Cite as: Boulder Oaks Cmty. Ass'n v. B & J Andrews

123 Nev. Adv. Op. No. 46

November 1, 2007

 

IN THE SUPREME COURT OF THE STATE OF NEVADA

No. 46010

 

BOULDER OAKS COMMUNITY ASSOCIATION, A NEVADA CORPORATION, D/B/A RED MOUNTAIN RV RESORT,

Appellant,

        vs.

B & J ANDREWS ENTERPRISES, LLC, A NEVADA LIMITED LIABILITY COMPANY, D/B/A BOULDER OAKS RV RESORT,

Respondent.

 

Appeal from a district court order granting a preliminary injunction in a real property action. Eighth Judicial District Court, Clark County; Elizabeth Goff Gonzalez, Judge.

Affirmed.

Sterling Law, LLC, and Beau Sterling, Las Vegas; Wolf, Rifkin, Shapiro & Schulman, LLP, and Richard J. Vilkin, Las Vegas, for Appellant.

Bailus Cook & Kelesis and Mark B. Bailus and Marc P. Cook, Las Vegas, for Respondent.

 

BEFORE Parraguirre, Hardesty and Saitta, JJ.

 

OPINION

PER CURIAM:

This case involves a provision of NRS Chapter 116, Nevada's Common-Interest Ownership Act. The provision at issue-NRS 116.003-provides that "unless the context otherwise requires," words used in a common-interest community's governing documents are given their statutory definition. In this case, the common-interest community's conditions, covenants and restrictions (CC&Rs) utilize a definition of "declarant" that differs from the statutory definition supplied in NRS 116.035. As NRS 116.003 permits this modification, we conclude that the definition of "declarant" in the CC&Rs controls.

The CC&Rs also prohibit the community homeowners' association from amending the CC&Rs without the declarant's consent. As respondent falls within the CC&Rs' definition of declarant, we affirm the district court's order enjoining the homeowners' association from amending the CC&Rs without respondent's consent.

FACTS

This matter involves a common-interest community located in Boulder City, Nevada, that consists of 275 recreational vehicle lots developed by BCRV, Ltd.[1] When the development was completed, BCRV formed Boulder Oaks Community Association (Association), a nonprofit property owners' association. At the same time, through its declaration, BCRV adopted amended CC&Rs, fully incorporating Chapter 82 and Chapter 116 of the Nevada Revised Statutes, which govern nonprofit corporations and common-interest communities, respectively.

At the time BCRV was developing the resort, Boulder City prohibited recreational vehicle lot owners from occupying their lots for more than 180 days in a year. Since the lots were available for others to occupy for the remainder of each year, BCRV incorporated into the resort's CC&Rs, Section 5.04, a provision whereby the lot owners who wanted to rent their lots were required to utilize BCRV's rental services for ninety-nine years. According to this provision, BCRV was responsible for all advertising and promotion of rentals. It also retained forty percent of the rental receipts.

BCRV assigns its rights to B & J Andrews Enterprises

After enacting the CC&Rs in 1996, BCRV and the Association continued to abide by the terms of the symbiotic rental provision until 2001, when BCRV sold the resort and all attendant rights, including the right to manage the rentals to B & J Andrews Enterprises, LLC (Andrews).

For some time after Andrews took over the resort and rental services, the lot owners continued to rent their lots pursuant to the CC&Rs without protest. However, in early 2002, a few lot owners began to rent their lots to others without involving Andrews. Initially, Andrews sought to enforce the CC&Rs' provision for rental of space through the Association. When the Association refused to help by enforcing the CC&Rs, Andrews filed suits against the lot owners in 2003.

In 2005, the Association voted, without holding a meeting, to amend the CC&Rs in order to terminate Andrews' exclusive right to manage rentals. This change was purportedly based on Section 9.04 of the CC&Rs, which permits the Association to materially amend any provision therein as long as the Association obtains the requisite number of votes and the consent of the "declarant," if the declarant owns land within the resort. The CC&Rs define "declarant" as the original developer (BCRV) and "its successors and assigns."

Andrews objected to the amendment, claiming that it was invalid, and immediately sought a preliminary injunction in the district court. When seeking the injunction, Andrews argued, among other things, that it was a land-owning "declarant" under Section 9.04 of the CC&Rs and that, therefore, its consent to the amendment was required.[2] According to Andrews, without its consent, any material change in the CC&Rs was invalid, and the written ballot procedure utilized by the Association to make the changes violated Section 2.06 of the Association's bylaws.[3]

The Association responded to these assertions by arguing that Andrews was not a "declarant" within the statutory definition of "declarant" set forth in NRS 116.035, regardless of whether the CC&Rs defined Andrews as a "declarant." Thus, the Association maintained that the statutory definition nullified any definition found in the CC&Rs. The Association argued that because Andrews was not a "declarant," its consent to amend the CC&Rs was not required. In the alternative, the Association argued that even if Andrews was a "declarant," NRS 116.3105 authorized it to terminate any contract executed by the declarant before the lot owners assumed control of the Association. Finally, the Association argued that the vote to amend the CC&Rs was proper because nothing in the CC&Rs precluded the members from voting by written ballot.

The district court disagreed and entered a preliminary injunction against the Association, prohibiting independent rentals by the lot owners. This appeal followed.

DISCUSSION

A preliminary injunction is available when a party seeking the injunction can demonstrate that the nonmoving party's conduct, if allowed to continue, will cause irreparable harm for which compensatory relief is inadequate and that the moving party has a reasonable likelihood of success on the merits.[4] A district court has discretion in deciding whether to grant a preliminary injunction.[5] And the district court's decision "'will be reversed only where the district court abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact.'"[6] Questions of law are reviewed de novo, even in the context of an appeal from a preliminary injunction.[7] Here, we conclude that the district court did not abuse its discretion by granting the preliminary injunction after determining that Andrews established that it would suffer irreparable harm and had a reasonable likelihood of success on the merits.[8]

Reasonable likelihood of success on the merits

NRS 116.035 defines "declarant" as a person or group of persons acting together who either (1) offer to dispose of their interest in a unit that was not previously disposed of, when this offer is part of a common promotional plan or (2) succeed to or reserve any special declarant's right. The Association argues that because Andrews is not a "declarant" as defined by NRS 116.035, the Association was not required to obtain Andrews' consent to amend its CC&Rs. Therefore, it argues that Andrews could not sufficiently establish a reasonable likelihood of success on the merits. The Association also claims that even if Andrews is considered a declarant, the Association could still terminate the rental provision by a vote of the Association members, which it properly accomplished pursuant to Section 2.06 of its bylaws.

We conclude that the CC&Rs' definition of declarant is controlling and that Andrews is a declarant under this definition. Thus, we do not examine whether Andrews met the statutory definition of "declarant" set forth in NRS 116.035. Since Andrews is a declarant and owns land within the community, the Association was required to obtain Andrews' consent to change the rental provision in the CC&Rs. Finally, we conclude that the Association was not excused from obtaining Andrews' consent by "terminating" the rental provision, because the rental provision is a part of the CC&Rs, which run with the land, and is not a terminable unconscionable contract.[9]

Andrews is a "declarant" whose consent is necessary to amend the CC&Rs

Section 9.04 of the CC&Rs provides that material changes to the CC&Rs require approval from any land-owning declarant. Thus, the validity of the Association's CC&R amendment terminating Andrews' exclusive management rights turns on whether Andrews is a declarant that had to approve the amendment.

"Declarant" is defined in the CC&Rs, section 1.12, as including BCRV's "successors and assigns." Although Andrews, as BCRV's successor, fits neatly within this CC&R definition of declarant, the Association contends that Andrews is not a "declarant" because it does not meet the statutory definition set forth in NRS 116.035, and thus, BCRV was not permitted to adopt a different definition in the CC&Rs.

The Association fails to recognize that NRS 116.003 permits a common-interest community to modify the definition of "declarant" in its governing documents. As BCRV properly modified the "declarant" definition in accordance with NRS 116.003 to include BCRV's successors and assigns, this definition controls. Consequently, we need not consider whether Andrews met the statutory definition of declarant set forth in NRS 116.035.

Andrews is a declarant under NRS 116.003

NRS 116.003 states, with emphasis added, that "[a]s used in this chapter and in the declaration and bylaws of an association, unless the context otherwise requires, the words and terms defined in NRS 116.005 to 116.095, inclusive, have the meanings ascribed to them in those sections." We have often explained that when a statute's language is plain and unambiguous, we should give that language its ordinarily understood meaning and not look beyond it.[10] Since the pertinent language in NRS 116.003 ("unless the context otherwise requires") is plain, we apply its ordinary meaning. Under this provision, when statutorily defined words are given a different meaning in an association's governing documents, that context requires that the governing documents' meaning applies. Thus, NRS 116.003 allows an association, in its declaration and bylaws, to modify the statutory definition of "declarant" and other terms.[11]

Here, BCRV unequivocally provided that its successor or assign would be a "declarant" by setting forth in its declaration, which included the CC&Rs,[12] that "[d]eclarant shall mean BCRV, Ltd., a Nevada limited liability company, and its successors and assigns." (Emphasis added.) We therefore conclude that Andrews, as the successor in interest to BCRV, is a declarant. And because Andrews also owns land within the community, the Association was obligated to obtain Andrews' consent before amending the CC&Rs.

Statutory consideration of management contracts and NRS 116.3105

The Association argues that even if Andrews is a declarant, the rental agreement, as a management contract, is terminable according to the provisions of NRS 116.3105. The Association correctly asserts that NRS 116.3105 authorizes termination of a management contract that was unconscionable when entered into, if it was created before the lot owners controlled the Association. Andrews, in response, argues that the CC&R provision at issue is not a management contract but instead is a covenant running with the land. Thus, according to Andrews, the rental provision falls outside the scope of NRS 116.3105. Andrews' characterization is correct.

We agree with the Texas Court of Appeal that a developer is generally authorized, before selling any subdivision lots, to impose any restrictions that it chooses on its subdivision.[13] A restriction's enforceability is based on notice-a person who purchases a lot with notice that it contains a restriction may not violate the restriction and may be enjoined from doing so based on equitable principles.[14] And, convenants, conditions and restrictions run with the land.[15]

In this case, BCRV properly set forth in its declaration and the amended CC&Rs the provision under which the lot owners were required to utilize BCRV's rental services. The Association, as well as each lot owner, had notice of this CC&R provision.[16]

Generally, those who purchase lots in a common-interest community subject to restrictive covenants are deemed to understand the burden of compliance as well as the expectation of a benefit from the restrictive covenants.[17] In this case, the lot owners not only had actual notice of the rental provision, but also enjoyed the benefit of the provision for six years while BCRV and Andrews managed all rentals. The record shows that at one point, before the underlying suit, the Association acknowledged that it was in the best interest of the Association to have one rental agent for the resort. And, covenants made for the grantor's benefit, even for the purpose of guarding against competition, have been upheld as running with the land.[18] Under these circumstances, the exclusive rental provision was not an unconscionable management contract terminable under NRS 116.3105.

CONCLUSION

BCRV, as the original developer, had authority, consistent with NRS 116.003, to define "declarant" in the CC&Rs differently than the definition set forth in NRS 116.035. Andrews, as a successor in interest to the original developer, is a "declarant" as set forth by the CC&Rs and also owns land within the community. Therefore, Andrews had to approve any CC&R amendment removing the rental provision. Because the Association failed to obtain Andrews' consent to this material change in the CC&Rs, Andrews sufficiently established a reasonable likelihood of success on the merits and the district court properly granted a preliminary injunction against the Association. Accordingly, we affirm the district court's order.

 

**********FOOTNOTES**********

[1] See NRS 116.021 (defining a common-interest community as "real estate with respect to which a person, by virtue of his ownership of a unit, is obligated to pay for real estate other than that unit").

[2] Section 9.04 lists the requisite votes needed to make a valid amendment to any material provision within the CC&Rs:

9.04. Amendment

(a) Majority Vote. Except as provided in Section 9.04(c), no amendment of this Declaration shall be effective unless adopted by a majority of the Members. Notwithstanding the foregoing, the consent of sixty-seven percent (67%) of the Members entitled to vote and of the Declarant, so long as the Declarant owns any land subject to this Declaration, and the approval of Eligible Holder on Lots to which at least fifty-one percent (51%) of the votes of Lots subject to a Mortgage, shall be required to materially amend any provisions of this Declaration.

[3] Section 2.06 states that:

Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting, without a notice and without a vote, if a consent in writing, setting forth the actions taken, is signed by the Members with the percentage of the voting power required to take such action.

[4] NRS 33.010; see Dangberg Holdings v. Douglas Co., 115 Nev. 129, 142, 978 P.2d 311, 319 (1999); see also University Sys. v. Nevadans for Sound Gov't, 120 Nev. 712, 721, 100 P.3d 179, 187 (2004).

[5] Attorney General v. NOS Communications, 120 Nev. 65, 67, 84 P.3d 1052, 1053 (2004).

[6] Id. (quoting U.S. v. Nutri-cology, Inc., 982 F.2d 394, 397 (9th Cir. 1992)); S.O.C., Inc. v. The Mirage Casino-Hotel, 117 Nev. 403, 407, 23 P.3d 243, 246 (2001).

[7] University Sys. v. Nevadans for Sound Gov't, 120 Nev. 712, 721, 100 P.3d 179, 187 (2004); S.O.C., 117 Nev. at 407, 23 P.3d at 246.

[8] Because the Association has not challenged on appeal the finding of irreparable harm, this court need not discuss the irreparable harm requirement.

[9] Because we conclude that Andrews is a declarant and therefore any material change in the CC&Rs without Andrews' consent would be invalid, we do not consider Andrews' contentions, raised in the district court and on appeal, regarding the legality of extending the voting deadline, as well as whether the Association obtained the requisite number of the lot owners' and eligible holders' votes. Similarly, we need not reach the issue of whether the written ballot procedure was proper. We note, however, that the plain language of NRS 82.326(1) permits a nonprofit corporation like the Association to take actions without a meeting unless these actions are limited or forbidden by the articles or bylaws. That provision states, in part, that "unless prohibited or limited by the articles or bylaws, an action that may be taken at a regular or special meeting of members . . . may be taken without a meeting if the corporation mails or delivers a written ballot to every member entitled to vote on the matter."

[10] State, Dep't Human Res. v. Estate of Ullmer, 120 Nev. 108, 113, 87 P.3d 1045, 1049 (2004).

[11] NRS Chapter 116 is Nevada's version of the Uniform Common-Interest Ownership Act and largely mirrors the uniform act. The Uniform Act contains the same "unless the context otherwise requires" language in 1-103, and the commentary to that section explains that this language "permits the defined terms used in the Act to be defined differently in the declaration and bylaws." Unif. Common Interest Ownership Act 1-103 cmt. 1 (1994), 7 U.L.A. 847 (2005).

[12] See NRS 116.2105(1)(l) & (2) (providing that in addition to including information on restrictions regarding the "use, occupancy and alienation of the units," the declaration may "contain any other matters the declarant considers appropriate").

[13] City of Pasadena v. Gennedy, 125 S.W.3d 687, 698 (Tex. App. 2003).

[14] Gladstone v. Gregory, 95 Nev. 474, 480, 596 P.2d 491, 495 (1979).

[15] See, e.g., 12 Havemeyer Place Co., LLC v. Gordon, 820 A.2d 299, 307 (Conn. App. Ct. 2003).

[16] Each lot owner was given a document titled "Most commonly asked questions." It stated in pertinent part:

The rental of lots within the community is regulated in the CC&Rs (Paragraph 5.04 of Article V). Please look over the attached information regarding the rental program. Lot owners that would like to have their lot rented are required to enter a rental authorization agreement.

We reject the Association's assertion that because the rental provision was inconspicuously placed in the CC&Rs and did not adequately advise lot owners of their property rights, it should be construed as an unconscionable contract. No evidence in the record suggests that the lot owners lacked a meaningful opportunity to review and assent to that provision. See Burch v. Dist. Ct., 118 Nev. 438, 443-44, 49 P.3d 647, 649-50 (2002) (noting that "both procedural and substantive unconscionablility must be present in order for a court to exercise its discretion to refuse to enforce a contract or clause as unconscionable").

[17] Kauffman v. Roling, 851 S.W.2d 789, 792 (Mo. Ct. App. 1993).

[18] See generally A.M. Vann, Annotation, Covenant Restricting Use of Land, Made for Purpose of Guarding Against Competition, As Running With Land, 25 A.L.R.3d 897, 5[a] (1969 & Supp. 2007).

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