Carroll v. R.J. Nelson, Inc.

• Decision Date: 29 December 2021
• Docket Number: No. 81883-COA,81883-COA
• Citation: 501 P.3d 470 (Table)
• Parties: Annie Lee CARROLL, Individually and as Trustee of the Annie Lee Carroll Declaration of Trust U.A.D. 11/6/05, Appellants, v. R.J. NELSON, INC., a Nevada Corporation; and Ruby Nelson Carroll, Individually, n/k/a Ruby Nelson, Respondents.
• Court: Nevada Court of Appeals

501 P.3d 470 (Table)

Annie Lee CARROLL, Individually and as Trustee of the Annie Lee Carroll Declaration of Trust U.A.D. 11/6/05, Appellants,

v.R.J. NELSON, INC., a Nevada Corporation; and Ruby Nelson Carroll, Individually, n/k/a Ruby Nelson, Respondents.

No. 81883-COA

Court of Appeals of Nevada.

FILED DECEMBER 29, 2021

Hofland & Tomsheck

Cary Colt Payne

Law Offices of Shawanna L. Johnson

ORDER OF AFFIRMANCE

Lawrence William Carroll, III (Larry), married Ruby Jean Nelson in 2010.¹ The next year, the couple formed a Nevada corporation, R.J. Nelson, Inc. (RJN), as a vehicle to publish Ruby's book—something that never occurred. Ruby and Larry were the sole officers of RJN. In 2013, Larry's mother, Annie Lee Carroll, provided Larry and Ruby money from her trust so they could purchase a home. Larry, Ruby, Annie, and Ruby's adult son planned to live together in the home. All parties agree Annie's trust provided the entire purchase price for the home. To avoid creditors, Larry and Ruby titled the home in the name of RJN and never specified that Annie had an ownership interest, security interest, or lien in the home or corporation.

Sometime thereafter, Ruby learned that Larry had commenced an extramarital affair, so she unilaterally removed Larry as an officer of RJN. She also learned that Annie had stopped paying property taxes on the home, so she borrowed $6,000 from her sister to pay the property taxes. In exchange, Ruby created a trust in her sister's name and then unilaterally gave the trust a quitclaim deed to the home. She filed for divorce in 2016. During the divorce proceedings, Ruby claimed that Annie had gifted her the home as her sole and separate property. Two weeks later, Annie filed a civil suit in district court, seeking, among other things, to quiet title to the home and preserve her interest therein.

After initial litigation in both the family court and district court cases, the family court case proceeded, and the district court delayed the proceedings in this action until a resolution could be reached in the family court case. During the divorce proceedings before the family court, Larry argued that Annie loaned the parties money. In support, he presented his testimony, Annie's testimony that she intended to be repaid, and an unsigned document regarding the alleged arrangement. Ruby argued that Annie gifted her the home as her sole and separate property. The family court held, in an amended decree, in relevant part, that: (1) Annie may have an interest in the home, but the court was not adjudicating that interest because she was not a party to the litigation; (2) Annie never gifted Ruby the home as her sole and separate property, nor did she gift the money to the corporation, nor was there any writing evidencing that this property was a gift to Ruby and Larry, and therefore declined to decide Annie's interest in the property; (3) the corporation—and by extension the corporation's sole asset (the residence)—and the car were the community's only assets, but the court could not determine the extent of the parties’ interest in the residence because of Annie's potential interest in the home; and (4) Ruby unlawfully transferred the home from RJN to her sister's trust, in violation of NRS 123.230, which protects community property from unilateral transfers. Ruby appealed the divorce decree primarily on grounds unrelated to the issues above, and this court affirmed the judgment in 2019.

Following the divorce decree, and in advance of trial in the related civil case, Annie filed a motion in limine in the civil court seeking to offensively preclude Ruby from relitigating the issues determined in the family case as stated above. Annie claimed that the divorce decree provided for, and the court of appeals affirmed, that Annie loaned Ruby and Larry the money for the home, so the district court was bound by that determination. Apparently the district court denied or deferred the pre-trial motion for reasons not in the record, and after trial, the district court found that Annie gifted Larry the money alone, but that he subsequently transmuted it when he used the funds to purchase the home, which he titled in RJN's name and which the family court determined was a community asset. Annie then filed a motion to alter and amend the judgment on grounds that Larry was not a party to the civil action and that res judicata barred the district court from ruling as it did. The district court struck its previous order in part and found solely that Annie had not loaned the money to anyone. It then ruled against Annie on her remaining claims, including fraudulent conveyance, unjust enrichment, and elder abuse.

Annie now appeals the district court's judgment, arguing that the district court abused its discretion when it allowed Ruby to relitigate the issues decided in family court and ruled contrary to what the family court held. Annie also claims that the district court abused its discretion in ruling against her fraudulent conveyance, unjust enrichment, and elder abuse claims. We address each of her arguments in turn.

Neither issue or claim preclusion bar the district court's holdings

Annie argues that res judicata barred the district court from holding that (1) Annie did not loan Larry and Ruby money to purchase the residence, and (2) Ruby did not fraudulently convey the residence. Therefore, she asserts that the district court was required to find that Annie loaned Ruby and Larry the money and rule that Ruby must thus reimburse Annie for the money Ruby received upon sale of the residence, which the district court treated as a community asset without deciding if—or to what extent—Annie had an interest in the residence.

During Ruby and Larry's divorce, the family court ruled that the home was community property. However, it also held that it could not quantify the extent of Ruby and Larry's interest in the home because Annie, who was not a party to the divorce, may have an interest in the home and it could not adjudicate Annie's interest in her absence. However, the family court also held that Annie did not gift Ruby or RJN the money to purchase the home, nor was there any document showing that Annie gifted the money to the community; thus, Annie's interest in the property remained undecided. Following the conclusion of the divorce, Annie filed a motion in limine to bar Ruby from relitigating certain issues in district court because Annie argued the family court necessarily determined that Annie loaned the parties the money. The district court, however, found that Annie did not loan the parties the money. Annie now argues on appeal that the district court abused its discretion in allowing Ruby to relitigate that issue and in holding that Annie had not loaned the parties the money—contrary to the family court's holding. Annie asserts that the money was a loan from her to Larry and Ruby, and the result of the trial would have been different but for this error.

Res judicata precludes parties from "relitigating a cause of action or an issue which has been finally determined by a court of competent jurisdiction ... to prevent multiple litigation ... and wasted judicial resources." Univ. of Nev. v. Tarkanian, 110 Nev. 581, 598, 879 P.2d 1180, 1191 (1994), holding modified by Exec. Mgmt., Ltd. v. Ticor Title Ins. Co., 114 Nev. 823, 963 P.2d 465 (1998). In Nevada, courts "use the terms of claim preclusion and issue preclusion, over the use of ‘res judicata.’ "² Elizondo v. Hood Mach., Inc., 129 Nev. 780, 786 n.2, 312 P.3d 479, 483 n.2 (2013). On appeal, this court reviews allegations that issue or claim preclusion bars relitigation of an issue through a two-step process. See State, Univ. & Cmty. Coll. Sys. v. Sutton, 120 Nev. 972, 984, 103 P.3d 8, 16 (2004). "This court performs a de novo review of whether issue preclusion is available. Once it is determined that issue preclusion is available, the actual decision to apply it is left to the discretion of the district court." Id.

Issue preclusion applies when "(1) the issue decided in the prior litigation [is] identical to the issue presented in the current action; (2) the initial ruling [was] on the merits and ha[s] become final; (3) the party against whom the judgment [was] asserted [was] a party or in privity with a party to the prior litigation;³ and (4) the issue was actually and necessarily litigated." Five Star Cap. Corp. v. Ruby, 124 Nev. 1048, 1055, 194 P.3d 709, 713 (2008), holding modified by Weddell v. Sharp, 131 Nev. 233, 350 P.3d 80 (2015) (internal citations and quotations omitted).⁴ The party seeking to apply issue preclusion bears the burden of proving that it should apply. See Bower v. Harrah's Laughlin, Inc., 125 Nev. 470, 481, 215 P.3d 709, 718 (2009), holding modified by Garcia v. Prudential Ins. Co. of Am., 129 Nev. 15, 293 P.3d 869 (2013). We analyze each element separately.

The issues presented in the family and district courts were not identical

For issue preclusion to apply, the issue determined in the first case must be identical to the issue in the second case. Five Star, 124 Nev. at 1055, 194 P.3d at 713. Issue preclusion "may apply even though the causes of action are substantially different, if the same fact issue is presented." Clark v. Clark, 80 Nev. 52, 56, 389 P.2d 69, 71 (1964). Accordingly, "issue preclusion cannot be avoided by attempting to raise a new legal or factual argument that involves the same ultimate issue previously decided in the prior case." Alcantara ex rel. Alcantara v. Wal-Mart Stores, Inc., 130 Nev. 252, 259, 321 P.3d 912, 916-17 (2014) (holding preclusion applied where appellant tried proving a corporation's negligence through an alternate theory of duty than what he claimed in the first proceeding). "Therefore, when determining whether issue preclusion applies to a given case, courts must scrupulously review the record to determine if it actually stands as a bar to relitigation." Kahn v. Morse & Mowbray, 121 Nev. 464, 475, 117 P.3d...