Cardno Wrg v. Rbc Real Estate Finance C/W 60599

 the deed. The construction project was later halted and Las Vegas Paving
and WRG recorded mechanics' liens.
Las Vegas Paving, WRG, and RBC each attempted to foreclose
on lot G-2. The district court found that RBC's deed of trust held priority
over appellants' mechanics' liens. Las Vegas Paving and WRG separately
appealed and we consolidated the appeals. See NRAP 3(b)(2).
Moot ness
After Las Vegas Paving and WRG appealed, the City of
Henderson mailed a bill for tax assessments due on lot G-2 to the property
owner.' RBC foreclosed on lot G-2 following the district court's order and
the City initiated foreclosure proceedings shortly thereafter.
At the tax foreclosure sale, lot G-2 was sold to Douglas
Gerrard, RBC's attorney. He paid the amount of the delinquent payment
plus interest, penalties, and costs. The City then sent a notice of the sale
to RBC, as it had become the owner just before the sale, informing RBC
that it had 120 days to redeem the property. Approximately 62 days after
the sale, Gerrard assigned his rights and interest in the certificate of sale
to RBC. Five months later, the City issued an absolute deed, free of all
encumbrances, to RBC.
RBC filed a motion in this court to dismiss these appeals as
moot. RBC argued that the tax sale wiped out any interest Las Vegas
Paving and WRG may have had in lot G-2. This court ordered that it
ILLV-1, a subsidiary of the project's master developer, originally
owned both lot G-1 and lot G-2. LLV-1 later sold lot G-2 to CRV Lake Las
Vegas G-Lots, a California limited partnership.
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would defer ruling on the motion until after full briefing and asked the
parties to address mootness in their briefs.
RBC argues that appellants' mechanics' liens were
extinguished by the tax sale following RBC's foreclosure and, therefore,
that appellants' claims are moot. Under the mootness doctrine, this court
will only decide cases if a live controversy is present or they "involve[ ] a
matter of widespread importance that is capable of repetition, yet evading
review." Personhood Nevada v. Bristol, 126 Nev. 599, 602, 245 P.3d 572,
574 (2010).
However, RBC's position depends upon the validity of the deed
obtained from the City as a result of the tax sale. NRS 271.595(3) requires
the treasurer to provide a deed to the purchaser at the tax sale, but only
after notice of a demand for the deed has been given by the holder of the
certificate of the tax sale to the owners of the property. Further, if
redemption is not made within 60 days after the date of service of the
notice required in NRS 271.595(3), the deed may issue. NRS
271.594(4). The merits of this case concern the proper ownership of the
property based upon the priority of the parties underlying liens. If
appellant's liens have priority over RBC's mortgage, they would have been
entitled to notices under NRS 271.595(3) & (4). Therefore, the tax sale
does not moot this appeal and we deny the motion to dismiss."
Lien priority
On cross-summary judgment motions, the district court ruled
that RBC's deed was senior to Las Vegas Paving's and WRG's liens on
three grounds: (1) Las Vegas Paving only commenced work on lot G-1 not
G-2; (2) the grading work on lot G-2 was not visible work as a matter of
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law; and (3) equitable subrogation applies, changing RBC's younger
interest into a senior one.
We will affirm a grant of summary judgment when there are
no genuine issues of material fact and a "party is entitled to judgment as a
matter of law." Wood v. Safeway, Inc., 121 Nev. 724, 731, 121 P.3d 1026,
1031 (2005). We conclude that the district court erred because the timing
and scope of a work of improvement are genuine issues of material fact in
this case. Summary judgment was not appropriate.
Commencement of the work of improvement
A mechanics' lien achieves priority over a deed of trust "after
the commencement of construction of a work of improvement." NRS
108.225(1)(a). "The scope of an 'improvement' is a question of fact for the
trial court to determine and this court will not set aside the district court's
factual findings unless those findings are clearly erroneous." L Cox
Constr. Co., LLC v. CH2 Investments, LLC, 129 Nev., Adv. Op. 14, 296
P.3d 1202, 1204 (2013) (citations omitted). "[T]he fact-finder must define
the work of improvement before it can determine when that work of
improvement visibly commenced." Byrd Underground, LLC v. Angaur,
LLC, 130 Nev., Adv. Op. 62, 332 P.3d 273, 279 (2014).
In some cases the evidence at the summary judgment stage
might show that there is no genuine issue of fact regarding the
commencement of a work of improvement or the scope of such work. For
example, we have recognized that "contracts and permits may assist in
determining the scope of the work of improvement's 'structure or scheme .
. as a whole.' If the contract expressly or impliedly excludes certain
work, then that work might not be a part of the 'work of improvement."
Id. (quoting NRS 108.22188). And, in I. Cox Construction, 129 Nev., Adv.
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Op. 14, 296 P.3d at 1203, this court considered whether a district court
erred in determining that the subsequent soundproofing of a shooting
range was not part of the same work of improvement as construction of
the range. We held that the district court's decision was not erroneous
where it considered evidence of permits, the parties' contemplated scope of
the project, and the purpose of the soundproofing project. Id., 296 P.3d at
1205.
In this case, however, the district court appears to have simply
based its decision on the fact that lot G-1 and lot G-2 are different legal
parcels. It thusly concluded that any work on lot G-1 was not relevant to
whether work was performed on lot G-2. To the contrary, we have said
that the scope of an improvement is a question of fact. Byrd Underground,
130 Nev., Adv. Op. 62, 332 P.3d at 279. The district court did not make
findings regarding the• construction permits, the parties' contemplated
scope of the project, or the purpose of the project. See I. Cox Constr., 129
Nev., Adv. Op. 14, 296 P.3d at 1205. Furthermore, the record shows that
Las Vegas Paving's contract with the general partner of the lot's owner
was combined with a contract with the master developer. The master
developer's subsidiary had owned both parcels before selling them to
separate limited partnerships It is possible that the parties to the
construction contracts might have intended the scope of the project to
cover both parcels.
In the summary judgment briefing, Las Vegas Paving treated
lot G-1 and lot G-2 as a single work of improvement. RBC countered that
Las Vegas Paving did not provide sufficient evidence showing that the
improvement contract was for both lots. Because the scope of the project
was a material question of fact, /. Cox Constr. Co., 129 Nev., Adv. Op. 14,
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296 P.3d at 1204, that was genuinely at issue, the district court erred by
granting summary judgment.
Visibility
The district court found that Las Vegas Paving performed
grading work on lot G-2 but concluded that the grading work was not
visible as a matter of law. This was error.
Construction commences once the work performed "is visible
from a reasonable inspection of the site." MRS 108.22112(1). We analyzed
NRS 108.22112 in J.E. Dunn Northwest, Inc. v. Corus Construction
Venture, LLC, and concluded that, "visibility alone determines priority."
127 Nev., Adv. Op. 5, 249 P.3d 501, 506 (2011). Yet we went on to say that
preparatory work is not "commencement of construction" and that clearing
and grading were examples of such preparatory work. Id. at 509.
In Byrd Underground, we clarified that, despite J.E. Dunn's
statement that clearing and grading were examples of preparatory work,
this court did not mean to express, as a matter of law, that grading is
never visible work. 130 Nev., Adv. Op. 62, 332 P.3d at 278. Accordingly,
grading work may constitute visible "commencement of construction"
under NRS 108.22112 as long as it is visible from a reasonable inspection
of the site. Id. at 278-80. Byrd Underground emphasized that whether
work is visible from a reasonable inspection is an issue for the trier of fact.
Id. at 279-80.
Here, the district court erroneously relied upon the dicta in
J.E. Dunn, 127 Nev., Adv. Op. 5, 249 P.3d at 509, to conclude as a matter
of law that grading work "does not constitute commencement of
construction." We hold that whether work is visible is an issue of fact
that, when at issue, should be left for the ultimate trier of fact.
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Equitable subrogation
The district court found that RBC's loan paid the remaining
balance of the property owner's promissory note to the former property
owner. It therefore applied equitable subrogation as a separate basis to
prioritize RBC's deed over appellants' liens. Appellants argue that the
district court erred by applying the doctrine of equitable subrogation to
their mechanics' liens. RBC responds that the district court's application
of equitable subrogation is valid as an equitable assignment of the lien.
"Equitable subrogation permits 'a person who pays off an
encumbrance to assume the same priority position as the holder of the
previous encumbrance." Houston v. Bank of Am. Fed. Savings Bank, 119
Nev. 485, 488, 78 P.3d 71, 73 (2003) (quoting Mort v. U.S., 86 F.3d 890,
893 (9th Cir. 1996)). In other words, the doctrine "enables 'a later-filed
lienholder to leap-frog over an intervening lien[holder]." Am. Sterling
Bank v. Johnny Mgmt. LV, Inc., 126 Nev. 423, 429, 245 P.3d 535, 539
(2010) (quoting Hicks v. Londre, 125 P.3d 452, 456 (Cob. 2005)). "The
practical effect of equitable subrogation is a revival of the discharged lien
and underlying obligation and assignment to the payor or subrogee,
permitting the subrogee to enforce the seniority of the satisfied lien
against junior lienors." Am. Sterling, 126 Nev. at 429, 245 P.3d at 539.
Under Nevada law, "mechanics' liens tha[ve] no place in equity
jurisprudence." In re Fontainebleau Las Vegas Holdings, LLC, 128 Nev.,
Adv. Op. 53, 289 P.3d 1199, 1212 (2012) (quoting Lamb v. Lucky Boys M.
Co., 37 Nev. 9, 16, 138 P. 902, 904 (1914)). In Fontainebleau, we
concluded "that the plain and unambiguous language of NRS 108.225
precludes application of the doctrine of equitable subrogation, as it
unequivocally places mechanics' lien claimants in an unassailable priority
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position." Id. at 1212. We reasoned that "equitable principles will not
justify a court's disregard of statutory requirements." Id. (quoting
Pellegrini v. State, 117 Nev. 860, 878, 34 P.3d 519, 531 (2001)).
In this case, the district court applied equitable subrogation to
give RBC's lien priority over appellants' mechanics' liens. Yet the
unambiguous language of MRS 108.225 precludes application of equitable
subrogation or any other equitable rule that would upset the Legislature's
decision to give priority to mechanics' liens. See id. Accordingly, the
district court erred in applying the doctrine of equitable subrogation. The
same reasoning applies to RBC's equitable assignment argument, which
we also reject. Accordingly, we
ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.
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cc: Hon. James M. Bixler, District Judge
Robert F Saint-Aubin, Settlement Judge
Howard & Howard
Peel Brimley LLP/Henderson
Peel Brimley LLP/Seattle
Gerrard Cox & Larsen
Eighth District Court Clerk
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