Idaho First Bank v. Bridges

• Decision Date: 21 September 2018
• Docket Number: Docket No. 44532
• Citation: 164 Idaho 178,426 P.3d 1278
• Court: Idaho Supreme Court
• Parties: IDAHO FIRST BANK, Appellant/Cross-Respondent, v. Maj-Le BRIDGES and Harold A. Bridges, individuals, Respondent/Cross-Appellant.

164 Idaho 178

426 P.3d 1278

IDAHO FIRST BANK, Appellant/Cross-Respondent,

v.Maj-Le BRIDGES and Harold A. Bridges, individuals, Respondent/Cross-Appellant.

Docket No. 44532

Supreme Court of Idaho, Lewiston, April 2018 Term.

Filed: September 21, 2018

Thomas, Williams & Park, LLP, Boise, for Appellant/Cross-Respondent. Daniel E. Williams argued.

Greener Burke Shoemaker Oberrecht, P.A., Boise, for Respondents/ Cross-Appellants. Fredric V. Shoemaker argued.

BEVAN, Justice

This case arises out of a dispute regarding Idaho First Bank's ("IFB") efforts to collect on a note secured by a deed of trust. IFB appeals from the district court's order of summary judgment in favor of debtors Maj-Le and Harold Bridges (the "Bridges"). The Bridges also cross-appeal the district court's denial of a motion to stay arbitration as to a second note between the parties. We affirm the district court.

I. FACTS AND PROCEDURE

The Bridges began leasing land from the Idaho Department of Lands (the "State") in 2005, with the intent to build a cottage on the land. This land was located in McCall, Idaho and abutted Payette Lake. In 2006, the Bridges obtained a $1.5 million construction loan from IFB to build the cottage. IFB took a note and deed of trust as security for the loan, with the Bridges pledging both their interests in the lease and in any future buildings they would construct on the leased land as collateral. The Bridges built a 5,000-square foot cottage¹ on the leased land which was completed in 2008. In order to finish construction of the cottage, the Bridges also obtained a second loan from IFB for $150,000 which was secured by a deed of trust on property in Boise, Idaho (the "Boise property"). That deed of trust included both a cross-collateralization clause, and a provision mandating arbitration of any dispute between the parties.

In 2014, the Bridges entered into a new nine-year term lease agreement (the "2014 lease") with the State. This new lease contained a provision classifying buildings and structures on the leased land as "Personal Property." This provision was not in the original 2005 lease agreement.

In May 2015, the Bridges defaulted on the note. The Bridges then tendered both the cottage and the lease to IFB. On June 19, 2015, IFB filed suit, seeking a judgment on the note without taking action to foreclose on the deed of trust. On July 10, 2015, IFB amended its complaint, clarifying that it was seeking a judgment on the note because the cottage in question was personal property, as defined by the 2014 lease between the Bridges and the State.

IFB then sold the cottage and the lease, obtaining $1,200,088 in proceeds when the sale closed on September 15, 2015. Significant for purposes of this appeal, a little more than three months later, on December 18, 2015, IFB amended its complaint a second time, claiming two separate causes of action seeking a deficiency judgment in the sum of $344,377.24. The first cause of action sought a deficiency under Idaho Code section 28-9-615, with IFB continuing to maintain that the 5000-square-foot cottage was personal property; the second cause of action sought the same relief on the basis of Idaho Code section 45-1512, relative to trust deeds and real property.

The Bridges moved for summary judgment against IFB's deficiency claims. The Bridges argued that the cottage was not personal property; thus, the claim pursuant to section 28-9-615 was erroneous. Secondarily they argued that IFB's deficiency claims were time barred because they were not filed within three months after foreclosure of the deed of trust, as required by section 45-1512.

IFB responded that the time bar under section 45-1512 was inapplicable because: (1) the cottage under the deed of trust was personal property and; (2) the lease was substantially valueless pursuant to Idaho Code section 45-1503(2). In the alternative, IFB argued its deficiency claims were timely because its second amended complaint could relate back to the filing of its original or first amended complaints under Idaho Rule of Civil Procedure 15(c).

The district court granted the Bridges’ motion for summary judgment, ruling that the cottage was real property and thus subject to the strictures of Idaho Code section 45-1512, which barred IFB's deficiency claims because they were untimely. The court further ruled that IFB's deficiency claims could not relate back to the filing of the original complaint.

IFB then filed a motion for reconsideration. At oral argument on its motion, IFB proffered a new legal argument, asserting that its deficiency claims could also relate back to its original complaint under Idaho Rule of Civil Procedure 15(d). The district court denied IFB's motion for reconsideration at the conclusion of the hearing. IFB timely filed a notice of appeal.

After filing its notice of appeal, IFB notified the Bridges that it was exercising its rights under the cross-collateralization clause in the deed of trust on the Boise property, which provided:

CROSS-COLLATERALIZATION.... [T]his Deed of Trust secures all obligations, debts and liabilities, plus interest thereon, of [Bridges] to [IFB] ... as well as all claims by [IFB] against [Bridges] ... whether now existing or hereafter arising , whether related or unrelated to the purpose of the Credit Agreement, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, ... whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable.

(Emphasis added). Thus, under this provision the Boise property served as additional collateral for the cottage loan. The Boise property deed of trust also included a mandatory arbitration provision, which IFB exercised at the same time.

The Bridges then filed a motion with the district court to stay IFB's demand for arbitration.² IFB responded and the matter was heard before the district court. The court denied the Bridges’ motion on the ground that it lacked jurisdiction to rule on their requested relief under Idaho Appellate Rule 13(b). The Bridges then filed a timely cross-appeal of the district court's denial of their motion.

II. STANDARD OF REVIEW

When reviewing the district court's ruling on a summary judgment motion, this Court applies the same standard used by the district court. Summary judgment is appropriate if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Disputed facts and reasonable inferences are construed in favor of the non-moving party. If there is no genuine issue of material fact, only a question of law remains, over which this Court exercises free review.

Miller v. Idaho State Patrol , 150 Idaho 856, 863, 252 P.3d 1274, 1281 (2011) (citations and quotation marks omitted).

III. ANALYSIS

A. The district court did not err in granting summary judgment.

IFB argues the cottage was personal property and that the 2014 lease with the Idaho Department of Lands was substantially valueless; therefore, neither the cottage nor the lease were subject to the time limitation to bring a deficiency claim under section 45-1512. We hold the district court did not err in granting summary judgment, because 1) the cottage is real property and thus falls within the purview of Idaho Code Title 45, Chapter 15; and 2) the 2014 lease was not substantially valueless.

1. There was no genuine issue of material fact that the cottage was real property.

Our analysis of IFB's claim of error is governed by Idaho statutory and case law. The Idaho Legislature has defined "real property" under Title 55, Chapter 1, which governs property and ownership, as follows:

1. Lands, possessory rights to land, ditch and water rights, and mining claims, both load and placer.

2. That which is affixed to land.

3. That which is appurtenant to land.

I.C. § 55-101.

IFB's right to take the Bridges’ cottage as collateral arises from the deed of trust. While the State added language to the 2014 lease with the Bridges which defined the cottage as personal property, IFB and the Bridges are bound by the constraints in their relationship, as governed by the deed of trust, which is limited to conveyances of real property . I.C. § 45–1502(3). Indeed, the only document recorded was the deed of trust, signifying that both IFB and the Bridges understood that the cottage was real property. Additionally, the deed of trust between these parties did not define the term "personal property" to include buildings; instead the deed of trust defined the term "improvements" to include "buildings, structures, [and] mobile homes affixed on the Real Property ...." (Emphasis added, capitalization in original). Accordingly, the cottage (as a building) was characterized as an improvement affixed on the "Real Property" under the deed of trust. Furthermore, a secondary agreement between IFB and the Bridges to provide flood insurance also characterized the cottage as "real property." These facts support the district court's conclusion that the cottage was real property.

Moreover, while we recognize the right of the parties to classify what would otherwise be real property as personal property in contracts between themselves, the State's contractual classification of a piece of property in the lease between the State and the Bridges does not supplant the contractual language between IFB and the Bridges – nor does it overcome the legal requirements set forth by this Court in Spencer v. Jameson , 147 Idaho 497, 502, 211 P.3d 106, 111 (2009) and Liberty Bankers Life Ins. Co. v. Witherspoon, Kelley, Davenport & Toole, P.S ., 159 Idaho 679, 692, 365 P.3d 1033, 1046 (2016). In Spencer , we analyzed several factors relative to determining whether a...