BOCA PARK MARKETPLACE SYNDICATIONS GRP., LLC VS. HIGCO, INC.
Citation2017 NV 114
Date Filed2017-12-28
Docket71085
Cited0 times
StatusPublished
Full Opinion (plain_text)
133 Nev., Advance Opinion I I
IN THE SUPREME COURT OF THE STATE OF NEVADA
BOCA PARK MARTKETPLACE No. 71085
SYNDICATIONS GROUP, LLC, A
NEVADA LIMITED LIABILITY
COMPANY, FL
Appellant,
DEC 2 8 2017
vs.
ETH A. BROWN
HIGCO, INC., A NEVADA SWRKME.GQU
CORPORATION, BY
Respondent.
Appeal from a district court judgment following a bench trial in
a breach of contract action. Eighth Judicial District Court, Clark County;
Elizabeth Goff Gonzalez, Judge.
Affirmed.
Hejmanowski & McCrea LLC and Charles H. McCrea, Las Vegas,
for Appellant.
Garman Turner Gordon and Eric R. Olsen and Dylan T. Ciciliano, Las
Vegas,
for Respondent.
BEFORE DOUGLAS, GIBBONS and PICKERING, JJ.
OPINION
By the Court, PICKERING, J.:
This is a commercial dispute over an exclusive use clause in a
lease for space in a shopping center. The question presented is whether the
doctrine of claim preclusion prevents a tenant from suing its landlord for
contract damages after having won an earlier suit against the landlord for
declaratory judgment, where both suits concern the same underlying facts.
Ordinarily, claim preclusion bars a second suit seeking to vindicate claims
1-H1 q
that were or could have been asserted in the first suit. But the claim-
preclusion doctrine makes an exception for declaratory judgment actions,
which are designed to give parties an efficient way to obtain a judicial
declaration of their legal rights before positions become entrenched and
irreversible damage to relationships occurs. While a party may join claims
for declaratory relief and damages in a single suit, the law does not require
it. So long as the first suit only sought declaratory relief, a second suit for
contract damages may follow. Also, in a case involving a continuing or
recurrent wrong, a party may sue separately for after-accruing damages.
We therefore reject the landlord's argument that the doctrine of claim
preclusion requires reversal of the judgment awarding contract damages to
the tenant and affirm.
I.
Appellant Boca Park owns a Las Vegas shopping center. In
2002, Boca Park entered into a 20-year lease with respondent Higco, Inc.
The lease allowed Higco to operate a tavern in its leased space and included
an exclusive use clause, by which Boca Park granted Higco "an exclusive for
Boca Park I for a tavern and gaming, except for any tenants currently
located in the center which allow gaming (i.e. Vons, Longs)." Based on the
lease, Higco opened a tavern and installed slot machines for its patrons' use.
In late 2011 or early 2012, Higco learned that Boca Park had
entered into a lease with a new tenant, Wahoo's Fish Tacos, and that
Wahoo's had applied for a gaming license. On April 23, 2012, Higco sued
Boca Park for declaratory relief. In its complaint, Higco alleged that Boca
Park had leased space to Wahoo's, who had applied for a gaming license,
and sought a judgment declaring that the Higco/Boca Park lease gave Higco
the exclusive right to offer gaming in the shopping center.
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Shortly after Higco filed its declaratory judgment complaint,
Wahoo's obtained its gaming license and opened for business, competing
with Higco by also offering slot-machine gaming. Higco did not amend its
complaint to seek damages or injunctive relief, and the case was submitted
to the district court on cross-motions for summary judgment. The district
court decided the cross-motions in Higco's favor and entered declaratory
judgment for Higco. The judgment declared that the "controlling lease is
unambiguous, and. . . Higco has a right to an exclusive use both for tavern
and for gaming in Boca Park I, except for any tenants offering gaming in
Boca Park I as of November 5, 2002." Neither side appealed, and the
declaratory judgment became final in December of 2012, less than nine
months after the action began.
Despite the declaratory judgment, Boca Park continued to allow
Wahoo's to offer slot-machine gaming. Higco protested that this breached
the exclusive use clause in the lease, causing ongoing economic damages.
The parties tried to settle their differences, to no avail, and in December
2014, two years after the declaratory judgment became final, Higco filed a
second complaint against Boca Park. In this complaint, Higco sought
damages from Boca Park for breach of contract and breach of the implied
covenant of good faith and fair dealing.
Boca Park moved to dismiss, arguing that the doctrine of claim
preclusion barred Higco's claims for contract damages because those claims
could and should have been made in the earlier declaratory judgment
action. The district court denied Boca Park's motion. A bench trial followed,
in which the district court awarded Higco $497,000 in damages for Boca
Park's breach of the exclusive use clause in Higco's lease. Boca Park
appeals.
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Claim preclusion makes a valid final judgment conclusive on
the parties and ordinarily bars a later action based on the claims that were
or could have been asserted in the first case. See Five Star Capital Corp. v.
Ruby, 124 Nev. 1048, 1055, 194 P.3d 709, 713 (2008). Whether claim
preclusion operates to bar this action for contract damages based on the
final judgment Higco obtained in its earlier declaratory relief action
presents a question of law that we review de novo. G. C. Wallace, Inc. v.
Eighth Judicial Dist. Court, 127 Nev. 701, 705, 262 P.3d 1135, 1137 (2011).
A.
Claim preclusion—or res judicata, as it formerly was called—is
a policy-driven doctrine, designed to promote finality of judgments and
judicial efficiency by requiring a party to bring all related claims against its
adversary in a single suit, on penalty of forfeiture. See Weddell v. Sharp,
131 Nev., Adv. Op. 28, 350 P.3d 80, 83-85 (2015). Exceptions to the doctrine
have been created to address situations in which barring a later-filed claim
does not advance the doctrine's underlying policies or conflicts with a
statutory scheme, constitutional rights, or the agreed-upon or stated limits
of the first proceeding. See Restatement (Second) of Judgments § 26 (Am.
Law Inst. 1982) (cataloging black-letter exceptions to the rule against claim-
splitting that underlies claim preclusion). In G. C. Wallace, for example, we
recognized an exception to claim preclusion where a statute-based summary
eviction proceeding was later followed by an action for damages for unpaid
rent. 127 Nev. at 703, 262 P.3d at 1136. By design, the summary eviction
statutes provide an expeditious way for a landlord to regain possession of
its property; requiring litigation of the related damage claims and potential
counterclaims would frustrate, not promote, judicial efficiency. See id. at
705, 262 P.3d at 1137. So, we adopted the exception section 26(d) of the
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Restatement makes to claim preclusion, where a statutory scheme
contemplates multiple actions on related claims. Id. at 707, 262 P.3d at
1139 ("adjudication of a [later-filed damages] claim should not be precluded
when it appears 'from a consideration of the entire statutory scheme that
litigation, which on ordinary analysis might be considered objectionable as
repetitive, [was] intended to be permitted') (quoting Restatement (Second)
of Judgments § 26 cmt. e); see Five Star, 124 Nev. at 1058, 194 P.3d at 716
(recognizing "a public policy exception to claim preclusion in cases involving
a determination of paternity") (citing Restatement (Second) of Judgments
§ 19 cmt. e).
Similar to the split-claim exception recognized in G. C. Wallace,
the Restatement (Second) of Judgments endorses an exception to claim
preclusion where an action seeking a declaratory judgment is followed by a
later action for damages or other coercive relief:
When a plaintiff seeks solely declaratory relief, the
weight of authority does not view him as seeking to
enforce a claim against the defendant. Instead, he
is seen as merely requesting a judicial declaration
as to the existence and nature of a relation between
himself and the defendant. The effect of such a
declaration, under this approach, is not to merge a
claim in the judgment or to bar it. Accordingly,
regardless of outcome, the plaintiff or defendant
may pursue further declaratory or coercive relief in
a subsequent action.
Restatement (Second) of Judgments § 33 cmt. c. 1 Like the majority of courts
that have addressed the claim-preclusive effect of declaratory judgments,
Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 56-57 (1st
1 In contrast, a declaratory judgment does have issue-preclusive effect
as to "any issues actually litigated by [the parties] and determined in the
action." Restatement (Second) of Judgments § 33.
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Cir. 2008) (collecting cases); 18 James Wm. Moore et al., Moore's Federal
Practice § 131.24[3] (3d ed. 2017) (same), we find the Restatement's reasons
for a declaratory judgment exception persuasive and therefore hold that
claim preclusion does not apply where the original action sought only
declaratory relief.
Claim preclusion is inconsistent with the legislative scheme
providing for declaratory relief. The Uniform Declaratory Judgments Act,
which Nevada adopted in 1929 and codified in NRS 30.010 to 30.160, 1929
Nev. Stat., ch. 22, § 16 at 30, contemplates "that declaratory actions are to
supplement rather than supersede other types of litigation." See
Restatement (Second) of Judgments § 33 cmt. c. Thus, the Uniform Act, as
adopted in Nevada, provides that If] urther relief based on a declaratory
judgment or decree may be granted whenever necessary or proper." NRS
30.100. Although the statute permits a party to seek damages or other
coercive relief in a declaratory action, it also allows a party to pursue a
separate damages action based on the rights established by the declaratory
judgment. Id. (providing that "application [for further relief] shall be by
petition to a court having jurisdiction to grant relief'); Principal Mitt. Life
Ins. Co. v. Straus, 863 P.2d 447, 451 (N.M. 1993) (explaining that when the
declaratory relief action is limited to a request for declaratory judgment,
"[r] equests for damages may then be pursued by separate litigation as
supplement relief' under provision similar to NRS 30.100); Bankers &
Shippers Ins. Co. of N.Y. v. Electro Enters., Inc., 415 A.2d 278, 285 (Md.
1980) (interpreting provision similar to NRS 30.100 as "expressly
permit [ting] a party to bring one action requesting only a declaratory
judgment and then to bring a separate action for further relief based on the
rights determined by that judgment"); Winborne v. Doyle, 59 S.E.2d 90, 93-
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94 (Va. 1950) (interpreting provision similar to NRS 30.100 to allow for
further relief whether "by petition filed in [the declaratory relief action] or
in a separate and independent action"). The statutory scheme providing for
declaratory relief therefore is "antithetical" to claim preclusion, justifying
an exception to its bar. Restatement (Second) of Judgments § 33 cmt. c; cf.
18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal
Practice and Procedure § 4415 (3d ed. 2016) (although courts should be
cautious in applying exceptions to claim preclusion, "[s]pecial features of a
statutory scheme also may suggest departure from ordinary rules of claim
preclusion").
"A declaratory action is intended to provide a remedy that is
simpler and less harsh than coercive relief. . . ." Restatement (Second) of
Judgments § 33 cmt. c. It conserves judicial resources by providing a
mechanism for courts "to clarify the legal relationships of parties before
they have been disturbed thereby tending towards avoidance of full-blown
litigation." Andrew Robinson, 547 F.3d at 58 (internal citations and
quotation marks omitted); see also Aronoff v. Katleman, 75 Nev. 424, 432,
345 P.2d 221, 225 (1959) ("[A] declaratory judgment in essence does not
carry with it the element of coercion as to either party. Rather, it
determines their legal rights without undertaking to compel either party to
pay money or to take some other action to satisfy such rights as are
determined to exist by the declaratory judgment."). It would frustrate that
purpose "were parties required to bring, as part of a declaratory judgment
action, all conceivable claims and counterclaims on pain of preclusion,"
Andrew Robinson, 547 F.3d at 58, because "what would have been a simple
declaratory judgment action [likely would] blow[ ] up to involve all related
claims for coercive relief." Stilwyn, Inc. v. Rokan Corp., 353 P.3d 1067, 1078
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(Idaho 2015). Claim preclusion also conserves judicial resources by
requiring parties to bring all related claims in a single action. Five Star,
124 Nev. at 1058, 194 P.3d at 715; Andrew Robinson, 547 F.3d at 58. But
in weighing the competing policy concerns, we agree with the First Circuit
that the Restatement "sensibly" concludes "that, on balance, public policy is
furthered rather than retarded by the ready availability of a no-strings-
attached declaratory remedy that is simpler, faster, and less nuclear than
a suit for coercive relief." Id. at 58; cf. 18 Wright, Miller & Cooper, supra,
§ 4415 (observing that "[t]he values of repose and reliance [furthered by
claim preclusion] are gained at the expense of denying any opportunity to
litigate matters that. . . may involve valid rights to relief").
This case illustrates the utility of the declaratory judgment
exception. Faced with an incipient dispute with Boca Park respecting the
proper interpretation of the exclusivity provision in its lease, Higco sought
only a declaration of the parties' rights in that respect. Higco has
maintained (and Boca Park does not dispute) that it did not seek further
relief in the first action because it believed that Boca Park would honor a
judgment declaring the parties' rights under the lease agreement, avoiding
the need for coercive relief and conserving judicial resources. See
Restatement (Second) of Judgments § 33 cmt. c. ("[T]he declaratory plaintiff
ought to be permitted to make a partial presentation of his side of the
controversy, in the hope of preventing a full-blown claim from arising. . . .").
Start to finish, Higco's declaratory judgment action took less than nine
months to reach final judgment. The current action, by contrast, has taken
several years and a full-blown trial to resolve.
For the declaratory judgment exception to apply, the original
action must have only sought declaratory relief. Restatement (Second) of
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Judgments § 33 cmt. c ("When a plaintiff seeks solely declaratory relief, the
weight of authority does not view him as seeking to enforce a claim against
the defendant.") (emphasis added); see also id. cmt. d ("[A] pleader
demanding money damages may also ask for a corresponding declaration.
For res judicata purposes, the action should be treated as an adversary
personal action concluded by a personal judgment with the usual
consequences of merger, bar, and issue preclusion."). Thus, if the plaintiff
stated a claim for coercive relief in addition to declaratory relief in the
original action, the exception does not apply. E.g., Laurel Sand & Gravel,
Inc. v. Wilson, 519 F.3d 156, 164 (4th Cir. 2008) ("While it is true that courts
have limited the preclusive effect of declaratory judgments, declaratory
judgments have no limiting effect if coercive relief such as damages or an
injunction is also sought."). Boca Park suggests that Higco expanded upon
the relief it was seeking in the original action when it asserted in its
summary judgment motion that Boca Park had already breached the lease.
But "[a] contract may be construed [in a declaratory relief action] either
before or after there has been a breach thereof." NRS 30.050. Thus, the
fact that Higco characterized Boca Park's decision to allow Wahoo's to also
offer slot-machine gaming in the shopping center as a breach of the
exclusive use clause in the Boca ParldHigco lease is immaterial.
No doubt Higco could have amended its declaratory judgment
complaint to state a claim for damages or other coercive relief. And, the
district court could have declined to proceed on the declaratory relief action
after Higco suggested that Boca Park had already breached the lease
agreement. See NRS 30.080 ("The court may refuse to render or enter a
declaratory judgment or decree where such judgment or decree, if rendered
or entered, would not terminate the uncertainty or controversy giving rise
to the proceeding."); see Restatement (Second) of Judgments § 33 cmt. c
("[T]he court whose discretion is invoked by a declaratory action has means
of preventing abuse. The court should lean toward declining the action if
another remedy, such as a coercive action on an existing claim, is plainly
available and would have wider [claim preclusive] effects."). But neither of
these eventualities materialized, probably because Boca Park did not
include counterclaims in its answer or otherwise seek to expand the
declaratory judgment action to address damages. 2 As Higco's original
action sought only declaratory relief, the declaratory judgment exception to
claim preclusion applies.
B.
A second, independent ground exists for denying claim-
preclusive effect to the declaratory judgment Higco won: "A judgment in an
action for breach of contract does not normally preclude a plaintiff from
thereafter maintaining an action for breaches of the same contract that
consist of failure to render performance due after commencement of the first
action." Restatement (Second) of Judgments § 26 cmt. g. When Higco sued
Boca Park for declaratory judgment, Wahoo's had yet to offer slot-machine
gaming in the shopping center. After Wahoo's obtained its gaming license
and opened for business with slot-machine gaming, Higco could have
2 This occurred in Weddell v. Sharp, 131 Nev., Adv. Op. 28, 350 P.3d
80 (2015), where we applied claim preclusion to bar the later-asserted
claims by the defendant to a declaratory judgment action based on the
answer and counterclaims he asserted to his litigation adversary's
complaint for declaratory relief. The party against whom claim preclusion
applied did argue that comment c to the Restatement (Second) of Judgments
§ 33 applied.
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amended its complaint to add claims for contract damages or other coercive
relief, but the law did not require that it do so.
Because the original action between the parties sought only
declaratory relief, claim preclusion did not bar the second action.
Accordingly, the district court properly denied Boca Park's motion to
dismiss this action based on claim preclusion. Boca Park does not raise any
other arguments regarding the validity or amount of the judgment. We
therefore affirm.
Pickering
We concur:
Douglas
‘'d 2),17A J.
Gibbons
11