JSA, LLC v. Golden Gaming, Inc., 58074
| Decision Date | 25 September 2013 |
| Docket Number | No. 58074,58074 |
| Parties | JSA, LLC, A NEVADA LIMITED LIABILITY COMPANY AND WIDE HORIZON, LLC, A NEVADA LIMITED LIABILITY COMPANY, Appellants, v. GOLDEN GAMING, INC., A NEVADA CORPORATION D/B/A SPARKY'S SOUTH CARSON 7, LLC AND/OR GOLDEN TAVERN GROUP, Respondent. |
| Court | Supreme Court of Nevada |
An unpublished order shall not be regarded as precedent and shall not be cited as legal authority. SCR 123.
These are appeals from a district court judgment and a post-judgment order awarding attorney fees and costs in a contract action. First Judicial District Court, Carson City; James Todd Russell, Judge.1
Quail Park is a commercial property in Carson City consisting of several individual retail units. In March 2003, Quail Park was owned by the Ribeiro Company and was still under construction, however, it was accepting and negotiating leases with potential business tenants. One of the initial tenants of Quail Park was Sparky's Sports Bar and Grill No. 5, one franchise of a chain of Sparky's establishments, who executed a lease in March 2003 prior to completion of construction on Quail Park.
After's Sparky's executed the lease, two separate transactions transpired: (1) Madeline Armstrong and the Richard and Sandra AdamsonTrust (who would later incorporate as appellants JSA, LLC, and Wide Horizon, LLC, respectively) entered into negotiations to purchase the Quail Park unit that was to house Sparky's from Ribeiro; and (2) Mammoth Ventures, LLC, purchased all of the Sparky's locations, business mark, and brand. Mammoth is an affiliate of respondent Golden Gaming, Inc. (Golden Gaming). Thereafter, appellants, through their agents, then entered into negotiations with Golden Gaming to execute a lease on the location. Golden Gaming established a limited liability corporation, Sparky's South Carson 7, LLC (Sparky's 7), to be the named tenant of the Quail Park location. In the fall of 2003, Golden Gaming negotiated a new lease with appellants, naming Sparky's 7 as the tenant, which superseded the old lease of Sparky's No. 5. The lease was effectuated in November 2003, shortly after appellants officially closed escrow on Quail Park.
Golden Gaming specifically executed the lease on behalf of its subsidiary Golden Tavern Group (Golden Tavern), who would manage Sparky's 7. Sparky's 7 is listed as the leasee. No iteration of the lease ever listed Golden Gaming as the named tenant and, when asked, Golden Gaming refused to guarantee the lease. Appellants were advised to retain counsel to examine the newly negotiated lease with Sparky's 7, but failed to do so. Appellants and their agents admitted seeing Sparky's 7, and not Golden Gaming, listed on the lease, but did not challenge this based on their assumptions that Sparky's 7 was synonymous with Golden Gaming.
While Golden Gaming provided Sparky's 7 initial capitalization and recapitalized Sparky's 7 on a frequent basis, Sparky's 7 operated in accordance with Nevada gaming law, using its own on-site managers in control of daily business operations. Sparky's 7 managerswould report to a regional manager at Golden Tavern, who would then report to Golden Gaming. Upper-level management and operations occurred at Golden Gaming's offices, including accounting, marketing, and human resources. Golden Gaming directly managed the accounting for Sparky's 7 through the use of consolidated bank accounts with separate accounting through a coding system. Golden Gaming kept separate books and records for Sparky's 7 and filed independent state sales tax returns for Sparky's 7, but filed a single consolidated tax return. Sparky's 7 did not have an operating agreement, as one was not required under Nevada law.
Over the course of Sparky's 7 operations, Golden Gaming sustained approximately $1.5 million in Sparky's 7 losses. Ultimately, Sparky's 7 failed, and payments on the lease stopped. Appellants then sued Golden Gaming alleging breach of contract, breach of the implied covenant of good faith and fair dealing, reformation, alter ego, negligent misrepresentation, and fraudulent misrepresentation. Golden Gaming served appellants with an offer of judgment pursuant to NRCP 68 and NRS 17.115 in the amount of $25,000, which appellants did not accept. After a bench trial, the district court entered judgment in favor of Golden Gaming on all counts and granted Golden Gaming attorney fees and costs based on the offer of judgment. This appeal followed.2
On appeal, appellants argue that the district court erroneously determined that (1) Golden Gaming was not a party to the commercial lease agreement and, thus, could not be liable for breach of contract; (2)Golden Gaming did not fraudulently or negligently misrepresent its status as tenant or guarantor; (3) reformation was not appropriate; and (4) Golden Gaming was not the alter ego of Sparky's 7.3 As discussed below, we disagree with appellants' arguments and affirm the district court's judgment.
Standard of review
"The district court's factual findings . . . are given deference and will be upheld if not clearly erroneous and if supported by substantial evidence." Ogawa v. Ogawa, 125 Nev. 660, 668, 221 P.3d 699, 704 (2009). However, this court reviews a district court's conclusions of law de novo. Grosjean v. Imperial Palace, Inc., 125 Nev. 349, 359, 212 P.3d 1068, 1075 (2009).
Breach of contract
Appellants argue that the district court erred in (1) failing to hold Golden Gaming liable due to its failure to disclose its alleged agency status, (2) holding that the lease-commencement contract did not obligate Golden Gaming individually under the lease, and (3) failing to hold GoldenGaming contractually liable as a "dba" of Sparky's 7.4 Golden Gaming counters that since the lease clearly indicated that Sparky's 7, and not Golden Gaming, was the tenant, it was not an agent or a "dba." We agree with Golden Gaming.
Appellants first argue that the district court ignored their argument that Golden Gaming was liable under the contract as an undisclosed or partially disclosed agent. We conclude that Golden Gaming is not liable on the contract because Sparky's 7 was listed on the lease as the tenant, and the signature line clearly indicated that the lease was being signed by Golden Gaming on behalf of Sparky's 7. Golden Gaming was never an undisclosed or partially disclosed agent. See Peccole v. Fresno Air Serv., Inc., 86 Nev. 377, 380-81, 469 P.2d 397, 398-99 (1970); see also Wright Grp. Architects-Planners v. Pierce, 343 S.W.3d 196, 200 (Tex. App. 2011) (); see also Restatement (Third) of Agency § 6.02 (2006) (). Accordingly, the district court correctly determined that Golden Gaming is not liable under the lease pursuant to agency principles.
Appellants also argue that Golden Gaming is liable under a contract theory because it executed the lease-commencement contract in its individual capacity and not on behalf of Sparky's 7, thereby binding Golden Gaming to the lease provisions. However, appellants mischaracterize as a contract a legally irrelevant letter that merely changed the commencement date of the already-signed lease. Because the letter did not alter the identity of the tenant after the fact, it could not make Golden Gaming liable under the lease that was previously signed and in which Golden Gaming had disclosed that it was signing on behalf of the tenant, Sparky's 7.
Appellants further contend that the district court ignored the fact that Golden Gaming repeatedly used various LLCs as dba's for its business operations, making it rational for appellants to assume that it was doing so here.5 This argument flounders when put in the context of the plain language of the lease, which clearly stated that Sparky's 7 was the tenant and that Golden Gaming was signing for Sparky's 7 and not for itself. "When a contract is clear on its face, it will be construed from the written language and enforced as written." Sandy Valley Assocs. v. Sky Ranch Estates Owners Assoc., 117 Nev. 948, 953-54, 35 P.3d 964, 967 (2001), receded from on different grounds by Horgan v. Felton, 123 Nev. 577, 586, 170 P.3d 982, 988 (2007). Because appellants have failed to demonstrate that Golden Gaming was a party to the contract, we concludethat the district court did not err in determining that Golden Gaming was not a party to the lease and thus could not be liable for a breach of that lease.6
Fraudulent misrepresentation
Appellants contend that the district court erred in disregarding evidence of Golden Gaming's alleged fraud, specifically, subsequent contracts that Golden Gaming signed as tenant, a letter from Golden Gaming that included its financial information, a news article concerning the property, and Golden Gaming's failure to disclose that Sparky's 7 was inserted into the lease.
We conclude that substantial evidence supported the district court's determination that Golden Gaming did not make any fraudulent misrepresentations concerning the identity of the tenant. As explained by this court in Road & Highway Builders, L.L.C. v. N. Nev. Rebar, 128 Nev. ___,___, 284 P.3d 377, 381 (2012), the purported fraudulent inducement cannot be something that conflicts with the contract's express terms. Here, the contract clearly states that the tenant is Sparky's 7, and the signature line indicates that Golden Gaming was signing on behalf of Sparky's 7. Thus, Golden Gaming could not have committed fraud since the identity of the leasee as Sparky's 7 is clear in the written lease.Further, in order to prove intentional misrepresentation, a party must prove that its damages were caused by relying on the original representation or omission. Nelson v. Heer, 123 Nev. 217, 225, 163 P.3d 420, 426 (2007)....
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