Court Opinion

ID: 2757765
Source: CourtListenerOpinion
Date Created: 2014-12-04 20:11:32.600266+00
Date Added: 2024-06-11T12:08:49.753044
License: Public Domain

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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