Bennett v. Bank of E. Or.
| Decision Date | 31 August 2020 |
| Docket Number | Docket No. 47346 |
| Citation | 472 P.3d 1125,167 Idaho 481 |
| Court | Idaho Supreme Court |
| Parties | Bret W. BENNETT, an individual, and Mary E. Bennett, an individual, Plaintiffs-Appellants, v. BANK OF EASTERN OREGON, a national banking association, Defendant-Respondent. |
Law Office of D. Blair Clark, PC, Boise, for Appellants. Jeffrey P. Kaufman argued.
Yturri Rose, LLP, Boise, for Respondent. Timothy J. Helfrich argued.
This appeal addresses whether a debtor can use Idaho's single-action rule as a sanction to quiet title against a deed of trust when the secured creditor has violated the rule by filing an action against the debtor to recover on the debt before seeking satisfaction of the debt by foreclosing on the property serving as security. Bret and Mary Bennett filed an action to quiet title to their residence in Payette, Idaho, against the Bank of Eastern Oregon ("BEO"), seeking to remove a judgment lien and a deed of trust. BEO filed a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief could be granted. The district court granted the motion, reasoning that Idaho law did not provide for the Bennetts’ sought-after relief. We reverse the district court's decision.
In 2007, the Bennetts started a motorsports business in Ontario, Oregon, which leased its premises from a different business entity owned by the Bennetts. In 2008, the Bennetts personally guaranteed one or more loans between BEO and these businesses. Among these loans was a $100,000 promissory note ("the Note") that was secured by a deed of trust on the Bennetts’ residence situated on the other side of the Snake River in Payette, Idaho ("the Property"). The deed of trust designated 1st American Title Company of Malheur County, Oregon as trustee. The parties signed the deed of trust on April 10, 2008. One day later, on April 11, 2008, BEO recorded the deed of trust in the Payette County Recorder's Office. By its terms, the deed of trust was set to mature on May 5, 2009.
The Bennetts later defaulted on the Note and other obligations to BEO. Rather than seeking to foreclose on the Property for a breach of the Note's terms, BEO successfully pursued a collection action against the Bennetts in Oregon state court to recover on all of the Bennetts’ debts, including the Note. On June 15, 2010, BEO domesticated the Oregon state court judgment in Payette County pursuant to Idaho's Enforcement of Foreign Judgments Act. I.C. §§ 10-1301 to -1309. The abstract of judgment filed in Payette County aggregated four separate obligations—including the Note—totaling $283,597.57, prejudgment interest, and late fees. BEO recorded the abstract of judgment with the Payette County Recorder's Office on June 17, 2010.
Roughly a month later, on July 16, 2010, the Bennetts filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the District of Idaho. During the Bennetts’ bankruptcy proceedings, BEO filed a proof of claim for $281,597.57 as an unsecured debt. The bankruptcy estate disbursed $4,658.38 to BEO for its claim and the Bennetts’ personal liability for that obligation was extinguished. The bankruptcy estate abandoned the Property pursuant to 11 U.S.C. § 544(c). The Bennetts received their final bankruptcy discharge on April 8, 2011.
Eight years after their bankruptcy discharge, the Bennetts filed a verified complaint to quiet title to the Property against BEO. The Bennetts attached four documents: (1) the deed of trust; (2) the abstract of judgment filed in Payette County; (3) BEO's proof of claim in the Bennetts’ bankruptcy; and (4) the bankruptcy trustee's final account and distribution report. The Bennetts alleged that both the deed of trust and its judgment lien were unenforceable, and, thus, the Bennetts were entitled to a judgment removing the encumbrances. Specifically, the Bennetts alleged that BEO took the position that its security interest in the property was "substantially valueless" under Idaho Code section 15-1503(2) by filing its abstract of judgment in Payette County before foreclosing on the property and that BEO had let its judgment lien expire by failing to renew it. The Bennetts also relied on Idaho Code sections 6-411, 6-412, and 6-413 to assert that they were entitled to quiet title against the unenforceable instruments.
On June 4, 2019, BEO moved to dismiss the case under Idaho Rule of Civil Procedure 12(b)(6). BEO argued that the judgment lien expired as a matter of law under Idaho Code section 10-1110 and, thus, no longer encumbered the Property. BEO also argued that the Bennetts could not quiet title against the deed of trust because (1) BEO's Oregon judgment did not qualify as an "action" under Idaho's single-action rule; (2) the Bennetts’ bankruptcy discharge did not impact the judgment lien because the bankruptcy estate abandoned the property; and (3) Idaho case law provided that a party may not quiet title against an unenforceable mortgage when the underlying obligation is unsatisfied.
After fielding additional briefing and holding a hearing on the motion to dismiss, the district court granted BEO's motion and entered its findings on the record at a June 19, 2019, hearing. The district court reasoned that the Bennetts could not quiet title against the judgment lien because the lien was invalid as a matter of law as its expiration "operates automatically." The district court then determined that the single-action rule was inapplicable to the proceedings because BEO was not attempting to foreclose on the property. The district court next determined that there was no conflict between Idaho Code sections 6-411 and 6-413 and Idaho case law stating that a debtor must pay the underlying debt, even when collection and enforcement of that debt is barred by the statute of limitations. The district court entered an order granting BEO's motion to dismiss, and entered a judgment dismissing the Bennetts’ claims with prejudice. The Bennetts timely appealed.
Under Idaho Rule of Civil Procedure 12(b)(6), a party may seek to have the court dismiss a complaint for "failure to state a claim upon which relief can be granted." I.R.C.P. 12(b)(6). When a district court grants a 12(b)(6) motion, this Court will review that decision de novo. Paslay v. A&B Irrigation Dist. , 162 Idaho 866, 868, 406 P.3d 878, 880 (2017) (citing Syringa Networks, LLC v. Idaho Dep't of Admin. , 159 Idaho 813, 823, 367 P.3d 208, 218 (2016) ).
"A 12(b)(6) motion looks only at the pleadings to determine whether a claim for relief has been stated." Taylor v. McNichols , 149 Idaho 826, 833, 243 P.3d 642, 649 (2010) (citing Young v. City of Ketchum , 137 Idaho 102, 104, 44 P.3d 1157, 1159 (2002) ). "[T]he non-moving party is entitled to have all inferences from the record and pleadings viewed in its favor, and only then may the question be asked whether a claim for relief has been stated." Coghlan v. Beta Theta Pi Fraternity , 133 Idaho 388, 398, 987 P.2d 300, 310 (1999) (citations omitted). "The issue is not whether the plaintiff will ultimately prevail, but whether the party is ‘entitled to offer evidence to support the claims.’ " Losser v. Bradstreet , 145 Idaho 670, 673, 183 P.3d 758, 761 (2008) (quoting Sumpter v. Holland Realty, Inc. , 140 Idaho 349, 351, 93 P.3d 680, 682 (2004) ).
If a 12(b)(6) movant presents "matters outside the pleadings" and the trial court does not exclude them, then "the motion must be treated as one for summary judgment under Rule 56." I.R.C.P. 12(d). But where additional documents are incorporated by reference in the complaint, the general rule is that the court may consider those attachments when ruling on a 12(b)(6) motion. See Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) () (citing 5B Wright & Miller § 1357 (3d ed. 2004 and Supp. 2007) ); cf. Taylor , 149 Idaho at 833, 243 P.3d at 649.
On appeal, the Bennetts argue that the district court erred in granting BEO's motion to dismiss on two primary grounds. First, the Bennetts argue that BEO's violation of Idaho's single-action rule—i.e. , that BEO sought to recover from them personally on the Note before seeking satisfaction from the Property—entitles the Bennetts to a court order directing the trustee to reconvey legal title to them. Second, the Bennetts argue that Idaho Code section 6-412 permits them to quiet title against the judgment lien resulting from BEO's domestication of the Oregon judgment because BEO has allowed that lien to expire. For the reasons set forth below, we reverse the decision granting BEO's motion to dismiss, vacate the judgment dismissing the Bennetts’ claims, and remand for further proceedings.
In Idaho, quiet-title actions have long been provided for by statute: "An action may be brought by any person against another who claims an estate or interest in real or personal property adverse to him, for the purpose of determining such adverse claim." I.C. § 6-401 ; see Fry v. Summers , 4 Idaho 424, 425–26, 39 P. 1118, 1118 (1895).
The Bennetts argue that they are entitled to quiet title against the deed of trust on alternate grounds. First, the Bennetts contend that this Court should look to Idaho's single-action rule as codified in Idaho Code section 45-1503(1). Because this rule requires a...
To continue reading
Request your trial