATED: September 15, 2011 _______________________________ PHILIP M. PRO United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 9
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