Certified questions, pursuant to NRAP 5, concerning the priority of mechanics' liens based on visible commencement of construction. United States Bankruptcy Court for the District of Nevada; Bruce T. Beesley, Judge.
Questions answered in part.
Foley & Oakes, PC, and Daniel T. Foley, Las Vegas; M. Nelson Segel, Las Vegas; Peel Brimley LLP and Eric B. Zimbelman and Richard L. Peel, Henderson, for Appellants.
Fennemore Craig Jones Vargas and Craig S. Dunlap and Christopher H. Byrd, Las Vegas; Meier & Fine, LLC, and Glenn F. Meier, Las Vegas, for Respondents.
Gibbons, C.J. We concur: Pickering, J., Hardesty, J., Parraguirre, J., Douglas, J., Cherry, J., Saitta, J.
BEFORE THE COURT EN BANC.
In Nevada, a mechanic's lien takes priority over other encumbrances on a property that are recorded after construction of a work of improvement visibly commences. The visible-commencement-of-construction requirement often gives rise to dispute, however, and the United States Bankruptcy Court for the District of Nevada has certified three questions of law to this court regarding this aspect of mechanic's lien priority law.
The first question queries whether the placement of dirt material on a future project site before building permits are issued and the general contractor is hired can constitute commencement of construction. The second question asks us to clarify our decision in J.E. Dunn Northwest, Inc. v. Corus Construction Venture, L.L.C., 127 Nev., 249 P.3d 501 (2011), in which we stated that " clearing or grading" does not constitute commencement of construction. 127 Nev. at, 249 P.3d at 509. In our view, answering this question requires us to evaluate the appropriate precedential weight that courts should give to the passage in question, and we therefore rephrase the second certified question to include whether this statement was dictum. See, e.g., Boorman v. Nev. Mem'l Cremation Soc'y, 126 Nev.___,
___, 236 P.3d 4, 6 (2010) (rephrasing certified questions under NRAP 5). We rephrase the second question as follows:
Was the passage in J.E. Dunn Northwest, Inc. v. Corus Construction Venture, L.L.C., 127 Nev.___,
___, 249 P.3d 501, 509 (2011), that states " preparatory work on a site, such as clearing or grading, does not constitute commencement of construction," dictum? If so, can grading work constitute visible commencement of construction under NRS 108.22112?
Finally, the third question inquires whether the grading that took place in this case constituted visible commencement of construction, such that the mechanics' liens at issue take priority.
Because the second question influences our analysis of the other questions, we address it first. We respond to the three questions as follows. Regarding the bankruptcy court's second question, we conclude that this court's use of the term " clearing or grading" was dictum, and thus, our holding in J.E. Dunn does not preclude a trier of fact from finding that grading property for a work of improvement constitutes visible commencement of construction. Regarding the first question, we conclude that contract dates and permit issuance dates are irrelevant to the visible-commencement-of-construction test, but may assist the trier of fact in determining the scope of the work of improvement. Finally, we decline to answer the third question because it would require this court to resolve the factual dispute as to whether the grading presented here constituted visible commencement of construction of the work of improvement.
FACTS AND PROCEDURAL HISTORY
The construction project
The debtor respondents Angaur, LLC, and Balaji Properties Investment, LLC (collectively, the owners), jointly purchased a parcel of unimproved real property in Las Vegas, Nevada. No relevant activity took place with respect to the subject property until the spring and summer of 2006, when two different third parties placed, and allegedly spread, between 200 and 300 truckloads of dirt/material on the property. Both of the third parties were performing work on unrelated construction projects on neighboring parcels and roadways. The degree to which the subject property was covered and subsequently spread or graded is unclear given the record before this court.
Meanwhile, the owners solicited bids from general contractors to construct a strip mall on the property. During bidding on the project, appellant Byrd Underground, LLC, submitted a bid to general contractor Joseph's Construction to perform subcontracted grading work, but Atlas Construction Ltd., not Joseph's Construction, was selected as the general contractor. On November 2, 2006, at the request of Atlas, a representative of Byrd dug four to six holes on the subject property with a backhoe. Byrd dug these holes to determine how much dirt/material had been brought onto the subject property since ...