Mason-McDuffie Real Estate v. Villa Fiore ( 2014 )

130 Nev., Advance Opinion 63
IN THE SUPREME COURT OF THE STATE OF NEVADA
MASON-MCDUFFIE REAL ESTATE, No. 61233
INC., A NEVADA CORPORATION
D/B/A PRUDENTIAL NEVADA
REALTY,
Appellant,
FILL
vs. OCT 02 21M/1
VILLA FIORE DEVELOPMENT, LLC, A
NEVADA LIMITED LIABILITY CL
BY
COMPANY,
Respondent.
Appeal from a district court judgment in a contract action.
Second Judicial District Court, Washoe County; Brent T Adams, Judge.
Affirmed.
Olson, Cannon, Gormley, Angulo & Stoberski and Michael E. Stoberski
and Matthew A. Cavanaugh, Las Vegas,
for Appellant.
Fahrendorf, Viloria, Oliphant & Oster, LLP, and Patrick R. Millsap, Reno,
for Respondent.
BEFORE PICKERING, PARRAGUIRRE and SAITTA, JJ.
OPINION
By the Court, PARRAGUIRRE, J.:
In this appeal, we are asked whether a commercial tenant may
be constructively evicted without first providing the landlord notice of and
SUPREME COURT
OF
NEVADA
(0) 1947A 0 )L-1 3Z-4 c0
a reasonable opportunity to cure the defect. We conclude that constructive
eviction requires that a landlord be given notice of and a reasonable
opportunity to cure a defect, and substantial evidence supports the district
court's finding that the landlord in this case did not receive notice that the
defect continued after repairs were attempted. Therefore, we affirm.
FACTS AND PROCEDURAL HISTORY
Appellant Mason-McDuffie Real Estate, Inc., leased
commercial real property in Reno from respondent Villa Fiore
Development, LLC. Following a significant water intrusion event in
December 2007, Mason-McDuffie vacated the property and ceased paying
rent. Thereafter, Villa Fiore filed a complaint in the district court against
Mason-McDuffie, alleging that Mason-McDuffie breached the lease.
Mason-McDuffie filed an answer and counterclaims, alleging that Villa
Fiore constructively evicted Mason-McDuffie by failing to maintain the
roof. At a bench trial, the following evidence was presented.
Before Villa Fiore owned the property, Mason-McDuffie leased
the property from nonparty Joe Hitch. In 2006, Valerie Mapes, Mason-
McDuffle's manager at the time, repeatedly complained to Hitch about
water intrusion. In March 2006, Mason-McDuffie sent Hitch a letter
describing Hitch's failure to maintain the roof as a material breach of the
lease, and Hitch arranged extensive roof repairs in the summer of 2006.
After these repairs were made, Mason-McDuffie reported one new leak in a
different area, and additional repairs were made in February or March
2007. Hitch received no further complaints about the roof.
Villa Fiore bought the property from Hitch in June 2007.
Hitch told Gary Arthur, Villa Fiore's managing member, about the roofs
past problems and that the problems had been fixed. Mapes told Arthur
that the roof had leaked in the past but not recently. Villa Fiore assumed
SUPREME COURT
OF
NEVADA
2
(0) 1947A egefs.
the landlord's duties under the lease, including the duty to maintain the
roof and protect the interior from water intrusion. In the event that Villa
Fiore breached the lease, the lease entitled Mason-McDuffie to pay third
parties to cure any defects caused by Villa Fiore's breach and withhold rent
in the amount of these payments if Villa Fiore failed to cure the defects
within 30 days after receiving written notice of the defects. The lease was
to expire in July 2009.
Arthur testified that Mapes called him in October 2007 and
told him that the roof was leaking Arthur went to the property that day,
and Mapes showed him two or three areas where water was coming into
the building through the roof. A roofing contractor made repairs that day.
A few weeks later, Mapes reported roof leaks in different locations. Arthur
saw leaks inside the property, but no one could identify their sources
outside. Nevertheless, a roofing contractor performed repairs and
expressed confidence that the repairs would be effective.
Arthur testified that he was never informed of other water
intrusion or mold at the property before Mason-McDuffie vacated the
property in December 2007. Arthur testified that he gave Mapes an
emergency maintenance phone number. He also asserted that Villa Fiore's
maintenance employees told him whenever they performed work at the
property, but they never reported additional water intrusion problems.
Arthur never received any reports from roofers or mold inspectors hired by
Mason-McDuffie
In contrast, David Hansen, Mason-McDuffie's sales manager in
2007, testified that water intrusion occurred every time it rained,
beginning in August 2007. Hansen testified that Mapes called Arthur
repeatedly and a maintenance person typically responded. Mason-
McDuffle arranged two mold inspections in November 2007, and one
SUPREME COURT
OF
NEVADA
3
10) I947A
indicated that mold was present in the building while the other indicated
that mold was not present. Hansen did not know whether the mold reports
were ever given to Arthur or Villa Fiore.
In December 2007, a severe water intrusion event occurred at
the property. Hansen testified that Villa Fiore maintenance workers
brought buckets to catch water. Hansen testified that Mapes and Mason-
McDuffie's attorney tried to call Arthur, but he did not believe that Arthur
ever came to the property in response. Mason-McDuffie never sent a letter
to Arthur or Villa Fiore like the letter that Mason-McDuffie sent to Hitch
• in March 2006. Hansen never personally tried to contact Arthur. Mason-
McDuffie hired engineers to examine the roof, and the engineers reported
that portions of the roof needed to be replaced as soon as possible. This
report was not provided to Arthur or Villa Fiore, but Hansen did not know
why. In mid-December 2007, Mason-McDuffie vacated the property.
On January 3, 2008, Arthur passed by the property and saw a
note on the door stating that Mason-McDuffie had moved. A few days
later, Arthur received a letter from Mason-McDuffie stating that Mason-
McDuffie considered itself constructively evicted due to the water
intrusion. Upon receiving the letter, Arthur called Mapes, and the two
exchanged voicemail messages, but they had no further contact. Arthur
subsequently sought a new tenant for the property. The new tenant also
experienced water intrusion problems, and Villa Fiore eventually replaced
the roof in 2009.
The district court did not expressly decide whether Mason-
McDuffie was constructively evicted, but found that severe water intrusion
justified Mason-McDuffie's vacating the property. The district court also
found that Mason-McDuffie did not provide the information that it had in
November 2007 regarding the ongoing water intrusion and related mold
SUPREME COURT
OF
NEVADA
4
(0) 1947A e
problems to Villa Fiore before vacating the property. Finally, the district
court found that Mason-McDuffie did not provide Villa Fiore written notice
of the ongoing water intrusion. The district court concluded that the lease
obligated Mason-McDuffie to provide Villa Fiore written notice of and 30
days to cure the water intrusion before exercising any other potential
remedies. Because Mason-McDuffie did not comply with the notice and
cure provision, the district court entered judgment in favor of Villa Fiore.
Mason-McDuffie now appeals
DISCUSSION
The district court based its judgment in Villa Fiore's favor on
its finding that Mason-McDuffie failed to comply with the notice and cure
provision of the lease and its conclusion that the lease required Mason-
McDuffie to comply with this provision before seeking other remedies,
including constructive eviction. Mason-McDuffie first argues that the
district court misconstrued the lease. Next, Mason-McDuffie argues that
under a theory of constructive eviction, a tenant is not required to provide
its landlord with notice of and a reasonable opportunity to cure a defect
before vacating the premises. Finally, Mason-McDuffie contends that the
district court's findings support an implicit finding of constructive eviction.
We assume without deciding that the lease did not require
Mason-McDuffie to comply with the notice and cure provision before
asserting constructive eviction. We conclude, however, that constructive
eviction requires that a commercial tenant provide a landlord with notice
of and a reasonable opportunity to cure a defect. Because the district
court's finding that Mason-McDuffie did not provide Villa Fiore notice of
the ongoing nature of the water intrusion is supported by substantial
evidence, we conclude that the district court's factual findings do not
support a finding of constructive eviction. Accordingly, we affirm.
SUPREME COURT
OF
NEVADA
5
W) 1947A
Standard of review
Whether constructive eviction requires notice of and an
opportunity to cure a defect is a question of law that we review de novo.
See Brady, Vorwerck, Ryder & Caspino v. New Albertson's, Inc., 130 Nev.
P.3d , (Adv. Op. No. 68, August 7, 2014) (recognizing
that the interpretation of caselaw is a question of law that this court
reviews de novo). "Whether constructive eviction has occurred is a factual
determination to be made by the trier of fact." Krieger v. Elkins, 96 Nev.
839, 841, 620 P.2d 370, 372 (1980). We will not disturb such a finding if it
is supported by substantial evidence. Id.; see also Weddell v. H20, Inc.,
128 Nev. „ 271 P.3d 743, 748 (2012) (stating that this court will not
overturn factual findings that are supported by substantial evidence).
Substantial evidence is "that which a reasonable mind might accept as
adequate to support a conclusion.' Otak Nev., L.L.C. v. Eighth Judicial
Dist. Court, 129 Nev. „ 312 P.3d 491, 496 (2013) (quoting Finkel v.
Cashman Profl, Inc., 128 Nev. „ 270 P.3d 1259, 1262 (2012)).
Constructive eviction requires that the landlord have notice of and a
reasonable opportunity to cure the defect
We have required a party alleging constructive eviction to
prove three elements. First, the landlord must either act or fail to act. Yee
v. Weiss, 110 Nev. 657, 660, 877 P.2d 510, 512 (1994). Second, the
landlord's action or inaction must render "the whole or a substantial part
of the premises unfit for occupancy for the purpose for which it was
leased." Id. Third, the tenant must actually vacate the premises within a
reasonable time. Schultz v. Provenzano, 69 Nev. 324, 328, 251 P.2d 294,
296 (1952).
Villa Fiore argues that there is a fourth essential element of
constructive eviction, that the tenant provide the landlord notice of and a
SUPREME COURT
OF
NEVADA
6
(0) 1947A e
reasonable opportunity to cure the defect. We have not previously
discussed this proposed element, but it is not foreclosed by our decisions
Accordingly, we look to other jurisdictions for guidance. See City of Las
Vegas v. Cliff Shadows Prof? Plaza, L.L.C., 129 Nev. , n.4, 293 P.3d
860, 865 n.4 (2013) ("This court has often relied on the decisions of other
jurisdictions when, as here, it is faced with issues of first impression.").
Other jurisdictions have stated that constructive eviction cannot occur
unless the landlord has notice of and a reasonable opportunity to cure the
defect. E.g., Home Rentals Corp. v. Curtis, 602 N.E.2d 859, 863 (Ill. App.
Ct. 1992) ("UV tenant may not abandon premises under the theory of
constructive eviction without first affording the lessor a reasonable
opportunity to correct the defects in the property."); Pague v. Petroleum
Prods., Inc., 461 P.2d 317, 319 (Wash. 1969) ("In order for a vacating
tenant to claim constructive eviction, it is essential that he give the
landlord notice of the act or condition complained of and an opportunity to
remove or correct the condition."); see also Restatement (Second) of Prop.:
Landlord & Tenant § 5.4 (1977) (stating that a tenant may seek remedies
for a landlord's failure to make repairs if "the landlord does not correct the
situation within a reasonable time after being requested by the tenant to
do so").
A landlord cannot be expected to cure a defect if the landlord is
unaware that the defect exists. See Krieger, 96 Nev. at 841, 620 P.2d at
372 (stating that substantial evidence supported the district court's finding
of constructive eviction where the landlord was "notified of the
problems . . . but failed to make any repairs"). Requiring a commercial
tenant to provide a landlord notice of and a reasonable opportunity to cure
a defect in the leased premises as an element of constructive eviction
encourages the parties to discuss and potentially resolve• deficient
SUPREME COURT
OF
NEVADA
7
(0) I94Th
conditions in leased premises outside of the courts. See Conference Ctr.
Ltd. v. TRC—The Research Corp. of New England, 455 A.2d 857, 863-64
(Conn. 1983) (recognizing that requiring notice and an opportunity to cure
under a theory of constructive eviction is desirable because it provides "an
opportunity for dialogue to establish whether the parties intend to
repudiate or to fulfill their contractual obligations"). In contrast, declining
to impose such an element would require landlords to intrude upon
tenants' right to possess leased premises in order to guard against claims
of constructive eviction by conducting frequent inspections. See State v.
White, 130 Nev. , n.3 ,330 P.3d 482, 486 n.3 (2014) (stating that "a
landlord does not have an absolute right to enter a property he or she owns
because the landlord conveys the right of possession to the tenant")
Requiring a tenant to provide notice of and a reasonable opportunity to
cure a defect as an element of constructive eviction thus protects both
landlords' expectations in rental income and tenants' rights to possess the
leased premises free from excessive intrusions by the landlord.
Therefore, we hold that a commercial tenant alleging that it
was constructively evicted must show, in addition to the three elements
stated in Yee and Schultz, that it provided the landlord notice of and a
reasonable opportunity to cure the defect. See, e.g., Home Rentals Corp.,
602 N.E.2d at 863. 1
'Mason-McDuffie argues that notice and a reasonable opportunity to
cure are not required for constructive eviction, relying on Milheim v.
Baxter, 103 P. 376, 377 (Colo. 1909). The court in Milheim concluded that,
under the circumstances of that case, notice was not required because the
landlord already "had full knowledge" of and no intent to cure the defect.
Id. Milheim thus stands only for the proposition that a tenant need not
provide the landlord with notice of a defect if the landlord already knows of
SUPREME COURT
continued on next page...
OF
NEVADA
8
(0) 1947A eo
The district court's findings are supported by substantial evidence, but they
do not support a finding of constructive eviction
Applying this rule to the circumstances presented here, we
conclude that the district court's factual findings are supported by
substantial evidence, but these findings do not support Mason-McDuffie's
argument that it was constructively evicted.
The district court found, based on substantial evidence, that
severe water intrusion rendered the property unfit for occupancy in
December 2007, and it is undisputed that Mason-McDuffie vacated the
property in a reasonable time. Given that the lease expressly imposed
upon Villa Fiore the duty to maintain the roof, we also assume for the
purpose of argument that the district court implicitly found that Villa Fiore
failed to maintain the roof, thus causing the severe water intrusion. See
Luciano v. Diercks, 97 Nev. 637, 639, 637 P.2d 1219, 1220 (1981) ("[T]his
court will imply findings of fact and conclusions of law so long as the record
is clear and will support the judgment."). Thus, the three elements of
constructive eviction set forth in Yee and Schultz were satisfied. See Otak
Nev., 129 Nev. at , 312 P.3d at 496; Krieger, 96 Nev. at 841, 620 P.2d at
372.
But the district court also found that Mason-McDuffie knew
that the water intrusion and related mold problems were ongoing in
November 2007 but never provided this information to Villa Fiore before
vacating the premises. Although Hansen testified that Villa Fiore
maintenance employees were at the property in December 2007, Arthur
...continued
the defect through other means and has failed to cure it. See id.; Krieger,
96 Nev. at 841, 620 P.2d at 372. Therefore, this argument is unpersuasive.
SUPREME COURT
OF
NEVADA
9
(0) 1947A Arp
testified that Villa Fiore employees always told him when they performed
work at the property and no one did so in December 2007. Hansen testified
that Mapes tried to call Arthur in December 2007 to no avail. But Arthur
testified that he responded to Mapes' calls promptly in the past and that he
believed the problems were resolved because no one told him about water
intrusion after October 2007. Mason-McDuffie also had documentation of
the ongoing water intrusion that it, inexplicably, never provided to Arthur
or Villa Fiore. Thus, the district court's finding that Mason-McDuffie did
not provide the information regarding the failure of the roof that it had in
November 2007 to Villa Fiore before vacating the property is supported by
substantial, although conflicting, evidence.
Mason-McDuffie argues that it provided Villa Fiore notice of
and an opportunity to cure the prior water intrusion and that this satisfied
any notice and opportunity to cure obligation that Mason-McDuffie had
under a theory of constructive eviction. Notice that the water intrusion
continued despite Villa Fiore's attempted repairs was important because
without further complaints from Mason-McDuffie, Villa Fiore would have
no reason to believe that the repairs were ineffective. See SGM P'ship v.
Nelson, 705 P.2d 49, 52 (Haw. Ct. App. 1985) (requiring a tenant to give a
landlord notice that attempted repairs were insufficient in order to assert
constructive eviction based on the insufficiency of the repairs). Because
Villa Fiore attempted repairs and the district court found on substantial
evidence that Mason-McDuffie did not inform Villa Fiore that these repairs
were ineffective, we conclude that Mason-McDuffie's notice of prior water
intrusion was insufficient to satisfy its notice and cure obligation under a
theory of constructive eviction. See id.While the evidence in this case is conflicting, it nevertheless
constitutes substantial evidence supporting the district court's finding that
SUPREME COURT
OF
NEVADA
10
(0) 19414
Mason-McDuffie did not inform Villa Fiore that the water intrusion and
related problems continued after the last repairs in October 2007 before
vacating the property in December 2007. Thus, Mason-McDuffie did not
satisfy the fourth element of constructive eviction, notice of and a
reasonable opportunity to cure the defect.
CONCLUSION
Because the district court found that Mason-McDuffie did not
provide Villa Fiore notice of and a reasonable opportunity to cure the
ongoing water intrusion, the district court's factual findings do not support
Mason-McDuffie's argument that it was constructively evicted. As a result,
we need not address whether Mason-McDuffie was required to comply with
the lease's notice and cure provision in order to successfully assert
constructive eviction, and we affirm the judgment. See Saavedra-Sandoval
v. Wal-Mart Stores, Inc., 126 Nev. , 245 P.3d 1198, 1202 (2010)
("This court will affirm a district court's order if the district court reached
the correct result, even if for the wrong reason.").
J.
Parraguirre
We concur:
Adeutli, J.
Pickering
J.
Saitta
SUPREME COURT
OF
NEVADA
11
(0) 1947A 4Bp