Thursday, August 21, 2008
Monday, July 14, 2008
Buzz Stew, LLC v. City of N. Las Vegas
Cite as: Buzz Stew, LLC v. City of N. Las Vegas
124 Nev. Adv. Op. No. 21
April 17, 2008
IN THE SUPREME COURT OF THE STATE OF NEVADA
No. 47262
BUZZ STEW, LLC, A NEVADA LIMITED LIABILITY COMPANY,
Appellant,
vs.
CITY OF NORTH LAS VEGAS, NEVADA, A MUNICIPAL CORPORATION,
Respondent.
Appeal from a district court order dismissing an inverse condemnation action. Eighth Judicial District Court, Clark County; Douglas W. Herndon, Judge.
Affirmed in part, reversed in part and remanded.
Law Offices of Kermitt L. Waters and Kermitt L. Waters, Autumn L. Waters, and James Jack Leavitt, Las Vegas, for Appellant.
Santoro, Driggs, Walch, Kearney, Holley & Thompson and Gregory J. Walch and Stella B. Dorman, Las Vegas, for Respondent.
BEFORE THE COURT EN BANC.
OPINION
By the Court, DOUGLAS, J.:
In this appeal, we examine whether a landowner may assert a cause of action for precondemnation damages that arise when a municipality announces its intent to condemn a parcel of land and then unreasonably delays instituting an eminent domain action.[1] We conclude that a municipality’s announcement of intent to condemn a parcel of land may give rise to a cause of action by the landowner for damages based on allegations that, under the circumstances, the municipality acted improperly in making the announcement before instituting an eminent domain action. In this, we expand our ruling in State, Department of Transportation v. Barsy.[2]
In addition to the precondemnation damages claim, we also consider claims of inverse condemnation, estoppel, abuse of eminent domain laws, prejudgment interest, severance damages, and attorney fees. For the reasons stated below, we reverse the district court’s order to the extent that it dismissed the landowner’s claim for precondemnation damages, and we remand this matter to the district court for further proceedings with respect to that claim. We nevertheless affirm the remaining portions of the district court’s order dismissing the remaining causes of action.
FACTS
In 2003, respondent City of North Las Vegas began searching for a suitable location to construct a flood control channel. This search led the City to a 20-acre parcel of land in North Las Vegas owned by appellant Buzz Stew, LLC. Before securing funding for the flood control project, the City made an offer to purchase one acre of Buzz Stew’s 20-acre parcel for the project. Buzz Stew declined the offer.
Shortly thereafter, in June 2003, the City adopted a resolution of “need and necessity,” announcing its intent to condemn one acre of Buzz Stew’s property. Then, in July 2004, Buzz Stew sold its entire 20-acre parcel to a third party for $8,200,000.[3]
After it sold the 20 acres, Buzz Stew learned that, despite the City’s resolution of “need and necessity,” the City had determined not to institute an eminent domain action against the property because the City could not secure funding for the flood control project. But the City failed to publicly withdraw or retract its resolution of “need and necessity,” including its intent to condemn the one-acre parcel.
Consequently, Buzz Stew filed a complaint in the district court asserting claims for precondemnation damages, inverse condemnation, estoppel, abuse of eminent domain laws, prejudgment interest, severance damages, and attorney fees and costs. The City filed a motion to dismiss the complaint, under NRCP 12(b)(5), asserting that Buzz Stew had failed to state a claim upon which relief could be granted. The district court ultimately granted the City’s motion to dismiss, concluding that Buzz Stew had failed to state a claim against the City upon which it could grant relief. This appeal followed.
DISCUSSION
The City’s motion to dismiss Buzz Stew’s complaint under NRCP 12(b)(5) “is subject to a rigorous standard of review on appeal.”[4] Accordingly, this court will recognize all factual allegations in Buzz Stew’s complaint as true and draw all inferences in its favor.[5] Buzz Stew’s complaint should be dismissed only if it appears beyond a doubt that it could prove no set of facts, which, if true, would entitle it to relief.[6] We review the district court’s legal conclusions de novo.[7]
Precondemnation damages
Buzz Stew’s cause of action for precondemnation damages alleges that a landowner is entitled to damages, independent of those resulting from a taking, when the municipality acts improperly with respect to announcing its intent to condemn the landowner’s property. We agree and conclude that a landowner may bring a cause of action for precondemnation damages based on allegations that the municipality acted improperly in announcing that it intended to condemn the landowner’s property.
This court addressed a substantially similar issue in Barsy regarding “whether . . . precondemnation activities of the State entitle [a condemnee] to damages in addition to those resulting from the taking of [its] property.”[8] In Barsy, we recognized that the assertion of damages in addition to those resulting from a taking requires the condemnee to “demonstrate that the condemnor acted improperly following a precondemnation announcement.”[9] In this opinion, we expand our conclusion in Barsy to allow a landowner to assert a cause of action for precondemnation damages, independent from those resulting from the taking of its property.
To support a claim for precondemnation damages, the landowner must first “allege facts showing an official action by the [would be] condemnor amounting to an announcement of intent to condemn. ‘The pivotal issue . . . is whether the public agency’s activities have gone beyond the planning stage to reach the “acquiring stage.”’”[10] The acquiring stage occurs “when condemnation has taken place, steps have been taken to commence eminent domain proceedings, or there has been an official act or expression of intent to condemn.”[11]
Here, Buzz Stew contends that the City officially expressed its intent to condemn when it adopted a resolution for the “need and necessity” of Buzz Stew’s property. We agree. The adoption of this resolution announced to the public the City’s intent to purchase the property, which moved beyond the planning stage and into the acquiring stage. Accordingly, we conclude that the record contains sufficient “facts showing an official action by the [City] amounting to an announcement of intent to condemn.”[12]
Second, the landowner must show that the public agency acted improperly following the agency’s announcement of its intent to condemn certain land. For example, the landowner can show that the public agency acted improperly by unreasonably delaying an eminent domain action after announcing its intent to condemn the landowner’s property. In Barsy, we used the terms “unreasonable delay” and “extraordinary delay” interchangeably and concluded that an extraordinary delay or oppressive conduct following an announcement of intent to condemn, which results in a decrease in the market value of the property, was improper.[13]
Extraordinary delay or oppressive conduct following an announcement of intent to condemn certain property conceivably reduces the market value of that property—especially when the government fails to retract its announcement to mitigate its detrimental effects. By allowing a cause of action for precondemnation damages, public agencies will be dissuaded from prematurely announcing their intent to condemn private property.
Because the Nevada Legislature has not passed legislation expressly defining what qualifies as an extraordinary delay or oppressive conduct, we must reserve this question for the fact-finder.[14] While the inquiry into what qualifies as a reasonable period of time will depend upon particular circumstances, which differ from case to case, the shorter the period between announcement and initiation of the action, the greater the chance of being found reasonable.[15]
Finally, to the extent that Barsy indicated that a taking must occur to recover damages related to a municipality’s announcement of intent to condemn and its improper action with respect to that announcement, that requirement has been eliminated as to precondemnation damages. Accordingly, Buzz Stew is not required to show that a taking and the damages resulting from such a taking have occurred.[16]
Based on the discussion above, we conclude that Buzz Stew’s claim for precondemnation delay damages is viable. We thus reverse the district court’s order to the extent that it dismisses that claim. As Buzz Stew’s claim necessarily raises a question of fact as to whether the City acted improperly with respect to its announcement that it intended to condemn Buzz Stew’s land, we remand this matter to the district court for further proceedings regarding that issue.
Remaining causes of action
Buzz Stew also argues that the district court erred in dismissing its causes of action for (1) estoppel, (2) abuse of eminent domain laws, (3) prejudgment interest, (4) severance damages, and (5) attorney fees and costs. With respect to Buzz Stew’s estoppel cause of action, we have considered Buzz Stew’s arguments and conclude that the district court properly dismissed that claim because Buzz Stew failed to state a claim against the City upon which relief may be granted.[17] Specifically, Buzz Stew could prove no set of facts, which, if true, would entitle it to relief based on estoppel.
Buzz Stew additionally contends that the City has violated eminent domain law by intending to acquire the property through a future dedication.[18] We conclude that this argument is without merit because it relates to a speculative future act by the City.[19] Accordingly, Buzz Stew cannot presently show the existence of a valid property interest as to a future taking. Thus, we further conclude that the district court properly dismissed this cause of action.
Buzz Stew also argues that it is entitled to prejudgment interest and severance damages as compensation for the proceeds that should have been paid by the City at the time of the taking.[20] In light of our conclusion that the resolution for the “need and necessity” does not qualify as a taking, these issues are moot.
Finally, because we are remanding the case to the district court for proceedings consistent with this opinion, we need not address the merits of Buzz Stew’s claim that it is entitled to attorney fees and costs as damages.
CONCLUSION
For the reasons stated above, we conclude that a landowner may assert a cause of action for precondemnation damages. Accordingly, we reverse that portion of the district court’s order dismissing Buzz Stew’s cause of action against the City for precondemnation damages, and we remand this matter to the district court for further proceedings thereon. We affirm the remaining portions of the district court’s order dismissing Buzz Stew’s causes of action against the City.
GIBBONS, C.J., MAUPIN, HARDESTY, PARRAGUIRRE, CHERRY and SAITTA, JJ., concur.
**********FOOTNOTES**********
[1] We note that the appellant in this appeal no longer owns the property that is the subject of the present litigation. However, the appellant may be entitled to compensation because just compensation should be paid to the person who was the owner at the time of the taking. Argier v. Nevada Power Co., 114 Nev. 137, 139, 952 P.2d 1390, 1391 (1998) (citing 3 Julius Sackman, Nichols on Eminent Domain § 5.01[5][d] (1997)).
[2] 113 Nev. 712, 941 P.2d 971 (1997), overruled on other grounds by GES, Inc. v. Corbitt, 117 Nev. 265, 268 n.6, 21 P.3d 11, 13 n.6 (2001).
[3] As previously noted, when Buzz Stew transferred its remaining interest in the 20-acre parcel, it did not also transfer the right to receive just compensation because “‘the right to receive the compensation does not run with the land, but remains a personal claim of the person who was the owner at the time of the taking, or his representatives.’” Argier, 114 Nev. at 139, 952 P.2d at 1391 (quoting 3 Julius Sackman, Nichols on Eminent Domain § 5.01[5][d] (1997)).
[4] Seput v. Lacayo, 122 Nev. 499, 501, 134 P.3d 733, 734 (2006).
[5] See id.
[6] Blackjack Bonding v. Las Vegas Mun. Ct., 116 Nev. 1213, 1217, 14 P.3d 1275, 1278 (2000). Our prior cases have not been completely consistent in applying the standard of review for failure to state a claim upon which relief can be granted. The appropriate standard requires a showing beyond a doubt. To the extent that these cases required a showing of proof beyond a reasonable doubt, they are disavowed. See Schmidt v. Washoe County, 123 Nev. ___, ___, 159 P.3d 1099, 1103 (2007); Rocker v. KMPG LLP, 122 Nev. 1185, 1192, 148 P.3d 703, 707 (2006); Brent G. Theobald Constr. v. Richardson Constr., 122 Nev. 1163, 1166, 147 P.3d 238, 240-41 (2006); Seput, 122 Nev. at 501, 134 P.3d at 734-35; Stockmeier v. State, Dep’t of Corrections, 122 Nev. 385, 389, 135 P.3d 220, 223 (2006); Edwards v. Direct Access, LLC, 121 Nev. 929, 931, 124 P.3d 1158, 1159 (2005); Jordan v. State, Dep’t of Motor Vehicles, 121 Nev. 44, 73, 110 P.3d 30, 50 (2005); Zhang v. Dist. Ct., 120 Nev. 1037, 1040, 103 P.3d 20, 22 (2004); Kourafas v. Basic Food Flavors, Inc., 120 Nev. 195, 197, 88 P.3d 822, 823 (2004); Schneider v. County of Elko, 119 Nev. 381, 383, 75 P.3d 368, 369 (2003); Hampe v. Foote, 118 Nev. 405, 408, 47 P.3d 438, 439 (2002).
[7] Seput, 122 Nev. at 501, 134 P.3d at 735.
[8] State, Dep’t of Transp. v. Barsy, 113 Nev. 712, 719, 941 P.2d 971, 976 (1997) (emphasis added).
[9] Id. at 720, 941 P.2d at 976; see also Klopping v. City of Whittier, 500 P.2d 1345, 1355 (Cal. 1972) (concluding that a property owner is entitled to compensation for damages occasioned by precondemnation announcements when the condemnor acts unreasonably in issuing precondemnation statements).
[10] Barsy, at 720, 941 P.2d at 977 (quoting Terminals Equipment Co. v. San Francisco, 270 Cal. Rptr. 329, 336 (Ct. App. 1990)).
[11] Id.
[12] Id.
[13] Id. at 721, 941 P.2d at 977.
[14] We note that the legislature in our sister state of California has adopted a statute, which states that six months is an unreasonable delay. See Cal. Civ. Proc. Code § 1245.260(a).
[15] 71 Am. Jur. Proof of Facts 3d 136-39 (2007).
[16] Buzz Stew also argues that the City’s adoption of a resolution for the “need and necessity” of its property qualifies as a taking. We conclude that Buzz Stew has standing to seek just compensation because, when it sold what remained of its property, it did not also sell the right to compensation. Argier v. Nevada Power Co., 114 Nev. 137, 139, 952 P.2d 1390, 1391 (1998) (concluding that just compensation should be paid to the person who was the owner at the time of the taking). However, we also conclude that a taking has not occurred under these facts because Buzz Stew has failed to show “the invasion of a property right which directly and specially affects him to his injury.” Jones v. People ex rel. Dept. of Transp., 583 P.2d 165, 169-70 (Cal. 1978); see DUWA, Inc. v. City of Tempe, 52 P.3d 213, 216 (Ariz. Ct. App. 2002) (citing City of Buffalo v. J.W. Clement Company, 269 N.E.2d 895, 902-03 (N.Y. 1971)). The record indicates that Buzz Stew was able to sell the entire 20-acre parcel, including the one acre referenced in the City’s resolution. Thus, we cannot conclude that the City’s resolution for the “need and necessity” created a direct and special interference with respect to the parcel. Jones, 583 P.2d at 170.
[17] See Sproul Homes v. State ex rel. Dep’t Hwys., 96 Nev. 441, 445, 611 P.2d 620, 622 (1980).
[18] Buzz Stew alleges that it is the City’s intent to acquire the property by imposing a future dedication requirement as a condition of development for any future development project.
[19] Doe v. Bryan, 102 Nev. 523, 525, 728 P.2d 443, 444 (1986) (concluding that an alleged harm that is speculative is insufficient—an existing controversy must be present).
[20] See County of Clark v. Alper, 100 Nev. 382, 392-93, 685 P.2d 943, 949-50 (1984).
*****************************
Hamm v. Arrowcreek Homeowners’ Ass’n
Cite as: Hamm v. Arrowcreek Homeowners’ Ass’n
124 Nev. Adv. Op. No. 28
May 15, 2008
IN THE SUPREME COURT OF THE STATE OF NEVADA
No. 47763
MICHAEL HAMM; CARA HAMM; AND THE 2005 HAMM FAMILY TRUST,
Appellants,
vs.
ARROWCREEK HOMEOWNERS’ ASSOCIATION, A NEVADA NONPROFIT CORPORATION; AND NEVADA ASSOCIATION SERVICES, INC.,
Respondents.
Appeal from a district court order dismissing a homeowners’ action that sought to release a homeowners’ association lien. Second Judicial District Court, Washoe County; Steven P. Elliott, Judge.
Affirmed.
Karla K. Butko, Verdi, for Appellants.
Mark H. Gunderson, Ltd., and Mark H. Gunderson and Laura M. Arnold, Reno, for Respondents.
BEFORE THE COURT EN BANC.[1]
OPINION
By the Court, GIBBONS, C.J.:
In this appeal, we consider whether homeowners must submit to mediation or arbitration, pursuant to NRS 38.310,[2] before they initiate a civil action in the district court to release a homeowners’ association assessment lien on their property. Under that statute, the district court must dismiss any dispute arising from the interpretation, application, or enforcement of homeowners’ associations’ covenants, conditions, and restrictions (CC&Rs) if the parties did not first submit the dispute to mediation or arbitration. However, this statutory requirement does not apply to actions for injunctive relief involving “an immediate threat of irreparable harm, or action[s] relating to the title to residential property.”[3] Thus, here, we must determine whether an action seeking the removal of a homeowners’ association lien and an injunction against future liens necessarily involves an immediate threat of irreparable harm or relates to residential title.
On these issues of first impression, we conclude that the filing of a lien, in and of itself, does not create “an immediate threat of irreparable harm”[4] and that an action to release a lien, without more, does not “relat[e] to the title to residential property.”[5] Accordingly, as neither of these exceptions was shown in this case, the district court correctly concluded that the homeowners were required to submit their claims to mediation or arbitration before instituting an action in the district court to release a lien.
We also consider whether NRS 38.310 applies to actions against a collection agency that acts as a homeowners’ association’s agent. We conclude that if the collection agency acts as the agent of a homeowners’ association and NRS 38.310 applies to the action against the homeowners’ association, then that statute applies equally to the collection agency. Accordingly, here, since the homeowners did not first submit their claims against the homeowners’ association and the collection agency to mediation or arbitration as required by NRS 38.310, the district court properly dismissed their complaint.
FACTS AND PROCEDURAL HISTORY
In 2004, appellants Michael and Cara Hamm purchased a home and an adjoining vacant lot in the Arrowcreek subdivision, a planned community in Reno, Nevada.[6] Thereafter, Mr. and Mrs. Hamm transferred the properties to appellant the 2005 Hamm Family Trust, which currently owns them. According to Mr. and Mrs. Hamm, when they purchased the properties, they were told that they would not be required to pay homeowner assessment fees on the vacant lot, pursuant to Arrowcreek’s CC&Rs.
However, due to Mr. and Mrs. Hamm’s failure to pay assessment fees on the vacant lot, respondent Arrowcreek Homeowners’ Association (Arrowcreek HOA) sent them a notice assessing a late fee and interest. Mr. and Mrs. Hamm responded to the notice by asking Arrowcreek HOA to execute a “no-fee” agreement with them similar to one that it had purportedly previously executed with other homeowners. This request was denied. Mr. and Mrs. Hamm apparently did not pay the assessed amount, late fee, or interest. As a result, in November 2005, respondent Nevada Association Services, Inc. (NAS), a collection agency, notified Mr. and Mrs. Hamm that they were required to pay Arrowcreek HOA the amount due within ten days to prevent the recording of a notice of delinquent assessment lien. Although Mr. and Mrs. Hamm immediately notified NAS that the assessment was disputed, NAS, at the direction of Arrowcreek HOA, filed a notice of delinquent assessment lien with the county recorder.
Shortly thereafter, Mr. and Mrs. Hamm and the 2005 Hamm Family Trust (collectively, the Hamms) filed a district court complaint against Arrowcreek HOA and NAS (collectively, Arrowcreek). In their complaint, the Hamms sought (1) a declaratory judgment interpreting the CC&Rs in a manner that eliminated any assessment fees on the vacant lot; (2) release of the lien; (3) a permanent injunction against further assessments and liens with respect to the vacant lot; (4) breach of contract damages, including attorney fees; (5) slander of title damages, including punitive damages for allegedly filing the lien in bad faith; and (6) special damages, including attorney fees and costs. The Hamms alleged that Arrowcreek’s actions clouded title to their properties and harmed their “creditworthiness.”
Arrowcreek HOA moved to dismiss the complaint, under NRCP 12(b)(5), based on the Hamms’ failure to state a claim upon which relief could be granted, and for their failure to comply with NRS 38.310, which provides that parties must submit claims relating to the interpretation and application of CC&Rs to mediation or arbitration before seeking relief in the district court. Alternatively, Arrowcreek HOA moved to compel mediation or arbitration pursuant to NRS 38.310. NAS joined Arrowcreek HOA’s motion.
After considering the motion and the Hamms’ opposition thereto, the district court concluded that the Hamms’ complaint called for the interpretation and enforcement of CC&Rs and, consequently, dismissed the complaint. In its order, the district court stated that once arbitration was concluded, the Hamms could, if necessary, seek relief from the lien in the district court. The Hamms appeal the district court’s order dismissing their complaint.
DISCUSSION
This court reviews the district court’s statutory interpretations de novo.[7] Generally, when this court interprets a statute, if “the language . . . is plain and unambiguous, and its meaning clear and unmistakable, there is no room for construction, and the courts are not permitted to search for its meaning beyond the statute itself.”[8]
The statute at issue here, NRS 38.310(1), provides that “[n]o civil action based upon a claim relating to . . . [t]he interpretation, application or enforcement” of CC&Rs may be commenced in state court, “unless the action has been submitted to mediation or arbitration pursuant to the provisions of NRS 38.300 to 38.360, inclusive.”[9] If a party institutes a civil action in violation of NRS 38.310(1), the district court must dismiss it pursuant to NRS 38.310(2).
The Hamms contend that this provision does not apply to their action to release the lien because (1) they sought not to interpret the CC&Rs but merely to enforce a prior interpretation of those CC&Rs; (2) their action was not a “civil action” for NRS 38.310 purposes; and (3) the lien portion of their claims that was directed at NAS, which is not a homeowners’ association, was not subject to NRS 38.310. The Hamms further contend that NRS 38.310 is unconstitutional because (1) it infringes on the right to a jury trial by requiring mediation or arbitration; and (2) it violates equal protection principles because a homeowners’ association may record a lien without submitting to mediation or arbitration, but homeowners must submit to mediation or arbitration before initiating an action in the district court to have the lien removed. We address each of these arguments in turn.
NRS 38.310’s application to actions seeking the “interpretation, application or enforcement” of CC&Rs
With respect to the Hamms’ argument that they did not seek the CC&Rs’ interpretation, the Hamms’ complaint explicitly stated that the Hamms sought “court intervention to interpret the language . . . of the Arrowcreek [HOA] CC&R’s.” Further, as the district court found, resolving the merits of the Hamms’ complaint would require the district court to interpret the CC&Rs’ meaning to determine whether, under that meaning, Arrowcreek HOA’s assessment was proper. Moreover, NRS 38.310 also prohibits civil actions related to the enforcement of CC&Rs without first submitting the claims to mediation or arbitration. Accordingly, so long as the Hamms’ action constitutes a “civil action” for NRS 38.310 purposes, and NRS 38.310 applies to NAS, the Hamms must submit their claims to arbitration or mediation before instituting an action in the district court.
The definition of “civil action” for NRS 38.310 purposes
For NRS 38.310 purposes, a “civil action” is defined as “includ[ing] an action for money damages or equitable relief.”[10] However, this definition excludes “an action in equity for injunctive relief in which there is an immediate threat of irreparable harm.”[11] This definition also excludes actions “relating to the title to residential property.”[12]
Based on these exclusions, the Hamms contend that the district court matter, in which they sought to remove the lien, was not a “civil action” under NRS Chapter 38 because the lien created an “immediate threat of irreparable harm” by clouding their title and putting Arrowcreek in the position to foreclose on their property. They also contend that the matter was not a “civil action” because it was related to residential title. These arguments are addressed in turn.
Exception to the definition of “civil action”: “immediate threat of irreparable harm”
This court has not previously addressed whether a lien on real property creates immediate and irreparable harm. “[A] lien is a security device that binds property to a debt and puts a party on notice that someone besides the owner of the property has an interest in that property.”[13] Further, this court has noted that a lien on property clouds that property’s title.[14] However, whether the mere existence of a lien creates an immediate threat of irreparable harm depends on the meanings of “immediate” and “irreparable.”
Courts often use the terms “immediate” and “irreparable” in the context of determining whether to grant injunctive relief.[15] The common understanding of “immediate” is “instant or direct.”[16] Generally, harm is “irreparable” if it cannot adequately be remedied by compensatory damages.[17] Although this court has concluded that a foreclosure may result in irreparable harm “[b]ecause real property and its attributes are considered unique,”[18] a lien is merely a preliminary step to foreclosure and does not itself instantly implicate the loss of unique real property.
In the injunction context, the Pennsylvania Commonwealth Court has recognized that, “[i]n special circumstances, a court conceivably could find that a property owner would be irreparably harmed because of the existence of [a] lien.”[19] Nonetheless, the Pennsylvania court concluded that the property owners must allege and prove an irreparable harm “apart from the existence of the liens themselves”[20] because liens usually may be removed by paying money or posting security, which would result in harm only to the extent of a temporary loss of any amount that is ultimately not owed.[21] Accordingly, the court concluded that an injunction was improper as the property owners there had failed to show that irreparable harm would occur as a result of the existence of the liens while they pursued means to remove the liens.[22] We find the Pennsylvania Commonwealth Court’s reasoning persuasive. Therefore, we conclude that the filing of a lien, in and of itself, does not effect an immediate threat of irreparable harm.
In this case, the Hamms did not allege or prove irreparable harm. Instead, they asserted in their complaint that the lien clouded their title and harmed their perceived “creditworthiness.” Further, Arrowcreek HOA had not yet instituted foreclosure proceedings.[23] Accordingly, as the Hamms did not provide proof that they would have been unable to pay the lien prior to the institution of foreclosure proceedings or were otherwise injured in a manner that could not be remedied, the district court did not err in concluding that the Hamms’ action fell within the scope of NRS 38.310.
Exception to definition of “civil action”: “an action relating to the title to residential property”
For the purpose of NRS 38.310, this court has not previously addressed whether an action to release a lien constitutes an “action relating to the title to residential property.”[24] As noted above, a lien is a monetary encumbrance on property,[25] which clouds title.[26] We now take this opportunity to clarify that, while a lien clouds title, it exists separately from that title, and therefore, an action simply to remove the lien does not “relate to” residential title so as to fall outside the scope of NRS 38.310.
Real property implicates a broad range of potential rights, including “all rights inherent in ownership, including the right to possess, use, and enjoy the property,”[27] as well as security in and title to the property.[28] While a lien creates a security interest in property, “[a] lien right alone does not give the lienholder right and title to property.”[29] Instead, title, which “constitut[es] the legal right to control and dispose of property,”[30] remains with the property owner until the lien is enforced through foreclosure proceedings. Before that time, the lien merely gives its holder priority to the property and security for compensation.[31] Therefore, while a lienholder possesses a property right,[32] and even though a lien clouds the property’s title,[33] an action to remove the lien does not, in and of itself, “relate to” the owner’s title so as to come outside the definition of “civil action” for NRS 38.310 purposes.
In this case, Arrowcreek recorded a lien against the Hamms’ property, but it did not initiate proceedings to foreclose upon the lien. The filing of the lien created a monetary encumbrance that did not alter the Hamms’ title to the property. Accordingly, we conclude that the Hamms’ action to release the lien did not “relat[e] to the title to residential property.”[34]
We further conclude that NRS 38.310 expresses Nevada’s public policy favoring arbitration of disputes involving the interpretation and enforcement of CC&Rs. Accordingly, because the Hamms’ action to release the lien on their property did not allege an immediate threat of irreparable harm or relate to residential title, it constituted a civil action subject to NRS 38.310’s mediation or arbitration prerequisite.
Application of NRS 38.310 to an action against a collection agency working as an agent for a homeowners’ association
The Hamms argue that NRS 38.310 does not apply to their claim against NAS because NAS is a collection agency, not an “association.” NAS argued below that it was Arrowcreek HOA’s agent and therefore subject to the same statutory prerequisites as Arrowcreek HOA.
An agency relationship results when one person possesses the contractual right to control another’s manner of performing the duties for which he or she was hired.[35] The party asserting the agency relationship has the burden of proving the relationship by a preponderance of the evidence.[36] While this court has not previously addressed whether collection agencies act as agents when collecting debts for homeowners’ associations, the Texas Court of Appeals has concluded that collection agencies attempting to collect on a promissory note secured by a lien
“act[ ] as agents for the various holders of the note.”[37]
We conclude that an agency relationship existed here because Arrowcreek HOA hired NAS to collect the Hamms’ alleged assessments and possessed the contractual right to direct NAS to record the lien on Arrowcreek HOA’s behalf. As the Hamms’ claims against NAS arose from actions performed as Arrowcreek HOA’s agent, NRS 38.310 applies to their claims against NAS just as it applies to their claims against Arrowcreek HOA. As we conclude that the district court properly dismissed the Hamms’ action against Arrowcreek HOA under NRS 38.310, we also conclude that the district court properly dismissed the Hamms’ action against NAS under that statute.
Constitutionality of NRS 38.310
The Hamms argue that NRS 38.310 violates their constitutional rights to a jury trial and equal protection under the law. While the Hamms failed to raise their constitutionality arguments below, we choose to analyze them sua sponte for plain error.[38]
NRS 38.310 and the constitutional right to a jury trial
Article 1, Section 3 of the Nevada Constitution provides: “The right of trial by Jury shall be secured to all and remain inviolate forever; but a Jury trial may be waived by the parties in all civil cases in the manner to be prescribed by law . . . .” NRS 38.310 does not require binding arbitration. Instead, it requires that the parties submit to mediation, nonbinding arbitration, or binding arbitration before they initiate a civil action.[39] If the parties agree to nonbinding arbitration, “any party to the arbitration may, within 30 days after a decision and award have been served upon the parties, commence a civil action in the proper court concerning the claim which was submitted for arbitration.”[40] Even if the parties agree to binding arbitration, the arbitration award may be vacated and a rehearing granted pursuant to NRS 38.241.[41]
In this case, the Hamms and Arrowcreek could select mediation or arbitration pursuant to the provisions of NRS 38.330 noted above. As the Hamms had adequate legal remedies available to them upon the conclusion of either nonbinding or binding arbitration, we conclude that NRS 38.310 does not violate the constitutional right to a jury trial.
NRS 38.310 and the constitutional right to equal protection
The Equal Protection Clause of the Fourteenth Amendment to the United States Constitution guarantees equal protection under the law. The first step in the equal protection analysis is to determine the appropriate standard of scrutiny to apply according to the rights infringed and the classification created.[42] If fundamental rights are not infringed or a suspect class is not involved, the statute “will survive an equal protection attack so long as the classification withstands ‘minimum scrutiny,’ i.e., is rationally related to a legitimate governmental purpose.”[43] In this case, as no fundamental rights are involved, we apply the rational basis test to assess the constitutionality of NRS 38.310.[44]
NRS 116.3116(1) provides that liens exist when assessments are due, regardless of any classification. Thus, an association is not required to commence a civil action to record or perfect the lien, which already exists once assessments are due, and, therefore, such association need not submit to mediation or arbitration before recording the lien. We conclude that NRS 38.310 does not treat similarly situated individuals differently because it requires mediation or arbitration before civil actions are initiated by homeowners or homeowners’ associations alike, without classification. Applying the rational basis test, we conclude that NRS 38.310’s requirement of mediation or arbitration is rationally related to the legitimate governmental interest of assisting homeowners to achieve a quicker and less costly resolution of their disputes with homeowners’ associations than if they had to initiate a civil action in the district court. Accordingly, we conclude that NRS 38.310 does not violate equal protection principles.
CONCLUSION
If parties dispute the interpretation and enforcement of CC&Rs, they must first submit to mediation or arbitration, unless a party seeks injunctive relief from a threat of immediate and irreparable harm or the action relates to residential title.[45] As an action to remove a lien, without more, neither involves an immediate threat of irreparable harm nor relates to title to residential property, we conclude that parties must submit such an action to mediation or arbitration pursuant to NRS 38.310 before seeking relief in the district court. Therefore, in this case, the district court properly dismissed the Hamms’ action against Arrowcreek HOA because they had not submitted to mediation or arbitration.
Further, when a homeowners’ association employs a collection agency to record a lien, the collection agency is usually acting as its agent. As such, any “civil actions” brought against the collection agency must be submitted to mediation or arbitration along with any corresponding claims against the homeowners’ association. Therefore, here, the district court properly dismissed the Hamms’ action against NAS, which acted as Arrowcreek HOA’s agent. Finally, we conclude that NRS 38.310 does not violate the constitutional rights to a jury trial and equal protection under the law. Accordingly, we affirm the district court’s order dismissing the Hamms’ action pursuant to NRS 38.310(2).[46]
HARDESTY, PARRAGUIRRE, DOUGLAS, CHERRY and SAITTA, JJ., and ROSE, Sr. J., concur.
**********FOOTNOTES**********
[1] The Honorable Robert E. Rose, Senior Justice, was appointed by the court to sit in place of the Honorable A. William Maupin, Justice, who voluntarily recused himself from participation in the decision of this matter. Nev. Const. art. 6, § 19; SCR 10.
[2] We note that the version of NRS 38.310 applicable to this case was effective through December 31, 2007. The amended version now includes real estate within condominium hotels.
[3] NRS 38.300(3) (amended effective January 1, 2008).
[4] Id.
[5] Id.
[6] See NRS 116.075.
[7] Keife v. Logan, 119 Nev. 372, 374, 75 P.3d 357, 359 (2003).
[8] State v. Jepsen, 46 Nev. 193, 196, 209 P. 501, 502 (1922).
[9] See also NRS 116.4117(2) (requiring that parties comply with NRS 38.310 before suing for damages on claims arising from a failure or refusal to comply with homeowners’ association documents).
[10] NRS 38.300(3).
[11] Id.
[12] Id.
[13] State, Dep’t Human Res. v. Estate of Ullmer, 120 Nev. 108, 117, 87 P.3d 1045, 1051 (2004) (explaining that a lien “is ‘a claim, encumbrance, or charge on property for the payment of some debt, obligation or duty’”) (quoting Black’s Law Dictionary 922 (6th ed. 1990)).
[14] See In re Contrevo, 123 Nev. 20, 24, 153 P.3d 652, 655 (2007) (“Permitting creditors to attach judgment liens to exempt homestead property would allow them to cloud the title to property that they have no legal right to execute against.”); O’Dell v. Martin, 101 Nev. 142, 143, 696 P.2d 996, 997 (1985) (explaining that federal tax liens recorded against the appellant’s property clouded title to that property).
[15] See NRCP 65(b) (permitting temporary restraining orders if specific facts show “immediate and irreparable injury, loss, or damage”); Dixon v. Thatcher, 103 Nev. 414, 415-16, 742 P.2d 1029, 1029-30 (1987) (concluding that a preliminary injunction to stop a foreclosure is proper where there is a reasonable likelihood of success and a threat of irreparable harm).
[16] Sam v. Com., 411 S.E.2d 832, 839 (Va. Ct. App. 1991).
[17] University Sys. v. Nevadans for Sound Gov’t, 120 Nev. 712, 721, 100 P.3d 179, 187 (2004).
[18] Dixon, 103 Nev. at 416, 742 P.2d at 1030.
[19] LCN Real Estate v. Borough of Wyoming, 544 A.2d 1053, 1059 (Pa. Commw. Ct. 1988).
[20] Id.
[21] Id. at 1060.
[22] Id.
[23] See NRS 116.31162(1)(c) (requiring an association to wait 90 days from the recording of the notice of default before instituting foreclosure proceedings).
[24] NRS 38.300(3).
[25] State, Dep’t Human Res. v. Estate of Ullmer, 120 Nev. 108, 117, 87 P.3d 1045, 1051 (2004).
[26] In re Contrevo, 123 Nev. 20, 24, 153 P.3d 652, 655 (2007) (judgment liens); O’Dell v. Martin, 101 Nev. 142, 143, 696 P.2d 996, 997 (1985) (federal tax liens).
[27] McCarran Int’l Airport v. Sisolak, 122 Nev. 645, 658, 137 P.3d 1110, 1119 (2006).
[28] In re Marino, 205 B.R. 897, 899 (Bankr. N.D. Ill. 1997).
[29] Id.
[30] Black’s Law Dictionary 1522 (8th ed. 2004).
[31] In re Marino, 205 B.R. at 899.
[32] Id.
[33] In re Contrevo, 123 Nev. 20, 24, 153 P.3d 652, 655 (2007); O’Dell v. Martin, 101 Nev. 142, 143, 696 P.2d 996, 997 (1985).
[34] NRS 38.300(3).
[35] Grand Hotel Gift Shop v. Granite St. Ins., 108 Nev. 811, 815, 839 P.2d 599, 602 (1992).
[36] Trump v. District Court, 109 Nev. 687, 695 n.3, 857 P.2d 740, 745 n.3 (1993).
[37] Mills v. Haggard, 58 S.W.3d 164, 165 (Tex. App. 2001).
[38] See Matter of Guardianship of L.S. & H.S., 120 Nev. 157, 166 n.24, 87 P.3d 521, 526 n.24 (2004) (noting that this court may address constitutional issues sua sponte if they were not raised in the district court).
[39] NRS 38.310(1).
[40] NRS 38.330(5).
[41] NRS 38.330(6).
[42] Arata v. Faubion, 123 Nev. ___, ___, 161 P.3d 244, 248 (2007).
[43] Id.
[44] See Sawyer v. Dooley, 21 Nev. 390, 394, 32 P. 437, 438 (1893) (applying the rational basis test to a statute involving different treatment of property owners according to the amount of delinquent taxes they owed on their property).
[45] NRS 38.300(3); NRS 38.310.
[46] We have considered the parties’ other arguments and conclude that they lack merit. Specifically, the Hamms argue that the district court’s equity jurisdiction requires it to decide their case and that Arrowcreek selected the forum and waived arbitration by recording the lien.
*****************************
Mayfield v. Koroghli
Cite as: Mayfield v. Koroghli
124 Nev. Adv. Op. No. 34
May 29, 2008
IN THE SUPREME COURT OF THE STATE OF NEVADA
No. 46972
SEAYNOAH MAYFIELD AND HELEN J. MAYFIELD,
Appellants,
vs.
RAY KOROGHLI, AS THE NOMINEE OF SATSOY THAY, AN INDIVIDUAL,
Respondent.
No. 47454
SEAYNOAH MAYFIELD AND HELEN J. MAYFIELD,
Appellants,
vs.
RAY KOROGHLI, AS THE NOMINEE OF SATSOY THAY, AN INDIVIDUAL,
Respondent.
Consolidated appeals from district court judgments granting specific performance and awarding costs in a real property contract action. Eighth Judicial District Court, Clark County; J. Charles Thompson, Judge.
Affirmed in part, reversed in part and remanded with instructions.
Hunterton & Associates and C. Stanley Hunterton and Pamela R. Lawson, Las Vegas, for Appellants.
Brownstein Hyatt Farber Schreck, LLP, and Todd L. Bice and James J. Pisanelli, Las Vegas, for Respondent.
BEFORE HARDESTY, PARRAGUIRRE and DOUGLAS, JJ.
OPINION
By the Court, HARDESTY, J.:
This case concerns a contract for the sale of Henderson, Nevada, real property. Under the contract, the close of escrow was conditioned on the buyer obtaining commercial subdivision approval with respect to the land. After the parties worked unsuccessfully for approximately three years to obtain the commercial subdivision approval, the sellers, without any warning to the buyer, repudiated the contract and refused to consummate the sale. In the ensuing action instituted by the buyer against the sellers and his real estate agent, who ultimately settled with the buyer, the district court granted specific performance to the buyer and awarded him costs.
In this appeal, we consider whether a party’s performance under a contract must be completed within a certain time when the contract’s terms do not make the time for the party’s performance of the essence. We conclude that when a contract does not make the time for a party’s performance of the essence, either party can make it so by setting a reasonable time for performance and notifying the other party of an intention to abandon the contract if it is not performed within that time. Further, absent such a demand for performance, or a term making time of the essence, a contract must be performed within a reasonable time. What constitutes a reasonable time for a contract’s performance is a question of fact to be determined based on the nature of the contract and the circumstances surrounding its making.
We also consider in this appeal the circumstances under which a party to a contract may waive a condition precedent to his performance so that he can complete his performance under the contract. We conclude that when a contract contains a condition precedent to a party’s performance, that party may waive the condition and tender performance so long as the parties included the condition in the contract for the sole benefit of the party seeking to waive the condition and complete performing his contractual obligations. Whether a condition included in a contract is for the benefit of one or both parties is a question of fact.
Finally, we consider whether costs should be apportioned when one party sues multiple defendants on similar claims based on the same set of facts. We conclude that in such a situation, it is within the district court’s discretion to determine whether the claims are so intertwined as to render apportionment impracticable, but before declaring apportionment impracticable, the district court must make a good faith effort to apportion costs. In light of those considerations, we affirm the district court’s judgment granting specific performance to the buyer. In particular, the sellers did not provide the buyer a reasonable time to complete his performance under the contract, and although the buyer failed to obtain the commercial subdivision approval—a condition precedent to the buyer’s performance—that condition was included in the contract solely for the buyer’s benefit so he was free to waive it and complete performance by tendering the down payment. Nevertheless, because the record in this case does not reveal that the district court made an effort to apportion costs, we reverse its award of costs and remand for further proceedings consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
In 1999, appellants Seaynoah and Helen Mayfield entered into a contract with Satsoy Thay for the sale to Thay of a parcel of land in Henderson, Nevada. Thay subsequently assigned the contract to respondent Ray Koroghli. Koroghli hired real estate agent Ellen Ross to make an offer on the property on his behalf and to represent him in the transaction with the Mayfields. The 1999 contract expired by its own terms after four extensions. Soon after that contract expired, the parties entered into a second contract, on January 5, 2000. The second contract provided for a purchase price of $10 per square foot of “net usable acreage,” with the final price to be calculated after realignment of roadways. The purchase was to be seller financed, with a $1.3 million down payment, secured by a deed of trust for the balance, payable in quarterly installments over 20 years. The second contract also provided for the close of escrow 60 days from the date that Koroghli obtained commercial rezoning and approval for commercial subdivision of the property. The parties included the commercial subdivision condition in the second contract on Koroghli’s insistence, to ensure that he could use the property in the manner he expected. Other than noting that escrow would close 60 days after Koroghli obtained commercial rezoning and subdivision of the property, the second contract did not specify a date by which performance was to occur, nor did it contain a clause declaring time of the essence.
Koroghli retained an engineer, and the parties worked together to obtain rezoning and approval for commercial subdivision of the property. On September 5, 2000, the Henderson City Council rezoned the property. However, by early 2001, the property had still not been approved for commercial subdivision. Koroghli offered to waive the commercial subdivision condition and close on the property. Mr. Mayfield declined to close at that time, insisting that he would assist in obtaining all of the property that the parties anticipated would be added through expected road vacations, road realignments, and a land trade with the City of Henderson. Over the next two years, the parties worked on these issues and Koroghli retained engineering, architectural, and public relations entities to assist in developing the property.
On February 26, 2003, three years after the Mayfields and Koroghli entered into the second contract, Mr. Mayfield, without providing Koroghli notice or a reason, repudiated the contract and refused to sell the property to Koroghli. In response, Koroghli sent Mr. Mayfield a letter indicating that he was “ready, willing and able” to perform, and demanding close of escrow. Mr. Mayfield refused to perform.
Koroghli filed suit against the Mayfields seeking specific performance and against Ross alleging breach of contract and breach of fiduciary duty. The Mayfields asserted cross-claims against Ross. Both Koroghli and the Mayfields reached out-of-court settlements with Ross, and she was dismissed from the case. Following a bench trial, the district court concluded that the Mayfields had breached their contract with Koroghli and that Koroghli was entitled to specific performance. The court found that because the contract did not contain a date by which Koroghli was to obtain commercial subdivision or a clause making time of the essence, the Mayfields were obligated to fix a reasonable time for performance of this condition and communicate that time to Koroghli before they could declare him to be in default. The district court concluded that because the Mayfields did not so notify Koroghli, their repudiation constituted a breach of the contract. The court therefore awarded specific performance to Koroghli. The court also awarded Koroghli costs totaling $52,690.91. This appeal followed.
DISCUSSION
On appeal, the Mayfields assert that the district court’s grant of specific performance was improper because (1) the Mayfields were not required to make a demand on Koroghli to perform by a certain date, and the passage of three years exceeded a reasonable time for performance; and (2) Koroghli did not and cannot tender performance according to the terms of the contract. The Mayfields argue further that the district court erred by awarding costs to Koroghli because the costs should have been apportioned between those incurred in pursuit of claims against the Mayfields versus those incurred in pursuit of claims against Ross.
We review the district’s court’s decisions to grant specific performance and to award costs for an abuse of discretion.[1]
Because time was not of the essence in the parties’ contract, the Mayfields were required to allow Koroghli a reasonable time in which to perform his obligations under the contract
The Mayfields argue that a demand for performance is not necessary unless it is required by the terms or the nature of a contract and that, even if a demand is required, an exception exists when it is apparent that a demand would be unavailing or constitute a useless formality. The Mayfields argue that they were not required to demand performance from Koroghli because doing so would have been futile, since, if Koroghli intended to perform, he would have done so by February 2003.
Although not previously recognized by this court, a fundamental principle of contract law is that the time for performance under a contract is not considered of the essence unless the contract expressly so provides or the circumstances of the contract so imply.[2] If time is not of the essence, the parties generally must perform under the contract within a reasonable time,[3] which “depends upon the nature of the contract and the particular circumstances involved.”[4] Nevertheless, in the absence of a clause making time of the essence, a party’s failure to perform within a reasonable time generally does not constitute a material breach of the agreement.[5] But when a contract does not make time of the essence, one party to the contract may make it so by demanding performance by a certain date or time, so long as the party “fix[es] a reasonable time for the completion of the contract and giv[es] notice to the other party of an intention to abandon the contract unless it is completed within the specified time.”[6] In so doing, the time for a party’s performance becomes a material term of the contract, so that the failure to perform by the time specified usually constitutes and has the legal effect of a material breach.[7] Of course, it would be futile for a party to make a demand “if the other party has repudiated the contract or otherwise indicated [he] refuses to perform.”[8]
The contract between the Mayfields and Koroghli did not expressly make time of the essence. Nor did the circumstances surrounding the making of the contract indicate that the parties intended performance by a certain date to be an essential part of the bargain. Indeed, the parties worked together over a period of three years to complete the transaction. Also, Mr. Mayfield declined Koroghli’s offer, made approximately one year after the parties entered into the contract, to waive the commercial subdivision condition and close the deal. At that time, Mr. Mayfield told Koroghli that he wanted to ensure that Koroghli received the deal for which he had bargained.[9] Based on the terms of the contract and the parties’ behavior and representations, we must conclude that time was not of the essence in their contract.
The Mayfields were entitled to make time of the essence after the formation of the contract by setting a reasonable time for Koroghli’s performance and by communicating that deadline to Koroghli. But the Mayfields did not make such a demand. Had they made such a demand for performance which allowed a reasonable time to close escrow, the Mayfields would have had the right to abandon the contract if Koroghli failed to perform by the stated date. Although they claim they did not make a demand because doing so would have been futile, we reject that contention. Koroghli did not repudiate the contract or otherwise indicate that he did not intend to perform under it. Rather, as the district court found, Koroghli diligently proceeded toward obtaining subdivision approval. Therefore, the Mayfields were not excused on grounds of futility from demanding performance. We thus discern no abuse of discretion in this finding, and we conclude that, because the Mayfields did not demand performance and were not excused from doing so on grounds of futility, time was not of the essence in their contract with Koroghli.
Because time was not of the essence, the Mayfields were obligated to allow Koroghli a reasonable time for performance and were not excused from performing under the contract unless Koroghli failed to perform within a reasonable time. The Mayfields argue that the passage of three years exceeds a reasonable time for performance and, therefore, their repudiation was justified. We disagree.
Whether a reasonable time for a contract’s completion has passed is determined by the nature of the contract and the circumstances surrounding its making.[10] Here, although the district court did not make express findings in this regard, it is apparent from the record that a reasonable time for performance had not yet expired.[11] Specifically, the record demonstrates that the Mayfields and Koroghli agreed to enter into a contract for the sale of undeveloped, commercial property. The parties were both experienced in transactions of this kind and were aware of the myriad development and zoning permits necessary to develop the land as agreed. Mr. Mayfield worked alongside Koroghli to obtain the requisite permits and approvals during the three-year period, which he now complains was unreasonable. At no point during those three years did the Mayfields express impatience or frustration as to the length of time that had passed. We conclude that under the circumstances of this case, the passage of three years after the parties’ formation of the contract did not exceed a reasonable time for performance. It follows, therefore, that the Mayfields’ repudiation was not excused and constituted a breach of the contract.
Koroghli tendered performance when he offered to waive the commercial subdivision condition and close on the contract at the time of the Mayfields’ repudiation
The Mayfields argue that the district court’s grant of specific performance was an abuse of discretion because Koroghli did not tender performance, which is a prerequisite to a grant of specific performance. Specifically, the Mayfields contend that Koroghli cannot tender performance according to the terms of the contract because the commercial subdivision requirement has not been fulfilled.
We have previously held that specific performance is available only when: “(1) the terms of the contract are definite and certain; (2) the remedy at law is inadequate; (3) the appellant has tendered performance; and (4) the court is willing to order [specific performance].”[12] If a purchaser of real property has not yet tendered the purchase price, the district court may still grant specific performance if the purchaser can “demonstrate that she is ready, willing, and able to perform.”[13] There is no dispute that, at the time Mr. Mayfield repudiated the contract, Koroghli offered to tender the agreed-upon purchase price and close escrow. Koroghli thereby adequately demonstrated that he was ready, willing, and able to perform. The Mayfields assert, however, that Koroghli’s purported tender of performance was deficient because the commercial subdivision condition was never fulfilled. They further argue that Koroghli did not have the right to unilaterally waive the commercial subdivision condition because it was for the benefit of both parties. We disagree.
A party may waive a condition in a contract if the condition was included in the contract for his or her benefit.[14] Whether a particular condition is for the benefit of one or both parties is a question of fact.[15] Such a determination involves examination of the facts and circumstances of the particular case as well as the language of the contract at issue.[16] “The test is whether the condition was intended by both parties to be included in the contract for the benefit of both parties, not whether the condition was in fact of a benefit to both parties.”[17]
In this case, the district court found that the commercial subdivision condition was included at Koroghli’s request to ensure that the property could be used in the manner expected by Koroghli. The district court based that finding on Mr. Mayfield’s testimony that the parties’ added the condition at Koroghli’s request. We determine that the district court did not abuse its discretion by finding that the parties included the commercial subdivision requirement in the contract solely for Koroghli’s benefit. Although the Mayfields argue now that the condition could have benefited them because, if satisfied, it would make the property more valuable in case Koroghli defaulted on his financial obligations under the contract, the proper inquiry focuses on the parties’ intent in adding the condition at the time of contracting.[18] That the condition may have later benefited the Mayfields is inapposite. Because the parties included the condition at the time of the contract solely for Koroghli’s benefit, Koroghli could unilaterally waive it. His offer to waive the condition and tender performance of the purchase price at the time of Mr. Mayfield’s repudiation was thus satisfactory proof that he was ready, willing, and able to perform. The district court did not abuse its discretion by granting specific performance to Koroghli. We therefore affirm the district court’s judgment granting specific performance.
The district court must attempt to apportion the costs incurred in litigating against Ross and the costs incurred in litigating against the Mayfields
The Mayfields argue that the district court erred by failing to apportion the costs awarded to Koroghli between those incurred in pursuit of claims against the Mayfields versus costs incurred in pursuit of claims against Ross before she settled with the parties. The Mayfields argue that the award of costs should be reduced by 50 percent since Ross was dismissed from the action after much of the litigation had already taken place. Koroghli argues that apportionment is impracticable and not required when claims pursued against multiple parties are substantially intertwined, as were his claims against the Mayfields and Ross.
We have not previously considered the propriety of apportioning costs when the prevailing party pursued similar claims, based on the same factual circumstances, against multiple defendants. The California Court of Appeal faced a similar problem in Abdallah v. United Savings Bank.[19] In Abdallah, the court affirmed an award of attorney fees to the prevailing party in an action in which fees were authorized for only one of three claims pursued. The court explained that apportionment was not mandatory in such an instance, as the district court could reasonably have concluded that the claims were so “‘inextricably intertwined’”[20] as to make it “‘impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units.’”[21] We adopt the Abdallah court’s reasoning and hold that, in an action in which a plaintiff pursues claims based on the same factual circumstance against multiple defendants, it is within the district court’s discretion to determine whether apportionment is rendered impracticable by the interrelationship of the claims against the multiple defendants. The district court must, however, attempt to apportion the costs before determining that apportionment is impracticable. When attempting to apportion costs, the district court must make specific findings, either on the record during oral proceedings or in its order, with regard to the circumstances of the case before it that render apportionment impracticable.
In this case, the district court found that Koroghli’s claims against the Mayfields and Ross were so intertwined that apportionment was impracticable. However, the record does not reflect that the district court attempted to apportion the costs before making its finding. We therefore reverse the award of costs to Koroghli and remand this matter to the district court for it to consider the practicability of apportioning costs.[22]
CONCLUSION
We affirm the district court’s judgment granting specific performance because the Mayfields were not excused from performing under the contract and Koroghli showed that he was ready, willing, and able to perform. However, we determine that the district court abused its discretion by failing to attempt to apportion the costs Koroghli incurred while litigating against the Mayfields from those costs he incurred while litigating against Ross. Accordingly, we reverse the award of costs to Koroghli and remand this matter to the district court for it to consider apportionment of any costs awarded to Koroghli consistent with the rule adopted in this opinion.[23]
PARRAGUIRRE and DOUGLAS, JJ., concur.
**********FOOTNOTES**********
[1] Serpa v. Darling, 107 Nev. 299, 304, 810 P.2d 778, 782 (1991) (reviewing a district court’s denial of specific performance for an abuse of discretion); Borgerson v. Scanlon, 117 Nev. 216, 221, 19 P.3d 236, 239 (2001) (reviewing a district court’s award of costs for an abuse of discretion).
[2] See 15 Richard A. Lord, Williston on Contracts § 46:3, at 399-404 (4th ed. 2000).
[3] Stratton v. Tejani, 187 Cal. Rptr. 231, 235 (Ct. App. 1982).
[4] Mohr Park Manor, Inc. v. Bank of Nevada, 87 Nev. 520, 522, 490 P.2d 217, 218 (1971).
[5] See Zancanaro v. Cross, 339 P.2d 746, 749 (Ariz. 1959); Deep Nines, Inc. v. McAfee, Inc., 246 S.W.3d 842, 846 (Tex. App. 2008).
[6] See 15 Richard A. Lord, Williston on Contracts § 46:16, at 484-85 (4th ed. 2000).
[7] See O’Malley v. Cummings, 229 N.E.2d 878, 880-81 (Ill. App. Ct. 1967); New Colony Homes v. Long Island Property, 803 N.Y.S.2d 615, 616 (App. Div. 2005).
[8] In re K-Com Micrographics, Inc., 159 B.R. 61, 64 (Bankr. D.C. 1993).
[9] Mr. Mayfield told Koroghli that he did not want to sell him a “pig in a poke,” or, in other words, Mayfield did not want to sell Koroghli something other than what he bargained for.
[10] Mohr Park Manor, Inc. v. Bank of Nevada, 87 Nev. 520, 522, 490 P.2d 217, 218 (1971).
[11] Butler v. Bayer, 123 Nev. ___, ___ n.22, 168 P.3d 1055, 1062 n.22 (2007) (“‘[T]his court will affirm the order of the district court if it reached the correct result, albeit for different reasons.’” (quoting Rosenstein v. Steele, 103 Nev. 571, 575, 747 P.2d 230, 233 (1987))).
[12] Serpa v. Darling, 107 Nev. 299, 305, 810 P.2d 778, 782 (1991).
[13] Id. at 304, 810 P.2d at 782.
[14] Silver Dollar Club v. Cosgriff Neon, 80 Nev. 108, 111, 389 P.2d 923, 924 (1964).
[15] See Pelligreen v. Wood, 111 S.W.3d 446, 451 (Mo. Ct. App. 2003); Crescenta Valley Moose Lodge No. 808 v. Bunt, 87 Cal. Rptr. 428, 431 (Ct. App. 1970).
[16] Pelligreen, 111 S.W.3d at 451.
[17] Id.
[18] The Mayfields never argued that the seller financing would be impaired as a consequence of not securing commercial subdivision approval.
[19] 51 Cal. Rptr. 2d 286, 293 (Ct. App. 1996).
[20] Id. (quoting Finalco, Inc. v. Roosevelt, 3 Cal. Rptr. 2d 865, 869 (Ct. App. 1991)).
[21] Id. (quoting Fed-Mart Corp. v. Price, 168 Cal. Rptr. 525, 532 (Ct. App. 1980)).
[22] We note that a disparity exists between the amount of costs awarded by the district court at the hearing on the Mayfields’ motion to retax and settle costs—$51,629.09—and the amount of costs listed in the judgment on costs—$52,690.91. The district court should rectify this inconsistency on remand.
[23] Having considered all of the Mayfields’ contentions, we conclude that their remaining arguments lack merit.
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Brooks v. Bonnet
Cite as: Brooks v. Bonnet
124 Nev. Adv. Op. No. 36
June 5, 2008
IN THE SUPREME COURT OF THE STATE OF NEVADA
No. 48250
ROBERT L. BROOKS, TRUSTEE, BROOKS LIVING TRUST DATED FEBRUARY 22, 1999,
Appellant,
vs.
ROBERT BONNET AND ANGELA HEREDIA BONNET, HUSBAND AND WIFE, AS JOINT TENANTS,
Respondents.
Appeal from a district court order entered after a bench trial in an easement action. Second Judicial District Court, Washoe County; Connie J. Steinheimer, Judge.
Affirmed.
Prezant & Mollath and Stephen C. Mollath, Reno, for Appellant.
Stephen H. Osborne, Reno, for Respondents.
BEFORE MAUPIN, CHERRY and SAITTA, JJ.
OPINION
Appellant Robert L. Brooks instituted a district court action seeking declaratory and injunctive relief with respect to a strip of land owned by respondents Robert and Angela Bonnet, on which he had built a driveway. At issue in this case is whether Brooks possessed an express easement, easement by necessity, or residual easement over that strip of land. We conclude that Brooks did not possess an easement and therefore was not entitled to the declaratory or injunctive relief that he sought.
FACTS AND PROCEDURAL HISTORY
Originally, the two pieces of land involved in this dispute were part of a larger parcel of land. The deed to the larger parcel of land, which was filed in 1952, contains a grant to the City of Reno of an easement for a public road.[1] The subsequent deeds creating the two smaller pieces of land involved in this dispute, Parcel 4 and Parcel 5, contain grants of easement almost identical to the public road easement granted to the City of Reno in the 1952 deed. In addition, a parcel map filed in 1975, Parcel Map 191, indicates the existence of the public road easement.[2]
Brooks purchased Parcel 5 in 1986. In 1992, he obtained an encroachment permit from the Nevada Department of Transportation (NDOT) to build a driveway over the land allotted for the easement. The encroachment permit allowed Brooks to “[c]onstruct [a] 25′ access rd. to McCarran Blvd. for single Family use.” It further specified that the driveway was “limited for single family residence use of lots #4 and 5.” In 2001, the Bonnets purchased Parcel 4. They subsequently constructed a fence that blocked Brooks’ access to the driveway.
Thereafter, the Bonnets applied for abandonment of the deeded roadway. The City of Reno subsequently officially abandoned any interest it had in the right of way for a public road created by the 1952 deed. In March 2002, Ms. Bonnet requested that NDOT revoke Brooks’ encroachment permit. NDOT rescinded the encroachment permit pursuant to Ms. Bonnet’s request but later reinstated it based on the belief that Brooks held a “deeded private easement” that he could use “regardless of the abandonment of the public easement.”
Brooks subsequently filed suit seeking a declaration that he enjoyed either an express or implied easement over the Bonnets’ parcel. He correspondingly sought injunctive relief preventing the Bonnets from interfering with the claimed easement. According to Brooks, because his “main, legal and most convenient 50′ access was to McCarran Blvd. through the BONNET parcel pursuant to the original deeded easement and Parcel Map 191,” he should be permitted to use the road. The Bonnets counterclaimed to quiet title to their land. The district court initially granted the Bonnets’ motion for summary judgment, quieting title to them. However, it then granted Brooks’ motion to reconsider that determination on the limited issue of whether Brooks held an implied easement. After conducting a bench trial with respect to the implied easement issue,[3] the district court determined that Brooks did not possess an easement and entered a judgment quieting title to the Bonnets. This appeal followed.
On appeal, Brooks claims that the district court erred in refusing to grant him easement rights and that he is entitled to injunctive relief, precluding the Bonnets from interfering with his purported easement rights. We disagree with Brooks and affirm the district court’s decision.
DISCUSSION
Brooks contends that he has the right to use the driveway he built over the Bonnets’ property because he held either an express easement appurtenant, an easement by necessity, or a residual easement. He also contends that, based on his purported easement rights, he is entitled to injunctive relief. We address these arguments in turn.
Express easement
Brooks argues that he holds an express easement appurtenant over the driveway that crosses the Bonnets’ parcel, Parcel 4. In this, he cites a number of cases from other jurisdictions for the proposition that an express conveyance of an easement may be made by written deed and, in such cases, courts should give effect to the intent of the parties.[4] In addition, he argues that an express easement may only be extinguished by consent, prescription, abandonment by the user, or merger.[5] Brooks asserts that, as none of those circumstances existed here, he still holds a permanent, express easement appurtenant.
In Nevada, an easement may be created by express agreement, prescription, or implication.[6] The scope of an express easement is determined by the terms used to create it. As with any other contract, courts must interpret the specific language of the instrument creating the easement to identify the easement’s scope.[7] Accordingly, unless extrinsic evidence was admitted to aid in construing the language in the instrument creating the easement, which is not the case here, the interpretation of the conveyance is a question of law subject to de novo review.[8] Here, the 1952 deed undoubtedly granted the City of Reno an easement in the form of a limited right to build a public road, but neither the 1952 deed, subsequent deeds, nor Parcel Map 191 granted Brooks any easement rights. Accordingly, even if we agreed with Brooks that the alleged easement in this case has not been extinguished, only the City of Reno would possess express easement rights. None of the instruments here grant Brooks an easement. As a result, we conclude that Brooks did not hold an express easement appurtenant over Parcel 4.
Easement by necessity
Brooks claims that he has an implied easement by necessity over Parcel 4 because (1) there was prior common ownership of Parcels 4 and 5, and (2) an easement was necessary at the time of severance. He further asserts that he is entitled to use the easement because the Bonnets are using the strip of land and Brooks’ use will, therefore, not diminish their property value. Brooks also contends that it would be inequitable for the Bonnets to enjoy the use of an easement that he improved.
We noted in Jackson v. Nash[9] that an easement by necessity exists if (1) there is prior common ownership of the land benefited by the easement and the land burdened by the easement and (2) the easement is reasonably necessary to use the land the easement benefits.[10] We further recognized that “[e]asements by necessity are most often created where a possessor of land has no access to any public roadway except by way of passage through the servient estate.”[11] In an easement action, “[t]he burden of proof is upon the one who seeks to impose the way of necessity.”[12] With respect to the burden of proof we stated that
[w]hile a showing of reasonable necessity does not require that the passageway be the only one available, something significantly greater than inconvenience to the party claiming the easement must be shown. Although substantial inconvenience is a factor, it must be weighed against the burden and possible damage that could result from imposing an easement across another’s property.[13]
Moreover, “[a]lthough an implied easement arises [by necessity] by operation of law, the existence of an implied easement is generally a question of fact.”[14]
We conclude that Brooks’ argument is without merit. In this, we determine that to demonstrate reasonable necessity the party claiming the easement must show both necessity at the time of severance and present necessity. Here, Brooks has no present necessity because he has access to two other public roads from his property. He is merely, by his own admission, seeking an easement for his convenience, and accordingly, he cannot prove the element of reasonable necessity. In addition, we conclude that any inconvenience to Brooks from using alternate routes to access his property does not outweigh the damage to the Bonnets that could result from imposing an easement across their land. Indeed, substantial evidence supports the district court’s finding that granting Brooks an easement by necessity would impair the Bonnets’ property value and diminish their privacy and safety more than it would benefit Brooks or his property. Consequently, granting him an easement merely because he built the driveway that the Bonnets are now using would yield an inequitable result. Accordingly, Brooks does not possess an implied easement by necessity.
Residual easement
Brooks claims that “a private easement arises in a public highway following its vacation or abandonment from the mere fact that the landowner’s property abuts the former public way.” He cites a litany of cases from other jurisdictions as support for his argument that he has residual rights in the roadway despite the City of Reno’s abandonment.
We decline to expand the doctrine of abutting landowner rights as Brooks requests. Such an expansion is contrary to Nevada law. Specifically, under NRS 278.480, when a city in Nevada abandons an easement, “title to . . . the easement reverts to the abutting property owners in the approximate proportion that the property was dedicated by the abutting property owners or their predecessors in interest.”
Similarly, under NRS 408.523(3), an abandoned easement for a public highway is simply destroyed.[15] In addition, under NRS 278.480(5), a governing body is entitled to abandon an easement if it “is satisfied that the public will not be materially injured by the proposed [abandonment].” In fact, the only time that we have recognized abutter’s rights is in State ex rel. Department of Highways v. Linnecke.[16] In Linnecke, we held that an abutting landowner
has a special right of easement in a public road for access purposes. This is a property right of easement which cannot be damaged or taken from the owner without due compensation. But an owner is not entitled to access to his land at all points in the boundary to it and the highway, although entire access to his property cannot be cut off. If he has free and convenient access to his property and his means of egress and ingress are not substantially interfered with, he has no cause for complaint. The determination of whether such substantial impairment has been established must be reached as a matter of law. The extent of such impairment must be fixed as a matter of fact.[17]
In other words, abutter’s rights to an easement only exist in Nevada insofar as there is an easement by necessity that exists.[18]
Here, when the City of Reno abandoned its right to construct a public road, rights to the Parcel 4 land designated for the public road easement in the 1952 deed, subsequent deeds, and Parcel Map 191 reverted to the Bonnets, not Brooks.[19] Because Brooks did not have any interest in the easement land based on the terms of the written conveyance, he did not have any residual easement rights in the strip of land. In addition, because Brooks did not show that it was necessary for him to have the right to an easement, Linnecke does not apply here. Accordingly, we conclude that Brooks did not retain any residual rights in the easement across Parcel 4.[20]
CONCLUSION
For all of the reasons stated above, we affirm the decision of the district court and conclude that Brooks has no right to an easement across the Bonnets’ property, and we deny his request for injunctive relief.[21]
**********FOOTNOTES**********
[1] Specifically, the 1952 deed grants rights to the parcel’s owner “EXCEPTING THEREFROM a right of way over a strip of ground, 25 feet in width, along the north line of said parcel for a public road.”
[2] We conclude that the easement marked on Parcel Map 191 is the same easement as was originally reserved in the 1952 deed.
[3] Brooks filed his motion for reconsideration on October 22, 2002, and his first notice of appeal on November 18, 2002. The district court refused to reconsider its ruling that an easement could not be sustained on the theories of express grant of an easement or dedication. However, because it granted the motion for reconsideration on the implied easement issue, we remanded the case to the district court noting its intention to conduct a trial on the implied easement theory. See NRCP 54(b).
[4] See, e.g., Beebe v. Swerda, 793 P.2d 442 (Wash. Ct. App. 1990); City of Missoula v. Mix, 214 P.2d 212 (Mont. 1950).
[5] See Cotsifas v. Conrad, 905 P.2d 851 (Or. Ct. App. 1995).
[6] Alrich v. Bailey, 97 Nev. 342, 344, 630 P.2d 262, 263 (1981).
[7] See Cox v. Glenbrook Co., 78 Nev. 254, 371 P.2d 647 (1962).
[8] See, e.g., City of Manhattan Beach v. Superior Ct., 914 P.2d 160, 164-65 (Cal. 1996). If extrinsic evidence is admitted, then we will uphold the district court’s interpretation of the contract provided that it is supported by substantial evidence. Id.
[9] 109 Nev. 1202, 866 P.2d 262 (1993).
[10] Id. at 1209, 866 P.2d at 268.
[11] Id. at 1211, 866 P.2d at 269.
[12] Id. at 1209, 866 P.2d at 268.
[13] Id. at 1211, 866 P.2d at 269 (emphasis added).
[14] Id. at 1208, 866 P.2d at 267.
[15] NRS 408.523(3) provides that:
When a highway for which the State holds only an easement is abandoned, or when any other easement is abandoned, the property previously subject thereto is free from the public easement for highway purposes.
[16] 86 Nev. 257, 468 P.2d 8 (1970).
[17] Id. at 260, 468 P.2d at 9-10 (emphasis added) (citations omitted).
[18] Even in states that have recognized abutter’s rights, the abutting landowner must often show necessity and the prior existence of a public road or, in cases of abandonment, that the abutting landowner had a preexisting right in the easement. See Greenberg v. L.I. Snodgrass Co., 119 N.E.2d 292 (Ohio 1954); Mason v. State, 656 P.2d 465 (Utah 1982); Gilmor v. Wright, 850 P.2d 431, 437-38 (Utah 1993) (holding that “[a] subsequent abandonment of a public right-of-way over such a road has no effect on a private easement owned by an abutting landowner”).
[19] We conclude that, based on the facts here, the City of Reno’s abandonment did not materially injure the public.
[20] Brooks claims that NDOT’s decision to grant him an encroachment permit and its letter stating that he had a valid easement are entitled to deference because NDOT is a state agency. That argument is without merit because NDOT was not making a factual determination that warranted deference. Accordingly, Brooks’ reliance on Rosser v. SIIS to argue that the NDOT decision is entitled to deference is misplaced. 113 Nev. 1125, 1128, 946 P.2d 185, 187 (1997) (holding that an agency’s determination on a worker’s compensation claim was entitled to deference).
[21] Because we conclude that Brooks failed to demonstrate that the Bonnets interfered with cognizable property rights or that the equities heavily balanced in his favor, we conclude that he was not entitled to injunctive relief.
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