Court Opinion

ID: 2824816
Source: CourtListenerOpinion
Date Created: 2015-08-11 05:24:56.005126+00
Date Added: 2024-06-11T12:24:45.183531
License: Public Domain

defaulted on the loans, GC-Global and JVLV filed complaints, seeking,
                    among other relief, foreclosure on the collateral. While the case was
                    pending, Mafia acquired some of the notes that it guaranteed. Mafia then
                    filed a counterclaim/third-party claim against the collateral agent, Andrew
                    DeMaio, alleging unjust enrichment and breach of fiduciary duty. The
                    district court granted summary judgment in favor of GC-Global, JVLV,
                    and DeMaio (cumulatively "the respondents"), and awarded attorney fees
                    and costs as allegedly provided for in the parties' secured notes and
                    security agreement.
                                Mafia appeals, raising three principal arguments: (1) the
                    district court erred by ruling that Mafia's interests in the collateral
                    merged when it allegedly acquired some but fewer than all of the secured
                    notes, (2) the district court erred by dismissing as nonassignable its claim
                    for breach of fiduciary duty, and (3) the security agreement did not provide
                    for attorney fees and costs. Our review of the district court orders
                    granting summary judgment is de novo, Wood v. Safeway, Inc.,       121 Nev.
                    724, 729, 121 P.3d 1026, 1029 (2005), and we reverse and remand.
                                                         I.
                                "Summary judgment is appropriate under NRCP 56 when the
                    pleadings, depositions, answers to interrogatories, admissions, and
                    affidavits, if any, that are properly before the court demonstrate that no
                    genuine issue of material fact exists, and the moving party is entitled to
                    judgment as a matter of law." Id. at 731, 121 P.3d at 1031. The record
                    assembled thus far does not establish as a matter of law that the merger
                    doctrine or Nevada's fraudulent transfer statute extinguished Mafia's
                    claims. We therefore reverse.

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                             At the outset, the respondents and district court mistake
                 Mafia's acquisition of 29 (or 31) 1 secured notes as an attempt to owe a debt
                 to itself when in fact Mafia is the nondebtor guarantor—not the debtor.
                 Thomas v. Valley Bank of Nev.,      97 Nev. 320, 323, 629 P.2d 1205, 1207
                 (1981) ("[G]uarantors['] . . . obligations are wholly separate from the
                 principal obligation guaranteed."), overruled on other grounds by First
                 Interstate Bank of Nev. v. Shields, 102 Nev. 616, 730 P.2d 429 (1986). As a
                 nondebtor guarantor, Mafia did not owe a debt to the creditors from whom
                 it acquired the notes. Instead, when Mafia acquired the notes, it reduced
                 its liability as guarantor and "subrogated to the rights of the creditor."   Id.
                 at 325, 629 P.2d at 1209. Mafia's subrogation to the rights of a creditor
                 did not, however, extinguish its independent duties as a guarantor to the
                 remaining creditors, including JVLV and GC-Global. 38A C.J.S. Guaranty
                 § 106 (2008) ("A settlement by the guarantor of one default does not
                 discharge him or her from liability for another . ..."). Accordingly, Mafia
                 did not acquire all of the legal and equitable interests in the collateral
                 given that, at minimum, the collateral guaranteed the unsatisfied secured
                 notes from Murder, Inc. to JVLV and GC-Global, and as such, there could
                 be no merger. See Aladdin Heating Corp. v. Trustees of Cent. States, 93
                 Nev. 257, 261, 563 P.2d 82, 85 (1977) ("Since respondents acquired only
                 part of the subject matter covered. .. there can be no merger."); see also
                 Roy v. Luschar, 108 Nev. 567, 571, 835 P.2d 807, 810 (1992) (holding that

                        'The record is unclear as to the number of notes that Mafia
                 purchased from the "Former Noteholders." A dispute also appears to exist
                 as to the legitimacy of some of the Mafia-acquired notes; we make no
                 ruling on that issue one way or the other.

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                    merger will not occur if "the interests said to merge were not coextensive
                    and commensurate").
                                The respondents try to defend the district court's orders on the
                    alternative basis that NRS 112.180 prohibits a defaulting debtor from
                    working with some creditors with the intent to thwart enforcement of the
                    other creditors' rights, charging that Mafia's purchase of the secured notes
                    could serve no purpose "other than to hinder the remaining creditors'
                    rights." We disagree. For one, the respondents' reliance on NRS 112.180
                    is misplaced because Murder Inc.—not Mafia—is the defaulting debtor.
                    More importantly, there is nothing nefarious about a guarantor acquiring
                    a secured party's note because "an owner of property on which there is a
                    lien created or imposed by another may protect himself or herself by
                    purchasing the lien." 51 Am. Jur. 2d Liens § 16 (2d ed. 2011). Indeed, the
                    only "wrong" that the respondents protest is that they may not receive the
                    entirety of the collateral, but that is the consequence of the multi-secured
                    party security agreement that the respondents agreed to, not Mafia's
                    acquisition of other secured parties' notes.

                                Claims for breach of fiduciary duty are akin to fraud claims,
                    Stalk v. Mushkin, 125 Nev. 21, 30, 199 P.3d 838, 844 (2009); Nev. State
                    Bank v. Jamison Family P'ship, 106 Nev. 792, 799, 801 P.2d 1377, 1382
                    (1990), and rights of action based on fraud are not assignable because they
                    are personal to the party who was defrauded.       Prosky v. Clark, 32 Nev.
                    441, 445, 109 P. 793, 794 (1910). Here, the district court correctly
                    reasoned that a claim for breach of fiduciary duty may not be assigned.
                    Nevertheless, the district court erred by dismissing Mafia's
                    counterclaim/third-party claim because there is a disputed issue of
                    material fact as to the basis of Mafia's claim, namely, whether DeMaio
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                 allegedly breached his fiduciary duty to Mafia in its personal capacity, as a
                 guarantor and/or a creditor (after it acquired the secured loans), or
                 whether DeMaio allegedly breached his fiduciary duty to the Former
                 Noteholders, who in turn attempted to assign their claim to Mafia by
                 virtue of the loan assignments. The former claim would be permissible;
                 the latter would not.
                             For the foregoing reasons, we
                             ORDER the judgments of the district court REVERSED AND
                 REMAND this matter to the district court for proceedings consistent with
                 this order. Because the district court erred by granting summary
                 judgment in favor of the respondents, we also VACATE the award of
                 attorney fees and costs.

                                                                                     J.

                 cc: Hon. Joanna Kishner, District Judge
                      Maier Gutierrez Ayon, PLLC
                      Greenberg Traurig, LLP/Las Vegas
                      Randolph L. Westbrook, III
                      Eighth District Court Clerk

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