Livelife, LLC v. Bay Point Capital Partners, LP

— 1 — — 2 — UNITED STATES DISTRICT COURT — 3 — DISTRICT OF NEVADA — 4 — LIVELIFE, LLC, Case No. 2:21-cv-02106-ART 5 (Appeal Reference No. 21-30) APPELLANT, 6 v. Bankruptcy Case No. BK-S-1912086-ABL 7 BAY POINT CAPITAL PARTNERS, LP; Chapter 7 and SHELLEY D. KROHN, CHAPTER 7 8 TRUSTEE FOR THE ESTATE OF Adv. Proceeding No. 19-01084 ARRON AUGUSTIN AFFLALO, 9 ORDER RESPONDENTS. — 10 — 11 I. SUMMARY 12 Before the Court is an appeal by Appellant LiveLife, LLC (“LiveLife”) of the 13 following orders (“Orders”) entered by the Bankruptcy Court on November 10, 14 2021: 1) Order Denying Motion for Partial Summary Judgment Filed by LiveLife, 15 LLC [ECF No. 361]1; 2) Order Granting Motion for Summary Judgment Filed by 16 Counterclaimant, Third-party Defendant, and Chapter 7 Trustee Shelley D. 17 Krohn [ECF No. 362]; 3) Order Granting Motion for Summary Judgment Filed by 18 Bay Point Capital Partners, LP [ECF No. 363]; 4) Order Granting-in-Part and 19 Denying-in-Part Amended Motion for Summary Judgment Filed by LiveLife, LLC 20 [ECF No. 364]; and 5) Transcript of the Bankruptcy Court’s Oral Findings of Fact 21 and Conclusions of Law, held on November 1, 2021 (“FFCL”) [ECF No. 365]. 22 The multi-million-dollar real estate transaction at the heart of this case was 23 rendered fatally defective by the omission of a critical quitclaim deed and rushed 24 drafting of closing documents. The Bankruptcy Court correctly acknowledged — 25 — 1 Where, as here, the ECF entry is set off in brackets it refers to the docket entry — 26 — in the underlying bankruptcy action. Where the ECF entry is set off in 27 parentheses, it refers to the docket entry in the instant appeal. For clarity, the Court cites to the bates stamp of documents filed in this appeal whenever 28 possible. 1 that while negligence does not bar equitable subrogation under Nevada law 2 equitable subrogation is nonetheless inappropriate based on the facts of this 3 case. The Court affirms the decision of the Bankruptcy Court in full. 4 II. BACKGROUND 5 This case involves competing interests in the real property described as 16 6 Soaring Bird Court, Las Vegas, NV 89135 (the “Property”) that was owned by 7 Arron Augustin Afflalo (the “Debtor”) at all times relevant to this appeal. Appellant 8 LiveLife, LLC (“LiveLife”) and Appellee Bay Point Capital Partners, LP (“Bay Point”) 9 disagree about whether LiveLife owns a senior lien on the Property and, if so, 10 whether Bay Point’s interest is subordinate to that lien. 11 On June 26, 2014, Augustin Paris, LLC (“AP LLC”) was organized as a limited 12 liability company under the laws of the state of Nevada. See APP0327413 APP03277. On July 15, 2014 Afflalo, as trustee of the D&A Trust, dated July 15, 14 2014 (the “Trust”) and the sole member of AP, LLC, executed the operating 15 agreement of AP, LLC (the “AP, LLC Operating Agreement) which named Afflalo 16 as the manager of AP, LLC, and the Trust as the sole member of AP, LLC. See 17 APP03278-APP03317. 18 On February 14, 2017, AP, LLC purchased the Property. See APP0331819 APP03324. On April 12, 2017, Afflalo entered into a business loan agreement 20 with East West Bank, dated April 17, 2017 (the “Bay Point Loan Agreement”). See 21 APP03325-APP03332. The Bay Point Loan Agreement was evidenced by a note 22 (the “Bay Point Note”). See APP03333-APP03339. East West Bank agreed to loan 23 Afflalo $5,500,000 under the Bay Point Loan Agreement. See id. 24 On May 4, 2017, Afflalo granted BofI Federal Bank (“BofI”), a deed of trust (the 25 “BofI DOT”) against the property to secure a promissory note for $2,335,000, 26 dated May 2, 2017 (the “BofI Note”), which, along with the Bay Point Loan 27 Agreement, collectively constituted the Bay Point Loan Documents. See 28 APP03440-APP03365. The BofI Note was scheduled to mature on June 1, 2047, 1 and was payable in equal monthly payments. See APP03333-APP03339. 2 On June 27, 2017, AP, LLC transferred the property to the Trust through deed 3 of grant filed with the Clark County Recorder on July 6, 2017. See APP033664 APP03371. Also on June 27, 2017, the Trust transferred the Property to Afflalo 5 in his individual capacity, via a deed of grant filed with the Clark County Recorder 6 on July 11, 2017. See APP03372-APP03377. 7 On November 30, 2017, Bay Point Advisors, LLC, purchased East West Bank’s 8 rights under the Bay Point Loan Documents pursuant to a loan sale agreement 9 between Bay Point Advisors, LLC, and East West Bank. See APP0337810 APP03396. On January 8, 2018, Bay Point Advisors, LLC assigned its rights 11 under the Bay Point Loan Agreement to Bay Point. See APP03397-APP03401. The 12 same day, Bay Point and Afflalo entered into a forbearance agreement where 13 Afflalo acknowledged that the principal amount due and owing to Bay Point under 14 the Bay Point Note as of December 1, 2017 was $3,790,862.59, and that such 15 amount would accrue interest at the rate of 14 percent per annum until paid off 16 in accordance with the terms of the Bay Point Loan Agreement. See APP0340217 APP03414. 18 Also on January 8, 2018, Afflalo granted Bay Point a deed of trust on the 19 Property (the “Bay Point DOT”) as consideration for the promises and obligations 20 undertaken by Bay Point under the forbearance agreement. The Bay Point DOT 21 was recorded with the Clark County Recorder on January 19, 2018, as security 22 for the sum of $3,930,000. See APP03415-APP03445. 23 Also on January 8, 2018, Bay Point agreed to loan AP, LLC $430,000 (the 24 “January 8th Loan Agreement”), and AP, LLC executed a secured promissory 25 note, dated January 8, 2018 in the principal amount of $430,000 in favor of Bay 26 Point (the “January 8th Note”). See APP03446-APP03473; APP03474-APP03479. 27 The January 8th Note and the Bay Point Note are collectively the “Bay Point 28 Notes.” Afflalo personally guaranteed the obligations owing by AP, LLC to Bay 1 Point under the January 8th Note, pursuant to a guaranty, also dated January 2 8, 2018. See APP03480-APP03485. 3 On August 22, 2018, Afflalo applied for a loan with Civic Financial Services 4 (“Civic”), who was unwilling to provide the requested loan to Afflalo because the 5 value of the Property was too low. See APP03486-APP03492. Kendra Rommel 6 (“Rommel”), an employee of Civic, referred the loan to David Rosenberg 7 (“Rosenberg”), the Vice President of Macoy Capital Partners, Inc. See APP03509. 8 Rommel remained involved in Afflalo’s efforts to secure a new loan on the property 9 (the “LiveLife Loan Transaction”) even though she was not an employee of LiveLife. 10 See APP03509-APP03510. 11 Afflalo’s original loan application was provided to Demetrius Ware (“Ware”) 12 who was subsequently hired by JetClosing, Inc. (“JetClosing”) and brought the 13 loan with him to JetClosing. See APP03716. JetClosing eventually served as the 14 title and escrow agent for the LiveLife transaction. See id. Afflalo’s original loan 15 application to Civic identified Afflalo as the borrower under the loan and stated 16 that he would remain the owner of the Property in his individual capacity. See 17 APP03792-APP03799. When the file was opened, JetClosing believed that Civic 18 was going to be the lender and Afflalo was going to be the borrower. See 19 APP03719. 20 Mr. Ware had a preexisting relationship with a loan officer at an entity called 21 New Heights Lending, LLC, which resulted in New Heights being chosen as the 22 mortgage broker for the LiveLife Loan Transaction. See APP03823. 23 LiveLife intended to have Afflalo transfer the property to AP, LLC, and to then 24 have AP, LLC be the obligor and deed of trust grantor with respect to the Property, 25 which would serve as collateral under the LiveLife loan transaction. See 26 APP03519, APP03808. 27 On August 28, Ware changed the lender in JetClosing’s file to New Heights. 28 See APP03835-APP03837. On the same day, New Heights and LiveLife were aware 1 of the terms of the LiveLife Loan Transaction, including the new maturity date 2 with a required balloon payment, an increased interest rate, and the identity of 3 AP, LLC as the borrower. See APP03693, APP03838-APP03839, APP038404 APP03843. 5 No one informed JetClosing that Afflalo would not be the obligor and deed of 6 trust grantor in his individual capacity until September 5, 2018, when JetClosing 7 received the loan documents from LiveLife. See APP03721, APP03735. 8 On August 29, 2018, Afflalo informed Bay Point that he planned to refinance 9 the BofI Note and requested that Bay Point enter into a subordination agreement 10 in connection with that refinance but stated that Bay Point would continue to 11 retain its lien in the second position. See APP03844-APP03850. Bay Point advised 12 Afflalo that communications should be directed through its counsel, Thompson 13 Hine LLP (“Thompson Hine”). See APP03898-APP03900. Christina Campbell, 14 (“Campbell”), an attorney at Thompson Hine, served as the exclusive point of 15 contact for communications with Bay Point. See APP03898-APP03900. 16 Also on August 29, 2018, Afflalo, Rommel, and Campbell participated in a 17 conference call (the “August 29th Call”) regarding Afflalo’s desire to refinance the 18 BofI note. See APP03536-APP03539, APP03546. There was no discussion of the 19 terms of the refinancing during this call, including any discussion of terms of any 20 note, deed of trust, or subordination agreement that would be part of the 21 refinancing. See APP03536-3539. The August 29th Call was the only verbal 22 communication between Campbell and Rommel. See APP03536, APP03631. 23 The same day, Rommel emailed JetClosing and requested that JetClosing 24 prepare a subordination agreement. See APP04107. In her request, Rommel 25 stated that “We have a VERY small w/o do, this AM to get this document emailed 26 to Bay Point, or they will not sign, and this deal will die!” See APP04112. Bay 27 Point never told anyone that there was any time pressure on the LiveLife Loan 28 Transaction. See APP03605, APP01340. 1 As of August 30, 2018, JetClosing, Rommel, New Heights, Macoy, and LiveLife 2 all knew that the LiveLife Note was going to have a one-year maturity date. See 3 APP01340. Later that day, JetClosing ordered the subordination agreement from 4 ReQuire, a third-party deed preparation service. See APP01340. At the time 5 JetClosing ordered the subordination agreement, JetClosing believed that New 6 Heights, rather than LiveLife, was going to be the lender under the proposed 7 transaction. See id. JetClosing ordered the draft subordination agreement 8 through ReQuire’s online portal, which asks for the “major components of the 9 documents” and provided ReQuire with the name of the borrower—which it 10 believed to be Afflalo in his individual capacity at that time—the potential 11 subordinating lender, the new lender, and the loan amount. See APP0372512 APP03726, APP01340. 13 Jet Closing did not indicate to ReQuire that the subordination agreement 14 needed to include terms that would create a lien against the property. See 15 APP03780-APP03781. 16 The next day, August 31, 2018, ReQuire provided JetClosing with the 17 requested draft subordination agreement. (“Subordination Agreement 1.0”). See 18 APP04114-APP04120. Subordination Agreement 1.0 was between Afflalo in his 19 individual capacity, Bay Point, and New Heights. It identified New Heights as the 20 “Grantee for indexing purposes,” and stated “Arron Afflalo, an unmarried man” 21 as “individually or collectively ‘Grantor’ for indexing purposes and hereinafter 22 ‘Property Owner.’” See APP04116, APP01341. 23 On August 31, 2018, at 8:55 a.m. Pacific Time, Rommel sent Subordination 24 Agreement 1.0 to Campbell, and copied Afflalo, LiveLife, and JetClosing. See 25 APP04121-04127, APP01341. At 11:11 a.m., JetClosing indicated to ReQuire that 26 Subordination Agreement 1.0 needed two revisions: a) the lender’s name needed 27 to be changed from New Heights to LiveLife; and b) the loan amount needed to be 28 reduced from $3,930,000 to $3,150,000. See APP04128-APP04133, APP01341. 1 At 11:37 a.m., ReQuire returned the revised Subordination Agreement 1.0 with 2 the requested changes, and Rommel sent Campbell the revised Subordination 3 Agreement 1.0 at 11:59 a.m. See APP04121-APP04127, APP03726-APP03727, 4 APP04134-APP04140, APP01342. 5 August 31, 2018 was the first time that Rommel learned that LiveLife would 6 be the lender under the proposed LiveLife Loan Transaction. See APP03577. 7 At 12:18 p.m. on August 31, 2018, Campbell sent Rommel, Afflalo, LiveLife, 8 and JetClosing a revised draft subordination agreement (“Subordination 9 Agreement 2.0”) containing a redline of her comments. See APP04141-APP04161, 10 APP01342. Subordination Agreement 2.0 was between and among Afflalo 11 individually, Bay Point, and New Heights—rather than LiveLife—as the 12 refinancing lender. See id. 13 At 12:25 p.m. on August 31, 2018, Rommel sent Campbell an email indicating 14 that Subordination Agreement 2.0 needed to be revised to change the refinancing 15 lender to LiveLife. See id. 16 At 12:26 p.m. on August 31, 2018, Bay Point received an email from Campbell 17 that included Subordination Agreement 2.0. See id. 18 At 12:30 p.m. on August 31, 2018, Campbell sent Rommel, Afflalo, JetClosing, 19 and LiveLife a newly revised draft subordination agreement between and among 20 Afflalo, Bay Point, and LiveLife that changed the refinancing lender from New 21 Heights to LiveLife. (“Subordination Agreement 3.0”). See APP04175-APP04185, 22 APP01342. 23 Campbell never sent Subordination Agreement 3.0 to Bay Point. See 24 APP03955-APP03957. As a result, Bay Point signed Subordination Agreement 2.0 25 (the “Bay Point Executed Subordination Agreement”). See APP038657, 26 APP03971-APP03972, APP03986. 27 At 4:28 p.m. Afflalo circulated Afflalo’s signature page (the “Afflalo Signature 28 Page”) without the remaining pages of Subordination Agreement 3.0 that Afflalo 1 had signed, to Campbell, LiveLife, and JetClosing. See APP04186-APP04188. 2 Five minutes later, at 4:33 p.m., Campbell circulated the Bay Point Executed 3 Subordination Agreement (Subordination Agreement 2.0), which included the full 4 version of Subordination Agreement 2.0 signed by Bay Point, to Rommel, LiveLife, 5 and JetClosing. See APP04189-APP04198. 6 On Labor Day, September 3, 2018, LiveLife ordered loan documents prepared 7 “on a super-duper rush” by the Geraci Law Firm. This was the first time LiveLife 8 and/or Macoy Capital had requested that loan documents be prepared in 9 connection with this transaction. See APP04199-APP04200, APP01344. 10 The next day, September 4, 2018, Bay Point sent the originally signed Bay 11 Point Executed Subordination Agreement (Subordination Agreement 2.0) to 12 JetClosing at its Seattle, Washington address, as requested by the closing agent, 13 Rachel Burham (“Burham”). See APP04201-APP04206, APP03990-APP03991, 14 APP01344. 15 Afflalo also sent his original signed copy of Subordination Agreement 3.0 (the 16 “Afflalo Signed Subordination Agreement”), to JetClosing’s offices in Seattle. See 17 APP04201-APP04206, APP01344. LiveLife sent its signed copy of Subordination 18 Agreement 3.0 (the “LiveLife Signed Subordination Agreement”), to JetClosing 19 offices in Las Vegas, Nevada. See APP04207-APP04215, APP01344. 20 On September 5, 2018, JetClosing received the Bay Point Executed 21 Subordination Agreement and the Afflalo Signed Subordination Agreement at its 22 offices in Seattle, Washington. See APP04216-APP04237, APP01344. 23 The same day, Shawna Hernandez (“Hernandez”), the Vice President of 24 operations for JetClosing and the supervisor of the escrow personnel who closed 25 the LiveLife Loan Transaction, sent an email to Burham, indicating that the Bay 26 Point Executed Subordination Agreement (Subordination Agreement 2.0), and 27 the Afflalo’s Signed Subordination Agreement (Subordination Agreement 3.0), 28 had arrived in Seattle. A signed copy of Subordination Agreement 2.0 and 1 Subordination Agreement 3.0 were attached to Hernandez’s email. See 2 APP04216-APP04233, APP03772, APP01345. The only copy of a Subordination 3 Agreement signed by Afflalo JetClosing received was attached to Hernandez’s 4 September 5, 2018 email. See id. 5 Also on September 5, 2018, LiveLife received the draft loan documents from 6 the Geraci Law Firm. Missing from the fourteen draft loan documents was a draft 7 granting deed that would have transferred ownership of the Property from Afflalo 8 in his individual capacity to AP, LLC. See APP04238-APP04364, APP01345. Janet 9 Nelson, the assistant to Vice President David Rosenberg at Macoy Capital, was 10 assigned to review the loan documents prepared by the Geraci Law Firm to 11 identify any errors in the documents. See APP03700, APP01345. 12 Also on September 5, 2018, JetClosing: 1) received the draft loan documents 13 for the first time; 2) learned for the first time that AP, LLC and not Afflalo 14 individually was going to be the borrower under the LiveLife Loan Transaction; 3) 15 learned that AP, LLC and not Afflalo was going to be the grantor with respect to 16 the deed of trust securing the obligations owed under the LiveLife Loan 17 Transaction; and 4) received a copy of the lender’s closing instructions for the 18 first time. See APP03749-APP03750, APP03752, APP01346, APP03734. 19 The lender’s closing instructions do not list or otherwise reference a quitclaim 20 deed or grant deed related to the Property from Afflalo in his individual capacity 21 to AP, LLC among the various documents needed for the closing. See APP0275522 APP02762. 23 Later on September 5, 2018, Afflalo signed the loan documents (collectively, 24 the “LiveLife Loan Documents”) for the LiveLife Loan Transaction. See APP03739. 25 The note evidencing the debt owed to LiveLife under the LiveLife Loan 26 Agreement (the “LiveLife Note”), identifies AP, LLC as the borrower. See 27 APP02432-APP02439. Afflalo is not mentioned anywhere in the LiveLife Note in 28 his individual capacity. See APP02432-APP02439. 1 The escrow supplemental closing instructions (the “Supplemental Closing 2 Instructions”), which were signed by JetClosing and Afflalo and sent to LiveLife, 3 state that JetClosing is to issue a title policy with respect to the property showing 4 the borrower as AP, LLC, but also state that “title vested in Arron Afflalo, an 5 unmarried man.” See APP01346. The Supplemental Closing Instructions provide 6 check boxes to indicate if named documents are included. Boxes next to the 7 promissory note, the deed of trust, and documents required by the lender are 8 checked. Named, but without a checked box signifying its inclusion, is a quitclaim 9 deed. [See ECF No. 277-5, Ex. 49]. 10 The LiveLife Note, which is dated September 5, 2018, had a maturity date of 11 October 1, 2019—about a year after the note was executed. A balloon payment of 12 $3,176,223.75 was due on October 1, 2019. The note required monthly interest 13 payments of $26,223.75, beginning May 1, 2019, with interest through April 1, 14 2019 having been prepaid with the proceeds of the LiveLife Loan Transaction. See 15 APP02432-APP02439, APP01348. 16 The deed of trust securing the LiveLife Note was executed by Afflalo solely in 17 his capacity as manager of AP, LLC. See APP02440-APP02476. The deed of trust 18 further provides that AP, LLC is granting a security interest in the property. See 19 id. The deed of trust was recorded with the Clark County Recorder’s Office on 20 September 7, 2018, as Instrument Number 20180907-0000954. See id. 21 The LiveLife Loan Transaction contemplated LiveLife receiving not less than 22 $440,685 in interest and fees. See id. 23 No funds from the LiveLife Loan Transaction were disbursed directly to Afflalo. 24 JetClosing disbursed all funds to AP, LLC as the borrower under the LiveLife Loan 25 Documents. See APP03749. 26 On September 6, 2018, the loan transaction was closed and disbursements 27 were made to the various participants pursuant to the final settlement statement. 28 See APP02765-APP02766. 1 JetClosing affixed the signature page from the Bay Point Executed 2 Subordination Agreement (Subordination Agreement 2.0) and the signature page 3 from the Afflalo Signed Subordination Agreement (Subordination Agreement 3.0), 4 and hand delivered that document to the Clark County Recorder’s Office on 5 September 7, 2018, for recording as Instrument Number 20180907-0000955 (the 6 “Recorded Subordination Agreement”). See APP02421-APP02431. 7 Bay Point never received Subordination Agreement 3.0. See APP03867, 8 APP03971- APP03972, APP03986, APP03990-APP03991, APP04033, APP040599 APP04060. 10 Bay Point never gave JetClosing permission to affix the signature page from 11 the Bay Point Executed Subordination Agreement to Subordination Agreement 12 3.0. See APP03971-APP03972, APP04034, APP04054. Thompson Hine never told 13 JetClosing that it was permitted to affix the signature page from the Bay Point 14 Executed Subordination Agreement to Subordination Agreement 3.0. See id. 15 Neither Bay Point nor Thompson Hine received a copy of the Recorded 16 Subordination Agreement. See APP03980-APP03982. Neither Bay Point nor 17 Thompson Hine received copies of the LiveLife Loan Documents. See APP03749, 18 APP03789, APP03995, APP04003-APP04004. 19 No grant deed transferring the property from Afflalo to AP, LLC was ever 20 prepared or filed in the Clark County Recorder's Office. See APP01353. LiveLife 21 never received a grant deed transferring the property from Afflalo to AP, LLC. See 22 id. 23 On June 20, 2019, Macoy Capital reached out to JetClosing, and for the first 24 time inquired about the grant deed transferring the property from Afflalo to AP, 25 LLC. See APP03740. 26 Neither Afflalo, nor LiveLife, nor Macoy Capital, nor New Heights, nor 27 JetClosing, nor Rommel ever told Bay Point or Thompson Hine: 1) the refinancing 28 would result in an acceleration from a 30-year amortized note maturing in 2047 1 to a one year note with a balloon payment due in 2019; 2) the refinancing would 2 require Afflalo to transfer the property out of his own name and into the name of 3 AP, LLC; or 3) the change in obligor under the LiveLife Note from Afflalo to AP, 4 LLC. See APP04023-APP04024, APP01355-APP01359, APP03753, APP040855 APP04086. 6 Neither Bay Point nor Thompson Hine were aware of: 1) the fact that 7 refinancing would require Afflalo to transfer the property out of his own name 8 and into AP, LLC; or 2) the change in obligor from Afflalo individually to AP, LLC 9 under the LiveLife Note. See APP04023-APP004024, APP04085-APP004086. 10 Thompson Hine was not aware that the refinancing would result in an 11 acceleration of the refinanced loan obligation from a 30-year amortized note 12 maturing in 2047 to a one-year note with a balloon payment due in 2019. See 13 APP04023, APP01359. 14 Bay Point understood that the proposed restructuring would not accelerate 15 the maturity date. See APP03902-03904, APP03945-03949, APP04023. 16 Bay Point further believed that LiveLife knew that any acceleration of the 17 maturity date from that date set forth in the BofI note was a material issue to Bay 18 Point, based on the amendments made to the draft subordination agreement as 19 reflected in Subordination Agreement 2.0. See APP03902-APP03904, APP0394520 APP03949, APP04024, APP04043. 21 Bay Point relied on the inclusion of Afflalo in his individual capacity in the Bay 22 Point Executed Subordination Agreement (Subordination Agreement 2.0), 23 informing its belief that Afflalo would be, first, the obligor under any debt 24 resulting from the refinancing transaction related to such agreement, and 25 second, as the owner of the property after the closing of any refinancing 26 transaction related to such agreement. See APP04095. 27 The Property is the only collateral securing the amounts due to Bay Point 28 under the Bay Point Notes. See APP03873. 1 Campbell did not have authority to bind Bay Point to any agreements. See 2 APP03971-APP003972, APP04032, APP04096-APP04097. 3 Bay Point never told anyone at Thompson Hine, including Campbell, that 4 Campbell had authority to bind Bay Point to any agreements. See APP03899, 5 APP04032. Nobody at Thompson Hine, including Campbell, ever told anyone that 6 Thompson Hine or Campbell had any authority to bind Bay Point to any 7 agreements. See APP03665-APP03669, APP03971-APP03972, APP04032. 8 JetClosing did not communicate with Bay Point regarding either the LiveLife 9 loan transaction or the subordination agreements related to that transaction. See 10 APP03728, APP03745. 11 Rommel did not communicate with LiveLife or Macoy Capital, New Heights or 12 JetClosing regarding the terms of the draft subordination agreements that were 13 circulated in connection with the LiveLife loan transaction. See APP0353014 APP03533, APP03541. Rommel did not communicate with LiveLife, Macoy 15 Capital, or JetClosing regarding the terms of the LiveLife loan transaction and 16 Rommel did not communicate at all with ReQuire. See APP03545-APP03541, 17 APP03750, APP03780, APP01362. Rommel did not serve in any capacity with 18 LiveLife, and/or Macoy Capital in the LiveLife loan transaction. See APP03690. 19 JetClosing did not have any oral communications with LiveLife or Macoy Capital. 20 See APP03780. LiveLife and Macoy Capital did not have any communications with 21 ReQuire. See APP03695. 22 On September 7, 2018, the LiveLife Loan Transaction was closed by 23 JetClosing, and a payment of $2,331,057.46 was made to BofI Federal Bank in 24 full satisfaction of the BofI loan and deed of trust. See APP02765-APP02769. 25 JetClosing, as escrow agent, did not record a grant deed or a quitclaim deed 26 at the close of the LiveLife loan transaction escrow, transferring the property from 27 Afflalo in his individual capacity to AP, LLC. LiveLife was unaware of that fact. 28 See APP02480. 1 Shortly after the loan was issued by LiveLife, Afflalo listed the property for 2 sale. See APP02753. 3 In late March 2019, Afflalo reached a deal to sell the property, and contacted 4 LiveLife to obtain payoff information for the LiveLife loan. See APP02753. 5 Rosenberg spoke with Charles Andros of Bay Point by telephone on April 2, 6 2019 to discuss Afflalo’s sale of the property because it would not generate 7 sufficient proceeds to pay both the LiveLife loan and the Bay Point loan. Mr. 8 Andros acknowledged that Bay Point held a second priority lien behind LiveLife’s 9 lien and agreed that Bay Point would accept a payment of $100,000 in 10 satisfaction of Bay Point’s deed of trust. See APP02752. 11 On April 4, 2019 (the “Petition Date”), Afflalo filed a voluntary Chapter 7 12 bankruptcy petition. At that time, the Property was under contract to be sold. 13 See APP02754. 14 As of the Petition Date, Afflalo was current on all payments due under the 15 LiveLife loan, and no default existed under the LiveLife Loan. See id. 16 On May 3, 2019, Afflalo filed a motion to sell the property for $3,376,000. See 17 APP06306-APP06391. 18 Afflalo signed the purchase agreement on April 9, 2019, five days after the 19 date of the bankruptcy. See APP06306-APP06391. 20 On July 15, 2019, the Court granted the motion to sell and ordered that the 21 sale proceeds, $3,376,000 be held by the trustee until such time as the Court 22 could resolve the issue of the priority of interests on the Property as between Bay 23 Point and LiveLife. See APP06296-APP06305. 24 On August 16, 2019, LiveLife initiated an adversary proceeding by filing a 25 complaint (the “Complaint”) asserting causes of action against Bay Point and AP, 26 LLC for: (a) Declaratory Relief / Lien Validity and Priority (against Bay Point); (b) 27 Alternative Claim under Bankr. Rule 7008(d), Equitable Subrogation / 28 Declaratory Relief (against Bay Point); (c) Equitable Estoppel (against Bay Point); 1 (d) Alter Ego (against Augustin Paris, LLC). See APP06284-APP06295. 2 On April 2, 2020, Bay Point filed an Amended Answer to Complaint, 3 Counterclaim, and Third-Party Complaint (the “Answer”). In its Answer, Bay Point 4 asserted the following causes of action against LiveLife and the Trustee: (a) 5 Declaratory Relief; (b) Fraud; (c) Turnover of Sale Proceeds (against Trustee). See 6 APP05840-APP06058. 7 On October 22, 2019, the Trustee Shelley D. Krohn (“Trustee”) filed her 8 Answer to Third-Party Complaint and Counterclaim (the “Trustee Counterclaim”) 9 asserting causes of action against LiveLife for: (a) Avoidance of Deed of Trust 10 Pursuant to 11 U.S.C. § 544 (a) Against LiveLife; (b) For a Declaration that LiveLife 11 Does Not Hold A Perfected Deed of Trust In the Property. See APP0608212 APP06093. 13 On May 15, 2020, LiveLife filed a Motion for Partial Summary Judgment. See 14 APP05246-APP05248. 15 On June 4, 2020, the Trustee filed a Motion for Summary Judgment Pursuant 16 to Federal Rule of Bankruptcy Procedure 7056 and Federal Rule of Civil Procedure 17 56. See APP05185-APP05204. 18 On August 3, 2020, Bay Point Capital Partners filed a Motion for Summary 19 Judgment Pursuant to Federal Rule of Bankruptcy Procedure 7056 and Federal 20 Rule of Civil Procedure 56. See APP03242-APP03252. 21 On August 4, 2020, LiveLife LLC filed LiveLife, LLC’s Motion for Summary 22 Judgment on All Claims Against or Asserted by Bay Point Capital Partners, LP. See 23 APP03202-APP03241. 24 On November 1, 2021, the Bankruptcy Court delivered an oral ruling resolving 25 all pending motions for summary judgment (“FFCL”) [ECF No. 365]. 26 On November 10, 2021, the Bankruptcy Court entered an Order Denying 27 Motion for Partial Summary Judgment Filed by LiveLife, LLC [ECF No. 361]. 28 (APP00001-APP000003). 1 On November 10, 2021, the Bankruptcy Court entered an Order Granting 2 Motion for Summary Judgment Filed by Counterclaimant, Third-party Defendant, 3 and Chapter 7 Trustee Shelley D. Krohn [ECF No. 362] (APP00004-APP000006). 4 On November 10, 2021, the Bankruptcy Court entered an Order Granting 5 Motion for Summary Judgment Filed by Bay Point Capital Partners, LP [ECF No. 6 363] (APP00007-APP00009). 7 On November 10, 2021, the Bankruptcy Court entered an Order Granting in 8 Part and Denying in Part Amended Motion for Summary Judgment Filed by 9 LiveLife, LLC [ECF No. 364] (APP00007-APP00009). 10 On November 24, 2021, LiveLife filed its Notice of Appeal and Statement of 11 Election. (ECF No. 2). 12 On December 28, 2021, the Deputy Clerk of the U.S. Bankruptcy Court 13 certified that the record on appeal is complete. (ECF No. 3). 14 III. LEGAL STANDARD 15 1. Bankruptcy Appeal 16 On appeal “the district court or bankruptcy appellate panel may affirm, 17 modify, or reverse a bankruptcy judge's judgment, order, or decree or remand 18 with instructions for further proceedings.” In re R & S St. Rose, LLC, 611 B.R. 19 119, 127 (D. Nev. 2019); see also Fed. R. Bankr. P. 8013 advisory committee’s 20 note; 28 U.S.C. § 158 (a)(1). 21 A bankruptcy court's conclusions of law are reviewed de novo, “including its 22 interpretation of the Bankruptcy Code,” and its factual findings are reviewed for 23 clear error. In re Rains, 428 F.3d 893 , 900 (9th Cir. 2005); In re Salazar, 430 F.3d 24 992, 994 (9th Cir. 2005). The bankruptcy court's factual findings are clearly 25 erroneous only if the findings “leave the definite and firm conviction” that the 26 bankruptcy court made a mistake. In re Rains, 428 F.3d at 900. “A bankruptcy 27 court abuses its discretion if it applies the law incorrectly or if it rests its decision 28 on a clearly erroneous finding of a material fact.” In re Brotby, 303 B.R. 177 , 184 1 (9th Cir. BAP 2003); see also In re Plyam, 530 B.R. 456, 461 (9th Cir. BAP 2015) 2 (“A bankruptcy court abuses its discretion if it applies the wrong legal standard, 3 misapplies the correct legal standard, or if its factual findings are illogical, 4 implausible, or without support in inferences that may be drawn from the facts 5 in the record.”) 6 In reviewing a bankruptcy court's decision, this Court ignores harmless errors. 7 In re Mbunda, 484 B.R. 344, 355 (9th Cir. BAP 2012). The Court may affirm the 8 Bankruptcy Court's decision “on any ground fairly supported by the record.” In 9 re Warren, 568 F.3d 1113, 1116 (9th Cir. 2009) (citation omitted). In addition, 10 the Court need not address arguments not raised in the trial court but “may do 11 so to (1) prevent a miscarriage of justice or to preserve the integrity of the judicial 12 process, (2) when a change of law during the pendency of the appeal raises a new 13 issue, or (3) when the issue is purely one of law.” In re Lakhany, 538 B.R. 555 , 14 560 (9th Cir. BAP 2015). 15 2. Summary Judgment 16 “The purpose of summary judgment is to avoid unnecessary trials when there 17 is no dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t 18 of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994) (citation omitted). Summary 19 judgment is appropriate when the pleadings, the discovery and disclosure 20 materials on file, and any affidavits “show there is no genuine issue as to any 21 material fact and that the movant is entitled to judgment as a matter of law.” 22 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue is “genuine” if there 23 is a sufficient evidentiary basis on which a reasonable fact-finder could find for 24 the nonmoving party and a dispute is “material” if it could affect the outcome of 25 the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 26 248-49 (1986). Where reasonable minds could differ on the material facts at 27 issue, however, summary judgment is not appropriate. See id. at 250-51 . “The 28 amount of evidence necessary to raise a genuine issue of material fact is enough 1 ‘to require a jury or judge to resolve the parties’ differing versions of the truth at 2 trial.’” Aydin Corp. v. Loral Corp., 718 F.2d 897, 902 (9th Cir. 1983) (quoting First 3 Nat’l Bank v. Cities Service Co., 391 U.S. 253, 288-89 (1968)). The court must 4 view the facts in the light most favorable to the non-moving party and give it the 5 benefit of all reasonable inferences to be drawn from those facts. Matsushita Elec. 6 Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The court must not 7 weigh the evidence or determine the truth of the matter, but only determine 8 whether there is a genuine issue for trial. Balint v. Carson City, 180 F.3d 1047 , 9 1054 (9th Cir. 1999). 10 The party seeking summary judgment bears the initial burden of informing 11 the court of the basis for its motion and identifying those portions of the record 12 that demonstrate the absence of a genuine issue of material fact. Celotex, 477 13 U.S. at 323. Once the moving party satisfies Rule 56’s requirements, the burden 14 shifts to the non-moving party to “set forth specific facts showing that there is a 15 genuine issue for trial.” Anderson, 477 U.S. at 256 . The nonmoving party “may 16 not rely on denials in the pleadings but must produce specific evidence, through 17 affidavits or admissible discovery material, to show that the dispute exists,” Bhan 18 v. NME Hosps., Inc., 929 F.2d 1404 , 1409 (9th Cir. 1991), and “must do more 19 than simply show that there is some metaphysical doubt as to the material facts.” 20 Orr v. Bank of Am., 285 F.3d 764, 783 (9th Cir. 2002) (quoting Matsushita Elec. 21 Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). 22 IV. DISCUSSION 23 LiveLife argues that it holds a valid, first-priority lien against the Property, 24 whether it is created in law or equity by the Subordination Agreement on its own, 25 or in conjunction with the other LiveLife Loan Documents. LiveLife further argues 26 that if these arguments fail, it is entitled to equitable subrogation as it assumed 27 it was stepping into the shoes of the former first-priority lender, BofI, when it paid 28 off the BofI Note. Bay Point argues that LiveLife holds no valid lien against the 1 Property due to mistakes made during the transaction—namely, the absence of 2 a deed granting the Property from Afflalo individually to AP, LLC. Like the 3 Bankruptcy Court, this Court finds that LiveLife holds no valid lien against the 4 Property due to various defects with the transaction, and that equitable 5 subrogation is inappropriate here under Nevada law. 6 A. Mortgage Lien 7 LiveLife argues that the Bankruptcy Court erred as a matter of law in 8 determining LiveLife holds no valid mortgage lien against the Property, (ECF No. 9 10 at 45),2 and makes three arguments in support of this proposition. First, 10 LiveLife admits that the LiveLife Deed of Trust alone does not create a lien, but 11 argues that the language of the Recorded Subordination Agreement, when read 12 together with the LiveLife Deed of Trust, “evidences Afflalo’s individual intent to 13 create a lien. . . .” (ECF No. 10 at 51). Second, LiveLife argues that Afflalo adopted 14 and ratified the LiveLife Deed of Trust as a lien against the property. (Id.) Third, 15 LiveLife argues that notwithstanding the fact that Bay Point never signed the 16 Recorded Subordination Agreement, LiveLife has an equitable mortgage against 17 the Property. (Id. at 52). 18 1. Subordination Agreement 19 LiveLife argues that the Recorded Subordination Agreement, standing alone, 20 meets the elements under Nevada law to create a valid “lien” or “mortgage” against 21 the subject Property, in favor of LiveLife. (ECF No. 10 at 46-47). The Bankruptcy 22 Court certified a question of whether a Subordination Agreement could constitute 23 a lien to the Nevada Supreme Court, which declined to consider the question. See 24 APP00628-APP00629. The Bankruptcy Court subsequently determined that the 25 Recorded Subordination Agreement alone did not create a lien. This Court agrees. — 26 — 27 2 Unless otherwise noted, page number citations to docket entries in the appeal are to the blue docket text that appears at the top of each page, not the brief’s 28 pagination. 1 In Nevada, “[a] mortgage is usually considered to be a nominal conveyance, 2 held in abeyance, of certain property as a security for the payment of certain debt. 3 If the parties intend to create a mortgage, no particular form of instrument or 4 words is necessary to create an equitable mortgage.” Nee v. L.C. Smith, Inc. 97 5 Nev. 42, 47-8 , 624 P.2d 4, 7 (1981) (internal citations omitted). “Under Nevada 6 law, when, as in this case, it is claimed that a lien arises out of an express 7 contract, the parties’ intent to create the lien must be clearly indicated on the 8 face of the agreement.” Gonzales v. Shotgun Creek Las Vegas, LLC., 577 F. App'x 9 709, 710 (9th Cir. 2014) (citing Union Indem. Co. v. A.D. Drumm, Jr., Inc., 57 Nev. 10 242, 70 P.2d 767 , 768 (1937)). 11 While a Subordination Agreement might create a valid lien under Nevada law, 12 this Recorded Subordination Agreement clearly contemplates that another 13 document—the Deed of Trust signed by Afflalo as manager of his LLC, rather 14 than in his individual capacity—will create the lien. See APP02424 (“WHEREAS, 15 Property Owner has executed, or is about to execute a Deed of Trust and Note. . 16 . . WHEREAS, it is a condition precedent to obtaining said loan that the Superior 17 Deed of Trust last above mentioned shall unconditionally be and remain at all 18 times a lien or charge upon the land . . . .”) Therefore, there is no indicia of intent 19 by the parties that the Recorded Subordination Agreement independently created 20 a lien. To decide that this Subordination Agreement independently creates a lien 21 would render superfluous the language of the Agreement which contemplates the 22 lien being created via the Deed of Trust. A Court must give effect to all the 23 language of a contract. See, e.g., Musser v. Bank of Am., 114 Nev. 945 , 964 P.2d 24 51, 54 (1998) (“A basic rule of contract interpretation is that ‘[e]very word must 25 be given effect if at all possible.’”) (citation omitted); United States v. Butler, 297 26 U.S. 1, 65 (1936) (“These words cannot be meaningless, else they would not have 27 been used.”); Sturges v. Crowinshield, 17 U.S. (4 Wheat.) 122 , 202 (1819) (“It 28 would be dangerous in the extreme, to infer from extrinsic circumstances, that a 1 case for which the words of an instrument expressly provide, shall be exempted 2 from its operation.”) The Subordination Agreement, standing alone, does not 3 create a lien against the Property in favor of LiveLife.3 4 2. Deed of Trust 5 While LiveLife concedes that the Deed of Trust does not provide a valid security 6 interest against the Property, (ECF No. 10 at 51 (“The mistake made by the escrow 7 agent caused the LiveLife Deed of Trust, on its own, to be deficient in creating the 8 lien. . . .”)), the Court agrees with the Bankruptcy Court that the Deed of Trust 9 does not grant a valid security interest against the Property. As discussed above, 10 Afflalo held title to the Property in his own name both before and after the 11 refinancing transaction. AP, LLC, had no ownership interest in the Property at 12 the time of the refinancing transaction, and Afflalo never transferred title to AP, 13 LLC. 14 It is well-established under Nevada law that a grantor can convey no greater 15 title or interest than he or she has in the property. See, e.g., Brophy Min. Co. v. 16 Brophy & Dale Gold & Silver Min. Co., 15 Nev. 101 (1880). “Nevada is a race-notice 17 recording state, wherein any interest in real property, properly recorded, has 18 priority over subsequently filed interests.” Freedom Mortg. Corp, v. Trovare 19 Homeowners Ass'n, No. 2:11-CV-01403-MMD, 2012 WL 5986441 , at *3 (D. Nev. 20 Nov. 28, 2012) (citing NRS 111.320, 111.325; Buhecker v. R.B. Petersen & Sons 21 Consr. Co., 112 Nev. 1498 , 929 P.2d 937, 940 (1996)). 22 AP, LLC is listed as the borrower on the LiveLife Note. See APP02433. AP, LLC — 23 — 24 3 The Court considered but gives little weight to the expert report of Charles Hansen as Hansen wrote the report assuming that Bay Point signed the Recorded 25 Subordination Agreement, which it did not. See APP01873 (Hansen’s report, dated January 22, 2020, assumes that each signature to the Subordination — 26 — Agreement is “proper”; APP01691 (additional versions of Subordination 27 Agreement not provided to Hansen until the morning of his May 29, 2020 deposition); APP01856 (Hansen not aware of discrepancy in what version of the 28 Subordination Agreement Bay Point signed until July 9, 2020). 1 is also listed as the trustor/borrower on the recorded LiveLife Deed of Trust which 2 was intended to secure the LiveLife Note. See APP02440-APP02447. As noted, 3 nowhere in the LiveLife Deed of Trust does Afflalo grant any interest in the 4 Property in his individual capacity to LiveLife. Therefore, AP, LLC could not grant 5 a valid security interest to LiveLife via the Deed of Trust because AP, LLC had no 6 interest to grant. 7 As Nevada is a race-notice recording state the LiveLife Deed of Trust perfects 8 nothing with regards to the Property because it would not appear in the chain of 9 title to the Property as the title holder was at all relevant times Afflalo in his 10 individual capacity. As a “wild deed,” the recorded LiveLife Deed of Trust would 11 not appear in the chain of title of the property. For all of these reasons, the Court 12 agrees with the Bankruptcy Court that the LiveLife Deed of Trust did not create 13 a valid security interest or mortgage against the Property. 14 B. Adoption and Ratification 15 LiveLife next argues that Afflalo adopted and ratified the LiveLife Deed of Trust 16 as a lien against the property because the Recorded Subordination Agreement 17 contained language that the LiveLife Deed of Trust “shall . . . be and remain at 18 all time a lien or charge on the property therein described. . . .” See APP02425. 19 “Generally, contract ratification is the adoption of a previously formed 20 contract, notwithstanding a quality that rendered it relatively void and by the 21 very act of ratification that party affirming becomes bound by it and entitled to 22 all proper benefits from it.” Merrill v. DeMott, 113 Nev. 1390 , 951 P.2d 1040 , 1044 23 (1997) (emphasis added); see also Clarke v. Lyon Cnty., 7 Nev. 75, 81 (1871) 24 (“[T]here can be no such ratification when the very existence of the contract is 25 unknown.”) 26 LiveLife’s ratification argument fails. It is impossible to ratify a document that 27 has not even been drafted at the time of the alleged ratification because 28 ratification applies to contracts formed prior to the ratification. Here the Deed of 1 Trust was not drafted at the time the Afflalo signed the Recorded Subordination 2 Agreement. In fact, LiveLife did not request its attorneys draft the Deed of Trust 3 until three days after Afflalo signed the Recorded Subordination Agreement in the 4 name of AP, LLC. See APP04200. 5 More importantly, and as the Bankruptcy Court concluded, Afflalo never 6 transferred his interest in the Property to AP, LLC due to the missing quitclaim 7 deed. The Court agrees with the Bankruptcy Court: any ratification would be of 8 a hollow document that can convey no interest to LiveLife because no interest in 9 the Property was ever conveyed to AP, LLC. 10 C. Equitable Mortgage 11 Next, LiveLife argues that the Bankruptcy Court erred by not recognizing 12 LiveLife’s equitable mortgage against the Property. (ECF No. 10 at 52-53). LiveLife 13 notes that Afflalo testified in three separate depositions that his intention was to 14 create a first-priority lien in favor of LiveLife when he signed the LiveLife Loan 15 Documents, and avers that when read together, the LiveLife Loan Documents 16 create an equitable mortgage against the property. 17 “Under Nevada law, when . . . it is claimed that a lien arises out of an express 18 contract, the parties’ intent to create the lien must be clearly indicated on the 19 face of the agreement.” Gonzales v. Shotgun Creek Las Vegas, L.L.C., 577 F. App'x 20 709 (9th Cir. 2014) (citing Union Indem. Co. v. A.D. Drumm, Jr., Inc., 70 P.2d 767 , 21 768 (1937) (per curiam)). 22 LiveLife relies on the Recorded Subordination Agreement for the proposition 23 that an equitable mortgage or lien should be imposed on its behalf. But, as the 24 Bankruptcy Court held, the Recorded Subordination Agreement is invalid and 25 cannot bind Bay Point. There is no version of the Subordination Agreement that 26 was signed by Bay Point, LiveLife, and Afflalo. Bay Point did not sign the Recorded 27 Subordination Agreement, and the version of the Agreement it signed was never 28 recorded. The Recorded Subordination Agreement is an amalgamation of pages 1 from Subordination Agreement 2.0 and Subordination Agreement 3.0. 2 Subordination Agreement 2.0 and 3.0 each identified different lenders—New 3 Heights in version 2.0, and LiveLife in version 3.0. The identity of the lender is a 4 fundamental element in any Subordination Agreement. See 26 Beverly Glen, LLC 5 v. Wykoff Newberg Corp., 334 Fed. Appx. 62 at 63-64 (9th Cir. 2009) (citing Tri6 Pacific Com. Brokerage, Inc. v. Boreta, 113 Nev. 203 , 931 P.2d 726, 727 (1997) 7 (“[T]he identity of the seller is an essential element of a contract, and thus parol 8 evidence may not be used to clear of the ambiguity of ‘ETAL.’”)). Moreover, the 9 Recorded Subordination Agreement is missing the last page of the agreement, 10 and, like the Bankruptcy Court, this Court will not speculate as to whether the 11 page missing from the recorded agreement is the page appearing at APP02418. 12 In sum, the Court finds that these various deficiencies are more serious than 13 a minor error which would permit this Court to find an equitable lien created in 14 this instance. To decide that Bay Point agreed to the Subordination Agreement 15 would require this Court to countenance the appending of a signature to one 16 version of a document to a second version with different material terms. 17 Considered together, these errors are especially fatal because NRS § 106.220 18 provides that “Any instrument by which any . . . interest in real property is 19 subordinated . . . must be recorded . . . . The instrument is not enforceable . . . 20 unless and until it is recorded.” NRS § 106.220. Here, the Subordination 21 Agreement Bay Point signed (2.0) was not the version that was recorded. 22 Therefore, the Recorded Subordination Agreement cannot be enforced against 23 Bay Point. 24 The Court agrees with the Bankruptcy Court that when the Recorded 25 Subordination Agreement is removed from the set of documents LiveLife argues 26 should be considered, the remaining documents—the LiveLife Note, LiveLife Deed 27 of Trust, and guarantee—do not reflect a clear intent to create a lien on the 28 Property. The Property is not mentioned in the guarantee, the LiveLife Note makes 1 no reference to Afflalo or the Property, and the LiveLife Deed of Trust conveys no 2 interest as AP, LLC did not hold title to the Property at the time of the transaction. 3 Perhaps cognizant of these deficiencies, LiveLife further argues that Bay Point 4 entered into the Recorded Subordination Agreement with LiveLife and that it 5 should therefore bind Bay Point now, notwithstanding the fact that Bay Point 6 never signed the Recorded Subordination Agreement. As support, LiveLife makes 7 two main arguments: 1) Bay Point admitted in its Answer and Amended Answer 8 that it entered into a Subordination Agreement with LiveLife (when the Recorded 9 Subordination Agreement is between Bay Point and New Heights) (ECF No. 10 at 10 58-60); and 2) Bay Point is bound by the actions of Campbell because she 11 possessed actual or apparent authority to act on its behalf. (Id. at 60-62). Neither 12 argument is availing. 13 First, Bay Point did not discover the error in its Amended Answer until after 14 the Amended Answer was drafted and filed. See APP06541-91; (ECF No. 42 at 15 63). LiveLife attempts to capitalize on the late discovery of multiple versions of 16 the Subordination Agreement by arguing that Bay Point’s error is binding, but in 17 the Ninth Circuit when “the party making an ostensible judicial admission 18 explains the error in a subsequent pleading or by amendment, the trial court 19 must accord the explanation due weight.” Sicor Ltd. v. Cetus Corp., 51 F.3d 848 , 20 859-60 (9th Cir. 1995). Moreover “[a]ny deliberate, clear, and unequivocal 21 statement, either written or oral, made in the course of a judicial proceeding, 22 qualifies as a judicial admission.” Scarff v. Intuit, Inc., 318 F. App'x 483, 487 (9th 23 Cir. 2008) (citation omitted). 24 The Court concludes that Bay Point’s alleged admission was not deliberate. 25 Bay Point cited the correct version of the Subordination Agreement (2.0) in its 26 Counterclaim and Third-Party Complaint filed simultaneously with its Amended 27 Answer. See APP05854. Further, the Court finds that Bay Point retracted its 28 alleged admission by subsequently clarifying that it did not sign the Recorded 1 Subordination Agreement in multiple pleadings during the underlying 2 bankruptcy litigation and again in this appeal. 3 Second, Campbell had neither actual nor apparent authority to bind Bay 4 Point. LiveLife appears to concede that Campbell did not have actual authority, 5 (see ECF No. 56 at 37), but the Court discusses it for the sake of completeness. 6 The Supreme Court of Nevada defines actual authority as follows: “‘[a]n agent 7 acts with actual authority when, at the time of taking action that has legal 8 consequences for the principal, the agent reasonably believes, in accordance with 9 the principal’s manifestations to the agent, that the principal wishes the agent so 10 to act.’ When examining whether actual authority exists, we focus on an agent’s 11 reasonable belief.” Simmons Self-Storage v. Rib Roof, Inc., 130 Nev. 540 , 331 P.3d 12 850, 856 (2014), as modified on denial of reh'g (Nov. 24, 2014) (quoting 13 Restatement (Third) of Agency § 2.01 (2006)). 14 There is no evidence of actual authority. Campbell herself never believed she 15 had authority to enter into agreements on Bay Point’s behalf. See APP02869. Bay 16 Point never told Campbell she could sign a subordination agreement on their 17 behalf. See id. Gregory Jacobs, manager for Bay Point, signed Subordination 18 Agreement 2.0, not Campbell. See APP04190-98. In his 30(b)(6) deposition, 19 Jacobs testified that only a Bay Point employee—and no one at Thompson Hine— 20 was authorized to sign the Subordination Agreement. See APP04032. 21 As to apparent authority, LiveLife argues that Bay Point admitted “it made 22 Campbell its exclusive agent with regard to negotiating and approving the 23 Subordination Agreement” because 1) Bay Point told Afflalo that communications 24 should be directed through its counsel, Thompson Hine; and 2) Campbell served 25 as the exclusive point of contact for communications to Bay Point. (ECF No. 56 26 at 36). Further, Bay Point argues that Campbell’s authority to act on Bay Point’s 27 behalf in “negotiating and approving the Subordination Agreement was confirmed 28 by Campbell to Afflalo and Rommel. . . .” (Id. at 37). This last point holds no water. 1 Rommel herself understood that Campbell could not execute the Subordination 2 Agreement, as evidenced by her asking Campbell to “have Bay Point execute and 3 notarize” a draft of the Subordination Agreement. See APP04142; see also 4 APP03669. 5 Therefore, the Court focuses on whether apparent authority exists based on 6 Bay Point’s statement to Afflalo that all communications should be directed 7 through Thompson Hine and Campbell’s designation as “the exclusive point of 8 contact for communications to Bay Point.” 9 “Apparent authority is ‘that authority which a principal holds his agent out as 10 possessing or permits him to exercise or to represent himself as possessing, 11 under such circumstances as to estop the principal from denying its existence. 12 Dixon v. Thatcher, 103 Nev. 414 , 742 P.2d 1029, 1031 (1987) (quoting Myers v. 13 Jones, 99 Nev. 91, 657 P.2d 1163, 1164 (1983)). “[T]here can be reliance only 14 upon what the principal himself has said or done, or at least said or done through 15 some other and authorized agent. The acts of the agent in question can not be 16 relied upon as alone enough to support [this theory]. If his acts are relied upon 17 [,] there must also be evidence of the principal's knowledge and acquiescence in 18 them. Moreover, . . . the reliance must have been a reasonable one. . . .” Simmons 19 Self-Storage, 331 P.3d at 856 (quoting Ellis v. Nelson, 68 Nev. 410 , 233 P.2d 1072 , 20 1076 (1951)). 21 Here, LiveLife offers no persuasive evidence that Bay Point held Campbell out 22 as having authority to bind Bay Point to the Subordination Agreement. Telling a 23 customer to direct his communications through counsel plainly is not equivalent 24 to telling that customer that counsel has the authority to bind the principal to a 25 contract. Therefore, under Simmons and Ellis, LiveLife must show that it 26 reasonably relied on some act by Campbell, and that Bay Point knew of and 27 acquiesced to that act. 28 LiveLife alleges the following acts by Campbell gave rise to its understanding 1 of apparent authority: 1) a phone call on August 30, 2018 in which LiveLife alleges 2 Campbell held herself out as Bay Point’s agent (APP02788); and 2) two emails. 3 See APP02825-02826; APP02258-02259. (ECF No. 10 at 62). 4 The phone call does not contain any evidence of apparent authority. No 5 employee of Bay Point was on the call. Furthermore, by Rommel’s own admission 6 the August 30, 2018 phone call did not contain any acts by Campbell upon which 7 Rommel could reasonably rely; Rommel herself testified that she was “concerned” 8 about the extent of Campbell’s authority, and advised Afflalo to “make sure she 9 has the authority to give [Afflalo] answers correctly.” See id. 10 The first email is similarly devoid of apparent authority to bind Bay Point. See 11 APP02826. Campbell’s only words are “Hi Arron, I’ll call you back in a minute. I 12 have to get something done for Bay Point for a closing happening today. Thanks! 13 Christina.” Id. No actor would reasonably rely on this communication to 14 determine that Campbell had authority to bind Bay Point. 15 In the second email LiveLife relies on, a third party, Grant Carter, emails 16 Campbell and writes “I am sending over the Subordination Agreement for your 17 review and / approval on behalf of Aaron Afflalo.” See APP02259. Later, he writes 18 “Please review and contact Greg or myself with any questions or concerns.” See — 19 — id. Carter copies Greg Jacobs, manager of Bay Point, on the email. LiveLife’s 20 argument relies entirely on the “review and / approval” language, (See ECF No. 21 10 at 28), while entirely ignoring the context of the email where Carter requests 22 Campbell to contact the manager of Bay Point—Greg Jacobs—or himself with any 23 questions. Based on the email in its entirety, no reasonable actor would 24 reasonably rely on “review / approval” to signal Campbell’s alleged authority to 25 bind Bay Point, especially because the author of the email is not a Bay Point 26 employee. 27 In addition to the lack of evidence of apparent authority in the materials 28 LiveLife cites, there is one more fatal issue with LiveLife’s argument as to 1 apparent authority: LiveLife was not part of any of the communications it claims 2 to have relied on in believing that Campbell had apparent authority to bind Bay 3 Point. LiveLife’s employee, David Rosenberg, admitted that Rommel was not 4 LiveLife’s agent during his deposition. See APP03690 (“Q. So does Ms. Rommel 5 have any role with LiveLife? A. No. Q. Does Ms. Rommel have any role with Macoy 6 Capital Partners? A. No). 7 For the foregoing reasons, the Court finds that no equitable mortgage was 8 created during the LiveLife Loan Transaction. 9 D. Equitable Subrogation 10 Next, LiveLife argues that the Bankruptcy Court erred when it determined that 11 LiveLife was not entitled to be equitably subrogated to the BofI loan and BofI Deed 12 of Trust, and a likelihood of prejudice, rather than evidence of actual material 13 prejudice must be shown to avoid the application of equitable subrogation. (ECF 14 No. 10 at 4, 63-71). The parties do not dispute that LiveLife paid the BofI Note in 15 the amount of $2,331,057.46, fully satisfied the BofI Deed of Trust, and that BofI 16 filed a full release of its Deed of Trust on the Property. See APP02765-02769. 17 In the usual course, “when a senior deed of trust is satisfied, the junior 18 lienholders remain in their respective order of priority and are consequently 19 elevated up the priority line. Equitable subrogation interrupts this procedure and 20 ‘permits a person who pays off an encumbrance to assume the same priority 21 position as the holder of the previous encumbrance.’” Am. Sterling Bank v. Johnny 22 Mgmt. LV, Inc., 126 Nev. 423 , 245 P.3d 535, 539 (2010) (citations omitted). 23 Nevada recognizes the doctrine of equitable subrogation as formulated in 24 Section 7.6 of the Third Restatement of Property: Mortgages. See Houston v. Bank 25 of Am., 119 Nev. 485 , 78 P.3d 71, 74 (2003). The Nevada Supreme Court has held 26 that the following standard applies: “[A] mortgagee will be subrogated when it 27 pays the entire loan of another as long as the mortgagee ‘was promised repayment 28 and reasonably expected to receive a security interest in the real estate with the 1 priority of the mortgage being discharged, and if subrogation will not materially 2 prejudice the holders of the intervening interests in the real estate.’” Id. (quoting 3 Restatement (Third) of Property: Mortgages § 7.6(a)(4) (1997)). Negligence of the 4 party seeking equitable subrogation is irrelevant. See id. fn.23. 5 After Houston, the Nevada Supreme Court clarified the standard for 6 determining whether subrogation would materially prejudice holders of 7 intervening interests in the real estate when the prejudice would result from an 8 accelerated maturity date: “[I]n extreme situations, where the maturity date is 9 drastically accelerated while the principal value and monthly payment obligations 10 are significantly increased, an accelerated maturity date may be considered 11 prejudicial as it directly affects the likelihood of default on a senior lien.” Johnny 12 Management, 245 P.3d at 540 (emphasis added). In Johnny Management, the 13 Court analyzed whether the junior lienholder’s assumption of risk of foreclosure 14 on senior liens included a significant acceleration of the maturity date and 15 concluded it did not because “the increased risk of default on the [senior] note 16 prejudicially [sic] effects [the junior lienholder’s] calculated risk of foreclosure on 17 a senior lien.” Id. at 541 (emphasis added). 18 Here there is no dispute that the LiveLife Note had a maturity date roughly 28 19 years sooner than the maturity date on the BofI Note and required a balloon 20 payment of $3,176,223.75 within one year of the LiveLife Note’s issue date. 21 Compare APP03341 with APP06425-APP06432. Like the 14-year acceleration the 22 Nevada Supreme Court deemed prejudicial in Johnny Management, here the 2823 year acceleration would be prejudicial under the test articulated in Johnny 24 Management because it “directly affects the likelihood of default on a senior lien” 25 and the increased risk of default on the senior note prejudicially affects the junior 26 lienholder’s calculated risk of foreclosure on a senior lien. See Johnny 27 Management, 245 P.3d at 540-41 . 28 LiveLife’s arguments all focus on whether or not there is evidence of material 1 prejudice to Bay Point and conclude no actual prejudice existed because “Bay 2 Point remained in exactly the same position it would have been in if the BofI lien 3 remained in place and no refinance had occurred” both because either “the sale 4 of the Property or Afflalo’s bankruptcy would have triggered the due on sale clause 5 of the BofI mortgage, the Bay Point mortgage, or the LiveLife mortgage, 6 irrespective of the maturity date. . . .” (ECF No. 10 at 69 (citing APP021487 APP02173; APP02179-APP02358; APP02440-76)). It is true that the Houston 8 court emphasized the lack of evidence of material prejudice in the record when 9 denying equitable subrogation. See Houston, 78 P.3d at 75 . But the Johnny 10 Management court clarified that the test for prejudice focuses on the likelihood of 11 default at the time of the refinancing, rather than whether default actually 12 occurred contrary to the expectations of the junior lienholder sometime 13 thereafter. Therefore, this Court agrees with the Bankruptcy Court that equitable 14 subrogation is inappropriate here as a matter of law under the Nevada Supreme 15 Court’s decision in Johnny Management. 16 E. Trustee’s Section 544(a) Claims 17 Finally, LiveLife argues that the Bankruptcy Court erred in ruling that the 11 18 U.S.C. § 544 (a) claim of the Bankruptcy Trustee was valid as a matter of law. 19 (ECF No. 10 at 4-5, 71-72). LiveLife maintains that the Recorded Subordination 20 Agreement satisfies all the requirements to create a valid mortgage lien against 21 the Property. Therefore, LiveLife argues, because the Recorded Subordination 22 Agreement was recorded, the trustee was on constructive notice of this lien, 23 which would defeat the trustee’s claims under 11 U.S.C. § 544 (a). (See ECF No. 24 10 at 62-63). The Trustee argues that even if an equitable lien could be 25 established in favor of LiveLife, § 544(a)(3) allows the trustee to take title to the 26 real property free and clear of any equitable liens. (See ECF No. 41). 27 As discussed above, however, the Recorded Subordination Agreement does not 28 independently create a lien because it specifically contemplates that the lien 1 would be created by the LiveLife Deed of Trust. Moreover, and as discussed above, 2 the Recorded Subordination Agreement is invalid because no version was ever 3 signed by Bay Point, LiveLife, and Afflalo, the Recorded Subordination Agreement 4 is missing a page, and the version Bay Point did sign had different material 5 terms—most importantly a different lender. The only version of the Subordination 6 Agreement signed by Bay Point was never recorded, which renders it 7 unenforceable under NRS 106.220. See also Bank of Am., N.A. v. SFR Investments 8 Pool One, LLC, 134 Nev. 604 , 427 P.3d 113, 119-120 (2018). 9 In addition, and as discussed above, the LiveLife Deed of Trust does not create 10 or provide a valid security interest in the Property. The LiveLife Deed of Trust is 11 only signed by AP, LLC, and there is no grant deed or quitclaim deed from Afflalo 12 to AP, LLC. The LiveLife Deed of Trust cannot convey an interest in the Property 13 because AP, LLC did not hold any title or ownership interest in the Property at 14 the time of the transaction. Due to these deficiencies, the LiveLife Deed of Trust 15 will not appear in the chain of title to the Property because the title holder was 16 and continued to be Afflalo before and after the September 7, 2018 closing on the 17 Property. 18 Ultimately, the Court need not reach the question of whether or not the 19 Trustee’s § 544 powers could prevail over an equitable lien or mortgage in favor 20 of LiveLife because there is no such equitable lien here. 21 Further, equitable subrogation is inappropriate here for the same reasons as 22 it is against Bay Point—the change in material terms increased the likelihood of 23 default to the prejudice of the junior lienholders and, under Johnny Management, 24 that is sufficient to foreclose equitable subrogation in this instance. 25 V. CONCLUSION 26 The Court notes that the parties made several arguments and cited to several 27 cases not discussed above. The Court has reviewed these arguments and cases 28 and determines that they do not warrant discussion as they do not affect the 1 || outcome of the appeal. 2 The Court further notes that, having undertaken a detailed review of the 3 || record, no oral argument was required in this appeal. 4 It is therefore ordered that the Bankruptcy Court’s Orders in Adversary 5 || Proceeding No. 19-01084-ABL [ECF Nos. 361, 362, 363, 364] are affirmed. 6 The Clerk of Court is respectfully directed to enter judgment accordingly in 7 || the instant appeal (2:21-cv-O2106-ART) and close this case. — 8 — — 9 — 10 DATED THIS 1st day of May 2023. — 11 — — 12 — 1 res [asind ide 14 UNITED STATES DISTRICT JUDGE — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —