High Noon At Arlington Ranch Homeowners Ass'n, Nonprofit Corp. v. Eighth Judicial Dist. Court of State

402 P.3d 639

HIGH NOON AT ARLINGTON RANCH HOMEOWNERS ASSOCIATION, a Nevada Nonprofit Corporation, Petitioner,

v. The EIGHTH JUDICIAL DISTRICT COURT of the State of Nevada, IN AND FOR the COUNTY OF CLARK; and the Honorable Susan Johnson, District Judge, Respondents,andD.R. Horton, Inc., Real Party in Interest.

No. 65456

Supreme Court of Nevada.

FILED SEPTEMBER 27, 2017

Angius & Terry LLP and Scott P. Kelsey, Paul P. Terry, Jr., and John J. Stander, Las Vegas, for Petitioner.

Wolfenzon Rolle and Bruno Wolfenzon and Jonathan P. Rolle, Las Vegas; Wood, Smith, Henning & Berman, LLP, and Joel D. Odou and Victoria L. Hightower, Las Vegas, for Real Party in Interest.

BEFORE THE COURT EN BANC.¹

OPINION

By the Court, HARDESTY, J.:

In this petition for extraordinary relief, we consider whether a homeowners' association has standing to bring a construction defect suit on behalf of its members if the ownership of some units has changed since the action began. The statute in effect at the commencement of litigation, NRS 116.3102(1)(d) (2007), afforded a homeowners' association representational standing to pursue litigation on behalf of the units' owners. The narrow questions we consider are whether a homeowners' association has such standing to represent (a) unit owners who purchase their units after the litigation commences, and (b) unit owners who sell their units after the litigation commences.

We conclude that homeowners' associations do have representational standing to represent unit owners who purchase their units after the litigation commences as both NRS Chapters 40 and 116 and this court's previous construction defect holdings support the assertion that homeowners' associations represent all unit owners within a community. We further conclude, however, that under NRS 116.3102(1)(d) (2007), homeowners' associations may only represent their members, and thus, a homeowners' association does not have standing under that statute to bring, or continue to pursue, claims for unit owners who sell their units after the litigation commences. Accordingly, we grant the petition.

FACTS AND PROCEDURAL HISTORY

Petitioner High Noon at Arlington Ranch Homeowners Association (High Noon) is a homeowners' association created pursuant to NRS Chapter 116 that operates and manages the High Noon at Arlington Ranch community. This community consists of 342 residential units contained in 114 buildings, with three units per building.

In June 2007, High Noon filed its complaint against real party in interest D.R. Horton, "in its own name on behalf of itself and all of the High Noon ... unit owners" alleging breach of implied warranties of workmanlike quality and habitability, breach of contract, breach of express warranties, and breach of fiduciary duty. In addition, High Noon obtained written assignment of the claims of 194 individual unit owners. These assigned units involve 107 of the community's 114 buildings.

On January 24, 2014, D.R. Horton filed a motion for partial summary judgment² contending that, since only 112 of High Noon's 342 members were unit owners at the time the complaint was filed, High Noon's standing should be reduced to those 112 units. D.R. Horton also argued that a subclass of 192 units for interior claims' purposes should be reduced to 62 units for the same reason.

The district court agreed with D.R. Horton and granted partial summary judgment. In its order, the district court determined that High Noon could not represent "claims on behalf of the now 230 former-owners as [they] are no longer the real parties in interest as required under NRCP 17." Instead, the court found that former owners "retain their claims for damages they personally suffered," but because the units remain "constructively defective, the former owners are no longer the ‘real parties in interest’ with respect to such claims." The district court also determined, however, that High Noon could represent "the claims of former owners for other damages suffered and specified under NRS 40.655, such as loss of use and market value, repair and temporary housing expenses, attorneys' fees and the like ...." Finally, the district court concluded that High Noon could also represent subsequent owners "in the event of an assignment of claims for existing or continuing construction defects by the seller or soon-to-be former owner to the purchaser in conjunction with the property's transfer." This petition followed.

DISCUSSION

High Noon argues the district court erred when it found that the association could only maintain an action for those owners who have owned their units continuously since High Noon first filed its complaint.³

D.R. Horton responds that the unit owners at the time High Noon filed the complaint are the real parties in interest, and without a valid assignment, High Noon cannot represent those owners who subsequently purchased units. D.R. Horton further argues that the district court erred when it found that High Noon has standing to pursue the claims of former unit owners. Finally, D.R. Horton argues for the first time in its answer to the petition that subsequent unit owners are barred from bringing specific claims in the complaint, such as breach of express warranties and breach of fiduciary duty.

Writ relief is appropriate

High Noon petitions this court for a writ of mandamus⁴ compelling the district court to amend its order granting partial summary judgment in favor of D.R. Horton. "A writ of mandamus is available to compel the performance of an act that the law requires ... or to control an arbitrary or capricious exercise of discretion." Int'l Game Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556, 558 (2008) ; see NRS 34.160. Generally, this court "decline[s] to consider writ petitions that challenge interlocutory district court orders," here, an order granting partial summary judgment, because an appeal from a final judgment is an adequate legal remedy. Int'l Game Tech ., 124 Nev. at 197, 179 P.3d at 558 ; see also Smith v. Eighth Judicial Dist. Court, 113 Nev. 1343, 1344, 950 P.2d 280, 281 (1997). However, even when an adequate and speedy remedy exists, this court may exercise its discretion when an important issue of law needs clarification and sound judicial economy warrants intervention. Cote H. v. Eighth Judicial Dist. Court, 124 Nev. 36, 39, 175 P.3d 906, 908 (2008).

This petition merits this court's consideration as it raises an important issue regarding Nevada's construction defect law and NRS 116.3102(1)(d) (2007).⁵ Specifically, the petition presents an important question regarding a homeowners' association's ability to represent its members in construction defect litigation under the older version of the statute, and there are a number of similar cases currently pending. Not only will the court's resolution of the legal questions raised in this petition affect the underlying case, but it will also likely affect other pending construction defect cases. Therefore, we exercise our discretion to entertain the petition.

At issue is whether homeowners' associations have standing to represent unit owners who purchased their units after an association files its initial complaint, and whether homeowners' associations may continue to represent unit owners who sold their units while the litigation was pending. Before addressing these issues, however, we must examine High Noon's complaint and interpret the district court's order to frame our discussion of the standing issues.

High Noon's claims for relief

The district court's order never referred to High Noon's complaint and, ultimately, did not specify how the association's claims on behalf of the various past and present unit owners related to its standing. The district court instead indicated that High Noon could continue to represent those owners who had not sold their property during the litigation, could represent owners who had sold their property during the litigation in their claims for personal damages relating to construction defects, and could represent new unit owners only if the former unit owners assigned their "claims for constructional defects" to the subsequent owners. The problem with this oversight is that the standing analysis varies depending on the type of claim, as some claims do not transfer to a subsequent party.⁶ Because the district court did not specify how High Noon's standing related to the unit owners' claims in the complaint, we briefly examine High Noon's complaint.

High Noon's complaint alleged four claims for relief: (1) breach of implied warranties of workmanlike quality and habitability, (2) breach of contract, (3) breach of express warranties, and (4) breach of fiduciary duty. The complaint never alleges that the claims for relief fall under NRS Chapter 40. Rather, the only specific mention of NRS Chapter 40 is in the first claim for relief, which references "monies recoverable for attorney's fees, costs and expenses under NRS 40.600 et seq ."

The breach of contract and breach of fiduciary duties claims are not construction defect claims under NRS Chapter 40. Similarly, a breach of the implied warranty of habitability is not mentioned in NRS Chapter 40 and was extended to include builders in Radaker v. Scott, 109 Nev. 653, 661, 855 P.2d 1037, 1042 (1993). These claims are distinct from construction defect claims, but the district court's order does not indicate how the order was intended to affect them. Therefore, we conclude that the order does not affect these claims, and we decline to address them.

However, in the breach of implied warranty of workmanlike quality and breach of express warranties claims, High Noon sought damages for alleged defects and code violations under NRS 116.4113 and NRS 116.4114. While High Noon did not specifically identify NRS Chapter 40, the implied and express warranty claims sought relief similar to that allowed for a construction defect. Under NRS 40.615, "[c]onstructional defect" is defined as

a defect in

...