Case Title: Weddell v. H20, Inc.

Citation: 128 Nev. Adv. Op. No. 9

Docket Number: 55981

State: nevada

Court: Nevada Supreme Court

Date: 2012-03-01T00:00:00Z

Document:
428 Nev., Advance Opinion

IN THE SUPREME COURT OF THE STATE OF NEVADA

ROLLAND P, WEDDELL; GRANITE |
INVESTMENT GROUP, LLC; AND |
HIGH ROCK HOLDING, LLC, |

Appellants, FILED

H20, INC.; MICHAEL B. STEWART, AN |
INDIVIDUAL AND AS TRUSTEE OF Har 012012

‘THE MICHAEL B. STEWART TRUST; pf emauat,
Fan

No, 55200

 

EMPIRE ENERGY, LLC; EMPIRE
GROUP, LLC; EMPIRE FOODS, LLC;
EMPIRE FARMS, LLC; ORIENT
FARMS, LLC; WHITE PAPER, LLC;
EMPIRE GEOTHERMAL POWER, LLC;
NEVADA ENERGY PARK, LLC; AMOR
II CORPORATION; M.BS., INC.
TAHOE ROSE, LLC; CLEARWATER.
RIVER PROPERTIES, LLC; HONALO
KAI, LLC; SIERRA ROSE, LLC;
SUNDANCE FARMS, LLC; GNV
ENTERPRISES, LLC; KOSMOS LEASE
HOLDINGS, LLC; GRANITE CREEK
LAND & CATTLE, LLC; EMPIRE SEED
COMPANY LIMITED PARTNERSHIP; ||
GEOR II CORPORATION; SAN EMIDIO
RESOURCES, INC.; SAN EMIDIO
AGGREGATE, INC.; AND JUNIPER
HILL PARTNERS, LLC,

Respondents. |

|

 

 

  

 

Appeal from a district court judgment following a bench trial
in a breach of contract, tort, and declaratory relief action. First Judicial

District Court, Carson City; James Todd Ruseell, Judge.

12-0659

 

 
as

 

Affirmed in part, reversed in part, and remande

Day R. Williams, Carson City; Sisco & Naramore and Kenneth D. Sisco,
Norco, California,
for Appellants.

Robison, Belaustegui, Sharp & Low and F. DeArmond Sharp, Keegan G.
Low, and Kristen L. Martini, Reno,
for Respondents.

BEFORE SAITTA, C.J., CHERRY and GIBBONS, JJ.

OPINION:
By the Court, CHERRY, J.:

In this appeal, we consider distinct issues arising from a fall-
out between business partners. We first consider whether a judgment
creditor divests a dual member and manager of a limited-liability company
of his managerial duties. In doing so, we determine the rights and
remedies of a judgment creditor pursuant to NRS 86.401. We conclude
that a judgment creditor has only the rights of an assignee of the
member's interest, receiving only a share of the economic interests in a
limited-liability company, including profits, losses, and distributions of
assets. Therefore, the judgment creditor and holder of a charging order
against appellant Rolland P. Weddell’s membership interests is simply
entitled to Weddell’s economic interest in appellant Granite Investment
Group, LLC. For this reason, we reverse the district court's judgment
relating to the scope of the charging order against Weddell’s membership
interests and remand this matter to the district court for further

proceedings concerning Weddell’s managerial interests in Granite,

 
or

 

We next consider whether a party may file a notice of
pendency of actions on an option to purchase a membership interest in a
limited-liability company. In resolving this issue, we define the scope of
NRS 14.010 and conclude that parties should only file a notice of pendency
when the action directly involves real property—more specifically,
concerning actions for the foreclosure of a mortgage upon real property or
actions affecting the title of posse:

 

ion of real property. In the matter

 

before us, we conclude that the notice of pendency filed by Weddell is

unenforceable, as the action on which it is based concerned an alleged

 

expectancy in the purchase of a membership interest in respondent
Empire Geothermal Power, LLC, and, thus, did not involve a direct legal
interest in real property,

Lastly, we consider whether substantial evidence exists to
support the district court's finding that Weddell had no ownership interest
in respondent H20, Inc. After meticulously reviewing the record, we
conclude that substantial evidence supports the district court's findings
that Weddell was merely an agent on behalf of respondent Michael B.
Stewart and has never acquired an ownership interest in H20.
Accordingly, we affirm the district court’s judgment in all other aspects.

FACTS

Between 2000 and 2007, Stewart and Weddell entered into a
business relationship concerning a number of different projects, ranging
from garlic farming to geothermal energy. Several disputes arose among
the two parties, ultimately leading to the collapse of their business
relationship. Upon the relationship’s demise, Weddell filed a complaint
asserting numerous claims against Stewart. Stewart also filed a
complaint and asserted numerous counterclaims. After a four-day bench
trial, the district court found in Stewart’s favor on all counts. Weddell, on

 
ons ee

 

behalf of himself and his respective companies, filed this appeal. Below,
we recapture the pertinent facts surrounding the collapse of Stewart and
Weddell’s relationship.
Granite Investment Group & High Rock Holding

Stewart and Weddell wore both involved in some respect with
Granite Investment Group and appellant High Rock Holding, LLC. In
December 2004, Weddell was elected manager of Granite. Several months
later in May 2005, Stewart and Weddell signed an amended and restated

operating agreement (Granite operating agreement).!

‘Around the same time, an option agreement was executed, which
Weddell argues gave Granite an option to purchase 100 percent of a
separate Stewart company owning a geothermal power plant and 20,000
acres of geothermal leases. Later, an April 2006 option agreement was
signed by both parties and contains an integration clause. The district
court found that the April 2006 option agreement to purchase the
geothermal plant is valid, supported by consideration, and is binding upon
the parties.

Weddell contends that the district court should have accepted the
parties’ May 2005 option agreement to purchase the geothermal plant,
instead of finding that the April 2006 option agreement was valid,
supported by consideration, signed, and binding. He argues that he was
preoccupied when he signed the April 2006 agreement and that the May
2005 agreement remains pending under a binding mediation decision.
The district court did not err in coming to this conclusion. See Zhang v.
Dist._Ct,, 120 Nev. 1037, 1041 n.11, 108 P.3d 20, 23 n.11 (2004)
(recognizing that a novation is a substitution of a new contract for an old
contract, thereby extinguishing the old contract), abrogated on_other
grounds by Buzz Stew, LLC v, City of N, Las Vegas, 124 Nev, 224, 228 n.6,
181 P.3d 670, 672 n.6 (2008); see_also Campanelli v. Altamira, 86 Nev.
888, 841, 477 P.2d 870, 872 (1970) (declaring that ““when a party to a
written contract accepts it [a]s a contract he is bound by the stipulations
and conditions expressed in it whether he reads them or not. Ignorance
through negligence or inexcusable trustfulness will not relieve a party
continued on next page

 

 
According to the Granite operating agreement, Stewart
received 1.5 votes and Weddell received 1 vote. Several years later, in
October 2007, Stewart used his majority voting power to allegedly remove
Weddell as manager. Thereafter, Stewart ostensibly elected himself
manager of Granite, However, pursuant to section 5.10 of the Granite
operating agreement, a manager can only be removed by the unanimous
affirmative vote of all of the members. Additionally, section 5.2 does not
prohibit more than one manager at a time.

When Weddell was elected manager of the Granite Investment
Group, he was also elected manager of High Rock Holding. To reflect the
management changes at High Rock, Stewart and Weddell entered into an
amended and restated operating agreement whereby Stewart had 1.5
votes and Weddell had 1 vote (High Rock operating agreement). Likewise,
in October 2007, Stewart used his superior voting power to remove
Weddell as manager of High Rock. While the Granite operating
agreement required a unanimous affirmative vote of the members, the
similarly numbered section of the High Rock operating agreement only

required an affirmative vote of the members.

continued

from his contract obligations.” (quoting Level Export Corp. v. Wolz, Aiken
& Co, 111 N.E.2d 218, 221 (N.Y. 1953) (quoting Metzger v. Aetna Ins, Co.
125 N.E. 814, 816 (N.Y. 1920))).

 

 
nen a

 

In October 2008, in an unrelated matter, the district court
granted an application by a creditor to charge Weddell’s membership
interest in Granite and High Rock, among other Weddell entities, for over
$6 million. Pursuant to NRS 86.401," the charging order entitled the
creditor to any and all disbursements and distributions, including interest,

and all other rights of an

 

ssignee of the membership interest. Thereafter,
Stewart purportedly purchased Weddell’s remaining membership interest
in Granite for $100 in accordance with section 10.2 of the Granite
operating agreement?

‘The district court concluded that the charging order divested
Weddell of both membership and managerial rights in Granite and High
Rock upon the tender of purchase money made by Stewart. The district
court
Rock.

Iso concluded that Stewart is the sole manager of Granite and High

 

“This statute was revised by the 2011 Legislature. See 2011 Nev.
Stat., ch. 455, § 69, at 2800-01.

8Section 10.2 concerns voluntary transfers without the consent of
the other members whereas section 10.4 concerns involuntary transfers,
such as charging orders. Both sections would permit Stewart to buy out
Weddell’s membership interest. Under section 10.2, a transferring
member is merely required to sell his or her membership interest for a
purchase price of $100. On the other hand, section 10.4 includes an
elaborate transferring scheme wherein the company must give written
notice to the member and an appraisal must occur within thirty (30) days
of the involuntary transfer.

‘The district court's language concerning the divestiture of both
membership and managerial rights is troublesome. It appears that the
district court has conflated the purpose of a charging order with the
statutory provisions encompassed in the parties’ operating agreements.

 

 
Empire Geothermal Power

During the course of the litigation, Weddell filed a notice of lis
pendens against Stewart and Empire Geothermal Power, among others,
clouding the title to Empire Geothermal's real property. Subsequently,
Empire Geothermal filed a motion to cancel the notice of pendency under
NRS 14.015, asserting that the underlying action was for monetary
damages and was not an action to foreclose on or an action affecting the

title or possession of real property as mandated by NRS 14.010. In his

 

opposition, Weddell asserted that the action involved real property
because he was entitled to 100 percent of the membership interest in
Empire Geothermal, including a geothermal power plant and 20,000 acres
of geothermal leases,

During a hearing on the motion, the district court focused on
the language in Stewart and Weddell’s option agreement: “Granite
Investment Group[,] LLC[] shall purchase from [Stewart] entities their
membership interest in Empire Geothermal Power.” Following the
hearing, the district court ordered that the notice of pendency recorded by
Weddell be canceled, finding that Weddell’s alleged expectancy in the
purchase of the membership interest in Empire Geothermal involved
personal property interests, not real property interest. The district court
found that Weddell failed to establish that his action was for the
foreclosure of a mortgage upon real property or that it affected the title or

possession of real property as required by NRS 14.015(2)(a).

 

 
ome ae

 

Ine.
In the early 1980s, Stewart began farming garlic in Empire,

Nevada, Stewart's food-processing company, Empire Foods, LLC, received
a loan from a bank in 1999, Shortly thereafter, Empire Foods filed for
Chapter 11 bankruptcy due to a decline in the garlic market. Stewart had
Weddell, his business associate at the time, negotiate with the bank to
reduce the loan. Instead of the bank taking the garlic inventory and the
accounts receivable that were the original collateral to the Joan, Weddell
was able to extinguish nearly half of Stewart's debt.

In exchange for his successful negotiation with the bank,
Weddell received a 15-percent interest in High Rock Holding from
Stewart. According to Weddell, Stewart also promised him that he would
receive $2.5 million in compensation if and when the funds became
available, Stewart denies that he made such a promise. The alleged
promise of $2.5 million was not memorialized on paper; nor were there any
witnesses to the statements between Stewart and Weddell at the time the
promise was purportedly made.

Apparently, in May 2004, Stewart gave Weddell a check for
$2.5 million, with which Weddell ultimately purchased 100 percent of the
stock (10,000 shares) in H20, Inc. Shortly thereafter, Weddell assigned
his alleged interest in H2O to White Paper, LLC, an entity owned and
operated by Stewart. In June 2007, Weddell transferred any and all
interest that he had in the shares of H2O stock to Stewart. Subsequently,
a dispute arose as to whether the $2.5 million used to purchase the H20
stock belonged to Weddell or Stewart and, thus, whether the stock was
purchased for the benefit of Weddell or Stewart. ‘The district court held
that Weddell had never acquired an interest in the stock of H2O and was
acting merely as Stewart's agent when he purchased the shares. ‘The

 
os

 

district could found that the June 2007 transfer would have transferred
any interest that Weddell might have had in H20 to Stewart. The district
court also found that Stewart was the source of virtually all monies and
assets transferred into H20. The court further found that the business
activities between Stewart and Weddell were simply strategic and did not
constitute fraud.
DISCUSSION

‘The issues on appeal require us to review the district court's
factual findings,
“The district cou

well as interpret

 

fatutory and contractual provisions.

 
 

's factual findings... are given deference and will be

 

upheld if not clearly erroneous and if supported by substantial evidence.”
Ogawa _v. Ogawa, 125 Nev. 660, 668, 221 P.3d 699, 704 (2009).
“Substantial evidence is evidence that a reasonable mind might accept as
adequate to support a conclusion.” Whitemaine v. Aniskovich, 124 New.
302, 308, 183 P.3d 197, 141 (2008). Issues involving statutory and
contractual interpretation are legal issues subject to our de novo review.
See Canarelli_v. Dist. Ct, 127 Nev. __, __, 265 P.3d 673, 676 (2011)
(declaring that ‘[w]e review the ‘district court's conclusions of law,
including statutory interpretations, de novo” (quoting Borger v. Dist, Ct.,
120 Nev. 1021, 1026, 102 P.3d 600, 604 (2004))); Benchmark Insurance
Company v, Sparks, 127 Nev. _, __ 254 P.8d 617, 620 (2011) (providing
that “ijnterpretation of a contract is a question of law that we review de
novo” (quoting Farmers Ins, Exch. v. Neal, 119 Nev. 62, 64, 64 P.3d 472,
473 (2003))).

 

 
   

 

Judgment creditor’s rights under

‘To better understand the preeminent issue, we first review the
general nature of limited-liability companies, including the statutory
framework pursuant to NRS Chapter 86. Next, we will present a
historical overview of the charging order remedy. As part of this overview,
we will analyze the rights of judgment creditors in the course of holding a
charging order. Finally, we will explain the basis for our conclusion that,
under Nevada law, judgment creditors have no right to participate in the
‘management of the limited-liability company and only obtain the rights of
an assignee of the member's interest—receiving only a share of the

economic interests in a limited-liability company, including profits, loss

 

and distributions of assets. By limiting a creditor's right to exercise the
debtor member's management rights, we ensure that creditors of a
limited-liability company cannot disrupt and interfere with the
management rights of other members. This conclusion rests on the
uncontested right of a member to choose his or her associates and to
encourage investing by enabling limited members to invest money and to
share profits, but without risking more than the amount they contributed.
Limited-liability. companies

Limited-liability companies (LLCs) are business entities
created “to provide a corporate-styled liability shield with pass-through
tax benefits of a partnership.” White v. Longley, 244 P.3d 753, 760 (Mont.
2010); Gottsacker v. Monnier, 697 N.W.2d 436, 440 (Wis. 2005) (stating
that “[fjrom the partnership form, the LLC borrows characteristics of
informality of organization and operation, internal governance by contract,
direct participation by members in the company, and no taxation at the
entity level. From the corporate form, the LLC borrows the characteristic
of protection of members from investor-level liability.” (internal citation

10

 
omitted)); Elf Atochem N, America, Inc. v, Jaffari, 727 A.2d 286, 287 (Del.
1999) (LLCs allow “tax benefits akin to a partnership and limited liability
akin to the corporate form."). Originally enacted by Wyoming in 1977, the
atutorily based creature of an LLC has expanded to all 50 states and the
District of Columbia
ruling. White, 244 P.3d at 760; Keith Paul Bishop & Jeffrey P. Zucker,
is wada_Cs d_Liabilit
Companies § 16.1 & n.7 (2011) (isting the states and years of enactment)
With a goal of attracting new business to Nevada, the Secretary of State,

 

a result of a favorable Internal Revenue Service

 

with the support of the Attorney General, proposed the adoption of “the
LLC” in 1991 as part of a comprehensive bill, A.B. 655, to streamline the
corporate law in this state. Bishop & Zucker, § 16.1; see Hearing on A.B.
655 Before the Joint Senate and Assembly Judiciary Comms., 66th Leg.
(Nev., May 7, 1991). Along with Colorado, Florida, Kansas, and Wyoming,
Nevada became the fifth state to enact such groundbreaking corporate
legislation. Bishop & Zucker, § 16.1 n.7.
‘Statutory framework for Nevada LLCs

The rules governing the formation and operation of Nevada
LLCs are set forth in NRS Chapter 86. Those who wish to enter into an
LLC should be vastly familiar with this chapter in order to properly
protect their interests. In considering the question at issue, we focus on
the provisions in Chapter 86 that set forth the organization and

‘It is noteworthy that some sections of Chapter 86 appear to have
been borrowed from Nevada's partnership law, NRS Chapter 88. Bishop
& Zucker, § 16.1 n.11.

 

 
one

 

‘management of an LLC, as well as the authorization of a charging order

 

remedy for personal creditors of LLC members

 

In Nevada, an LLC is formed by signing and filing the articles
of organization, together with the applicable filing fees, with the Secretary
of State. NRS 86.151; NRS 86.201, An LLC may, but is not required to,
adopt an operating agreement, NRS 86.286, which is defined as “any valid
written agreement of the members as to the affairs of a limited-liability
company and the conduct of its business.” NRS 86.101. Unless the
articles of organization or operating agreement provide otherwise,
management of a limited-liability company is vested in its members in
“the

 

proportion to their contribution to capital. NRS 86.291, A member
owner of a member's interest in a limited-liability company or a
noneconomic member.” NRS 86.081. The term “[mJember's interest” is
defined as “a share of the economic interests in a limited-liability
sets.” NRS

 

company, including profits, losses and distributions of
86.091.

‘The collection rights and remedies against a member's interest
in a limited-liability company are governed by NRS 86.401. This provision
recognizes the charging order as a remedy by which a judgment creditor of
a member can seek satisfaction by petitioning a court to charge the
member's interest with the amount of the judgment. NRS 86.401(1); see
Brant v. Krilich, 835 N.E.2d. 582, 592 (Ind. Ct. App. 2005) (holding “that a

"This statute was amended by the 2011 Legislature. It now defines
operating agreement as “any valid agreement of the members as to the
affairs of a limited-liability company and the conduct of its business,

whether in any tangible or electronic form.” See 2011 Nev. Stat., ch. 168,
§ 12, at 779.

12

 
charging order is the only remedy for a judgment creditor against a
member's interest in an LLC,” after interpreting a similar Indiana
jatute). A charging order directs the LLC to make distributions to the
creditor that it would have made to the member. See lat Street v.
Goldstein, 691 A.2d 272, 282 (Md. Ct. Spec. App. 1997). As a result, a
charging order affects only the debtor's partnership interest and does not

permit a creditor to reach partnership assets,
“Charging orders originated as a

 

fatutory solution to
cumbersome common law collection procedures ‘that were ill-suited for
reaching partnership interests.” Green v, Bellerive, 763 A.2d 262, 256
(Ma. Ct. Spec. App. 2000) (quoting 1st Street, 691 A.2d at 275).’ The
charging order concept was first established in the United States in the
1914 Uniform Partnership Act and has

 

‘ince been replicated in some
degree in nearly every United States jurisdiction, including Nevada. 91st
Street, 691 A.2d at 275; See NRS 86.401; NRS 88.5355 (NRS Chapter 88
contains Nevada's partnership statutes).

‘Charging orders were formed by the English Partnership Act of
1890 as a result of an artificial and clumsy procedure whereby the town
sheriff went down to the partnership's place of business, seized
partnership assets, closed the partnership, infuriated the solvent partners,
and caused the judgment creditor to bring an action for an injunction.
City of Arkansas City v. Anderson, 752 P.2d 673, 681-82 (Kan. 1988); see
J. Gordon Gose, The Charging Order Under the Uniform Partnership Act,
28 Wash. L. Rev. 1, 3 (1953).

“This statute was revised by the 2011 Legislature. See 2011 Nev.
Stat, ch. 455, § 82, at 2807-08.

 

 
one

 

Charging orders have been described as “nothing more than a
legislative means of providing a creditor some means of getting at a
debtor's ill-defined interest in a statutory bastard, surnamed ‘partnership,’
but corporately protecting participants by limiting their liability as []
corporate shareholders.” Bank of Besthesda v, Koch, 408 A.2d 767, 770
(Md. Ct. Spec. App. 1979). In short, “[a] charging order gives the charging
creditor only limited access to the partnership interest of the indebted
partner.” Green, 763 A.2d at 257. Consequently, the judgment creditor
does not unequivocally step into the shoes of a limited-liability member.
Id, at 259. The limited access of a judgment creditor includes “only the

rights of an assignee of the member's interest.” NRS 86.401(1) (emphasis

 

added). A judgment creditor, or assignee, is only entitled to the judgment
debtor's share of the profit and distributions, takes no interest in the
LLC's assets, and is not entitled to participate in the management or
administration of the business. Dixon v. American Industrial Leasing Co.,
205 S.E.2d 4, 9 (W. Va. 1974); see In.re Lucas, 107 B.R. 332, 336 (Bankr.
D.NM. 1989) (stating that “[aJny assignee of the [membership] interest
merely entitles the assignee to receive the profits to which the [member]
would otherwise be entitled”); Kellis v. Ring, 155 Cal. Rptr. 297, 299 (Ct.
App. 1979) (stating that “[wJhile [the judgment creditor] has a right to
receive the share of the profits or other compensation by way of income, or
the return of his contributions to which his assignor would otherwise be
entitled, he has no right to interfere in the management of the limited
partnership” (internal quotations omitted); Madison Hills Ltd. v. Madison
Hills, Inc., 644 A.2d 363, 367 (Conn. App. Ct. 1994) (noting that “a
charging creditor does not become a full partner, [and] is not entitled to
manage the partnership"); Olmstead v. F.T.C., 44 So. 34 76, 79 (Fla, 2010)

4

 
(providing that “an assignment of a membership interest will not
necessarily transfer the associated right to participate in the LLC's
management’); Green, 763 A2d at 260 (holding that the fundamental
management rights of a partner are not transferred to a judgment creditor
by a charging order); see also J. Gordon Gose, The Charging Order Under
the Uniform Partnership Act, 28 Wash. L. Rev. 1, 18 (1958) (noting that ‘a
receiver doos not become a partner or participate in the management").
After the entry of a charging order, the debtor member no longer has the
right to future LLC distributions to the extent of the charging order, but
retains all other rights that it had before the execution of the charging
order, including managerial interests,
Weddell’s membership and managerial interests in Granite

Here, the charging order levied by Weddell’s creditor directed
Granite to divert Weddell’s rights to LLC profits and distributions to the
creditor. ‘The charging order only divested Weddell of his economic
opportunity to obtain profits and distributions from Granite—charging
only his membership interest, not his managerial rights. See NRS 86.401
Prohibiting the creditor from exercising Weddell’s management rights
reflects the principle that LLC members should be able to choose those

"This rationale is analogous to the rights of a transferee pursuant to
NRS 86.361(1):

[A] transferee of a member's interest has no right
to participate in the management of the business
and affairs of the company...[and] is only
entitled to receive the share of profits or other
compensation by way of income, and the return of
contributions, to which the transferor would
otherwise be entitled.

 

 
ome ae

 

members with whom they associate, Green v, Bellerive, 763 A.2d 262,
261-62 (Md. Ct. Spec. App. 2000).

We further conclude that the charging order triggered the
involuntary transfer provision of the Granite operating agreement, section
10.4, Section 10.4 explicitly included charging orders in its purview.

‘Therefore, we remand this case to the district court to resolve whether

 

Stewart properly complied with section 10.4 and whether, as a result,
Weddell was divested of his membership interest in Granite. In light of
our conclusion, we direct the district court to determine whether Weddell
has retained his managerial interests, and whether Stewart has elected
himself co-manager pursuant to sections 5.2 and section 5.10 of the
Granite operating agreement. We also conclude that the district court did
not err in finding that the April 2006 High Rock operating agreement
signed by both parties controlled and that, under it, Weddell was voted out
as manager of that LLC.
Notice of lis pendens

Weddell argues that the district court improperly canceled his
notice of lis pendens because the option agreement to purchase the
membership interest and assets of the geothermal company
“affect[ed] . . . possession of real property.” NRS 14.010(1),

‘The doctrine of lis pendens provides constructive notice to the
world that a dispute involving real property is ongoing. NRS 14.010(3).
“{Ljis pendens are not appropriate instruments for use in promoting
recoveries in actions for personal or money judgments; rather, their office
is to prevent the transfer or loss of real property which is the subject of
dispute in the action that provides the basis for the lis pendens.” Levinson
v. District Court, 109 Nev. 747, 750, 857 P.2d 18, 20 (1993); see NRS
86.351(1) (providing that “[tJhe interest of each member of a limited-

16

 
liability company is personal property’). “It is fundamental to the filing
and recordation of a lis pendens that the action involve some legal interest
in the challenged real property.” In re Bradshaw, 315 B.R. 875, 888
(Bankr. D. Nev. 2004). Cf. BGJ Associates v, Superior Court, 89 Cal. Rptr.
2d 693, 703 (Ct. App. 1999) (stating that “an action for money only, even if
it relates in some way to specific real property, will not support a lis
pondens”). Therefore, under Nevada law, the filing of a notice of pendency
is limited to actions involving “the foreclosure of a mortgage upon real
property, or affecting the title or po
14.0101); NRS 14.015(2)(a); see Thomas v. Nevans, 67 Nev, 122, 180, 215
P.2d 244, 247-48 (1950) (providing that “[tJhe doctrine of constructive

 

ssion of real property.” NRS

notice resulting from the filing with the county recorder of a notice of lis
pendens applies .. . only to actions affecting real property”).

‘The underlying complaint is not of the type envisioned under
NRS 14.010(1) and NRS 14.015(2)(a) because it does not directly involve
real property. Instead, Weddell seeks enforcement of an option to
purchase the membership interest in the geothermal company, and even
though the geothermal company apparently owned real property,
membership interest is personal property. See NRS $6.351(1) (providing
that the interest of each member in an LLC is personal property).
Accordingly, the doctrine of lis pendens does not apply, and the district
court did not abuse its discretion in canceling the notice of lis pendens.
See Meadow Springs, LLC v. TH Riverdale, LLC, 690 S.E.2d 842, 845-46
(Ga. 2010).

The parties’ briefs suggest that the real property has been sold
resuming that the real property associated with the geothermal company
continued on next page .

 

 
Ownership of H20.

Next, we must consider the district court's decision on the
merits, including whether substantial evidence supports its finding that
Weddell has never acquired an ownership interest in the stock of H20.
According to Weddell, Stewart promised him $2.5 million in compensation
for his successful debt negotiation in 2001. Stewart denies that he made
such a promise, which was neither memorialized on paper nor witnessed
by a third person. A few years later, Stewart gave Weddell $2.5 million,
which Weddell then used to purchase 10,000 shares of H20 stock. Both
Stewart and Weddell now claim the shares. The district court held that
Weddell had never acquired an interest in the stock of H20 and was
merely acting as an agent on behalf of Stewart, in part because Stewart
was the source of virtually all monies and assets transferred into H20
after Weddell purchased the shares.

Weddell contends that substantial evidence does not support
the district court's conclusion that he never obtained ownership interest in
H20. The record demonstrates otherwise. Regardless of whether Weddell
ever owned the shares, the record clearly establishes that in May 2004,
Weddell assigned his purported H20 shares to another company, White
Paper, LLC, which was owned by Stewart, and later validly transferred

continued

has since been sold, this issue would be deemed moot. Lathrop _v.
Sakatani, 141 P.3d 480, 486 (Haw. 2006) (providing that “the sale of the
property prevents the appellate court from granting any effective relief”
(citing Chaney v, Community Development Ageney, 641 N.W.2d 328, 385
(Minn. Ct. App. 2002))).

 

 
any and all interest that he had in those shares to Stewart in June 2007.
NRS 104.8301 (governing delivery of shares to a third person on behalf of
the purchaser). Accordingly, we conclude that Weddell’s arguments
concerning fraud, estoppel, and waiver are irrelevant or lack merit, see
J.A.dones Constr. v. Lehrer McGovern Bovis, 120 Nev. 277, 291, 89 P.3d
1009, 1018 (2004) (declaring that “[f}raud is never presumed; it must be
clearly and satisfactorily proved” (alteration in original) (quoting Havas v.
Alger, 85 Nev. 627, 631, 461 P.2d 857, 860 (1969), and there exists
substantial evidence supporting the district court’s conclusion that
Weddell does not enjoy any ownership interest in H20 stock.
CONCLUSION

Pursuant to NRS 86.401, a judgment creditor may obtain the

rights of an

ignee of the member's interest, receiving only a share of the

   

economic interests in a limited-liability company, including profits, loss

 

and distributions of assets. Thus, the charging order does not entitle the
creditor to Weddell’s managerial rights in Granite. Due to the district
court's misinterpretation of NRS 86.401, we reverse the district court's
judgment in part and remand this matter to the district court for further

proceedings consistent with this opinion.

 

 
  
  
  
 
   
 
 
 
 
 
   

With regard to the other issues on appeal, the district court,
properly rendered its legal conclusions and substantial evidence supports
the district court’s findings. For the foregoing reasons, we affirm the

district court's judgment in all other aspects.!!

Cherry

 

Weddell requests that he be awarded legal fees and costs and that
the award of attorney fees in Stewart's favor be reversed, Because
Weddell fails to provide this court with any cogent argument or persuasive
legal authority in support of this allegation, this argument lacks merit.
Sec Smith v. Timm, 96 Nev. 197, 201, 606 P.2d 530, 632 (1980) (stating
that the court was unable to find error because the appellant had failed to
provide adequate legal authority). Additionally, this court has already
dismissed Weddell’s appeal concerning the district court's award of
attorney fees. See Weddell _v. Stewart, Docket No. 55981 (Order
Dismissing Appeal and Referring Counsel to State Bar, November 12,
2010).