Title: Tahican, LLC v. Eighth Judicial District Court

State: nevada

Issuer: Nevada Supreme Court

Document:

4130New, Advance Opinion Z.
IN THE SUPREME COURT OF THE STATE OF NEVADA

‘TAHICAN, LLC, No. 84352
Petitioner,

‘THE EIGHTH JUDICIAL DISTRICT

COURT OF THE STATE OF NEVADA, FILED
IN AND FOR THE COUNTY OF

CLARK; AND THE HONORABLE

KATHLEEN E, DELANEY, DISTRICT FEB 02 2023
JUDGE, nt
Respondents, ott!

ve TTT

MAX JOLY; PATRICIA JOLY; JEAN
FRANCOIS RIGOLLET; LE MACARON,
LLC; AND BYDOO, LLC,

Real Parties in Interest.

 

Original petition for a writ of mandamus challenging a district
court order denying a motion to expunge a lis pendens.

Petition denied.

Cory Reade Dows & Shafer and R. Christopher Reade and Paul R. Graff,
Las Vegas,

for Petitioner Tahican, LLC, and Real Parties in Interest Le Macaron, LLC,
and Bydoo, LLC.

Jennings & Fulton, Ltd., and Jared B. Jennings, Adam R. Fulton, and
Logan G. Willson, Las Vegas,
for Real Parties in Interest Max Joly and Patricia Joly.

Jean Francois Rigollet, Henderson,
Pro Se.

i

23-0320b
ov

 

 
8

BEFORE THE SUPREME COURT, CADISH and PICKERING, JJ., and
GIBBONS, Sr. J.

OPINION
By the Court, CADISH, J.:

NRS 14.010(1) permits a party to an “action . affecting the
title or possession of real property” to record a “notice of the pendency of the
action,” commonly referred to as a “lis pendens.” In construing this
provision in Levinson v. Eighth Judicial District Court, we stated that a
party who records a lis pendens must have some claim of entitlement to the
property, 109 Nev. 747, 752, 857 P.2d 18, 21 (1993).

In this original proceeding, we consider whether a creditor's
claim seeking avoidance of a fraudulent transfer of real property under
Nevada's Uniform Fraudulent Transfer Act may support the recording of a

lis pendens even though the creditor does not claim an interest in the

 

property but instead seeks to transfer title back to the debtor. In doing so,
we clarify the statement in Levinson and hold that the plain language of
NRS 14.010(1) does not limit a lis pendens to actions in which the plaintiff
claims an ownership or possessory interest in the property. We conclude
that a fraudulent transfer claim seeking avoidance of the transfer of real
property is one “affecting the title or possession of real property” under NRS.
14.0101) and thus supports a lis pendens. Accordingly, we conclude that
the district court did not err in denying the motion to expunge the lis

pendens.

"Phe Honorable Mark Gibbons, Senior Justice, participated in the
decision of this matter under a general order of assignment.

 
d
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FACTS AND PROCEDURAL HISTORY
Real parties in interest Max Joly and Bydoo, LLC, formed a
partnership, Le Macaron, LLC, to operate restaurants. They later entered
into a purchase agreement whereby Joly agreed to transfer his shares in Le
Macaron to Bydoo in exchange for $360,000. Joly assigned his shares, but
Bydoo did not make the payments required under the purchase agreement.
In April 2016, Joly filed a complaint against Bydoo, Jean Francois Rigollet
(the owner and sole member of Bydoo), and Le Macaron, alleging, among
other things, breach of contract, fraud in the inducement, and fraud. Less
than a month later, Bydoo transferred real property located in Henderson,
Nevada, to petitioner Tahican, LLC, by quitclaim deed. Joly subsequently
recorded a notice of lis pendens against the Henderson property.
Rigollet sought to expunge the lis pendens, arguing that the
Henderson property was not the subject of the lawsuit and Joly could not.
record a lis pendens on the property merely to secure payment for any
judgment he might eventually obtain against Bydoo or Rigollet on his
breach of contract and fraud claims. Joly then amended his complaint to
add Tahican as a defendant and to allege additional claims of conversion
and fraudulent transfer. In the amended complaint, Joly alleged that Bydoo
quitclaimed multiple properties to Tahiean (for which Rigollet was the
registered agent and one of two managers) without adequate consideration
in anticipation of and during the pending litigation, thereby fraudulently
divesting Bydoo of assets. Joly also opposed Rigollet’s motion to expunge,
arguing that the lis pendens was proper because his fraudulent transfer
claim “affect(s] the title or possession” of the Henderson property within the
meaning of NRS 14.010(1),

 

 
The district court denied Rigollet’s motion to expunge, finding
that Joly’s claim for fraudulent transfer established a valid legal basis for
recording the lis pendens. The court subsequently granted summary
judgment in Joly’s favor on the majority of his claims, including the
fraudulent transfer claim. As to that claim, the district court found that the
defendants fraudulently transferred Bydoo’s properties in anticipation of
and during the pendency of this litigation. The court did not decide what
relief Joly was entitled to at that time because there remained a factual
dispute about the applicable operating agreement.

‘Tahican then filed a second motion to expunge the lis pendens,
arguing that none of Joly’s claims sought ownership or possession of the

property and Tahican was not a party to the litigation when the lis pendens

 

was recorded. After a hearing, the district court denied the second motion
to expunge, determining that the lis pendens was tied to Joly’s claim of
fraudulent transfer and was proper “because the outcome of the case could
affect the ultimate ownership of the property.” ‘Tahican now seeks a writ of
‘mandamus instructing the district court to expunge the lis pendens.
DISCUSSION

Tahican argues that the district court erred in finding that
Joly’s fraudulent transfer claim can support a lis pendens. Tahican
contends that the lis pendens was improper because Joly had no direct.
interest in the property himself but sought only to return the property to
Bydoo so that it can be used to secure any money judgment Joly obtains
against Bydoo, which is an improper use of a lis pendens.
We elect to consider the petition for a writ of mandamus

A writ of mandamus is available to compel the performance of

 

an act that the law requires as a duty resulting from an office, NRS 34.164

or to control an arbitrary or capricious exercise of discretion, Int'l Game

 

 
0

Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556,
558 (2008). ‘The decision to entertain a mandamus petition is within our
sole discretion, and the petitioner has the burden of demonstrating that
such extraordinary relief is warranted. Pan v. Eighth Judicial Dist. Court,
120 Nev. 222, 228, 88 P.3d 840, 844 (2004). A writ of mandamus is not
available when the petitioner has a plain, speedy, and adequate remedy at
law. NRS 34.170. The right to appeal from an adverse final judgment is
generally an adequate legal remedy that will preclude writ relief, but
whether a future appeal is sufficiently speedy depends on factors such as
“the underlying proceedings’ status [and] the types of issues raised in the
writ petition.” D.R. Horton, Inc. v. Eighth Judicial Dist. Court, 123 Nev.
468, 474-75, 168 P.3d 731, 736 (2007).

Tahican lacks a speedy and adequate legal remedy. An order
denying a motion to expunge a lis pendens is not substantively appealable.
See NRAP 3A(b) (listing appealable orders). And a future appeal from a
final judgment in the underlying case is not an adequate remedy given that,
a lis pendens impedes the property's marketability and thus “may cause
substantial hardship to the property owner.” Levinson, 109 Nev. at 751,
857 P.2d at 21 (internal quotation marks omitted). In addition, this petition
presents a purely legal issue concerning the availability of a lis pendens in
a fraudulent transfer action, an issue that we touched upon but never
resolved in Levinson. We are concerned that some of the language in
Levinson, as well as in Weddell v. H20, Inc., 128 Nev. 94, 106, 271 P.3d 743,
751 (2012), and subsequent unpublished orders relying on them, may have
misled lower courts about the availability of a lis pendens in certain actions,
and this petition provides us the opportunity to clarify the law in this area.

 

Accordingly, we elect to exercise our discretion and consider the petition.

 

 
on ee

A fraudulent transfer claim seeking to avoid the transfer of real property
“affect/s] the title” of the property within the meaning of NRS 14.010 so as to
support a lis pendens

The sole issue in this petition is whether a claim of fraudulent
transfer of real property secking avoidance of the transfer supports the
recording of a lis pendens. This issue presents a purely legal question that
we review de novo. See Int'l Game Tech., 124 Nev. at 198, 179 P.3d at 559
(applying de novo review to questions of law in the context of a writ
petition).

A lis pendens serves as constructive notice to potential
purchasers or lenders that the real property described in the lis pendens is
the subject of a pending lawsuit. NRS 14.010(3). As noted, a lis pendens
may be recorded by a party “liJn an action... affecting the title or
possession of real property.” NRS 14.010(1). After a lis pendens is recorded,
the property owner may move to expunge the lis pendens pursuant to NRS
14.015. To maintain the lis pendens, the party who recorded it has the
burden of establishing, among other things, that the lis pendens is proper

and that the party is likely to prevail in the action and as a result will be

 

entitled “to relief affecting the title or possession of the real property.” NRS.
14.015(2), (3). If the party fails to meet its burden, the district court must
order the lis pendens expunged. NRS 14.015(5).

‘The central question here is whether a claim of fraudulent
transfer “affectis) the title or possession of real property” within the
meaning of NRS 14.010(1). Tahican asserts that this court has already
answered that question in Levinson. We disagree.

In Levinson, this court considered the propriety of a lis pendens
in an action alleging fraudulent conveyance and constructive trust. 109

Nev. at 750, 857 P.2d at 20. This court ultimately held that the action was

 

 
 

not one “affecting the title or possession of real property” as was
contemplated by NRS 14.010(1). Id. at 751-52, 857 P.2d at 21. In reaching
this conclusion, this court did not decide that a fraudulent transfer claim
‘can never be a basis for a lis pendens; rather, the court determined that the
plaintiff's fraudulent transfer claim was without merit, given that the
plaintiff had not “adequately demonstrated actionable fraud.” Id. at 752,
857 P.2d at 21. The court acknowledged, however, that the plaintiff had
“presented relevant case law indicating that lis pendens may apply to
actions designed to avoid conveyances or transfers in fraud of creditors.” Id.
‘Thus, the court left open the issue of whether a lis pendens may be proper
in a fraudulent transfer action where the plaintiff demonstrates actionable
fraud. We must now decide that precise issue.

‘A fraudulent transfer claim under Nevada’s Uniform
Fraudulent Transfer Act (UPTA) is a claim by a creditor that a debtor
transferred property with the intent to defraud the creditor by placing the
property out of the creditor’s reach. NRS 112.180(1Xa); see also Herup v-
First Bos. Fin., LLC, 123 Nev. 228, 232, 162 P.3d 870, 872 (2007). The
UFTA sets forth remedies for a fraudulent transfer, one of which is the
“falvoidance of the transfer... to the extent necessary to satisfy the
creditor's claim,” NRS 112.210(1Xa). When a creditor seeks this statutory
remedy of avoidance, the district court may void the transfer of title to the
property and return title to the debtor. See 37 Am. Jur. 24 Fraudulent
Conveyances and Transfers § 116 (2015) (providing that a fraudulent
transfer “is void or voidable and will be set aside in a proper proceeding”);
see also Farris v. Advantage Capital Corp., 170 P.3d 250, 252 (Ariz. 2007)
(stating that the avoidance remedy for a fraudulent transfer “allows a court,

to undo a transaction, thus, returning title to its rightful owner"). This

 

 

 
transfer of title back to the debtor necessarily affects the title of the
property. We thus conclude that a fraudulent transfer action secking
avoidance of a transfer of real property constitutes an action “affecting the
title or possession of real property” within the meaning of NRS 14.010(1).

Tahican nevertheless argues that a creditor's fraudulent
transfer claim cannot support a lis pendens because the creditor has no
direct interest in the property and only seeks to make the property available
for the collection of a judgment. As support, Tahican relies on statements
in Levinson, 109 Nev. at 752, 857 P.2d at 21, and Weddell, 128 Nev. at 106,
271 P.3d at 751, requiring a party who records a lis pendens to have some
entitlement to title or possession of the property.

The lis pendens statutes, however, do not impose such a
requirement. Rather, NRS 14.010(1) requires only that the action “affect! |
the title or possession of real property.” (Emphasis added.) It does not
restrict a lis pendens to an action seeking the title or possession of real
property. And NRS 14.015, which sets forth the requirements to defeat a
motion to expunge a lis pendens, requires the party who recorded the lis
pendens to show “entitle[ment] to relief affecting the title or possession of
the real property.” (Emphasis added.) It notably does not require the party
to show entitlement to the title or possession. We must give effect to the
plain language of NRS 14.010 and NRS 14.015. See Chur v. Eighth Judicial
Dist. Court, 136 Nev. 68, 72, 458 P.3d 336, 340 (2020), ‘Thus, we disavow
Levinson and Weddell to the extent they suggest that a lis pendens must be
grounded in a claim of ownership or possessory interest in the real property.

‘Tahican also contends that allowing the use of a lis pendens in
fraudulent transfer actions would invite abuse of the lis pendens statutes,

a concern cited in Levinson as a basis for restricting the availability of a lis,

 

 
pendens. In Levinson, this court explained that the purpose of a lis pendens
is “to prevent the transfer or loss” of the real property while the dispute
involving the property is ongoing and that “lis pendens are not appropriate
instruments for use in promoting recoveries in actions for personal or money
judgments.” 109 Nev. at 750, 857 P.2d at 20. The court discussed the need
to restrict the use of a lis pendens to avoid abuse: “Lis pendens is one of the
few remaining provisional remedies available at [the case's] inception
without prior notice to the adversary,” and as such, it “may cause
substantial hardship to the property owner before relief can be obtained.”
109 Nev. at 751, 857 P.2d at 20 (quoting Burger v. Superior Court, 199 Cal.

Rptr. 227, 230 (Ct. App. 1984)). Recognizing the danger that a lis pendens
may be improperly utilized to avoid the more onerous procedures involved
in obtaining a prejudgment attachment, Levinson emphasized that a “lis
pendens is not available to merely enforce a personal or money judgment.”
Id, at 752, 857 P.2d at 21. We today reiterate that a lis pendens may not be
used in place of a writ of attachment to secure the ultimate collection of an
anticipated money judgment. However, Levinson did not conclude that the
potential for such abuse justifies ignoring the plain language of the lis
pendens statutes when, as here, a party's substantive claim for relief itself
seeks relief affecting title to real property and the other statutory
requirements are met.

‘To the extent some may fear parties will improperly assert such
fraudulent transfer claims along with routine claims for money damages to
be able to record a lis pendens, the lis pendens statutes are themselves
designed to prevent and discourage such abuse. NRS 14.016 provides for
an expedited process to expunge an improperly recorded lis pendens and
places the burden on the party who recorded the lis pendens to show that

 

 
0

the lis pendens is proper and should not be expunged. The statute requires.
the recording party to demonstrate not only that the action affects the title
or possession of the property, NRS 14.015(2), but also that the action has
merit and that, if the recording party prevails, the party will be entitled to
relief “affecting the title or possession of the real property.” NRS 14.015(3).
If the recording party fails to establish any of the requirements in NRS
14.015, the court must expunge the lis pendens. NRS 14.015(5). And, even
if the recording party establishes all of the requirements to maintain the lis,
pendens, the court may still order expungement if the property owner posts
a bond sufficient to secure adequate relief for the recording party. NRS.
14.015(6). In addi
pendens may be subjected to criminal charges or a civil lawsuit. NRS

yn, @ person who knowingly files a groundless lis

 

205.395. In sum, we conclude that the lis pendens statutes adequately
account for and protect against any potential abuses.

In contrast, adopting Tahican’s position would significantly
frustrate the UFTA’s purpose: “to prevent a debtor from defrauding
creditors by placing the subject property beyond the creditors’ reach.” Wells
Fargo Bank, N.A. v. Radecki, 134 Nev. 619, 622, 426 P.3d 593, 597 (2018).
‘The UFTA does not allow for a transfer of property to be voided in a
fraudulent transfer action if the transferee took the property in good faith
for a reasonably equivalent value. NRS 112.220(1). Thus, ifa lis pendens
is not available to creditors in fraudulent transfer actions, the property
could be transferred to a good faith transferee during the litigation, which
would “cut off the creditor's rights, and the court's power, to undo the prior
transfer.” Farris, 170 P.3d at 252. “Without the creditor's lis pendens,
evasive debtors may secure the benefit of their fraudulent transfers and

impede collection.” Id. An interpretation of the lis pendens statutes as

10

 

 
 

applying to a fraudulent transfer claim seeking avoidance of the transfer of
real property comports with and furthers the purpose of the UFTA. Such
an interpretation also serves the purpose of the lis pendens statutes, as it,
protects a party from having their claim involving title to real property
defeated by the transfer of the property to a bona fide purchaser during the
course of the lawsuit. Other jurisdictions with similar lis pendens and
fraudulent transfer statutes have likewise concluded that a fraudulent
transfer claim may support a lis pendens where the claim seeks to void a
real property transfer. See, e.g. id.; Kirkeby v. Superior Court, 93 P.3d 395,
400 (Cal. 2004). We therefore conclude that this result harmonizes the
applicable statutes and is faithful to their plain language.
CONCLUSION

‘Though we entertain this writ petition, we decline to provide
the relief Tahican seeks. Because a fraudulent transfer claim seeking
avoidance of the transfer of real property is an “action . .. affecting the title
or possession of real property” within the meaning of NRS 14.010(1), the
district court did not err in denying Tahican's motion to expunge the lis

pendens. Accordingly, we deny the writ petition,

 

We concur:

Sr.J.

 

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