Holcomb Condo. Homeowners' Ass'n, Inc. v. Stewart Venture, LLC

• Decision Date: 04 April 2013
• Docket Number: No. 57024.,57024.
• Citation: 300 P.3d 124,129 Nev. Adv. Op. 18
• Court: Nevada Supreme Court
• Parties: HOLCOMB CONDOMINIUM HOMEOWNERS' ASSOCIATION, Inc., A Nevada Nonprofit Corporation, Appellant, v. STEWART VENTURE, LLC, a Nevada Limited Liability Company; Luther David Bostrack, Individually; Martha Allison, Individually; Paul McKinzie, Individually; and Q & D Construction, Inc., a Nevada Corporation, Respondents.

300 P.3d 124

129 Nev. Adv. Op. 18

HOLCOMB CONDOMINIUM HOMEOWNERS' ASSOCIATION, Inc., A Nevada Nonprofit Corporation, Appellant,

v.STEWART VENTURE, LLC, a Nevada Limited Liability Company; Luther David Bostrack, Individually; Martha Allison, Individually; Paul McKinzie, Individually; and Q & D Construction, Inc., a Nevada Corporation, Respondents.

No. 57024.

Supreme Court of Nevada.

April 4, 2013.

Robert C. Maddox & Associates and Robert C. Maddox, Nancy A. Cyra, Bruce E. Cyra, Nancy H. Jasculca, and Eva G. Segerblom, Reno, for Appellant.

Hoffman, Test, Guinan & Collier and David J. Guinan, Reno, for Respondent Martha Allison.

Hoy & Hoy, PC, and Michael D. Hoy, Reno, for Respondent Paul McKinzie.

Kelly L. Turner, Reno, for Respondent Stewart Venture, LLC.

Lee, Hernandez, Landrum, Garofalo & Blake, APC, and David S. Lee, Natasha A. Landrum, and Kelly L. Kindelan, Las Vegas, for Respondent Q & D Construction, Inc.

Luther David Bostrack, Reno, in Proper Person.

Before PICKERING, C.J., HARDESTY and SAITTA, JJ.

OPINION

By the Court, HARDESTY, J.:

In this appeal, we consider whether statutory limitations periods for constructional defect claims may be contractually modified by parties to residential unit purchase agreements. We conclude that, in general, statutory limitations periods may be reduced by contract provided there is no statute to the contrary and the reduced limitations period is reasonable and does not violate public policy.

The parties dispute whether a provision in an arbitration agreement validly reduced the limitations period for appellant Holcomb Condominium Homeowners' Association's (HCHA) constructional defect negligence and warranty claims. NRS 116.4116 expressly permits a contractual reduction of its six-year limitations period for warranty claims to not less than two years if, with respect to residential units, the reduction agreement is contained in a “separate instrument.” Since the reduction provision is within an arbitration agreement that is attached to and incorporated into a purchase contract, we conclude that the reduction provision does not qualify as a “separate instrument” and the arbitration agreement provision is unenforceable for HCHA's breach of warranty claims. As such, the district court improperly dismissed HCHA's breach of warranty claims as contractually time-barred.

We further conclude that the district court improperly relied upon NRS 116.4116, which only governs warranty claims, in dismissing HCHA's negligence-based claims, and in declining to allow HCHA to amend its complaint to add additional claims for intentional conduct on the ground that these claims were also contractually time-barred. Accordingly, we reverse the district court's orders and remand this matter for further proceedings.

FACTS AND PROCEDURAL HISTORY

Holcomb Condominiums is a common interest community that was developed by respondent Stewart Venture, LLC. Respondents Paul McKinzie, Luther David Bostrack, and Q & D Construction, Inc., allegedly were involved in the development and construction of the condominiums, while respondent Martha Allison represented both the individual purchasers and Stewart Venture in the sale of the condominiums during July and August, 2002. Appellant HCHA is the homeowners' association for Holcomb Condominiums.

In 2007, HCHA served a notice of constructional defect claims pursuant to NRS 40.645. In 2009, HCHA filed, on behalf of itself and all Holcomb Condominium homeowners, a constructional defect complaint against respondents, alleging a variety of defects and claims for negligence, negligence per se, negligent misrepresentation, and breach of express and implied warranties.

Stewart Venture and Allison moved to dismiss HCHA's complaint pursuant to NRCP 12(b)(5), asserting that the complaint was time-barred by a contractual two-year limitations period found in nearly identical arbitration agreements attached to each of the homeowner's purchase contracts.¹ The arbitration agreements attached to the purchase contracts contain a provision reducing the applicable statutory limitations periods for constructional defect claims to two years from substantial completion of the homeowner's property. In particular, the provision states

II. TIME LIMITATIONS TO COMMENCE ACTION FOR DISPUTE

In the event that a Dispute arises, Buyer and Seller hereby waive the statute of limitations and statute of repose commencement requirements contained in Nevada Revised Statutes Chapter 11.190 to 11.206 inclusive, and Chapter 116.4116, and instead agree to submit all Disputes, under the procedures provided herein, within two (2) years from substantial completion of the Buyer's Property within the project. This limitation applies, without limitation, to known or unknown claims, claims which could have or could not have been discovered by a reasonable inspection, and claims which result from willful misconduct or which were fraudulently concealed.

The first lines of each arbitration agreement state that the agreement is a part of the purchase contract. In addition, paragraph 19 of the purchase contract states that the arbitration agreement is “attached” and “incorporated” into the purchase contract, and paragraph 25 requires the homeowner's initials to confirm that he or she received the arbitration agreement “incorporated herein and attached hereto.”

The district court found that the arbitration agreements met the “separate instrument” requirement of NRS 116.4116 and that the reduced limitations period provision was not unconscionable. Thus, the court dismissed HCHA's complaint as time-barred by the two-year contractual limitations period. The court also denied as futile HCHA's oral request to amend its complaint to add causes of action for willful misconduct and fraudulent concealment based on missing roof underlayment because it found that this claim would also be time-barred by the contractual limitations period.

HCHA then filed a motion for reconsideration of the district court's order and moved in writing to amend its complaint to add causes of action for willful misconduct and fraudulent concealment. HCHA asserted that the proposed claim was the result of newly discovered evidence, which could not have been discovered previously because the roofing shingles were not removed until after the court heard HCHA's original motion. The district court denied both of HCHA's motions. It found that HCHA presented no evidence to alter the court's original findings that the arbitration agreements complied with the “separate instrument” requirement of NRS 116.4116, or that the proposed claim would also be time-barred by the contractual limitations period. HCHA now appeals.

DISCUSSION

On appeal, we are asked to determine whether the homeowners and Stewart Venture validly contracted to reduce the limitations periods applicable to HCHA's claims, and whether the district court properly refused to allow new claims for intentional conduct because they also would be barred by the contractual limitations period. To do so, we must determine in the first instance whether statutory limitations periods may be contractually modified. We conclude that, generally, statutory limitations periods may be contractually reduced, as long as there is no statute to the contrary and the reduced limitations period is reasonable and does not violate public policy.

NRS 116.4116 allows parties to contractually reduce the limitations periods for constructional defect warranty claims to two years provided the agreement to do so is contained in a “separate instrument.” We determine that the arbitration agreements containing the reduced limitations period that are attached to and incorporated into the purchase contracts do not satisfy the “separate instrument” requirement of the statute. Therefore, we conclude that the district court improperly dismissed HCHA's breach of warranty claims as contractually time-barred.

Standard of review

Under NRCP 12(b)(5)'s failure-to-state-a-claim dismissal standard, “[a] complaint should not be dismissed unless it appears to a certainty that the plaintiff could prove no set of facts that would entitle him or her to relief.” Cohen v. Mirage Resorts, Inc., 119 Nev. 1, 22, 62 P.3d 720, 734 (2003). This is a rigorous standard, “as this court construes the pleading liberally, drawing every inference in favor of the nonmoving party.” Citizens for Cold Springs v. City of Reno, 125 Nev. 625, 629, 218 P.3d 847, 850 (2009). “A court [may] dismiss a complaint for failure to state a claim upon which relief can be granted [when an] action is barred by the statute of limitations.” Bemis v. Estate of Bemis, 114 Nev. 1021, 1024, 967 P.2d 437, 439 (1998); NRCP 12(b)(5). When the facts are uncontroverted, as we must so deem them here, the application of the statute of limitations is a question of law that this court reviews de novo. Citizens for Cold Springs, 125 Nev. at 629, 218 P.3d at 850;Day v. Zubel, 112 Nev. 972, 977, 922 P.2d 536, 539 (1996).²

Contractual reduction of statutory limitations periods

Whether a party may contractually modify a statutory limitations period is an issue of first impression in Nevada. However, in other jurisdictions, “it is well established that, in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.” Order of Travelers v. Wolfe, 331 U.S. 586, 608, 67 S.Ct. 1355, 91 L.Ed. 1687 (1947); see, e.g., William L. Lyon & Assoc. v. Superior Court, 204 Cal.App.4th 1294, 139 Cal.Rptr.3d 670, 679–80 (2012); Country Preferred Ins. Co. v. Whitehead, 365 Ill.Dec. 669, 979 N.E.2d 35, 42–43 (Ill.2012); Robinson v. Allied Property and Cas. Ins., 816 N.W.2d 398, 402 (Iowa 2012); Creative Playthings v. Reiser, 463 Mass. 758, 978 N.E.2d 765,...