Date: 10-16-2014

Case Style: Oxbow Construction, LLC v. The Regent at Town Center Homeowners' Association

Case Number: 61941

Judge: Douglas

Court: Supreme Court of Nevada

Plaintiff's Attorney: Koeller Nebeker Carlson & Haluck, LLP, and Robert C. Carlson, Jr., and Megan K. Dorsey, Las Vegas, for Oxbow Construction, LLC.

Defendant's Attorney: Feinberg Grant Mayfield Kaneda & Litt, LLP, and Bruce Mayfield and Dan Clifford, Las Vegas, for The Regent at Town Centre Homeowners' Association.

Description: In this opinion, we consider several issues raised by
consolidated writ petitions arising out of a construction-defect action.
Specifically, we address whether the district court acted arbitrarily or
capriciously by failing to perform an NRCP 23 class-action analysis,
determining that previously occupied units in a common-interest
community do not qualify for NRS Chapter 40 remedies,' and allowing
claims seeking NRS Chapter 40 remedies to proceed for alleged
'When using NRS Chapter 40 in this opinion, we refer exclusively to
the construction-defect provisions. We also note that while the relevant
statutes use the term "constructional defect," we use "construction defect"
in this opinion to refer to those statutes.
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construction defects in limited common elements assigned to multiple
units in a building containing at least one "new residence." We conclude
that the district court's order was not arbitrary or capricious, and
therefore, we deny both petitions.
FACTS AND PROCEDURAL HISTORY
These consolidated writ petitions arise from a constructiondefect
action initiated by The Regent at Town Centre Homeowners'
Association against Oxbow Construction, LLC. El Capitan Associates, the
original developer of The Regent at Town Centre mixed-use community
(Town Centre), hired Oxbow as its general contractor. Town Centre
includes 20 buildings containing 274 residential units and 10 commercial
units, as well as an office and recreation building. After each building's
completion, El Capitan obtained a certificate of occupancy from the
Department of Building and Safety so that the building's units could be
leased out as apartments.
After Town Centre's completion, El Capitan submitted a
condominium plan for the complex, which the City of Las Vegas approved.
After this approval, El Capitan entered into an agreement to sell Town
Centre to Regent Group II, LLC (Regent II), which recorded Covenants,
Conditions and Restrictions (CC&Rs) for Town Centre. As relevant here,
section 5.1 of the CC&Rs, entitled "Assigned Limited Common Elements,"
defines certain elements as limited common elements assigned to a
particular unit or units.
Adhering to their agreement, El Capitan transferred titles to
Town Centre's units to Regent II in groups over a period of four months.
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When Regent II received the final group of titles, lessees occupied between
212 and 246 units in the complex, 2 and multiple buildings contained at
least one unoccupied unit Over a period of nine months, Regent II sold all
of its condominiums to individual purchasers. The average lease to sale
occupancy of the community's units was 7.7 months, and the average unit
age was 11.4 months.
Pursuant to NRS 40.645, the Association, on behalf of itself
and the condominium unit-owners, served Oxbow with an NRS Chapter 40
notice, alleging construction defects in exterior walls and openings, entry
decks/exterior stairs, interior walls and ceilings, and sloped roofs, among
other things. After receiving the notice, Oxbow filed a complaint for
declaratory relief in district court seeking a determination that NRS
Chapter 40 does not apply to Oxbow because the Town Centre units did
not qualify as residences after being rented as apartments. In response,
under NRS 116.3102(1)(d), the Association, on behalf of itself and the unitowners,
filed an answer and counterclaims for, inter alia, construction
defects. Oxbow then filed a motion to dismiss the Association's
counterclaims for construction defects. The district court denied Oxbow's
motion, ordering limited discovery to determine which units were occupied
before the title transfers from El Capitan to Regent II.
The Association filed its own motion requesting that all units,
irrespective of prior occupancy, be declared "new residence Is]" under NRS
40.615 based on their chronological age and the duration of their
occupancy. The district court also denied this motion. The Association
2This number is disputed by the parties.
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then filed a second motion, this time seeking a determination that NRS
Chapter 40 remedies are available for all common elements, including
those contained within "building envelopes." 3 In its opposition to that
motion, Oxbow argued that the Association was precluded from bringing a
representative action for construction defects in common elements, and
that the district court was required to conduct an NRCP 23 class-action
analysis to determine whether the Association had standing to bring
claims for defects in limited common elements. The district court granted
the Association's motion, in part, determining that the Association could
seek, on behalf of itself or two or more unit-owners, NRS Chapter 40
remedies for construction defects in the common elements of buildings
containing a "new residence."
After that ruling, Oxbow filed a writ petition requesting that
this court vacate the district court's order because the district court
abused its discretion by failing to conduct an NRCP 23 analysis. The
Association filed its own writ petition, asking this court to direct the
district court to amend its order denying the Association's initial motion to
state that NRS Chapter 40 remedies are available for all 274
condominiums at Town Centre.
3"Building envelope" is a term of art in construction and
"encompasses the entire exterior surface of a building, including walls,
doors, and windows, which enclose, or envelop, the interior spaces."
Barbara Nadel, FAIA, 21st Century Building Envelope Systems: Merging
Innovation with Technology, Sustainability, and Function,
AIA/Architectural Record, Continuing Education Series, August 2006, at
146.
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DISCUSSION
Writ relief
A writ of mandamus is available to, among other things,
"control an arbitrary or capricious exercise of discretion." 4 Inel Game
Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556,
558 (2008). When seeking such extraordinary relief, the petitioners bear
the burden of demonstrating that an exercise of this court's discretion to
that end is warranted. See Westpark Owners' Ass'n v. Eighth Judicial
Dist. Court, 123 Nev. 349, 356, 167 P.3d 421, 426 (2007); Pan v. Eighth
Judicial Dist. Court, 120 Nev. 222, 228, 88 P.3d 840, 844 (2004).
Generally, writ relief is available only when there is no "plain,
speedy and adequate remedy in the ordinary course of law." NRS 34.170;
Westpark, 123 Nev. at 356, 167 P.3d at 426. Because an appeal from a
final judgment or order is ordinarily an adequate remedy, Ina Game
Tech., 124 Nev. at 197, 179 P.3d at 558; Westpark, 123 Nev. at 356, 167
P.3d at 426, in most cases, we decline to exercise our discretion to consider
writ petitions challenging interlocutory district court orders. Smith v.
Eighth Judicial Dist. Court, 113 Nev. 1343, 1344, 950 P.2d 280, 281
(1997). Nevertheless, we will exercise our discretion to consider such writ
petitions when "an important issue of law needs clarification and
considerations of sound judicial economy and administration militate in
4Because prohibition is not a proper vehicle to challenge the orders
at issue here, we deny each petitioner's alternative requests for writs of
prohibition. See NRS 34.320 (noting that prohibition relief is available to
address proceedings in excess of a tribunal's jurisdiction).
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favor of granting the petition." Ina Game Tech., 124 Nev. at 197-98, 179
P.3d at 559.
NRS 40.615 limits NRS Chapter 40 construction-defect
remedies for residences to defects in "new residence[s]" or in alterations or
additions to existing residences. We have construed "new residence" to
mean "a product• of original construction that has been unoccupied as a
dwelling from the completion of its construction until the point of its
original sale." ANSE, Inc. v. Eighth Judicial Dist. Court, 124 Nev. 862,
872, 192 P.3d 738, 745 (2008); Westpark, 123 Nev. at 360, 167 P.3d at 429.
The consolidated writ petitions address whether we should broaden our
definition of "new residence" under NRS 40.615 and whether we should
extend NRS Chapter 40 remedies for construction defects to limited
common elements assigned to multiple units in a building containing at
least one "new residence." These issues are important questions of law,
the resolution of which could cabin the underlying litigation and
potentially affect other similarly situated persons living in commoninterest
communities throughout Nevada. We therefore conclude that
sound judicial economy and administration favor our consideration of
these important legal issues, and we exercise our discretion to address the
consolidated writ petitions. Our review of the questions of law raised by
these writ petitions is de novo. Int'l Game Tech., 124 Nev. at 198, 179
P.3d at 559.
NRCP 23 analysis
As a threshold matter, Oxbow argues that the district court
abused its discretion by allowing the Association to bring a representative
construction-defect action on behalf of unit-owners without conducting an
NRCP 23 analysis as required by D.R. Horton, Inc. v. Eighth Judicial
District Court (First Light II), 125 Nev. 449, 215 P.3d 697 (2009). That
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argument, however, conflicts with our decision in Beazer Homes Holding
Corp. v. Eighth Judicial District Court, 128 Nev. , 291 P.3d 128 (2012), 5
where we clarified that when a homeowners' association litigates
construction-defect claims on behalf of its members under NRS
116.3102(1)(d), a "[fl ailure to meet any additional procedural
requirements, including NRCP 23's class action requirements, cannot strip
a common-interest community association of its standing to proceed on
behalf of its members . ." Id. at , 291 P.3d at 134. In clarifying First
Light II, we explained that when a homeowners' association seeks to
proceed in a class-action format, the district court must, upon either
party's request, analyze NRCP 23's factors to determine how the action
should proceed. Id. at , 291 P.3d at 136.
Here, the Association has standing to bring its constructiondefect
claims on behalf of itself and unit-owners pursuant to NRS Chapter
116, under Beazer Homes. Id. And, although Oxbow requested an NRCP
5We note that Beazer was published on December 27, 2012, after the
district court had issued the two orders being challenged here. However,
because Beazer clarified our law, as opposed to changing it, there are no
retroactivity concerns here. See Harper v. Va. Dep't of Taxation, 509 U.S.
86, 96-97 (1993) (stating that after a U.S. Supreme Court ruling
concerning federal law is applied to the parties in that case, the Court's
ruling must be given full retroactive effect in other cases); Great N. Ry. Co.
v. Sunburst Oil & Ref Co., 287 U.S. 358, 364 (1932) ("A state in defining
the limits of adherence to precedent may make a choice for itself between
the principle of forward operation and that of relation backward."); Nunez-
Reyes v. Holder, 646 F.3d 684, 691-92 (9th Cir. 2011) (explaining that an
exception to the general rule of giving court rulings retroactive effect
includes decisions establishing a new principle of law unrelated to
jurisdiction).
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23 analysis, the district court was not required to conduct that analysis at
this point in the litigation because nothing in the record indicates that the
Association sought to proceed as a class action. Accordingly, the district
court's refusal to engage in an NRCP 23 analysis was neither arbitrary
nor capricious.
"New residence"
Next, Oxbow contends that Town Centre's units, having been
leased as apartments, are neither residences per NRS 40.630 nor "new"
under NRS 40.615, and therefore do not qualify for NRS Chapter 40
remedies. In contrast, the Association claims that the units are residences
and that, for purposes of determining whether a residence is new under
NRS 40.615, courts should apply a sliding-scale approach that considers
factors such as a residence's chronological age and the duration of any
occupancy. Before addressing the Association's sliding-scale argument, we
must determine whether Town Centre's units are "residence [s]."
In Westpark, we concluded that rental apartment units are not
"[r] esidence[s1" under NRS 40.630 because "the event conferring
'residence' status on a dwelling is the transfer of title to a home
purchaser." 123 Nev. at 358, 167 P.3d at 427-28. In this case, Regent II's
filing of CC&Rs converted Town Centre from an apartment complex to a
common-interest community, see NRS 116.2101, and El Capitan's transfer
of all individual Town Centre unit titles to Regent II transformed those
units into residences. Thus, Town Centre's condominium units are
residences for purposes of MRS Chapter 40.
Having determined that the condominium units are residences
under NRS 40.630, we now revisit what "new" means under MRS 40.615.
As stated above, "a residence is new for constructional defect purposes if it
is a product of original construction that has been unoccupied as a
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dwelling from the completion of its construction until the point of its
original sale." ANSE, 124 Nev. at 872, 192 P.3d at 745; Westpark, 123
Nev. at 360, 167 P.3d at 429. When we originally interpreted "new" in
Westpark, we stated that one of NRS Chapter 40's primary purposes is "to
protect the rights of homebuyers by providing a process to hold contractors
liable for defective original construction or alterations" 123 Nev. at 359,
167 P.3d at 428. We recognized that this purpose would be defeated if
contractors were able to "circumvent liability by using units as 'model
homes' or leasing units to `strawmen' for a period of time before offering
them for sale."6 Id. at 359-60, 167 P.3d at 428. Acknowledging that it was
"nearly impossible to define in strict chronological terms," we defined
"new" in terms of original construction, lack of occupancy, and the point of
original sale. Id. at 359-60, 167 P.3d at 428-29. Taking this approach, we
balanced MRS Chapter 40's remedial purpose with the need for certainty.
With our rationale from Westpark in mind, it should come as
no surprise that we are unwilling to replace our current definition of
"new," which provides certainty for all parties, with the amorphous,
sliding-scale test advocated by the Association Imposing a definition of
"new" grounded in chronological terms, whether a construction's age or the
duration of any occupancy, is a task more appropriate for the Legislature.
See Renown Health, Inc. v. Vanderford, 126 Nev. 221, 225, 235 P.3d 614,
6Based on the average duration of occupation and age of the units at
issue, the Association suggests that the persons who leased units at Town
Centre before Regent II sold those units were "strawmen." As the
Association states in its brief, however, it is not raising that issue before
this court; therefore, we will not address it at this time.
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616 (2010) ("This court may refuse to decide an issue if it involves policy
questions better left to the Legislature."). Accordingly, we reaffirm our
definition of "new" as stated in AlVSE and Westpark. Relying on this
definition, we conclude that the district court correctly determined that
Town Centre units occupied before their original sale cannot be classified
as "new" and therefore do not independently qualify for NRS Chapter 40
remedies.
NRS Chapter 40 remedies for limited common elements assigned to
multiple units in a common building containing at least one "new
residence"
The parties next dispute whether the Association may seek
construction-defect remedies for limited common elements assigned to
multiple units in a common building containing at least one "new
residence." Before reaching this issue, however, we find it necessary to
clarify the district court's July 5, 2012, order granting the Association's
motion to that extent. When a district court's order is unclear, its
interpretation is a question of law that we review de novo. Allstate Ins.
Co. v. Thorpe, 123 Nev. 565, 570, 170 P.3d 989, 992-93 (2007).
In its order, the district court stated that the Association could
pursue NRS Chapter 40 remedies for construction defects in the "common
elements" of buildings containing at least one previously unoccupied unit;
i.e., a "new residence." In this context, it is unclear whether the district
court is referring to pure common elements or limited common elements.
Although limited common elements are a subset of common elements, see
NRS 116.059, only the limited common elements assigned to the units in a
particular building would be impacted by whether a unit in that building
was a "new residence."
By requiring a building to contain a "new residence," the
district court impliedly focused on construction defects associated with
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units as opposed to pure common elements. That the district court
adopted a new rule despite its previous order affirming Westpark's
definition of "new" also suggests that it was not addressing defects in or
assigned solely to an individual unit. Thus, we conclude that the district
court actually meant limited common elements assigned to multiple units
in a common building containing at least one previously unoccupied
residence.
With this interpretation in mind, we turn to Oxbow's
argument that the district court erred by permitting the Association to
seek NRS Chapter 40 remedies for construction defects in limited common
elements assigned to multiple units in a common building in which at
least one unit is a "new residence." Oxbow contends that a constructiondefect
action cannot be maintained because the assigned limited common
elements at issue are appurtenances and must be "new" under NRS
40.615. The Association asserts that NRS 40.615 does not require
appurtenances7 to be "new," but also maintains that it is entitled to
pursue NRS Chapter 40 remedies for construction defects in these
elements regardless of whether the building in which they are located
contains a "new residence" because the limited common elements should
7While the Association refers to "building envelopes" in its
arguments, we decline to incorporate this term into our analysis. We find
that it creates unnecessary confusion and has no legal underpinning in
NRS Chapters 40 or 116. Additionally, we note that the term is not used
in Town Centre's CC&Rs. Accordingly, we clarify the Association's
arguments based on the issue presented by our interpretation of the
district court's order.
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be classified as pure common elements and not as part of the units to
which they are assigned.
We review questions of statutory interpretation de novo.
Westpark, 123 Nev. at 357, 167 P.3d at 426-27. Where a statute is
unambiguous, we apply its plain meaning. Id. at 357, 167 P.3d at 427. As
explained above, a residence must be "new" to qualify for constructiondefect
remedies. Id. at 360, 167 P.3d at 429. However, we have never
directly considered whether, as Oxbow argues, an appurtenance must also
be "new." NRS 40.615 defines "constructional defect[s1" and provides:
"Constructional defect" means a defect in the
design, construction, manufacture, repair or
landscaping of a new residence, of an alteration of
or addition to an existing residence, or of an
appurtenance and includes, without limitation,
the design, construction, manufacture, repair or
landscaping of a new residence, of an alteration of
or addition to an existing residence, or of an
appurtenance. . . .
Thus, in NRS 40.615, "new" only precedes "residence," raising the question
of whether it modifies any other elements in the phrase. "The typical way
in which syntax would suggest no carryover modification is that a
determiner (a, the, some, etc.) will be repeated before the second
element. . . ." Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 148 (2012). Applying this syntactic rule to
NRS 40.615, the determiner "a/an" is repeated before each subsequent
element; i.e., "a new residence, . . . an alteration of or addition to. .
or. . . an appurtenance." Accordingly, while "new" modifies "residence," it
does not modify "alteration," "addition," or "appurtenance." See Beazer,
128 Nev. at , 291 P.3d at 134 (noting that homeowners' associations
may pursue construction-defect claims for common elements, which are
included in the definition of "appurtenance" in NRS 40.605, without
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reference to the common elements being "new"); Pankopf v. Peterson, 124
Nev. 43, 47, 175 P.3d 910, 912-13 (2008) (addressing a construction-defect
action for an appurtenance without referring to any newness
requirement). We therefore conclude that an appurtenance is not required
to be "new" under NRS 40.615 to qualify for NRS Chapter 40 remedies.
With this conclusion in mind, we must determine whether the assigned
limited common elements referred to in the district court's order are a part
of the residence, requiring newness, or are appurtenances with no such
requirement.
NRS 40.605 states that an appurtenance is "a structure,
installation, facility, amenity or other improvement that is appurtenant to
or benefits one or more residences, but is not part of the dwelling unit" and
"includes . . . common elements and limited common elements other than
those described in NRS 116.2102. . . ." Common elements include "all
portions of the common-interest community other than the units
NRS 116.017(1)(a). "Limited common element' means a portion of the
common elements allocated by the declaration or by operation of
subsection 2 or 4 of NRS 116.2102 for the exclusive use of one or more but
fewer than all of the units" NRS 116.059. While limited common
elements include elements found in NRS 116.2102, NRS 40.605 expressly
excludes these elements from being appurtenances. Therefore, limited
common elements not contained in NRS 116.2102 are appurtenances not
8A "[u]nit" is "a physical portion of the common-interest community
designated for separate ownership. . . ." NRS 116.093.
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required to be "new," while those found in NRS 116.2102 are not
appurtenances and may or may not be required to be "new."
Generally, NRS 116.2102 assigns certain housing components
to an individual unit and others to common elements. Despite these
assignments, CC&Rs can assign these components differently. See
generally NRS 116.2102. Town Centre's CC&Rs adopt NRS 116.2102's
provisions, in part. Diverging from NRS 116.2102, parts of section 5.1 of
the CC&Rs provide that identified housing components serving more than
one unit are not common elements but limited common elements assigned
to the units which they serve.°
While only indirectly before us, we find it necessary to explain
that NRS Chapter 40 remedies for construction defects in limited common
elements that are assigned solely to an individual unit and that fall within
NRS 116.2102's purview would only be available when the individual unit
qualifies as a "new residence." This is because these elements, whether by
NRS 116.2102's or the CC&Rs' assignments, are exclusively allocated to
the individual residence that they benefit.
However, this is not the case for limited common elements
that are assigned to and benefit multiple units in a common building. We
now conclude that to pursue NRS Chapter 40 remedies for construction
defects in limited common elements assigned to multiple units in a
°Limited common elements assigned to the units which they serve
include, among other things, stairs, stoops, entrances to buildings, exterior
surfaces, trim, siding, and doors.
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common building, a plaintiff needs only to establish that the building in
question contains at least one unit that is a "new residence." 1°
We believe that requiring this minimal nexus to newness in
these circumstances is logical, given the apportionment of these assigned
limited common elements, and harmonious with NRS Chapter 40's
remedial purpose. Allowing the existence of one occupied unit to preclude
other "new residence[s]" in the same building from recovering for
construction defects assigned to that building would undermine NRS
Chapter 40's purpose to "protect the rights of homebuyers by providing a
process to hold contractors liable for defective original construction or
alterations." Westpark, 123 Nev. at 359, 167 P.3d at 428.
Our interpretation of the district court's order permits the
Association to pursue NRS Chapter 40 remedies for construction defects in
the limited common elements of buildings containing at least one "new
residence." This comports with our holding here.

1°We note that section 1.14 of the CC&Rs defines "common
elements" to include several components identical to those listed as
limited common elements assigned to multiple units under section 5.1 of
the CC&Rs. Unlike NRS 116.2102, which allows CC&Rs to alter the
categorization of components contained in its provisions, NRS 116.017
does not expressly permit CC&Rs to deviate from its definition of common
elements. On remand, the district court must take this into consideration
when determining what limited common elements the CC&Rs assign to
multiple units in a common building containing at least one previously
unoccupied residence.

Outcome: Accordingly, we conclude that the district court's decision was
not an arbitrary or capricious exercise of its discretion, and we therefore
deny both writ petitions.

Plaintiff's Experts:

Defendant's Experts:

Comments: Keyword: Condominium