Case Title: State, Bus. & Indus. v. Nev. Ass'n Servs.

Citation: 128 Nev. Adv. Op. No. 34

Docket Number: 

State: nevada

Court: Nevada Supreme Court

Date: 2012-08-02T00:00:00Z

Document:
428 Nev, Advance Opinion 34
IN THE SUPREME COURT OF THE STATE OF NEVADA
‘THE STATE OF NEVADA
DEPARTMENT OF BUSINESS AND

INDUSTRY, FINANCIAL

| No. 57470
INSTITUTIONS DIVISION; AND

FILED

AUG 02 2012

GEORGE E. BURNS, INDIVIDUALLY
AND IN HIS OFFICIAL CAPACITY AS
COMMISSIONER OF THE STATE OF
NEVADA, DEPARTMENT OF
BUSINESS AND INDUSTRY,
FINANCIAL INSTITUTIONS
DIVISION,

Appellants,

vs.

NEVADA ASSOCIATION SERVICES,
INC.; RMI MANAGEMENT, LLC; AND
ANGIUS & TERRY COLLECTIONS,
INC.,
Respondents,

 

Appeal from a district court order granting a preliminary
injunction prohibiting appellants from enforcing its declaratory order and
advisory opinion. Eighth Judicial District Court, Clark County; Susan
Johnson, Judge.

Affirmed,
Catherine Cortez, Masto, Attorney General, and Daniel D. Ebihara,

Deputy Attorney General, Carson City,
for Appellants,

Holland & Hart LLP and Patrick John Reilly and Nicole E. Lovelock, Las
Vegas,
for Respondents.

 

 

18-A4336
orn

 

BEFORE DOUGLAS, GIBBONS and PARRAGUIRRE, JJ.
OPINION:
By the Court, GIBBONS, J.:

In this appeal, we review a district court order granting a
preliminary injunction prohibiting appellants State of Nevada

 

Department of Business and Industry, the Financial Institutions Division,
and its Commissioner, George E. Burns (collectively, the Department),
from enforcing its declaratory order and advisory opinion regarding the
appropriate amount of homeowners’ association lien fees respondents
Nevada Association Services, Inc; RMI Management, LLC; and Angius &
Terry Collections, Inc. (collectively, NAS) can collect. Because the district
court did not abuse its discretion in determining that the Department did
not have jurisdiction to issue an advisory opinion regarding NRS Chapter
116 and that NAS would suffer irreparable harm if the Department
enforced its opinion, we affirm the district court’s order granting NAS's
request for injunctive relief.
FACTS AND PROCEDURAL HISTORY

The Department is responsible for regulating the collection

practices of collection agencies in the state of Nevada. The statutes

pertaining to the regulation and licensing of collection agencies are found

1We affirmed the district court’s order in an unpublished order
entered May 23, 2012. Respondents and other interested parties
subsequently filed motions to reissue the decision as a published opinion.
NRAP 36(f). Cause appearing, we grant the motions. Accordingly, we
issue this opinion in place of the prior unpublished order.

 
in NRS Chapter 649. The Department has the authority to issue advisory
opinions “as to the applicability of any (such) statutory provision,” NRS
233B.120. A homeowners’ association (or unit owners’ association), which
may act on behalf of a common-interest community, will often employ
collection agencies to assist it with collecting assessments owed by
homeowners within the community. The statutes governing common-
interest communities and common-interest ownership are contained in
NRS Chapter 116,

In November 2010, the Department issued an advisory
opinion in which it, inter alia, interpreted certain statutes within NRS
Chapter 116, in particular NRS 116.3116, and their importance in the
Department's regulation of collection agencies. The primary question
presented to the Department was as follows:

Pursuant to NRS 116.3116, what portion of the
lien, if any, is superior to the unit's first mortgage
lender's security interest (‘super priority lien”)
and may the sum total of the super priority lien
amount, whether it be comprised of assessments,
fees, costs of collection or other charges, ever
exceed 9 times the monthly assessment amount
for common expenses based on the periodie budget
adopted by the association pursuant to NRS
(6.3115...?

In addressing this question, the Department noted that the interpretation

 

of provisions within NRS Chapter 116 was required but that it would only
address this chapter as it related to collection agencies and the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692f. The Department then went on
to reference NRS 649.020(3\(a), st:

“a community manager while engaged in the
management of a common-interest community or
the management of an association of a

  

ing that a collection agency includes

 

 
one ae

 

condominium hotel if the community manager, or
any employee, agent or affiliate of the community
manager, performs or offers to perform any act
associated with the foreclosure of a lien pursuant
to NRS 116.31162 to 116.3168, inclusive, or
116B.635 to 116B.660, inclusive.”

Because the Department believed that homeowners’ associations had not
sufficiently fixed the amount of fees that collection agencies may charge,
the Department concluded that the determination of the additional sums
would have to be authorized by law in order to be collected by the
collection agencies. In coming to its conclusion as to what fees were
authorized by law, the Department noted that any penalties, fees, and
charges are enforceable as assessments, and that in order for a lien to
maintain super priority,? it cannot be in an amount in excess of the value
of the assessments that would have become due in a nine-month period
preceding the institution of an action to enforce the lien. Furthermore, the
Department found that in order for the additional fees to be valid, the fees
must be approved by the homeowners’ associations, not added
independently by the collection agency. ‘The Department concluded that

[a] collection agency is limited to the total of nine
(9) months of assessments for common charges on
the amount it can collect pursuant to priority
status provided in NRS 116.3116(2). This nine (9)
month cap includes any additional fees, charges,
interest, costs, penalties or fines which the
association could apply towards a lien pursuant to
NRS 116.3116.

2Priority status over certain types of encumbrances is granted to
liens against units for delinquent assessments. NRS 116.3116(2); NRS
116.093 (defining “unit”).

 
os

 

---Additionally, prior to the imposition of any
additional fees, charges, penalty and interest to
any assessment or fine by a collection agency, the
association must expressly approve the fees,
charges, penalty and interest pursuant to the
provisions in its governing documents.

Less than one month after the Department issued its opinion,

 

NAS filed its complaint and motion for preliminary injunction in district
court, As prominent collection agencies, NAS has been involved in several
lawsuits to determine its rights with respect to the types of liens described
above and NAS's priority in the chain of title.

NAS's complaint was prompted by the threat that the
Department would enforce its advisory opinion. NAS primarily argued
that the Department lacked jurisdiction to issue advisory opinions
interpreting provisions of NRS Chapter 116. In support of its request for a
preliminary injunction, NAS argued that because the Department did not
have jurisdiction to issue the advisory opinion, NAS would likely succeed
on the merits of the case, and if the opinion was enforced, it would suffer
irreparable harm.

Following a hearing, the district court granted NAS's request
for a preliminary injunction. In its order, the court determined that
neither NRS Chapter 649 nor NRS Chapter 116 authorized the
Department to interpret the provisions of NRS Chapter 116. Conversely,
the district court found that the Real Estate Division of the Department of
Business and Industry and the Commission for Common Interest
Communities and Condominium Hotels (CCICCH) have exclusive
jurisdiction to interpret and administer the provisions of NRS Chapter
116. ‘Therefore, the court determined that only the Real Estate Division
and the CCICCH could decide what fees homeowners’ associations could

 
os

 

add to the total assessments in filing a lien. Having determined that the
Department lacked jurisdiction to issue the opinion, the district court
concluded that NAS had sustained its burden to prove a likelihood of
success on the merits. The court then found that NAS would suffer
irreparable harm if the injunction did not issue because NAS would be
faced with the threat of future litigation, public records showing that it
had been subject to actions filed by the Department, and, finally, the
prospect of temporarily losing its license to carry on collection activities.
‘The Department now appeals the district court's order granting the
preliminary injunction.
DISCUSSION

‘The Department contends that the district court abused its
discretion in enjoining it from enforeing its advisory opinion. The
Department argues that NAS failed to show that it had a likelihood of
success on the merits because the Department had jurisdiction to issue the
advisory opinion, Further, it argues that NAS would not suffer
irreparable harm because the administrative disciplinary process is a
requirement of holding a license and irreparable harm cannot be based on
the filing of an administrative complaint. We disagree.
Preliminary injunction

A preliminary injunction is proper when the moving party can
demonstrate that it has a reasonable likelihood of suecess on the merits
and that it will suffer irreparable harm for which compensatory damages
would not suffice. See NRS 33.010; University Sys. v. Nevadans for Sound
Gov't, 120 Nev. 712, 721, 100 P.3d 179, 187 (2004). We review a district
court's grant of a preli

 

ary injunction for an abuse of discretion and will

reverse only when the district court’s decision was based “on an erroneous

 
om

 

legal standard or on clearly erroneous findings of fact.” Boulder Oaks
Cmty, Ass'n v, B & J Andrews, 125 Nev. 397, 403, 215 P.3d 27, 31 (2009)
(internal quotations omitted). However, when the underlying issues in the
motion for preliminary injunction “involve[] questions of statutory
construction, including the meaning and scope of a statute, we
review . . . those questions [of law] de novo.” Nevadans for Prop. Rights v.
Secy of State, 122 Nev. 894, 901, 141 P.3d 1235, 1240 (2006).
Reasonable likelihood of success on the merits

‘The Department's primary contention on appeal is that NAS
failed to show that it had a likelihood of success on the merits because the
Department had jurisdiction to issue an advisory opinion regarding NRS
Chapter 116. In order for us to determine whether the Department had
jurisdiction to issue such an advisory opinion, we must review several
sections from NRS Chapters 649 and 11

NRS Chapter 619
‘Under NRS 649.051, the commissioner of the Department is

 

granted authority to administer and enforce the provisions of NRS
Chapter 649 and may adopt “such regulations as may be necessary to
carry out the provisions of this chapter.” NRS 649.053. ‘The commissioner
is also responsible for the issuance of licenses allowing collection agencies
to operate within the state. NRS 649.075(1). NRS 649.375 describes
which collection agency practices are prohibited. As such practices pertain
to this case, collection agencies may not “(clollect or attempt to collect any
interest, charge, fee or expense incidental to the principal obligation
unless ... such [sums] alre] authorized by law or {have been] agreed to by
the parties.” NRS 649.375(2Xa)b). And, if such violations occur, the

Department may impose fines or, in more severe cases, suspend or revoke

 
the license of a collection agency. NRS 649.395(1)43). Finally, as defined
in NRS 649.020(3\a), a collection agency may include a community
manager “if the community manager, or any employee, agent or affiliate
of the community manager, performs or offers to perform any act
associated with the foreclosure of a lien pursuant to NRS 116.3162 to
116.31168, inclusive, or 116B.635 to 116B.660, inclusive.”

RS Chapter 116

Article 3. of Chapter 116 contains provisions for the
management of common-interest communities. Unit owners’ associations
may “hire and discharge managing agents and other employees, agents
and independent contractors,” and may also “make contracts and incur
liabilities.” NRS 116.3102(1\X6), (e). NRS 116.310313(1) also allows “[aln
association (to) charge a unit's owner reasonable fees to cover the costs of
collecting any past due obligation.” ‘This section also provides that “(tJhe
{CCICCH] shall adopt regulations establishing the amount of the fees that
‘an association may charge pursuant to this section.” Id, (emphasis added).
Additionally,

[t]he provisions of th[e] section apply to any costs
of collecting a past due obligation charged to a
unit's owner, regardless of whether the past due
obligation is collected by the association itself or
by any person acting on behalf of the association,
including, without limitation,...a community
manager or a collection agency.

A community manager is “a person who provides for or otherwise
engages in the management of a common-interest community or the
management of an association of a condominium hotel.” NRS 116.023.

 

 

 
ene ae

 

RS 116.310313(2). The language of the two sections is clear in that the
CCICCH is solely responsible for determining the type and amount of fees,
that may be collected by associations.

In its order granting the preliminary injunction, the district
court pointed to additional statutes in NRS Chapter 116, which it believed
supported a finding that only the Real Estate Division and the CCICCH
could adopt regulations to supplement, as well as interpret, the statutory
provisions of the chapter. NRS 116.615 provides, in pertinent part, for the
administration and regulation of the chapter as follows:

1. The provisions of this chapter must be
administered by the (Real Estate] Division,
subject to the administrative supervision of the
Director of the Department of Business and
Industry.

2, (The CCICCH] and the [Real Estate]
Division may do all things necessary and
convenient to carry out the provisions of this
chapter, including, without limitation, prescribing
such forms and adopting such procedures as are
necessary to carry out the provisions of this
chapter.

3. [The CCICCHI, or the [Real Estate]
Administrator with the approval of the [CCICCH],
may adopt such regulations as are necessary to
carry out the provisions of this chapter.

(Emphasis added.) The language of this provision is clear that the
CCICCH and the Real Estate Division are responsible for regulating and
administering the chapter. There is no provision granting any other
commission or department the authority to regulate or interpret the
language of the chapter. NRS Chapter 116 also addresses the issuance of
advisory opinions, stating that “[tJhe [Real Estate] Division shall provide

 
by regulation for the filing and prompt disposition of petitions for
declaratory orders and advisory opinions as to the applicability or
interpretation of: (a) [alny provision of this chapter or chapter 116A or
116B of NRS.” NRS 116.623(1Xa).

‘The language of NRS 116.615 and NRS 116.623 is clear and
unambiguous. Thus, we apply a plain reading. See Westpark Owners’
Assin v. Dist. Ct, 123 Nev. 349, 357, 167 P.3d 421, 427 (2007). We will
also read NRS Chapter 116 and NRS Chapter 649 in a way that
harmonizes them as a whole. Southern Nev. Homebuilders v. Clark
County, 121 Nev. 446, 449, 117 P.3d 171, 173 (2005). Based on a plain,
harmonized reading of these statutes, the responsibility of determining

 

which fees may be charged, the maximum amount of such fees, and
whether they maintain a priority, rests with the Real Estate Division and
the CCICCH, See NRS 116.615; NRS 116.623. Because the Real Estate
Division is charged with adopting appropriate regulations concerning NRS
Chapter 116, the regulations regarding the fees chargeable by community
managers would then become “authorized by law” as required by NRS
649.375(2Xa).4 See NRS 116.615; NRS 116.623. Allowing the Real Estate

‘The Department also argues that it had implied authority to
examine NRS Chapter 116. Although it is true that “wherever a power is
conferred by statute, everything necessary to carry out the power and
make it effectual and complete will be implied,” Checker, Ine, v, Public
Serv. Comm'n, 84 Nev. 623, 629-30, 446 P.2d 981, 985 (1968), this rule of
statutory construction is inapplicable in this situation because the
Department can rely on the interpretations and regulations of the Real
Estate Division concerning NRS Chapter 116. The Department would not
need to act on its own to properly effectuate its statutory powers. Further,
if the Department determines that certain regulations should be enacted

continued on next page...

 

 
 

Division to adopt regulations concerning the amount collectible by
‘community managers and allowing the Department to enforce those
regulations, if the community managers act in derogation of those
regulations, harmonizes the chapters in a way to give each its full effect.
See Southern Nev. Homebuilders, 121 Nev. at 449, 117 P.3d at 173.
Furthermore, the Department's enforcement of the regulations adopted by
the Real Estate Division avoids the absurd result of having a regulation
without someone with authority to enforce it because the Real Estate
Division is not charged with enforcing its regulations. See id. We
therefore determine that the plain language of the statutes requires that
the CCICCH and the Real Estate Division, and no other commission or
division, interpret NRS Chapter 116. Consequently, the Department
lacked jurisdiction to issue an advisory opinion interpreting NRS Chapter
116. Therefore, the district court did not abuse its discretion in
determining that NAS had a likelihood of suecess on the merits.
Inreparable harm

‘The district court found that not only would the instigation of
disciplinary action against NAS by the Department be harmful in and of
itself, but also that any such disciplinary action would have the added
harmful effect of placing the matter in the public record. It also found
that even a temporary revocation of NAS’s collection license could lead to

irreparable harm because it would be unable to conduct its business,

=.continued
or that an interpretation of a provision is required, nothing prevents it
from requesting the CCICCH and/or the Real Estate Division to so act.

a

 
nee

 

We have determined that “acts committed without just cause
which unreasonably interfere with a business or destroy its credit or
profits, may do an irreparable injury.” Sobol v. Capital Management, 102
Nev. 444, 446, 726 P.2d 335, 337 (1986); see also Com. v. Yameen, 516
N.E.2d 1149, 1151 (Mass. 1987) (“A licensee whose license has been
revoked or suspended immediately suffers the irreparable penalty of loss

 

of [license] for which there is no practical compensation.” (alteration in
original) (internal quotations omitted)).

Here, the district court found that the mere act of filing a
disciplinary action against NAS would cause irreparable harm. In its
findings, the district court explained that it was possible for the
Department to revoke NAS's license without a hearing under its powers
pursuant to NRS 649,395(2\a), which allows the Department to revoke a
collection license “without notice and hearing if... necessary for the
immediate protection of the public,” and “[tJhe licensee is afforded a

 

hearing to contest the suspension or revocation within 20 days” thereafter.
NRS 649.395(2Xb). ‘Thus, if such an instance occurred, NAS would be
unable to conduct any business during that time, not just on those liens
that may contain unauthorized fees. The district court properly
determined that the inability to conduct any business would cause
irreparable harm, Sobol, 102 Nev. at 446, 726 P.2d at 937. It was within
the district court’s discretion to find that NAS would suffer irreparable
harm because it was threatened with the prospect of losing its license to
conduct business. Therefore, NAS sustained its burden, under NRS
33.010, to prove that it had a reasonable likelihood of success on the
merits and that it would suffer irreparable harm for which compensatory

damages would not suffice. Consequently, we determine that the district

12

 
 

aan a

  
     

court did not abuse its discretion in granting NAS's request for injunctive
relief, and we therefore affirm its ord

 

Gibbons

Parraguirre

'We have reviewed all of the Department's remaining contentions
and conclude that they are without merit.

13.