Torrealba v. Kesmetis

Cite as: Torrealba v. Kesmetis

124 Nev. Adv. Op. No. 10

March 6, 2008

IN THE SUPREME COURT OF THE STATE OF NEVADA

No. 47738

LEONARD TORREALBA, AN INDIVIDUAL; AND SHELLY TORREALBA, AN INDIVIDUAL,

Appellants,

vs.

LAURIE KESMETIS, AN INDIVIDUAL; EMILY HERRERA, AN INDIVIDUAL; JOHN KEILLY, AN INDIVIDUAL; AND J.M.K. INVESTMENTS, LTD.,

Respondents.

Appeal from a district court summary judgment in a tort action. Eighth Judicial District Court, Clark County; Valorie Vega, Judge.

Reversed and remanded.

Law Office of Charles J. Lybarger and Charles J. Lybarger, Las Vegas, for Appellants.

Larry C. Johns, Las Vegas; John H. Pilkington, Las Vegas, for Respondents.

BEFORE HARDESTY, PARRAGUIRRE and DOUGLAS, JJ.

OPINION

By the Court, HARDESTY, J.:

This appeal concerns claims of negligence per se and fraud based on alleged misconduct by notaries public. Appellants Leonard and Shelly Torrealba filed a complaint for damages against two notaries public, respondents Laurie Kesmetis and Emily Herrera, and the notaries’ employer, respondent J.M.K. Investments, Ltd., claiming that the notaries were negligent as a matter of law under regulatory statutes governing notaries public and that they fraudulently notarized the Torrealbas’ signatures on certain loan documents. The district court dismissed both the negligence per se claim and the fraud claim as time-barred. Today, we consider, first, the statute of limitations applicable to claims brought under NRS 240.150, which establishes civil liability and penalties for notary misconduct or neglect. Second, we consider whether instruments recorded but improperly acknowledged provide constructive notice under NRS 111.320 to start the running of the limitations period.

We conclude that claims brought under NRS 240.150(1) and NRS 240.150(2) are claims upon a liability created by statute, other than a penalty or forfeiture, and are subject to a three-year statute of limitations under NRS 11.190(3)(a). Because the Torrealbas’ negligence per se claim is based upon NRS 240.150(1)-(2), we reverse the district court’s order dismissing that claim as time-barred and remand for further proceedings.

Actions for fraud are subject to a three-year statute of limitations under NRS 11.190(3)(d), which commences when the aggrieved party discovers the facts constituting the fraud. Respondents maintain that the Torrealbas had constructive notice of the recorded but improperly acknowledged loan documents at least three years before they commenced their action, resulting in the fraud claim being time-barred. In resolving this issue, we adopt the test articulated by the Supreme Court of Appeals of West Virginia in In re Williams[1] for determining whether a recorded but improperly notarized instrument can impart constructive notice. Under the Williams test, an improperly notarized instrument is void, and thus does not provide constructive notice for statute of limitations purposes, if either the notary or any party to the instrument benefited from the improper notarization or any harm flowed from the transaction. In light of our holding, we reverse the district court’s order dismissing the Torrealbas’ fraud claim and remand for further proceedings under the Williams test.

FACTS

Beginning in 1997, the Torrealbas invested with respondent J.M.K. Investments, Ltd., with the understanding that J.M.K. would make real estate loans on behalf of the Torrealbas, and name the Torrealbas as lenders. In April 2000, J.M.K. informed the Torrealbas that borrowers on three loans—the Taylor Ranch loan, the Saxton loan, and the Diamond Key Homes loan—were going to default. On January 7, 2003, the Torrealbas learned that three declarations of agency and limited powers of attorney had been notarized and recorded for those loans. The powers of attorney authorized J.M.K. to sign for the Torrealbas when reconveying the deeds of trust to the borrowers.

The Torrealbas did not sign the powers of attorney for the Taylor Ranch and Saxton loans, nor did they appear in front of notaries to acknowledge their signatures. Laurie Kesmetis and Emily Herrera, notaries hired by J.M.K., notarized the Torrealbas’ signatures on these powers of attorney, and the instruments were recorded in Clark County on February 20, 1998, and May 27, 1999, respectively. With regard to the Diamond Key Homes loan, Leonard Torrealba admitted to signing a document on his and his wife Shelly Torrealba’s behalf, but he asserted that he did not know that the document was a power of attorney and that he did not sign the document in front of a notary. According to the parties, that power of attorney was recorded in Maricopa County, Arizona, on July 20, 2000, but it is unclear who notarized it.

In late January 2003, the Torrealbas filed complaints with the Notary Division of Nevada’s Secretary of State, alleging that Kesmetis and Herrera had improperly notarized their signatures on powers of attorney because they never actually appeared before either Kesmetis or Herrera. The Notary Division’s hearing officer determined that Kesmetis had violated Nevada law by notarizing the Torrealbas’ signatures without requiring them to appear before her, therefore improperly acknowledging their signatures, as well as by failing to maintain a notary journal. The Division fined Kesmetis. Herrera agreed to pay a fine rather than challenge the complaint.

On January 6, 2006, the Torrealbas filed a complaint in the district court against Kesmetis, Herrera, J.M.K., and respondent John Keilly, the president of J.M.K. (collectively, respondents). The Torrealbas alleged two causes of action: negligence per se for violations of NRS 240.075, NRS 240.120, and NRS 240.150; and fraud. The Torrealbas allege that they were injured when J.M.K. improperly reconveyed deeds of trust in which the Torrealbas had an interest. Respondents filed a motion to dismiss, arguing that the statute of limitations barred the Torrealbas’ claim for negligence per se. Treating the motion to dismiss as a summary judgment motion, the district court found that the Torrealbas had constructive notice of the Taylor Ranch power of attorney, the Saxton power of attorney, and the Diamond Key Homes power of attorney on the dates when the powers of attorney were recorded. The district court also found that the Torrealbas had actual notice of the Diamond Key Homes power of attorney since Leonard had signed that document. Finally, the district court determined that since the Torrealbas brought both of their claims under NRS Chapter 240 and, because the Torrealbas had constructive notice of the three powers of attorney as of the date of their recordation, the claims were time-barred under NRS 11.190(4)(b)’s two-year statute of limitations for actions grounded on a penalty statute. Accordingly, the district court granted the motion and entered summary judgment in favor of respondents. The district court subsequently denied the Torrealbas’ motion for reconsideration. The Torrealbas now appeal.

DISCUSSION

This court reviews a district court’s order granting summary judgment de novo, “to determine whether the evidence properly before the district court ‘demonstrate[s] that no genuine issue as to any material fact [remains] and that the moving party is entitled to a judgment as a matter of law.’”[2] While we construe the facts in the light most favorable to the nonmoving party, we also place the burden on the nonmoving party to “set forth facts demonstrating the existence of a genuine issue in order to withstand a disfavorable summary judgment.”[3] Where the nonmoving party would bear the burden of persuasion at trial, “the party moving for summary judgment may satisfy the burden of production by either (1) submitting evidence that negates an essential element of the nonmoving party’s claim, or (2) ‘pointing out . . . that there is an absence of evidence to support the nonmoving party’s case.’”[4] To successfully defend against a summary judgment motion, “the nonmoving party must transcend the pleadings and, by affidavit or other admissible evidence, introduce specific facts that show a genuine issue of material fact.”[5]

The Torrealbas’ negligence per se claim

The Torrealbas contend that their negligence per se claim should not be considered “[a]n action upon a statute for a penalty” and therefore should not be subject to NRS 11.190(4)(b)’s two-year statute of limitations. According to the Torrealbas, their action does not involve a statutory penalty because it was brought under NRS 240.150(1) and NRS 240.150(2), neither of which refers to penalties. Instead, they argue that because NRS 240.150 subsections (1) and (2) create civil liabilities for notary public misconduct or neglect, NRS 11.190(3)(a)’s three-year statute of limitations applicable to “actions upon a liability created by statute” governs their action. We agree.

Statutory interpretation is a question of law that this court reviews de novo.[6] We interpret statutes in accordance with their plain meaning and generally do not look beyond the plain language of the statute absent ambiguity.[7] Furthermore, “it is the duty of this court, when possible, to interpret provisions within a common statutory scheme ‘harmoniously with one another in accordance with the general purpose of those statutes’ and to avoid unreasonable or absurd results, thereby giving effect to the Legislature’s intent.”[8]

In determining the statute of limitations applicable to the Torrealbas’ claims, we must characterize the actions authorized under each subsection of the statute. NRS 240.150(1) permits an aggrieved party to bring a claim against a notary on the notary’s official bond based on misconduct or neglect, while NRS 240.150(2) permits an aggrieved party to bring a claim against the notary’s employer for the notary’s misconduct, provided the notary was acting within the scope of his employment and the employer consented to the misconduct.[9] NRS 240.150 subsections (3) and (4) authorize the Secretary of State to discipline a notary public for willful violations of the regulatory scheme by way of fines or revocation or suspension of the notary’s appointment. Subsections (1) and (2) of NRS 240.150 thus authorize claims for damages in favor of an aggrieved party, while subsections (3) and (4) authorize claims in favor of the state to penalize notaries for violations of the notarial code.

Because the nature of the claims authorized under the statute is different, we determine that NRS 240.150 should be bifurcated for purposes of determining the applicable statute of limitations. Claims under NRS 240.150(1)-(2), such as the Torrealbas’ claims, are actions upon a liability created by statute.

“‘The phrase “liability created by statute” means a liability which would not exist but for the statute. Where a duty exists only by virtue of a statute . . . the obligation is one created by statute.’”[10] In determining that claims based on the misconduct or neglect of a notary are actions upon a liability created by statute, we adopt the reasoning of the Supreme Court of California in Sonoma County v. Hall.[11] There, the court held that an action on the bond of a county recorder who collected fees for official services and failed to pay the county was an action upon a liability created by statute.[12] The court explained that the position of county recorder was created by statute, the recorder’s duty to collect and pay fees prescribed by statute, the amount of the fees fixed by statute, and the recorder’s liability for failure to perform his duty set by statute.[13] The court thus applied California’s three-year statute of limitations applicable to actions “‘upon a liability created by statute other than a penalty or forfeiture.’”[14] The court later held that the same reasoning applied to all actions against sureties on the bonds of public officers.[15]

Similarly here, NRS 240.010 sets forth the Nevada Secretary of State’s authority to appoint notaries public. A notary’s powers are limited by statute,[16] and the Secretary of State retains the authority to fine a notary or revoke or suspend a notary’s license.[17] Further, to qualify for appointment as a notary, an applicant must file a bond for $10,000 payable to the state[18] “to provide indemnification to a person determined to have suffered damage as a result of an act by the notary public which violates a provision of NRS 240.001 to 240.169, inclusive.”[19] Because the position, duties, and liability of a notary public are authorized by statute, we determine that a claim on a notary’s official bond under 240.150(1) is an action upon a liability created by statute.[20] A claim against a notary’s employer under NRS 240.150(2) is also an action upon a liability created by statute because such a claim would not exist but for the statutory creation of the position of notary as well as the statutory prescription of notarial duties. These claims are, therefore, subject to NRS 11.190(3)(a)’s three-year statute of limitations on “action[s] upon a liability created by a statute, other than a penalty or forfeiture.”

Although respondents argue that the Torrealbas’ claims are “[a]n action upon a statute for a penalty” and therefore subject to NRS 11.190(4)(b)’s two-year statute of limitations, we disagree. For statute-of-limitations purposes, in determining whether an action is based upon a statute for a penalty or based upon a liability created by statute, a penalty has been described as a “punishment for an offense against the public . . . not incident to the redress of a private wrong.”[21] In other words, the term “penalty” generally is construed to mean something other than damages or pecuniary loss.[22] Here, the Torrealbas are suing for losses resulting from alleged notary misconduct, as authorized by statute. As such, their action is properly characterized as one upon a liability created by statute.

The Torrealbas claim to have learned of the alleged misconduct on January 7, 2003, and they filed their complaint on January 6, 2006. Because, according to the Torrealbas’ account of when they discovered the alleged misconduct, they brought their claim within NRS 11.190(3)(a)’s three-year limit, the district court improperly granted summary judgment on their negligence per se claim on the ground that it was time-barred. Accordingly, we reverse the district court’s summary judgment on the Torrealbas’ negligence per se claim and remand this matter to the district court.[23]

The Torrealbas’ fraud claim

The Torrealbas also brought a claim for fraud against respondents, but their complaint did not specify any statutory authority for that claim. On appeal, the Torrealbas assert that their fraud claim was brought under NRS 240.150. NRS 240.150 makes no provision for a fraud claim, and we therefore conclude that a claim for fraud brought under this statute is improper. We have held previously that “‘it is the nature of the grievance rather than the form of the pleadings that determines the character of the action.’”[24] Because the nature of the Torrealbas’ claim is one for fraud, we conclude that the three-year statute of limitations applicable to common-law fraud actions under NRS 11.190(3)(d) applies here. Therefore, the district court erred by applying NRS 11.190(4)(b)’s two-year statute of limitations.

An action for fraud accrues when the aggrieved party discovers the facts constituting the fraud.[25] In deciding whether the Torrealbas’ fraud-based claim was timely, the district court found that the Torrealbas had actual notice of the Diamond Key Homes power of attorney on the date Leonard signed that document and constructive notice of all three powers of attorney as of their recordation dates, which were all more than three years before the Torrealbas filed suit.[26] According to the Torrealbas, however, they discovered the facts constituting the alleged fraud on January 7, 2003, and their January 6, 2006, complaint was therefore timely. As we discuss below, the district court’s summary judgment on both actual and constructive notice grounds was in error.

Actual notice

We now consider whether the Torrealbas had actual notice of the Diamond Key Homes power of attorney. The Torrealbas acknowledge that Leonard signed his name and Shelly’s name, with her authority, on a document that was later attached to the Diamond Key Homes power of attorney. However, they maintain that the document was a separate signature sheet sent by J.M.K., that it did not include any acknowledgment, and that they were never informed of its intended use. Respondents, on the other hand, assert that Leonard signed the Diamond Key Homes power of attorney with full knowledge of the nature of the instrument.

We conclude that a genuine issue of material fact exists with regard to the nature of the document Leonard signed, what he knew about the document, and whether his signature charges him with actual notice. Therefore summary judgment was inappropriate on the issue of actual notice.

Constructive notice

We next consider whether the Torrealbas received constructive notice of the powers of attorney when they were recorded, more than three years before the Torrealbas commenced their action. In doing so, we are presented with an issue of first impression: whether the recordation of an improperly acknowledged instrument can provide constructive notice. The Torrealbas argue that recordation does not impart constructive notice when the document recorded was improperly acknowledged. Respondents point to NRS 111.315 and NRS 111.320 specifically for the contention that the act of recording certain instruments imparts notice of the instruments to third parties, subsequent purchasers, and subsequent mortgagees.

We conclude that a recorded but improperly acknowledged instrument may provide constructive notice only if honoring the instrument would not improperly benefit the notary or any party to the instrument and would not create harm.

NRS 111.450(1) directs that powers of attorney be acknowledged and recorded in the same manner as other instruments that convey or affect real property.[27] Under NRS 111.320, filing with the Secretary of State or county recorder an acknowledged and recorded written instrument that conveys or is designed to convey or affect real property operates as notice of the contents of the instrument to all persons.[28] For the recordation to serve as notice to third parties, NRS 111.315 mandates that the instruments be recorded in the county in which the property is situated. The plain language of NRS 111.320 and NRS 111.315 encompasses the powers of attorney at issue here. Each of the powers of attorney authorizes J.M.K. to sign for the Torrealbas when reconveying deeds of trust for real property. The powers of attorney thereby contain the power to convey real property within the meaning of NRS 111.450, under which they must be acknowledged and recorded. Filing the powers of attorney with the Secretary of State or county recorder operates as notice to all persons of the contents thereof under NRS 111.320.

NRS 111.320 requires, however, not only that such powers of attorney be recorded to provide notice, but also that they be acknowledged in the manner provided in NRS Chapter 111. NRS 111.240 instructs that acknowledgment of a power of attorney containing the authority to convey real property must conform to the requirements of the Uniform Law on Notarial Acts codified in NRS 240.161 to 240.169.[29] We conclude that although NRS 111.320 requires a power of attorney to be acknowledged to provide constructive notice, a bare allegation of a defect in a power of attorney’s acknowledgment is insufficient to prevent a recorded power of attorney from imparting constructive notice. While some jurisdictions require strict compliance with notarial requirements,[30] we determine that such a rule prevents courts from considering the individual circumstances in each case. In rejecting a rule requiring strict compliance, we consider and adopt the test enunciated by the Supreme Court of Appeals of West Virginia in In re Williams.[31] The Williams test allows courts to consider the individual factual circumstances surrounding a defective acknowledgment, thereby permitting courts to waive certain technical notarial violations while protecting against actual harm that may flow from honoring an improperly acknowledged document.

In Williams, the Supreme Court of Appeals of West Virginia considered a certified question from the United States Bankruptcy Court for the Northern District of West Virginia regarding the priority of parties in a bankruptcy action when the instrument used to secure a priority interest was improperly acknowledged.[32] At issue was a deed of trust, notarized in West Virginia, granting the mortgage company a security interest in residential property. Because the notary was authorized to acknowledge signatures only in Maryland, however, he subsequently altered the acknowledgment to appear as if the debtors signed the deed in Maryland. The deed was then recorded in West Virginia. After the debtors filed bankruptcy, the bankruptcy trustee filed an action seeking to have the mortgage company declared an unsecured creditor on the ground that the improperly acknowledged deed of trust failed to secure the company’s priority interest.[33] The bankruptcy court certified the following question to the state court: “Does the trustee in bankruptcy, given the status of a bona fide purchaser without notice by federal bankruptcy law, prevail over the holder of a deed of trust recorded but improperly acknowledged?”[34]

The Williams court concluded that the appropriate test for determining whether an improperly notarized instrument should be declared void is to inquire “‘whether an improper benefit was obtained by the notary or any party to the instrument, as well as whether any harm flowed from the transaction.’”[35] If either question receives an affirmative response, the acknowledgment is invalid and the recorded instrument therefore does not provide constructive notice.[36] The court explained that it was retreating from its prior application of a strict per se rule for compliance with notary requirements because the newly adopted test focused on shielding the parties from “potential wrongdoing or fraud where notary misconduct results in an improperly acknowledged” instrument rather than voiding instruments based on imperfect acknowledgments regardless of the nature of the defect.[37]

We adopt the Williams test because it strikes an appropriate balance between respecting the role of substantive notary requirements in protecting parties to a transaction from wrongdoing or fraud and recognizing that certain technical acknowledgement violations may not warrant voiding an instrument. Therefore, an improperly acknowledged but recorded instrument is invalid and thus does not provide constructive notice for commencing the limitations period if the notary or other party to the instrument would obtain an improper benefit or if harm would flow from the transaction if the court honored the instrument despite the improper acknowledgment.

Here, the district court concluded that the Torrealbas had constructive notice of all three powers of attorney at least three years before they filed their complaint in this action. With regard to the Diamond Key Homes loan power of attorney, it is not clear whether it was signed, acknowledged, or recorded.[38] We conclude that a genuine factual dispute exists as to these issues, and we remand to the district court for further fact-finding.

According to the test we adopt in this case, the Torrealbas had constructive notice of the other two recorded powers of attorney only if honoring the improperly acknowledged power of attorney would not confer an improper benefit to the notaries or other parties involved and would not cause harm to the Torrealbas. The Torrealbas allege that they never appeared before the notaries to sign the powers of attorney for the Taylor Ranch or Saxton loans.[39] J.M.K. does not refute that the Torrealbas failed to appear before the notaries, and therefore, no genuine issue of material fact exists with respect to the propriety of the acknowledgments. Since the Torrealbas did not appear before the notaries, the powers of attorney were not acknowledged according to the requirements of NRS 240.1655(2)(a). We therefore reverse the district court’s summary judgment and remand to the district court to consider whether honoring the improperly acknowledged powers of attorney would confer an improper benefit or cause harm.

CONCLUSION

We reverse the district court’s summary judgment on the Torrealbas’ claim of negligence per se because the Torrealbas brought the claim for damages under NRS 240.150(1)-(2), and such a claim is based upon a liability created by statute and is subject to a three-year statute of limitations under NRS 11.190(3)(a). In addition, we reverse the district court’s summary judgment on the Torrealbas’ fraud claim because common-law fraud is subject to a three-year statute of limitations under NRS 11.190(3)(d). Because factual issues remain disputed with regard to whether the Torrealbas filed their complaint within the three-year limitation period, we remand this matter to the district court.

Next, we reverse the district court’s summary judgment on the issue of whether the Torrealbas had actual notice of the Diamond Key Homes power of attorney. We conclude that a genuine factual dispute exists as to the nature of the document Leonard signed on his and Shelly’s behalf and whether his signature charges the Torrealbas with actual notice, and we remand this matter to the district court.

Finally, we adopt the test set forth in Williams for determining whether a recorded but improperly acknowledged instrument imparts constructive notice, and we instruct that an acknowledgment should be declared void for constructive notice purposes if the notary or any party to the instrument would obtain an improper benefit or if any harm would flow from the transaction if the court honored the improper acknowledgment. If either an improper benefit would result or harm would flow from the flawed acknowledgement, the recorded instrument that relied upon it does not impart constructive notice. Thus, we reverse the district court’s summary judgment and remand this matter to the district court for further proceedings.

PARRAGUIRRE and DOUGLAS, JJ., concur.

**********FOOTNOTES**********

[1] 584 S.E.2d 922 (W. Va. 2003).

[2] Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. ___, ___, 163 P.3d 405, 407 (2007) (alterations in original) (internal quotations omitted) (quoting Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005)).

[3] Sustainable Growth v. Jumpers, LLC, 122 Nev. 53, 61, 128 P.3d 452, 458 (2006).

[4] Cuzze v. Univ. & Cmty. Coll. Sys. of Nev., 123 Nev. ___, ___, 172 P.3d 131, 134 (2007) (internal footnote omitted) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).

[5] Id.

[6] Leven v. Frey, 123 Nev. ___, ___, 168 P.3d 712, 714 (2007).

[7] Seput v. Lacayo, 122 Nev. 499, 502, 134 P.3d 733, 735 (2006).

[8] Southern Nev. Homebuilders v. Clark County, 121 Nev. 446, 449, 117 P.3d 171, 173 (2005) (quoting Washington v. State, 117 Nev. 735, 739, 30 P.3d 1134, 1136 (2001)).

[9] NRS 240.150 states,

1. For misconduct or neglect in a case in which a notary public appointed pursuant to the authority of this State may act, either by the law of this State or of another state, territory or country, or by the law of nations, or by commercial usage, he is liable on his official bond to the parties injured thereby, for all the damages sustained.

2. The employer of a notary public is liable for any damages proximately caused by the misconduct of the notary public, if:

(a) The notary public was acting within the scope of his employment at the time he engaged in the misconduct; and

(b) The employer of the notary public consented to the misconduct of the notary public.

3. The Secretary of State may refuse to appoint or may suspend or revoke the appointment of a notary public who fails to provide to the Secretary of State, within a reasonable time, information that the Secretary of State requests from him in connection with a complaint which alleges a violation of this chapter.

4. Except as otherwise provided in this chapter, for any willful violation or neglect of duty or other violation of this chapter, or upon proof that the notary public has been convicted of a crime involving moral turpitude:

(a) A notary public or other person who violates a provision of this chapter may be fined not more than $2,000 for each violation;

(b) The appointment of the notary public may be suspended for a period determined by the Secretary of State, but not exceeding the time remaining on his appointment;

(c) The appointment of the notary public may be revoked; or

(d) The notary public may be fined and his appointment may be:

(1) Revoked; or

(2) Suspended for a period determined by the Secretary of State.

5. If the Secretary of State revokes or suspends the appointment of a notary public pursuant to this section, the Secretary of State shall:

(a) Notify the notary public in writing of the revocation or suspension; and

(b) Cause notice of the revocation or suspension to be published in a newspaper of general circulation in the county in which the notary public resides or works.

6. Except as otherwise provided by law, the Secretary of State may impose the fine that is authorized pursuant to this section upon a notary public whose appointment has expired if the notary public committed the violation that justifies the fine before his appointment expired.

[10] Gonzalez v. Pacific Fruit Express Co., 99 F. Supp. 1012, 1015 (D. Nev. 1951) (quoting Abram v. San Joaquin Cotton Oil Co., 46 F. Supp. 969, 976 (D. Cal. 1942)) (internal citations and quotations omitted).

[11] 62 P. 257, 257 (Cal. 1900).

[12] Id.

[13] Id.

[14] Id. (quoting Cal. Civ. Proc. Code § 338(1) (Deering 1886)).

[15] Norton v. Title Guaranty & Surety Co., 168 P. 16, 16-17 (Cal. 1917); see also Hellwig v. Title Guaranty & Surety Co., 179 P. 222, 222 (Cal. Ct. App. 1919) (holding “[t]hat an action upon the official bond of a notary public is an action upon a liability created by statute”). We note that since the court’s decision in Hellwig, the California Legislature amended the statute of limitations to provide a more specific limitations period for actions against a notary public on his official bond. Cal. Civ. Proc. Code § 338(6) (Deering 1949). Since the California Legislature has changed its subsections to a numbered format, the relevant statute is now codified as § 338(f).

[16] NRS 240.020; NRS 240.060; NRS 240.065; NRS 240.075; NRS 240.130.

[17] NRS 240.033(5); 240.036(2); 240.085(3)-(4); NRS 240.150(3)-(4).

[18] NRS 240.030(1)(d).

[19] NRS 240.033(1).

[20] Sonoma County v. Hall, 62 P. 257, 257 (Cal. 1900); see also City of Leavenworth v. Hathorn, 58 P.2d 1160, 1161-62 (Kan. 1936) (holding that civil liability arising from a public official’s failure to perform the statutory duties of his office or post is a liability created by statute). We recognize that contrary authority holds that “[t]he liability of a notary public is founded on the common law and predates any statutory duty.” First Bank of Childersburg v. Florey, 676 So. 2d 324, 331 (Ala. Civ. App. 1996) (citing Independence Leasing Corp. v. Aquino, 445 N.Y.S.2d 893, 894 (City Ct. 1981)). We reject this position, however, in light of our analysis above.

[21] Freeman v. Q Petroleum Corp., 417 N.W.2d 617, 618 (Minn. 1988).

[22] See id. (citing Ashland Oil Co. of Cal. v. Union Oil Co. of Cal., 567 F.2d 984, 991 (Temp. Emer. Ct. App. 1977)).

[23] Massey v. Litton, 99 Nev. 723, 728, 669 P.2d 248, 252 (1983) (holding that the time when statutes of limitation begin to run presents a factual issue precluding summary judgment).

[24] State Farm Mut. Auto Ins. v. Wharton, 88 Nev. 183, 186, 495 P.2d 359, 361 (1972) (quoting Automobile Ins. Co. v. Union Oil Co., 193 P.2d 48, 50 (Cal. Ct. App. 1948)).

[25] Siragusa v. Brown, 114 Nev. 1384, 1391, 971 P.2d 801, 806 (1998).

[26] Despite the district court’s erroneous application of NRS 11.190(4)(b)’s two-year statute of limitations, it found that the Torrealbas waited more than three years after they had constructive notice of the alleged fraud to file their cause of action. Thus, even applying NRS 11.190(3)(a)’s three-year statute of limitations, the district court would have found that the Torrealbas’ fraud claim was time-barred.

[27] NRS 111.450(1) provides:

Every power of attorney, or other instrument in writing, containing the power to convey any real property as agent or attorney for the owner thereof, or to execute, as agent or attorney for another, any conveyance whereby any real property is conveyed, or may be affected, shall be acknowledged, or proved and certified, and recorded as other conveyances whereby real property is conveyed or affected are required to be acknowledged, or proved and certified, and recorded.

[28] NRS 111.320 provides:

Every such conveyance or instrument of writing, acknowledged or proved and certified, and recorded in the manner prescribed in this chapter or in NRS 105.010 to 105.080, inclusive, must from the time of filing the same with the Secretary of State or recorder for record, impart notice to all persons of the contents thereof; and subsequent purchasers and mortgagees shall be deemed to purchase and take with notice.

[29] The Uniform Law on Notorial Acts requires the notary, in taking an acknowledgement, to, among other things, determine that the person making the acknowledgement is the person signing the document. NRS 240.1655(2).

[30] See Szczepka v. Weaver, 942 P.2d 247, 249 (Okla. Civ. App. 1997); Succession of Wilson, 213 So. 2d 776, 780 (La. Ct. App. 1968); Gulf Production Co. v. Continental Oil Co., 61 S.W.2d 185, 186-87 (Tex. Civ. App. 1933).

[31] 584 S.E.2d 922, 925 (W. Va. 2003).

[32] Id.

[33] Id. at 924-25.

[34] Id. at 925. The bankruptcy court noted that twelve cases were pending involving improperly acknowledged deeds of trust. Id.

[35] Id. at 928 (quoting Galloway v. Cinello, 423 S.E.2d 875, 876 (W. Va. 1992)).

[36] Id.

[37] Id.

[38] Since we cannot determine where the power of attorney was recorded, if at all, we decline to address whether Arizona or Nevada law governs on the constructive notice issue.

[39] We note that an additional basis exists for the Torrealbas’ fraud claim. The Torrealbas maintain, and J.M.K. does not dispute, that they did not sign the powers of attorney for the Taylor Ranch or Saxton loans, and the Torrealbas maintain that they did not know the nature of the document they signed for the Diamond Key Homes loan. NRS 111.450(1) requires that powers of attorney authorizing sales of real property or agreements affecting real property be “acknowledged, or proved and certified, and recorded.” NRS 240.002 defines an acknowledgment as “a declaration by a person that he has executed an instrument for the purposes stated therein.” Under NRS 111.450(1), an unacknowledged power of attorney is void. The Torrealbas, however, argue only that the recordation of the powers of attorney does not impart notice; they do not argue that the powers of attorney are void because they do not contain the Torrealbas’ signatures or they were not acknowledged. Accordingly, we do not reach the issue.

*****************************

Andersen Family Assocs. v. State Engineer

Cite as: Andersen Family Assocs. v. State Engineer

124 Nev. Adv. Op. No. 17

March 27, 2008

IN THE SUPREME COURT OF THE STATE OF NEVADA

No. 47878

ANDERSEN FAMILY ASSOCIATES, A LIMITED PARTNERSHIP,

Appellant,

vs.

HUGH RICCI, P.E., STATE ENGINEER, NEVADA DIVISION OF WATER RESOURCES, RE: PERMIT 68984; AND CARSON CITY, A POLITICAL SUBDIVISION OF THE STATE OF NEVADA,

Respondents.

Appeal from a district court order denying judicial review in a water law matter. First Judicial District Court, Carson City; Michael R. Griffin, Judge.

Affirmed.

Parsons Behle & Latimer and Ross E. de Lipkau and Alysa K. Keller, Reno, for Appellant.

Catherine Cortez Masto, Attorney General, and Bryan L. Stockton, Deputy Attorney General, Carson City, for Respondent Nevada State Engineer.

Neil A. Rombardo, District Attorney, and Melanie L. F. Bruketta, Deputy District Attorney, Carson City, for Respondent Carson City.

BEFORE THE COURT EN BANC.

OPINION

By the Court, PARRAGUIRRE, J.:

In this appeal, we address whether an entity can lose its vested rights to utilize certain water flow—rights that it acquired before the adoption of Nevada’s statutory water law scheme—when a permit modifying those rights is canceled and later reinstated pursuant to NRS 533.395. For the reasons set forth below, we conclude that the cancellation and later reinstatement of a permit modifying an entity’s prestatutory vested water rights cannot result in the entity losing its priority to use that water flow because Nevada law prevents such rights from impairment by statute. In reaching this conclusion, however, we reiterate that prestatutory vested water rights are subject to state regulation, and the holders of such rights must comply with state permit requirements when seeking to modify the use of their vested rights.

FACTS AND PROCEDURAL HISTORY

This case involves a dispute about water that flows in Ash Canyon Creek in Carson City. The district court first apportioned Ash Canyon Creek water rights as part of an 1885 decree. At that time, the court expressly made most rights equal in priority. Both appellant Andersen Family Associates (AFA) and respondent Carson City own rights under the decree to portions of the Ash Canyon Creek water flow as successors in interest to the original owners.

In 2000, Carson City sent a letter to the State Engineer inquiring about the different ownership interests in Ash Canyon Creek. The State Engineer responded that AFA owned 29.872 percent of the creek’s flow. The State Engineer also noted, however, that 6.2757 percent of AFA’s interest belonged specifically to the Donald A. Andersen Trust. In addition, the Engineer observed that Carson City’s interest in the creek’s flow was 60.608 percent.

Following Carson City’s inquiry and the State Engineer’s response, the Donald A. Andersen Trust sold its interest in the waters of Ash Canyon Creek to the City. Shortly before this transaction was completed, the State Engineer granted an application by Carson City for a permit to change the manner and location of its use of a portion of the creek’s waters for municipal purposes. As a condition of the permit, Carson City was required to file proof of completion of the approved work by June 23, 2004.

When Carson City failed to file the required proof of completion, the State Engineer notified the City that the permit was subject to cancellation. Because Carson City still did not satisfy its completion requirement, the State Engineer eventually canceled the City’s permit.

On August 31, 2004, Carson City petitioned the State Engineer to rescind the cancellation of the City’s permit. Following a hearing on Carson City’s petition, the State Engineer allowed the City to submit a request for an extension to file the necessary documents. Carson City then applied for an extension, which the Engineer granted, extending the City’s proof of completion deadline for one year from the original date. Thereafter, Carson City filed its proof of work completion within the extended deadline.

After the reinstatement of Carson City’s permit, AFA sent a letter to the State Engineer asserting that, under NRS 533.395(3), the permit’s cancellation resulted in a loss of priority for the rights that Carson City purchased from the Donald A. Andersen Trust. The State Engineer replied that, because the rights at issue were part of an 1885 court decree and NRS 533.085(1) specifically provides that Nevada’s water law statutes cannot impair rights that vested before the state’s statutory scheme was enacted, the priority of the rights in question had not been lost.[1]

AFA petitioned the district court for judicial review of the State Engineer’s decision. The district court denied AFA’s petition, noting that in light of NRS 533.085(1)’s nonimpairment provision, the priority of the water rights at issue in this case did not change.[2] This appeal followed.

DISCUSSION

The sole issue on appeal is whether Carson City lost priority on certain vested water rights after the State Engineer canceled and later reinstated a permit modifying the use of those rights pursuant to NRS 533.395.

Standard of review

In the context of an appeal from a district court order denying a petition for judicial review of a decision made by the State Engineer, this court has the authority to undertake an independent review of the State Engineer’s statutory construction, without deference to the State Engineer’s determination.[3] Still, because the appropriation of water in Nevada is governed by statute, and the State Engineer is authorized to regulate water appropriations, that office has the implied power to construe the state’s water law provisions and great deference should be given to the State Engineer’s interpretation when it is within the language of those provisions.[4] Nonetheless, the State Engineer’s “‘interpretation of a regulation or statute does not control if an alternative reading is compelled by the plain language of the provision.’”[5]

Conflict between NRS 533.085(1) and NRS 533.395(3)

On appeal, AFA argues that, under the plain language of NRS 533.395(3), Carson City lost priority with respect to the water rights at issue because the State Engineer canceled and reinstated the City’s permit modifying the place and manner of the City’s use of those rights. In the proceedings underlying this appeal, however, both the State Engineer and the district court concluded that NRS 533.395(3) did not alter the priority of the water rights at issue because Carson City’s water rights vested before NRS Chapter 533’s provisions were enacted.

NRS 533.395(3) provides,

If [a] decision of the State Engineer modifies or rescinds the cancellation of a permit [that changed the manner or place of use of water already appropriated], the effective date of the appropriation under the permit is vacated and replaced by the date of the filing of the written petition [to rescind the cancellation] with the State Engineer.

By contrast, NRS 533.085(1), Nevada’s nonimpairment statute, states that

Nothing contained in [Chapter 533] shall impair the vested right of any person to the use of water, nor shall the right of any person to take and use water be impaired or affected by any of the provisions of this chapter where appropriations have been initiated in accordance with law prior to March 22, 1913.[6]

Thus, we are faced with two unambiguous statutes that are in conflict: while NRS 533.085(1) specifically exempts prestatutory water rights from impairment by Nevada’s statutory water law, NRS 533.395(3) more generally provides for a loss of priority when any water permit (regardless of the underlying right) is canceled and reinstated.

In the past, this court has recognized that, when statutory language is clear and unambiguous, the court will not look beyond its plain meaning and will “give effect to its apparent intent from the words used, unless that meaning was clearly not intended.”[7] In addition, rules of statutory construction require that “multiple legislative provisions be construed as a whole, and where possible, a statute should be read to give plain meaning to all its parts.”[8] Thus, when a specific statute is in conflict with a general one, the specific statute will take precedence.[9] Still, no statutory language should be rendered mere surplusage if such a consequence can properly be avoided.[10]

In this case, the State Engineer contends that NRS 533.085(1) prohibits him from applying NRS 533.395(3) to Carson City’s vested water rights because a loss of priority would “impair” or “affect” those rights.[11] On the other hand, AFA argues that once Carson City sought a permit modifying its vested rights, those rights became subject to NRS 533.395(3)’s plain language, which mandates a loss of priority upon the reinstatement of a canceled permit. For the reasons that follow, we deem AFA’s argument unpersuasive.

Types of water rights in Nevada

Generally, “[t]he term ‘water right’ means . . . the right to divert water by artificial means for beneficial use from a natural spring or stream.”[12] In Nevada, there are three different types of water rights: vested, permitted, and certificated. First, “vested” rights are those that existed under Nevada’s common law before the provisions currently codified in NRS Chapter 533 were enacted in 1913.[13] These rights may not be impaired by statutory law and may be used as granted in the original decree until modified by a later permit.[14] Second, “permitted” rights refer to rights granted after the State Engineer approves a party’s “application for water rights.”[15] Such permits grant the right to develop specific amounts of water for a designated purpose.[16] Third, “certificated” rights are statutory rights granted after a party perfects his or her permitted water rights.[17] In order to perfect permitted water rights, “an applicant must file proof of beneficial use with the State Engineer. Once proof has been filed, the State Engineer will issue a certificate in place of the permit.”[18]

Effect of applying for a permit to modify the use of vested rights

As noted above, AFA contends that vested rights can be “lost” by applying for and receiving a permit modifying the use of those rights. As this court has recognized, however, “rights acquired before 1913 [can] only be lost in accordance with the law in existence at the time of the enactment of [Nevada’s statutory water rights provisions], namely, intentional abandonment.”[19] Because nothing in NRS Chapter 533 or our previous cases suggests that an application to modify vested rights amounts to “intentional abandonment” of those rights, AFA’s argument fails.[20] In this case, therefore, the cancellation of Carson City’s permit (and later reinstatement of that permit) did not affect the City’s underlying vested rights. Although Carson City lost the right to use the water at issue in the approved manner under the permit when the permit was canceled, the City did not lose the priority attached to its vested rights because such a result would “impair” the City’s vested rights in violation of NRS 533.085(1).

Our conclusion in this case comports with two previous opinions discussing vested water rights in Nevada. First, in Ormsby County v. Kearney,[21] we considered the extent to which Nevada courts could determine whether an appropriator with vested rights has violated the water rights of another party. There, we concluded that such a determination would not amount to “an unlawful interference with the vested rights of water appropriators.”[22] In reaching this conclusion, we dismissed the notion that the provisions of NRS 533.085(1) prevented any of the other sections of Nevada’s water law act from applying to water rights acquired before the act was adopted because “[t]he whole scope and purpose of the act show that it was intended to apply to all water rights, whether acquired before or after its adoption. There would be little or no use in attempting state control over a stream or stream system unless all water rights were brought under that control.”[23] Still, we further recognized that vested rights were not subject to impairment by statute:

The greater portion of the water rights upon the streams of the state were acquired before any statute was passed prescribing a method of appropriation. Such rights have uniformly been recognized by the courts as being vested under the common law of the state. Nothing in the act shall be deemed to impair these vested rights; that is, they shall not be diminished in quantity or value. As they are all prior in time to water rights secured in accordance with later statutory provisions, such priorities must be recognized.[24]

In this sense, although Ormsby makes clear that vested water rights are subject to regulation under Nevada’s statutory system, such regulation may not impair the quantity or value of those rights. Here, a loss of priority, which would render Carson City’s rights useless in some years, certainly affects the rights’ value;[25] thus, the loss of priority provision in question cannot apply.

Second, in In Re Waters of Manse Spring, we addressed whether NRS 533.085(1) prevented the application of a statute providing for the forfeiture of water rights after a five-year period of continuous nonuse.[26] We concluded that the forfeiture statute did not apply and expressly adopted the district court’s reasoning that “to apply the terms of [the forfeiture provision] would have the effect of impairing rights to the waters of Manse springs which had vested prior to the enactment of the 1913 statute, and therefore said section should be excluded.”[27] Moreover, we recognized that in light of NRS 533.085(1), “rights acquired before 1913 [can] only be lost in accordance with the law in existence at the time of the enactment of said 1913 statute, namely, intentional abandonment.”[28] Although this case only involves a potential loss of priority (as opposed to the forfeiture of rights), we note that a loss of priority can amount to a de facto loss of rights depending on water flow. In this manner, the loss of priority provision at issue here poses a similar problem as the forfeiture statute at issue in Manse Spring, and we conclude that the reasoning from Manse Spring is equally applicable here.

By contrast, AFA cites our decision in Desert Irrigation, Ltd. v. State of Nevada for support of the argument that Carson City’s rights are subject to a loss of priority.[29] In Desert Irrigation, the appellant received a permit to change its use of certain certificated rights.[30] When the appellant failed to comply with the terms of the permit, however, the State Engineer canceled the permit pursuant to NRS 533.395(1).[31] The State Engineer then concluded that the appellant’s certificated rights reverted to the public (i.e., the appellant lost both its permitted and certificated rights).[32] On appeal, the appellant contended that because its water rights were certificated, any portion of its rights that were canceled under the permit should have reverted back to it.[33] We disagreed, however, concluding that “[b]ecause the language of NRS 533.395(1) does not distinguish between original permittees and those permittees with prior certificated rights, all permittees are subject to the same requirements.”[34] Furthermore, we recognized that “[t]he plain language of NRS 533.040 ‘severs’ all existing water rights under a prior certificated use. Thus, a former certificated holder must begin the water certification process anew.”[35] As a result, “permitted water rights, cancelled pursuant to NRS 533.395, revert to the public domain and are available for further appropriation.”[36]

AFA argues that the reasoning from Desert Irrigation applies with equal force to this case. According to AFA, because the language of NRS 533.395(3) does not distinguish between original permittees and those permittees with prestatutory vested rights, all permittees, including those with prestatutory vested rights, are subject to the same requirements. Unlike the certificated rights at issue in Desert Irrigation, however, prestatutory vested rights are protected from impairment by the plain language of NRS 533.085(1). Thus, Desert Irrigation did not address the issue currently before us. Moreover, the present case involves the reinstatement of a permit and NRS 533.395(3)’s loss of priority provision—not cancellation under NRS 533.395(1). Thus, the concern of whether the water reverts to the holder or to the public is not a factor, and the reasoning in Desert Irrigation does not apply.[37]

Despite AFA’s arguments to the contrary, we further conclude that Carson City’s decision to apply for a permit, which was granted, did not subject the City’s water rights to NRS 533.395(3). Although Carson City changed the use of its vested rights, those rights remained of the same character—i.e., they remained vested and did not become solely “permitted rights” just because the holder obtained a permit changing the use of the rights.

Still, as we explained in Ormsby, prestatutory vested rights are subject to state regulation.[38] Thus, Carson City must obtain the proper permits and documentation to modify the use of its vested rights, and the State Engineer has the authority to cancel those permits under NRS Chapter 533. In such instances, NRS 533.085(1) is not implicated because the cancellation of a water rights permit does not “impair” the underlying vested rights. In other words, although the state could never cancel Carson City’s prestatutory vested rights (absent a finding of intentional abandonment), the state can and has required the City to comply with permitting and certificating requirements or risk losing the permits and certificates that define and modify its existing vested rights. Therefore, had the City failed to obtain reinstatement of its permit by the State Engineer in this case, the City would not have been able to use the rights in the modified manner approved by that permit.

CONCLUSION

We conclude that Carson City’s prestatutory vested water rights are not subject to a loss of priority under NRS 533.395(3). We reiterate, however, that such rights are subject to state regulation, and rights holders must comply with all state permit requirements. Indeed, the failure to comply with state permit requirements may render valuable permitted rights useless in certain circumstances. Because Carson City’spermit was properly reinstated in this case, however, we affirm the judgment of the district court denying AFA’s petition for judicial review.

GIBBONS, C.J., MAUPIN, HARDESTY, DOUGLAS, CHERRY and SAITTA, JJ., concur.

**********FOOTNOTES**********

[1] More specifically, the State Engineer suggested that “only the decree court can [make] the decision as to whether a decreed right can lose its priority when this decreed right is changed under the provisions of NRS 533 and cancelled.”

[2] See NRS 533.395(3); NRS 533.085(1); In Re Waters of Manse Spring, 60 Nev. 280, 108 P.2d 311 (1940); Ormsby County v. Kearney, 37 Nev. 314, 352, 142 P. 803, 810 (1914).

[3] Bacher v. State Engineer, 122 Nev. ___, ___, 146 P.3d 793, 798 (2006). “Statutory construction is a question of law, which this court reviews de novo.” Kay v. Nunez, 122 Nev. ___, ___, 146 P.3d 801, 804 (2006).

[4] United States v. State Engineer, 117 Nev. 585, 589, 27 P.3d 51, 53 (2001).

[5] Id. at 589-90, 27 P.3d at 53 (quoting Southern Cal. Edison v. PUC, 102 Cal. Rptr. 2d 684, 698 (Ct. App. 2000)).

[6] The Legislature enacted NRS 533.085(1) to avoid any unconstitutional impingements on water rights that were in existence at the time Nevada’s statutory water law went into effect. Manse Spring, 60 Nev. at 288-89, 108 P.2d at 315. The parties do not dispute that Carson City’s water rights are vested and that appropriations were initiated prior to March 1913.

[7] Seput v. Lacayo, 122 Nev. 499, 502, 134 P.3d 733, 735 (2006).

[8] Gaines v. State, 116 Nev. 359, 365, 998 P.2d 166, 169-70 (2000).

[9] SIIS v. Surman, 103 Nev. 366, 368, 741 P.2d 1357, 1359 (1987).

[10] Seput, 122 Nev. at 502-03, 134 P.3d at 735; Torreyson v. Board of Examiners, 7 Nev. 19, 22 (1871).

[11] As AFA conceded at oral argument, a loss of priority undoubtedly amounts to an “impairment” of water rights.

[12] Application of Filippini, 66 Nev. 17, 21, 202 P.2d 535, 537 (1949).

[13] See Ormsby County v. Kearney, 37 Nev. 314, 352-53, 142 P. 803, 810 (1914). In Ormsby, we recognized that

[t]he greater portion of the water rights upon the streams of the state were acquired before any statute was passed prescribing a method of appropriation. Such rights have uniformly been recognized by the courts as being vested under the common law of the state. Nothing in the act shall be deemed to impair these vested rights; that is, they shall not be diminished in quantity or value. As they are all prior in time to water rights secured in accordance with later statutory provisions, such priorities must be recognized.

Id. Notably, the term “vested right” sometimes more generally refers to a right that “has become fixed and established either by diversion and beneficial use or by permit procured pursuant to the statutory water law relative to appropriation.” Filippini, 66 Nev. at 22, 202 P.2d at 537. For purposes of this opinion, however, the term is used “to describe water rights which came into being by diversion and beneficial use prior to the enactment of any statutory water law, relative to appropriation.” Id.

[14] Ormsby, 37 Nev. at 352-53, 142 P. at 810; NRS 533.085(1).

[15] Silver Lake Water v. Public Serv. Comm’n, 107 Nev. 951, 952 n.1, 823 P.2d 266, 267 n.1 (1991); see NRS 533.325-.380 (describing application and approval process for permits).

[16] Silver Lake Water, 107 Nev. at 952 n.1, 823 P.2d at 267 n.1.

[17] Desert Irrigation, Ltd. v. State of Nevada, 113 Nev. 1049, 1059 n.5, 944 P.2d 835, 841 n.5 (1997); see Silver Lake Water, 107 Nev. at 952 n.1, 823 P.2d at 267 n.1; NRS 533.325-.380 (describing application and approval process for permits).

[18] Silver Lake Water, 107 Nev. at 952 n.1, 823 P.2d at 267 n.1; NRS 533.325-.380 (describing application and approval process for permits).

[19] In Re Waters of Manse Spring, 60 Nev. 280, 289, 108 P.2d 311, 316 (1940).

[20] NRS 533.325 states that “[a]ny person who wishes . . . to change the place of diversion, manner of use or place of use of water already appropriated, shall . . . apply to the State Engineer for a permit to do so.” See also NRS 533.345 (setting forth application for modification requirements). However, the language of NRS 533.325 does not suggest that a party with vested rights intentionally abandons those rights by requesting a change of use permit.

[21] 37 Nev. 314, 142 P. 803 (1914).

[22] Id. at 353, 142 P. at 810.

[23] We note that although NRS 533.085 was not in existence at the time the court decided Ormsby, another provision containing similar language was part of Nevada’s Revised Laws. See Nev. Rev. Laws § 84 (1919). For purposes of simplicity, we will identify the applicable statutes by their current numeration.

[24] Ormsby, 37 Nev. at 352, 142 P. at 810 (emphasis added).

[25] Indeed, AFA specifically conceded this point during oral argument.

[26] 60 Nev. 280, 283-84, 108 P.2d 311, 313-14 (1940).

[27] Id. at 289, 108 P.2d at 316.

[28] Id.

[29] 113 Nev. 1049, 1059-60, 944 P.2d 835, 842 (1997).

[30] Id. at 1051, 944 P.2d at 837.

[31] Id. at 1053, 944 P.2d at 838. NRS 533.395(1) provides,

If, at any time in the judgment of the State Engineer, the holder of any permit to appropriate the public water is not proceeding in good faith and with reasonable diligence to perfect the appropriation, the State Engineer shall require the submission of such proof and evidence as may be necessary to show a compliance with the law. If, in his judgment, the holder of a permit is not proceeding in good faith and with reasonable diligence to perfect the appropriation, the State Engineer shall cancel the permit, and advise the holder of its cancellation.

[32] Desert Irrigation, 113 Nev. at 1059, 944 P.2d at 841.

[33] Id. at 1058-59, 944 P.2d at 841.

[34] Id. at 1059, 944 P.2d at 842.

[35] Id. at 1060, 944 P.2d at 842; see NRS 533.040(2) (providing that “[i]f at any time it is impracticable to use water beneficially or economically at the place to which it is appurtenant, the right may be severed from the place of use and be simultaneously transferred and become appurtenant to another place of use, in the manner provided in this chapter, without losing priority of right.” (emphasis added)).

[36] Desert Irrigation, 113 Nev. at 1060, 944 P.2d at 842.

[37] A closer argument might exist under Desert Irrigation if the State Engineer had refused to reinstate Carson City’s permit because then the issue would be whether Carson City’s rights reverted to the public in the same manner as the certificated rights in Desert Irrigation. Even in that scenario, however, Desert Irrigation probably would not apply because prestatutory vested rights can only be lost by intentional abandonment. In Re Waters of Manse Spring, 60 Nev. 280, 289, 108 P.2d 311, 316 (1940).

[38] Ormsby County v. Kearney, 37 Nev. at 314, 352-53, 142 P. 803 at 810 (1914).

*****************************

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).

*****************************