Wilmington Trust FSB v. A1 Concrete Cutting & Demolition, LLC , 127 Nev. 941 ( 2011 )

OPINION

By the Court,

Hardesty, J.:

In this opinion, we address an important policy question concerning the proper scope of the record before this court and the extent to which this court may determine facts, if at all, when it considers a certified question from a federal court. The present matter arises in a pending certification case from the United States Bankruptcy Court, Southern District of Florida. Appellant has moved to strike respondents’ appendix, contending that the included documents contain information beyond the facts certified to this court by the bankruptcy court. Respondents oppose the motion, arguing that the additional information is necessary for this court’s understanding of the certified legal questions. In resolving the motion to strike, we conclude that this court’s review is limited to the facts provided by the certifying court, and we must answer the questions of law posed to us based on those facts. While an appendix may be filed to assist this court in understanding the matter, it may not be used to controvert the facts as stated in the certification order. Thus, we grant the motion to strike.

BACKGROUND

Fontainebleau was planned as a hotel-casino on property along the Las Vegas Strip. In 2005, a syndicate of lenders, with Bank of America as the administrative agent, loaned the casino’s developers $150 million secured by a deed of trust. In 2007, Bank of America, as agent, negotiated construction financing totaling $1.85 billion, to be disbursed in three stages. Over 300 contractors and suppliers worked on the project. Bank of America included in the agreement with the general contractor, and required the general contractor to include in its agreements with subcontractors, a provision subordinating their liens to the Bank of America deed of trust. Construction proceeded for a time, but at some point, it appears that Bank of America refused to advance further funds. Work ceased, and Fontainebleau filed a Chapter 11 bankruptcy petition in Florida.

Appellant Wilmington Trust succeeded Bank of America as administrative agent for the lenders. Respondents are a multitude of contractors, subcontractors, and suppliers who have asserted statutory liens against the property. Eventually, the property was sold, with the liens to attach to the proceeds, and the Chapter 11 reorganization proceeding was converted to a Chapter 7 liquidation.

A dispute between appellant and the various contractors and suppliers over the priority of their respective liens on the property is at the center of the bankruptcy court’s certified questions. In particular, the bankruptcy court has sought a ruling from this court regarding the application of contractual subordination, equitable subordination, and equitable subrogation in the context of a mechanic’s lien. The bankruptcy court’s certification order provided an overview of the factual background and attached a copy of the 27-page adversary complaint in this matter, which sets forth the facts asserted by appellant. This court accepted the questions and directed briefing, including the preparation and filing of an appendix, as is usual in these matters.

Following appellant’s filing of the opening brief and six-volume appendix, which included the adversary complaint, answer, and other pleadings, as well as pretrial motion practice, respondents objected to the appendix as incomplete. Respondents maintain that appellant failed to include other pertinent documentation in its appendix, and thus, when filing their answering brief, they included a four-volume appendix that contained the other documentation they contend should be before this court. Appellant filed a motion to strike all but one transcript in respondents’ appendix.

The source of the disagreement over the proper scope of the appendix is the parties’ dispute regarding whether Bank of America met the requirements for subordination or subrogation. The parties vigorously dispute how the 2007 transaction was structured and whether, as a result, the doctrine of equitable subrogation applies. When the bankruptcy court announced that it intended to certify legal questions concerning these doctrines to this court, respondents apparently challenged the court’s decision to certify at this stage of the litigation, arguing that the court should first determine the facts surrounding the 2007 financing before considering certification. The bankruptcy court declined to do so, noting that should this court hold that these doctrines could never apply in the mechanic’s lien context, then the adversary proceeding would be resolved, as the facts of the 2007 financing would not matter and appellant would fall behind respondents in priority.

The documents in respondents’ appendix fall into four main categories and appear to be included for the purpose of informing this court that the factual allegations in the complaint and the factual presumptions in the questions, as drafted by the bankruptcy court, are hotly contested. First, respondents included several of the loan documents that were referred to in the complaint but not attached to the complaint. Second, respondents included a few, but not all, of the documents related to some post-certification motion practice in the proceeding concerning the facts to be used by this court in answering the certified questions. Third, some documents filed in the main bankruptcy case were included, and fourth, documents from other adversary proceedings within the Fontainebleau main bankruptcy case were included.

DISCUSSION

NRAP 5 permits federal courts to certify questions of Nevada law to this court when no controlling Nevada authority exists. The certifying court must include “[a] statement of all facts relevant to the questions certified” in its order certifying questions to this court. NRAP 5(c)(2). The rule does not provide for certification of factual questions. NRAP 5(a). Here, the text of the bankruptcy court’s order included background information, and the court attached appellant’s complaint, which sets forth detailed facts as alleged by appellant. Essentially, the bankruptcy court has asked this court to perform an analysis akin to that undertaken when evaluating a motion to dismiss for failure to state a claim. See NRCP 12(b)(5); FRCP 12(b)(6).

Respondents contend that the facts asserted in the complaint and the assumptions included in the certified questions are not true. They maintain that simply examining the loan documents and comparing them to the complaint reveals inconsistencies. Therefore, according to respondents, additional documentation is necessary so that this court has the “real” factual context in mind when making its decision. Appellant counters that this court’s role is not to find the facts — that task remains with the certifying court. Rather, appellant contends that this court is bound by the facts as presented by the certifying court.

As the answering court to a certified question, we must determine the proper scope of the record before us and the extent to which this court may determine any facts when answering a certified question. A vast majority of courts hold that the answering court is bound by the facts as provided in the certification order. See, e.g., Piselli v. 75th Street Medical, 808 A.2d 508, 516 (Md. 2002) (disregarding assertion that injury was discovered earlier than stated in the certification order); Preussag Intern. Steel v. March-Westin, 655 S.E.2d 494, 498 n.2 (W. Va. 2007) (refusing to consider new affidavit intended to downplay certain facts in certification order); In re Patel, 242 P.3d 1015, 1017 n.2 (Wyo. 2010) (stating that answering court relies on facts presented by certifying court). The answering court’s role is limited to answering the questions of law posed to it, and the certifying court retains the duty to determine the facts and to apply the law provided by the answering court to those facts. See Janson v. Christensen, 808 P.2d 1222, 1222 n.1 (Ariz. 1991); AGV Sports v. Frotas IP, 10 A.3d 745, 746 n.1 (Md. 2010); Piselli, 808 A.2d at 516; In re Gregory, 97 P.3d 639, 640 n.1 (Okla. 2004); Mecham v. Frazier, 193 P.3d 630, 632 (Utah 2008). This approach prevents the answering court from intruding into the certifying court’s sphere by making factual findings or resolving factual disputes. Alexander v. Certified Master Builders, 1 P.3d 899, 908 (Kan. 2000) (declining to apply a substantial evidence standard to certifying court’s factual findings, explaining that “[t]he question certified is solely one of law. This court does not review the factual findings of the federal district court. . . . Rather, instead, this court accepts the facts as found by the federal district court . . . .”); Puckett v. Rufenacht, Bromagen & Hertz, 587 So. 2d 273, 277 (Miss. 1991) (stating that “this Court is not called upon to decide the case. Nor should we go behind the facts presented by the certifying court. If either party has any objection to the facts related by the certifying court, the place to voice the objection is with that court, not us.”); but see Ball v. Wilshire Ins. Co., 221 P.3d 717, 720-21, 723 n.26 (Okla. 2009) (permitting the answering court to supplement the certification order with undisputed facts found in the record, but stating that any dispute apparent therein must be resolved by the certifying court’s order); Penn Mut. Life Ins. Co. v. Abramson, 530 A.2d 1202, 1207-08 (D.C. 1987) (stating that answering court’s review of a certified question is identical to its review of an appeal).

We are persuaded by the majority approach and hold that this court is bound by the facts as stated in the certification order and its attachment and that this court cannot make findings of fact in responding to a certified question. We are further convinced that while providing an appendix in a certification matter is not unusual and allows this court a greater understanding of the pending action, this court may not use information in the appendix to contradict the certification order. Because respondents’ appendix has been filed solely to contradict the certification order and the complaint, we strike respondents’ appendix in its entirety.² We therefore direct the clerk of this court to strike respondents’ appendix.

Saitta, C.J., and Douglas, Cherry, Gibbons, and Parraguirre, JJ., concur.

2 Although appellant did not object to one transcript that was contained in respondents’ appendix, a hearing transcript, that hearing took place after the certification order was transmitted to this court, and it thus appears irrelevant to the certified questions. If the bankruptcy court believes that this court should refer to that transcript, it may amend its certification order accordingly and transmit the order and transcript to this court.