Hamm v. Arrowcreek Homeowners' Ass'n

• Decision Date: 15 May 2008
• Docket Number: No. 47763.,47763.
• Citation: 183 P.3d 895
• Parties: Michael HAMM; Cara Hamm; and The 2005 Hamm Family Trust, Appellants, v. ARROWCREEK HOMEOWNERS' ASSOCIATION, A Nevada Nonprofit Corporation; and Nevada Association Services, Inc., Respondents.
• Court: Nevada Supreme Court

183 P.3d 895

Michael HAMM; Cara Hamm; and The 2005 Hamm Family Trust, Appellants, v. ARROWCREEK HOMEOWNERS' ASSOCIATION, A Nevada Nonprofit Corporation; and Nevada Association Services, Inc., Respondents.

No. 47763.

Supreme Court of Nevada.

May 15, 2008.

Karla K. Butko, Verdi, for Appellants.

Mark H. Gunderson, Ltd., and Mark H. Gunderson and Laura M. Arnold, Reno, for Respondents.

BEFORE THE COURT EN BANC.¹

OPINION

By the Court, GIBBONS, C.J.:

In this appeal, we consider whether homeowners must submit to mediation or arbitration, pursuant to NRS 38.310,² before they initiate a civil action in the district court to release a homeowners' association assessment lien on their property. Under that statute, the district court must dismiss any dispute arising from the interpretation, application, or enforcement of homeowners' associations' covenants, conditions, and restrictions (CC & Rs) if the parties did not first submit the dispute to mediation or arbitration. However, this statutory requirement does not apply to actions for injunctive relief involving "an immediate threat of irreparable harm, or action[s] relating to the title to residential property."³ Thus, here, we must determine whether an action seeking the removal of a homeowners' association lien and an injunction against future liens necessarily involves an immediate threat of irreparable harm or relates to residential title.

On these issues of first impression, we conclude that the filing of a lien, in and of itself, does not create "an immediate threat of irreparable harm"⁴ and that an action to release a lien, without more, does not "relat[e] to the title to residential property."⁵ Accordingly, as neither of these exceptions was shown in this case, the district court correctly concluded that the homeowners were required to submit their claims to mediation or arbitration before instituting an action in the district court to release a lien.

We also consider whether NRS 38.310 applies to actions against a collection agency that acts as a homeowners' association's agent. We conclude that if the collection agency acts as the agent of a homeowners' association and NRS 38.310 applies to the action against the homeowners' association, then that statute applies equally to the collection agency. Accordingly, here, since the homeowners did not first submit their claims against the homeowners' association and the collection agency to mediation or arbitration as required by NRS 38.310, the district court properly dismissed their complaint.

FACTS AND PROCEDURAL HISTORY

In 2004, appellants Michael and Cara Hamm purchased a home and an adjoining vacant lot in the Arrowcreek subdivision, a planned community in Reno, Nevada.⁶ Thereafter, Mr. and Mrs. Hamm transferred the properties to appellant the 2005 Hamm Family Trust, which currently owns them. According to Mr. and Mrs. Hamm, when they purchased the properties, they were told that they would not be required to pay homeowner assessment fees on the vacant lot, pursuant to Arrowcreek's CC & Rs.

However, due to Mr. and Mrs. Hamm's failure to pay assessment fees on the vacant lot, respondent Arrowcreek Homeowners' Association (Arrowcreek HOA) sent them a notice assessing a late fee and interest. Mr. and Mrs. Hamm responded to the notice by asking Arrowcreek HOA to execute a "no-fee" agreement with them similar to one that it had purportedly previously executed with other homeowners. This request was denied. Mr. and Mrs. Hamm apparently did not pay the assessed amount, late fee, or interest. As a result, in November 2005, respondent Nevada Association Services, Inc. (NAS), a collection agency, notified Mr. and Mrs. Hamm that they were required to pay Arrowcreek HOA the amount due within ten days to prevent the recording of a notice of delinquent assessment lien. Although Mr. and Mrs. Hamm immediately notified NAS that the assessment was disputed, NAS, at the direction of Arrowcreek HOA, filed a notice of delinquent assessment lien with the county recorder.

Shortly thereafter, Mr. and Mrs. Hamm and the 2005 Hamm Family Trust (collectively, the Hamms) filed a district court complaint against Arrowcreek HOA and NAS (collectively, Arrowcreek). In their complaint, the Hamms sought (1) a declaratory judgment interpreting the CC & Rs in a manner that eliminated any assessment fees on the vacant lot; (2) release of the lien; (3) a permanent injunction against further assessments and liens with respect to the vacant lot; (4) breach of contract damages, including attorney fees; (5) slander of title damages, including punitive damages for allegedly filing the lien in bad faith; and (6) special damages, including attorney fees and costs. The Hamms alleged that Arrowcreek's actions clouded title to their properties and harmed their "creditworthiness."

Arrowcreek HOA moved to dismiss the complaint, under NRCP 12(b)(5), based on the Hamms' failure to state a claim upon which relief could be granted, and for their failure to comply with NRS 38.310, which provides that parties must submit claims relating to the interpretation and application of CC & Rs to mediation or arbitration before seeking relief in the district court. Alternatively, Arrowcreek HOA moved to compel mediation or arbitration pursuant to NRS 38.310. NAS joined Arrowcreek HOA's motion.

After considering the motion and the Hamms' opposition thereto, the district court concluded that the Hamms' complaint called for the interpretation and enforcement of CC & Rs and, consequently, dismissed the complaint. In its order, the district court stated that once arbitration was concluded, the Hamms could, if necessary, seek relief from the lien in the district court. The Hamms appeal the district court's order dismissing their complaint.

DISCUSSION

This court reviews the district court's statutory interpretations de novo.⁷ Generally, when this court interprets a statute, if "the language . . . is plain and unambiguous, and its meaning clear and unmistakable, there is no room for construction, and the courts are not permitted to search for its meaning beyond the statute itself."⁸

The statute at issue here, NRS 38.310(1), provides that "[n]o civil action based upon a claim relating to . . . [t]he interpretation, application or enforcement" of CC & Rs may be commenced in state court, "unless the action has been submitted to mediation or arbitration pursuant to the provisions of NRS 38.300 to 38.360, inclusive."⁹ If a party institutes a civil action in violation of NRS 38.310(1), the district court must dismiss it pursuant to NRS 38.310(2).

The Hamms contend that this provision does not apply to their action to release the lien because (1) they sought not to interpret the CC & Rs but merely to enforce a prior interpretation of those CC & Rs; (2) their action was not a "civil action" for NRS 38.310 purposes; and (3) the lien portion of their claims that was directed at NAS, which is not a homeowners' association, was not subject to NRS 38.310. The Hamms further contend that NRS 38.310 is unconstitutional because (1) it infringes on the right to a jury trial by requiring mediation or arbitration; and (2) it violates equal protection principles because a homeowners' association may record a lien without submitting to mediation or arbitration, but homeowners must submit to mediation or arbitration before initiating an action in the district court to have the lien removed. We address each of these arguments in turn.

NRS 38.310's application to actions seeking the "interpretation, application or enforcement" of CC & Rs

With respect to the Hamms' argument that they did not seek the CC & Rs' interpretation, the Hamms' complaint explicitly stated that the Hamms sought "court intervention to interpret the language . . . of the Arrowcreek [HOA] CC & R's." Further, as the district court found, resolving the merits of the Hamms' complaint would require the district court to interpret the CC & Rs' meaning to determine whether, under that meaning, Arrowcreek HOA's assessment was proper. Moreover, NRS 38.310 also prohibits civil actions related to the enforcement of CC & Rs without first submitting the claims to mediation or arbitration. Accordingly, so long as the Hamms' action constitutes a "civil action" for NRS 38.310 purposes, and NRS 38.310 applies to NAS, the Hamms must submit their claims to arbitration or mediation before instituting an action in the district court.

The definition of "civil action" for NRS 38.310 purposes

For NRS 38.310 purposes, a "civil action" is defined as "includ[ing] an action for money damages or equitable relief."¹⁰ However, this definition excludes "an action in equity for injunctive relief in which there is an immediate threat of irreparable harm."¹¹ This definition also excludes actions "relating to the title to residential property."¹²

Based on these exclusions, the Hamms contend that the district court matter, in which they sought to remove the lien, was not a "civil action" under NRS Chapter 38 because the lien created an "immediate threat of irreparable harm" by clouding their title and putting Arrowcreek in the position to foreclose on their property. They also contend that the matter was not a "civil action" because it was related to residential title. These arguments are addressed in turn.

Exception to the definition of "civil action": "immediate threat of irreparable harm"

This court has not previously addressed whether a lien on real property creates immediate and irreparable harm. "[A] lien is a security device that binds property to a debt and puts a party on notice that someone besides the owner of the property has an interest in that property."¹³ Further, this court has noted that a lien on property clouds that property's title.¹⁴ However whether the mere existence of a lien creates an immediate threat of irreparable harm depends on the meanings of "immediate" and "irreparable."

Courts often use the terms "immediate" an...