Western States Const., Inc. v. Michoff

• Decision Date: 05 November 1992
• Docket Number: No. 19793,19793
• Citation: 840 P.2d 1220,108 Nev. 931
• Parties: WESTERN STATES CONSTRUCTION, INC., and Max Michoff, an individual, Appellants, v. Lois MICHOFF, Respondent.
• Court: Nevada Supreme Court

Page 1220

840 P.2d 1220

108 Nev. 931

WESTERN STATES CONSTRUCTION, INC., and Max Michoff, an individual, Appellants, v. Lois MICHOFF, Respondent.

No. 19793.

Supreme Court of Nevada.

Nov. 5, 1992.

Crowell, Susich, Owen & Tackes, Carson City, for appellants.

Aebi & McCarthy, Carson City, for respondent.

OPINION

YOUNG, Justice:

Appellant Max Michoff ("Max") and respondent Lois Michoff ("Lois") cohabitated for approximately nine years, although they were never married. They formed Western States Construction, Inc. during their relationship. Lois provided valuable services in the operation of the business based on Max's representations that she was a co-equal owner. When they terminated their relationship, Lois brought this action seeking one-half of the parties' assets. The district court entered judgment in favor of Lois and against Max and Western States Construction, Inc. For the reasons discussed herein, we affirm the judgment against Max but reverse it against the corporation.

Facts

In 1977, Lois and Max became romantically involved, even though Max was already married. At the time, Lois was employed as a prototype technician, ¹ working forty hours per week and earning eleven dollars per hour. Their relationship continued, and Max divorced his wife. Lois and Max then decided to, and did, live together.

In 1979, Lois and Max moved from California to Carson City, Nevada. That same year, Lois legally changed her name to Lois Michoff. ² The parties started a construction equipment rental business called L & M Rentals (named for Lois and Max). Lois obtained the business license and paid the licensing fees. The business license listed Lois as the sole owner. Max wanted Lois to be the sole owner so that his ex-wife could not make a claim against the business. ³ Although Max contributed a large portion of the funds to start L & M Rentals, Lois and Max had agreed that they were co-equal owners of the business. Consequently, Lois devoted her efforts and time toward running the business, including such integral functions as bookkeeping and maintaining the equipment.

Approximately six months after starting L & M Rentals, Lois and Max discovered that they needed a contractor's license to operate the business. Lois therefore applied for such a license but listed the name of the business as Western States Construction. Lois was listed as the owner of the business and Max was listed as the "qualified employee." Lois testified that they had agreed that it was their company; thus, again, Lois provided much of the skill and labor necessary for the business' success. Her services included doing all of the office work (bookkeeping, payroll, and paperwork) and assisting in the maintenance, service, and running of the equipment. The profits from the business were either invested into the business or retained as savings.

In 1983, Lois and Max incorporated the business, naming it Western States Construction, Inc. ("Western States"). Lois testified that they agreed to hold the company as co-equal owners, each owning fifty percent of the company. The articles of incorporation listed Lois and Max as the Board of Directors and the Incorporators. Also, they were the sole officers of the corporation: Lois was treasurer, and Max was president and secretary. They opened checking and payroll accounts for Western States, and both Lois and Max had authority to withdraw funds from these accounts.

Lois continued to do the bookkeeping, and she also updated the records, reviewed bids, negotiated contracts and labored in the field--performing such jobs as flagging and running heavy equipment. Whenever Western States sought a license increase, it was Lois who applied for the increase. In order to obtain the necessary contractor's bonds from the Contractor's Board, Lois personally guaranteed the bonds.

During their relationship, Max held Lois out as his wife. In fact, in 1984, Max entered a partnership agreement with Robert Frybarger and requested that Lois sign a consent of spouse. ⁴ Max and Lois filed joint tax returns as husband and wife commencing in 1980 and continuing through 1986. For the years 1983 through 1986, they also filed tax returns under Western States, showing Lois as an officer and owner of the corporation. Moreover, Western States elected to file a sub-chapter S election on March 24, 1983. The election was signed by Lois and Max and designated the holdings of the corporation as community property.

After Lois and Max terminated their relationship (Lois apparently left Max because he had been physically abusing her), she brought this action, seeking a declaration and judgment that she owns one-half of the parties' assets, including Western States. She alleged that she had performed valuable services based on Max's representations that she owned one-half of the corporation. Specifically, the complaint provided:

That at all times pertinent herein, Defendant, MAX MICHOFF, represented to [Lois] that she was entitled to one-half ( 1/2) of the assets held by Defendant, Western States Construction, Inc. In accordance with the representations, [Lois] has performed valuable services over many years last past, including those as set forth above.

....

That based upon the representations as aforestated, [Lois] requests a determination by this Court that she is entitled to one-half ( 1/2) of the assets of the parties whether held solely in the name of MAX MICHOFF, Defendant Corporation, or [Lois].

After a trial, the district court found that there existed an express and an implied agreement between the parties to acquire and hold properties as if they were married. The court ruled that the community property laws should apply by analogy and thus entered judgment in favor of Lois and against Max and Western States for one-half of the net assets of the parties less the value of the property already taken. ⁵

Discussion

Max contends that Lois did not plead any contractual claims against him. We disagree. Nevada is a notice-pleading state; thus, our courts liberally construe pleadings to "place into issue matters which are fairly noticed to the adverse party." Hay v. Hay, 100 Nev. 196, 198, 678 P.2d 672, 674 (1984). A complaint need only set forth sufficient facts to demonstrate the necessary elements of a claim for relief so that the defending party has adequate notice of the nature of the claim and relief sought. Id.; see also Ravera v. City of Reno, 100 Nev. 68, 70, 675 P.2d 407, 408 (1984) (test for determining whether the allegations of a cause of action are sufficient to assert claim is whether allegations give fair notice of nature and basis of claim and relief requested).

We have previously held that allegations similar to those contained in this case were sufficient to state a cause of action for breach of an implied-in-fact contract to acquire and hold property as if the parties were married or general partners. See Hay, 100 Nev. at 198, 678 P.2d at 674. In that case, Virginia Hay alleged that she and Tom Hay had held themselves out as husband and wife, although they were not married. Id. at 197, 678 P.2d at 673. She further alleged that they had pooled their money as though they were a "marital community or a general partner." Id. at 198, 678 P.2d at 674. Likewise, here, Lois alleged that she and Max had held themselves out as though they were married. Lois also alleged that based on Max's representations that she was a co-equal owner of Western States, she performed valuable services. Lois' complaint adequately apprised Max that Lois pursued an ownership interest in the assets accumulated during their relationship based on an implied contract action. See Smith v. Recrion Corp., 91 Nev. 666, 668, 541 P.2d 663, 664 (1975) (the terms of an implied contract are manifest by conduct).

Indeed, Max's pretrial pleadings acknowledged that he understood the grounds on which Lois based her complaint. In his answer to the complaint, Max contended, as an affirmative defense, that the complaint should fail for lack of consideration. Moreover, Max submitted a hearing and a trial date questionnaire, and on each one, he stated that the nature of the action was one of contract.

Lois even confirmed her position in her trial statement:

[Lois], for the next several years, continued to act as an officer of the corporation and generally handled the corporate paperwork, bid documents, and bookkeeping for the corporation. On occasion, she even handled and operated the heavy equipment of the corporation. [Lois] was held out by [Max] as his wife to the parties, acquaintances, and friends, and she virtually acted as a co-owner of the business with [Max] providing valuable services to the business with no substantial compensation. All of the above was done on the basis of an agreement between the parties and the representations of [Max] that the MICHOFFS were and would be equal co-owners of [Western States].

(Emphasis added.) Max recognized in his trial statement that Lois based her claim on a contract action, stating: "In her Second Cause of Action Lois is apparently asserting a contractual right."

Therefore, we conclude that under Nevada's notice pleading rule, Max was given sufficient notice that Lois' complaint stated a cause of action for breach of an express and an implied contract to acquire and hold property as though the parties were married.

Max also contends that to allow unmarried cohabiting parties to hold their property as though they were married violates Nevada's strong public policy of encouraging legal marriages. We strongly disagree and emphasize that this court by no means seeks to encourage, nor does this opinion suggest, that couples should avoid marriage. Quite to the contrary, we reaffirm this state's strong public policy interest in encouraging legally consummated marriages. However, this policy is not furthered by allowing "one participant in a meretricious relationship to abscond with the bulk of the...