Land Baron Invs. v. Bonnie Springs Family LP

131 Nev., Advance Opinion (61
IN THE SUPREME COURT OF THE STATE OF NEVADA
LAND BARON INVESTMENTS, INC., A No. 59687
NEVADA CORPORATION; MICHAEL
CHERNINE, A TRUSTEE OF THE
MISHA TRUST; AND ROBERT BLACK,
JR., TRUSTEE OF THE BLACKBUSH
FILED
FAMILY TRUST, SEP 1 7 2015
Appellants,
vs.
BONNIE SPRINGS FAMILY LIMITED
PARTNERSHIP, A NEVADA LIMITED
PARTNERSHIP; BONNIE SPRINGS
MANAGEMENT COMPANY, A
NEVADA LIMITED LIABILITY
CORPORATION; ALAN LEVINSON, AN
INDIVIDUAL; BONNIE LEVINSON, AN
INDIVIDUAL; AND APRIL BOONE, AN
INDIVIDUAL,
Respondents.
Appeal from a district court judgment in a tort and real
property contract action. Eighth Judicial District Court, Clark County;
Douglas W. Herndon, Kathleen E. Delaney, and Gloria Sturman, Judges.
Affirmed in part and reversed in part.
Cotton, Driggs, Walch, Holley, Woloson & Thompson and John H. Cotton
and Christopher G. Rigler, Las Vegas,
for Appellants.
Greenberg Traurig, LLP, and Tyler R. Andrews and Philip M. Hymanson,
Las Vegas,
for Respondents.
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Darren J. Welsh, Chtd., and Darren J. Welsh, Las Vegas,
for Amicus Curiae Prudential Americana Group, Realtors.
BEFORE HARDESTY, CA., PARRAGUIRRE and CHERRY, JJ.
OPINION
By the Court, HARDESTY, C.J.:
This appeal arises from a failed land sale contract and raises
three issues of first impression. First, we must consider whether a mutual
mistake will provide a ground for rescission where one of the parties bears
the risk of mistake. Second, we must determine whether an abuse of
process claim may be supported by a complaint to an administrative
agency instead of one involving a legal process. Finally, we consider
whether a nuisance claim seeking to recover only emotional distress
damages requires proof of physical harm.
In addressing the first issue, we adopt the Restatement
(Second) of Contracts § 154(b) (1981), which provides that a party bears
the risk when "he is aware, at the time the contract is made, that he has
only limited knowledge with respect to the facts to which the mistake
relates but treats his limited knowledge as sufficient." In this, we reject
mutual mistake as a basis for rescission. We also reject the assertions
that an abuse of process claim may be supported by a complaint to an
administrative agency or that a nuisance claim seeking only emotional
distress damages must be supported by proof of physical harm.
Accordingly, we affirm in part and reverse in part the district court's
orders and judgment.
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FACTS
Factual background
In 2004, appellants Land Baron Investments, Inc., Michael
Chernine, and Robert Black, Jr. (collectively, Land Baron), contracted to
purchase land for $17,190,000 from respondents Bonnie Springs Family
Limited Partnership, Bonnie Springs Management Company, Alan
Levinson, Bonnie Levinson, and April Boone (collectively, Bonnie Springs)
for the express purpose of building a subdivision. The property lies next to
the Bonnie Springs Ranch, beyond the outskirts of Las Vegas and is
surrounded largely by undeveloped land
Prior to signing the purchase agreement, Land Baron verified
that Bonnie Springs had title to the property but did not inquire into
water or access rights or do any other due diligence. Land Baron drafted
the purchase agreement, which stated that Bonnie Springs would allow
Land Baron to use some of its treated wastewater for landscaping but did
not mention access or water rights or make the contract contingent upon
its ability to secure access, water, or any other utility necessary for the
planned subdivision. Immediately after signing the agreement and while
the sale was pending, Land Baron also began listing and relisting the
property for sale, first as a single piece of property and then as separate
parcels. However, obtaining access and water proved to be difficult, and
beginning in December 2004, the parties amended the purchase
agreement five times to extend the escrow period, with Land Baron paying
a nonrefundable fee of $50,000 for each extension.
The property is flanked by two gravel roads, Los Loros Lane
and Gunfighter Lane, both of which overlap or border Federal Bureau of
Land Management (BLM) land. Clark County informed Land Baron it
would not approve either road as access into the proposed subdivision
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unless the road was widened and paved. After further researching the
issue, Land Baron discovered that Gunfighter Lane could not be paved or
widened because a right-of-wayl would not allow it and that Los Loros
Lane 2 likewise could not be paved or widened because it was on National
Conservation Land and use of that road could constitute a trespass.
In September 2005, Land Baron began a search for water
rights for the subject property. An attempt to buy existing water rights
from another owner in the area failed because the rights were not in the
same water basin. Land Baron was unable to find a viable option for
obtaining water rights from nearby water sources and was unable to bring
in water by a pipeline from another development. Land Baron asked
Bonnie Springs if it would be willing to share its commercial water rights
from the Bonnie Springs Ranch, but Bonnie Springs informed Land Baron
that it could not allow its commercial water to be used in the residential
development. Despite these issues, Land Baron never attempted to
amend the language of the agreement with Bonnie Springs to address
concerns with access or water.
The parties met in August 2007 to discuss the access and
water rights issues. Land Baron informed Bonnie Springs that, because
the property would likely need to be sold as a single parcel rather than as
'The BLM informed Land Baron that Gunfighter Lane was known
as an "R.S. 2477 right-of-way" road. An employee from Clark County
Development Services indicated that R.S. 2477 roads are roads across
BLM land that have been adopted and maintained by the county as public
roads but that cannot be altered from their original condition in any way.
2At the time of this appeal, Land Baron's application with the BLM
to widen and pave Los Loros Lane was still pending approval.
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individual lots in a subdivision, its value was greatly reduced. Following
this meeting, Land Baron failed to make a payment to extend the escrow
period through September 2007. On September 26, 2007, Bonnie Springs
notified Land Baron that it was in breach and that Bonnie Springs was
terminating escrow and keeping the deposits as liquidated damages. The
next day, Bonnie Springs notified the title company of Land Baron's
breach and requested that escrow be terminated.
Subsequent negotiations proved unsuccessful, and Land Baron
filed a citizen's complaint with the Clark County Commissioner's office
alleging that there were multiple county code violations on the Bonnie
Springs Ranch. The complaints were based on investigations allegedly
performed at Bonnie Springs Ranch by individuals it hired to search for
code violations. These investigators allegedly found horses that had been
electrocuted or infected with West Nile virus; turtles in the petting zoo
that were infected with salmonella; licensing issues with the motel and
business; code violations with the walkways, handrails, restrooms, shade
structures, electrical wiring, and stairways; and other health, waste, and
zoning issues. As a result, the county commissioner and multiple state
and local regulatory agencies performed a large-scale inspection of the
Bonnie Springs Ranch during business hours, when guests and school
children were present. Officials from each county office arrived at the
ranch in police vehicles that had lights flashing. No violations were found
on the Bonnie Springs Ranch.
Procedural background
The same month it filed the citizen's complaint, Land Baron
also filed a complaint against Bonnie Springs in district court, asserting
claims for breach of contract, breach of the implied covenant of good faith
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and fair dealing, intentional misrepresentation and nondisclosure,
negligent misrepresentation, rescission based on mutual mistake,
rescission based on unilateral mistake, rescission based on failure of
consideration, and rescission based on fraud in the inducement. All of the
claims centered on Land Baron's difficulty obtaining access and water
rights for the subject property. Bonnie Springs counterclaimed for breach
of contract, abuse of process, nuisance, fraudulent misrepresentation,
intentional interference with contractual relations, and slander of title.
Several summary judgment motions were filed. Of note,
Bonnie Springs filed a motion for summary judgment on the ground that it
had no legal or contractual duty to provide or secure water rights for the
property. And Land Baron filed a motion for summary judgment to
confirm its right to rescind the contract based on mutual mistake.
The district court granted Bonnie Springs' motion for
summary judgment on the water rights issues. It found that Bonnie
Springs had no contractual duty to provide notice of water rights issues or
to help secure water rights for the subject property, and that the burden
was on Land Baron to secure water rights.
The district court then denied Land Baron's motion for
summary judgment regarding mutual mistake. The court found that
there was no mutual mistake because the parties did not know, at the
time of the agreement, whether there were sufficient access and water
rights to support a subdivision on the property, and it assigned the risk of
that mistake to Land Baron. Finally, the district court granted Land
Baron's second summary judgment motion dismissing Bonnie Springs'
intentional interference with contractual relations and fraudulent
misrepresentation claims because it found that there were no remaining
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factual issues. However, it denied the motion as to Bonnie Springs'
counterclaims for breach of contract, abuse of process, nuisance, and
slander of title because it found that factual issues remained.
The parties proceeded to trial on Bonnie Springs' remaining
counterclaims for abuse of process and nuisance. 3 Prior to closing
arguments, Land Baron made a motion for a directed verdict, arguing that
Bonnie Springs had failed to satisfy the elements of each claim and had
failed to prove the physical harm necessary to support emotional distress
damages under the nuisance claim. The district court denied the motion. 4
The jury returned a unanimous verdict for Bonnie Springs on
its nuisance and abuse of process counterclaims, awarding Bonnie Springs
$1,250,000 as compensatory damages for its abuse of process counterclaim
and $350,000 as compensatory damages for its nuisance counterclaim.
The jury awarded Bonnie Springs an additional $1,512,500 in punitive
damages on the abuse of process counterclaim and an additional $762,500
in punitive damages on the nuisance counterclaim.
Land Baron moved for a mistrial. It argued, among other
things, that emotional distress damages may not be awarded on a
3 The parties also went to trial on Bonnie Springs' breach of contract
and slander of title counterclaims. Bonnie Springs filed a separate trial
brief seeking judicial determination in its favor on the breach of contract
counterclaim, which the district court granted. The district court also
granted Land Baron's motion for a directed verdict on the slander of title
counterclaim, and the parties do not dispute either ruling on appeal.
4 The motion was brought on behalf of three parties: appellants
Michael Chernine, Robert Black, and Land Baron. The motion was
granted as to Chernine but denied as to the other parties. The parties do
not appeal the grant in favor of Chernine
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nuisance or abuse of process claim absent proof of physical harm. The
district court denied the motion, finding that a party did not need to prove
physical harm in order to recover emotional distress damages for nuisance
and abuse of process claims in Nevada. Judgment on the jury verdict,
including an award of attorney fees and costs in favor of Bonnie Springs,
was entered. After, Land Baron moved for reconsideration, which the
district court denied.
Land Baron now appeals.
DISCUSSION
On appeal, the parties dispute whether the district court erred
in denying Land Baron's motion for summary judgment on its rescission
claim and granting Bonnie Springs' motion for summary judgment on
Land Baron's misrepresentation and nondisclosure claims. Land Baron
also argues that the district court improperly denied its motions for a
directed verdict on Bonnie Springs' abuse of process and nuisance claims.
We review de novo the grant or denial of summary judgment.
Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005); see
also NRCP 56(c). Summary judgment should be granted when the
evidence, viewed in the light most favorable to the nonmoving party,
demonstrates that there is no genuine issue of material fact remaining in
the case, and where the moving party is entitled to judgment as a matter
of law. Id. at 729, 255 P.3d at 1029. In reviewing a ruling for or against a
directed verdict, this court applies the same standard as the trial court,
viewing the evidence in the light most favorable ``"to the party against
whom the motion is made." M. C. Multi-Family Dev., LLC v. Crestdale
Assocs., Ltd., 124 Nev. 901, 910, 193 P.3d 536, 542 (2008) (quoting Bliss v.
DePrang, 81 Nev. 599, 601, 407 P.2d 726, 727 (1965)).
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The district court did not err in denying Land Baron's motion for summary
judgment on its mutual mistake rescission claim
Land Baron argues that it was entitled to summary judgment
on its rescission claim because both Land Baron and Bonnie Springs
mistakenly believed there would be sufficient access and water rights for a
subdivision on the property, giving rise to a mutual mistake that would
render the contract voidable.
A contract may be rescinded on the basis of mutual mistake
"'when both parties, at the time of contracting, share a misconception
about a vital fact upon which they based their bargain." Gramanz v.
Gramanz, 113 Nev. 1, 8, 930 P.2d 753, 758 (1997) (quoting Gen. Motors v.
Jackson, 111 Nev. 1026, 1032, 900 P.2d 345, 349 (1995)). However,
mutual mistake will not provide grounds for rescission where a party
bears the risk of mistake. Restatement (Second) of Contracts §§ 152(1),
154(b), (c) (1981). If the party is aware at the time he enters into the
contract "that he has only limited knowledge with respect to the facts to
which the mistake relates but treats his limited knowledge as sufficient,"
that party will bear the risk. Restatement (Second) of Contracts § 154(b)
(1981). Moreover, if the risk is reasonably foreseeable and yet the contract
fails to account for that risk, a court may infer that the party assumed
that risk. United States v. Winstar Corp., 518 U.S. 839, 905-06 (1996)
(noting that in considering if a risk is foreseeable in a regulatory setting,
absent a specific contract provision, the party assumes the risk); see also
Tarrant v. Monson, 96 Nev. 844, 845-46, 619 P.2d 1210, 1211 (1980) ("One
who is uncertain assumes the risk that the facts will turn out unfavorably
to his interests," and where the party bargains "with conscious
uncertainty," there cannot be mutual mistake). The party also bears the
risk of mistake if the court allocates that risk to the party on the ground
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that to do so is reasonable under the circumstances. Restatement
(Second) of Contracts § 154(c) (1981).
Here, we need not determine whether Land Baron and Bonnie
Springs shared a mistaken assumption about the certainty of procuring
access and water rights because Land Baron bore the risk of mistake,
foreclosing any possibility of rescinding the contract based on a mutual
mistake. Land Baron is a sophisticated and experienced land buyer and
developer, and in this instance, it contracted to purchase property that
was well beyond the outskirts of Las Vegas, surrounded by land that was
mostly undeveloped, flanked by dirt roads, and only a few minutes away
from Red Rock Canyon, a well-known conservation area. Land Baron also
drafted the contract and its amendments. Yet, despite including a section
for contingencies, Land Baron failed to include language to address the
possibilities that a narrow gravel road may not provide sufficient access to
a subdivision, or that water may not be available to support a
neighborhood complete with large homes and horse pastures. At best, this
was a significant oversight for this type of project, and it can be fairly
inferred that by failing to provide for such contingencies, Land Baron
assumed the risk of mistake as to these issues. Winstar Corp., 518 U.S. at
906.
Land Baron argues that Bonnie Springs assured it that water,
at least, would not be a problem. However, Land Baron points to no
evidence (as opposed to Land Baron's assertions) that Bonnie Springs ever
actually made such a statement and thus fails to show a genuine issue of
material fact. Rather, the record indicates that Land Baron entered into
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the contract without conducting any due diligence, 5 hoping that it could
procure water, access, and any other utility necessary to obtain
development permits. A hope that things will work out is not the same as
a reasonable belief in a set of facts, and Land Baron assumed the risk by
proceeding with the contract despite having limited knowledge of the
actual conditions as to water and access. Thus, rescission is not
appropriate on grounds of mutual mistake. 6 The district court did not err
in granting summary judgment on Land Baron's rescission claims.
Land Baron argues that Bonnie Springs misrepresented,
either intentionally or negligently, Land Baron's ability to obtain access or
water rights. Specifically, it alleges that Bonnie Springs knew Los Loros
Lane was on ELM land and had previously dealt with the BLM regarding
land use issues on the surrounding property, and that Bonnie Springs
knew Land Baron would not be able to get water rights for the subdivision
and had represented to Land Baron that Bonnie Springs would provide
water. It asserts that genuine issues of material fact remain and that the
district court erred in dismissing these claims on summary judgment.
At the threshold, to establish a claim for either intentional or
negligent misrepresentation, Land Baron must show that Bonnie Springs
5Land Baron admitted that the only step it took was to ask a friend
of the corporation whether Bonnie Springs actually held title to the
property.
6 Because we conclude that Land Baron was not entitled to rescind
the contract on the basis of mutual mistake, we do not address Bonnie
Springs' arguments that Land Baron is precluded from seeking rescission
because (1) the doctrine of unclean hands precludes equitable relief, and
(2) Land Baron failed to seek rescission within a reasonable time.
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supplied Land Baron with false information. Barmettler v. Reno Air, Inc.,
114 Nev. 441, 446-47, 449, 956 P.2d 1382, 1386-87 (1998). Summary
judgment is appropriate on either of these claims if Land Baron has not
provided evidence of this essential element. Id. at 447, 956 P.2d at 1386.
Here, Land Baron has provided no evidence that Bonnie Springs ever
represented that there would be no impediment to gaining access for a
subdivision via either Los Loros or Gunfighter Lanes, or that Bonnie
Springs had stated that it would supply the property with water. Because
the record does not indicate that Bonnie Springs ever misrepresented any
facts regarding access or water to Land Baron, summary judgment was
appropriate on the misrepresentation claims.
The district court did not err in granting Bonnie Springs' motion for
summary judgment on Land Baron's nondisclosure claim
Land Baron next argues that Bonnie Springs knew, and did
not disclose, that the property could not be supplied with adequate water
and that both Los Loros and Gunfighter Lanes were on BLM land, giving
rise to a claim for nondisclosure. Nondisclosure arises where a seller is
aware of materially adverse facts that "could not be discovered by the
buyer" after diligent inquiry. Mackintosh v. Jack Matthews & Co., 109
Nev. 628, 633, 855 P.2d 549, 552 (1993). "[W] hen the defect is patent and
obvious, and when the buyer and seller have equal opportunities of
knowledge," a seller cannot be liable for nondisclosure. Collins v. Burns,
103 Nev. 394, 397, 741 P.2d 819, 821 (1987). Liability for nondisclosure is
generally not imposed where the buyer either knew of or could have
discovered the defects prior to the purchase. Mitchell v. Skubiak, 618
N.E.2d 1013, 1017 (Ill. App. Ct. 1993).
The record makes clear that Land Baron could have, and did,
discover the facts surrounding the difficulty or impossibility of obtaining
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sufficient water and access for a subdivision on the property. Those
defects arose from government regulations, were public knowledge, and
were available to anyone upon inquiry. Thus, even if Bonnie Springs had
known about these facts and not disclosed them, there would still be no
viable nondisclosure claim because the facts were discoverable and Land
Baron had an "equal opportunit[if to discover, and did discover, those
facts before closing. Collins, 103 Nev. at 397, 741 P.2d at 821. We also
note that the record shows that Bonnie Springs was not aware, prior to
signing the contract, that Land Baron would be unable to obtain water
rights or that neither Los Loros Lane nor Gunfighter Lane would provide
suitable access. 7 Moreover, water rights are public information that can
be accessed through the Nevada District of Water Resources' (NDWR)
website, and Black testified that Land Baron, through its engineering
firm, was in the best position to know how much water was going to be
needed for the proposed subdivision and whether it would be possible to
procure that amount of water. Also, Land Baron was aware that it would
need to obtain access approval across ELM land, as is evidenced by its
7Alan Levinson and April Boone both testified that they were not
aware of these issues prior to signing the agreement, and that they had
never attempted to widen or pave the roads themselves. Although there is
evidence that at some point an official advised Bonnie Springs that the
county would not approve a transfer of water rights from Bonnie Springs
to the property for purposes of supplying water to a subdivision, that
testimony does not show that Bonnie Springs knew, in advance of the
contract, that Land Baron would be unable to procure any water rights for
the property.
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August 2006 request for permission from Clark County to request a right-
of-way across BLM land. 8
Thus, we conclude that Bonnie Springs cannot be liable for
nondisclosure regarding water rights or access. 9 Accordingly, we conclude
that summary judgment was appropriate as a matter of law on Land
Baron's nondisclosure claim.
The district court's denial of Land Baron's motion for a directed verdict on
Bonnie Springs' abuse of process and nuisance counterclaims
We next turn to whether the damages award was proper on
Bonnie Springs' abuse of process and nuisance counterclaims, and
whether Bonnie Springs was required to provide evidence of physical
harm in order to recover emotional distress damages. We review
questions of law de novo. See Gonski v. Second Judicial Dist. Court, 126
Nev. 551, 557, 245 P.3d 1164, 1168 (2010).
Abuse of process
To support an abuse of process claim, a claimant must show
"(1) an ulterior purpose by the [party abusing the process] other than
resolving a legal dispute, and (2) a willful act in the use of the legal
process not proper in the regular conduct of the proceeding." LaMantia v.
8We reject Land Baron's argument that a prior dispute between
Bonnie Springs and the BLM regarding a parking lot on the Bonnie
Springs Ranch indicated that Bonnie Springs was aware of potential
access issues because that dispute did not concern widening or paving
either Los Loros Lane or Gunfighter Lane.
9 Because the record reveals that Bonnie Springs was not aware of
the water rights and access issues, we do not address amicus curiae party
Prudential Americana Group's argument that allowing Bonnie Springs not
to disclose these issues will detrimentally harm purchasers of real estate
by reinstating strict application of the rule of caveat emptor in Nevada.
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Redisi, 118 Nev. 27, 31, 38 P.3d 877, 880 (2002); Posadas v. City of Reno,
109 Nev. 448, 457, 851 P.2d 438, 444-45 (1993) (quoting Kovacs v. Acosta,
106 Nev. 57, 59, 787 P.2d 368, 369 (1990)); see also Exec. Mgmt., Ltd. v.
Ticor Title Ins. Co., 114 Nev. 823, 843, 963 P.2d 465, 478 (1998). Thus, the
claimant must provide facts, rather than conjecture, showing that the
party intended to use the legal process to further an ulterior purpose.
LaMantia, 118 Nev. at 31, 38 P.3d at 880 (holding that where the party
presented only conjecture and no evidence that the opposing party actually
intended to improperly use the legal process for a purpose other than to
resolve the legal dispute, there was no abuse of process). The utilized
process must be judicial, as the tort protects the integrity of the court.
ComputerXpress, Inc. v. Jackson, 113 Cal. Rptr, 2d 625, 644 (Ct. App.
2001); Stolz v. Wong Commc'ns Ltd. P'ship, 31 Cal. Rptr. 2d 229, 236 (Ct.
App. 1994). Furthermore, the tort requires a "willful act," and the
majority of courts have held that merely filing a complaint and proceeding
to properly litigate the case does not meet this requirement. See, e.g.,
Pomeroy v. Rizzo, 182 P.3d 1125, 1128 (Alaska 2008); Ramona Unified
Sch. Dist. v. Tsiknas, 37 Cal. Rptr. 3d 381, 389 (Ct. App. 2005); Weststar
Mortg. Corp. v. Jackson, 61 P.3d 823, 831 (N.M. 2002); Muro-Light v.
Farley, 944 N.Y.S.2d 571, 572 (App. Div. 2012); Loeffelholz v. Citizens for
Leaders with Ethics & Accountability Now (C.L.E.A.N.), 82 P.3d 1199,
1217 (Wash. Ct. App. 2004).
We agree with the majority rule that filing a complaint does
not constitute abuse of process. The tort requires a "willful act" that
would not be "proper in the regular conduct of the proceeding," Kovacs,
106 Nev. at 59, 787 P.2d at 369, and filing a complaint does not meet this
requirement. Moreover, we agree with other jurisdictions' holdings that
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abuse of process claims do not encompass actions involving administrative
agencies. See, e.g., ComputerXpress, 113 Cal. Rptr. 2d at 644. The tort
requires the abuse of "legal process," Kovacs, 106 Nev. at 59, 787 P.2d at
369, but courts are not usually involved in the conduct of administrative
agencies. Crowe v. Horizon Homes, Inc., 116 S.W.3d 618, 623 (Mo. Ct.
App. 2003) (in contrast to administrative process, legal process is founded
upon court authority).
Here, Bonnie Springs failed to establish the elements of abuse
of process. Bonnie Springs alleges that Land Baron abused process by
filing a civil complaint and by filing a citizen's complaint with the county
commissioner for the ulterior purpose of coercion. However, filing a
citizen's complaint does not demonstrate abuse of legal process, and
Bonnie Springs has alleged no facts that show Land Baron improperly
abused the legal process in filing its complaint or litigating the case. Nor
did it present any evidence at trial of an improper motive, other than its
own allegations that Land Baron filed its complaint for an ulterior
purpose. Therefore, we conclude that the district court erred in denying
Land Baron's motion for a directed verdict on the abuse of process
counterclaim. 10
10 We likewise conclude that the district court abused its discretion
by denying Land Baron's motion for reconsideration on this issue. AA
Primo Builders, LLC v. Washington, 126 Nev. 578, 589, 245 P.3d 1190,
1197 (2010) (noting that a motion for reconsideration is reviewed for an
abuse of discretion when appealed with the underlying judgment).
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Nuisance
Nuisance arises where one party interferes with another
party's use and enjoyment of land, and that interference is both
substantial and unreasonable. Sowers v. Forest Hills Subdivision, 129
Nev., Adv. Op. 9, 294 P.3d 427, 432 (2013). In its answer to the complaint,
Bonnie Springs based its nuisance counterclaim on the complaint filed
with the county commissioner and the resulting inspection, alleging that
this inspection caused "needless expense and loss of income" and that
recoverable costs were incurred when Bonnie Springs paid attorney fees to
defend itself in the ensuing litigation. During trial, however, Bonnie
Springs' representatives admitted that it had suffered no known economic
harm as a result of the inspection, and although it believed the inspection
had damaged its reputation, it presented no evidence to that extent.
Instead, they urged the jury to award damages for the emotional pain and
suffering inflicted by the nuisance."
Courts differ on whether a plaintiff must prove physical harm
to recover for emotional distress arising under a nuisance claim. Compare
Bailey v. Shriberg, 576 N.E.2d 1377, 1380 (Mass. App. Ct. 1991)
(concluding that evidence of physical injury is necessary in an emotional
distress claim based on nuisance), with Herzog v. Grosso, 259 P.2d 429,
433 (Cal. 1953) (determining that occupants could recover for mere
"On appeal, Land Baron does not argue that the district court
inappropriately included the Bonnie Springs' entities in the counter-
plaintiff category and, thus, does not argue whether such entities are
incapable of emotion. See HM Hotel Properties v. Peerless Indem. Ins, Co.,
874 F. Supp. 2d 850, 854 (D. Ariz. 2012). Accordingly, we do not address
this distinction.
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annoyance and discomfort, such as lack of sleep, for a cause of action for
nuisance). However,
[i]t seems to be the prevailing view in most
jurisdictions that, in a nuisance action, an owner
or occupant of real estate is entitled to recover
damages for personal inconvenience, discomfort,
annoyance, anguish, or sickness, distinct from, or
in addition to, damages for depreciation in value of
property or its use.
Tracy A. Bateman, Annotation, Nuisance as Entitling Owner or Occupant
of Real Estate to Recover Damages for Personal Inconvenience, Discomfort,
Annoyance, Anguish, or Sickness, Distinct From, or in Addition To,
Damages for Depreciation in Value of Property or Its Use, 25 A.L.R. 5th
568 (1994). See, e.g., Kornoff v. Kingsburg Cotton Oil Co., 288 P.2d 507,
512 (Cal. 1955) (reiterating that "[o]nce a cause of action for trespass or
nuisance is established, an occupant of land may recover damages for
annoyance and discomfort that would naturally ensue") (internal
quotations omitted); Webster v. Boone, 992 P.2d 1183, 1185-86 (Colo. App.
1999) (holding that damages for nuisance claim can include discomfort
and annoyance); Reichenbach v. Kraska Enters., LLC, 938 A.2d 1238, 1245
(Conn. App. Ct. 2008) (holding that trier of fact can consider discomfort
and annoyance in nuisance damages claim). Further, Restatement
(Second) of Torts § 929(1)(c) (1979) provides that the damages for nuisance
include "discomfort and annoyance" to the occupants.
This court has not previously addressed emotional distress
damages arising under a nuisance claim. We conclude that California,
Colorado, Connecticut, and the Restatement offer the better-reasoned
approach for recovering damages based on a nuisance claim. Because
damages for nuisance include personal inconvenience, discomfort,
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annoyance, anguish, or sickness, an occupant need not show physical
harm to recover.
Bonnie Springs bases its nuisance counterclaim on Land
Baron's complaint to the county commissioner and the resulting inspection
of Bonnie Springs Ranch. The record shows that the inspection lasted
several hours, during which the group of inspecting agents separately
moved through the property conducting a thorough search, which included
pulling apart beds in the motel and searching dark areas with a black
light. Bonnie Springs' representatives testified that the inspection caused
an interruption in business and that it believed the ranch's reputation had
suffered as a result, even though the county failed to find evidence of any
of the violations alleged by Land Baron. Bonnie Springs' representatives
also testified that they lost sleep, had anxiety, and were very upset from
the investigations and inspection.
While we do not opine as to whether the facts are sufficient to
support a nuisance claim, the facts here support the damages arising
under such a claim. Accordingly, we conclude that the district court did
not err by denying Land Baron's motion for a directed verdict on the
nuisance counterclaim, as Bonnie Springs presented evidence sufficient to
merit a damages award.
CONCLUSION
Because insufficient facts exist to support the abuse of process
counterclaim, the district court erred in refusing to enter a directed verdict
on this counterclaim Therefore, the judgment on the jury's award of
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compensatory and punitive damages 12 for the abuse of process claim must
be reversed. Conversely, we affirm the damages award and corresponding
punitive damages award under the nuisance counterclaim. 13 Based on our
decision, we thus affirm the district court's award of attorney fees and
costs. 14
12 Punitive
damages generally may not be awarded when there is no
basis for compensatory damages. See Tucker v. Marcus, 418 N.W.2d 818(Wis. 1988). See also Richard C. Tinney, J D, Annotation, Sufficiency of
Showing Actual Damages to Support Award of Punitive Damages—
Modern Cases, 40 A.L.R. 4th 11, § 2[a] (1985) ("The general rule that
punitive damages may not be awarded unless the party seeking them has
sustained actual damage is accepted universally. . . ."); J.D. Lee & Barry
A. Lindahl, 2 Modern Tort Law: Liability and Litigation § 21:49 (2d ed.
2002) ("As a general rule a plaintiff is required to establish actual
damages before he or she may be entitled to recover punitive damages.");
John J. Kircher & Christine M. Wiseman, 1 Punitive Damages: Law and
Practice 2d § 5:21, 401 (2015) ("Abundant authority exists to support the
proposition that a finding must be entered entitling the plaintiff to actual
damages before that plaintiff will be allowed to recover punitive
damages.").
After review, we conclude that Land Baron's remaining arguments
1 -3
are without merit.
14We disagree that sanctions should issue for Bonnie Springs' "trial
by ambush." Trial by ambush traditionally occurs where a party
withholds discoverable information and then later presents this
information at trial, effectively ambushing the opposing party through
gaining an advantage by the surprise attack. See, e.g., Clark v. Trailways,
Inc., 774 S.W.2d 644, 646 (Tex. 1989); Johnson v. Berg, 848 S.W.2d 345,
349 (Tex. App. 1993). Here, Land Baron points to instances where Bonnie
Springs briefly raised arguments and evidence that Land Baron was
already aware of and objected to during the trial. The trial judge either
overruled these objections or sustained them and took steps necessary to
mitigate any damage. Such is not the type of action or level of seriousness
that constitutes trial by ambush.
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Accordingly, for the reasons set forth above, we affirm in part
and reverse in part the district court's orders and judgment.
C.J.
Hardesty
We concur:
(2.-CA c.e.scS J.
Parraguirre
akartiLl,
Cherry
, J.
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