135 Nev., Advance Opinion I
IN THE SUPREME COURT OF THE STATE OF NEVADA
VEGAS UNITED INVESTMENT No. 74163
SERIES 105, INC., A NEVADA
DOMESTIC CORPORATION,
Appellant,
vs.
CELTIC BANK CORPORATION,
FILED
SUCCESSOR-IN-INTEREST TO DEC 1 9 2919
SILVER STATE BANK BY
ACQUISITION OF ASSETS FROM THE SU COURr
FDIC AS RECEIVER FOR SILVER BY
DEPUTY CLERK
STATE BANK, A UTAH BANKING
CORPORATION ORGANIZED AND IN
GOOD STANDING WITH THE LAWS
OF THE STATE OF UTAH,
Respondent.
Appeal from a district court judgment following a bench trial in
a judicial foreclosure action. Eighth Judicial District Court, Clark County;
Susan Johnson, Judge.
Affirmed.
Roger P. Croteau & Associates, Ltd., and Roger P. Croteau and Timothy E.
Rhoda, Las Vegas,
for Appellant.
Sylvester & Polednak, Ltd., and Allyson R. Noto and Kelly L. Schmitt, Las
Vegas,
for Respondent.
BEFORE HARDESTY, STIGLICH and SILVER, JJ.
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OPINION
By the Court, STIGLICH, J.:
NRS Chapter 116 codifies the Uniform Common-Interest
Ownership Act and sets forth statutory regulations applying to common-
interest communities in Nevada, such as property owners associations
(P0As). NRS Chapter 116 generally applies to all residential Nevada
POAs—i.e., homeowners' associations (HOAs)—but does not automatically
apply to nonresidential POAs. Nonresidential POAs may elect to apply such
provisions by expressly incorporating NRS Chapter 116s provisions, either
in whole or in part. As this incorporation is elective, NRS Chapter 116
applies to nonresidential POAs only to the extent provided for by the
incorporated statutory provisions.
Here, the conditions, covenants, and restrictions (CC&Rs) of the
subject nonresidential property state that the association may enforce
delinquent assessment liens pursuant to NRS 116.3116-.31168. The
CC&Rs only incorporated NRS 116.3116-.31168,1 however, and not the
entirety of NRS Chapter 116. Specifically, the CC&Rs did not incorporate
the provisions that might invalidate a mortgage savings clause or provide
for assessments supporting a lien that would have superpriority status.
Appellant Vegas United Investment Series 105, Inc., purchased the
1The 2015 Legislature substantially revised NRS 116.3116-.31168.
2015 Nev. Stat., ch. 266, §§ 1-7, 9, at 1333-45, 1349. Any discussion in this
opinion regarding these statutes as they applied to the nonjudicial
foreclosure sale here refers to the version of statutes in effect before those
amendments, when the foreclosure sale took place. See Saticoy Bay LLC
Series 350 Durango 104 v. Wells Fargo Home Mortg., 133 Nev. 28, 28 n.2,
388 P.3d 970, 971 n.2 (2017).
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property at a foreclosure sale conducted pursuant to the procedures set
forth in NRS 116.3116 in foreclosing on delinquent POA assessment liens.
Because the lien did not have a superpriority portion and the mortgage
savings clause, which provided that foreclosure on a delinquent assessment
lien would not affect the priority of a prior mortgage, was still valid,
respondent Celtic Bank's existing mortgage on the subject property was not
extinguished. The district court therefore reached the correct outcome
when it determined that Vegas United took the property subject to Celtic
Bank's interest, and we affirm.
FACTS AND PROCEDURAL HISTORY
In 2005, nonparty Gibson Road, LLC, borrowed $748,000 from
Celtic Bank's predecessor-in-interest in order to buy commercial property
located in Henderson, Nevada. Gibson Road executed a first priority deed
of trust to secure payment of the note. The note and deed of trust were
assigned to Celtic Bank in 2009. The property purchased is located within
two common-interest communities (CICs) that encompass the same
business park, Gibson Business Park Property Owners Association (Park
POA) and Gibson Business Center Property Owner's Association, Inc.
(Center POA), each of which has adopted CC&Rs. Center POA adopted
CC&Rs in 2004.2
Gibson Road failed to pay both its POA assessments and its
mortgage. In 2011, Center POA's agent Red Rock Financial Services
2Park POA separately adopted CC&Rs in 1989 and amended them in
1994. Its CC&Rs are not at issue here.
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recorded a lien for delinquent assessments and then a notice of default.3 In
February 2014, Red Rock recorded and posted a notice of foreclosure sale,
announcing a March 2014 sale date. Vegas United was the high bidder at
the nonjudicial foreclosure sale with a bid of $30,000. In March 2015, Celtic
Bank recorded a notice of default for nonpayment of mortgage payments
and subsequently filed a complaint for judicial foreclosure of the property.
Vegas United counterclaimed to quiet title, alleging that the nonjudicial
foreclosure extinguished Celtic Bank's deed of trust, and asserted a slander
of title claim.
The district court conducted a bench trial and entered a
judgment in favor of Celtic Bank. The district court ruled that the CC&Rs
incorporated the procedures for enforcing delinquent assessment liens from
NRS 116.3116-.31168 but not the substantive provisions pertaining to the
priorities of competing security interests. Accordingly, the district court
concluded that the foreclosure sale did not extinguish Celtic Bank's deed of
trust and that the Bank was entitled to foreclose on its first security
interest. Vegas United now appeals.
DISCUSSION
Vegas United argues on appeal that the 2014 nonjudicial
foreclosure was conducted pursuant to the 2004 CC&Rs and NRS 116.3116-
.31168, the delinquent assessment lien accordingly had superpriority
3The lien referenced CC&Rs with instrument number
1994024000285, which does not correspond with any recorded CC&Rs in
Nevada. The 1994 amendment to Park PONs CC&Rs has instrument
number 19941024000285. As we resolve this appeal on other grounds, we
do not address whether this error affected the adequacy of the notice
provided or the validity of the foreclosure sale.
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status, the CC&Rs mortgage savings clause was unenforceable as a matter
of law, and Center POA's nonjudicial foreclosure sale therefore extinguished
Celtic Bank's deed of trust.4
Following a bench trial, we review the district court's legal
conclusions de novo and uphold its factual findings so long as they are not
clearly erroneous and are supported by substantial evidence. Wells Fargo
Bank, N.A. v. Radecki, 134 Nev. 619, 621, 426 P.3d 593, 596 (2018).
The CC&Rs partially incorporated provisions from NRS Chapter 116
We use the rules governing contract interpretation to interpret
a CIC's declaration of its CC&Rs. Diaz v. Ferne, 120 Nev. 70, 73, 84 P.3d
664, 665-66 (2004). When the facts are not disputed, contract interpretation
is subject to de novo review as a question of law. Id. at 73, 84 P.3d at 666.
"Contractual provisions should be harmonized whenever possible,"Eversole
v. Sunrise Villas VIII Homeowners Ass'n, 112 Nev. 1255, 1260, 925 P.2d 505,
509 (1996), and no provision should be rendered meaningless, Musser v.
Bank of Am. , 114 Nev. 945, 949, 964 P.2d 51, 54 (1998).
NRS Chapter 116 only applies to a nonresidential CIC—that is,
properties subject to a nonresidential POA—to the extent that the
community's declaration incorporates NRS Chapter 116s provisions in
whole or in part pursuant to NRS 116.12075. NRS 116.1201(1), (2)(b);
Boulder Oaks Cmty. Ass'n v. B & J Andrews Enters., LLC, 125 Nev. 397,
404, 215 P.3d 27, 31 (2009). By so stating in its declaration, a POA may
elect to apply either (a) the entirety of NRS Chapter 116, (b) specifically
Wegas United also argues that the foreclosure notices were sufficient
and that Celtic• Bank's payment of the property's outstanding tax liability
was irrelevant. Because these issues do not affect our disposition, we
decline to address them.
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NRS 116.001-.2122 and NRS 116.3116-.31168, or (c) exclusively NRS
116.3116-.31168. NRS 116.12075(1); see also NRS 278A.170 (providing that
a CIC may apply the procedures set forth in NRS 116.3116-.31168 to enforce
payment of association common-space maintenance assessments).
Center PONs CC&Rs comport with this statutory scheme and
incorporate NRS 116.3116s delinquent assessment lien enforcement
procedure. Recital D of the CC&Rs provides that real property within the
POA shall only be subject to NRS Chapter 116 to the extent permitted by
NRS 278A.170, which permits incorporating the chapter's assessment
payment enforcement provisions. Section 10.2 of Center PONs CC&Rs
provides that the POA may record a delinquent assessment lien and
foreclose upon it "pursuant to a sale• conducted in accordance with the
provisions of (i) Covenants Nos. 6, 7 and 8 of NRS 107.030 and/or (ii) NRS
116.3116 to NRS 116.31168, inclusive, or any successor laws hereafter in
effect." While NRS 107.030 is not at issue here, Section 10.2 partially
incorporated NRS Chapter 116 in the CC&Rs, electing to apply NRS
116.3116-.31168 but no other provisions of NRS Chapter 116. See NRS
116.12075(1) (providing that a POA electing to adopt provisions of NRS
Chapter 116 may designate either NRS 116.3116-.31168 or two other sets
of provisions). Where a contract incorporates a statutory provision by
reference, that statutory language is interpreted as though set out in the
contract just as any other contract term. 11 Williston on Contracts § 30:19
(4th ed. 2012). Accordingly, Section 10.2 incorporated the NRS 116.3116
delinquent lien enforcement procedures, qualified by Section 10.2s
subsequent statement that such a lien shall not be valid as against a prior-
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recorded mortgagee.5 See Rd. & Highway Builders, LLC v. N. Nev. Rebar,
Inc., 128 Nev. 384, 390, 284 P.3d 377, 380 (2012) (providing that contracts
must be read as a whole to avoid negating any provision). Therefore, the
nonjudicial foreclosure sale was conducted pursuant to the procedure set
forth in NRS 116.3116-.31168, as constructed with regard to the CC&Rs as
a whole.6
Mortgage savings clauses are not necessarily unenforceable in
nonresidential POAs
In applying NRS 116.3116 here, we must resolve the apparent
conflict between NRS 116.3116(2)s superpriority provision and the
mortgage savings clause contained in the CC&Rs, which purported to
prevent an action pursuant to an enforcement mechanism set forth in the
CC&Rs from invalidating a preexisting mortgage.
5Section 10.2 of the 2004 CC&Rs specifically provides:
The Lien provided in this Section shall not be valid
as against a bona fide purchaser (or bona fide
Mortgagee) of the Lot in question unless the Lien
shall have been filed in the Public Records prior to
the recordation in the Public Records of the deed (or
Mortgage) conveying the Lot in question to such
purchaser (or subjecting the same to such
Mortgage).
6The district court erroneously concluded that the incorporation of
NRS 116.3116 cannot include the superpriority effects when NRS 116.3116
is incorporated through reference from NRS 278A.170 because NRS
278A.170 does not discuss the priority of such liens. As we acknowledge
above, where a statutory provision is incorporated by reference, each part
of that provision is treated as though it were written in the contract as a
term. Because we affirm on different bases, this error does not affect our
disposition.
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First, we conclude that mortgage savings clauses are not
necessarily unenforceable in CC&Rs for a nonresidential POA. While this
court has held that a mortgage savings clause in HOA CC&Rs is
unenforceable as against NRS 116.3116(2)s superpriority provision, that
decision rested on both the application of NRS 116.1104, which precluded
any contractual provision from curtailing the application of NRS Chapter
116, and the applicability of the entirety of NRS Chapter 116 to residential
CICs. SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 130 Nev. 742, 757-58, 334
P.3d 408, 418-19 (2014). Here, the Center POA's CC&Rs incorporated only
NRS 116.3116-.31168, and such limited incorporation is permitted by
statute. Accordingly, the basis relied upon in SFR Investments is not
present here, and the CC&Rs must be interpreted to give force to both
provisions, harmonizing their meaning without negating either.7
Where CC&Rs permit both foreclosure of delinquent assessment liens and
mortgage savings clauses, such provisions must be harmonized
The Center POA's CC&Rs emphasize that enforcement of a
delinquent assessment lien should not impair a prior recorded mortgage.
Article XIII of Center POA's CC&Rs provides that:
No violation of any provision of this Declaration,
nor any remedy exercised hereunder, shall defeat
or render invalid the lien of any Mortgage made in
good faith and for value upon any portion of the
Project, nor shall any Lien created hereunder be
superior to any such Mortgage unless such Lien
shall have been recorded in the Public Records prior
70ur conclusion in this regard is limited to nonresidential POAs
electing to apply NRS 116.3116-.31168 pursuant to NRS 116.12075(1)(c),
without encompassing nonresidential POAs that choose to incorporate
provisions of NRS Chapter 116 pursuant to NRS 116.12075(1)(a)-(b). Such
broader incorporation of NRS Chapter 116 may fall within SFR
Investments reasoning.
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to the recordation in the Public Records of such
Mortgage; provided however, that any Mortgagee
or other purchaser at any trustees or foreclosure
sale shall be bound by and shall take its property
subject to this Declaration as fully as any other
Owner of any portion of the Project.
Section 10.2 qualifies the exercise of the NRS 116.3116 procedure by stating
that a lien so enforced "shall not be valid" as against a prior recorded
mortgage. NRS 116.3116(2) (2013) itself relevantly states this:
A lien under this section is prior to all other liens
and encumbrances on a unit except:
•• •
(b) A first security interest on the unit
recorded before the date on which the assessment
sought to be enforced became delinquent . . .
The lien is also prior to all security interests
described in paragraph (b) to the extent of any
charges incurred by the association on a unit
pursuant to NRS 116.310312 and to the extent of
the assessments for common expenses based on the
periodic budget adopted by the association
pursuant to NRS 116.3115 which would have
become due in the absence of acceleration during
the 9 months immediately preceding institution of
an action to enforce the lien . . . .
NRS 116.3116(2) indicates that the superpriority exception against first
security interests applies to certain charges and expenses incurred
pursuant to NRS 116.310312 or NRS 116.3115. Neither of these statutes
applies to Center PONs CC&Rs, however, because neither statute was
among those statutes incorporated from NRS Chapter 116. Whatever
assessment payments were due pursuant to Center PONs CC&Rs, those
assessment payments did not rest on a statutory basis encompassed by NRS
116.3116(2). As such, no portion of the delinquent assessment lien
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foreclosed upon had superpriority status pursuant to NRS 116.3116(2) as
against Celtic Bank's prior recorded deed of trust. Moreover, to read NRS
116.3116(2)—as incorporated here as a covenant in the CC &Rs—to impair
the priority of Celtic Bank's deed of trust would conflict with Article XIII of
Center PONs CC&Rs and result in an unharmonious interpretation of the
CC&Rs. Accordingly and consistent with the intent expressed in the
mortgage savings clause to not impair prior recorded mortgages, the district
court reached the correct disposition when it ruled that Vegas United took
its interest subject to Celtic Bank's deed of trust when it purchased the
property. See Saavedra-Sandoval v. Wal-Mart Stores, Inc., 126 Nev. 592,
599, 245 P.3d 1198, 1202 (2010) (affirming a district court order reaching
the correct result, albeit for the wrong reason).
CONCLUSION
Because Center POA's CC&Rs expressly elected to apply NRS
116.3116-.31168, those provisions were incorporated in the CC&Rs. No
other provisions of NRS Chapter 116 were incorporated, however, as that
statutory scheme envisions elective incorporation, either in part or in whole,
by nonresidential POAs. Accordingly, NRS 116.1104 did not apply to render
the CC &Rs mortgage savings clause unenforceable, nor did the CC&Rs
apply other NRS Chapter 116 provisions supporting assessments that
would have superpriority status pursuant to NRS 116.3116(2). As a result,
no portion of the delinquent POA assessment lien had superpriority status
as against Celtic Bank's first security interest. Therefore, Vegas United
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took its interest subject to Celtic Bank's deed of trust. We affirm the district
court's order.
k_„'LS2
Stiglich
We concur:
J.
J.
Silver
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