Title: Hardy Companies, Inc. v. SNMARK, LLC

State: nevada

Issuer: Nevada Supreme Court

Document:

nee

 

426 Nev, Advance Opinion 44
IN THE SUPREME COURT OF THE STATE OF NEVADA

HARDY PAINTING AND DRYWALL, A
NEVADA CORPORATION; AND W.E.

HARDY COMPANIES, INC., D/B/A | No, 52758
O'NEIL CONSTRUCTION CO. OF |

CALIFORNIA, A DELAWARE
CORPORATION, Fi L E D
Appellants,

vs. DEC 16 2010
SNMARK, LLC, A NEVADA LIMITED eo

LIABILITY COMPANY,
Respondent. ae

Appeal, pursuant to NRS 108.2275(8), from a district court
order expunging mechanics’ liens. Eighth Judicial District Court, Clark
County; Blizabeth Goff Gonzalez, Judge.

‘Reversed and remanded,
Lewis & Roca LLP and Daniel F. Polsenberg and Dan R. Waite, Las
Vegas,
for Appellant W.E. O'Neil Construction Company of California.

Reynolds & Associates and Ronald H. Reynolds, Las Vegas,
for Appellant Hardy Companies, Inc.

Fennemore Craig, P.C., and David W. Dachelet, Las Vegas,
for Respondent.

BEFORE THE COURT EN BANC.
OPINION

By the Court, DOUGLAS, J.

J0- 34850

 
Appellant W.E. O'Neil Construction Company of California
CONeil) and its subcontractor, appellant Hardy Companies, Inc. (Hardy),
sought to foreclose mechanics’ liens on property owned by respondent
SNMARK, LLC. O'Neil had contracted with ECT Holding, LLC's lessee,
Wickes Furniture, to build out a large commercial space in a shopping
center owned by ECT. A month later, ECT transferred the shopping
center and lease to SNMARK. Neither O'Neil nor Hardy served a notice of
right to lien (pre-lien notice) on either ECT or its successor SNMARK,
pursuant to NRS 108.245; however, SNMARK knew about and was
involved with the construction.

After construction was completed, O'Neil and Hardy filed
‘mechanics’ liens on SNMARK’s property and then sought to foreclose on
those liens. The district court determined that none of the lien claimants
had served SNMARK with a pre-lien notice, as required by NRS 108.245,
and therefore, granted SNMARK’s motion to expunge the mechanics’ liens
and for summary judgment.

In this appeal, we address whether recent legislative
amendments to the mechanic's lien law abrogated or overruled Fondren v.
K/L Complex, Ltd., 106 Nev. 705, 800 P.2d 719 (1990), and Nevada’s
substantial compliance doctrine. We conclude that Fondren and the
substantial compliance doctine are still good law. An owner must have
either pre-lien notice or actual knowledge as described in Fondren in order
to prevail in a lien action against that owner. Additionally, strict
compliance with the mechanic's lien statutes is not required to perfect a
lien. However, while substantial compliance is still the law in Nevada,

substantial compliance requires actual notice to the owner and under the

facts of this case, mere notice to the tenant is not sufficient.

 

 
‘Therefore, the district court erred in granting summary
judgment against O'Neil and Hardy because pre-lien notice was
unnecessary if SNMARK had actual knowledge of O'Neil’s or Hardy's
work. The question of whether SNMARK had actual knowledge is a
question of material fact that must be determined by the district court

upon remand,

PROCEDURAL HISTORY AND FACTS:

Wickes Furniture Company leased retail space from ECT
Holding, LLC, in March 2007. The lease required Wickes to improve the
premises and in exchange, ECT agreed to contribute $2,150,000 toward
the improvements. The lease also required Wickes to obtain ECT’s
approval on both the final build-out plans and the selection of the general
contractor. The lease stated: “Landlord approves Tenant's use of O'Neil
Industries Inc. or an affiliate thereof, as its general contractor.” The lease
was executed by ECT through its manager, Eliezer Mizrachi.

‘Two days after the execution of the lease, ECT recorded a
notice of nonresponsibility with the Clark County Recorder's Office,
pursuant to NRS 108.234. In the notice, ECT acknowledged the intended
construction by Wickes and noted its nonresponsibility for the
improvements. However, ECT did not deliver the notice to O'Neil, the
prime contractor.

"There is no evidence in the record that ECT served or attempted to
serve Wickes the notice of nonresponsibility within ten days after
recording it, as required by NRS 108.234(4)(a). SNMARK admits that
ECT never served O'Neil, the prime contractor, within ten days after the
formation of the contract between Wickes, the lessee, and O'Neil, as
required by NRS 108.234(4)(b). Because ECT failed to comply with the
provisions of NRS 108.234, SNMARK cannot, and does not, claim it is not

continued on next page...

 

 
or

In April 2007, ECT transferred the shopping center by
quitclaim deed to SNMARK. ECT also assigned all of its rights and
obligations under the lease to SNMARK. Mizrachi, the manager of both
‘ignment document on behalf of both ECT and

 

companies, executed the a
SNMARK.

 

In July 2007, Wickes and O'Neil executed a construction
contract for $5,527,416 to complete the tenant improvement work. O'Neil
then entered into a subcontract with Hardy for work on the Wickes store?

Throughout the construction, SNMARK. through Mizrachi,
was involved in several aspects of O’Neil’s tenant improvement work,
including directing O'Neil on the demising walls, curbs, gutters, and
landscaping; making 15 to 20 site visits to monitor O'Neil’s progress; and
participating in meetings with Wickes and O'Neil to discuss the removal of
an entry canopy. In addition, Mizrachi specifically directed O’Neil's work
on the installation of the electrical house panel that controlled the
electricity and metering for the entire shopping center. O'Neil also
performed work on the common areas for the benefit or at the direction of
SNMARK, who remained responsible for those common areas.®

+ continued

subject to or is immune from the attachment of a mechanic's lien. NRS
108.2346).

*There were multiple subcontractors; two other subcontractors also
placed liens on the property and were involved in the consolidated district,
court case. Only O'Neil and Hardy are parties to this appeal.

S0’Neil’s work on the common area included repaving portions of the
parking lot, restriping the parking lot, removing existing planters,
continued on next page .

 

 
0 05

O'Neil and its subcontractors, including Hardy, completed the
work on Wickes Furniture Store in November 2007. O'Neil was paid
$2,150,001 by Wachovia Bank, on behalf of SNMARK, between July and
Soptember 2007. Before these payments were made, Mizrachi
communicated directly with O'Neil to verify the percentage completed 80
the appropriate progress payment could be made to O'Neil. Wickes paid
O'Neil $1,145,064 in October 2007. O'Neil achieved a cost savings of
$99,000 in favor of Wickes, but an unpaid balance remains.*

O'Neil never gave a notice of right to lien pursuant to NRS
108.245. On January 18, 2008, O'Neil recorded a mechanic's lien against
SNMARK’s property for $2,133,620 and listed SNMARK as the owner.
Hardy gave a notice of right to lien, pursuant to NRS 108.245, to Wickes
and O'Neil, but not to SNMARK, On December 18, 2007, Hardy recorded
a mechanic's lien listing Wickes Furniture as the owner.

Hardy filed suit against SNMARK, Wickes, and O'Neil on
January 25, 2008. Hardy then filed to foreclose on the mechanic's lien on
February 29, 2008. O'Neil answered and asserted cross-claims against
SNMARK, including a claim to foreclose its mechanic's lien. O'Neil also
filed a direct action against SNMARK on April 1, 2008. These two cases
were consolidated in district court.

continued

relocating and reinstalling planters, installing irrigation curbs and
landscaping, removing sidewalks, installing street lights in the parking
lot, and more.

“On February 3, 2008, less than one year into its 30-year lease with
SNMARK, Wickes filed for bankruptey and vacated the property.

 

 
SNMARK filed a motion to expunge the mechanics’ liens and
lis pendens and for partinl summary judgment. The district court
“determined that none of the Lien Claimants served SNMARK with any
Notice of Right to Lien as required by NRS 108.245, and good cause
otherwise appearing,” granted SNMARK’s motion in all respects. This
appeal followed.

DISCUSSION
Standard of review
Statutory interpretation

“The construction of a statute is a question of law that this
court reviews de novo.” AF. Constr, Co, v. Virgin River Casino, 118 Nev.
699, 703, 56 P.3d 887, 890 (2002) (citing SIS v. United Exposition
Services Co., 109 Nev. 28, 30, 846 P.2d 294, 295 (1993). ‘The “court first,
looks to the plain language of the statute.” ALF, Constr. Co., 118 Nev. at
708, 56 P.3d at 890 (citing Salas v. Allstate Rent-A-Car, Inc,, 116 Nev.
1165, 1168, 14 P.3d 511, 513-14 (2000). “[I]f_ the statutory
language . .. fails to address the issue, this court construes the statute
according to that which ‘reason and public policy would indicate the
legislature intended.” A.F. Constr, Co,, 118 Nev. at 703, 56 P.3d at 890
(quoting State, Dep't Mtr, Vehicles v. Vezeris, 102 Nev. 282, 236, 720 P.2d
1208, 1211 (1986).

 

5Wo note that the district court did not make a determination as to
whether an issue of material fact exists as to actual knowledge

 

 
‘The Legislature's intent is the primary consideration when
interpreting an ambiguous statute. Cleghorn v, Hess, 109 Nev, 544, 548,
853 P.2d 1260, 1262 (1993). When construing an ambiguous statutory
provision, “this court determines the meaning of the words used in a
statute by examining the context and the spirit of the law or the causes
which induced the legislature to enact it.” Leven v, Frey, 123 Nev. 399,
405, 168 P.3d 712, 716 (2007) (internal quotation marks omitted), In
conducting this analysis, “[tJhe entire subject matter and policy may be

  

involved as an interpretive aid.” Id, (internal quotation marks omitted).
Accordingly, this court will consider “the statute's multiple legislative
provisions as a whole.” Id.

This court has a duty to construe statutes as a whole, so that
all provisions are considered together and, to the extent practicable,
reconciled and harmonized. Id.; Southern Nev. Homebuilders v. Clark
County, 121 Nev. 446, 449, 117 P.3d 171, 173 (2005). In addition, the
court will not render any part of the statute meaningless, and will not
read the statute's language so as to produce absurd or unreasonable
results. Leven, 123 Nev. at 405, 168 P.3d at 716.

jummary judgment

This court reviews orders granting summary judgment de
novo. Yeager v. Harrah’s Club, Inc., 111 Nev. 830, 833, 897 P.2d 1093,
1094 (1995). Summary judgment is only proper if no genuine issue of
material fact exists and the moving party is entitled to judgment as a
matter of law. NRCP 56(0); see Wood v, Safeway, Inc., 121 Nev. 724, 729,
121 P.3d 1026, 1029 (2005). “On appeal from a summary judgment, this
court may ‘be required to determine whether the law has been correctly

 

 
perceived and applied by the district court.”* Calloway v. City of Reno,
116 Nev. 250, 256, 993 P.2d 1259, 1263 (2000) (quoting Mullis v. Nevada
National Bank, 98 Nev. 510, 512, 654 P.2d 683, 585 (1982)), overruled on
other grounds by Olson v. Richard, 120 Nev. 240, 241-44, 89 P.3d 31, 31-33
(2004),

RS 108.2453

NRS 108,2453(1) provides: “Except as otherwise provided in
NRS 108.221 to 108.246, inclusive, a person may not waive or modify a
right, obligation or liability set forth in the provisions of NRS 108.221 to
108.246 [the mechanic's lien statutes], inclusive.” SNMARK argues that
NRS 108.2453(1) clearly articulates a directive that compliance with the
technical obligations of the statutes is required and that a lien claimant
‘can no longer claim that the owner has forfeited his or her right to service
of a preliminary notice of right to lien (pre-lien notice pursuant to NRS
108.245).

Contrary to SNMARK’s assertion, NRS_108.2453(1) can be
interpreted to avoid overruling Fondren and Board of Trustees v, Durable
Developers, 102 Nev. 401, 724 P.2d 736 (1986). Thus, NRS 108.2453(1)
could be interpreted as voiding conditions, stipulations, or provisions of a
contract that require a lien claimant to waive lien rights. With the
presumption against abrogation and alteration of common law, we
conclude that NRS 108.2453(1) is ambiguous. It is not clear from the plain

5In this case, the district court believed that strict compliance with
NRS 108.245 was required, and that since O'Neil and Hardy did not serve
@ pre-lien notice on SNMARK, SNMARK was entitled to judgment as a
matter of law.

 

 
language of the statute that strict compliance with the pre-lien notice
statute is required. Therefore, we must look to the legislative history and
harmonize NRS 108.2453 and NRS 108.245.

‘The 2003 and 2008 legislative amendments to the mechanic's lien law did
not_abrogate or overrule Fondren_and Nevada's substantial compliance
doctrine

SNMARK argues that the legislative amendments of 2003 and
2005, specifically the addition of NRS 108.2453 in 2003, overruled
Nevada's substantial compliance doctrine and requires strict compliance
with the statutory requirements in order for a lien claimant to perfect his
or her claim, O'Neil and Hardy argue that the legislative amendments did
not abrogate Fondren or the actual knowledge exception to the pre-lien
requirement, We conclude that Fondren was not abrogated or overruled
by NRS 108.2453, Fondren is still good law.

‘Nevada's mechanic's lien law

Nevada's mechanic's lien law requires that a lien claimant
serve the owner of the property with preliminary notice of right to lien
(pre-lien notice). NRS 108.245. NRS 108.245 provides in pertinent part:

“Owner” is defined by NRS 108.2148, which provides that
“[olwner’ includes: . .. [a] person who claims an interest in or possesses
less than a fee simple estate in the property.” Thus, an owner includes a
lessee such as Wickes, who possessed “less than a fee simple estate in the
property.” NRS 108.22148(1)(e); see also Tobin v. Gartiez, 44 Nev. 179,
185, 191 P. 1063, 1065 (1920) (discussing a leasehold interest as being
“some lesser estate” than a fee simple estate).

 

 

 
1. Except as otherwise provided in
subsection 5, every lien claimant, other than one
who performs only labor, who claims the benefit of
NRS 108.21 to 108.246, inclusive, shall, at any
time after the first delivery of material or
performance of work or services under a contract,
deliver in person or by certified mail to the owner
of the property a notice of right to lien in
substantially the following form:

 

2, Such a notice does not constitute a lien or
give actual or constructive notice of a lien for any
purpose,

5. A prime contractor or other person who
contracts directly with an owner or sells materials
direetly to an owner is not required to give notice
pursuant to this section.

“The purpose underlying the notice requirement is to provide the owner
with knowledge that work and materials are being incorporated into the
property.” Fondren, 106 Nev. at 710, 800 P.2d at 721-22.

‘The pre-lien notice is important because “every improvement
constructed, altered or repaired upon property shall be deemed to have
been constructed, altered or repaired at the instance of each owner having
therein.” NRS 108.234(1). A disinterested owner

 

or claiming any intere:
may give “notice that he or she will not be responsible for the
improvement by recording a notice in writing to that effect with the county
recorder” “within 3 days after he or she first obtains knowledge of the
construction.” NRS 108.234(2). If the disinterested owner is a lessor, the

notice is timely if it is filed within three days of the lease and must be

 

 
served upon the lessee and the prime contractor.’ NRS 108.234(2)(a); NRS
108.234(4)(a)-(b). If an owner fails to record and serve a notice of
nonresponsibility pursuant to NRS 108.234, the owner cannot claim that
he or she is not subject to, or is immune from, the attachment of a
mechanic's lien. NRS 108.234(6).

“This court has repeatedly held that the mechanic's lien
statutes are remedial in character and should be liberally construed; that
substantial compliance with the statutory requirements is sufficient to
perfect the lien if the property owner is not prejudiced.” Las Vegas
Plywood _v. D & D Enterprises, 98 Nev. 378, 380, 649 P.2d 1367, 1368
(1982).

As this court explained in Durable Developers, a lien claimant
substantially complies with NRS 108.248's pre-lien requirement when the
property owner has actual knowledge of the potential lien claim and is not
prejudiced. 102 Nev. at 410, 724 P.2d at 743. Failure to either fully or
substantially comply with the mechanic's lien statute will render a
mechanic's lien invalid as a matter of law. Schofield v. Copeland Lumber,
101 Nev. 83, 86, 692 P.2d 519, 521 (1985).

In Fondren, this court reaffirmed the principle that was set
forth in Durable Developers, concluding that actual knowledge of the
potential lien claim was sufficient to perfect a lien. 106 Nev. at 709, 800

 

5A prime contractor is defined by NRS 108.22164(1) as “[a] person
who contracts with an owner or a lessee of property to provide work,
materials or equipment to be used for the improvement of the property or
in the construction, alteration or repair of a work of improvement.”

 

 
P.2d at 721. In Fondren, we concluded that the |
property who failed to file a notice of nonresponsibility had knowledge that

sor of a commercial

 

the lessee had contracted to have remodeling work done. Id, at 709-10,
800 P.2d at 721. ‘The mechanic's lien on the property could be enforced
against the lessor even though the contractors? who sought to enforce the
liens failed to deliver a pre-lien notice to the lessor. Id, Because the lessor
had actual knowledge of the work, the purpose behind the pre-lien notice
had been satisfied. [d, at 710, 800 P.2d 721-22. “Delivery of any pre-lien
notice would have accomplished little or nothing and, therefore, was not
required.” Id,
Legislative amendments
SNMARK argues that the adoption of NRS 108.2458 in 2003
abrogated Nevada's substantial compliance doctrine and requires strict
compliance with the statutory requirements in order for a lien claimant to
perfect its claim. We disagree.
In the enactment of a statute, “the legislature will be
presumed not to intend to overturn long-established principles of law, and

the statute will be so construed unless an intention to do so plainly

%In Fondren, we quoted the district court's conclusion, which we
approved by rejecting Fondren's argument that the district court erred in
applying the law to the facts in that case, that it was immaterial that
Fondren did not know the names of individual subcontractors. Fondren,
106 Nev. at 708 n.2, 800 P.2d at 720 n.2. However, in Fondren, no
subcontractors sought to impose a lien on the property; rather, all of the
claimants contracted directly with the lessee. Id, at 707, 800 P.2d at 720.
Additionally, Fondren’s agent supervised the construction by those
contractors. Id. at 709, 800 P.2d at 721. It is immaterial whether the
owner had knowledge of the identity of subcontractors when it is the
general contractor who is claiming actual knowledge.

 

 
appears by express declaration or necessary implication.” 73 Am. Jur. 2d.
Statutes § 97 (2001); see also Orr Ditch Co. v, Dist. Ct,, 64 Nev. 138, 164,
178 P.2d 668, 571 (1947) (‘[T]here is a presumption that the law-makers
did not intend to abrogate or alter [the common law] in any manner,
although where the intention to alter or repeal is clearly expressed, it
must be given effect by the courts.”); State v, Donnelly, 20 Nev, 214, 217,
19 P. 680, 681 (1888) (‘The presumption is always against the intention to
repeal where express terms are not used.”) (internal quotations omitted);
Estate of David Walley, 11 Nev. 260, 264 (1876) (“Repeals by implication
are not favored, and are only held to have occurred in cases of
irreconcilable repugnancy between the later and the former enactment,
when the two cannot stand together.”)

In 2003, NRS 108.2453 was added by Senate Bill 206 (S.B.
206). 2003 Nev. Stat., ch. 427, § 25, at 2590-91. NRS 108.2453(1)
provides: “[e]xcept as otherwise provided in NRS 108.221 to 108.246,
inclusive, a person may not waive or modify a right, obligation or liability
set forth in the provisions of NRS 108.221 to 108.246, inclusive.” The
summary provided with the proposed changes to the mechanic's lien laws
stated that the section

voids conditions, stipulations, and provisions of a
contract that requires a lien claimant to waive lien
rights, except as provided in statute; makes the
contract subject to the laws of another state;
requires litigation or arbitration to occur in
another state; or requires a lien claimant to waive
delay damages that were not contemplated. Please
note that 36 states prohibit the prospective waiver
of lien rights either by statute or case law.

Hearing on §.B. 206 Before the Assembly Comm. on Judiciary, 72d Leg.

 

(WNev., May 8, 2003).

 

 
 

‘The legislative history of $.B, 206, and the specific section that
added NRS 108.2453, demonstrates that the intent of the 2003 legislative

 

amendments was to facilitate payments to lien claimants. Nothing in the
legislative history of S.B, 206 indicates any intent by the Legislature to
overrule long-standing Nevada caselaw supporting a liberal interpretation
of mechanic's lien statutes that allow substantial performance of statutory
requirements to perfect a lien.

‘The Legislature amended Nevada's mechanic's lien laws again
in 2005, with the adoption of Senate Bill 343 (S.B. 343). 2005 Nev. Stat.,
ch, 428, § 25, at 1913-14. Again, the legislative record is devoid of any
intent to overrule Nevada's substantial performance doctrine. Further, it
includes a statement reaffirming that the purpose of the 2003 amendment
was to assist lien claimants:

In 2003 we did a major overhaul of the statute,
which is there for a purpose. It is there to assist
people who have improved real property so that
they can get paid for their efforts. That is
something that has proven to work over the years.
In fact, our Nevada Supreme Court has
consistently held that our lien law should be
liberally construed in favor of lien claimants.

Hearing on S.B. 343 Before the Assembly Comm. on Judiciary, 73d Leg.
(Nev., May 13, 2005).

‘The Legislature did not express a clear intent to overrule
Fondren in either amendment to Chapter 108. To the contrary, the
Legislature favorably cited this court’s holdings that liberally construe the
lien laws in favor of lien claimants, Hearing on S.B. 343 Before the
Assembly Comm, on Judiciary, 73d Leg. (Nev., May 13, 2005). Absent a
clear statement of intent to abrogate Fondren and Durable Developers in
the legislative history, we will not interpret NRS 108.2458 to require strict

4

 
compliance and overrule Nevada's doctrine of substantial compliance.
Instead, we interpret NRS 108.2453(1) to avoid overruling Fondren and
Durable Developers

Moreover, we conclude that NRS 108.2453(1) voids conditions,

 

stipulations, or provisions in a contract that require a lien claimant to
waive lien rights. ‘Therefore, substantial compliance with the pre-lien
notice requirement is sufficient to perfect the lien if the property owner is
not prejudiced. ‘The rule articulated in Durable Developers and upheld in
Fondren, that actual knowledge on the part of the property owner
constitutes substantial compliance, remains good law.

‘The district court erred in granting summary judgment against O'Neil

Both O'Neil and Hardy challenge the district court's
determination that their failure to give SNMARK statutory pre-lien notice
‘was fatal to their respective liens. We conclude that summary judgment
against O'Neil and Hardy was improper. A genuine issue of material fact
exists regarding whether SNMARK had actual knowledge of the potential
lien claims of O'Neil and Hardy.

In Fondren, we explained that a property owner who
negotiates a lease with knowledge that substantial improvements need to
be made to the property has actual knowledge of potential lien claims on
the property. Fondren, 106 Nev. at 709, 800 P.2d at 721. If that owner
fails to file a notice of nonresponsibility after knowledge of the

‘We are not persuaded by the treatise on which SNMARK rel
While “[mlany construction practitioners believe the demise of Fondren is
complete with the adoption of NRS 108.2458(1),” Leon F. Mead II, Nevada
Construction Law § 8.3 (2009), we disagree.

 

 

 
 

construction, “the statute provides that the construction is at the instance
of the owner.” Id, (quoting Matter of Stanfield, 6 B.R. 265, 268 (Bankr. D.
Nev. 1980)). This court concluded that the property owner in Fondren had
negotiated the lease with the understanding that substantial remodeling
would be required on the property. Id.

In addition, a property owner has actual knowledge of
potential lien claims if the property owner or the property owner's agent
regularly inspects the remodeling project. Id, Actual knowledge by the
property owner's agent is imputed to the property owner. Id. (citing Gould
y.Wise, 18 Nev. 253, 259, 3 P. 30, 31 (1884), An owner who witnesses the
construction, either firsthand or through an agent, cannot later claim a
lack of knowledge regarding future lien claims. Id, In Fondren, the
property owner received regular updates from her lawyer and approved
specific construction activities. Id.

We concluded that the property owner in Fondren had actual
knowledge of the potential lien claims because the property owner had
both knowledge that the property required substantial remodeling and
regular updates on the progress of the project from an agent who inspected
the premises. “Delivery of any pre-lien notice would have accomplished
little or nothing and, therefore, was not required.” Id, at 710, 800 P.2d at
722. However, “[t]he purpose of the pre-lien statute is to put the owner on
notice of work and materials furnished by third persons with whom he has
no direct [contract].” Id. at 709, 800 P.2d at 721 (quoting Matter of
Stanfield, 6 B.R. at 269). Therefore, we conclude that actual knowledge
requires that the owner has to have been reasonably made aware of the
identity of the third party seeking to record and enforce a lien.

16

 
Summ: ainst O'Neil

O'Neil argues facts similar to those presented in Fondren.
O'Neil claims that SNMARK had actual knowledge of potential lien
claims, and specifically, potential lien claims by O'Neil, because SNMARK
was aware that the property required substantial remodeling when it
negotiated the lease with Wick Further, O'Neil points out that
SNMARK specifically knew that O'Neil would be adding value to the
property because SNMARK’s predecessor-in-interest approved the use of
O'Neil as the general contractor in the lease with Wickes,

O'Neil also claims that SNMARK had actual knowledge of
ONeil’s presence on the work site because SNMARK regularly inspected
the project site. O'Neil cites a number of occasions on which SNMARK’s
representative met with O'Neil and instructed O'Neil on how to complete

 

certain aspects of the remodeling project. O'Neil claims that because of
‘these interactions, SNMARK had actual knowledge of O'Neil’s potential
work on the property and, therefore, O’Neil's potential lien claims.

ONeil has presented factual arguments that SNMARK had
‘actual knowledge of its potential lien claims that may excuse O’Neil’s duty
to provide a prelien notice. Because it rejected the application of
substantial compliance and actual knowledge, the district court made no
finding as to whether SNMARK had actual knowledge of O’Neil’s potential
lien claims. Therefore, a genuine issue of material fact remains. Thus, we
conclude that the district court erred in granting summary judgment
against O’Neil.!t

 

In addition, O'Neil also argues that it should be excused from the
pre-lien notice requirement because: (1) it was a prime contractor and
continued on next page...

 

 
one Be

 

Sui judgment,
Hardy argues that NRS 108.245 only requires one owner to be

inst

 

given notice in order to affect the interest of all other interest holders. We
disagree, Where a claimant is seeking to place and enforce a lien, NRS
108.245 requires that the claimant serve all parties whose interest it is
secking to affect. The service of one owner is not adequate to give notice to
other owners of the potential claim. Therefore, while Hardy's pre-lien
notice to O'Neil and Wickes is sufficient to affect their interest in the
property, it is insufficient to affect SNMARK's interest in the property.
Hardy also argues that, under NRS 108.229(3), a mistake in
the property owner's name on a pre-lien notice does not invalidate the lien.
Hardy argues that it had substantially complied with the statute despite
the fact that it served the wrong entity. Even if we were to agree that
NRS 108,229(3) is applicable to the pre-lien notice statute, substantial
compliance is not applicable in this instance. Hardy has an affirmative
duty of due diligence to ascertain the identity of the owner whose interest
it is seeking to affect. This is not a case where Hardy served the right
entity under the wrong name; instead, Hardy served an entirely different
entity that holds an entirely different interest in the property. NRS
108.245 not only requires that the notice of right to lien contain certain

continued

contracted directly with the owner, and (2) SNMARK was not a
disinterested owner and is therefore estopped from invoking the pre-lien
statute. Given our conclusion to reverse and remand for the district court,
to determine whether SNMARK had actual knowledge of O'Neil’s
potential lien claims, we do not reach O’Neil’s additional arguments.

18.

 
information, but also requires that the notice be given to the right person
or entity. A failure to serve the right person or entity cannot be cured by
NRS 108.229(8).

Hardy argues that SNMARK had actual knowledge of its
potential lien claims. Hardy does not point to a contract or specific
interactions between SNMARK and itself, but instead relies on
SNMARK’s general awareness of construction on the property in
question.? Like the lien claimants in Fondren, Hardy claims that
SNMARK knew of the improvements to its property and therefore had
actual knowledge of Hardy's potential lien claims,

 

However, an owner's actual knowledge is more than mere
Knowledge of construction occurring on its property. Actual knowledge
requires that the owner have knowledge as to the identity of the third
person with whom he has no direct contract. In cases of actual knowledge
for mechanics’ liens, it is a question of fact as to whether the owner had
actual or constructive knowledge as to the existence of the third party and
the third party's identity. Actual knowledge may be found where the
owner has supervised work by the third party, reviewed billing statements
from the third party, or any other means that would make the owner
aware that the third-party claimant was involved with work performed on

its property.

14It should be noted that while SNMARK had actual dealings with
O'Neil, such as construction review, no similar relationship or dealings
existed between SNMARK and Hardy.

 

 

 
 

In cases such as Fondren, we imputed the knowledge of the
lessee as to the existence and identity of the parties with whom the lessee
directly contracted because a relationship existed between the lessor and
the lessee. The lessor, through its contractual relationship, would have
been aware that the I

 

"¢ had hired a contractor to perform work on the

 

property. However, a lessor would not necessarily be aware of whether

the lessee’s contractor retained additional contractors and who those

 

contractors may be. We will not impute knowledge when there is no
evidence that either the lessee or the lessor knew of both the existence and
the identity of additional third parties.

‘The purpose of the pre-lien statute is to protect owners from
hidden claims and the statute is meant to apply to subcontractors and
materialmen. Matter of Stanfield, 6 B.R. at 269. This purpose would be
frustrated if mere knowledge of construction is sufficient to invoke the
actual knowledge exception against an owner by any contractor.
Otherwise, the exception would swallow the rule.

As noted in the discussion relating to O'Neil, a material issue
of fact exists as to whether SNMARK had actual knowledge of O’Neil’s
claim. Likewise, an issue of material fact exists as to whether SNMARK
had actual knowledge of Hardy's potential lien claim. Thus, we conclude
that the district court erred in granting summary judgment,

CONCLUSION

We hold that NRS 108.2453 does not abrogate Fondren or
Nevada's substantial compliance doctrine. Substantial compliance,
however, requires notice to be given to the party whose interest the lien
claimant is seeking to affect. Notice to one owner is not sufficient to affect
the interest of other owners. We further conclude that the actual

Knowledge exception requires the owner to have actual knowledge of the

20

 
identity of the lien claimant. Accordingly, we reverse the district court's
grant of summary judgment against O'Neil and Hardy, and remand for
further proceedings consistent with this opinion.

  

Pickering

no 21