Nev. Ass'n Servs. v. Eighth Jud. Dist. Ct.

130 Nev., Advance Opinion 414.
IN THE SUPREME COURT OF THE STATE OF NEVADA
NEVADA ASSOCIATION SERVICES, No. 62748
INC.; AND PECCOLE RANCH
COMMUNITY ASSOCIATION,
Petitioners,
vs.
THE EIGHTH JUDICIAL DISTRICT 0 4 2014
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF
CLARK; AND THE HONORABLE
SUSAN SCANN, DISTRICT JUDGE,
Respondents,
and
ELSINORE, LLC, ON BEHALF OF
ITSELF AND AS REPRESENTATIVE
OF THE CLASS DEFINED HEREIN;
AND G.J.L., INCORPORATED,
Real Parties in Interest.
Original petition for a writ of mandamus or prohibition
challenging a district court order denying a motion to dismiss and a
district court order denying a motion for summary judgment in a real
property action.
Petition granted in part and denied in part.
Holland & Hart LLP and Patrick J. Reilly and Nicole E. Lovelock, Las
Vegas,
for Petitioner Nevada Association Services, Inc.
Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP, and Michael J. Lemcool,
Don Springmeyer, and Gregory P. Kerr, Las Vegas,
for Petitioner Peccole Ranch Community Association.
Adams Law Group and James R. Adams, Las Vegas,
for Real Party in Interest Elsinore, LLC.
- 94-6
Johns & Durrant, LLP, and Lance W. Johns, Las Vegas,
for Real Party in Interest G.J.L., Incorporated.
BEFORE THE COURT EN BANC.'
OPINION
By the Court, SAITTA, J.:
"The voluntary payment doctrine is a long-standing doctrine of
law, which clearly provides that one who makes a payment voluntarily
cannot recover it on the ground that he was under no legal obligation to
make the payment." Best Buy Stores v. Benderson-Wainberg Assocs., 668
F.3d 1019, 1030 (8th Cir. 2012) (internal quotations omitted). This
doctrine precludes recovery of a voluntary payment unless the party can
demonstrate that it meets an exception to the doctrine.
At issue here is whether the voluntary payment doctrine
applies in Nevada to bar a property owner from recovering fees that it
paid to a community association and, if so, whether the property owner
demonstrated an exception to this doctrine by showing that the payments
were made under business compulsion or in defense of property. We hold
that the doctrine is valid in Nevada and that the property owner did not
show an exception which would preclude its application in the present
case.
'The Honorable Mark Gibbons, Chief Justice, voluntarily recused
himself from participation in the decision of this matter.
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P.3d 556, 558 (2008) (citations omitted); see NRS 34.160. "A writ of
prohibition is appropriate when a district court acts without or in excess of
its jurisdiction." Sandpointe Apartments, LLC v. Eighth Judicial Dist.
Court, 129 Nev. „ 313 P.3d 849, 852 (2013) (quoting Cote H. v.
Eighth Judicial Dist. Court, 124 Nev. 36, 39, 175 P.3d 906, 907 (2008)).
Because a writ is an extraordinary remedy, "we will exercise our discretion
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to consider such a petition only when there is no plain, speedy and
adequate remedy in the ordinary course of law or there are either urgent
circumstances or important legal issues that need clarification in order to
promote judicial economy and administration." Cheung v. Eighth Judicial
Dist. Court, 121 Nev. 867, 869, 124 P.3d 550, 552 (2005) (internal
quotations omitted). "Therefore, 'we generally will not exercise our
discretion to consider petitions for extraordinary writ relief that challenge
district court orders denying motions for summary judgment, unless
summary judgment is clearly required by a statute or rule, or an
important issue of law requires clarification." Sandpointe, 129 Nev. at ,
313 P.3d at 852 (quoting ANSE, Inc. v. Eighth Judicial Dist. Court, 124
Nev. 862, 867, 192 P.3d 738, 742 (2008)).
The present petition involves significant unsettled questions of
law regarding the application of the voluntary payment doctrine in
Nevada. Thus, the petition presents "an important issue of law
requir [ing] clarification," which may be significant to other litigation
involving common-interest community assessments. See id. (quoting
ANSE, Inc., 124 Nev. at 867, 192 P.3d at 742). Additionally, this case is in
the early stages of litigation and postponing consideration of this issue
would not serve the interests of the parties, judicial economy, nor the
wider community. We therefore exercise our discretion to entertain the
merits of the writ petition with regard to the application of the voluntary
payment doctrine. 2
2We decline to exercise our discretion, however, with regard to the
district court's denial of Peccole Ranch's motion to dismiss. See Cheung,
121 Nev. at 869, 124 P.3d at 552 (holding that this court has discretion to
consider a writ petition).
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The voluntary payment doctrine applies to Elsinore's payments
The voluntary payment doctrine is an affirmative defense that
"provides that one who makes a payment voluntarily cannot recover it on
the ground that he was under no legal obligation to make the payment."
Best Buy Stores v. Benderson-Wainberg Assocs., 668 F.3d 1019, 1030 (8th
Cir. 2012) (internal quotations omitted). "The 'voluntary' in the voluntary
payment doctrine does not entail the mere payment of the bill or fee."
Putnam v. Time Warner Cable of Se. Wis., 649 N.W.2d 626, 632 (Wis.
2002). Instead, it considers "the willingness of a person to pay a bill
without protest as to its correctness or legality." Id. at 633. This doctrine
serves to promote the "policy goals of certainty and stability" in
transactions. Berrum v. Otto, 127 Nev. , n.5, 255 P.3d 1269, 1273
n.5 (2011).
We have recognized the validity of the voluntary payment
doctrine in Nevada since at least 1887, when we applied the rule to
reverse a district court order allowing a county to recover for an erroneous
overpayment it made to a jailor, observing that "R]he rule is well settled
that money voluntarily paid, with full knowledge of all the facts, although
no obligation to make such payment existed, cannot be recovered back."
Randall v. Cnty. of Lyon, 20 Nev. 35, 38, 14 P. 583, 584 (1887).
Recently, we discussed the voluntary payment doctrine
without applying it. In Berrum, we discussed that while the voluntary
payment doctrine generally applies to tax payments, it does not apply
when a statute gives a taxpayer the right to challenge a voluntary
payment. 127 Nev. at n.5, 255 P.3d at 1273 n.5. Thus, we held that
the doctrine did not apply in that case because the taxpayers had made
the disputed payments while properly challenging the property valuations
that were the bases of their tax liabilities. Id.
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The voluntary payment doctrine remains good law in Nevada.
Therefore, we hold that the voluntary payment doctrine is a valid
affirmative defense in Nevada.
Because the voluntary payment doctrine is an affirmative
defense, the defendant bears the burden of proving its applicability. See
Schwartz v. Schwartz, 95 Nev. 202, 206 n.2, 591 P.2d 1137, 1140 n.2
(1979) (stating that a defendant bears the burden of proving each element
of an affirmative defense). Once a defendant shows that a voluntary
payment was made, the burden shifts to the plaintiff to demonstrate that
an exception to the voluntary payment doctrine applies. See Randazzo v.
Harris Bank Palatine, N.A., 262 F.3d 663, 666 (7th Cir. 2001) (noting that
"a plaintiff who voluntarily pays money in reply to an incorrect or illegal
claim of right cannot recover that payment unless he can show fraud,
coercion, or mistake of fact"). If an exception applies, a plaintiff is not
precluded from recovering a payment that it made without protest. See
Ross v. City of Geneva, 357 N.E.2d 829, 836 (Ill. App. Ct. 1976) (stating
that "the mere payment, without protest, . . . does not constitute waiver of
a right to recovery" when an exception applies), aff'd, 373 N.E.2d 1342,
1347 (Ill. 1978). Therefore, we first address whether petitioners have
demonstrated that this affirmative defense applies before considering
whether Elsinore established that an exception to the voluntary payment
doctrine exists.
NAS and Peccole Ranch demonstrated that the voluntary payment
doctrine applies to Elsinore's claims
In its counterclaim, Elsinore admitted that it paid Peccole
Ranch's assessment. In addition, NAS submitted documentation of
Elsinore's payment. Elsinore did not argue that it made its payment
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under protest or without knowledge of the facts. Because of Elsinore's
admission and the documentation of Elsinore's payment, NAS met its
burden of showing that Elsinore made a voluntary payment.
The record does not demonstrate, however, that petitioners
presented any evidence to the district court to show that any other class
member made a voluntary payment. Therefore, NAS and Peccole Ranch
have not met their burden of showing that the voluntary payment doctrine
precludes the remaining class members' claims.
Elsinore has not demonstrated that an exception to the voluntary
payment doctrine applies
Elsinore argues that two exceptions to the voluntary payment
doctrine preclude its application in the present case. These exceptions are
(1) coercion or duress caused by a business necessity and (2) payment in
defense of property. 3 We do not address whether other exceptions to the
voluntary payment doctrine could apply.
3 Elsinore also argues that an exception to the voluntary payment
doctrine exists for situations that involve a payee's improper conduct.
This exception applies, however, where the improper conduct induces the
payee's mistake of law. See, e.g., Time Warner Entm't Co. v. Whiteman,
802 N.E.2d 886, 889 (Ind. 2004) ("Generally a voluntary payment made
under a mistake or in ignorance of law, but with a full knowledge of all the
facts, and not induced by any fraud or improper conduct on the part of the
payee, cannot be recovered back." (internal quotations omitted)); cf. Smith
v. Prime Cable of Chi., 658 N.E.2d 1325, 1329 (Ill. App. Ct. 1995) (stating
that a payee's assertion that a claim was illegal does not, by itself, create
an exception to the voluntary payment doctrine). Since Elsinore does not
allege that a payee's improper conduct caused it to make a mistake of law,
this exception is inapplicable in the present case.
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Elsinore has not demonstrated that business necessity caused it
to make the payment
The coercion or duress exception applies when "(1) . . . one side
involuntarily accepted the terms of another; (2) . . . circumstances
permitted no other alternative; and (3) . . . circumstances were the result
of coercive acts of the opposite party." Emp'rs Ins. of Wausau v. United
States, 764 F.2d 1572, 1576 (Fed. Cir. 1985) (internal quotations omitted).
Business necessity can constitute duress for the purposes of this exception.
Randazzo, 262 F.3d at 669. Business necessity constituting duress occurs
when the payor has only a single "commercially reasonable course of
action," despite the fact that the action involves a choice, in some limited
sense. Ross, 357 N.E.2d at 836.
In Ross, a municipal power company threatened to terminate
electrical service to the plaintiffs' businesses if they failed to pay the
power company's disputed charges. Id. Because the power company was
"the sole provider of electricity to the [plaintiffs'] commercial enterprises"
and no formal or statutory mechanism to challenge or protest the charges
existed, the plaintiffs' payment of the disputed charges "was the
commercially reasonable action under the circumstances." Id. As a result,
the voluntary payment doctrine did not preclude their claims. Id.
When a party has other reasonable alternatives to payment,
however, its decision to pay is not made under duress. In Employers
Insurance of Wausau, an insurance company sought to recover an alleged
overpayment that it made in response to the federal government's demand
relating to a government contractor's nonpayment of a liability for which
the insurance company was a surety. 764 F.2d at 1573-74. The federal
government threatened to remove the insurance company from the list of
approved sureties for government contracts if it failed to make the alleged
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overpayment. Id. at 1574. In considering the issue of duress, the Federal
Circuit Court observed that the insurance company had other alternatives
to paying the federal government's demand, such as requesting a delay of
the payment as was authorized by federal law. Id. at 1576. Thus, the
federal government's threat to remove the insurance company from the
list of approved sureties for government contracts if it failed to pay or
request a delay did not cause duress by business necessity. Id. As a
result, the voluntary payment doctrine applied and prohibited the
insurance company's claim. Id.
Unlike Ross, where no other electricity supplier could serve
the plaintiffs and there was no mechanism for protest, Elsinore did not
meet its burden to demonstrate that it lacked a reasonable alternative to
paying the lien. Although Elsinore filed an NRED complaint three years
after it paid the lien amount, it could have sought NRED arbitration or
mediation prior to paying the lien. Thus, Elsinore's decision to pay was
not made under duress because it had reasonable alternatives at the time
of payment. See Employers Ins. of Wausau, 764 F.2d at 1575 76; see also
-
NRS 38.310 (providing that parties must mediate or arbitrate CC&R-
based claims before pursuing civil litigation, thus demonstrating that
meditation and arbitration were available to Elsinore). Further, Elsinore
did not demonstrate that NRED arbitration or mediation would have been
too expensive or too slow to be reasonable. Instead, Elsinore and the
class's attorney argued at the summary judgment hearing that arbitration
was too slow for Elsinore's business model. "Arguments of
counsel[, however,] are not evidence and do not establish the facts of the
case," Jain v. McFarland, 109 Nev. 465, 475-76, 851 P.2d 450, 457 (1993).
Therefore, Elsinore failed to provide any evidence to demonstrate that the
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NRED arbitration was not a reasonable alternative to paying the lien and,
unlike Ross, where no other electricity supplier could serve the plaintiffs,
Elsinore did not demonstrate that paying Peccole Ranch was its only
commercially reasonable course of action. See Ross, 357 N.E.2d at 836.
Because the record does not support the district court's conclusion that
Elsinore paid under duress, the district court erred in finding that
Elsinore was under duress caused by a business necessity when it paid the
full amount of Peccole Ranch's lien.
Elsinore did not demonstrate that it paid in defense of property
The second exception that Elsinore proffers is the payment in
defense of property exception. We recognized this exception in Cobb v.
Osman, where we stated that "[it is well settled that one is not a
volunteer or stranger when he pays to save his interest in his property."
83 Nev. 415, 421, 433 P.2d 259, 263 (1967). In Cobb, a property seller
made payments on a loan secured by a mortgage on the property, even
though the buyer had assumed the loan, after the buyer failed to make her
loan payments and a notice of default was recorded. Id. at 417-20, 433
P.2d at 260-62. Though the seller had no legal duty to make payments on
the buyer's loan, the seller retained ownership of two other properties
securing the loan, and thus nonpayment of the loan would have subjected
the seller's two other properties to foreclosure. Id. at 421, 433 P.2d at 263.
Because the seller had paid the mortgage to save his interest in the two
other properties that secured the mortgage, the Cobb court concluded that
the voluntary payment doctrine did not prevent the seller from recovering
damages from the buyer for her failure to pay the mortgage. Id. at 422,
433 P.2d at 263.
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The present case is distinct from Cobb in at least two
significant ways. First, the remedy sought in Cobb was against a party
who failed to make necessary payments, not against the recipient of a
disputed payment. This distinction is important because the exception as
applied in Cobb does not undermine the voluntary payment doctrine's
policy of promoting stability of transactions.
Second, Cobb involved a case where the payor risked losing his
property interest in foreclosure if he did not pay another's loan. Here,
Elsinore did not demonstrate any such risk existed. Although Elsinore
demonstrated that Peccole Ranch placed a lien on Elsinore's property,
there is no evidence showing that foreclosure proceedings were imminent.
"While a lien creates a security interest in property, a lien right alone does
not give the lienholder right and title to property. Instead, title, which
constitutes the legal right to control and dispose of property, remains with
the property owner until the lien is enforced through foreclosure
proceedings." Hamm v. Arrowcreek Homeowners' Ass'n, 124 Nev. 290, 298-
99, 183 P.3d 895, 902 (2008) (citations omitted) (internal quotations
omitted). Thus, a lien that is not subject to ongoing or imminent
foreclosure proceedings does not create a risk of the loss of property. See
id. (stating that a lien constitutes a monetary encumbrance that does not
alter title when foreclosure proceedings have not been initiated on the
lien). Furthermore, where a reasonable legal remedy is available to the
payor, a payment made to relieve the lien is voluntary. See Oxxford
Clothes XX, Inc. v. Expeditors Int'l of Wash., Inc., 127 F.3d 574, 579 (7th
Cir. 1997) (stating that a party was not under duress when it had "an
entirely feasible legal remedy"); see also City of Rochester v. Chiarella, 448
N.E.2d 98, 102 (N.Y. 1983) (observing that the "imposition of a lien and/or
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exaction of interest, without more, falls short of what is to be recognized as
duress in [the] context" of a payment made to relieve a lien). But cf.
Mercury Mach. Importing Corp. V. City of New York, 144 N.E.2d 400, 403
(N.Y. 1957) (stating that "[p]ayment after a tax has become a lien is not
voluntary, for the menace of the lien with penalties added for delay has
the effect of rendering it compulsory" (emphasis added) (internal
quotations omitted)).
Therefore, Elsinore's payment to release Peccole Ranch's lien
does not meet Cobb's defense of property exception to the voluntary
payment doctrine. As a result, the district court erred by finding that
Elsinore made a payment to defend its interest in the property. Because
Elsinore did not present a valid exception to the application of the
voluntary payment doctrine, the district court erred by denying NAS and
Peccole Ranch's motion for summary judgment with regard to Elsinore's
counterclaims for damages.
CONCLUSION
The voluntary payment doctrine provides an affirmative
defense to a claim for the recovery of money that a plaintiff voluntarily
paid. In the present case, NAS and Peccole Ranch demonstrated that
Elsinore made a voluntary payment. Though exceptions to the voluntary
payment doctrine exist, Elsinore did not demonstrate that any exception
applied to the payment that it made. Thus, the district court erred by
denying NAS and Peccole Ranch's motion for summary judgment against
Elsinore's counterclaims for damages.
We therefore grant the petition for a writ of mandamus and
order the district court to grant petitioners' motion for summary judgment
with regard to Elsinore's counterclaims for damages because the voluntary
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payment doctrine is a complete defense to Elsinore's claims. 4 We decline
to consider the remaining issues in the petition and thus deny the
remainder of the petition.
Saitta
We concur:
Pickering
J.
Hardesty
'J.
Parraguirre
Cherry
4 BecauseNAS and Peccole Ranch failed to meet their burden in
showing that the voluntary payment doctrine applies to the remaining
class members, this summary judgment is limited to Elsinore's claims
only.
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