N5Hyg, Llc v. Iglesias

IN THE SUPREME COURT OF THE STATE OF NEVADA
N5HYG, LLC, A MICHIGAN LIMITED No. 83425
LIABILITY COMPANY,
Appellant, F;
vs.
MANUEL IGLESIAS; AND EDWARD JUN 1
MOFFLY, t
Res ondents.
ORDER OF REVERSAL AND REMAND
This is an appeal from a final judgment entered by the district
court in a contract action. Eighth Judicial District Court, Clark County;
Nancy L. Allf, Judge.'
In 2017, appellant N5HYG, LLC, filed the underlying action
against respondents, former directors of Hygea Holdings Corp., alleging
numerous claims related to a stock purchase agreement. Respondents
joined with another party to remove the case to federal court. While the
case was pending in federal court, appellant joined in a petition to appoint
a receiver to manage Hygea. Hygea successfully moved to change the venue
of the receivership case to a different court (the "receiver court"), and
thereafter, the receiver court denied the petition. After the federal court
remanded this case back to the state district court in 2018, appellant filed
an amended complaint. Respondents moved to dismiss the amended
'Pursuant to NRAP 34(0(4 we have determined that oral argument
is not warranted.
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complaint, arguing that the doctrine of claim preclusion barred appellants'
claims because they could have been raised in the receivership case.
Originally, the district court concluded that because the receiver court
found it lacked jurisdiction, it had not entered a final judgment on the
merits and its decision therefore had no preclusive effect. After Hygea
moved for reconsideration, the district court concluded that the receiver
court's order was a final judgm.ent for purposes of claim preclusion and
dismissed the first amended complaint. Appellant then filed a second
amended complaint limited to claims that were not precluded by the district
court's dismissal order. The district court eventually entered a judgment,
certified as final, in appellant's favor. This appeal followed.
Appellant argues that the district court erred in applying claim
preclusion to the first amended complaint. Whether the district court
properly applied claim preclusion is a question of law that we review de
novo. Alcantara v. Wal-Mart Stores, Inc., 130 Nev. 252, 256, 321 P.3d 912,
914 (2014). Under that review, we conclude that the district court's original
determination was correct and that it erred in subsequently applying claim
preclusion.
When Hygea moved for reconsideration, it relied in part on this
court's unpublished order in Lynch v. Awada, No. 72873, 2018 WL 4700577,
(Nev. Sept. 28, 2018) (Order Affirming in Part, Reversing in Part, and
Remanding). But Lynch is distinguishable for two reasons. First, in that
case, the parties did not dispute the finality of the valid final order entered
in the prior case. Id. at *2. Second, appellant in that case sought a receiver
under NRS 32.010 as a means to facilitate the final relief sought, i.e., the
dissolution of respondents company. Id. at *1 & n.1. See Goldfine v. United
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States, 300 F.2d 260, 263 (1st Cir. 1962) ("The appointment of a receiver is
incidental to the purpose of effecting other relief."); Johnson v. Steel, Inc.,
100 Nev. 181, 183, 678 P.2d 676, 678 (1984) (providing that "Nhe use of a
receiver pendente lite is an ancillary remedy used to preserve the value of
assets pending outcome of the principal case"), overruled on other grounds
by Shoen v. SAC Holding Corp., 122 Nev. 621, 137 P.3d 1171 (2006); 75
C.J.S. Receivers § 5 (2022) (explaining that generally the appointment of a
receiver "is not the final or ultimate relief. . . . It is merely an ancillary
remedy, or it is merely an auxiliary, incidental, and provisional remedy"
(internal footnotes ornitted)).
Appellant also argues that the district court erred because the
receiver court did not enter a final judgment; rather, it resolved the matter
based on a lack of jurisdiction. See Five Star Capital Corp. v. Ruby, 124
Nev. 1048, 1054 n.27, 194 P.3d 709, 713 n.27 (2008) (providing that "a valid
final judgment . . . does not include a case that was dismissed without
prejudice or for some reason (jurisdiction, venue, failure to join a party) that
is not meant to have preclusive effect"). We agree.
NRS 78.650(1) provides that a "holder or holders of one-tenth of
the issued and outstanding stock may apply to the district court . . for an
order appointing a receiver." "Where the statute provides for the
appointment of receivers, the statutory requirements must be met or the
appointment is void and in excess of jurisdiction." Shelton v. Second
Judicial Dist. Court, 64 Nev. 487, 494, 185 P.2d 320, 323 (1947). Thus, an
action to appoint a receiver under NRS 78.650 is only available to a ten-
percent stockholder or stockholders, and this requirement is jurisdictional,
i.e., a district court does not have authority to consider the merits of an
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action brought by shareholders owning less than ten percent of a company's
stock. Searchlight Dev., Inc. u. Martello, 84 Nev. 102, 109, 437 P.2d 86, 90
(1968) (The district court does not have jurisdiction to appoint a corporate
receiver, unless the applicant holder or holders of one-tenth of the issued
and outstanding stock has legal title at the time the court considers the
application."); see also State (Cameron) v. Second Judicial Dist. Court, 48
Nev. 198, 203, 228 P. 617, 618 (1924) (providing that "Nhe jurisdiction of a
court depends upon. its right to decide a case"); Abelleira v. Dist. Court of
Appeal, 109 P.2d 942, 947 (Cal. 1941) (explaining that a court lacks
jurisdiction where there is "an entire absence of power to hear or determine
the case).
Here, the receiver court correctly concluded that it could not
“
consider appointment of a receiver under NRS 78.650 because appellant
did not hold one-tenth of Hygea's issued and outstanding stock.2 The
receiver court's order additionally discussed the substance of appellant's
request because "[a]n appellate court may disagree with this . . . analysis on
2Appellant alternatively sought a receiver under NRS 32.010 and
NRS 78.630. The record shows that the receiver court did not have
jurisdiction as appellant failed to satisfy the statutory requirement under
either statute. See NRS 32.010(1) (allowing a court to appoint a receiver in
cases with a pending action); NRS 78.630(1) (providing the same one-tenth
ownership of stock requirement); see also State (Nenzel) v. Second Judicial
Dist. Court, 49 Nev. 145, 156-57, 241 P. 317, 320-21 (1925) (explaining that
a court has no jurisdiction to appoint a receiver in a proceeding merely
seeking the appointment of a receiver under the predecessor to NRS
32.010).
4
the 10% issue."3 But having found it could not consider appointing a
receiver because it lacked jurisdiction, the receiver coures discussion of the
merits of whether to appoint a receiver was a nullity. See Landreth v.
Malik, 127 Nev. 175, 179, 251 P.3d 163, 166 (2011) (explaining that "if the
district court lacks subject matter jurisdiction, the judgment is rendered
void"); Nenzel, 49 Nev. at 161, 241 P. at 322 (concluding that a receiver
appointed by a court without jurisdiction resulted in "all proceedings
therein [being] null and void"). Therefore, we conclude that the district
court erred in concluding that the receiver court entered a final judgment
and applying claim preclusion based on the receiver court's order. See
Alcantara, 130 Nev. at 257, 321 P.3d at 915 (explaining that entry of a final
judgment is a necessary element of claim preclusion); Five Star Capital
Corp., 124 Nev. at 1054 n.27, 194 P.3d at 713 n.27 (explaining that cases
dismissed for jurisdictional reasons are not meant to have preclusive effect
and citing 18 Moore's Federal Practice § 131.30[3][a] (3d ed.2008);
3This court did not disagree. See Arellano v. Iglesia.s, No. 76969, 2020
WL 4464542, *4 (Nev. July 31, 2020) (Order of Affirmance) (affirming the
receiver court's award of attorney fees after finding "that appellants knew
or should have known that they failed to meet the jurisdictional
requiremene). Respondents correctly note that the receiver court denied
rather than dismissed the request for a receiver. However, this court
explained that the substance of appellants NRS 78.650 claim were
irrelevant because the receiver court did not have jurisdiction to consider
the merits, see id. at *2 n.2, and discussed the decision as a dismissal, see
id. at *1-2 (providing that "NRS 78.650s ten-percent ownership
requirement is jurisdictional" and "the district court dismissed appellants'
receivership petition"); see also Lee v. GNLV Corp., 116 Nev. 424, 427, 996
P.M 416, 418 (2000) (explaining that this court looks "to what the order or
judgment actually does").
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Restatement (Second) of Judgments § 19 cmt. a, § 20 (1982); NRCP 41(b)).
Accordingly, we
ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.4
Parraguirre
A J.
Pickering
cc: Hon. Nancy L. Allf, District Judge
Lansford W. Levitt, Settlement Judge
The Miller Law Firm, P.C.
Albright Stoddard Warnick & Albright
Lewis Roca Rothgerber Christie LLP/Las Vegas
Lemons, Grundy & Eisenberg
Kaplan Cottner
Eighth District Court Clerk
4 The Honorable Mark Gibbons, Senior Justice, participated in the
decision of this matter under a general order of assignrnent.
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