Title: Saticoy Bay, LLC v. Peccole Ranch Community Ass'n

State: nevada

Issuer: Nevada Supreme Court

Document:

187 Nev., Advance Opinion 5Z
IN THE SUPREME COURT OF THE STATE OF NEVADA

SATICOY BAY, LLC, SERIES 9720 No. 81446
HITCHING RAIL, A NEVADA LIMITED
LIABILITY COMPANY,

Appellant,
" FILED
PECCOLE RANCH COMMUNITY

ASSOCIATION; AND NEVADA SEP 23 202)

ASSOCIATION SERVICES, INC., hie
Respondents. Zh Pees

Appeal from a district court order granting a motion to dismiss

 

 

in a tort action arising out of a homeowners’ association foreclosure sale.
Eighth Judicial District Court, Clark County; Joseph Hardy, Jr., Judge.

Reversed and remanded.
Roger P. Croteau & Associates, Ltd., and Roger P. Croteau, Las Vegas,

for Appellant.

Lipson Neilson P.C. and Kaleb D. Anderson and Amanda A. Ebert, Las

Vegas,
for Respondents.

BEFORE THE SUPREME COURT, PARRAGUIRRE, STIGLICH, and
SILVER, JJ.

2i-17490

 
es

OPINION
By the Court, STIGLICH, J.

NRS 38.310 requires parties to attempt alternative dispute
resolution as a prerequisite to filing a civil action “based upon a claim
relating to... (tJhe interpretation, application or enforcement of any
covenants, conditions or restrictions {CC&Rs} applicable to residential
property or any bylaws, rules or regulations adopted by an association.” In
this opinion, we consider whether a suit dismissed for noncompliance with
this statute fell within its scope. Appellant Saticoy Bay, LLC, Series 9720
Hitching Rail purchased property at a homeowners’ association (HOA)
foreclosure sale conducted after the previous owner defaulted on HOA
assessments imposed by the CC&Rs. Saticoy Bay claims it believed it was
purchasing the property free of other liens. However, the first deed of trust
on the property survived the foreclosure sale, and Saticoy Bay sued the
HOA and its agent, alleging misrepresentation, breach of the duty of good
faith, conspiracy, and violation of NRS Chapter 113.

The district court granted respondents’ motion to dismiss on the
ground that Saticoy Bay had not engaged in alternat
before filing suit, violating NRS 38.310. Saticoy Bay appeals, arguing that
NRS 38.310 di
claims arose out of an HOA foreclosure sale is not sufficient to trigger NRS

 

e dispute resolution

 

not apply to its claims. We agree. ‘The mere fact that these

38.310's mediation requirement. Mediation is required before a district
court can hear a claim that itself requires “interpretation, application or
enforcement” of HOA CC&Rs, rules, bylaws, or regulations, Here, there is
no dispute that the HOA properly foreclosed after the owner failed to pay
their assessments, only that it did not disclose to the prospective new owner
an existing interest in the property. Because the tort claims asserted in this

 

 
4

matter are unrelated to the interpretation, application, or enforcement of
HOA CC&Rs or rules, NRS 38.310's scope does not encompass those claims.
BACKGROUND

‘The previous owner of 9720 Hitching Rail Drive in Las Vegas
entered into a first deed of trust with Countrywide KB Home Loans, LLC.
Several years later, this deed of trust was assigned to Bank of America, N.A.
(BANA). The homeowner became delinquent on her assessment fees to
Peccole Ranch Community Association (the HOA), and the HOA, through
its agent Nevada Association Services, Inc., recorded a notice of default and
election to sell in December 2011. BANA, through its agent, subsequently
tendered the amount of the superpriority lien to preserve its deed of trust,
but the HOA trustee rejected the payment and moved forward with the
property's sale, In 2014, Saticoy Bay purchased the property at the
foreclosure sale.

In 2016, BANA filed a quiet title complaint in federal district
court. The federal court found that BANA’s deed of trust survived the
foreclosure sale. This finding was based on our 2018 decision that “a first
deed of trust holder's unconditional tender of the superpriority amount due
results in the buyer at foreclosure taking the property subject to the deed of
trust,” even if the HOA rejects the tender. Bank of Am., N.A. v. SFR Invs.
Pool 1, LLC, 134 Nev. 604, 605, 427 P.3d 113, 116 (2018). Saticoy Bay sued
respondents the HOA and its trustee, alleging misrepresentation, breach of
the duty of good faith, conspiracy, and violation of NRS 113.130. Its claims
hinge on the assertion that the HOA and its trustee should have disclosed
BANA's tender of the superpriority lien that made Saticoy Bay's ownership
of the property subject to BANA’s first deed of trust. Saticoy Bay asserts

 

 
oo

that,
the property.

 

had been aware of any tender by BANA, it would not have bid on

Respondents moved to dismiss the suit for noncompliance with
NRS 38.310 or alternatively for dismissal for failure to state a claim or for
summary judgment. The district court dismissed the case without
prejudice, concluding that the action was “related to the enforcement of
CC&Rs,” that NRS 38.310 therefore applied, and that Saticoy Bay had filed
its complaint without participating in prelitigation mediation. The district
court accordingly declined to reach respondents’ alternative bases for relief.
Saticoy Bay appeals.

DISCUSSION

The district court's order dismissing the action based on NRS
38.310 involves a question of statutory interpretation; we therefore review
this appeal de novo. See McKnight Fam., LLP v. Adept Mgmt. Servs., Inc.,
129 Nev. 610, 614, 310 P.3d 555, 558 (2013). As a preliminary matter,
however, we begin with respondents’ contention that we lack jurisdiction to
consider this matter.
The district court's order was a final, appealable judgment

Respondents contend that the district court’s order granting the
motion to dismiss in this action was not a final, appealable judgment
because the case was dismissed without prejudice. The order stated that
the case may be filed again if the parties were unable to successfully resolve
their claims through mediation. NRAP 3A(bX1) allows an appeal to be
taken from “la] final judgment entered in an action or proceeding
which the judgment is rendered.” Whether a
dismissal without prejudice pursuant to an exhaustion statute like NRS

commenced in the court

 

38.10 is a final judgment is a question of first impression.

 

 
We have clarified that “a final judgment is one that disposes of
all the issues presented in the case, and leaves nothing for the future
consideration of the court, except for postjudgment issues such as
attorney's fees and costs.” Lee v. GNLV Corp., 116 Nev. 424, 426, 996 P.24
416, 417 (2000) (internal quotation marks omitted). Generally, a dismissal
without prejudice expresses that the same claims could be refiled as a new
case, See 24 Am, Jur. 2d Dismissal § 2 (“(T)he primary meaning of
‘dismissal without prejudice’ is dismissal without barring the defendant
from returning later, to the same court, with the same underlying claim.”).

We have said that “a district court order dismissing a complaint
with leave to amend is not final and appealable.” Bergenfield v. BAC Home
Loans Servicing, LP, 131 Nev. 683, 685, 354 P.3d 1282, 1284 (2015).
Although a dismissal without prejudice is not entirely different from a
general dismissal with leave to amend, that is not the case for dismissals
under NRS 38.310.

Here, Saticoy Bay's case was dismissed with allowance to leave
the public courts, enter mediation for its claims, and refile in the distriet
court only if mediation fails. ‘The district court made clear that refiling
without entering mediation would mandate dismissal again in this matter.
Saticoy Bay insisted—and continues to insist—that its claims do not require
mediation,

In all circumstances, “{t]he finality of an order or judgment
depends on what the order or judgment actually does...” Brown v. MHC
Stagecoach, LLC, 129 Nev. 343, 345, 301 P.3d 850, 851 (2013) (internal
quotation marks omitted). NRS 38.310's prefiling requirement is not
dissimilar to requirements of exhaustion of administrative remedies before
filing a civil complaint. See Nationstar Mortg., LLC v. Maplewood Springs

 

 
Homeowners Ass'n, 238 F. Supp. 3d 1257, 1269 (D. Nev. 2017) (holding that
“NRS 38.510 is an exhaustion statute that creates prerequisites for filing
certain state-law claims” (emphasis added). The effect of the district
court's order here more conclusively bars Saticoy Bay from the courts than
a typical dismissal without prejudice. We agree with the Eleventh Circuit's
conclusion that “a ‘district court’s dismissal of a case without prejudice for
failure to exhaust administrative remedies is a final order, giving an
appellate court jurisdiction.’ . . [T]he practical effect of the district court’s
order here is to deny the plaintiffs judicial relief until they have exhausted
their administrative remedies.” Peterson v. BMI Refractories, 132 F.3d
1405, 1411 (11th Cir. 1998) (quoting Kobluer v. Grp. Hospitalization & Med.
Serv., Inc., 954 F.2d 705, 708 (11th Cir. 1992)). Therefore, we conclude that
orders dismissing without prejudice on the basis of failure to comply with
NRS 38.310 constitute appealable final orders subject to the jurisdiction of
this court on appeal.

NRS 38.310 did not require prefiling alternative dispute resolution in this
case

Saticoy Bay contends that its claims do not implicate NRS
38.310 because this case does not require the interpretation, application, or
enforcement of any CC&Rs or HOA rules. We agree.

NRS 38.310 bars certain ci

 

actions from being filed unless the

  

dispute has already been submitted to alternative dispute resolution. As
relevant to this case, NRS 38.310(1) provides as follows:
No civil action based upon a claim relating to:

(a)The interpretation, application or
enforcement of any covenants, conditions or
restrictions applicable to residential property or
any bylaws, rules or regulations adopted by an
association;

 

 
a

may be commenced in any court in this State unless
the action has been submitted to mediation or, if
the parties agree, has been referred to a program
pursuant to the provisions of NRS 38.300 to 38.360,
inclusive...

‘No alternative dispute resolution processes were undertaken before Saticoy

 

Bay filed its complaint.

RS 38.310(1Xays bar is triggered when (1) the case is a “civil
action,"= and (2) the action is based on claims “relating to... [tlhe
interpretation, application or enforcements” of CC&Rs or HOA rules or
bylaws.? NRS 38.310. The parties dispute only the second prong of this
portion of the statute. We take this opportunity to clarify when the second
requirement is met, before applying that analysis to the facts of this case.

Determining the scope of NRS 38.310(1)'s limitation on filing civil
actions

Saticoy Bay disputes that the district court properly dismissed
its entire complaint pursuant to NRS 38.310. Our cases on whether an
action relates to the interpretation, application, or enforcement of CC&Rs
have left open two salient questions. First, how connected must a claim be
to the CC&Rs in order to trigger NRS 38.310's requirements? Second,

\For the purposes of this statute, a civil action “includes an action for
money damages or equitable relief. The term does not include an action in
equity for injunctive relief in which there is an immediate threat of
irreparable harm, or an action relating to the title to residential property.”
NRS 38.3003).

"This matter does not present the opportunity to determine when
something analogously relates to an association's bylaws, rules, or
regulations.

 

 
should courts dismiss an entire suit if a claim relates to the CC&Rs, or only
those claims that are barred by the statute?

First, we clarify that a civil action falls within NRS
38.310(1XaYs scope if resolving the claim's merits would require the
interpretation, application, or enforcement of CC&Rs. In Hamm v.
Arrowereek Homeowners’ Association, 124 Nev. 290, 183 P.34 895 (2008),
this court examined a suit dismissed pursuant to NRS 38.310 that had been
brought by property owners against their HOA after it had placed a lien on

 

the property. Because the plaintiffs had explicitly asked for interpretation
of the CC&Rs to see if fees must be paid on vacant lots, “resolving the merits
of the [] complaint would require the district court to interpret the CC&Rs’
meaning,” and this court found that the plaintiffs “must submit their claims
to arbitration or mediation before instituting an action in the district court.”
Id. at 296, 183 P.3d at 900. Hamm did not explicitly hold that NRS 38.310
applies only when interpreting the CC&Rs is necessary, but instead lists the
fact that one claim required interpretation of the CC&Rs among other
reasons why NRS 38.310 applied. Id. at 296, 183 P.3d at 900.

In McKnight Family, LLP v. Adept Management Services, Inc.,
129 Nev. 610, 310 P.3d 555 (2013), this court read the statute more broadly.
In McKnight, the plaintiffs’ home was sold after an HOA foreclosure, and
plaintiffs brought a suit making seven claims, which were all dismissed
pursuant to NRS 38.310. Id. at 613, 310 P.3d at 557. But, while considering
whether the plaintiffs’ claims under NAC 116.300, NAC 116.341,’ NRS
116.1113, and NRS 116.3103 were barred, this court determined that these
claims fell under NRS 38.310 because they “required the district court to

SNAC 116.300 is now NAC 116A.320, and NAC 116.341 is now NAC
116A.345.

 
on

interpret regulations and statutes that contained conditions and restrictions
applicable to residential property.” Id. at 615, 310 P.3d at 558 (emphasis
added). We conclude that this language in McKnight improperly extended
the scope of NRS 38.310 by treating “covenants, conditions, or restrictions”
as a term encompassing all conditions and restrictions on property, no
matter their source. NRS 38.310, in using the phrase “covenants, conditions
or restrictions,” utilizes a term of art for those rules contained in an HOA’s
recorded declaration or deed and enforceable through the association's
power to impose sanctions. See NRS 116.2105; NRS 116.3102(3); cf. Hawk
v. PC Vill. Ass'n, Inc., 309 P.3d 918, 922 (Ariz, Ct. App. 2013) (“CC & Rs
Isic] are contracts that create enforceable property rights and obligations
that may run with the land.”).

Holding that any statute or regulation which conditions or
restricts residential property falls within NRS 38.310’s scope would expand
the statute to include claims based on dozens of restrictions that have
nothing to do with common-interest communities’ CC&Rs. The only way of
reading the statute to cover non-CC&R restrictions is to willfully ignore that
“covenants, conditions, or restrictions” as used in the statute is a term of art
with a specific meaning. A primary duty of courts is to interpret, apply, and
enforce a jurisdiction's statutes and regulations. The CC&Rs that NRS
38.310 refers to are not such statutes and regulations, but rather private
contracts—and a specific kind of private contract that the Legislature has
decided should be subject to mediation before coming into court. As we
stated in Hamm, “NRS 38.310 expresses Nevada's public policy favoring
arbitration of disputes involving the interpretation and enforcement of
CC&Rs.” 124 Nev. at 299 n.34, 183 P.3d at 902 n.34.

 

 
Accordingly, we clarify that, under NRS 38.310, a claim does
not relate to the CC&Rs unless deciding the claim requires interpreting,
applying, or enforcing the CC&Rs. See id. at 295-96, 183 P.3d at 900. This
interpretation does not significantly narrow the statute's scope or redefine
the broad phrase “relating to."* A district court tasked, even in part, with
resolving a claim through interpreting, applying, or enforcing CC&Rs would
necessarily consider those CC&Rs. Given the policy justification expressed
in Hamm, the statute certainly does not encompass every claim where a
decision-maker might, in passing, look at the CC&Rs or a claim with a
passing connection to the CC&Rs. Rather, the statute's function is to
prevent a court from having to insert itself into the weeds of HOA CC&R.
disputes, unless the parties have already tried and failed to resolve the
dispute through mediation. ‘Therefore, only in disputes where the claim
itself requires—not where the facts surrounding the claim merely involve—
the interpretation, application, or enforcement CC&Rs, does the claim
relate to the CC&Rs for the purposes of NRS 38.310.

Next, we turn to our second question: may a court dismiss only
some claims in a complaint for noncompliance with NRS 38.310? The
statute refers to a “civil action based upon a claim relating to” the CC&Rs.
However, many civil suits bring a variety of claims together against the
same party, only some of which might have any connection to the CC&Rs.

‘See Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. _, _, 138
S. Ct. 1752, 1760 (2018) ("Use of the word ‘respecting’ in a legal context
generally has a broadening effect, ensuring that the scope of a provision
covers not only its subject but also matters relating to that
subject. ... {W]hen asked to interpret statutory language including the
phrase ‘relating to,’ which is one of the meanings of ‘respecting,’ this Court
has typically read the relevant text expansively.’).

 

10

 

 
We hold that, under NRS 38.310, a district court must only dismiss those
claims that fall within NRS 38.310's scope and do not comply with its
requirements—leaving any remaining claims to proceed in the court. In
Hamm, this court did not explicitly address whether each cause of action in
the complaint fell under NRS 38.310, See Hamm, 124 Nev. at 295-96, 183
P.3d 895, 900 (analyzing the “complaint” overall, rather than each claim
therein), However, in McKnight, this court examined, claim by claim,
whether a dismissal pursuant to NRS 38.310 was appropriate. But in
McKnight, this court only explicitly addressed whether each claim was a
“civil action,” while addressing whether the CC&Rs were sufficiently
implicated for three of the seven claims. McKnight, 129 Nev. at 615-17, 310
P.3d at 558-60. This was in error; the court only “showed its work” for half
of the questions it should have addressed. In analyzing whether dismissal
under NRS 38.310(1) is warranted, courts must consider whether each
claim requires the district court to interpret, apply, or enforce an
association’s CC&Rs in order to resolve the claim (and, if relevant, whether
the claim falls into one of NRS 38.310's exceptions).
The district court erred in dismissing this action

Now, we consider whether the district court abused its
discretion in finding that NRS 38.310(1) mandated dismissal of Saticoy
Bay's complaint. Saticoy Bay brought four claims: misrepresentation,
breach of the duty of good faith under NRS 116.1113, conspiracy, and
violation of NRS 113.130. Each claim falls within the definition of civil
action under NRS 38.300. The district court found that NRS 38.310
required dismissal because the statute was “implicated in the instant case,”

 

 

the case did not fall under any exception to the statute, and “under the
‘McKnight case, the Supreme Court reads NRS 38.310(a) fairly broadly.” We

ul

 

 
conclude this was incorrect, because no claim required the district court to
interpret, apply, or enforce the CC&Rs.

Saticoy Bay first claimed intentional or, alternatively, negligent
misrepresentation by the HOA and the HOA trustee. Saticoy Bay argued
that respondents did not disclose BANA’s attempt to satisfy the
superpriority lien because they did not want prospective purchasers like
Saticoy Bay to know that the property might be subject to the first deed of
trust. Of course, the sale happened because the homeowner did not pay
HOA fees due, which are required in the HOA's CC&Rs. Thus, the claim’s
factual background involved the CC&Rs. But mere involvement is not
enough to make a claim fall within the statute. ‘The claim hinges on an
allegation that respondents breached a duty they owed to Saticoy Bay before
Saticoy Bay purchased the property, i.e., to disclose BANA’s tender offer.
The duty supposed by this claim originated in common law, not the CC&Rs.
In McKnight, we said that a wrongful foreclosure claim was barred by NRS
38.310 because it challenged the authority behind the foreclosure, which
derived from the CC&Rs. 129 Nev. at 616, 310 P.3d at 559. In contrast,
Saticoy Bay does not argue that the HOA lacked the authority to foreclose
on the property, just that it misrepresented the property it was selling. As
a result, this claim could be resolved without interpreting the CC&Rs and
therefore falls outside NRS 38.310's scope.

Saticoy Bay next claimed a violation of NRS 116.1113's duty of
good faith. This claim, too, is dependent on a prepurchase nondisclosure
which would not require analysis of the CC&Rs. This claim has nothing to
do with the foreclosure sale authority or any duties under the CC&Rs.
Respondents argue that McKnight supports their contention that the NRS
116.1113 breach-of- good-faith claim was properly dismissed under NRS

12

 

 
4

38.310. This is incorrect for two reasons. First, the breach-of-good-faith
claim in McKnight related to the allegation that the HOA should not have
foreclosed on the plaintiffs’ property under authority of the CC&Rs. 129
Nev. at 616, 310 P.3d at 559. That differs from this matter, where a
purchaser at a foreclosure sale is suing based on a breach of good faith
related to nondisclosure that does not involve whether the HOA or the
homeowner complied with the CC&Rs. Second, as discussed above,
McKnight wrongly suggested that NRS 116.1113 itself was a condition or
restriction on residential property as referred to in NRS 38.310(1Xa), and
respondents cannot rely on McKnight’s mistake.

Saticoy Bay next claimed conspiracy, alleging that the HOA and
HOA trustee conspired to commit the wrongs alleged in its first two claims.
As with those claims, the alleged conspiracy does not require looking to the
CC&Rs for resolution, and respondents have not shown that this claim
involved interpreting, applying, or enforcing the CC&Rs.

Lastly, Saticoy Bay claimed that NRS Chapter 113’s
requirements applied to HOA foreclosure sale disclosures and that NRS
Chapter 113 required the HOA to submit a real property disclosure form
disclosing “defects,” which would include a preexisting deed of trust. This
claim does not involve a duty arising from the CC&Rs or any other provision
of the CC&Rs. As noted above, statutory requirements themselves are not
CC&Rs and do not trigger the limitations of NRS 38.310 unless they require
interpretation, application, or enforcement of CC&Rs.

Accordingly, we conclude that because none of Saticoy Bay's
claims fell within the scope of NRS 38.310, the district court erred in
dismissing the claims on those grounds.

13

 

 
ene

CONCLUSION
In granting a request for dismissal pursuant to NRS
38.310(1Xa), courts should make a finding that resolving the dismissed
claims would necessitate interpreting, applying, or enforcing the CC&Rs or
association rules. When a court dismisses an action without prejudice
under this statute, we may consider an appeal of that judgment. The
district court erred in dismissing appellant's complaint under NRS 38.310
because resolving the claims would not require interpreting, applying, or
enforcing respondent HOA’s CC&Rs. However, the district court declined
to consider the other grounds for dismissal in respondents’ motion below.
‘Therefore, we reverse the district court’s order and remand for
consideration of the other rationales in the respondents’ motion for
dismissal or summary judgment that the district court did not reach.

Aten J.

Stiglich
‘We concur:
J.
Parraguirre
IND ADs
Silver
14