Settelmeyer & Sons v. Smith & Harmer

• Decision Date: 24 December 2008
• Docket Number: No. 46594.,No. 45180.,No. 45442.,45180.,45442.,46594.
• Citation: 197 P.3d 1051
• Parties: FRANK SETTELMEYER & SONS, INC., A Nevada Corporation, Appellant, v. SMITH & HARMER, LTD., A Nevada Corporation, Respondent. Frank Settelmeyer & Sons, Inc., A Nevada Corporation, Appellant, v. Smith & Harmer, Ltd., A Nevada Corporation, Respondent. Sean Boyd, as Receiver for Frank Settelmeyer & Sons, Inc., A Nevada Corporation, Appellant, v. Smith & Harmer, Ltd., A Nevada Corporation, Respondent.
• Court: Nevada Supreme Court

197 P.3d 1051

FRANK SETTELMEYER & SONS, INC., A Nevada Corporation, Appellant, v. SMITH & HARMER, LTD., A Nevada Corporation, Respondent.

Frank Settelmeyer & Sons, Inc., A Nevada Corporation, Appellant, v. Smith & Harmer, Ltd., A Nevada Corporation, Respondent.

Sean Boyd, as Receiver for Frank Settelmeyer & Sons, Inc., A Nevada Corporation, Appellant, v. Smith & Harmer, Ltd., A Nevada Corporation, Respondent.

No. 45180.

No. 45442.

No. 46594.

Supreme Court of Nevada.

December 24, 2008.

Parsons Behle & Latimer and Rew R. Goodenow, Reno, for Appellants.

Smith & Harmer, Ltd., and Julian C. Smith Jr., Carson City, for Respondent.

BEFORE THE COURT EN BANC.¹

OPINION

By the Court, CHERRY, J.:

These consolidated matters arise from an action in which a law firm sought to recover attorney fees incurred for its representation of a corporation in a separate receivership and dissolution action. The district court awarded the requested fees; approved the law firm's garnishment and directed the corporation's receiver to pay the firm out of the receivership funds; and awarded the firm additional fees under the offer of judgment protocol. The corporation has appealed from the attorney fees judgment and post-judgment order, and the receiver has appealed from the court's order on garnishment.

As a threshold matter, the firm challenges this court's jurisdiction to consider the receiver's appeal, asserting that the receiver was not a party below and that he was not aggrieved by the district court's order on garnishment. Having considered the parties' jurisdictional arguments, we conclude that we have jurisdiction over the receiver's appeal because the court's order constituted a final judgment in the garnishment proceeding, and since the order was rendered against the receiver, who was the garnishee defendant in that proceeding, he is an aggrieved party entitled to appeal.

As for the merits of the parties' appeals, we address whether the failure to pursue a claim under the receivership claims process necessarily precludes the recovery of attorney fees outside of the receivership court. We also address whether fees are appropriate when a firm represents both the corporation and its majority shareholder and president, as well as whether the firm can recover fees for representing itself in the separate attorney fees action.

We conclude that claims for attorney fees incurred in a receivership and dissolution action can be liquidated in a separate action. The court in that separate action, however, has no jurisdiction to levy on receivership funds without the receivership court's permission. Accordingly, as we conclude that no conflict of interest barred recovery here, we affirm the district court's judgment liquidating the firm's attorney fees. We reverse, however, the district court's orders concerning garnishment and disbursement of receivership funds. Finally, we conclude that a law firm cannot recover fees for representing itself, and we therefore reverse the post-judgment order awarding attorney fees.

FACTS

This matter implicates two district court actions: a corporate dissolution action and an action to recover attorney fees incurred in the dissolution action. The dissolution action involved a minority shareholder's suit against a closely held corporation, appellant Frank Settelmeyer & Sons, Inc. (FSS), and the majority shareholder and FSS president, Karen White. The minority shareholder alleged that White had engaged in misconduct when assuming control of the corporation and requested that the district court appoint a receiver and dissolve the corporation.

In the dissolution action, which was assigned to Judge Michael P. Gibbons, White and FSS were initially represented by respondent Smith & Harmer, Ltd. When the minority shareholder amended her complaint to include Smith & Harmer as a defendant, however, the firm withdrew all representation. After withdrawing, Smith & Harmer filed a notice of its attorney's lien for services rendered in the dissolution action prior to its withdrawal.

Thereafter, Smith & Harmer instituted a separate district court action against FSS to recover the attorney fees owed for its services in the dissolution action, which was ultimately assigned to Judge David R. Gamble. Meanwhile, in the dissolution action, the court appointed a receiver, appellant Sean Boyd, to oversee the corporation's dissolution and asset disbursement. The receivership court ordered all creditors to submit notice of any claims to the receiver by January 1, 2004. The receiver then sought leave to intervene in the attorney fees action pending before Judge Gamble; his request was denied.

Although Smith & Harmer did not submit its attorney fees claim to the receiver in the dissolution action, and despite the pending separate action to recover those fees, it later moved the receivership court to enforce its attorney's lien. Because Smith & Harmer had failed to submit its motion for decision, however, the receivership court found that Smith & Harmer had abandoned its claim. The court also stated that "good cause" existed to deny the claim. Accordingly, Smith & Harmer obtained no attorney fees from the receivership court.

In the attorney fees action, Smith & Harmer made an offer of judgment for $25,000, which FSS refused. Thereafter, and after the receivership court had ruled on the attorney's lien issue, Judge Gamble rendered judgment in favor of Smith & Harmer, determining that Smith & Harmer's right to attorney fees was not waived by its failure to submit a claim to the receiver in the dissolution action, as FSS had argued, and awarding Smith & Harmer fees, costs, and interest in the amount of $28,623.21.

Based on that judgment, Smith & Harmer then filed a post-judgment motion for attorney fees and costs under NRS 17.115(4)(d)(3), asserting that FSS had failed to obtain a more favorable judgment than Smith & Harmer's offer of judgment. The district court granted Smith & Harmer's motion and awarded it additional attorney fees and costs in the amount of $14,012. FSS has appealed from the judgment and the post-judgment order awarding attorney fees.

Thereafter, Smith & Harmer attempted to enforce the judgments against the corporation by garnishing funds held by the receiver. After Smith & Harmer served a writ of garnishment and interrogatories on the receiver as garnishee, the receiver answered Smith & Harmer's interrogatories. To interrogatory number three, which questioned whether the receiver had on that date any property in which FSS "was interested," the receiver answered "no." Smith & Harmer filed a reply traversing the receiver's answer and seeking a default judgment for the receiver's answer to interrogatory number three. The receiver then filed a motion to quash and a declaration. According to the district court, the declaration revealed that the receiver held $450,000 of FSS's money for payment of claims against the corporation and had been ordered by the receivership court to pay all claims against FSS out of that amount.

After a hearing on the matter, the court concluded that the receiver was subject to garnishment under NRS 31.292(1), which provides that "[c]lerks of the courts, sheriffs, justices of the peace, peace officers and all other officers who may, by virtue of their office, collect or hold money belonging to a defendant and all guardians, attorneys and trustees are subject to garnishment in the same manner and to the same extent as other persons are subject to be garnished." The court also found that the receiver had unintentionally incorrectly answered interrogatory number three, which was tantamount to a failure to answer that question at all, entitling Smith & Harmer to a default judgment against the receiver personally. Nonetheless, the court determined, so long as receivership funds were paid in satisfaction of Smith & Harmer's judgment, no judgment would be rendered against the receiver personally. Accordingly, the court required the receiver to pay the judgment from the receivership funds, and the receiver appealed. The receiver's appeal was consolidated with FSS's appeals from the judgment and the post-judgment order.

After the receiver's appeal was filed, Smith & Harmer moved to dismiss his appeal for lack of jurisdiction, asserting that the receiver was not an aggrieved party with standing to appeal. As directed, the parties then briefed the jurisdictional issues. In addition to the party and aggrieved status issues raised in the motion to dismiss, the parties addressed whether the orders specified in the receiver's notice of appeal were substantively appealable.

DISCUSSION

Jurisdiction over the receiver's appeal

Preliminarily, we must determine whether we have jurisdiction to consider the receiver's appeal. In its motion to dismiss the receiver's appeal, Smith & Harmer alleges that the receiver is not a party and that, even if he were a party, the receiver is not aggrieved. We disagree, since the district court's order on garnishment was a final order in the garnishment proceeding, rendered against the receiver as the garnishee defendant, and therefore appealable by the receiver under NRS 31.460 and NRAP 3A.

Under NRAP 3A(a), only aggrieved parties to the district court action may appeal.² As this court noted in Albert D. Massi, Ltd. v. Bellmyre, "[t]o qualify as a party, an entity must have been named and served."³ Here, the record reflects that the receiver was not named as a party to the attorney fees action, and although the receiver moved to be substituted in as a party, leave to do so was expressly denied.⁴

Moreover, this court generally adheres to the proposition that it has jurisdiction to consider an appeal only when the appeal is authorized by statute or court rule.⁵ Under NRAP 3A(b)(1), appeals may be taken from final judgments "in an action or proceeding commenced in the court in which the judgment is rendered." This court has stated that a judgment is final when...