In re Cay Clubs ( 2014 )

130 Nev., Advance Opinion q2..
IN THE SUPREME COURT OF THE STATE OF NEVADA
IN RE: CAY CLUBS. No. 58176
DAVID B. CLARK; ANN CLARK;
DONALD W. GILLIS; NELL C. GILLIS;
PETER GILLIS; MARY PISCITELLI; FL
THOMAS TEDESCO; KENNETH B.
RITCHEY; DEBRA A. RITCHEY; DEC 0 4 2014
MICHAEL GIANFORTE; KYLE SMITH;
NANCY HELGESON; RAYMOND D.
REED, II; BRYAN SOPKO;
CHRISTOPHER T. WILSON; JAY
JADEJA; KETAN PATEL; RAJESH
PATEL; PARESH SHUKLA; ROSANNO
DELARA; RANDALL J. GOYETTE;
RITA M. GOYETTE; JOHN
THOMPSON; MICHAEL ZARI;
MICHAEL CROUCH; ALEX ARRIAGA;
MARIUS SMOOK; JAMES MCNEIL;
SUZAN MCNEIL-TUSSON; LOLITA
ALVAREZ; AND DOLORES CERALVO,
Appellants,
vs.
JDI LOANS, LLC; JDI REALTY, LLC;
AND JEFFREY AEDER,
Respondents.
IN THE MATTER OF CAY CLUBS. No. 59751
DAVID B. CLARK; ANN CLARK;
DONALD W. GILLIS; NELL C. GILLIS;
PETER GILLIS; MARY PISCITELLI;
THOMAS TEDESCO; KENNETH B.
RITCHEY; DEBRA A. RITCHEY;
MICHAEL GIANFORTE; KYLE SMITH;
NANCY HELGESON; RAYMOND D.
REED, II; BRYAN SOPKO;
CHRISTOPHER T. WILSON; JAY
- 3943L
JADEJA; KETAN PATEL; RAJESH
PATEL; PARESH SHUKLA; ROSANNO
DELARA; RANDALL J. GOYETTE;
RITA M. GOYETTE; JOHN
THOMPSON; MICHAEL ZARI;
MICHAEL CROUCH; ALEX ARRIAGA;
MARIUS SMOOK; JAMES MCNEIL;
SUZAN MCNEIL-TUSSON; LOLITA
ALVAREZ; AND DOLORES CERALVO,
Appellants,
vs.
JDI REALTY, LLC; JDI LOANS, LLC;
AND JEFFREY AEDER,
Respondents.
Petition for en banc reconsideration of a panel opinion in
consolidated appeals from a district court summary judgment certified as
final under NRCP 54(b) and an order awarding costs. Eighth Judicial
District Court, Clark County; Elizabeth Goff Gonzalez, Judge.
Petition granted; affirmed in part, reversed in part, and
remanded.
Lemons, Grundy & Eisenberg and Alice Campos Mercado and Robert L.
Eisenberg, Reno; Gerard & Associates and Robert B. Gerard and Ricardo
R. Ehmann, Las Vegas,
for Appellants.
Lionel Sawyer & Collins and Charles H. McCrea, Jr., and Lynda Sue
Mabry, Las Vegas,
for Respondents.
Morris Law Group and Steve L. Morris, Las Vegas,
for Amici Curiae.
2
BEFORE THE COURT EN BANC.'
OPINION
By the Court, SAITTA, J.:
On March 6, 2014, a panel of this court issued an opinion
examining the partnership-by-estoppel doctrine and affirming in part,
reversing in part, and remanding a district court order that determined on
summary judgment that the doctrine did not apply. Because this case
involves a substantial precedential and public policy issue, we now grant
en bane reconsideration to consider an issue that the prior opinion did not
directly address: whether the partnership-by-estoppel doctrine must be
based on a transaction between the complainant and the purported
partnership. NRAP 40A(a). We thus withdraw the March 6 opinion and
issue this opinion in its place. After considering the necessity of a
transaction and the other aspects of establishing a partnership-by-
estoppel claim, we affirm in part, reverse in part, and remand. 2
After purchasing condominiums at a resort named Las Vegas
Cay Club, the appellants (hereinafter the purchasers) filed suit against
approximately 40 defendants, including Cay Clubs and respondents
Jeffrey Aeder; JDI Loans, LLC; and JDI Realty, LLC. The purchasers
alleged that: (1) Cay Clubs ran Las Vegas Cay Club, (2) Cay Clubs inflated
"The Honorable Kristina Pickering, Justice, voluntarily recused
herself from participation in the decision of this matter.
2 MGM Resorts International filed an amicus curiae brief in support
of the petition for en banc reconsideration, which the Las Vegas
Metropolitan Chamber of Commerce joined.
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the condominiums' value by advertising that it would develop Las Vegas
Cay Club into a luxury resort, (3) Cay Clubs' marketing materials
represented that it was in a partnership with JDI Loans and JDI Realty
(collectively, the JDI entities), and (4) the purchasers bought
condominiums and engaged in other transactions on the belief that the
purported partnership provided the expertise and resources to execute Las
Vegas Cay Club's transformation. They claimed that Cay Clubs and
others engaged in actionable wrongdoings while abandoning the plan to
improve Las Vegas Cay Club and leaving the purchasers with "worthless
property." The purchasers asserted that Aeder and the JDI entities were
liable for these actionable wrongdoings under NRS 87.160(1)—a statute
that codifies the partnership-by-estoppel doctrine. However, Aeder and
the JDI entities prevailed on a motion for summary judgment with respect
to their liability under NRS 87.160(1) and the other claims asserted
against them.
Provided that other conditions are met, NRS 87.160(1)
imposes partnership liability on a party where, with the party's
"consent[ ]," there is a representation that the party is a "partner" and
another party has "given credit" to the purported "partnership." In
addressing these consolidated appeals, we clarify the meaning and
application of NRS 87.160(1). 3 We conclude that the statute may impose
3We also considered NRS 87.4332(1), a similar statute that appears
to codify the partnership-by-estoppel doctrine, but because the parties'
contentions operate on the implied premise that NRS 87.160(1) is the
statute that is applicable to this matter, and because we find that the
application of NRS 87.4332(1) would not change the disposition of this
opinion, we do not address it further.
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partnership liability where there is a representation of a joint venture
rather than a partnership, that the consent required for partnership by
estoppel may be manifested expressly or may be fairly implied from the
liable party's conduct, that the meaning of the statute's phrase "given
credit" is not limited to the extension of financial credit, and that the
reliance on the representation of a partnership or joint venture must be
reasonable. Moreover, the statute may impose partnership liability with
respect to any claims that implicate the element of reasonable reliance on
which the partnership-by-estoppel doctrine is based. In light of these
clarifications, we conclude that the district court erred in granting the JDI
entities summary judgment as to their liability under NRS 87.160(1).
FACTS AND PROCEDURAL HISTORY
Based on the purchasers' evidence and allegations below, Cay
Clubs appears to be a business that developed and sold condominiums at a
resort called Las Vegas Cay Club. As indicated in the purchasers'
allegations and Aeder's deposition testimony, Aeder created and managed
the JDI entities, which extended financial support for the development of
Cay Clubs' properties. The purchasers alleged that they entered into
purchase agreements for Las Vegas Cay Club condominiums and engaged
in related transactions with Flamingo Palms Villas, LLC, which Cay
Clubs allegedly created and controlled. According to their allegations and
supporting affidavits, the purchasers engaged in these transactions (1)
after reviewing marketing materials, which advertised that Las Vegas
Cay Club would be improved and developed into a luxury resort and which
represented a partnership between Cay Clubs and the JDI entities; and (2)
on the belief that the partnership relationship between Cay Clubs and the
JDI entities provided the experience and financial wherewithal to develop
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the advertised luxury resort.
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Believing that Cay Clubs disingenuously abandoned the plan
to improve Las Vegas Cay Club and fraudulently took the purchasers'
money, the purchasers filed suit against approximately 40 defendants,
including Cay Clubs, Aeder, and the JDI entities. The claims included,
but were not limited to, fraudulent misrepresentation, securities
violations, deceptive trade practices, civil conspiracy, and fraudulent
conveyances of money. Additionally, the purchasers pleaded that the JDI
entities and Aeder were liable under NRS 87.160(1), Nevada's
partnership-by-estoppel statute, for the wrongdoings of Cay Clubs.
After answering the complaint, Aeder and the JDI entities
filed a motion for summary judgment. They contended that there was an
absence of evidence to support the complaint and that the parol evidence
rule and the purchase agreements prevented the purchasers from relying
on evidence of representations of a partnership. They maintained that
NRS 87.160(1) did not apply to the purchasers' tort-based claims because
the statute imposed liability only for claims sounding in contract. They
also argued that the statute did not apply to any of the claims because it
conditioned liability on the extension of financial credit, which was not
extended by the purchasers. Moreover, they maintained that NRS
87.160(1) could not be used to impose liability against Aeder and the JDI
entities because the purchasers transacted solely with Flamingo Palms
Villas and not with the purported partnership between Cay Clubs, Aeder,
and the JDI entities on which their partnership-by-estoppel claim was
based.
The purchasers opposed the motion. Submitting additional
evidence in support of their complaint, they argued that issues of fact
remained with respect to Aeder's and the JDI entities' liability, especially
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with respect to their liability under NRS 87.160(1). We reserve a more
detailed discussion of the purchasers' evidence for our analysis of whether
genuine issues of material fact remained with respect to Aeder's and the
JDI entities' liability under NRS 87.160(1).
After a hearing, the district court granted the motion for
summary judgment in favor of the JDI entities and Aeder upon finding
that no genuine issues of material fact remained as to their liability for
any of the asserted claims, including the partnership-by-estoppel claim
under NRS 87.160(1). In so doing, it specifically noted that a "reference to
a 'strategic partner' in the marketing materials was insufficient for
partnership by estoppel.
The order granting summary judgment was later certified as
final under NRCP 54(b). In addition, the district court awarded costs to
the JDI entities and Aeder. These consolidated appeals followed. A panel
of this court issued an opinion affirming in part, reversing in part, and
remanding a district court order granting summary judgment. After the
panel denied the JDI entities' petition for rehearing, the JDI entities
petitioned for reconsideration.
DISCUSSION
The parties' argument on appeal
The parties dispute whether the district court erred in
granting summary judgment in favor of Aeder and the JDI entities
regarding their liability as putative partners with Cay Clubs under NRS
87.160(1). Modeled after section 16 of the 1914 version of the Uniform
Partnership Act (UPA), NRS 87.160(1) codifies the common law
partnership-by-estoppel doctrine. See 1931 Nev. Stat., ch. 74, § 1, at 112,
116; see also Facit-Addo, Inc. v. Davis Fin. Corp., 653 P.2d 356 359-60
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(Ariz. Ct. App. 1982) (providing that Arizona's partnership-by-estoppel
statute—which is substantially identical to NRS 87.160(1)—codifies the
partnership-by-estoppel doctrine). As long as other conditions are met,
NRS 87.160(1) provides that a person may incur partnership liability
where there is a holding out of that person as a partner, with the consent
of that person being held out, and another person gives credit to the
purported partnership upon believing in the representation:
When a person, by words spoken or written or by
conduct, represents himself or herself, or consents
to another representing him or her to any 'one, as a
partner in an existing partnership or with one or
more persons not actual partners, the person is
liable to any such person to whom such
representation has been made who has, on the
faith of such representation, given credit to the
actual or apparent partnership, and if the person
has made such representation or consented to its
being made in a public manner the person is liable
to such person, whether the representation has or
has not been made or communicated to such
person so giving credit by or with the knowledge of
the apparent partner making the representation
or consenting to its being made.
(Emphases added.) The parties offer different interpretations of this
statute. In so doing, they disagree on the meaning of "partnership," what
type of consent must be manifested for liability under the statute, and the
meaning of "given credit." Aeder and the JDI entities maintain that NRS
87.160(1) requires a reasonable reliance on the representation of a
partnership. They also dispute the statute's applicability to claims that do
not sound in contract. Under dissimilar interpretations of NRS 87.160(1),
the parties necessarily disagree over whether genuine issues of material
fact precluded the district court's grant of summary judgment with respect
to Aeder's and the JDI entities' liability under NRS 87.160(1).
Prior to this appeal, this court lacked the chance to address in
any significant depth the partnership-by-estoppel doctrine or NRS
87.160(1)'s meaning. We do so now. Because the arguments concern
issues of statutory interpretation and the grant of a summary judgment,
we engage in de novo review of the matters raised on appeal. Cromer v.
Wilson, 126 Nev. 106, 109, 225 P.3d 788, 790 (2010).
NRS 87.160(1)'s meaning
In interpreting NRS 87.160(1), our ultimate goal is to
effectuate the Legislature's intent. Cromer, 126 Nev. at 109, 225 P.3d at
790. We interpret a clear and unambiguous statute pursuant to its plain
meaning by reading it as a whole and giving effect to each word and
phrase. Davis v. Beling, 128 Nev. „ 278 P.3d 501, 508 (2012). We
do not look to other sources, such as legislative history, unless a statutory
ambiguity requires us to look beyond the statute's language to discern the
legislative intent. State, Div. of Ins. v. State Farm Mut. Auto. Ins. Co., 116
Nev. 290, 294, 995 P.2d 482, 485 (2000). Moreover, our interpretation of
NRS 87.160(1) is guided by the following rules that the Legislature set
out: (1) the law of estoppel applies to NRS 87.160(1), (2) this court is not to
apply "Mlle rule that statutes in derogation of the common law are to be
strictly construed," and (3) the statutory scheme that contains NRS
87.160(1) "must be interpreted and construed as to effectuate its general
purpose to make uniform the law of those states which enact it." NRS
87.040(1)-(2), (4).
The term "partnership" in NRS 87.160(1)
When arguing about the absence or presence of genuine issues
of material fact, the parties implicitly raise an issue about the meaning of
the statute's term "partnership." They appear to disagree about what type
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of relationship must be represented for partnership by estoppel: a
partnership or a less formal but collaborative profit-oriented relationship,
such as a joint venture. Their arguments about the nature of the
purported relationship between Cay Clubs, Aeder, and the JDI entities
urge us to answer whether partnership by estoppel can be found under
NRS 87.160(1) when the subject of the actionable representation is a joint
venture rather than a partnership.
Joint ventures and partnerships are similar but not identical.
Hook v. Giuricich, 108 Nev. 29, 31, 823 P.2d 294, 296 (1992). "[A]
partnership is an association of two or more persons to carry on as co-
owners a business for profit . . . ." NRS 87.060(1). A joint venture is a
similar collaboration for profit, but the collaboration is limited to a specific
business objective rather than an ongoing business. Hook, 108 Nev. at 31,
823 P.2d at 296. Despite the distinction, Nevada caselaw provides that
the principles of partnership law apply to joint ventures. Radaker v. Scott,
109 Nev. 653, 658, 855 P.2d 1037, 1040 (1993). Other jurisdictions have
concluded the same, and they have applied the partnership-by-estoppel
doctrine to impose liability for the representation of a joint venture. See,
e.g., Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290
F.3d 42, 56 (1st Cir. 2002) (indicating that partnership by estoppel applies
to joint ventures); John's, Inc. v. Island Garden Ctr. of Nassau, Inc., 269
N.Y.S.2d 231, 236 (Dist. Ct. 1966) (concluding that the rules that apply to
partnerships, including partnership by estoppel, apply to joint ventures),
aff'd sub nom. C.J. Zonneveld & Sons, Inc. v. Island Garden Ctr., Inc., 280
N.Y.S.2d 34, 34 (App. Term 1967); Allan Constr. Co. v. Parker Bros. & Co.,
535 S.W.2d 751, 754-55 (Tex. Civ. App. 1976) (applying partnership by
estoppel to conclude that a party was liable as a joint venturer). Likewise,
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we conclude that the partnership-by-estoppel doctrine, as defined by NRS
87.160(1), applies where the subject of the representation is a joint
venture rather than a partnership.
The term "consents" in NRS 87.160(1)
Partnership by estoppel may arise where a party, "by words
spoken or written or by conduct, represents himself or herself, or consents
to another representing him or her to any one, as a partner. . . with one or
more persons not actual partners." NRS 87.160(1). As to the term
"consents," the parties disagree over the extent to which NRS 87.160(1)
requires a manifestation of consent. Whereas Aeder and the JDI entities
argue as though the statute requires an explicit communication of consent,
the purchasers argue that consent may be found where it can be implied
from one's conduct.
Consent may be "express fedi" by words or "implied" by
conduct. Black's Law Dictionary 323 (8th ed. 2004). Also, the comment to
the UPA rule on which NRS 87.160(1) is based explains consent by
directing the reader to caselaw which provides that consent may be
implied when the facts make the implied conclusion reasonable. Unif.
P'ship Act § 16, 6 U.L.A. 661-62 cmt. (1914) (explaining consent by citing
to Morgan v. Farrel, 20 A. 614, 615-16 (1890) (indicating that consent may
be reasonably implied)); see also Anderson Hay & Grain Co. v. Dunn, 467
P.2d 5, 7 (N.M. 1970) (concluding that the consent to being represented as
a partner may be implied by conduct if the conduct would lead a
reasonable person to that conclusion). Thus, we conclude that consent
under NRS 87.160(1) may be manifested either by one's express words or
one's conduct from which consent can be reasonably implied.
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The phrase 'given credit" in NRS 87.160(1)
The parties disagree on the type of credit that must be
extended for partnership by estoppel. The purchasers contend that NRS
87.160(1)'s phrase "given credit" means a claimant's belief in and
detrimental reliance on the representation of a partnership's existence.
Aeder and the JDI entities respond that this statutory language conditions
partnership liability on the extension of financial credit to the purported
partnership.
"Credit" has been defined as the "[b] elief" or "trust" in another
person, the "availability of funds. . . under a letter of credit," or the
"ability to borrow money." Black's Law Dictionary 396 (8th ed. 2004).
Hence, because it lends itself to more than one reasonable interpretation,
the term "credit" presents an ambiguity that invites us to refer to other
authorities to resolve the statute's meaning. See State Farm, 116 Nev. at
294, 995 P.2d at 485. Unfortunately, NRS 87.160(1) lacks legislative
history that addresses the meaning of "given credit." However, because
the Legislature directed this court to construe NRS 87.160(1) in
uniformity with other jurisdictions that have adopted the UPA, we look to
other jurisdictions for guidance. See NRS 87.040(4).
Aeder and the JDI entities direct this court to one salient
authority, Bertin Steel Processing, Inc. v. U.S. Steel Corp., No. 1:02 CV
1669, 2005 WL 2205332, at *14 (N.D. Ohio Sept. 6, 2005), wherein the
phrase "given credit" was limited to financial credit. 4 But numerous
4Aeder and the JDI entities also rely on the following authorities
and unpublished decisions for their contention that the phrase "given
credit" is limited to the extension of financial credit, but they overlook that
none of these authorities expressly articulates such a limited definition of
continued on next page . . .
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jurisdictions have either rejected that limited reading of the phrase or
have read "given credit" to mean giving credence to a representation of a
partnership by detrimentally relying on the representation. See, e.g.,
Pinnacle Port Cmty. Ass'n v. Orenstein, 872 F.2d 1536, 1540-41 (11th Cir.
1989) (providing that Florida courts have not limited partnership by
estoppel to matters involving financial credit and construing credit to
mean detrimental reliance on the purported partnership); Glazer v.
Brookhouse, 471 F. Supp. 2d 945, 948-49 (E.D. Wis. 2007) (concluding that
the Wisconsin Supreme Court has not limited the phrase "given credit" to
financial credit and that the phrase means to detrimentally rely on the
representation of a partnership); see also McElwee v. Wharton, 19 F. Supp.
2d 766, 772 (W.D. Mich. 1998) (construing Michigan's partnership-by-
estoppel statute to apply to a party who detrimentally relies on a
representation of a partnership by contracting with the purported
. . . continued
the phrase: Milano ex rel. Milano v. Freed, 64 F.3d 91, 98 (2d Cir. 1995)
(without defining the phrase "given credit," concluding that there was an
absence of evidence to show that the plaintiffs relied on a representation of
a partnership); Stochastic Decisions, Inc. v. DiDomenico, 995 F.2d 1158,
1169 (2d Cir. 1993) (without defining the phrase "given credit," concluding
that claimant failed to assert a viable partnership-by-estoppel argument
for failure to assert that any credit was given); Barmes v. IRS, 116 F.
Supp. 2d 1007, 1014 n.4 (S.D. Ind. 2000) (without defining the phrase
"given credit," concluding that credit was not given); Davies v. Gen. Tours,
Inc., No. CV 970057425S, 1999 WL 712917, at *2 (Conn. Super. Ct. Aug.
31, 1999) (not defining "given credit" but determining that the facts did
not show "any sort of credit" was given), aff'd, 774 A.2d 1063, 1072-73,
1078 (Conn. App. Ct. 2001); Howick v. Lakewood Vill. Ltd. P'ship, No. 10-
08-20, 2009 WL 1110829, at *8 (Ohio Ct. App. Apr. 27, 2009) (not defining
"given credit" but using a definition of credit to which the parties agreed).
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partnership); Four Star Capital Corp. v. Nynex Corp., 183 F.R.D. 91, 105 -
06 (S.D.N.Y. 1997) (acknowledging that federal and New York courts have
interpreted "given credit" to mean financial credit or a reliance on the
existence of a represented partnership); Sitchenko v. DiResta, 512 F. Supp.
758, 761-62 (E.D.N.Y. 1981) (holding that one gave credit to a purported
partnership by entering into an employment agreement in reliance on the
representation of a partnership). These authorities indicate that the
phrase "given credit" is one that is reasonably understood as not being
limited to the extension of financial credit.
In arguing that the phrase "given credit" only concerns
extension of financial credit, Aeder and the JDI entities emphasize that
the revised 1997 version of the UPA replaced the phrase "given credit"
with "enter[] into a transaction." Unif. P'ship Act § 308(a), 6 U.L.A. 128
(1997). They contend that this revision expands the UPA's partnership-
by-estoppel language to matters that do not involve financial credit, such
that NRS 87.160(1)—which was based on the pre-1997 version of the
UPA—must be construed to apply only to matters that involve financial
credit. However, a comment to this revision suggests otherwise, as it
explains that the revised language "continues the basic principles of
partnership by estoppel from UPA Section 16." Unif. P'ship Act § 308(a), 6
U.L.A. 128, 129 cmt. (1997) (emphasis added). Thus, the revision does not
expand but, instead, clarifies and continues the partnership-by-estoppel
principles that the drafters attempted to encapsulate. See id.
Additionally, it provides indicia of the drafters' understanding that the
partnership-by-estoppel doctrine applies to matters beyond those that
implicate the extension of financial credit. See id.
To adopt Aeder's and the JDI entities' construction of the
phrase "given credit" would severely limit who could utilize the
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partnership-by-estoppel doctrine. Under their interpretation, NRS
87.160(1) would only benefit claimants with the financial resources and
expertise to extend financial credit to a purported partnership. There are
claimants beyond this cohort that face the risk of incurring an actionable
injury because of the representation of a purported partnership. See, e.g.,
Sitchenko, 512 F. Supp. at 760-62. Thus, we do not read NRS 87.160(1)'s
phrase "given credit" to only mean the extension of financial credit.
Rather, as it appears in NRS 87.160(1), "given credit" means giving
credence to the representation of a partnership by detrimentally relying
on the representation, which may include, but is not limited to, the act of
extending financial credit to the purported partnership or venture.
However, although there need not be an extension of credit for
the partnership-by-estoppel doctrine to apply, there must nonetheless be a
transaction between the claimants and the purported partnership. This
transaction requirement is illustrated by the 1997 version of the UPA,
which replaces "given credit" with "enter[ I into a transaction." As stated
above, the revised language of the 1997 version of the UPA merely
clarifies and continues the partnership-by-estoppel principles
encapsulated in previous versions of the UPA, on which NRS 87.160(1)
was based. See Unif. P'ship Act § 308(a), 6 U.L.A. 128, 129 cmt. (1997).
Thus, NRS 87.160(1) requires a transaction between the claimants and
the purported partnership for the claimants to have "given credit" under
the statute. The existence of or nature of any transaction between the
purchasers and the purported partnership is a factual question to be
resolved by the court below.
The reasonable reliance requirement
We now turn to a prerequisite for partnership by estoppel that
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is not explicitly stated in NRS 87.160(1). Generally, jurisdictions provide
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that the partnership-by-estoppel doctrine conditions liability on the
plaintiff having reasonably relied on the representation of partnership,
which often involves an exercise of due diligence to ascertain the facts.
See, e.g., Bragg v. Johnson, 229 A.2d 497, 498 (Del. Super. Ct. 1966)
(providing that plaintiff must have reasonably believed in the existence of
a partnership to prevail on a partnership-by-estoppel claim); Anfenson v.
Banks, 163 N.W. 608, 620-21 (Iowa 1917) (collecting cases where the
common law definition of partnership by estoppel included the
requirement of an exercise of due diligence to know the truth regarding
the existence of a partnership); Gamble Robinson Co. v. Carousel Props.,
688 P.2d 283, 288 (Mont. 1984) (explaining Montana's partnership-by-
estoppel statute—which resembles NRS 87.160(1)—and concluding that it
requires one to have reasonably relied on the representation of a
partnership by making a reasonable inquiry about the representation's
veracity); Wis. Tel. Co. v. Lehmann, 80 N.W.2d 267, 270 (Wis. 1957)
(indicating that the reliance on the representation of a partnership must
be reasonable for partnership by estoppel). Because Nevada caselaw lacks
a significant discussion of the partnership-by-estoppel doctrine, it has not
addressed the reasonable reliance requirement that other jurisdictions
uphold.
However, the Legislature has provided that the law of estoppel
applies to NRS 87.160(1). NRS 87.040(2). Moreover, in a similar matter,
we extended equitable estoppel's reasonable reliance requirement to a
party's claim that the apparent authority of an agent was the basis for
forming a contract. Great Am. Ins. Co. v. Gen. Builders, Inc., 113 Nev.
346, 352, 934 P.2d 257, 261 (1997). Likewise, we conclude that the
reasonable reliance requirement, including the performance of due
diligence to learn the veracity of the representation of partnership, that
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other jurisdictions impose for partnership by estoppel is one that NRS
87.160(1) includes as well. As indicated by its language, NRS 87.160(1)
seeks to afford relief to those who incur an injury upon believing and
detrimentally relying on the representation of a partnership. Without the
reasonable reliance requirement, the partnership-by-estoppel doctrine
would lack an objective limitation to prevent it from being abused by
people who knew, or reasonably should have known, that the
representation of the partnership or joint venture was untrue. This
factual determination remains to be considered on remand.
NRS 87.160(1)'s applicability to claims that do not sound in contract
The parties disagree about whether partnership-by-estoppel
liability under NRS 87.160(1) may be imposed where the claim for which
that theory of liability is pleaded does not sound in contract. Aeder and
the JDI entities argue that NRS 87.160(1) imposes partnership liability
only for causes of action that sound in contract. The purchasers respond
that the statute imposes liability for any cause of action that conditions
liability on the reliance upon the representation of a partnership.
In a partnership, the partners are jointly and severally liable
for injuries caused by a partner's actions within the ordinary course of the
partnership's business or with the authority of other partners. NRS
87.130; NRS 87.150(1). This liability extends to tortious acts such as
fraud. See Radaker v. Scott, 109 Nev. 653, 658, 660, 855 P.2d 1037, 1040,
1041 (1993) (providing that in the context of a joint venture—governed by
the laws of partnerships—a joint venturer is liable for another joint
venturer's fraudulent act that is completed within the scope of the joint
venture's enterprise). We recognize that even though the partnership-by-
estoppel doctrine provides for the same liability that would arise from a
17
partnership, which would include tort liability, other jurisdictions have
concluded that the doctrine only imposes liability under claims that sound
in contract. See, e.g., Roethke v. Sanger, 68 S.W.3d 352, 360 (Ky. 2001)
(providing in dicta that its partnership-by-estoppel statute only provides
for contractual liability); Pruitt v. Fetty, 134 S.E.2d 713, 717 (W. Va. 1964)
(concluding the same).
Generally, the premise relied on for concluding that the
partnership-by-estoppel doctrine is limited to contract claims is that the
doctrine's reliance element exists in contractual matters, in which a party
relies on the existence of a partnership in entering into a contract, but
does not exist in tortious matters, in which a victim often does not rely on
a partnership's existence in sustaining an injury. See Pruitt, 134 S.E.2d at
717; see also Thomas Erickson, Recent Decision, 55 Mich. L. Rev. 1190,
1191 (1957) (noting that the reliance element for partnership by estoppel
is often present in contract-based causes of action). This premise is poor,
as reliance on a partnership or joint venture's existence may arise in
claims that do not sound in contract. See Erickson, supra, at 1191
(concluding that partnership by estoppel applies to "tort actions involving
reliance"). For example, "[in cases of fraud or misrepresentation, where
one is induced to buy from those misrepresenting,. . . relying on their
holding out of a partnership, he [or she] may sue them as partners and
hold them estopped to deny the relation." Id.; see also Frye v. Anderson,
80 N.W.2d 593, 603 (Minn. 1957) (determining that the partnership-by-
estoppel doctrine is applicable to tort-based causes of action).
Accordingly, we conclude that the application of NRS
87.160(1) does not turn on whether the cause of action sounds in contract.
Instead, it turns on whether the claim implicates the reliance element that
is required for partnership by estoppel. Thus, NRS 87.160(1) applies to
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the purchasers' claims that are based on their reliance upon the
representations of a partnership or a joint venture and are not limited to
contract claims.
A review of our determinations about NRS 87.160(1)'s meaning
Thus, to review, NRS 87.160(1)—Nevada's partnership-by-
estoppel statute—imposes partnership liability on a party where, with the
party's "consent[ ]," there is a representation that the party is a "partner,"
and another party has "given credit" to the purported "partnership."
Partnership by estoppel may arise under this statute where the subject of
the representation is a joint venture. Consent to the representation may
be reasonably implied from one's conduct. The phrase "given credit" does
not limit the statute's application to matters where financial credit is
extended to the purported partnership or joint venture; rather, the phrase
concerns the credence that is given to the representation when one
detrimentally relies on it in conducting a transaction with the purported
partnership, which may but is not required to include the extension of
financial credit. The claimant who seeks to prevail on a partnership-by-
estoppel claim must have reasonably relied on the representation of a
partnership or joint venture, which entails the effort to learn the veracity
of the representation. Finally, NRS 87.160(1) may impose partnership
liability with respect to claims that implicate the reliance element that is
required for partnership by estoppel, and such claims are not limited to
those sounding in contract.
The summary judgment in favor of Aeder and the JDI entities
Having clarified NRS 87.160(1)'s meaning, we now consider
whether genuine issues of material fact remained with respect to Aeder's
and the JDI entities' liability under NRS 87.160(1).
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The purchasers contend that Aeder and the JDI entities did
not show the absence of genuine issues of material fact with respect to
their liability under NRS 87.160(1) when they moved for summary
judgment. The purchasers assert that their evidence revealed that they
relied on and gave credence to a purported partnership between Cay
Clubs, Aeder, and the JDI entities when purchasing condominiums and
engaging in related transactions on their reasonable belief that the
purported partnership provided the financial strength to create the
advertised luxury resort. Further, they contend that the evidence showed
that Aeder and the JDI entities consented to the representation of a
partnership with Cay Clubs. Last, they argue that the district court
placed undue emphasis on the word "strategic" in concluding that the
marketing materials' use of the phrase "strategic partnership" was
insufficient for establishing partnership-by-estoppel liability.
Aeder and the JDI entities respond that the parol evidence
rule barred the purchasers from relying on their evidence of a purported
partnership because the purchase agreements contained an integration
clause and identified Flamingo Palms Villas, and not a partnership, as the
seller of the Las Vegas Cay Club condominiums. They also argue that the
purchasers did not give any credit to the purported partnership between
Cay Clubs, Aeder, and the JDI entities because the purchasers'
transactions and agreements were with Flamingo Palms Villas, which was
not represented as being in a partnership with anyone.
In determining whether the district court erred in granting
summary judgment, we resolve whether genuine issues of material fact
remained with respect to partnership by estoppel under NRS 87.160(1),
such that "a rational trier of fact could return a verdict for the nonmoving
party." Wood v. Safeway, Inc., 121 Nev. 724, 731, 121 P.3d 1026, 1031
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(2005). The party who moves for summary judgment has the burden of
showing the absence of genuine issues of material fact. Cuzze v. Univ. &
Cmty. Coll. Sys. of Nev., 123 Nev. 598, 602, 172 P.3d 131, 134 (2007). If
that party lacks the burden of persuasion at trial, he or she may satisfy
this burden by pointing to "an absence of evidence to support the
nonmoving party's case.' Id. at 602-03, 172 P.3d at 134 (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 325 (1986)). Generally, to defeat the motion
for summary judgment, the nonmoving party must submit admissible
evidence to show a genuine issue of material fact. Id. at 603, 172 P.3d at
134. But when a party does not object to the inadmissibility of evidence
below, the issue is waived and otherwise inadmissible evidence can be
considered. See Whalen v. State, 100 Nev. 192, 195-96, 679 P.2d 248, 250
(1984) (considering otherwise inadmissible evidence with respect to a
summary judgment because the issue of admissibility was waived for lack
of an objection).
The parol evidence rule and the purchasers' evidence
Aeder and the JDI entities argue that no admissible evidence
was proffered to contest their motion for summary judgment because the
evidence on which the purchasers relied was barred by the parol evidence
rule. The parol evidence rule precludes the admission of extrinsic
"evidence that would change the contract terms when the terms of a
written agreement are clear, definite, and unambiguous." Ringle v.
Bruton, 120 Nev. 82, 91, 86 P.3d 1032, 1037 (2004). It applies only when
the contracting parties agree that the written agreement is the "final
statement of the agreement." 11 Richard A. Lord, Williston on Contracts
33:14 (4th ed. 2012). The rule does not bar extrinsic evidence that is
offered to explain matters on which the contract is silent "so long as the
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evidence does not contradict the [agreement's] terms." Ringle, 120 Nev. at
91, 86 P.3d at 1037. For example, in a matter regarding partnership by
estoppel, the Minnesota Supreme Court held that the parol evidence rule
did not bar extrinsic evidence to help resolve uncertainties about a
partnership's existence when the contract did not address a partnership or
preclude its possibility. Blumberg v. Palm, 56 N.W.2d 412, 415-16 (Minn.
1953).
Aeder and the JDI entities rely on the following language of a
purchase agreement in asserting that the parol evidence rule barred the
purchasers' evidence for partnership by estoppel:
This Agreement, such documents and all addenda
and exhibits attached hereto reflect the entire and
exclusive agreement of the Parties regarding the
construction of the Residence, the purchase and
sale of the Property, representations, warranties
and duties of Seller related to the Property and
the materials and workmanship used in
construction of the Property. No salesperson,
agent or employee of Seller has the authority to
make any representations that contradict or alter
any terms of this Agreement . . . . Except as
expressly set forth in this Agreement and such
documents, Buyer has not relied upon any
representations. . . with respect to any aspect of
the Property. This Agreement is intended by
Buyer and Seller as the final expression and the
complete and exclusive statement of their
agreement . . . , and any prior or contemporaneous
oral or written agreements or understandings
which may contradict, explain or supplement
these terms are hereby superseded . . . .
This language suggests the intent to integrate the purchase agreement.
Although the language provides that the purchasers did not rely on any
representations about the "Property," this language on which Aeder and
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the JDI entities rely for their parol evidence argument was silent about a
partnership. Thus, the parol evidence rule did not prohibit evidence
regarding the representations of a partnership or a joint venture.
The genuine issues of material fact
Although some of the purchasers' evidence may have been
inadmissible if objected to, Aeder and the JDI entities made no objections
about the admissibility of the evidence beyond their assertion of the parol
evidence rule. Thus, all of the evidence before the district court can be
considered for determining whether genuine issues of material fact
remained. See Whalen, 100 Nev. at 195-96, 679 P.2d at 250.
When moving for summary judgment, Aeder and the JDI
entities averred that there was an absence of evidence for the purchasers'
partnership-by-estoppel claim. At that time, the purchasers had not yet
proffered evidence of actual representations of a partnership or joint
venture. As a result, Aeder and the JDI entities satisfied their initial
burden of showing the absence of genuine issues of material fact. But in
contesting the motion, the purchasers submitted additional evidence that
demonstrated genuine issues of material fact.
The purchasers submitted evidence of Cay Clubs' marketing
materials. These materials included Cay Clubs' website, which stated
that Cay Clubs was "a partnership of. . . professionals" and that its
"strategic partner[s]" included the JDI entities. The marketing materials
described the relationship with the JDI entities as a "partnership in
excellence," identified the JDI entities as part of Cay Clubs' development
team, and often used JDI Realty's logo alongside Cay Clubs' logo.
Although the district court determined that a single use of the term
"strategic" undermined the partnership-by-estoppel theory of liability, the
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multiple representations of a profit-oriented relationship between Cay
Clubs and the JDI entities created a genuine issue of material fact as to
whether these marketing materials represented a partnership, or at least
a joint venture, between them.
The purchasers' evidence also established a genuine issue of
material fact about whether JDI consented to the representations of a
partnership or joint venture. In a deposition, Aeder stated that he
reviewed Cay Clubs' marketing materials and did not doubt, but could not
recall, that a reference was made to the JDI entities. Aeder also declared
that he was the manager for the JDI entities. Hence, there was evidence
of Aeder's potential knowledge of any actionable representations. There
was also evidence which indicated that Aeder, through his LLCs, had
supported Cay Clubs' development of other properties in the past and with
respect to Las Vegas Cay Club. Therefore, there was evidence of a
working relationship between Cay Clubs and Aeder and thus evidence of
the same between Cay Clubs and Aeder's JDI entities. Accordingly, the
totality of the evidence, especially the evidence of Aeder's knowledge of the
marketing materials and his history of using his LLCs to extend support
to Cay Clubs, indicated a genuine issue of material fact about whether
Aeder, on behalf of the JDI entities, permitted Cay Clubs to make the
actionable representations in the marketing materials.
With respect to the credit given to any actionable
representations, multiple purchasers submitted affidavits wherein they
stated that they relied on the representations of a partnership when
purchasing their condominiums and engaging in related transactions with
Cay Clubs. In those affidavits, they stated their beliefs that the
partnership with the JDI entities provided the financial strength and
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experience to manage their money and perform the promised
improvements to their property. Aeder and the JDI entities contend that
the purchasers did not give any credit to the purported partnership
between Cay Clubs and the JDI entities because the purchasers only
transacted with Flamingo Palms Villas. However, the purchasers
submitted to the district court an auditor's report that indicated that Cay
Clubs appeared to be made of various LLCs that were created for each of
its properties. Moreover, the district court had before it a deed of trust
that related to a Las Vegas Cay Club property that was signed by the
Flamingo Palms Villas' manager, who was identified in other documents
as forming and being involved in other Cay Clubs properties. Thus, the
evidence indicates that there remains a genuine issue of material fact as
to whether credit was given to the purported partnership when the
purchasers transacted with Flamingo Palms Villas, an entity that
appeared to be one of many LLCs that made up Cay Clubs, and therefore
whether the JDI entities may be held liable as Cay Club partners. The
various parties' relationships and representations, if any, must be
determined on remand.
As to the reasonable reliance requirement for partnership by
estoppel, the evidence indicated a genuine issue of material fact about the
purchasers' reasonable reliance on the representations of the relationship
between Cay Clubs and the JDI entities. The marketing materials
repeatedly emphasized a profit-oriented relationship between the two.
Moreover, the• affidavits of multiple purchasers provided that they
attended sales and marketing presentations where such representations
were made and that their belief in such representations was reinforced
when reviewing marketing materials and Cay Clubs' website. Hence, the
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evidence established the indicia of an effort to follow up on the
representations of a partnership or joint venture between the JDI entities
and Cay Club.
Accordingly, the district court erred in granting summary
judgment to the JDI entities with respect to their liability under NRS
87.160(1). Under this statute, the JDI entities may be liable as partners
for the wrongdoings of others that are raised in the purchasers' claims
that implicate their purported reasonable reliance on the representations
of a partnership or joint venture between Cay Clubs and the JDI entities. 5
However, as to Aeder's liability under partnership by estoppel, the
purchasers' briefing and analysis have only directed this court to evidence
5 In reaching our determinations above regarding the genuine issues
of material fact, we acknowledge that although multiple purchasers
submitted affidavits that indicated their reasonable reliance on the
representations of the profit-oriented relationship between Cay Clubs and
the JDI entities, not all of the purchasers submitted such affidavits. We
also acknowledge that the JDI entities and Aeder assert the following
argument, which lacks merit: only three purchasers could show reasonable
reliance because only three purchasers entered into their purchase
agreements before Flamingo Palms Villas engaged in the partnership-type
activity of a loan transaction with another JDI entity. This argument
overlooks that NRS 87.160(1) conditions liability on the claimant's
reasonable reliance on the representation—not on the existence and
activity—of a partnership or joint venture. Moreover, the record indicates
that the purchasers were primarily similarly situated plaintiffs. Given
these unique circumstances, the evidence showed that genuine issues of
material fact remained as to the JDI entities' partnership-by-estoppel
liability. Thus, the district court's determination that the JDI entities
lacked liability under NRS 87.160(1) must be reversed. To the extent that
the JDI entities want to dispute their liability as to each purchaser on a
plaintiff-by-plaintiff basis, we leave that matter to the parties and the
district court on remand.
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of partnership by estoppel with respect to the JDI entities. They have not
analyzed or directed this court to evidence of representations of a
partnership or joint venture with Aeder. Therefore, absent an analysis of
such evidence, we conclude that the district court did not err in granting
summary judgment in Aeder's favor regarding his liability under NRS
87.160(1).
CONCLUSION
Because of the genuine issues of material fact above, the
district court erred in granting summary judgment to the JDI entities
with regard to their liability under the partnership-by-estoppel doctrine
that NRS 87.160(1) codifies. We conclude that partnership by estoppel
may be found under NRS 87.160(1) where the subject of the actionable
representation is a partnership or a joint venture, that the consent
required for partnership by estoppel can be express or implied from one's
conduct, that the statute's phrase "given credit" means giving credence to
the representation by detrimentally relying on it to engage in a
transaction with the purported partnership, and that the claimant who
seeks to prevail on the partnership-by-estoppel claim must have
reasonably relied on the representation of partnership or joint venture.
Moreover, we conclude that NRS 87.160(1) may impose partnership
liability with respect to claims that implicate the reliance element that is
required for partnership by estoppel—such claims are not limited to
causes of action that sound in contract.
Therefore, we reverse the order granting summary judgment
in favor of the JDI entities with respect to their liability under NRS
87.160(1) and remand this matter to the district court for further
proceedings that are consistent with this opinion. In addition, we reverse
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the award of costs that was predicated on the grant of summary judgment
to the JDI entities. 6
J.
Saitta
Gibbons
J.
Hardesty
t C(LA
Parraguirre
J.
Douglas
6We have considered the remaining contentions on appeal and
conclude that they lack merit.
28