Agstar Fin. Servs. v. Nw. Sand & Gravel, Inc.

Decision Date22 March 2021
Docket NumberDocket No. 47140
Citation483 P.3d 415,168 Idaho 358
Parties AGSTAR FINANCIAL SERVICES, ACA, nka Compeer Financial FLCA, Plaintiff-Appellant, v. NORTHWEST SAND & GRAVEL, INC., an Idaho corporation; Gordon Paving Company, Inc., an Idaho corporation; and Blackrock Land Holdings, LLC, an Idaho limited liability company, Defendants-Respondents, and Town and Country Bank, Inc., and Fire Service of Idaho, Inc., Defendants.
CourtIdaho Supreme Court

Givens Pursley LLP, Boise, for appellant. Kersti H. Kennedy argued.

Robinson & Associates, Rupert, for respondents. Brent T. Robinson argued.

STEGNER, Justice.

In 2007 and 2008, AgStar Financial Services (AgStar), now known as Compeer Financial FLCA (Compeer), loaned substantial sums of money to Northwest Sand and Gravel, Inc., Gordon Paving Company, Inc., and Blackrock Land Holdings, LLC. (The three entities that were indebted to Compeer will be collectively referred to as Gordon Paving.) As a result of financing these loans, AgStar became a secured creditor of Gordon Paving. In 2012, Gordon Paving defaulted on its $10 million obligation to AgStar, which then resulted in AgStar obtaining a judgment of foreclosure on various parcels of real property owned by Gordon Paving. The district court also entered an order allowing the sale of virtually all of Gordon Paving's business equipment to further satisfy the debt. Gordon Paving appealed the district court's decision which allowed AgStar to sell the business equipment.

In AgStar I ,1 this Court reversed the district court's order allowing AgStar to liquidate Gordon Paving's business equipment. This decision came long after the business equipment had already been sold at auction. On remand, the district court determined that the correct remedy for Gordon Paving was an award of restitution in the amount of the gross proceeds of the sale plus interest from the date of the sale based on its interpretation of Idaho Code section 28-22-104.

Compeer now appeals from the district court's order denying it an offset for expenses its predecessor, AgStar, incurred in liquidating Gordon Paving's business equipment. Compeer also appeals the district court's order awarding Gordon Paving prejudgment interest on the restitution award from the date the collateral was sold.

For the reasons set out in this opinion, we reverse the district court's order denying Compeer an offset for the auctioneer's expenses incurred which were never received by AgStar. We affirm the district court's order awarding Gordon Paving prejudgment interest; however, we vacate the district court's decision allowing prejudgment interest to run from the date of the sale.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2007 and 2008, AgStar loaned Gordon Paving a total of $10 million pursuant to two government bond agreements.2 The loan was secured by virtually all of Gordon Paving's real and personal property.3 By 2012, Gordon Paving had defaulted on its obligations to AgStar after paying only a small fraction of the amount due. Gordon Paving's default resulted in AgStar bringing a foreclosure action against Gordon Paving. On June 19, 2013, the district court entered a judgment and decree of foreclosure against Gordon Paving in the amount of $9,387,069.17 and ordered a sale of all the collateral. Compeer subsequently purchased the five gravel pits and the commercial site via five separate credit bids totaling $7,200,000.4

Thereafter, AgStar sought a deficiency judgment for the difference between its credit bids and the unpaid balance of the foreclosure judgment. The district court found that deficiency judgments were "limited to the difference between the fair market value of the real property and the amount of unpaid debt." The district court determined that the fair market value of the real property purchased by AgStar via credit bids equaled $11,710,105, while the debt owed by Gordon Paving totaled only $9,813,340. Thus, because the fair market value of the foreclosed properties exceeded the amount of Gordon Paving's indebtedness, the district court denied Compeer's motion for a deficiency judgment.

AgStar then sought an order from the district court allowing it to liquidate Gordon Paving's personal property collateral via auction, which included "vehicles, equipment, office equipment, and office supplies" that AgStar asserted would be difficult to sell via a sheriff's sale. Gordon Paving objected to AgStar's request, arguing that "absent a deficiency judgment, a mortgagee cannot touch the other assets of the mortgagor." Despite its prior order denying AgStar a deficiency judgment, the district court nevertheless entered an order allowing liquidation of the personal property collateral, which was sold at auction on October 2, 2014.5 Gordon Paving did not request a stay of execution, nor did it post a bond which would have prevented the sale pending its appeal.

Gordon Paving appealed the district court's decision allowing the personal property to be sold. This Court subsequently reversed the district court's decision allowing the sale. We held that because the value of the real property obtained by AgStar via its credit bids exceeded the amount of Gordon Paving's indebtedness, "[AgStar's debt] had been fully satisfied and it was not entitled to seek additional monies from Gordon Paving." AgStar I , 161 Idaho at 809, 391 P.3d at 1279. This Court remanded the case to the district court for further proceedings which give rise to this appeal. Id.

The current appeal involves a determination of the amount of money Compeer (formerly AgStar) owes Gordon Paving as a result of the sale of Gordon Paving's personal property collateral. The matter was set for a court trial on May 2, 2018, to determine the amount Compeer owed Gordon Paving. A discovery dispute regarding an untimely disclosure of expert witnesses by Gordon Paving delayed the trial. As a result of the late disclosure, the district court continued the trial over Compeer's objection, resetting the trial date to December 11, 2018.6 The parties initially disputed the valuation of the property. Gordon Paving sought to receive the fair market value of the property sold, while Compeer asserted that Gordon Paving was only entitled to restitution for the amount it received as proceeds from the sale, minus expenses incurred in preserving and liquidating the property.

Compeer moved for summary judgment, arguing that Gordon Paving was only entitled to restitution and that the fair market value of the property sold was irrelevant. Compeer simultaneously filed a motion to exclude Gordon Paving's expert witnesses, who would have testified that the fair market value of the personal property greatly exceeded the amount obtained at the auction. The district court granted both of these motions, ruling that Gordon Paving was entitled to the "gross sale proceeds plus interest." The district court's ruling effectively excluded all of Gordon Paving's expert testimony because the fair market value of the property had been determined to be irrelevant.

In its Motion for Summary Judgment, Compeer also sought a reduction of the amount owed as a result of the expenses it claimed it had incurred in selling the collateral. The district court ruled that Compeer was not entitled to such a deduction. Compeer filed a motion to reconsider that decision which was denied.

At trial, Compeer put on evidence of several defenses to Gordon Paving's claim for restitution, including abandonment, unclean hands, unjust enrichment, and "change of position." Compeer also sought a deduction of expenses for costs associated with conducting the auction and repairing the collateral for sale. The district court rejected Compeer's defenses and denied Compeer's efforts to reduce its obligation to Gordon Paving.

The district court ultimately denied Compeer's motion for reconsideration and entered its decision awarding Gordon Paving restitution in the amount of $332,630.10, plus 12% prejudgment interest running from the date of the sale.

Compeer then filed a motion to reconsider, which the district court denied. Compeer timely appealed.

II. STANDARD OF REVIEW

"[W]hen reviewing a trial court's decision to grant or deny a motion for reconsideration, this Court utilizes the same standard of review used by the lower court in deciding the motion for reconsideration." Kenworth Sales Co. v. Skinner Trucking, Inc. , 165 Idaho 938, 943, 454 P.3d 580, 585 (2019) (quoting Fragnella v. Petrovich , 153 Idaho 266, 276, 281 P.3d 103, 113 (2012) ).

"Following a bench trial, this Court's review is limited to ascertaining whether the evidence supports the findings of fact, and whether the findings of fact support the conclusions of law."

Wilson v. Mocabee , 167 Idaho 59, 467 P.3d 423, 428 (2020) (quoting Mortensen v. Berian , 163 Idaho 47, 50, 408 P.3d 45, 48 (2017) ). Further, "this Court will not set aside a trial court's findings of fact unless they are clearly erroneous." Kenworth Sales Co. , 165 Idaho at 942, 454 P.3d at 584.

"We review an award of prejudgment interest under the abuse of discretion standard." Med. Recovery Servs., LLC v. Neumeier , 163 Idaho 504, 511, 415 P.3d 372, 379 (2018).

When this Court reviews an alleged abuse of discretion by a trial court the sequence of inquiry requires consideration of four essentials. Whether the trial court: (1) correctly perceived the issue as one of discretion; (2) acted within the outer boundaries of its discretion; (3) acted consistently with the legal standards applicable to the specific choices available to it; and (4) reached its decision by the exercise of reason.

Lunneborg v. My Fun Life , 163 Idaho 856, 863, 421 P.3d 187, 194 (2018) (italics in original).

III. ANALYSIS
A. Gordon Paving's recovery is limited to the amount Compeer has been unjustly enriched.

AgStar, pursuant to a valid court order issued in 2014,7 liquidated Gordon Paving's business equipment to further satisfy its debt. Long after that property was sold,...

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