Court Opinion

ID: 5133406
Source: CourtListenerOpinion
Date Created: 2021-12-09 17:14:38.931957+00
Date Added: 2024-06-11T08:23:36.943503
License: Public Domain

135 Nev., Advance Opinion 0(1/
                               IN THE SUPREME COURT OF THE STATE OF NEVADA

                      SHARATH CHANDRA,                                     No. 75477
                      ADMINISTRATOR, NEVADA REAL
                      ESTATE DIVISION,
                      Appellant,                                           FILED
                      vs.
                                                                            DEC 2 6 201,9
                      MELANI SCHULTE; AND WILLIAM R.
                                                                           ELIZAaE11-1 A. E3ROWN
                      SCHULTE,                                          CLERK          REME COU
                      Respondents.

                                  Appeal from district court orders directing payment from the
                      Real Estate Education, Research and Recovery Fund. Eighth Judicial
                      District Court, Family Court Division, Clark County; Cheryl B. Moss,
                      Judge.
                                  Reversed.

                      Aaron D. Ford, Attorney General, David J. Pope, Chief Deputy Attorney
                      General, and Donald J. Bordelove, Deputy Attorney General, Carson City,
                      for Appellant.

                      Law Office of Amberlea Davis and Amberlea S. Davis, Las Vegas,
                      for Respondent Melani Schulte.

                      William R. Schulte,
                      in Pro Se.

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                      BEFORE HARDESTY, STIGLICH and SILVER, JJ.

                                                      OPINION

                      By the Court, STIGLICH, J.:
                                  The Nevada Real Estate Education, Research and Recovery
                      Fund (the Fund) compensates victims of real estate fraud whose judgment
                      against a fraudulent real estate licensee is uncollectable. In this appeal,
                      the Administrator of the Nevada Real Estate Division challenges nine
                      orders directing payment from the Fund, one to Melani Schulte individually
                      and eight to various LLCs in her control. The orders stem from Melani's
                      then-husband William Schulte's fraudulent management of properties, all
                      but one of which were jointly owned by the Schultes. Because Melani and
                      William were married at the time of the fraud, we conclude that the spousal
                      exception to Fund recovery in NRS 645.844(4)(a) prohibits Melani's
                      individual recovery and the district court erred in granting her an award
                      from the Fund. Further, because transactions involving one's own
                      properties do not require a real estate license, the district court erred in
                      granting awards to the eight LLCs under NRS 645.844(1). Accordingly, we
                      reverse the nine district court orders directing payment from the Fund.
                                                    BACKGROUND
                                  Respondents William and Melani Schulte jointly owned
                      numerous properties during their marriage. William, who at the time was
                      a real estate licensee, managed these properties, among others, while
                      working for his and Melani's real estate management business. In 2013,
                      the Nevada Real Estate Commission found that William committed real
                      estate misconduct by defrauding both third-party clients and also

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                fraudulently managing his and Melani's jointly owned properties. Melani
                was uninvolved in the misconduct.
                               Also in 2013, the district court granted a divorce between
                William and Melani. In the divorce decree, the district court awarded
                numerous properties that William fraudulently managed to Melani. These
                properties are currently held by distinct LLCs with Melani as the successor
                in interest.
                               As part of the divorce proceeding, the district court granted 21
                individual judgments against William resulting from his real estate
                misconduct. One judgment was in favor of Melani for a payment she made
                to a third-party client to satisfy an outstanding judgment due to William's
                fraud. Twenty judgments were in favor of Melani's distinct LLCs. These
                judgments compensated the LLCs for William's failure to remit rent and
                security deposits while managing the LLC's properties that, at the time, he
                and Melani jointly owned.
                               After failing to collect on the judgments from William, Melani
                filed nine verified petitions for orders directing payment from the Fund, one
                requesting payment to Melani as an individual and eight to her LLCs.
                Appellant Sharath Chandra, as the Administrator of the Nevada Real
                Estate Division, opposed these petitions. The district court granted the
                petitions in nine nearly identical orders. Chandra appealed.'

                      "Melani challenges Chandra's standing to bring this action.
                "Standing is a question of law reviewed de novo." Arguello v. Sunset
                Station, Inc., 127 Nev. 365, 368, 252 P.3d 206, 208 (2011). NRS 645.845(1)
                specifically provides that "[w]henever the court proceeds upon a [Fund
                recovery] petition as provided in NRS 645.844, the Administrator may
                answer and defend any such action against the Fund on behalf of the Fund."

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                                              DISCUSSION
                            The Fund is a special revenue fund that aids victims of real
                estate fraud whose judg-ments against real estate licensees have proven to
                be uncollectable.2 See NRS 645.842; Colello v. Adm'r of Real Estate Div. of
                State of Nev., 100 Nev. 344, 347, 683 P.2d 15, 16 (1984). In this appeal, we
                consider whether the district court properly granted Melani's petitions for
                recovery from the Fund under NRS 645.844 for both herself individually
                and for the eight LLCs under her control. In doing so, we must determine
                whether the spousal exception to recovery under NRS 645.844(4)(a) applies
                to Melani, who was married to William at the time of his misconduct but
                was no longer married at the time she sought recovery from the Fund. We
                also consider whether NRS 645.844(1) allows recovery from the Fund for
                properties that were co-owned by William at the time of his misconduct.
                The spousal exception prohibits Melani's recovery
                            Chandra argues that Melani may not recover from the Fund
                because the spousal exception to recovery applied at the time of the fraud,
                when Melani was still married to William. NRS 645.844 requires a
                petitioner seeking payment from the Fund to satisfy numerous
                requirements, including that "[u]pon the hearing on the petition, the
                petitioner must show that . . .       petitioner is not the spouse of the

                See also Chandra v. Melani, Docket No. 75477 (Order Dismissing Appeal in
                Part, November 30, 2018) (holding that Chandra may appeal from orders
                directing payment from the Fund). We hold that Chandra, as the
                Administrator, has standing.

                      2Every licensed real estate broker, broker-salesperson, and
                salesperson pays a fee to finance the Fund. See NRS 645.843.

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                       debtor."3 NRS 645.844(4)(a). In this case, the district court found that the
                       spousal exception did not apply because Melani was not married to William
                       at the time she filed her action for Fund recovery. We conclude that the
                       district court erred.
                                   Conclusions of law, including the interpretation and
                       construction of statutes, are reviewed de novo. Dewey v. Redev. Agency of
                       Reno, 119 Nev. 87, 93-94, 64 P.3d 1070, 1075 (2003). Where a statute is
                       clear and unambiguous, this court gives effect to the ordinary meaning of
                       the plain language of the text without turning to other rules of construction.
                       Cromer v. Wilson, 126 Nev. 106, 109, 225 P.3d 788, 790 (2010). Conversely,
                       when a statute is ambiguous, this court construes the statute by looking at
                       the Legislature's intent and conforming the construction to public policy.
                       Great Basin Water Network v. State Ener, 126 Nev. 187, 196, 234 P.3d 912,
                       918 (2010). A statute is ambiguous if it "is capable of being understood in
                       two or more senses by reasonably informed persons" or is "one that
                       otherwise does not speak to the issue before the court." Nelson v. Heer, 123
                       Nev. 217, 224, 163 P.3d 420, 425 (2007) (internal quotation marks omitted).
                                   We determine that NRS 645.844(4)(a) is ambiguous as to
                       timing. When reading the introductory clause of NRS 645.844(4) and NRS
                       645.844(4)(a) together, a reasonably informed person may understand the
                       point of time a petitioner must show she is not the spouse of the debtor to
                       be "[u]pon the hearing on the petition." Alternatively, an equally
                       reasonably informed person may conclude that at the hearing, the
                       petitioner must show she was not the spouse of the debtor at an unspecified

                             3 The "debtor" refers to the fraudulent actor, in this case William, who
                       failed to satisfy an outstanding judgment in favor of the petitioner. See NRS
                       645.844.
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time because NRS 645.844(4)(a) is silent as to timing. See, e.g., Pub. Emps.'
Benefits Program v. Las Vegas Metro. Police Dep't, 124 Nev. 138, 154, 179
P.3d 542, 553 (2008) (reasoning that a statute's use of the present tense is
neutral and expresses no intent as to timing); see also Coal. for Clean Air v.
S. Cal. Edison Co., 971 F.2d 219, 224-25 (9th Cir. 1992). Therefore, NRS
645.844(4) is capable of being understood in two or more senses. Moreover,
NRS 645.844(4)(a) does not speak to the issue of when the spousal exception
applies at all. Under either theory, NRS 645.844(4)(a) is ambiguous.
            When construing an ambiguous statute, we often look to
analogous statutory provisions. State, Div. of Ins. v. State Farm Mut. Auto.
Ins. Co., 116 Nev. 290, 294, 995 P.2d 482, 485 (2000). Our statutes
governing the Fund are similar to California's statutes establishing its real
estate fund. Compare NRS 645.841-.8494, with Cal. Bus. & Prof. Code
§§ 10470-10481 (West 2008). In fact, the Legislature modeled the Fund
after California's fund. See Hearing on S.B. 328 Before the Assembly
Judiciary Comm., 54th Leg. (Nev., April 4, 1967). In construing NRS
645.844(4)(a), we consider California's interpretation of its nearly identical
spousal exception. See Cal. Bus. & Prof. Code § 10471(c)(7)(A).
            In Powers v. Fox, 158 Cal. Rptr. 92, 95 (Ct. App. 1979), the
California Court of Appeal reasoned that the "theory of the statute setting
up the [Real Estate Recovery Fund] is that a citizen has relied, to his
damage, on the implied representation, inherent in the fact of licensure,
that the licensee is honest and dependable." In contrast, "[t]he obvious
reason for the [spousal] exception . . . is that, where the victim and the
fraudulent actor are married, the reliance is more likely based on the
marital relationship with the trust therein involved than on the [real estate]
license." Id. The court in Powers therefore held that the petitioner could

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                not recover for her husband's misconduct that occurred during their
                marriage. Id.
                            We find the California Court of Appeal's reasoning persuasive.
                The theory of the Fund is not to aid those who mistakenly trusted a
                dishonest spouse, but to compensate victims who relied on real estate
                licensure to filter out dishonest real estate professionals. See NRS 645.844;
                Colello, 100 Nev.. at 347, 683 P.2d at 16. NRS 645.844(4)(a) is a blanket
                prohibition on spousal recovery that helps ensure the Fund only awards
                victims who selected and relied upon a licensee because of the fact of
                licensure. We conclude that only one interpretation of NRS 645.844(4)(a)
                adequately comports with this purpose: the petitioner may not be the spouse
                of the debtor at the time of the fraud.
                            While we confirmed in Colello that the Fund's statutory scheme
                should be "liberally construed in order to effectuate the benefits intended to
                be obtained," we also reaffirmed that "[w]here alternative interpretations of
                a statute are possible, the one producing a reasonable result should be
                favored." 100 Nev. at 347, 683 P.2d at 17. For example, in Administrator
                of Real Estate Education, Research & Recovery Fund v. Buhecker, 113 Nev.
                1147, 1149-51, 945 P.2d 954, 955-56 (1997), we refused to liberally construe
                the meaning of "judgment" in NRS 645.844(1) and allow a married couple
                to use their joint judgment against a real estate licensee in order to recover
                separate awards from the Fund when doing so would be inconsistent with
                the intent of the Fund.
                            Construing the spousal exception to apply at the time of the
                hearing on the petition does not effectuate the intended purpose of the
                Fund. We are not unsympathetic to Melani, who likely expected William to
                work for their real estate management business with integrity not because

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                   he held a real estate license, but because of the trust underlying their
                   marital relationship. Allowing Melani to recover, however, would not
                   conform to the spousal exception's purpose of ensuring the Fund only
                   compensates victims who relied on the real estate licensing scheme. Rather
                   than satisfy the aims of the Fund in this context, it would simply increase
                   the community property of a marital unit in order to satisfy a divorce award.
                   Moreover, applying the spousal exception at the time of filing or upon the
                   hearing as Melani urges could lead to absurd results regarding the timing
                   of a claim, enable couples acting fraudulently in concert to recover, and
                   deprive other Nevadans who actually relied on licensure from recovering
                   when they are defrauded.4
                                 Therefore, we hold that the spousal exception applies at the
                   time of the fraud, not at the filing of the petition or upon the hearing.
                   Because Melani was married to William when he committed the fraud, she
                   may not recover from the Fund.
                   The LLCs may not recover because the fraudulent transactions did not
                   require a license
                                 We next consider whether Melani's eight LLCs may recover
                   from the Fund. The district court granted Melani's petitions and directed
                   payments to the LLCs from the Fund under NRS 645.844(1). Chandra
                   contends that because William co-owned the defrauded properties, the
                   fraudulent transactions did not require a real estate license and Fund
                   recovery was therefore impermissible. We agree.

                         4 The Nevada Real Estate Division aims to maintain the Fund at
                   $300,000, and Melani's petitions for recovery are for a total of $94,045.46,
                   nearly a third of the total available. See NRS 645.842.
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                                Conclusions of law are reviewed de novo. Dewey, 119 Nev. at
                    93, 64 P.3d at 1075. In order to recover from the Fund, a petitioner must
                    show that the underlying judgment is "with reference to any transaction for
                    which a license is require& pursuant to NRS Chapter 645. NRS 645.844(1).
                    NRS Chapter 645 excludes any lolwner or lessor of property" who manages
                    the property or conducts real estate transactions "with respect to the
                    property in the regular course of or as an incident to the management of or
                    investment in the property." NRS 645.0445(1)(a).
                                We conclude that NRS Chapter 645 does not apply to William's
                    transactions regarding the LLC-owned properties. William co-owned the
                    victim properties as community property when he fraudulently collected
                    their rents and security deposits. As such, no real estate license was
                    required. See NRS 645.0445(1)(a); see also NRS 645.030(1) (defining "real
                    estate brokee as a person performing tasks "for anothee); NRS 645.019
                    (defining "property management" as requiring compensation pursuant to a
                    property management agreement); Stout v. Edmonds, 225 Cal. Rptr. 345,
                    347 (Ct. App. 1986) ("[I]t is well established that a person does not act as a
                    broker and does not require a license when he deals with his own
                    property."). This outcome is in accordance with the intent of the Fund to
                    aid third parties and not co-owners. See Colello, 100 Nev. at 347, 683 P.2d
                    at 16; see also Loomis v. Lange Fin. Corp., 109 Nev. 1121, 1127, 865 P.2d
                    1161, 1164 (1993) ("The legislature has enacted a comprehensive [real
                    estate licensing] regulatory scheme . . . for the purpose of protecting the
                    public in their dealings with persons in the real estate profession.").

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            i   r
                            William and Melani, as a community, were defrauded by
                William as an individual. Although Melani was uninvolved in the fraud
                and the properties were transferred from the community to Melani
                individually, it would be improper under NRS 645.844(1) to allow Melani to
                fictitiously remove William from the community at the time of the fraud so
                that she could assert a claim that required a real estate license.     See
                Buhecker, 113 Nev. at 1149-50, 945 P.2d at 955-56 (holding that a husband
                and wife who jointly owned defrauded property could not separate their
                judgment in order to recover additional awards from the Fund). William,
                as an owner of the properties he defrauded, could not be said to have
                expected himself to be honest and dependable because of his real estate
                license. The Fund therefore may not serve to enlarge his former community
                property.
                            We also find Melani's argument that William defrauded the
                properties in his capacity as a real estate licensee while working for the
                marital community's real estate management business unpersuasive.
                Regardless of whether William directly managed the properties or managed
                them through the real estate management business, the Fund does not
                compensate victims when a co-owner of community property defrauds the
                community. The district court therefore erred in finding that the judgments
                in favor of the LLCs refer to transactions requiring a real estate license.
                Therefore, the LLCs failed to meet NRS 645.844(1)s requirement.

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              Having concluded that the spousal exception applies at the time
of the misconduct, and that transactions involving one's own properties do
not require a real estate license and therefore do not qualify for NRS
Chapter 645s protections, we hold that neither Melani nor her LLCs may
recover from the Fund. Accordingly, we reverse the district court orders
directing payment from the Fund.5

                                      Stiglich

We concur:

   fJC        ta-4.0-1           J.
Hardesty

                                 J.
Silver

         5Becausewe hold that Melani and her LLCs cannot recover under
NRS 645.844(4)(a) and NRS 645.844(1), respectively, we need not address
Chandra's alternative arguments regarding whether the district court
lacked jurisdiction to amend the decree of divorce. We also need not decide
the total amount Melani and her LLCs may collectively recover from the
Fund. See NRS 645.844(1).

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