Case Title: Artemis Exploration Co. v. Ruby Lake Estates Homeowner's Ass'n

Citation: 135 Nev. Adv. Op. No. 48

Docket Number: 75323

State: nevada

Court: Nevada Supreme Court

Date: 2019-10-03T00:00:00Z

Document:
435 Nev, Advance Opinion 4B
IN THE SUPREME COURT OF THE STATE OF NEVADA

ARTEMIS EXPLORATION COMPANY, No. 75323
ANEVADA CORPORATION; HAROLD

WYATT; AND MARY WYATT, FILED
Appellants,

vs OCT 03 zo
RUBY LAKE ESTATES
HOMEOWNER'S ASSOCIATION,
Respondent.

 

 

Appeal from a final judgment in a real property action. Fourth
Judicial District Court, Elko County; Alvin R. Kacin, Judge,
Affirmed.

 

Gerber Law Offices, LLP, and Travis W. Gerber and Zachary A. Gerber,
Elko,
for Appellants.

Leach Kern Gruchow Anderson Song and Karen M. Ayarbe, Reno,
for Respondent.

 

BEFORE PICKERING, PARRAGUIRRE and CADISH, JJ.

OPINION
By the Court, CADISH, J.:
In 1991, the Nevada Legislature adopted the Uniform Common-
Interest Ownership Act, as codified in NRS Chapter 116. See 1991 Nev.

1A- UO

 
Stat., ch. 245, §§ 1-128, at 535-79; NRS 116.001. NRS Chapter 116 defines
what constitutes a “common-interest community,” see NRS 116.021, and
also authorizes the creation of a “unit-owners’ association” to govern the
common-interest community, see NRS 116.011; NRS 116.3101. As relevant
to this appeal, a unit-owners’ association is authorized to impose
assessments on unit owners for the unit owners’ association to maintain
“common elements,” which, generally speaking, comprise real estate within
the common-interest community that is owned by the unit-owners’
association but that benefits all unit owners. See NRS 116.017.
Appellants own property in Ruby Lake Estates (RLE), a
neighborhood which was created in 1989, In the underlying declaratory
relief action, they challenged respondent Ruby Lake Estates Homeowner's
Association’s (RLEHOA) authority to impose assessments on them. In
particular, appellants argued that RLE was not a validly created “common-
interest community” because the recorded Declaration that created RLE did
not expressly state that RLE’s residents would be responsible for paying
assessments for the maintenance of common elements or other real estate
aside from their individual units, which appellants contend is required
under NRS 116.021. Alternatively, appellants contended that RLEHOA
was not a validly created “unit-owners’ association” because it was not
organized until 2006, while NRS 116.3101 requires a unit-owners’
association to be created before the first lot in the common-interest

community is conveyed. The district court granted summary judgment for
RLEHOA, thereby affirming RLEHOA’s authority to impose assessments
on appellants.

 

 
We agree with the district court’s determination that RLEHOA
is authorized to impose assessments. First, we conclude that RLE is a
common-interest community within the meaning of NRS 116.021 because
RLE’s Declaration contained an implied payment obligation for the common
elements and other real estate that appellants had notice of by virtue of the
Declaration when they purchased their lots. Second, we conclude that NRS.
116.3101(1) does not apply to common-interest communities formed before
1992 and that, consequently, RLEHOA did not need to be organized before
the first lot in RLE was conveyed.

FACTS AND PROCEDURAL HISTORY

RLE is a rural subdivision in Elko County, Nevada. Developers
Stephen and Mavis Wright (the Wrights) filed an official Plat Map for the
community on September 15, 1989. The first sheet of the Plat Map reads
in relevant part:

At a regularly held meeting at the Board of

Commissioners of Elko County, State of Nevada,

held on the 5th day of July 1989, this Plat was

approved as a Final Plat pursuant to NRS 278.380.

‘The Board does hereby reject on behalf of the public

all streets or roadways for maintenance purposes

and does hereby accept all streets and easements

therein offered for utility, drainage, and access

purposes only as dedicated for public use.
(Emphasis added.)

Subsequently, the Wrights recorded the Declaration for the
community on October 25, 1989.1 As relevant here, the Declaration

provided this:

INRS 116.037 defines “Declaration” as “any instruments, however
denominated, that create a common-interest community, including any
amendments to those instruments.” The term is frequently used

 

 
‘The real property affected hereby is subjected to the
imposition of the covenants, conditions, restrictions
and reservations specified herein to provide for the
development and maintenance of an aesthetically
pleasing and harmonious community of residential
dwellings for the purpose of preserving a high
quality of use and appearance and maintaining the
value of each and every lot and parcel of said
Property.

(Emphasis added.) The Declaration further provided for the creation of an

Architectural Review Committee (ARC)
for the general purpose of providing for the
maintenance of a high standard of architectural
design, color and landscaping harmony and to
preserve and enhance aesthetic qualities and high
standards of construction in the development and
‘maintenance of the subdivision.

(Emphases added.) The Plat Map was also attached to the recorded
Declaration.

On December 15, 1989, the first lots in RLE were conveyed.
Appellant Artemis Exploration Company acquired two lots in RLE, one in
1994 and one in 2010. Elizabeth Essington was the sole officer and director
for Artemis Exploration Company. Mrs. Essington and her husband built
their residential home on one of the lots Artemis Exploration Company
owned in RLE. Appellants Harold and Mary Wyatt took title to a lot in RLE
in 2001.

interchangeably with “Covenants, Conditions & Restrictions,” or “CC&Rs.”
Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow Canyon,
133 Nev. 740, 753, 405 P.3d 641, 651 (2017).

 

 
From 1997, after the last lot was sold by the developer, until
2006, an informal Ruby Lake Estates Landowners Association existed, and
regularly levied and collected assessments from lot owners within RLE to
maintain the roadways, fences, culverts, cattle guards, and entrance sign,
and perform weed abatement within the community. Mr. Essington
prepared a draft letter dated August 22, 2005, to the RLE lot owners, which
he sent to Mr. Lee Perks as President of the Landowners Association to
review. In the letter, Mr. Essington wrote of “the need to revitalize the Ruby
Lakes Estates property owners association,” which could include “assurling]
the aesthetic qualities of the subdivision” and “periodic road maintenance.”
He specifically wrote that he was “appealing to all of the property owners to
take the time and interest now to help to revitalize the association and
assist in making it function as it was intended,” specifically seeking to
organize the election of association officers.

RLEHOA was officially formed as an association in early 2006,
17 years after the first lot was conveyed. At an RLEHOA meeting held
August 12, 2006, Mr. Essington seconded the motion to approve the bylaws
for RLEHOA, which included a provision for annual assessments on the
property owners for “maintenance, roads, fire protection, and other
expenditures.” On August 11, 2007, Mr. Essington was elected to the Board
of the RLEHOA, and he submitted a Declaration of Certification as a
Common-Interest Community Board Member to the Nevada Real Estate
Division certifying that he had read and understood “the governing
documents of the association and the provisions of Chapter 116 of Nevada
Revised Statutes (NRS) and the Nevada Administrative Code (NAC).” As a

member of the Board, Mr. Essington voted to levy assessments, and the
Essingtons paid imposed assessments on behalf of Artemis.

 

 
Several years after RLEHOA was created, there was a dispute
between Mrs. Essington and RLEHOA’s ARC regarding the construction of
a building in the subdivision. Over Mrs. Essington’s objections, the
RLEHOA Board and the ARC took the position that the structure was
permitted. ‘Thereafter, in response to the Board and the ARC's decision,
Mrs. Essington stopped paying assessments on behalf of Artemis
Exploration Company. Artemis Exploration Company then filed the
underlying declaratory relief action against RLEHOA challenging
RLEHOA's authority to impose assessments?

‘The parties filed competing motions for summary judgment.
‘The district court denied Artemis Exploration Company's motion and
granted RLEHOA’s motion. In particular, the district court found that RLE
‘was a common-interest community because its Declaration sufficiently
described RLE’s common elements and alerted unit owners that they would
be financially responsible for maintaining those elements. The district
court also found that even though RLEHOA was not organized before
conveyance of the first lot as required by NRS 116.3101, RLEHOA was
nevertheless a validly created unit-owners’ association because NRS
116.3101 should not apply retroactively. Following additional motion
practice not relevant to this appeal, the district court entered a final
judgment consistent with its summary judgment determinations.

*The parties initially participated in non-binding arbitration before
the Nevada Real Estate Division. After the arbitrator ruled in RLEHOA’s
favor, Artemis Exploration Company instituted the underlying action.

‘This case was initiated by Artemis Exploration Company against
RLEHOA. After the district court granted summary judgment in favor of
RLEHOA and against Artemis, the court ordered all other property owners
within RLE to be joined. Other than the Wyatts and Artemis, all property

 

 
DISCUSSION

A district court's decision to grant summary judgment is
reviewed de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026,
1029 (2005); see also Costello v. Casler, 127 Nev. 436, 439, 254 P.3d 631, 634
(2011). The district court's judgment in this case does not implicate any

 

disputed facts, but instead raises issues of statutory construction, which we
also review de novo. Estate of Smith v. Mahoney's Silver Nugget, Inc., 127
Nev. 855, 857, 265 P.3d 688, 690 (2011).

Appellants argue that the district court erred when it
determined RLE was a common-interest community as defined under NRS
116.021 because RLE’s Declaration includes neither a description of
common clements, nor an obligation to pay for common elements.
Alternatively, appellants argue that RLEHOA is not a valid unit-owners’
association because it was not created before the first conveyance in RLE,
thus violating NRS 116.3101(1). We disagree with these arguments and
conclude that the district court properly found that (1) RLE is a common-
interest community pursuant to NRS 116.021, and (2) NRS 116.3101(1)
does not apply retroactively, such that RLEHOA is a validly created unit-
owners’ association.

owners failed to respond and defaults were entered against them. ‘The
‘Wyatts stipulated and agreed to be bound by the court’s Order Granting
RLEHOA’s Motion for Summary Judgment and its Order Denying
Artemis's Motion for Summary Judgment and any appeals related thereto.

 

 
RLEHOA is a common-interest community pursuant to NRS 116.021
because RLE’s Declaration sufficiently gave notice to prospective unit owners
that they would be financially liable for maintaining common elements

Our inquiry into whether RLE’s Declaration meets NRS
116.021’s definition of “common-interest community” begins with that
statute's relevant language, which provides,

“Common-interest community” means real estate

described in a declaration with respect to which a

person, by virtue of the person's ownership of @ unit,

is obligated to pay for a share of real estate taxes,

insurance premiums, maintenance or improvement

of, or services or other expenses related to, common

elements, other units or other real estate

described in that declaration.
NRS 116.021(1) (emphases added). Thus, the definition of “common-
interest community” depends on the definitions of “common elements” and
“real estate.” NRS 116.017 defines “common elements” in relevant part as
“any real estate within a planned community which is owned or leased by
the association.” And NRS 116.081 defines “real estate” as

any leasehold or other estate or interest in, over or

under land, including structures, fixtures and other

improvements and interests that by custom, usage

or law pass with a conveyance of land though not

described in the contract of sale or instrument of

conveyance. The term includes parcels with or

without upper or lower boundaries and spaces that

may be filled with air or water.
Reading the definitions together, we conclude that to qualify as a “common-
interest community,” the community's Declaration must describe “real
estate” for which unit owners are financially responsible, which may include
“structures, fixtures and other improvements and interests that by custom,

usage or law pass with a conveyance of land though not described in the

contract of sale or instrument of conveyance.” Commonly, this would be real

 

 
os Ae

 

estate that is “owned or leased by the association,” i.e., “common elements,”
but not necessarily, as it could be “other real estate” described in a
declaration.

While the definition of “common-interest community” is
unwieldy, we conclude that RLE falls within that definition. As indicated,
RLE's Declaration provided “for the development and maintenance of an
aesthetically pleasing and harmonious community,” and it established the
ARC, whose responsibilities were to “maintlain]...a high standard of
architectural design, color and landscaping harmony and to preserve and
enhance aesthetic qualities and high standards of construction in the
development and maintenance of the subdivision.” Even if these provisions
could plausibly be interpreted as ensuring that each individual unit owner
maintained only their own unit (a proposition with which we disagree), that
interpretation is belied by the Plat Map, which was attached to the
Declaration, and wherein the Elko County Board of Commissioners
expressly “reject{ed] on behalf of the public all streets or roadways for
maintenance purposes” but nevertheless “accept{ed) all streets and
easements therein offered for utility, drainage, and access purposes only as
dedicated for public use.” The Plat Map also shows street monuments
within the community. Reading the Declaration and Plat Map in
conjunction, we conclude that the Declaration sufficiently describes

“structures, fixtures and other improvements" (ic., “real estate” under NRS

 

116,081) that, by virtue of the County Board disavowing any maintenance
responsibility, necessarily implies that unit owners will be responsible for

such maintenance.

 
Our conclusion is reinforced by NRS 116.2105, which provides
an extensive list of information a declaration must contain but,
conspicuously, does not require a declaration to expressly explain that unit
owners may be subject to assessments or otherwise be financially
responsible for maintaining common elements, and we do not read NRS
116.021 as imposing such a requirement. Indeed, the Restatement (Third)
of Property (Servitudes) § 6.2 (2000), provides support for this conclusion.
It states,

‘There may be an implied obligation to contribute to

the maintenance of commonly held property

without regard to usage. An implied obligation

may also be found where the declaration expressly

creates an association for the purpose of managing

‘common property or enforcing use restrictions and

design controls, but fails to include a mechanism for

providing the funds necessary to carry out its

funetions.
Restatement (Third) of Property (Servitudes) § 6.2 emt. a (2000).
Consequently, we conclude that while RLE’s Declaration does not expressly
state an obligation to pay for common elements, other units, or real estate
pursuant to NRS 116.021, the Plat Map (which is part of the Declaration

pursuant to NRS 116.2109) does describe such real estate,

 

ng rise to an
implied payment obligation. See, e.g., Evergreen Highlands Ass'n v. West,
73 P.3d 1, 7 (Colo, 2003) (adopting the approach taken by a number of other
states and the Restatement of Property (Servitudes) in holding that under
Colorado's version of the Uniform Common-Interest Ownership Act,
language in a declaration, plat, and other recorded documents may
establish a common-interest community by implication with the

association's concomitant implied authority to levy assessments on unit

owners to pay for maintenance of the subdivision's common elements).

 

 
om

 

‘Therefore, the district court was correct when it found that RLE met the
statutory requirements of NRS 116.021, making it a common-interest
‘community.*

RLEHOA is a valid unit-owners’ association even though it was organized
after RLE conveyed the first lot because NRS 116.3101(1) does not apply to
pre-1992 common-interest communities

Appellants next contend that even if RLE is a valid common-
interest community under NRS 116.021, RLEHOA is not a valid unit-
owners’ association because it was not organized in compliance with NRS
116.3101. That statute provides that “[a) unit-owners’ association must be
organized no later than the date the first unit in the common-interest
community is conveyed.” NRS 116.3101(1). According to appellants,
because RLE conveyed the first unit in 1989 and RLEHOA was not formally
organized until 2006, RLEHOA necessarily failed to comply with NRS
116.3101,

Appellants argue that the Legislature intended NRS
116.3101(1) to apply to pre-1992 common-interest communities because it
did not include this provision in a list of provisions from which pre-1992

common-interest communities are exempt.’ Further, they argue, if the

“The language of NRS 116.021 quoted in the text is the current
version following amendments adopted in 2009. While the parties dispute
whether the broader pre-2009 version or this one applies here, we hold that
RLE is a common-interest community under either version. ‘The current
language requires the declaration to describe the “real estate” but does not,
require it to specify the payment obligation. This is even clearer in this case
because the provisions of NRS 116.2105 specifying the required contents of
a declaration do not apply to pre-1992 communities like this one. NRS
116.1201(3Xb).

‘When the Uniform Common-Interest Ownership Act was first
adopted in 1991 as NRS Chapter 116, see 1991 Nev. Stat., ch. 245, §§ 1-2,

sty

 
 

provision does not apply, any community in the State formed before 1992
with a declaration could organize an HOA at any time, even if the
declaration provides no notice to the lot owners. On the other hand,
RLEHOA’s position is that if NRS 116.3101(1) applies here, it leads to the
absurd result that pre-1992 communities were required to comply with a
statute which did not exist when they were created. We agree with
RLEHOA's position.

In the context of deciding a statute's retroactive application,
this court has stated that

liln Nevada, as in other jurisdictions, statutes

‘operate prospectively, unless the Legislature

clearly manifests an intent to apply the statute

retroactively, or it clearly, strongly, and

imperatively appears from the act itself that the

Legislature's intent cannot be implemented in any

other fashion.

PEBP v. Las Vegas Metro. Police Dep't, 124 Nev. 138, 154, 179 P.3d 542, 553
(internal quotation marks omitted).

Here, appellants have not pointed to any legislative history or
other authority, nor have we found any, to indicate “clearly, strongly, and
imperatively” that the Legislature intended for NRS 116.3101(1) to apply to
pre-1992 communities. While the Uniform Common-Interest Ownership
Act commentary for this provision states that creating an HOA before the

first lot is conveyed is important for notice purposes, the RLE Plat Map and

at 535, NRS Chapter 116 did not apply at all to pre-1992 communities. It
was not until 1999 that such communities were made subject to this Act,
see 1999 Nev. Stat., ch. 572, § 16.5, at 2999, but certain exceptions were
adopted at that time, including the provision of NRS 116.1201(3)(b) stating
that pre-1992 common-interest communities do not have to comply with
NRS 116.2101 to NRS 116.2122. 1999 Nev. Stat., ch. 572, § 16, at 2998-99.

12

 
Declaration, which were recorded together when the community was
created, notified potential buyers that the community intended to maintain
‘common elements for a variety of reasons. Moreover, appellants and other
unit owners could not have relied on a yet-to-be enacted statute in deciding
whether to purchase lots and build homes in the community. Cf: PEBP, 124
Nev. at 155, 179 P.3d at 554 (observing that fair notice, along with

 

reasonable reliance and settled expectations, are guiding principles in
deciding whether a statute applies retroactively).

While the Legislature did not state its intention as to whether
NRS 116.3101(1) applies to pre-1992 communities, it did state that “INRS
Chapter 116] must be applied and construed so as to effectuate its general
purpose to make uniform the law with respect to the subject of this chapter
among states enacting it.” NRS 116.1109(2). The legislative history leading
to the 1999 amendments to NRS Chapter 116 shows that the legislative
purpose was to include more common-interest communities within the
scope of the uniform law in order to protect a greater number of
homeowners, because many pre-1992 communities that were previously
excluded from NRS Chapter 116 had been “mismanaged with loosely
written codes covenants and restrictions.” See Hearing on S.B. 451 Before
the Assembly Comm. on Judiciary, 70th Leg. (Nev., May 14, 1999)
(Statement of Senator Schneider, who worked on developing the bill). In
that regard, it would be absurd for the Legislature to decide in 1999 to

impose NRS Chapter 16's requirements on pre-1992 communities but only
if they knew, before 1992, that they would later be required to formally
create the unit-owners’ association before selling the first unit. See S. Nev.
Homebuilders Ass'n v. Clark County, 121 Nev. 446, 449, 117 P.3d 171, 173

 

 
(2005) (observing that in resolving statutory construction issues, this court's
duty is to select a construction that is consistent with the Legislature's
intent and the purpose of the legislation as a whole and that also avoids
absurd or unreasonable results). Therefore, we conclude that the district
court properly found that NRS 116.3101(1) does not apply to a pre-1992

community. Accordingly, we affirm.

 

Parraguirre