from a judgment following a bench trial in a contract action.
Eighth Judicial District Court, Clark County; Elizabeth Goff
Roca Rothgerber Christie LLP and Abraham G. Smith, Daniel F.
Polsenberg, and Joel D. Henriod, Las Vegas, for Appellant.
Hutchison & Steffen, LLC, and Michael K. Wall and Mark
Hutchison, Las Vegas; Fennemore Craig, P.C., and Patrick J.
Sheehan and Steven M. Silva, Las Vegas, for Respondent.
GIBBONS, C.J., TAO and BULLA,  JJ.
appeal arising from the alleged breach of a commercial lease,
we explore two legal questions not fully developed in Nevada
law: (1) when a written lease is otherwise silent, whether
the allegedly defaulting party is entitled to
"strict" or merely "substantial"
compliance with the notice requirements set forth in the
lease for declaring the party in default, and (2) whether,
under the circumstances of this case, a subtenant becomes a
necessary party under Rule 19 of the Nevada Rules of Civil
Procedure (NRCP) to an action for breach of
contract between the landlord and the prime tenant.
questions arise from a lease between landlord Treasure
Island, LLC, and its prime tenant, Rose, LLC, for space
inside of Treasure Island's hotel/casino that was
subleased to a third party, Senor Frog's (a subsidiary of
a Mexican company called Operadora Andersons, hereinafter
collectively referred to as Senor Frog's), and used to
operate a restaurant. Treasure Island alleged that Rose
failed to make timely rent payments and declared the lease in
default, triggering the instant lawsuit. In addressing the
two questions before us, we note that a clear majority of
states requires landlords to strictly comply with any
contractual notice provisions when declaring a lease in
default, but nonetheless we conclude that any failure to do
so is excused when the allegedly defaulting party receives
actual notice of the default despite any noncompliance. We
also conclude that, under the particular circumstances of
this case, Senor Frog's was not a necessary party to the
litigation under NRCP 19.
AND PROCEDURAL HISTORY
Island and Rose entered into a 10-year lease (with options to
renew for another 20 years) for space inside of Treasure
Island's Las Vegas Strip hotel/casino that was turned
into a Senor Frog's bar and restaurant. The lease
provided for both monthly rent and quarterly percentage rent
and required that notices under the lease be sent to Susan
Markusch (an officer of Rose), with a copy to Senor
Frog's. The lease provided that, upon the giving of any
notice of default, Rose would be given 10 days to cure any
alleged breach of the lease.
parties subsequently revised the lease a number of times
through mutual agreement. At issue here is the fifth revision
to the lease, which the parties negotiated primarily to
reflect a change in the relationship between Rose and Senor
Frog's, converting what had been a partnership between
them into a sublease with Rose as the principal tenant and
Senor Frog's as the subtenant. The fifth amendment
introduced a new provision "for the benefit of Senor
Frog's" as a subtenant, updated Rose's
"notice address," and added Senor Frog's and
Senor Frog's counsel to the list of those required to
receive copies of any notices given under the lease. Although
the amendment required notice to be given to Senor
Frog's, by its terms the text of the amendment did not
grant Senor Frog's any right to intervene to cure a
default by Rose after receiving such notice.
one year later, Rose failed to make its quarterly percentage
rent payment on time. Treasure Island's in-house counsel
sent a notice regarding the missed payment to Rose's
president, also cc'ing Rose's in-house counsel via
email. Treasure Island did not deliver separate notice to
either Susan Markusch or Senor Frog's. After Rose failed
to cure the default within the 10-day period set forth in the
lease, Treasure Island's counsel sent a
notice-of-termination letter to Rose's president and to
Senor Frog's. In response to this letter, Senor
Frog's attorney sent an email to Treasure Island
asserting that the termination letter
was sent to my client for notice . . . purposes only under
section 11 of the fifth amendment to the lease agreement
[and] my client, Senor Frog's, is not affected by default
by Rose LLC as to prime tenant. As we further discussed,
[Rose] is disputing the default. You have confirmed with me
that [Treasure Island] does not plan on taking any action
until the dispute with [Rose] is resolved, whether by court
action or settlement between the parties. None of this will
impact adversely on my client, which will be permitted to
continue its subtenancy.
Treasure Island sued Rose alleging breach of the lease
agreement and seeking declaratory relief, Rose
counterclaimed, alleging breach of contract and breach of the
implied covenant of good faith and fair dealing, and seeking
a declaratory judgment. The district court conducted a bench
trial during which the president of Senor Frog's
testified as a witness and expressed no concern that Senor
Frog's was not a participant in the lawsuit. Ultimately,
the district court entered judgment in favor of Treasure
Island, declaring that it properly terminated the lease. Rose
appeal, Rose challenges the district court's judgment on
two grounds. First, it argues that the district court erred
in declaring the lease terminated because Treasure Island
failed to give proper notice of the default. Second, it
argues that the judgment is void because a necessary party,
namely Senor Frog's, was not joined in the action in
violation of NRCP 19.
of the lease
parties do not dispute that Rose missed the quarterly rent
payment in question. They also do not dispute that, after
Treasure Island sent notice of the missed rent payment to
Rose, Rose failed to pay within 10 days. Nonetheless, Rose
argues that Treasure Island failed to comply with the notice
requirements specifically agreed upon by the parties and
recited in the fifth amendment and, therefore, the notice of
default was legally ineffective, rendering the notice of
termination ineffective. In response, Treasure Island
concedes that its notice failed to strictly comply with the
terms of the fifth amendment, but it argues that it
substantially complied with those terms and that, in any
event, the district court found that Rose received actual
Nevada Supreme Court has not yet addressed whether, under
Nevada law, a party declaring another party in contractual
default must comply strictly with the notice requirements set
forth in the contract, or whether it need only substantially
comply with those requirements, especially when the
defaulting party has received actual notice. While Nevada law
is silent, a review of other jurisdictions reveals that a
clear majority of states that have addressed the question
holds that a party declaring default must strictly comply
with any and all contractual notice requirements. These
courts reason that "equity abhors forfeitures of
valuable leasehold interests," Metro. Transp. Auth.
v. Cosmopolitan Aviation Corp,, 471 N.Y.S.2d 872, 873
(App. Div. 1984), and forfeiture is a result "so harsh[
that] the law requires that every prescribed requirement be
met unless waived by agreement of the parties/' Boyd
v. Boone Mgmt., Inc., 676 S.W.2d 24, 26-27 (Mo.Ct.App.
1984). See Tiller v. YW Rous. Partners, Ltd., 5
So.3d 623, 629 (Ala. Civ. App. 2008); Berry v.
Crawford, 373 S.W.2d 129, 131 (Ark. 1963); Boston
LLC v. Juarez, 199 Cal.Rptr.3d 452, 460 (Ct. App. 2016)
(citing Cal. Civ. Code § 1442 (West 2007));
Entrepreneur, Ltd. v. Yasuna, 498 A.2d 1151, 1160
(D.C. 1985); Wood v. Ensworth, 430 So.2d 617, 618
(Fla. Dist. Ct. App. 1983); Preferred Real Estate
Equities, Inc. v. Rous. Sys., Inc., 548 S.E.2d 646, 648
(Ga.Ct.App. 2001); Tage II Corp. v. Ducas (U.S.) Realty
Corp., 461 N.E.2d 1222, 1225 (Mass. App. Ct. 1984);
ARE-100/800/801 Capitola, LLC v. Triangle Labs., Inc.,
550 S.E.2d 31, 35 ( N.C. Ct. App. 2001); Keller v.
Bolding, 678 N.W.2d 578, 584 (N.D. 2004);
Elizabethtown Lodge No. 596, Loyal Order of Moose v.
Ellis, 137 A.2d 286, 290 (Pa. 1958); Litchfield Co.
of S.C, Inc. v. Kiriakides, 349 S.E.2d 344, 347 (S.C.
Ct. App. 1986); Vinson Minerals, Ltd. v. XTO Energy,
Inc., 335 S.W.3d 344, 354 (Tex. App. 2010); Grow v.
Marwick Dev., Inc., 621 P.2d 1249, 1251 (Utah 1980);
Vt. Small Bus. Dev. Corp. v. Fifth Son Corp., 67
A.3d 241, 245 (Vt. 2013); Tacoma Rescue Mission v.
Stewart, 228 P.3d 1289, 1291 (Wash.Ct.App. 2010);
see also Tatewosian v. McLellan, 80 A.2d 879, 880
(R.I. 1951) (cited in Turks Head Realty Tr. v. Shearson
Lehman Hutton, Inc., 736 F.Supp. 422, 428 (D.R.I. 1990)
for the proposition that notice provisions are literally
construed); cf In re Kapiolani Blvd. Lands, Inc.,
563 P.2d 390, 391 (Haw. 1977) (noting that covenants in a
lease upon "the breach of which a forfeiture is claimed.
. . must be strictly construed"); Davis v.
Wickline, 135 S.E.2d 812, 814 (Va. 1964) ("[A]
breach of covenant [in a lease] to sustain forfeiture is
construed strictly against forfeiture.").
minority of states, on the other hand, concludes that mere
substantial compliance with contractual notice terms is
sufficient. See Kimmel v. Cockrell, 317 N.E.2d 449,
451 (Ind.Ct.App. 1974) (finding notice sufficient when it
"substantially complie[d] with the terms of the
lease"); First Nat'l Bank of Commerce v.
DiRosa, 545 So.2d 692, 694 (La. Ct. App. 1989);
Equity Props. & Dev. Co. v. Entinger, No.
188302, 1996 WL 33347540, at *2 (Mich. Ct. App. Dec. 27,
1996) (citing Gordon v. Great Lakes Bowling Corp.,
171 N.W.2d 225 (Mich. Ct. App. 1969)); Hil-Roc Condo.
Unit Owners Ass'n v. HWC Realty, Inc., No. 87344,
2006 WL 2627553, at *3 (Ohio Ct. App. Sep. 14, 2006) (citing
McGowan v. DM Grp. IX, 455 N.E.2d 1052 (Ohio Ct.
the majority approach seems the better one, we need not
decide which of these lines of cases to follow because an
additional wrinkle exists here; in this case, the district
court specifically found that, notwithstanding Treasure
Island's failure to strictly comply with the contractual
notice requirements, Rose received actual notice anyway. A
number of states that require strict compliance with notice
requirements nonetheless recognize that, if a defaulting
party received actual notice anyway despite some failure of
strict compliance, then the failure resulted in no prejudice
and therefore no breach to complain about. See Jefferson
Garden Assocs. v. Greene, 520 A.2d 173, 183-84 (Conn.
1987); Thompson v. Fairchild, 468 P.2d 316, 318-19
(Idaho 1970); Vole, Inc. v. Georgacopoulos, 538
N.E.2d 205, 210-11 (Ill.App.Ct. 1989). These courts reason
that "[s]trict construction does not. . . require
ritualistic compliance with [notice requirements]."
Greene, 520 A.2d at 183. Instead, the notice of
termination "must reflect the purpose that the notices
were meant to serve." Id. Thus, when actual
notice is received and the defaulting party is fully aware of
the problem, how the notice was sent becomes immaterial. See
Thompson, 468 P.2d at 319 (noting that whether
formal requirements regarding notice were complied with is
immaterial where it is clear that notice was in fact
received); Vole, 538 N.E.2d at 210 (noting that
provisions requiring a particular form of notice are only
meant to ensure delivery). Whether the legal standard is
characterized as "strict" or
"substantial" compliance, the point is to ensure
that the defaulting party actually receives the information
to which it is entitled, not to penalize the noticing party
for minor technical failures that caused no prejudice to any
the district court found, as a factual matter, that Rose
received actual notice of the default, for our purposes it
matters little that Treasure Island failed to technically
comply with the notice requirements agreed upon in the fifth
amendment. Rose knew what it was entitled to know: that the
quarterly rent payment had not been received in a timely
manner, and consequently the notice of default was valid
notwithstanding any failure of strict compliance. When the
missing rent was not paid despite the giving of actual
notice, Treasure Island became entitled to terminate the
Senor Frog's is a ...