Paulk v. Maese ( 2014 )

 $44,897.23 for breach of the real property sale agreement, and (3)
$33,340.82 for unpaid wages and unused vacation time. The district court
denied Maese's request for attorney fees, finding that his offers of
judgment failed to comply with NRS 17.115 and NRCP 68. This appeal
and cross-appeal followed.
Maese and Ben Kulick were investment partners in a biodiesel
enterprise. Paulk was chief executive officer of New-Cora and controlled a
majority of its shares. Around January 1, 2007, New-Corn exchanged
some of its own shares for shares that Maese and Kulick held in the
biodiesel enterprise, making Maese and Kulick New-Com shareholders.
Additionally, Kulick negotiated employment with New-Com for himself
and Maese.
In mid-2007, Paulk and Kulickl negotiated selling Paulk's
shares back to New-Corn with the expectation that New-Com would be
sold to a third party. Paulk and Kulick also executed an MOU providing
that if the envisioned sale did not occur, Paulk would elect to either sell
his shares to New-Com or purchase the shares owned by Kulick and
Maese. Further, if Paulk opted to purchase Maese's and Kulick's shares,
both Maese and Kulick would be given employment contracts.
The third-party sale did not materialize, so on October 1,
2007, Paulk exercised his option to purchase the shares owned by Maese
'Here and in regard to the subsequent MOU, Paulk was acting as an
individual and trustee controlling a substantial portion of New-Corn's
shares, while Kulick acted on behalf of New-Com as its chief operating
officer.
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and Kulick. Paulk provided promissory notes reflecting the sale, but he
never produced employment agreements.
In the fall of 2007, Maese contracted to purchase a second
home in Idaho, intending to pay for it with the proceeds from the sale of
his New-Corn shares. Since the sale had not yet occurred, Paulk agreed to
have New-Corn purchase the home and allow Maese to repay New-Corn
with the proceeds from selling his shares. New-Corn did in fact purchase
the house, and Maese signed a written contract memorializing the
agreement. In June 2008, Paulk fired Maese. Paulk and New-Corn never
purchased Maese's shares; as a result, Maese was never able to purchase
the Idaho property from New-Corn with the proceeds from his shares.
On appeal, we are asked to determine whether (1) the district
court findings of fact and conclusions of law are irreconcilably
inconsistent, (2) Maese can enforce the MOU Kulick and Paulk signed,
and (3) sufficient evidence supports the district court award for unpaid
wages and unused vacation time. On cross-appeal, we are asked to
determine whether the district court abused its discretion in denying
Maese's request for attorney fees. We affirm in part because we conclude
that (1) no irreconcilable inconsistency exists in the district court's
findings, (2) Maese can enforce the MOU, (3) sufficient evidence supports
the award for unpaid wages, and (4) the district court did not abuse its
discretion in denying Maese's request for attorney fees. We reverse in
part because there is insufficient evidence to support the district court's
award for unused vacation time.
The district court's findings of fact and conclusions of law are not
irreconcilably inconsistent
First, appellants claim that the district court's findings are
inconsistent because the district court found both that none of the
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appellants made an intentional or negligent misrepresentation or omission
to Maese and that New-Corn and Paulk never disclosed to Maese that they
did not plan to buy out his New-Corn shares in accordance with the MOU.
The first finding was related to Maese's tortious misrepresentation claims
on which appellants prevailed. The second finding relates to appellants'
defense that the MOU could not be enforced without a signed agreement
between Maese and New-Corn. In light of the district court's finding that
Maese was a third-party beneficiary to the MOU, these findings are not
irreconcilably inconsistent. Even if a contradiction resulted from the
district court's finding that no misrepresentation occurred, that finding
benefited appellant. Thus, the alleged error, if any, was harmless and
would not justify reversal. See Sheraden v. Black, 752 P.2d 791, 795 (N.M.
Ct. App. 1988).
Second, appellants argue that there is a contradiction between
the district court's findings that Paulk and New-Corn entered the MOU
and that Paulk and New-Com did not intend to follow the MOU in
accomplishing the New-Com share buyout. Appellants contend that these
findings show that the district court found a contract existed even though
there was no mutual intent to perform under the terms of the agreement.
Although mutual assent is required to form a valid contract, May v.
Anderson, 121 Nev. 668, 672, 119 P.3d 1254, 1257 (2005), appellants'
argument lacks merit because a party's undisclosed, subjective intent is
immaterial when determining the existence of a contract. James Hardie
Gypsum (Nevada) Inc. v. Inquipco, 112 Nev. 1397, 1402, 929 P.2d 903, 906
(1996), overruled on other grounds by Sandy Valley Assocs. v. Sky Ranch
Estates Owners Ass'n, 117 Nev. 948, 955 n.6, 35 P.3d 964, 968-69 n.6
(2001). "'[S]elf-serving testimony of the parties as to their subjective
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intentions or understandings is not probative evidence of whether the
parties entered into a contract.'" Id. (quoting Mullen v. Christiansen, 642
P.2d 1345, 1350 (Alaska 1982)). There is no inconsistency in these
findings because Paulk's and New-Corn's subjective intent not to perform
under the contract is irrelevant to whether a contract was formed. 2
Finally, appellants argue that the district court's findings are
inconsistent in that the court found an enforceable contract while also
finding that eventually Paulk and New-Com no longer intended to perform
under the MOU. Appellants contend that this is an implied finding that
the parties abandoned the contract. As detailed below, although parties
can abandon a contract "when both parties depart from the terms of the
contract by mutual consent," J.A. Jones Constr. Co. v. Lehrer McGovern
Bovis, Inc., 120 Nev. 277, 292, 89 P.3d 1009, 1019 (2004), such
abandonment is not always a defense to a third-party beneficiary's claim.
Maese was entitled to enforce the MOU as a third-party beneficiary
Appellants first argue that Maese cannot enforce the MOU
because he was not a third-party beneficiary. Whether a claimant is an
intended third-party beneficiary is reviewed de novo. See Benchmark Ins.
Co. v. Sparks, 127 Nev. , , 254 P.3d 617, 620 (2011). To obtain
third-party beneficiary status, "there must clearly appear a promissory
intent to benefit the third party, and ultimately it must be shown that the
third party's reliance thereon is foreseeable." Lipshie v. Tracy Inv. Co., 93
Nev. 370, 379, 566 P.2d 819, 824-25 (1977) (citations omitted).
2Appellants make similar arguments regarding their intent to make
Maese a third-party beneficiary to the MOU. As above, the subjective
intent of the parties is irrelevant.
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Maese was a third-party beneficiary here. First, there was
clearly a promissory intent to benefit Maese. The MOU states that "Paulk
agrees to buyout [sic] Kulick's and Maese's shares of New-Corn, Inc.,
12.9777% and 5.18% respectively, for a total consideration of $7,786,000
and $3,108,000 respectively." This demonstrates New-Com's and Paulk's
intent that their promises benefit Maese. Second, Maese demonstrated
actual reliance and that the reliance was foreseeable. Maese actually
relied on the agreement by purchasing property in Idaho, intending to use
proceeds from the sale of his New-Corn shares. That reliance was
foreseeable because New-Com agreed to buy the property for Maese and
agreed that Maese could use the proceeds from the sale of his shares to
buy the Idaho property from New-Com. Therefore, Maese was a third-
party beneficiary.
Appellants further contend that the MOU is unenforceable
because no consideration was given to Paulk in exchange for him
exercising the option to buy out Kulick and Maese. We conclude that the
option was enforceable and that there is substantial evidence that Paulk
received consideration.
An enforceable contract requires "an offer and acceptance
meeting of the minds, and consideration." Certified Fire Prot., Inc. v.
Precision Constr., Inc., 128 Nev. , 283 P.3d 250, 255 (2012)
(internal quotation marks omitted). "[W]hether a contract exists is [a
question] of fact." Id. (alterations in original) (internal quotation marks
omitted). An option becomes irrevocable, and thus fully enforceable, after
acceptance. Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 111-13, 424
P.2d 101, 105 (1967). Paulk had the option of purchasing Kulick's and
Maese's shares or having New-Com purchase his own shares. That option
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became irrevocable and thus enforceable upon his election to purchase
Kulick's and Maese's shares in the October 1 letter. Further, the district
court determined that the terms of the MOU and the October 1 letter
formed an enforceable agreement, necessarily supported by consideration.
That finding is supported by substantial evidence because the terms
allowed Paulk himself to choose whichever option he preferred, and
depending on his choice, he would receive either money from New-Corn or
New-Com shares from Kulick and Maese. Therefore, the option here was
enforceable because it became irrevocable after the October 1 letter and
there is substantial evidence that it was supported by consideration.
Finally, appellants argue that Maese cannot enforce the MOU
because Paulk and New-Corn abandoned the agreement. We conclude that
abandonment is not a valid defense against Maese.
Parties may abandon a contract's terms by mutual consent,
either express or implied. JA. Jones Constr. Co., 120 Nev. at 292, 89 P.3d
at 1019. Parties to a contract benefitting a third party may modify their
duties to an intended beneficiary, but "[s]uch a power terminates when the
beneficiary, before he receives notification of the discharge or modification,
materially changes his position in justifiable reliance on the promise"
Restatement (Second) of Contracts § 311(3) (1981). Here, Maese arranged
to buy the Idaho property in reliance on the promises contained in the
MOU and the October 1 letter without knowledge that Paulk and New-
Com had abandoned the MOU terms. As such, appellants cannot use
abandonment as a defense to Maese's claims as a third-party beneficiary.
There is substantial evidence to support the district court's award for
unpaid wages but not its award for unused vacation time
Appellants argue that substantial evidence does not support
the district court's award of unpaid wages and unused vacation time
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because there was no express employment agreement. In regard to wages,
Maese alleged that Paulk promised to pay him for 6 weeks after his
termination. Paulk argues that there was no employment agreement, and
absent such an agreement Maese is not entitled to payment for hours not
actually worked.
An employee seeking to enforce an employment agreement has
the burden of showing that an express or implied employment agreement
exists. Am. Bank Stationery v. Farmer, 106 Nev. 698, 701, 799 P.2d 1100,
1101-02 (1990). The existence of a contract is a factual finding reviewed
for clear error and substantial evidence. May, 121 Nev. at 672-73, 119
P.3d at 1257. Here, Maese testified that he and Paulk agreed that
Maese's wages would continue. Paulk admitted at trial that he agreed
that Maese's wages would continue to be paid for a reasonable time until
Maese found a new job. This is sufficient evidence to support the district
court's finding that there was an agreement to pay Maese for 6 weeks
following his termination. Therefore, we affirm the district court's $10,692
award for unpaid wages.
Conversely, there is no evidence in the record regarding any
agreement that Maese would be paid for unused vacation time, and Maese
cites no authority for the proposition that an employee is entitled to
payment for unused vacation time upon termination absent an express
agreement. Further, this court has indicated that an employment
agreement dictates the terms of payment for unused sick leave upon a
public employee's termination. Pressler v. Reno, 118 Nev. 506, 512, 50
P.3d 1096, 1100 (2002). We are presented with no reason to treat unused
vacation time differently. Based on the foregoing, the district court's
award of $22,648.82 for unused vacation time is not supported by
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substantial evidence. The portion of the judgment awarding Maese
unused vacation time is reversed, and the case is remanded to the district
court to recalculate interest for the remaining award.
The district court did not abuse its discretion in denying Maese's request
for attorney fees
On cross-appeal, Maese argues that the district court erred by
denying his motion for attorney fees.
This court reviews a district court's decision to grant or deny
attorney fees for an abuse of discretion. Albios v. Horizon Cmtys., Inc.,
122 Nev. 409, 417, 132 P.3d 1022, 1027-28(2006). This court reviews the
interpretation of statutes authorizing attorney fees de novo. Id. at 417,
132 P.3d at 1028. NRCP 68 and NRS 17.115 allow litigants to make an
offer of judgment. The offeror can recover post-offer costs and fees if the
offeree rejects an offer of judgment and subsequently fails to obtain a more
favorable judgment. NRS 17.115; NRCP 68. An offeror may make
apportioned offers to multiple parties and may require acceptance by all
parties before the offer becomes binding. NRS 17.115(7); NRCP 68(b).
Here, Maese made separate offers to Paulk, the Trusts, and
New-Com in the amount of $3,100,000 each. According to the district
court, Maese's offers did not comply with NRCP 68 and NRS 17.115.
Maese argues that the district court erred by reading NRCP 68 and NRS
17.115 to require that the offers be apportioned between the offerees and
be contingent on acceptance by all offerees. Maese is incorrect. The
district court concluded that Maese's failure to apportion and require
acceptance by all offerees effectively made his offer of judgment $9.3
million because $3.1 million was required from each defendant to settle all
claims. Even if such an approach is permissible, the $9.3 million offer to
settle was not surpassed by the $4,323,277 judgment in Maese's favor.
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Therefore, the district court did not abuse its discretion in denying
Maese's request for attorney fees.
Accordingly we
ORDER the judgment of the district court AFFIRMED IN
PART, REVERSED IN PART, AND REMANDED.
J.
Pickering
, J.
Parraguirre
Saitta
cc: Hon. Elizabeth Goff Gonzalez, District Judge
Greenberg Traurig, LLP/Las Vegas
Jolley Urga Wirth Woodbury & Little
Eighth District Court Clerk
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