Saticoy Bay, LLC Series 2301 Haren v. Lnv Corp. ( 2015 )

 attach the CC&Rs. Nevertheless, the CC&Rs are integral to the quiet title
claim in the complaint. Further, respondent requested judicial notice of
the CC&Rs, which appellant did not oppose. Thus, "no party questions the
authenticity of the document." Id. (quoting United States v. Corinthian
Coils., 655 F.3d 984, 999 (9th Cir. 2011)).
The main issue on appeal is whether the incorporation of
superpriority language from NRS Chapter 116 in a common interest
community's (CIC) CC&Rs renders this court's SFR decision applicable to
the CIC's foreclosure. See SFR Invs. Pool I, L.L.C. v. U.S. Bank, N.A., 130
Nev., Adv. Op. 75, 334 P.3d 408 (2014). Although NRS Chapter 116 does
not by its terms apply, since this is a nonresidential community, the
CC&Rs incorporate NRS 116.3116(2) (2013)'s superpriority language
verbatim. See NRS 116.12075(1). Thus, our interpretation of the same
language found in NRS 116.3116(2) (2013) provides meaningful guidance
to interpreting the CC&Rs here, and suggests that the CC&Rs create a
split priority lien for the CIC where the superpriority portion of the lien
has true priority over respondent LNV's first security interest, and the
foreclosure of that superpriority portion thus would extinguish the
security interest. See SFR Invs., 130 Nev., Adv. Op. 75, 334 P.3d at 412.
The CC&R sections implicated in this appeal are contained in
Article 6, which concerns the "Covenant for Maintenance Assessments to
Association." Section 6.1 explains that the lot owners agree to pay
assessments and other costs and fees, all of which "shall be a continuing
lien upon the Lot against which each such assessment is made." When a
lot owner becomes delinquent on assessments, Section 6.11 gives the CIC
the authority to record a notice of delinquent assessment. The nature of
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the CIC's lien is explained in Section 6.13, which states, including the
1997 amendments,' that:
Section 6.13. Continuing Lien. The lien
shall also secure all other payments and/or
assessments which shall become due and payable
with respect to said Lot following such recording,
and all costs (including attorneys' fees and
penalties) and interest accruing thereon. Unless
sooner satisfied or released and its enforcement
initiated, said lien shall continue for a period of
three (3) years from the date of recordation of the
notice of assessment. When a notice of assessment
has been recorded, such assessment shall
constitute a lien on each respective Lot, prior and
superior to all other liens, except (i) all taxes,
bonds, assessments and other levies which, by
law, would be superior thereto, and (ii) the lien or
charge of any first mortgage of record except as
otherwise provided in section 6.19 herein as
amended.
(Emphases added). The CC&Rs also grant the CIC a power of sale to
foreclose on the lien:
Section 6.15. Foreclosure. A power of sale is
conferred in the Association for the enforcement of
any assessment lien. Each assessment lien may
be foreclosed pursuant to Nevada Revised Statute
116.31162 and 116.31164 as from time to time
may be amended or any successor statute.
A later section further refines the CIC's lien in relation to the first security
interest:
'The recitals in the amendment document explain that these
changes were "to facilitate purchasers obtaining financing under Section
503 and 504 of the Small Business Industrial Act of 1959.. . by
subordinating the assessment lien to the two Deeds of Trust required for
participation in the 'SBA 504 loan' program"
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Section 6.18. Liens/Security Interest. A lien
under this section is prior to all other liens and
encumbrances on the Lot except:
(a) Liens and encumbrances recorded before
the recordation of the declaration;
(b) Liens for real estate taxes and other
governmental assessments or charges against the
Lot;
(c) Other than is provided in this section, a
first security interest on the Lot recorded before
the date on which the assessments sought to be
enforced became delinquent.
i) Super Priority. The lien is also prior
to all security interest described in paragraph (c)
to the extent of the assessments for Association
Property based on the periodic budget adopted by
the Association which would have become due in
the absence of acceleration during the six (6)
months ("super priority") immediately preceding
the institution of an action to enforce the lien.
Finally, (amended) Section 6.19 states:
Section 6.19. Subordination. The lien of
assessments provided for herein shall be
subordinate to the lien of any first Mortgage upon
a Lot and shall also be subordinate to the second
Mortgage or Deed of Trust required for
participation in financing under Sections 503 and
504 of the Small Business Investment Act, as
amended. The lien of assessments shall not be
subordinate to any second or other lien except as
provided herein.
"Mortgage," as used in the CC&Rs, includes deeds of trust.
Appellant Saticoy argues that Section 6.18 of the CC&Rs
contains substantially the same language as NRS 116.3116(2) (2013)'s
"superpriority" language, which this court confirmed grants an association
a true priority lien over the first security interest in SFR Investments, 130
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Nev., Adv. Op. 75, 334 P.3d 408. Thus, Saticoy submits that we should
interpret Section 6.18 the same and hold that the CIC's superpriority lien
had true priority over LNV's interest. We agree.
LNV argues that because the CIC is nonresidential and
incorporated only NRS 116.31162 (2013) and NRS 116.31164 (2005) when
granting it a power of sale, and not NRS 116.3116 (2013), our precedent
interpreting NRS 116.3116(2) (2013) has no relevance to the lien priority
outlined in the CC&Rs. See NRS 116.1201(2)(b) (declining to apply NRS
Chapter 116 to: "A planned community in which all units are restricted
exclusively to nonresidential use unless the declaration provides that this
chapter or a part of this chapter does apply to that planned community
pursuant to NRS 116.12075"), NRS 116.12075(1) (stating that NRS
Chapter 116 may apply to the extent the declaration states that: (1) the
entire chapter applies, (2) only NRS 116.001-116.2122 and 116.31166-
116.31168 apply, or (3) only NRS 116.31166-116.31168 apply). Though
LNV is correct that this is a nonresidential CIC and the CC&Rs do not
explicitly reference NRS 116.3116 (2013), the CC&Rs incorporated NRS
116.3116(2) (2013)'s superpriority language verbatim, rather than just by
citation. NRS 116.3116(2) (2013) states, in pertinent part:
A lien under this section is prior to all other
liens and encumbrances on a unit except:
(b) A first security interest on the unit recorded
before the date on which the assessment sought to
be enforced became delinquent . .
The lien is also prior to all security interests
described in paragraph (b) to the extent of any
charges incurred by the association on a unit
pursuant to NRS 116.310312 and to the extent of
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the assessments for common expenses based on
the periodic budget adopted by the association
pursuant to NRS 116.3115 which would have
become due in the absence of acceleration during
the 9 months immediately preceding institution of
an action to enforce the lien.
(Emphasis added). Section 6.18 similarly states that:
A lien under this section is prior to all other
liens and encumbrances on the Lot except:
(c) Other than is provided in this section, a
first security interest on the Lot recorded before
the date on which the assessments sought to be
enforced became delinquent.
i) Super Priority The lien is also prior
to all security interest described in paragraph (c) to
the extent of the assessments for Association
Property based on the periodic budget adopted by
the Association which would have become due in
the absence of acceleration during the six (6)
months ("super priority") immediately preceding
the institution of an action to enforce the lien.
(Emphasis added). So, just like NRS 116.3116(2) (2013), Section 6.18 says
that the superpriority lien is "prior to" the first security interest,
rendering the analysis of SFR Investments applicable. See 130 Nev., Adv.
Op. 75, 334 P.3d at 412.
LNV protests that this reading would render Section 6.13,
which excepts "the lien or charge of any first mortgage" from the general
rule that the association lien is prior and superior to all other liens, and
Section 6.19, which states that the association's lien "shall be subordinate
to the lien of any first Mortgage," meaningless. Instead, LNV argues that
the only way to meaningfully read the CC&R sections together is to find
that Section 6.18's superpriority lien is really only a priority for payment,
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and thus not a true lien. That "prior to" means something other than a
prior lien capable of extinguishing junior interests when foreclosed upon,
however, was rejected by SFR Investments. Id. at 412-14. And the CC&R
provisions can be reconciled, while still maintaining the superpriority
lien's true priority status, as such: after the CIC is paid the superpriority
amount from its foreclosure sale proceeds, Sections 6.13 and 6.19 entitle
LNV to share in the remaining proceeds. This is also consistent with
Section 6.15, which adopted NRS 116.31164 (2005), and under which LNV
would be a "subordinate claim of record" entitled to share the proceeds
after the CIC's sale expenses and superpriority lien amount are paid. 2
Therefore, though not controlling in the sense that this is a nonresidential
community that did not, by operation of law, opt into NRS Chapter 116's
superpriority statute, SFR Investments provides a persuasive
interpretation of the superpriority language in the CIC's CC&Rs that is
2 NRS 116.31164(3)(c) (2005) requires the person conducting the
association's sale to apply the proceeds in the following order:
(1) The reasonable expenses of sale;
(2) The reasonable expenses of securing possession
before sale, holding, maintaining, and preparing
the unit for sale, including payment of taxes and
other governmental charges, premiums on hazard
and liability insurance, and, to the extent provided
for by the declaration, reasonable attorney's fees
and other legal expenses incurred by the
association;
(3) Satisfaction of the association's lien;
(4) Satisfaction in the order of priority of any
subordinate claim of record; and
(5) Remittance of any excess to the unit's owner.
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still reconcilable with the CC&Rs as a whole. Indeed, any other reading
would nullify the language in Section 6.18(c)(1). See Quirrion v. Sherman,
109 Nev. 62, 65, 846 P.2d 1051, 1053 (1993) ("[W]here two interpretations
of a contract provision are possible, a court will prefer the interpretation
which gives meaning to both provisions rather than an interpretation
which renders one of the provisions meaningless."); see also Diaz, 120 Nev.
at 73, 84 P.3d at 665-66 ("The rules of construction governing the
interpretation of contracts apply to the interpretation of restrictive
covenants for real property.").
LNV further argues that applying the holding in SFR
Investments here would interfere with its vested contractual rights, citing
to Coral Lakes Community Ass'n, Inc. v. Busey Bank, N.A., 30 So. 3d 579,
581-84 & n.3 (Fla. Dist. Ct. App. 2010) (holding that a CC&R clause that
subordinated the association's lien to the first mortgage's interest
controlled over a later-enacted statute that would have interfered with
that subordination because the statute came into effect after the CC&Rs
and thus would have implicated• "constitutional concerns about
impairment of vested contractual rights"). This court recognized Coral
Lakes in SFR Investments, and found its concerns did not apply because
the CC&Rs at issue, which contained a mortgage savings clause, were
recorded after the Legislature adopted NRS Chapter 116 so the
respondent bank was aware that the statutory superpriority lien existed
and could not be waived per NRS 116.1104. SFR Invs., 130 Nev., Adv. Op.
75, 334 P.3d at 419 & n.7 (recognizing that NRS Chapter 116 prohibited
waiver of rights conferred by it unless expressly allowed).
Similarly, LNV's security interest did not come into existence
until 2007, well after the 1991 enactment of NRS Chapter 116 and the
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1996 recordation of the CIC's CC&Rs; 3 thus, there is no analogous later-
enacted statute that might threaten LNV's contractual rights. The
priority language in Section 6.18 being interpreted here has remained
unchanged in the CC&Rs since their original recordation, and using SFR
Investments as persuasive authority to interpret that language is not the
same as enacting a new statutory rule. And that the NRS Chapter 116
non-waiver provision does not apply to the CIC further proves our point:
the drafter of the CC&Rs was not legally obligated to grant the CIC a
superpriority lien, but nevertheless did.
We conclude that the district court therefore erred in
dismissing the complaint for failure to state a claim upon which relief can
be granted. Accordingly, we
ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.
, C.J.
Chtin
Parraguirre
Saitta
J.
Gibbons
3 See 1991 Nev. Stat., ch. 245, § 1-128, at 535-79.
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cc: Hon. Jerry A. Wiese, District Judge
Law Offices of Michael F. Bohn, Ltd.
Sylvester & Polednak, Ltd.
Lewis Roca Rothgerber LLP/Las Vegas
Eighth District Court Clerk
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