Liu v. Christopher Homes, LLC

• Decision Date: 27 March 2014
• Docket Number: No. 61435.,61435.
• Parties: JUN LIU, Appellant, v. CHRISTOPHER HOMES, LLC, a Nevada Limited Liability Company; and Christopher Homes Ridges, LLC, a Nevada Limited Liability Company, Respondents.
• Court: Nevada Supreme Court

321 P.3d 875

130 Nev. Adv. Op. 17

JUN LIU, Appellant,

v.CHRISTOPHER HOMES, LLC, a Nevada Limited Liability Company; and Christopher Homes Ridges, LLC, a Nevada Limited Liability Company, Respondents.

No. 61435.

Supreme Court of Nevada.

March 27, 2014.

Pengilly Robbins Slater and James W. Pengilly and Craig D. Slater, Las Vegas, for Appellant.

The Hayes Law Firm and Dale A. Hayes, Jr., Las Vegas, for Respondents.

Before GIBBONS, C.J., DOUGLAS and SAITTA, JJ.

OPINION

By the Court, SAITTA, J.:

The court in Sandy Valley Associates v. Sky Ranch Estates Owners Association stated that when a defendant's breach of contract with a plaintiff causes the plaintiff to incur attorney fees in his or her defense in a legal dispute that is brought by another party, the plaintiff can recover from the defendant the attorney fees as damages that arose from the breach of the contract. 117 Nev. 948, 957, 35 P.3d 964, 970 (2001). The Sandy Valley court also stated, “Attorney fees may ... be awarded as damages in those cases in which a party incurred the fee ... in clarifying or removing a cloud upon the title to property.” Id. The court in Horgan v. Felton retreated from this latter statement about the recovery of attorney fees in cloud-on-title cases, stating that “in cases concerning title to real property, attorney fees are only allowable as special damages in slander of title actions, not merely when a cloud on the title to real property exists.” 123 Nev. 577, 579, 170 P.3d 982, 983 (2007). It held that slander of title was a prerequisite for a plaintiff to “recover as damages the expense of legal proceedings necessary to remove a cloud on the plaintiff's title.” Id. at 584–85, 170 P.3d at 987.

Here the district court relied on Horgan in denying appellant Jun Liu's specially pleaded request to recover attorney fees from respondents Christopher Homes Ridges, LLC (CHR), and Christopher Homes, LLC (CH), concluding that because the breach of contract related to title to real property, and because Liu failed to allege and prove slander of title, she could not recover the attorney fees that she sought as special damages. We conclude that the district court erred in rejecting as a matter of law Liu's claim for attorney fees as special damages, as Horgan does not apply to preclude such recovery here. Although Horgan held that slander of title must be pleaded as a prerequisite for a party to recover attorney fees as damages in an action to clarify or remove a cloud on title to real property, that opinion did not retreat from the portion of Sandy Valley which held that a party, such as Liu, may recover attorney fees incurred in defending against third-party litigation because of CHR's or CH's breach of contract. Horgan, 123 Nev. at 583–86, 170 P.3d at 986–88. Accordingly, we reverse the district court's judgment to the extent that it denied Liu's request for special damages and affirm all other aspects of the district court's judgment. We remand this matter to the district court for proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

Liu's appeal only challenges the district court's legal determinations regarding the recovery of attorney fees as special damages. Thus, our discussion of the facts is based on the district court's findings of fact, which Liu does not contest or seek to undo on appeal.

CHR was the developer of a residential community that hired CH as a general contractor for the construction of homes within its community. CH subcontracted with K & D Construction, LLC, for various construction services. One of the homes upon which K & D performed its services was Liu's. Liu had purchased the home from CHR pursuant to a contract (the Agreement), wherein CHR agreed to convey good and marketable title to Liu at the close of escrow. As K & D performed its construction services at CHR's residential community, K & D was neither timely nor fully paid. As a result, K & D recorded liens on various properties within CHR's residential community, including Liu's property.

In addition, K & D filed a civil action against CHR, CH, Liu, and other homeowners. In its complaint, K & D sought to foreclose on its liens on numerous properties, including Liu's property. Liu filed an answer to K & D's complaint and a cross-claim against CHR and CH. She asserted a breach of contract claim against CHR and CH, alleging that they breached their duty under the Agreement to deliver good and marketable title when they failed to pay the debts to K & D that resulted in a lien on her property. Under this claim, Liu tried to recover from CHR and CH the attorney fees and costs that she allegedly incurred in defending herself against K & D's action. She also sought attorney fees that she incurred in prosecuting her claim for attorney fees.

K & D, CHR, and CH entered into a stipulated agreement that resolved the payments of the outstanding balances owed to K & D, dismissed K & D's claims against Liu, and resulted in the discharge and removal of K & D's liens. After the dismissal of K & D's claims, Liu's claims against CHR and CH remained, including the claim to recover attorney fees as damages that allegedly arose from the breach of the Agreement.

Before the district court, Liu contended that, pursuant to Sandy Valley, she could recover attorney fees as special damages that were caused by the breach of the Agreement by CH and CHR. The district court determined otherwise, concluding that CHR, not CH, possessed and breached a contractual duty to deliver good and marketable title to Liu when a lien was imposed on Liu's property because of unpaid debts to K & D. Relying on Horgan, the district court resolved that, as a matter of law, Liu could not recover attorney fees as special damages. According to the district court's interpretation of Horgan, Liu was required to prove slander of title in order to recover attorney fees as special damages, which the district court found that she failed to do. As a result, Liu filed this appeal challenging the district court's determinations regarding the recovery of attorney fees as special damages.

DISCUSSION

Liu argues that the district court erred in relying on Horgan for its conclusion that her failure to assert and prevail on a slander of title claim prevented her from recovering attorney fees as special damages in an action that related to the title to real property. She contends that Horgan does not bar a party from recovering attorney fees as special damages when the civil action incidentally pertains to title to real property. Liu reads Horgan to disallow attorney fees that stem from an action in which a claimant tries to remove a cloud on title but fails to prove slander of title. She emphasizes that she did not seek attorney fees as special damages from an action to remove a cloud on title but rather as special damages that resulted from CHR's breach of contract. Liu argues that Sandy Valley permits the recovery of attorney fees as special damages that arise from a breach of contract and thus her attorney fees claim below was not barred as a matter of law.

CHR and CH respond that the district court did not err in finding against Liu on her claim for recovery of attorney fees as special damages. They read Horgan to provide that a party, such as Liu, who fails to assert and prevail on a slander of title claim in an action relating to the title to real property cannot recover attorney fees as special damages.

These arguments indicate that there is confusion over (a) Sandy Valley 's and Horgan 's effect on the law regarding the recovery of attorney fees as special damages and (b) the extent to which Horgan retreated from Sandy Valley's discussion about the grounds for recovering attorney fees as special damages. We take this opportunity to clarify our precedent. In so doing, because the arguments concern the district court's application of caselaw to Liu's claims for attorney fees, we review these legal issues de novo.¹See Thomas v. City of N. Las Vegas, 122 Nev. 82, 90, 127 P.3d 1057, 1063 (2006)(providing that a denial of attorney fees is generally reviewed for abuse of discretion but that de novo review applies when an attorney fees matter concerns questions of law).

Horgan's partial abrogation of Sandy Valley

Generally, attorney fees are not recoverable “absent authority under a statute, rule, or contract.” Albios v. Horizon Communities, Inc., 122 Nev. 409, 417, 132 P.3d 1022, 1028 (2006). But, “[a]s an exception to the general rule,” attorney fees may be awarded “as special damages in limited circumstances.” Horgan, 123 Nev. at 583, 170 P.3d at 986.

The court in Sandy Valley made three significant statements about the grounds for recovering attorney fees as special damages. 117 Nev. at 956–57, 35 P.3d at 969–70. First, the court stated that attorney fees may be recovered as special damages when they are pleaded as such pursuant to NRCP 9(g) and are a “natural and proximate consequence of the injurious conduct.” Id. at 956–57, 35 P.3d at 969. Second, the court explained that

[a]ttorney fees may be an element of damage in cases when a plaintiff becomes involved in a third-party legal dispute as a result of a breach of contract ... [and] [t]he fees incurred in defending ... the third-party action could be damages in the proceeding between the plaintiff and the defendant [who breached the contract].

Id. at 957, 35 P.3d at 970. Third, the Sandy Valley court stated the following about the recovery of attorney fees as special damages in actions concerning a cloud on title to real property: “[a]ttorney fees may ... be awarded as damages in those cases in which a party incurred the fees ... in clarifying or removing a cloud upon the title to property.” Id.

The Horgan court revisited Sandy Valley in addressing a matter involving the recovery of attorney fees that were accumulated in seeking declaratory relief to remove a cloud on title to real property. Horgan, 123 Nev. at 579–80, 583–86, 170...