Yount v. Criswell Radovan, LLC

• Decision Date: 30 July 2020
• Docket Number: No. 74275,74275
• Citation: 469 P.3d 167
• Parties: George Stuart YOUNT, Individually, and in His Capacity as Owner of George Yount Ira, Appellant, v. CRISWELL RADOVAN, LLC ; CR Cal Neva, LLC; Robert Radovan; William Criswell; Cal Neva Lodge, LLC ; Powell, Coleman and Arnold LLP; David Marriner; and Marriner Real Estate, LLC, Respondents.
• Court: Nevada Supreme Court

469 P.3d 167

George Stuart YOUNT, Individually, and in His Capacity as Owner of George Yount Ira, Appellant,

v.CRISWELL RADOVAN, LLC ; CR Cal Neva, LLC; Robert Radovan; William Criswell; Cal Neva Lodge, LLC ; Powell, Coleman and Arnold LLP; David Marriner; and Marriner Real Estate, LLC, Respondents.

No. 74275

Supreme Court of Nevada.

FILED JULY 30, 2020

Lewis Roca Rothgerber Christie LLP and Daniel F. Polsenberg, Joel D. Henriod, Abraham G. Smith, and Adrienne Brantley-Lomeli, Las Vegas; Kaempfer Crowell and Richard G. Campbell, Jr., Reno, for Appellant.

Howard & Howard Attorneys PLLC and Martin A. Little, Ryan T. O'Malley, and Alexander Villamar, Las Vegas, for Respondents Criswell Radovan, LLC; CR Cal Neva, LLC; Robert Radovan; William Criswell; Cal Neva Lodge, LLC; and Powell, Coleman and Arnold LLP.

Simons Hall Johnston PC and Mark G. Simons, Reno, for Respondents David Marriner and Marriner Real Estate, LLC.

BEFORE THE COURT EN BANC.

OPINION

By the Court, SILVER, J.:

This case arises from an attempt to restore and reopen the historic Cal Neva Lodge, a resort and casino originally constructed in the 1920s, which sits on the California-Nevada border near Lake Tahoe. As the restoration project neared completion, a critical loan unexpectedly fell through. Certain investors in the project ostensibly collaborated to undermine that loan. The entire project subsequently failed, and investor George Stuart Yount sued the developers and others involved in setting up his investment in the project. The defendants asserted affirmative defenses but did not file any counterclaims or request any damages. At the conclusion of trial, the district court denied relief on Yount's claims and, despite the defendants never seeking to file a counterclaim or requesting damages, awarded the defendants damages. The district court based its award on evidence that Yount was involved with the group of investors that undermined the loan and caused the project to fail, thereby damaging the defendants.

In this opinion, we primarily address whether the district court improperly awarded the defendants damages where no defendant expressly asserted a counterclaim or requested damages. In particular, we address whether the parties tried a counterclaim by implied consent under NRCP 15(b) and whether the damages award can be upheld under NRCP 8(c) or 54(c). We conclude the record neither supports the district court's determination that the parties tried a counterclaim by consent nor supports upholding the damages award. We therefore reverse the damages award and remand for the district court to remove that award from its order. We affirm, however, the district court's decision to deny relief on Yount's claims, as Yount failed to prove he was entitled to relief.

FACTS

The Cal Neva Lodge redevelopment project

Property developers William Criswell and Robert Radovan purchased the historic Lake Tahoe Cal Neva Lodge (the Lodge) in 2013, intending to renovate and reopen it. As pertinent here, they created the following Nevada limited liability companies: Criswell Radovan, LLC, as a conduit to move money; CR Cal Neva, LLC, as the manager for the Cal Neva project; and, through CR Cal Neva, LLC, Cal Neva Lodge, LLC, to purchase and develop the property.

To raise funds needed for the project, Criswell and Radovan issued a Private Placement Memorandum (PPM) soliciting $20 million in equity investment. Under the PPM, each investment of $1 million would give the investor a "founder's share," amounting to a 3.5% ownership in Cal Neva Lodge, LLC. To subscribe for a founder's share, an investor would sign a subscription agreement with Cal Neva Lodge, LLC. CR Cal Neva purchased two founder's shares, and the subscription agreement allowed CR Cal Neva to sell one of those shares at a future time. The largest investor under the PPM was the Incline Men's Club Investment Group (IMC).

David Marriner lived in nearby Incline Village and became aware of the project. He contacted Criswell and Radovan, who hired Marriner's real estate consulting firm to work on the project. They also asked Marriner to help find investors for the Lodge. Marriner, who was also an investor, knew Stuart Yount socially and introduced Yount to the project, but Yount did not immediately invest.

In July 2015, Marriner informed Yount that only $1.5 million of equity remained available for investment under the PPM. At that time, the Lodge was set to open in December. Yount spoke with Radovan about the project, and Marriner sent Yount the investment documents, including the PPM. The PPM indicated that the project was over budget and would need to be refinanced, pushing back the schedule. Marriner communicated to Yount in August and September that Criswell and Radovan were trying to close out the final founding membership, as Yount still had not invested.

Soon thereafter, however, Les Busick purchased the final $1.5 million founder's share under the PPM. Simultaneously, Yount—after discussing the investment with his accountant—decided to buy a $1 million founder's share. Criswell and Radovan sold Yount one of their CR founder's shares, as permitted by their subscription agreement. Yount signed a subscription agreement with Cal Neva Lodge, and his investment funded on October 13, 2015. During this same time, Radovan was considering a $55 million refinance of the project to obtain extra funds necessary for its completion.

Cal Neva Lodge's executive committee, consisting of Criswell, Radovan, two IMC members, and Busick, met in early November to discuss the refinance after Mosaic Real Estate Investors, LLC, the company slated to fund it, pressured Radovan to finalize the deal. The executive committee, however, wanted to change certain loan terms and was therefore not ready to complete the refinance deal. Criswell and Radovan then loaned $50,000 to Cal Neva Lodge so that Cal Neva Lodge could deposit those funds with Mosaic to secure a term sheet from Mosaic.

By early December 2015, it was apparent the Lodge would not open on time. Although the hotel was nearly complete, the foundation in the bar area needed rebuilding. The opening was therefore delayed until spring 2016. On December 12, Criswell and Radovan met with the executive committee to explain the cost overruns and seek approval to secure the Mosaic loan. The executive committee did not approve the loan, and the meeting became heated.

The following day, Yount voiced his concerns about the project's failing to Radovan. Around the same time, Yount, the IMC, and another investor, apparently unhappy with Criswell and Radovan, began discussing replacing Mosaic with another financer. Yount asked for the return of his $1 million investment, but that money had already been spent. Yount then learned that he had purchased one of CR's founder's shares—instead of a share under the PPM—and emailed Marriner to complain. Criswell and Radovan then asked Yount to sign documents stating his intent had been to buy a CR share, but Yount refused.

The executive committee finally approved the loan in late January 2016, and Radovan planned to meet with Mosaic a few days later, but Mosaic canceled the meeting via email at the last moment. Mosaic stated that it had met with a group of Cal Neva investors (later discovered to include IMC members) who "were interested in hearing about the history of Mosaic's involvement in CalNeva," and that Mosaic told them that Mosaic had not heard "much" from Criswell and Radovan for nearly three months. Mosaic said that the investors "explain[ed] a little of the history of the deal from their perspective" and that it appeared to Mosaic as though the project was "a little bit of a mess right now." Mosaic therefore was going to "step back, tear up the executed term sheet," so that the parties running the project had "time to figure things out." Once the Mosaic loan fell through, other lenders withdrew from the project and it failed.

Yount's lawsuit

Yount sued Criswell, Radovan, CR Cal Neva, Criswell Radovan, LLC, the Cal Neva Lodge, LLC, Marriner and his real estate company, and others¹ for breach of contract, breach of fiduciary duty, fraud, negligence, conversion, and securities fraud. Pertinent here, Yount generally alleged that Marriner had misrepresented the project's health and that the defendants, particularly Marriner and Radovan, misinformed Yount that $1.5 million in founder's shares remained available to induce him to invest, despite knowing they had already sold those shares to Busick. Yount alleged that his purchase of a founder's share from Criswell and Radovan, rather than through the same process as the other investors, damaged him in excess of $1 million.²

CR answered the complaint and asserted affirmative defenses, including comparative negligence, failure to mitigate damages, unclean hands, and indemnity/contribution, essentially alleging that Yount's own actions or omissions caused the damages he claimed. Marriner similarly responded to Yount's claims by asserting that Yount caused his own damages, if any. Neither CR nor Marriner asserted a counterclaim or requested damages. They also did not request any damages or other affirmative relief in their unsuccessful pretrial motions for summary judgment. Their proposed findings of fact and conclusions of law submitted before trial similarly did not address any counterclaim or damages against Yount.

The case proceeded to a bench trial before Judge Patrick Flanagan. Considerable evidence addressed Yount's involvement with the IMC and its actions to undermine the project's funding involving Mosaic. Emails demonstrated Yount was in contact with the IMC and included in conversations disparaging Criswell and Radovan, but those emails did not show Yount directly undermined the Mosaic loan. CR repeatedly asserted throughout trial, however, that no defendant had asserted counterclaims against Yount and that the case was not about the project's collapse. Marriner did not attempt to correct CR's...