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March 2011

Las Vegas Partner Robert Schumacher Wins Case on Motion for Summary Judgment

Las Vegas Partner Robert E. Schumacher won a Motion for Summary Judgment in Clark County District Court on behalf of Nevada property developer/seller. Gordon & Rees's client was awarded over $850,000.00 in judgment as a result.

The dispute stemmed from the sale of two parcels of undeveloped real property in the once "hot" real estate market of Kyle Canyon, an area northwest of Las Vegas. The plaintiff bought the first parcel from Gordon & Rees's client in 2005 for a cash payment of $1,750,000.00. In 2007, among increasing speculation in the media about development in that area, the plaintiff bought a second parcel from Gordon & Rees's client for $2,200,000.00. The plaintiff paid an earnest money deposit of $200,000.00 and another $1,000,000.00 cash at the close of escrow for the second parcel. The plaintiff executed a promissory note in favor of Gordon & Rees's client for the remaining $1,000,000.00.

The plaintiff's first payment on the promissory note was due in September 2008, at the same time the real estate bubble burst and the country entered the current recession. No payments were made on the promissory note. Gordon & Rees's client initiated a non-judicial foreclosure. In December 2008, the plaintiff responded by pre-emptively filing a Complaint in Clark County District Court seeking injunctive relief to stop the foreclosure process. Additionally, the plaintiff asserted causes of action for fraudulent misrepresentation, constructive fraud, civil consipiracy and rescission against Gordon & Rees's client and two others (also represented by Gordon & Rees) alleged to have been co-conpirators in an elaborate scheme to defraud plaintiff. In short, the plaintiff wanted all the monies tendered to Gordon & Rees's client returned as well as the $1,000,000.00 promissory note voided. Gordon & Rees filed an answer and counterclaim for breach of the promissory note. Plaintiff's request for injunctive relief was denied. Gordon & Rees filed a motion for pre-judgment writ of attachment on the first parcel, the title of which remained in plaintiff's name. The court issued a pre-judgment writ of attachment in favor of Gordon & Rees's client. Shortly thereafter, Gordon & Rees prevailed on a motion to dismiss one of the alleged co-conspirators. Later, Gordon & Rees was successful in obtaining summary judgment in favor of the second co-conspirator. At that point only the developer/seller remained in the litigation.

After completing discovery, Gordon & Rees brought a motion for summary judgment on behalf of its remaining client, the property developer/seller. Gordon & Rees sought to eliminate plaintiff's claims of fraud and rescission and obtain a favorable judgment on the promissory note. Plaintiff filed a counter-motion for summary judgment asking the court to rescind the transactions and return all of plaintiff's monies. The court granted Gordon & Rees's motion for summary judgment in part and denied plaintiff's motion entirely. The court's ruling left remaining plaintiff's cause of action for fraudulent misrepresentation, which had the effect of precluding summary judgment on the counterclaim of Gordon & Rees's client. Gordon & Rees filed a motion for resonsideration asking the court to dismiss plaintiff's surviving fraud claim on the basis that no triable issue of fact existed concerning the alleged fraudulent representations about the property value and the fact that Gordon & Rees's client would jointly develop the property with plaintiff. Plaintiff opposed the motion and brought a counter-motion to dismiss the counterclaim of Gordon & Rees's client on the basis of Nevada's "One Action Rule". Nevada's One Action Rule is codified at NRS 40.430, and it essentially provides that there may be but one action on a debt secured by a mortgage or other lien on real property. Plaintiff agued that the counterclaim of Gordon & Rees's client was barred by application of the One Action Rule. Plaintiff argued Gordon & Rees's client could only pursue a statutory deficiency action because of the non-judicial foreclosure proceeding.

After intensive briefing and oral argument, Schumacher successfully argued that no triable issue of fact existed concerning plaintiff's fraud claim thereby prompting the court to order the dismissal with prejudice of plaintiff's entire complaint. Additionally, Schumacher argued that Nevada's One Action Rule was inapplicable since the foreclosure was non-judicial and not an "action" within the meaning of NRS 40.430(6)(e). The court agreed. Accordingly, summary judgment on the counterclaim was granted and Gordon & Rees's client was awarded over $850,000.00 in damages consisting of the deficiency after the foreclosure sale and interest on the promissory note.

Gordon & Rees filed a Motion for Attorney's Fees and Costs which is pending.

Robert E. Schumacher



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