No, 61978 

FILED 

AUG 0 7 2014 

BY i

11 I er Ariports:::: 

I • 

C KcLINDEMAN 

CLE tir At E 

130 Nev., Advance Opinion 472- 

IN THE SUPREME COURT OF THE STATE OF NEVADA 

BYRD UNDERGROUND, LLC; AND 

WELLS CARGO, INC., 

Appellants, 

vs. 

ANGAUR, LLC; BALAJI PROPERTIES 

INVESTMENT, LLC; AND US BANK 

NATIONAL ASSOCIATION, 

Respondents. 

Certified questions, pursuant to NRAP 5, concerning the 

priority of mechanics' liens based on visible commencement of 

construction. United States Bankruptcy Court for the District of Nevada; 

Bruce T. Beesley, Judge. 

Questions answered in part. 

Foley & Oakes, PC, and Daniel T. Foley, Las Vegas; M. Nelson Segel, Las 

Vegas; Peel Brimley LLP and Eric B. Zimbelman and Richard L. Peel, 

Henderson, 

for Appellants. 

Fennemore Craig Jones Vargas and Craig S. Dunlap and Christopher H. 

Byrd, Las Vegas; Meier & Fine, LLC, and Glenn F. Meier, Las Vegas, 

for Respondents. 

BEFORE THE COURT EN BANC. 

OPINION 

By the Court, GIBBONS, C.J.: 

In Nevada, a mechanic's lien takes priority over other 

encumbrances on a property that are recorded after construction of a work 

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of improvement visibly commences. The visible-commencement-ofconstruction requirement often gives rise to dispute, however, and the 

United States Bankruptcy Court for the District of Nevada has certified 

three questions of law to this court regarding this aspect of mechanic's lien 

priority law.' 

The first question queries whether the placement of dirt 

material on a future project site before building permits are issued and the 

'The three certified questions were presented as follows: 

1. Can a mechanic's lien claimant properly 

claim lien priority under NRS 108.225 when the 

dirt/material that is the basis of the lien on the 

project was placed on a prospective building 

project site months before the building permit was 

issued or the general contractor hired? Stated 

another way, does placing significant quantities of 

dirt/material on a prospective building project site 

months before a building permit is issued 

constitute "commencement of construction" on 

such a site pursuant to NRS [108.221121? 

2. Did the Nevada Supreme Court in J.E. 

Dunn Northwest, Inc. v. Corus Construction 

Venture, LLC, 249 P.3d 501, 509, 127 Nev. Adv. 

Op. 5 (Nev. 2011) mistakenly use the term of art 

"clearing and grading" instead of "clearing and 

grubbing" when describing preparatory work on a 

construction project? 

3. Does "grading" in the circumstances 

presented here constitute visible "commencement 

of construction" under NRS 108.22112 for 

purposes of establishing lien priority under NRS 

108.225? 

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general contractor is hired can constitute commencement of construction. 

The second question asks us to clarify our decision in J.E. Dunn 

Northwest, Inc. v. Corns Construction Venture, L.L.C., 127 Nev. 249 

P.3d 501 (2011), in which we stated that "clearing or grading" does not 

constitute commencement of construction. 127 Nev. at 249 P.3d at 

509. In our view, answering this question requires us to evaluate the 

appropriate precedential weight that courts should give to the passage in 

question, and we therefore rephrase the• second certified question to 

include whether this statement was dictum. See, e.g., Boorman v. Nev. 

Mem'l Cremation Soc'y, 126 Nev. „ 236 P.3d 4, 6 (2010) (rephrasing 

certified questions under NRAP 5). We rephrase the second question as 

follows: 

Was the passage in J.E. Dunn Northwest, Inc. v. 

Corns Construction Venture, L.L.C., 127 Nev. , 

249 P.3d 501, 509 (2011), that states 

"preparatory work on a site, such as clearing or 

grading, does not constitute commencement of 

construction," dictum? If so, can grading work 

constitute visible commencement of construction 

under NRS 108.22112? 

Finally, the third question inquires whether the grading that took place in 

this case constituted visible commencement of construction, such that the 

mechanics' liens at issue take priority. 

Because the second question influences our analysis of the 

other questions, we address it first. We respond to the three questions as 

follows. Regarding the bankruptcy court's second question, we conclude 

that this court's use of the term "clearing or grading" was dictum, and 

thus, our holding in J.E. Dunn does not preclude a trier of fact from 

finding that grading property for a work of improvement constitutes 

visible commencement of construction. Regarding the first question, we 

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conclude that contract dates and permit issuance dates are irrelevant to 

the visible-commencement-of-construction test, but may assist the trier of 

fact in determining the scope of the work of improvement. Finally, we 

decline to answer the third question because it would require this court to 

resolve the factual dispute as to whether the grading presented here 

constituted visible commencement of construction of the work of 

improvement. 

FACTS AND PROCEDURAL HISTORY 

The construction project 

The debtor respondents Angaur, LLC, and Balaji Properties 

Investment, LLC (collectively, the owners), jointly purchased a parcel of 

unimproved real property in Las Vegas, Nevada. No relevant activity took 

place with respect to the subject property until the spring and summer of 

2006; when two different third parties placed, and allegedly spread, 

between 200 and 300 truckloads of dirt/material on the property. 2Both of 

the third parties were performing work on unrelated construction projects 

on neighboring parcels and roadways. The degree to which the subject 

property was covered and subsequently spread or graded is unclear given 

the record before this court. 

Meanwhile, the owners solicited bids from general contractors 

to construct a strip mall on the property. During bidding on the project, 

2The parties could not agree what to call the substance that was 

placed on the property, so the bankruptcy court used the term 

"dirt/material." The bankruptcy court noted that it did not intend the 

term to carry any specific legal meaning. We also will use the term 

"dirt/material" to remain consistent with the bankruptcy court. 

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appellant Byrd Underground, LLC, submitted a bid to general contractor 

Joseph's Construction to perform subcontracted grading work, but Atlas 

Construction Ltd., not Joseph's Construction, was selected as the general 

contractor. On November 2, 2006, at the request of Atlas, a representative 

of Byrd dug four to six holes on the subject property with a backhoe. Byrd 

dug these holes to determine how much dirt/material had been brought 

onto the subject property since its prior bid in order to submit a revised 

bid to Atlas incorporating the new scope of work. On November 8, 2006, 

Atlas and the owners executed the written contract for Atlas to serve as 

the general contractor on the construction project. 

On November 28, 2006, a title company conducted a site 

inspection of the subject property and concluded that the land was vacant 

and that there was no evidence of a recent work of improvement. 

Thereafter, the owners borrowed funds from PFF Bank & Trust for the 

purpose of constructing the strip mall on the subject property, 3and on 

November 29, 2006, a deed of trust for the construction loan was recorded 

with the Clark County Recorder. Byrd had not performed any work on the 

subject property prior to November 29, 2006, other than digging the test 

holes and submitting bids to Joseph's Construction and Atlas. 

Subsequently, a dust control permit and a building permit 

were issued for the subject property. During construction, Atlas used and 

incorporated at least a portion of the dirt/materials into the construction 

project. Atlas and Byrd executed three written subcontracts—for wet 

3PFF Bank eventually went into FDIC receivership and respondent 

US Bank now claims ownership of the construction loan and deed of trust. 

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utilities, dry utilities, and grading—in 2007. Byrd and another 

subcontractor, appellant Wells Cargo, Inc. (collectively, lien claimants), 

provided services for the construction project but were not paid. As a 

result, they commenced mechanic's lien actions in state court and obtained 

judgments against Angaur, Balaji, and Atlas. 

Angaur and Balaji file bankruptcy petitions and the lien claimants' 

objections lead the bankruptcy court to certify questions to this court 

After the construction project was completed, the owners filed 

voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. 

Both of the owners' schedules of creditors holding secured claims included 

(1) a "[first [m]ortgage" to US Bank, and (2) both lien claimants' judgment 

liens. The owners and US Bank entered into a forbearance agreement and 

created a disclosure statement and plan of reorganization with the 

bankruptcy court that stated that US Bank was the only "Class 1" secured 

creditor. 

The lien claimants filed an objection to the owners' disclosure 

statement and plan of reorganization, and they subsequently filed an 

adversary complaint in bankruptcy court to determine the priority of liens. 

At the close of discovery, the owners, US Bank, and the lien claimants 

filed competing motions for summary judgment. 

During briefing on the competing motions for summary 

judgment, the lien claimants requested that the bankruptcy court certify 

questions to this court in order to clarify whether this court in J.E. Dunn 

mistakenly used the term "clearing [or] grading" instead of "clearing and 

grubbing" when describing non-"construction" preparatory work on a 

construction project. The lien claimants argued that "clearing and 

grubbing" is a recognized term of art used in the construction industry, 

whereas "clearing and grading" is not. Additionally, the lien claimants 

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argued that evidence of the dirt/materials being spread or graded on the 

subject property creates genuine issues of material fact regarding when 

the construction visibly commenced sufficient to avoid summary judgment. 

In response, the bankruptcy court certified questions to this court. 

DISCUSSION 

Priority of mechanics' liens in Nevada 

A mechanic's lien is a "statutory creature established to help 

ensure payment for work or materials provided for construction or 

improvements on land." In re Fontainebleau Las Vegas Holdings 

(Fontainebleau II), 128 Nev. „ 289 P.3d 1199, 1210 (2012); see also 

Hearing on S.B. 343 Before the Assembly Judiciary Comm, 73d Leg. 

(Nev., May 13, 2005) (indicating that mechanics' liens "assist people who 

have improved real property so that they can get paid for their efforts"). 

Here, the parties do not dispute that the lien claimants performed lienable 

work. But "whether work is entitled to a lien pursuant to NRS 108.22184 

and whether it is entitled to priority over other encumbrances pursuant to 

NRS 108.225 are two entirely separate issues." J.E. Dunn, 127 Nev. at 

 , 249 P.3d at 507. 

Relevant to the priority issue, Nevada's mechanic's lien 

priority statute, NRS 108.225, provides that mechanics' liens are entitled 

to priority over any encumbrance that attaches after construction of a 

work of improvement began: 

1. The liens provided for in NRS 108.221 to 

108.246, inclusive, are preferred to: 

(a) Any lien, mortgage or other encumbrance 

which may have attached to the property after the 

commencement of construction of a work of 

improvement. 

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2. Every mortgage or encumbrance imposed 

upon, or conveyance made of, property affected by 

the liens provided for in NRS 108.221 to 108.246, 

inclusive, after the commencement of construction 

of a work of improvement are subordinate and 

subject to the liens provided for in NRS 108.221 to 

108.246, inclusive, regardless of the date of 

recording the notices of liens. 

Thus, if construction has commenced on a "work of improvement" before a 

deed of trust is recorded, then a mechanic's lien will take a priority 

position over the deed of trust regardless of when the notice of lien is 

recorded. NRS 108.225; see J.E. Dunn, 127 Nev. at , 249 P.3d at 509; 

Fontainebleau II, 128 Nev. at , 289 P.3d at 1211. Moreover, to claim 

priority, a claimant itself need not perform before the deed of trust is 

recorded, so long as the work of improvement began before the deed's 

recordation, because "all mechanics' liens relate back to the date overall 

construction is commenced." J.E. Dunn, 127 Nev. at n.2, 249 P.3d at 

504 n.2. As a result, in this case, the lien claimants are entitled to priority 

positions over the deed of trust if the work of improvement's construction 

commenced, as those terms are defined by statute, on the subject property 

before the deed of trust was recorded on November 29, 2006. 

Visibility of the work of improvement alone determines priority 

NRS 108.22112 defines "[c]ommencement of construction" as 

the date on which: 

1. Work performed; or 

2. Materials or equipment furnished in 

connection with a work of improvement, 

is visible from a reasonable inspection of the site. 

This court analyzed NRS 108.22112 in J.E. Dunn and concluded that, 

consistent with "the recognized policy interest in maintaining certainty 

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and predictability in construction financing," which would be hindered if 

lenders were forced to assume the risk associated with funding a 

construction project over which nonvisible work could grant contractors 

priority, "visibility alone determines priority." 127 Nev. at „ 249 

P.3d at 508, 506. We then reviewed the preconstruction activities that 

Dunn—the lien claimant—had performed, in light of NRS 108.22112's 

visibility standard. In doing so, we stated, "[o]ther courts have more 

generally held, and we agree, that preparatory work on a site, such as 

clearing or grading, does not constitute commencement of construction." 

Id. at ,249 P.3d at 509 (citing Clark v. Gen. Elec. Co., 420 S.W.2d 830, 

833-34 (Ark. 1967), superseded by statute as stated in May Constr. Co. v. 

Town Creek Constr. & Dev., L.L.C., 383 S.W.3d 389, 392-95 (Ark. 2011)). 

Because placing an architect's sign at the project site and removing power 

lines was "insufficient to provide lenders notice of lienable work entitled to 

priority," we held that those preconstruction activities failed to constitute 

visible commencement of "'actual on-site construction." Id. at , 249 

P.3d at 509 (quoting Aladdin Heating Corp. v. Trs. of Cent. States, 93 Nev. 

257, 260, 563 P.3d 82, 84 (1977)). 

Regarding the second question, the lien claimants take issue 

with our statement in J.E. Dunn that listed "clearing or grading" as types 

of nonvisible preparatory work that fail to establish construction 

commencement, and they argue that the statutes require merely that 

construction be visible to a reasonable site inspection to establish lien 

priority. J.E. Dunn, 127 Nev. at , 249 P.3d at 504-05 (citing Aladdin 

Heating, 93 Nev. at 260, 563 P.2d at 84). The lien claimants argue that it 

is unnecessary to declare broad categories of construction activities per se 

"nonvisible," thereby depriving the trier of fact of the opportunity to 

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evaluate the visibility of such activities on a case-by-case basis. As 

concerns clearing and grading, we agree. 

As noted, mechanics' liens have priority over other 

encumbrances that attach to the property after "the [visible] 

commencement of construction of a work of improvement." NRS 

108.225(1)(a). NRS 108.22188 defines "[w]ork of improvement" as the 

"entire structure or scheme of improvement as a whole, including, without 

limitation, all work, materials and equipment to be used in or for the 

construction, alteration or repair of the property or any improvement 

thereon." Nothing in these provisions excludes preconstruction activities 

from the definition of work of improvement, and indeed, subsection 2 of 

NRS 108.22188 expressly recognizes that activities undertaken to prepare 

the project site can be a work of improvement. NRS 108.22188(2) (stating 

that "the improvement of the site" may be "contemplated by the contracts 

to be a separate work of improvement to be completed before the 

commencement of construction of the buildings"). Moreover, NRS 

108.22128 defines "Mmprovement," in pertinent part, as including 

buildings, irrigation systems and landscaping, removal of trees or other 

vegetation, the drilling of test holes, and grading, grubbing, filling, or 

excavating. In construing these provisions together, as we must, City of 

N. Las Vegas v. Warburton, 127 Nev. „ 262 P.3d 715, 718 (2011), 

we conclude that the trier of fact must look to the entire structure or 

scheme of improvement as a whole—the "overall construction"—rather 

than solely evaluating the activities based on whether they are 

preparatory or structural or vertical construction, in determining whether 

construction on a work of improvement has commenced. J.E. Dunn, 127 

Nev. at n.2, 249 P.3d at 504 n.2. 

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Accordingly, grading work can be an integral part of the 

"entire structure or scheme of improvement as a whole" and part of the 

actual on-site construction. NRS 108.22188. If it is, grading may be 

sufficient to establish commencement of construction in Nevada as long as 

it is visible from a reasonable inspection of the site sufficient to provide 

lenders notice that lienable work has commenced, and we are unwilling to 

conclude, as a matter of law, that on-site grading work can never place 

lenders on notice that lienable work has begun. NRS 108.22112; see also 

May Constr. Co., 383 S.W.3d at 392-94 (construing Arkansas's mechanic's 

lien statute "just as it reads, giving the words their ordinary and usually 

accepted meaning in common language" in determining that grading can 

constitute commencement of construction). 

This holding is consistent with J.E. Dunn, in which we 

explained that the visibility requirement for determining lien priority 

applies to preconstruction activities. 127 Nev. at „ 249 P.3d at 507-

08, To the extent that the examples of nonconstruction preparatory work 

in J.E. Dunn suggest otherwise, neither clearing nor grading were at issue 

in that case, and thus the examples are mere dicta. See St. James Vill., 

Inc. v. Cunningham, 125 Nev. 211, 216, 210 P.3d 190, 193 (2009). We take 

this opportunity to clarify that J.E. Dunn does not preclude a trier of fact 

from finding that clearing and grading work constitutes visible 

commencement of construction of a work of improvement. We thus 

answer the second question, as we have rephrased it, in the affirmative: 

our statement in J.E. Dunn, 127 Nev. at , 249 P.3d at 509, regarding 

"clearing or grading" was dictum, and grading work may constitute visible 

commencement of construction under NRS 108.22112. 

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Contract dates and permit issuance dates are irrelevant to the visiblecommencement-of-construction test set forth by NRS 108.22112 

The bankruptcy court's first certified question asks whether a 

mechanic's lien claimant can properly claim lien priority under NRS 

108.225 based on work that was performed or materials that were 

delivered months before the building permit was issued and the general 

contractor was hired. The lien claimants argue that the plain language of 

MRS 108.225 and NRS 108.22112 require visibility, and that nothing in 

the statutes conditions the priority of a lien on the issuance of permitting 

or contract dates. The lien claimants argue that the timing of contracts 

and permits related to a given project is irrelevant to the issue of whether 

the delivery of materials or the performance of work had, in fact, been 

furnished prior to the date the deed of trust was recorded. We agree. 

Here, "the meaning of NRS 108.22112 is plain and requires 

visibility for work performed, including preconstruction services, in order 

for a mechanic's lien to take a priority position over a deed of trust." J.E. 

Dunn, 127 Nev. at , 249 P.3d at 506-07; see also Aladdin Heating, 93 

Nev. at 260, 563 P.2d at 84. Thus, any subjective intent on the part of an 

owner to commence construction on a given date, based on either a 

contract or permit issuance date, is not an element of the commencement 

of construction and should therefore not be considered dispositive. See 

May Constr., 383 S.W.3d at 395 (concluding that the district court erred 

when it failed to make factual determinations regarding objective, visible 

manifestation of activity on the property, and instead ruled that 

construction did not commence until after the mortgage was recorded 

based on the perceived intent of the lender). 

But while the date of the contract or permits does not directly 

affect priority, the contract and permits may have some bearing on the 

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issue, because the fact-finder must define the work of improvement before 

it can determine when that work of improvement visibly commenced. In 

this regard, contracts and permits may assist in determining the scope of 

the work of improvement's "structure or scheme ... as a whole." NRS 

108.22188. If the contract expressly or impliedly excludes certain work, 

then that work might not be a part of the "work of improvement." See 

Schultz v. King, 68 Nev. 207, 212-13, 228 P.2d 401, 404 (1951) (looking to 

the contract in addressing the possible scope of a work of improvement); 

see also L Cox Constr. Co. v. CH2 Invs., L.L.C., 129 Nev. „ 296 P.3d 

1202, 1205 (2013) (determining a work of improvement's scope by looking 

to the purpose, impetus, and continuity of the work, the parties' 

contemplations regarding the project, the building and operating permits, 

and the timing of the work in relation to the rest of the construction). 

Thus, we answer the first question in the affirmative, with a 

caveat: a mechanic's lien claimant may properly claim lien priority under 

NRS 108.225 when the work or material forming the basis of the lien's 

priority was placed or performed on the site "months before the building 

permit was issued or the general contractor hired," as long as there was, 

in fact, visible commencement of construction as defined by NRS 

108.22112 and as long as all of the work or material placed or performed 

on the site in the prior months was a part of the same work of 

improvement under NRS 108.22188 as the later work giving rise to the 

mechanic's lien. 

We decline to answer the third certified question because it asks this court 

to make findings of fact that should be left to the bankruptcy court 

The third certified question asks: "[d] oes 'grading' in the 

circumstances presented here constitute visible 'commencement of 

construction' under NRS 108.22112 for purposes of establishing lien 

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priority under NRS 108225?" But the visibility, scope, and duration of a 

work of improvement generally are factual questions for the trier of fact to 

decide, L Cox Construction, 129 Nev. at 296 P.3d at 1205, and this 

court recently noted that it cannot make findings of fact in responding to a 

certified question. In re Fontainebleau Las Vegas Holdings (Fontainebleau 

I), 127 Nev. „ 267 P.3d 786, 795 (2011). "The answering court's role 

is limited to answering the questions of law posed to it, and the certifying 

court retains the duty to determine the facts and to apply the law provided 

by the answering court to those facts." Id. at 267 P.3d at 794-95. 

"This approach prevents the answering court from intruding into the 

certifying court's sphere by making factual findings or resolving factual 

disputes." Id. at , 267 P.3d at 795. 

The dispute between the parties as to whether the importing 

and spreading or grading of the dirt/material in this case constituted 

visible "commencement of construction" of one comprehensive "work of 

improvement" is, as explained above, of an intensively factual nature. 

Given these unresolved factual disputes, we decline to answer the third 

question. 

CONCLUSION 

We conclude that this court's use of the term "clearing or 

grading" in J.E. Dunn Northwest, Inc. v. Corus Construction Venture, 

L.L.C., 127 Nev. „ 249 P.3d 501, 509 (2011), was dictum and does 

not alter our ultimate holding that visibility alone determines priority. 

We therefore clarify that grading work may constitute visible 

commencement of construction of a work of improvement in some 

circumstances, as long as it is visible from a reasonable inspection of the 

site in a manner sufficient to provide notice of lienable work that may be 

entitled to priority. Additionally, we conclude that contract dates and 

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J. 

Parraguirre 

Saitta 

J. 

, J. 

permit issuance dates are irrelevant to the visible-commencement-ofconstruction test set forth by NRS 108.22112, but may assist the trier of 

fact in determining the scope of the work of improvement. Finally, we 

decline to decide whether the circumstances presented here constitute 

visible commencement of construction under MRS 108.22112 of a 

comprehensive work of improvement under NRS 108.22188 because it 

would require this court to resolve thOactual dispute between the parties. 

Gibbons 

We concur: 

tehiL 

Pickering 

Hardesty 

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