March 2016 – After OREO Corp., an affiliate of KeyBank, prevailed in federal district court on a post-foreclosure deficiency claim for a multimillion-dollar construction loan, the borrower appealed to the Ninth Circuit Court of Appeals. The borrower challenged the district court’s holding by arguing that: (1) the statute of limitations barred OREO’s claim because OREO substituted as the party in interest after the six-month limitations period for a deficiency action; (2) the evidence was insufficient to support the district court’s valuation determination; and (3) post-judgment interest should apply at the interest rate mandated by federal statute (less than 1%) rather than the contractual default rate provided in the parties’ loan agreement.
In a Memorandum Decision filed March 17, 2016, the Ninth Circuit found that the statutory interest rate should apply to post-judgment interest but otherwise affirmed the district court’s decision and sided with the arguments D|J|P attorneys presented on OREO Corp.’s behalf. The Ninth Circuit agreed that OREO’s claims as the substituting plaintiff related back to the timely deficiency action filed by KeyBank, OREO’s predecessor in interest. Therefore, the statute of limitations did not bar OREO’s claims. The Court also agreed that the district court’s determination of fair market value based on expert testimony consistent with financial industry standards was not clearly erroneous. The Court recognized that trial courts can “properly consider all relevant evidence in determining the value of the property.” (Craig S. Newman, Michael J. Thomas)