Try to create database on server $> rake db:create RAILS_ENV=production

replace this:
root /home/lacy/public_html;
on this
root /home/lacy/your-app-name/current/public;


Remove this:
location / {
            root   html;
            index  index.html index.htm;  }
error_page   500 502 503 504  /50x.html;
        location = /50x.html {
            root   html;  }

Dont use 'www'
set :domain, 'www.myapp1.domain.com' 

Be sure you've added 'domain.com' and 'myapp1.domain.com' in your 
/etc/hosts file

Make the same
set :deploy_to, " /home/lacy/your-app-name" 
and in your nginx config file
root /home/lacy/your-app-name/current/public;

After changing your nginx.cong file restart nginx 
$> sudo service nginx stop
$> sudo service nginx start
(or $> sudo service nginx reload && sudo service nginx restart)

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