Eagle SPE NV1 Inc v Southern Highlands Development Corp et al

Filing 166

ORDER that Defendants' Motion for Attorney's Fees and Costs (ECF No. 149 ) is denied. Signed by Judge Miranda M. Du on 3/9/2018. (Copies have been distributed pursuant to the NEF - LH)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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EAGLE SPE NV 1, INC.,

Case No. 2:12-cv-00550-MMD-PAL
Plaintiff,

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ORDER

v.
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SOUTHERN HIGHLANDS
DEVELOPMENT CORP., et al.,
Defendants.

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I.

SUMMARY

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This case involves application of a statutory provision formerly codified at NRS §

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40.459(1)(c) (“Subsection (1)(c)”), which placed additional limitations upon the right of a

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successor-creditor to recover on a deficiency. The Court granted summary judgment in

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favor of Defendants, finding that: Subsection (1)(c) applies to Eagle’s deficiency claim

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(ECF No. 66); and Eagle failed to offer specific evidence to show that the amount of

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consideration it paid was more than the sale price of the Property (ECF No. 146).1

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Because the Court found that Eagle was not entitled to a deficiency, the Court denied

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Eagle’s motion for summary judgment on its two remaining claims for breach of the Note

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and of the Guarantee. Defendants now move for an award of attorney’s fees and costs

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(“Motion”). (ECF No. 149.) Plaintiff opposes (ECF No. 156) and Defendants have replied

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(ECF No. 159). For the reasons discussed herein, the Motion is denied.

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Court’s previous Orders set out the relevant background facts. (ECF Nos.
66, 149.) The terms as used herein are the same as the terms used in those Orders.

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II.

DISCUSSION

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Defendants’ Motion relies on the fees provision in the Loan Agreement. (ECF No.

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149 at 8-10.) Plaintiff counters that it did not bring any claim under the Loan Agreement

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and that its claims for breach of contract are based on the repayment provisions of the

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Note and the Guarantee. (ECF No. 156 at 8-11.) The Court agrees with Plaintiff.

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Nevada law permits attorneys’ fees to be awarded if authorized by statute, rule or

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contract. Frank Settelmeyer & Sons, Inc. v. Smith & Hammer, Ltd., 197 P.3d 1051, 1059

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(Nev. 2008). In determining whether a contractual provision allows for the recovery of

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fees, the court should apply the general rules governing contract interpretation. See

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Debron v. Bunch, 215 P.3d 35, 37 (Nev. 2009). The Nevada Supreme Court has offered

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this caution: “[w]here a contract provision purports to allow attorney's fees in an action

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arising out of the terms of the instrument, we will not construe the provision to have

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broader application.” Id. (quoting Campbell v. Nocilla, 692 P.2d 491, 493 (Nev. 1985)).

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Defendants argue that the Loan Agreement’s fees provision permits the Court to

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award fees to Defendants as the prevailing parties. (ECF No 149 at 8-10.) However,

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Plaintiff’s two breach of contract claims involved the Note and the Guarantee (ECF No.

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67 at 6), not the Loan Agreement. The first claim for relief alleges that “[t]he Borrowers

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defaulted on its obligations under the Note by failing to pay all amounts due thereunder

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when it matured on November 12, 2009.” (Id.) The second claim for relief alleges that the

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Guarantors have similarly failed to fulfill their obligations under the Guarantee. (Id.) As

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Plaintiff correctly pointed out, the Note and the Guarantee do not contain a fees

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provision awarding fees to Defendants in the event they prevail.

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In their reply, Defendants argue that even if the Court looks beyond the Loan

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Agreement, Defendants are entitled to fees under the Note, the Deed of Trust and the

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Guarantee because these agreements’ one-sided fees provisions “must be read as

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reciprocal as a matter of law.” (ECF No. 157 at 6.) However, there are two problems with

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this argument.

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First, Defendants did not seek fees under these agreements in their Motion;

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rather, Defendants seek fees under the Loan Agreement. Plaintiff responds that the

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agreements which serve as the basis of its two breach of contract claims—the Note and

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the Guarantee—do not contain a fees provision enforceable by Defendants, and

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Defendants do not “claim otherwise” in their Motion. (ECF No. 154 at 9.) Because

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Defendants did not rely on the fees provisions in the Note and the Guarantee in their

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initial Motion, they are foreclosed from asserting for the first time in their reply that they

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are entitled to fees under the Note and the Guarantee. See Zamani v. Carnes, 491 F.3d

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990, 997 (9th Cir. 2007) (“The district court need not consider arguments raised for the

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first time in a reply brief.”)

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Second, Defendants rely primarily on McCrary v. Bianco, 131 P.3d 573, 577 (Nev.

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2006), to argue that the fees provisions in the Note and the Guarantee which provide for

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fees to the lender are reciprocal as a matter of law. However, this is not the holding in

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McCrary. That case involved attorney’s fees in the context of Nev. R. Civ. P. 68 and

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NRS § 17.115. The plaintiffs in that case had rejected an offer of judgment and prevailed

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at trial but the judgment obtained was lower than the amount in the offer. The plaintiffs

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sought recovery of fees under NRS § 18.10(2) and the parties’ repair agreement. The

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district court agreed with the defendant that the plaintiffs were not entitled to fees under

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Rule 68 and NRS § 17.115 because the offer exceeded the judgment. The Nevada

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Supreme Court affirmed. In dicta, the court referenced the parties’ repair agreement

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providing for an “award of fees to [the defendant] in the event of a dispute” and went on

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to observe that “[w]hile this award was clearly reciprocal as a matter of law, the fact of

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the contract provision does not dictate a different result in terms of whether such fees

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should be included in the comparison formula.” McCrary, 131 P.3d at 577. Thus,

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contrary to Defendants’ contention, McCrary does not hold that the unilateral fee

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provision similar to the provisions in the Note and the Guarantee “must be read as

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reciprocal as a matter of law.” (ECF No. 157 at 6.)

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Defendants cite to an unpublished Nevada Supreme Court decision, Solky v.

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Smith, No. 60008, 2013 WL 7155016 (Nev. Oct. 31, 2013), but the court in that case did

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not address the defendants’ argument that one of the agreements at issue “is one-sided

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and fails for lack of mutuality of the remedy because only [the plaintiffs] could recover

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attorney fees.” Id. at *3 n. 3. Instead, the court reasoned that the second agreement

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“contained the proper mutuality of remedy.” Id. The court affirmed the district court’s

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decision to award fees to the defendants “because the plain language of both

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[agreements] provided that [the defendants] were entitled to attorney fees.” Id. at *3. As

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support, the court cited to Rowland v. Lepire, 662 P.2d 1332, 1337 (Nev. 1983). Solky,

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2013 WL 7155016 at *3 n. 3. In Rowland, the court found that the district court’s

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conclusion that the prevailing parties were entitled to fees under a theory of mutuality of

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remedy where the governing agreement contained only a one-sided fee provision to lack

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“legal or factual support.” Rowland, 662 P.2d at 1337. Thus, Solky and in turn Rowland

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do not support Defendants’ argument that the fees provisions in the Note and the

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Guarantee should be construed as reciprocal to entitle Defendants to recover their

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attorney’s fees. Defendants’ proposed reading also runs counter to the general rule of

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contract interpretation—that the court should not construe contractual fees provision “to

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have broader application.” See Debron, 215 P.3d at 37.

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The fees provisions in the Note and Guarantee do not provide for fees to be

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awarded to the Borrowers or the Guarantors in the event they prevail in a dispute.

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Accordingly, Defendants cannot rely on these agreements to support their request for

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fees.

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III.

CONCLUSION

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The Court notes that the parties made several arguments and cited to several

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cases not discussed above. The Court has reviewed these arguments and cases and

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determines that they do not warrant discussion as they do not affect the outcome of

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Defendant’s Motion.

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It is ordered that Defendants’ Motion for Attorney’s Fees and Costs (ECF No. 149)
is denied.

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DATED THIS 9th day of March 2018.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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