Court Opinion

ID: 6329025
Source: CourtListenerOpinion
Date Created: 2022-04-01 10:06:20.638382+00
Date Added: 2024-06-11T09:21:57.089957
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF NEVADA

OMNI FINANCIAL, LLC, A FOREIGN                           No. 82028
LIMITED LIABILITY COMPANY,
Appellant,
vs.
KAL-MOR-USA, LLC, A NEVADA                               FILED
LIMITED LIABILITY COMPANY; AND
FIRST 100, LLC, A NEVADA LIMITED                         MAR 3 1 2022
LIABILITY COMPANY,                                              H A. BROWN
                                                               UPREME COU
Res s ondents.
                                                           DEPUTY CLERK

                         ORDER OF AFFIRMANCE

            This is an appeal from a district court order granting partial

summary judgment, certified as final pursuant to NRCP 54(b), in an action
to quiet title to real property. Eighth Judicial District Court, Clark County;
Richard Scotti, Judge.
            Appellant Omni Financial, LLC, loaned $5 million to
respondent First 100, LLC, secured by, among other things, three deeds of
trust on real property owned by First 100. After entering into the loan
agreement with Omni, First 100 sold nine of the properties to respondent
Kal-Mor-USA, LLC (the properties). However, First 100 failed to disclose
to Kal-Mor that the properties were encumbered by the deeds of trust in
favor of Omni. First 100 defaulted in the payment of the Omni loan. First
100 and Omni sued each other in federal court, eventually leading to a
settlement agreement (the Settlement Agreement) and stipulated judgment
containing specific terms regarding repayment of the debt owed to Omni.
Thereafter, Omni attempted to foreclose on the properties based on the
deeds of trust. In response, Kal-Mor filed a complaint against Omni in

                                                           z oa
                   district court. Kal-Mor also filed a motion for partial summary judgment
                   seeking declaratory relief and quiet title, alleging that the Settlement
                   Agreement constituted a novation of the Omni loan and thereby
                   extinguished Omni's first-priority security interest in the properties. The
                   district court granted Kal-Mor's motion for partial summary judgment,
                   agreeing that the Settlement Agreement functioned as a novation,
                   rendering Omni's security interest in the properties unenforceable.
                               A district court's decision to grant summary judgment is
                   reviewed de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026,
                   1029 (2005). Summary judgment is proper if the pleadings and all "other
                   evidence on file demonstrate that no genuine issue" of material fact exists
                   "and that the moving party is entitled to a judgment as a matter of law."
                   Id. (internal quotation marks omitted). All evidence "must be viewed in a
                   light most favorable to the nonmoving party." Id. To withstand summary
                   judgment, the nonmoving party cannot rely solely on general allegations
                   and conclusions set forth in the pleadings but must instead present specific
                   facts demonstrating the existence of a genuine factual issue supporting its
                   claims.1 NRCP 56(e); see also Wood, 121 Nev. at 731, 121 P.3d at 1030-31.
                   Kal-Mor had standing to obtain a judicial declaration
                             Omni argues on appeal that Kal-Mor, as a third party to the
                   contract, lacked standing to even challenge the Settlement Agreement.
                   "Standing is a question of law reviewed de novo." Nationstar Mortg., LLC

                         1We  have considered and reject Omni's argument that Kal-Mor's
                   partial summary judgment motion was procedurally improper. The alleged
                   inadmissible statements were adequately supported by evidence in the
                   record. See Clauson v. Lloyd, 103 Nev. 432, 434, 743 P.2d 631, 633 (1987)
                   (recognizing that no affidavit is required to support summary judgment if
                   other evidence in the record independently supports the motion).
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v. SFR Invs. Pool 1, LLC, 133 Nev. 247, 249, 396 P.3d 754, 756 (2017)
(internal quotation marks omitted). "To have standing, the party seeking
relief [must have] a sufficient interest in the litigation, so as to ensure the
litigant will vigorously and effectively present his or her case against an
adverse party." Id. at 250, 396 P.3d at 756 (alteration in original) (internal
quotation marks omitted). "An action may be brought by any person against
another who claims an estate or interest in real property, adverse to the
person bringing the action, for the purpose of determining such adverse
claim." NRS 40.010. "A plea to quiet title does not require any particular
elements, but each party must plead and prove his or her own claim to the
property in question and a plaintiff's right to relief therefore depends on
superiority of title." Chapman v. Deutsche Bank Nat'l Tr. Co., 129 Nev. 314,
318, 302 P.3d 1103, 1106 (2013) (internal quotation marks omitted).
            Here, Omni and Kal-Mor both claimed an adverse interest in
the properties at issue in this case. Omni claimed that it retained a security
interest in the properties under the deeds of trust recorded as collateral for
the Omni loan. Kal-Mor asserted that it purchased the subject properties
from First 100 without First 100 disclosing the previously existing security
interest. In its summary judgment motion, Kal-Mor sought to quiet title
and to obtain a judicial declaration that the Settlement Agreement
extinguished Omni's interest in the properties.
            We conclude that under NRS 40.010, Kal-Mor had standing to
bring a quiet title action against Omni to determine whether Omni's
adverse security interest in the properties remained in effect after the
Settlement Agreement's execution and entry of the stipulated judgment by
the federal court approving the same. We also conclude that the district
court did not err in finding that Kal-Mor was presumed to have standing

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through its attempt to seek clarification of the effect of the Settlement
Agreement. See id.
The Settlement Agreement was a novation of the Omni loan
                Omni maintains that the Settlement Agreement did not
constitute a novation because First 100 breached the loan agreement prior
to the parties entering the Settlement Agreement.2 A novation, or
substituted contract, substitutes a new obligation for an existing one,
"which thereby discharges the parties from all of their obligations under the
former agreement inasmuch as such obligations are extinguished by the
novation." Lazovich & Lazovich, Inc. v. Harding, 86 Nev. 434, 437, 470 P.2d
125, 127-28 (1970) (quoting Williams v. Crusader Disc. Corp., 75 Nev. 67,
70, 334 P.2d 843, 845 (1959)). "A novation consists of four elements: (1)
there must be an existing valid contract; (2) all parties must agree to a new
contract; (3) the new contract must extinguish the old contract; and (4) the
new contract must be valid." United Fire Ins. Co. v. McClelland, 105 Nev.
504, 508, 780 P.2d 193, 195 (1989). "If all four elements exist, a novation
occurred." Id. "Mhe party asserting novation has the burden of proving all
the essentials of novation by clear and convincing evidence." Id. at 509, 780
P.2d at 196.
                Although Omni argues that a novation by a new agreement
cannot occur where the original contract was invalidated by a breach of the
agreement, see In re Cohen, 422 B.R. 350, 372 (E.D.N.Y. 2010) (recognizing
that under New York law novation cannot occur where the original contract
is breached because the breached contract is no longer valid when the

           100 submitted an answering brief in this matter stating that it
      2 First
did not dispute the district court's determination that the Settlement
Agreement served as a novation of the Omni loan.

                                      4
                    parties enter a new contract), Nevada has no similar controlling authority.
                    Nevada law permits a novation to occur after the breach of the parties'
                    original agreement. See Williams, 75 Nev. at 71, 334 P.2d at 846 (The
                    alteration of the original contract . . . has the legal effect of discharging it
                    by mutual recission, and substitutes therefor a new and different
                    contract."). Omni does not argue that the original loan agreement was
                    invalid before First 100 is said to have breached it and, in fact, to breach a
                    contract, the contract first must be valid.          See Richardson v. Jones &
                    Denton, 1 Nev. 405, 408 (1865) (stating that a breach of contract action
                    requires a plaintiff to prove a valid contract, breach by the defendant, and
                    damages). This court's recent order in Desert Valley Contracting, Inc. v. In-
                    Lo Properties is also persuasive in addressing the issue of contract validity.
                    No. 79751, 2021 WL 818191, at *2 (Nev. Mar. 3, 2021) (Order of Reversal
                    and Remand) (To succeed on a breach of contract claim, the plaintiff must
                    show that . . . a valid contract exists . . . .").
                                 Thus, even though First 100 breached the terms of the Omni
                    loan, both parties entered into the Settlement Agreement that contained
                    new and different terms and changed the date upon which payment of the
                    debt was due, thereby substituting a new contractual obligation.            See

                    Lazovich, 86 Nev. at 437, 470 P.2d at 127-28 (stating that a novation
                    substitutes a new obligation for an existing one); Williams, 75 Nev. at 71,
                    334 P.2d at 846 CWhere, after breach of contract, . . . the creditor and
                    principal debtor enter into a new contract, [where] the amount of
                    damages . . . due [are] made payable on a future day, . . . upon terms
                    different from . . . the original agreement, such new contract presumptively
                    merges the old." (internal quotation marks omitted)). Accordingly, we
                    conclude that the district court properly determined that Kal-Mor proved

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all the essential elements of novation by clear and convincing evidence, and
that the Settlement Agreement was thus a novation of the Omni loan.3
            This conclusion is further evinced by examining the intent of
the parties. See Pink v. Busch, 100 Nev. 684, 690, 691 P.2d 456, 460 (1984)
("The intent of the parties to cause a novation must be clear." (internal
quotation marks omitted)). "Novation is a question of law only when the
agreement and consent of the parties are unequivocal." United Fire, 105
Nev. at 508, 780 P.2d at 196. "[W]hen a contract is clear, unambiguous, and
complete, its terms must be given their plain meaning and the contract
must be enforced as written; the court may not admit any other evidence of
the parties intent because the contract expresses their intent." Ringle v.
Bruton, 120 Nev. 82, 93, 86 P.3d 1032, 1039 (2004). Ascertaining the

      3We   have considered and reject Omni's argument that the district
court misconstrued the Settlement Agreement as a novation rather than an
executory accord. An executory accord is "an agreement that operates as a
satisfaction of an antecedent claim only when performed," whereas a
substituted contract is "an agreement that operates as an immediate
substitution for and extinguishment of an antecedent claim." Johnson v.
Utile, 86 Nev, 593, 597, 472 P.2d 335, 337 (1970). The combination of
certain provisions in the Settlement Agreement immediately discharged
First 100 from the terms of the Omni loan and substituted performance
under the new and different terms of the Settlement Agreement. For
instance, the immediate and unconditional release of both parties from all
claims and liabilities associated with the Omni loan, the express limitation
of any future claims that a party may bring to only the enforcement of the
Settlement Agreement itself and making Omni's only method of recourse a
breach of contract under the Settlement Agreement. As such, the
Settlement Agreement was not an executory accord.

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                   parties intent requires the trier of fact to "construe the contract as a whole."
                   Id.
                               Here, the district court determined that the Settlement
                   Agreement's plain language expressly and unambiguously extinguished the
                   deeds of trust and Omni's security interest in the properties. The district
                   court specifically looked at the Settlement Agreement's release language in
                   Section 15 and found that it clearly released and discharged both First 100
                   and Omni from anything related to First 100s default of the Omni loan, any
                   foreclosure actions commenced by Omni related to the Omni loan, and any
                   other related lawsuits filed. There was no express language in the
                   Settlement Agreement permitting Omni the right to enforce the Omni loan
                   against First 100 after the execution of the Settlement Agreement. The
                   release language was also repeated and clarified in the stipulated judgment
                   entered by the federal court and agreed to by both First 100 and Omni. The
                   federal court stipulated judgment explicitly dismissed all disputes related
                   to Omni's security interest in the deeds of trust for the real properties
                   previously or currently owned by First 100. Additionally, the Settlement
                   Agreement's plain language stated Omni's intent to retain its first-priority
                   security interest only in First 100s current and future assets as security for
                   the Settlement Agreement debt, which did not include the properties at
                   issue in this matter because they were not part of First 100s current assets
                   at the time the Settlement Agreement was executed.
                               Omni does not identify any specific language it deems to be
                   ambiguous or provide any alternate interpretations of any specific language
                   in the Settlement Agreement. Thus, based on the plain and unambiguous
                   language of the Settlement Agreement, we conclude that the district court

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                properly found that the parties clearly intended to cause a novation.4
                            For these reasons, we conclude that the district court did not
                err in granting Kal-Mor's motion for partial summary judgment. Therefore,
                we
                            ORDER the judgment of the district court AFFIRMED.

                                                                 ,   , J.
                                         Hardesty

                       Al4C4A-0            , J.                                         , J.
                Stiglich                                    Herndon

                cc:   Chief Judge, Eighth Judicial District Court
                      Howard & Howard Attorneys PLLC
                      Shea Larsen
                      Maier Gutierrez & Associates
                      Eighth District Court Clerk

                      4 0mni argues it was entitled to additional discovery pursuant to
                NRCP 56(d) to better ascertain the intent of the parties, and the district
                court abused its discretion in denying its request. We disagree. The district
                court's decision was based solely on its interpretation of the Settlement
                Agreement's language, which it found to be plain and unambiguous.
                Therefore, it was not an abuse of discretion for the district court not to admit
                any other extrinsic evidence of the parties intent. See Francis v. Wynn Las
                Vegas, LLC, 127 Nev. 657, 669, 262 P.3d 705, 713 (2011) C`The district
                court's refusal of an NRCP 56[(d)] continuance is reviewed for an abuse of
                discretion."); Ringle, 120 Nev. at 93, 86 P.3d at 1039 (stating that courts
                must enforce a clear and unambiguous contract as written and "may not
                admit any other evidence of the parties' intent because the contract
                expresses their intent"). Moreover, Omni has failed to demonstrate "how
                discovery might alter the district court's determination." Sciarratta v.
                Foremost Ins. Co., 137 Nev., Adv. Op. 32, 491 P.3d 7, 13 (2021).
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