J.E. Dunn Nw. Inc. v. Corus Constr. Venture Llc

• Decision Date: 03 March 2011
• Docket Number: No. 54332.,54332.
• Citation: 127 Nev. Adv. Op. 5,249 P.3d 501
• Parties: J.E. DUNN NORTHWEST, INC., Appellant,v.CORUS CONSTRUCTION VENTURE, LLC, Respondent.
• Court: Nevada Supreme Court

249 P.3d 501

127 Nev. Adv. Op. 5

J.E. DUNN NORTHWEST, INC., Appellant,

v.CORUS CONSTRUCTION VENTURE, LLC, Respondent.

No. 54332.

Supreme Court of Nevada.

March 3, 2011.

Gibbs, Giden, Locher, Turner & Senet, LLP, and Ronald S. Sofen, Las Vegas, for Appellant.Meier & Fine, LLC, and Glenn F. Meier and Kathryn J. Quinn, Las Vegas, for Respondent.Before the Court En Banc.

OPINION

By the Court, HARDESTY, J.:

Appellant J.E. Dunn Northwest, Inc. (Dunn), performed various preconstruction services for the One Las Vegas condominium project in Las Vegas, Nevada, and recorded a mechanic's lien for this work. Respondent Corus Construction Venture, LLC (Corus Bank),¹ provided construction financing for the project and recorded a deed of trust to secure its loan. In this appeal, we address four issues concerning the visibility requirement for a mechanic's lien to obtain priority over a deed of trust: (1) whether the visibility requirement contained in the definition of “commencement of construction” in NRS 108.22112 applies to both work performed and materials and equipment furnished to the construction site; (2) whether, in the 2003 amendments to NRS Chapter 108, the expansion of the definition of “work” to make preconstruction services lienable excuses the visibility requirement found in NRS 108.22112; (3) whether a lender with priority waives its superior position if it has actual knowledge of lienable preconstruction work; and (4) whether the placement of signs and removal of power lines constitutes visible work. We conclude that NRS 108.22112 plainly requires visibility of work performed, including preconstruction services, to establish priority. We also conclude that the 2003 amendments to NRS Chapter 108 did not affect the long-standing requirement that work must be visible on the property for a mechanic's lien to take priority over a deed of trust recorded before commencement of construction, and the statutory visibility requirement may not be waived by a lender who has actual knowledge of off-site preconstruction services. Finally, we conclude that the preparatory placement of signs and removal of power lines does not constitute visible work. In light of these conclusions, we affirm the district court's order granting Corus Bank's motion for summary judgment.

FACTS

In August 2005, Midbar Condo Development hired Dunn to perform a project feasibility assessment for One Las Vegas, a multimillion-dollar condominium project consisting of two 20–story towers on Las Vegas Boulevard. Dunn reviewed design considerations, coordinated contract documents, developed a construction schedule, and completed various other administrative tasks in preparation for construction.

In December 2005, Midbar hired Dunn to serve as construction manager and contractor for the One Las Vegas project. From December 2005 to March 2006, Dunn performed over $1 million in preconstruction services that included preparing project schedules, coordinating meetings with subcontractors, reviewing subcontractors' and architects' drawings, and other planning-related services.

Midbar obtained a loan from Corus Bank to finance the construction of the project, and Corus Bank recorded its deed of trust on March 17, 2006. Before recording the deed of trust, Nevada Title Company hired a third party to perform an inspection of the property. The inspector reported that power lines had been removed from the subject property and provided photographs that depicted several signs on an adjacent property. The signs were imprinted with the name of an architectural firm, Kobi Karp, which was performing design services for the One Las Vegas project in conjunction with Dunn. The signs were not located on the specific parcel inspected by the third party, and the inspector's report ultimately concluded that no construction activity had occurred on the property as of the date Corus Bank recorded its deed of trust.

During loan negotiations and before approving the release of any funds, Corus Bank performed a due diligence review, after which it approved Dunn as the contractor. Corus Bank negotiated a separate agreement with Dunn, which acknowledged that Dunn had provided, and would continue to provide, construction services. An early version of this agreement contained a subordination provision requiring Dunn to “waive its lien rights and to subordinate its mechanic['s] lien to the Corus Bank deed of trust.” Dunn did not agree to this provision and Corus Bank ultimately removed it from the final version of the agreement.

Midbar issued a notice to proceed to Dunn on March 20, 2006, and Dunn commenced construction. Two years later, in April and June 2008, Clark County issued temporary certificates of occupancy for both condominium towers. In August 2008, Dunn served a notice of intent to lien and, on September 8, recorded a mechanic's lien for its unpaid services. A few weeks later, Midbar defaulted on the loan, and a dispute arose between Corus Bank and Dunn regarding the priority of the deed of trust and the mechanic's lien.

Dunn filed a complaint in district court in October 2008, seeking a declaratory judgment that its mechanic's lien had priority over Corus Bank's deed of trust. Dunn then filed a motion for summary judgment, and Corus Bank filed an opposition to Dunn's motion and a countermotion for summary judgment. The district court denied Dunn's motion, finding that pursuant to NRS 108.225 and NRS 108.22112, Dunn's work must have been visible from a reasonable inspection of the property prior to the date that Corus Bank recorded its deed of trust, and Dunn failed to make that showing.² The district court also denied Corus Bank's countermotion for summary judgment.

In March 2009, Corus Bank renewed its motion for summary judgment, arguing that under NRS 108.225, a mechanic's lien takes priority over encumbrances that attach after construction commences. Accordingly, Corus Bank contended that, because “no visible work had been performed on the property and no visible equipment or materials had been furnished to the property” as of the date it recorded its deed of trust, construction had not commenced. Therefore, its deed of trust had priority. Dunn argued in opposition that a genuine issue of material fact existed with regard to whether its work was visible from a reasonable inspection of the property. Alternatively, Dunn claimed that Corus Bank waived the requirement that the work must be visible because, prior to recording its deed of trust, Corus Bank had knowledge that Dunn performed preconstruction services. Dunn also asked for more time for discovery to investigate Corus Bank's knowledge of Dunn's preconstruction work.

The district court granted Corus Bank's renewed motion for summary judgment. The court concluded that “[t]here are no genuine factual issues indicating [that] Dunn provided any visible construction work on the property at the time Corus' deed of trust was recorded.” The court further found that, under NRS 108.225, Dunn's waiver argument lacked merit because, even if Corus Bank was aware of Dunn's preconstruction services, “such knowledge would not ... preclude Corus from relying on the law relative to priority, requiring that a lien claimant, for priority purposes, show visible work of improvement at the time of recordation of an intervening deed of trust.” Dunn appeals.

DISCUSSION

A mechanic's lien has priority over a deed of trust recorded after the commencement of construction. The priority statute, NRS 108.225, states, in pertinent part:

1. The liens provided for in NRS 108.221 to 108.246, inclusive, are preferred to:

(a) Any lien, mortgage or other encumbrance which may have attached to the property after the commencement of construction of a work of improvement.

....

2. Every mortgage or encumbrance imposed upon, or conveyance made of, property affected by the liens provided for in NRS 108.221 to 108.246, inclusive, after the commencement of construction of a work of improvement are subordinate and subject to the liens provided for in NRS 108.221 to 108.246, inclusive, regardless of the date of recording the notices of liens.

Since 1977, we have recognized that visible, on-site construction is required for mechanics' liens to take a priority position over a subsequently recorded deed of trust. Aladdin Heating v. Trustees, Cent. States, 93 Nev. 257, 260, 563 P.2d 82, 84 (1977). In this appeal, we examine the effect of the Legislature's 2003 amendments to NRS Chapter 108 on the visibility requirement for preconstruction services to take priority over a deed of trust. Dunn proffers three arguments that the visibility requirement does not apply to its preconstruction services. First, Dunn contends that NRS 108.22112, which defines “commencement of construction,” is ambiguous because that statute makes it unclear whether work performed, and specifically preconstruction services, must be visible. Second, Dunn argues that NRS 108.22184, which defines “work” for Chapter 108 purposes, expanded the scope of lienable work to include preconstruction services, excusing the visibility requirement for preconstruction services because such application would create a “right without a remedy.” Finally, Dunn argues that work did not have to be visible in this case because Corus Bank had actual knowledge of Dunn's preconstruction services, resulting in a waiver of the visibility requirement. Dunn alternatively argues that the placement of signs and removal of power lines on the site constitutes visible work. We conclude that these arguments are without merit.

Standard of review

“ ‘This court reviews a district court's grant of summary judgment de novo.’ ” George L. Brown Ins. v. Star Ins. Co., 126 Nev. ––––, ––––, 237 P.3d 92, 96 (2010) (quoting Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005)). “Summary judgment is appropriate when the moving party is entitled to judgment as a matter of law and there is no genuine dispute of...