Reynolds v. Tufenkjian

• Decision Date: 09 April 2020
• Docket Number: No. 78187,78187
• Citation: 461 P.3d 147
• Parties: Robert G. REYNOLDS, an Individual; and Diamanti Fine Jewelers, LLC, a Nevada Limited Liability Company, Appellants, v. Raffi TUFENKJIAN, an Individual; and Luxury Holdings LV, LLC, a Nevada Limited Liability Company, Respondents.
• Court: Nevada Supreme Court

461 P.3d 147

Robert G. REYNOLDS, an Individual; and Diamanti Fine Jewelers, LLC, a Nevada Limited Liability Company, Appellants,

v.Raffi TUFENKJIAN, an Individual; and Luxury Holdings LV, LLC, a Nevada Limited Liability Company, Respondents.

No. 78187

Supreme Court of Nevada.

FILED APRIL 09, 2020

Marx Law Firm PLLC and Bradley M. Marx, Las Vegas, for Appellants.

Marquis Aurbach Coffing and Terry A. Moore and Christian T. Balducci, Las Vegas, for Respondents.

BEFORE HARDESTY, STIGLICH and SILVER, JJ.

OPINION

By the Court, SILVER, J.:

A pending motion in this case provides us the opportunity to address the extent to which a judgment debtor’s rights of action are subject to execution to satisfy a judgment. Respondents have filed a motion to substitute themselves in place of appellants and to voluntarily dismiss this appeal because they purchased appellants’ rights and interests in the underlying district court action at a judgment execution sale. We agree with respondents in part. Although Nevada’s judgment execution statutes permit a judgment creditor (respondents) to execute on a debtor’s (appellants) personal property, including the right to recover a debt, money, or thing in action, those statutes limit the title the sheriff can convey at an execution sale to only that title which the debtor could convey himself. Nevada law, in turn, restricts the right to convey certain claims by making them unassignable. Accordingly, we hold that a judgment debtor’s claims that are unassignable similarly cannot be purchased at an execution sale. As such, respondents did not purchase the rights to appellants’ unassignable claims. Thus, we grant in part respondents’ motion and dismiss this appeal as to appellants’ assignable claims—negligent misrepresentation and breach of contract.

FACTS AND PROCEDURAL HISTORY

Appellants Robert G. Reynolds and Diamanti Fine Jewelers, LLC, brought the underlying action against respondents Raffi Tufenkjian and Luxury Holdings LV, LLC, Appellants alleged breach of contract, fraud, and tort claims related to their purchase of a jewelry store from respondents, arguing that they relied on respondents’ false representations of the store’s value to their detriment. The district court entered summary judgment for respondents, finding no genuine issues of material fact regarding respondents’ alleged misrepresentations or appellants’ justifiable reliance upon any of respondents’ statements. The district court also awarded respondents $57,941.92 in attorney fees and costs pursuant to a provision in the parties’ contract.

Appellants appealed the judgment but did not obtain a stay of execution on the award of attorney fees and costs, claiming they could not afford to post a supersedeas bond. While the appeal was pending, respondents obtained a writ of execution, which, in relevant part, allowed them to execute against Reynolds’ personal property. The writ therefore directed the sheriff to "levy and seize upon any and all causes of action, claims, allegations, assertions or defenses of" appellants, including those in the underlying district court action.

At the sheriff’s sale, respondents purchased, for $100, "all the rights, title and interest of" appellants in the district court action. Respondents now move to substitute themselves in place of appellants pursuant to NRAP 43 (allowing substitution of a party on appeal) and to voluntarily dismiss the appeal under NRAP 42(b) (allowing parties to voluntarily dismiss an appeal), on the basis that they now own the claims on appeal. Appellants respond that the Nevada Legislature did not intend for NRS 10.045, which defines personal property to include "things in action," to allow a party to purchase such "things in action" as a means to eliminate a litigant’s appellate rights. They argue that granting the motion would prevent parties who may not have the financial ability to satisfy a contested judgment from asserting their rights to an appeal.

This court ordered the parties to submit supplemental briefing on the issue of whether each of appellants’ claims were properly assigned to respondents as a result of the execution sale. See Reynolds v. Tufenkjian, Docket No. 78187 (Order for Supplemental Briefing, Nov. 1, 2019). Respondents argue that all of the claims were properly assigned based on statutory law, while appellants argue that, because the claims were personal to Reynolds, they were not assignable, and that this court should void the execution sale on public policy grounds.

DISCUSSION

Only assignable things in action are subject to execution under Nevada law

NRS 21.320 allows a district court to order a judgment debtor’s nonexempt property "be applied toward the satisfaction of the judgment" against him. NRS 21.080(1) provides that property liable to such execution includes all of the judgment debtor’s personal property. But see NRS 21.090 (listing property exempt from execution). The definition of "[p]ersonal property" includes "things in action." NRS 10.045.

Nevada’s general policy is that a statute specifying property that is liable to execution "must be liberally construed for the benefit of creditors." Sportsco Enters. v. Morris , 112 Nev. 625, 630, 917 P.2d 934, 937 (1996) (citing 33 C.J.S. Executions § 18 (1942) ). Referencing that general policy and the definition of a "thing in action" as "a right to bring an action to recover a debt, money, or thing," Gallegos v. Malco Enters. of Nev., Inc., 127 Nev. 579, 582, 255 P.3d 1287, 1289 (2011) (quoting Chose in Action, Black’s Law Dictionary (9th ed. 2009)), this court has concluded that "rights of action held by a judgment debtor are personal property subject to execution in satisfaction of a judgment," id. at 582, 255 P.3d at 1289. But in Butwinick v. Hepner , this court determined that "a ‘thing in action’ subject to execution ... does not include a party’s defenses to an action," 128 Nev. 718, 723, 291 P.3d 119, 121-22 (2012), because a party’s defensive rights do not constitute a "right to bring an action to recover a debt, money, or thing," id. at 722, 291 P.3d at 122 (quoting Chose in Action, Black's Law Dictionary (9th ed. 2009)).

In this case, respondents contend that, by purchasing appellants’ "things in action" at the sheriff’s sale, they are entitled to substitute themselves for appellants in this appeal as the now-owners of the claims being appealed. This would only be true, however, if "things in action" encompasses all of appellants’ underlying claims. In this vein, appellants argue that claims that are personal in nature are not included in "things in action" and, therefore, respondents do not own appellants’ personal claims and this court should deny the motion to substitute. They further argue that allowing the purchase of their claims improperly impedes on their appellate rights and therefore violates public policy.

Some jurisdictions that permit execution upon a debtor’s "things in action" narrowly interpret the term to only include claims that, under that jurisdiction’s law, the debtor could otherwise assign to another party. See , e.g., Holt v. Stollenwerck, 174 Ala. 213, 56 So. 912, 913 (1911) (holding that "things in action" only includes assignable rights of action); Wittenauer v. Kaelin, 228 Ky. 679, 15 S.W.2d 461, 462-63 (Ky. Ct. App. 1929) (concluding that the term "chose in action" does not include any right of action that may not be assigned). Other jurisdictions apply a broader interpretation of "things in action" to include any claim for damages, without concern for the claim’s assignability otherwise. See , e.g., O’Grady v. Potts, 193 Kan. 644, 396 P.2d 285, 289 (1964) (characterizing a tort claim as a chose in action and therefore personal property); Chi., Burlington & Quincy R.R. Co. v. Dunn, 52 Ill. 260, 264 (1869) ("A right to sue for an injury, is a right of action—it is a thing in action, and is property...."). For the reasons set forth below, we agree with the former approach and hold that "things in action" only includes those claims that the judgment debtor has the power to assign.

Nevada is one of several jurisdictions that prohibits the assignability of certain causes of action, regardless of how the assignment is accomplished.¹ See, e.g., Chaffee v. Smith, 98 Nev. 222, 223-24, 645 P.2d 966, 966 (1982) (generally prohibiting the assignment of unasserted legal malpractice claims on public policy grounds); Gruber v. Baker, 20 Nev. 453, 469, 23 P. 858, 862 (1890) (voiding the assignment of a right to bring a claim in action for fraud as being contrary to public policy because a fraud claim is personal to the one defrauded); accord Miller v. Jackson Hosp. & Clinic, 776 So. 2d 122, 125 (Ala. 2000) (acknowledging the general rule that "purely personal" tort claims are not assignable); Webb v. Gittlen, 217 Ariz. 363, 174 P.3d 275, 278 (2008) (holding that most claims are generally assignable "except those involving personal injury"). For example, in Prosky v. Clark , this court held that fraud claims are not assignable because they "are personal to the one defrauded." 32 Nev. 441, 445, 109 P. 793, 794 (1910). And in Maxwell v. Allstate Insurance Co. , we held that subrogation clauses allowing the assignment of claims in insurance contracts violated public policy due to the potential that only the insurer would receive payments from a personal injury action. 102 Nev. 502, 506-07, 728 P.2d 812, 815 (1986) (holding that such a result would deprive the injured party of "his actual damages [and] the benefit of the premiums he has paid"). Such public policy concerns do not arise, however, when an injured party assigns away the right to proceeds from a personal injury action, rather than the claim itself. See Achrem v. Expressway Plaza Ltd., 112 Nev. 737, 739-41, 917 P.2d 447, 448-49 (1996) (observing that there is a distinction "between assigning the rights to a tort action and assigning the proceeds from such an action"). This is because the assignment of the proceeds from a...