CHANDRA VS. SCHULTE

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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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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