Chandler v. Hayden

• Decision Date: 24 August 2009
• Docket Number: No. 33695.,33695.
• Citation: 215 P.3d 485,147 Idaho 765
• Parties: Michael L. CHANDLER, individually and doing business as Loomis Construction, Plaintiff, v. David HAYDEN and Storey Jones Hayden, husband and wife, City of Sun Valley, a municipal corporation, Bank of America, N.A., a national banking association, Robertson Stephens, Inc., a corporation, Blue Jeans Equities West, a corporation, United States of America, Department of the Treasury, Roberts OCHI, LLC and Does 1 through 10, inclusive, Defendants. First American Title Insurance Company, Plaintiff-Cross-Appellant, v. Michael L. Chandler, individually and doing business as Loomis Construction, Defendant-Cross-Respondent. Michael L. Chandler, individually and doing business as Loomis Construction, Third-Party Plaintiff, v. David Hayden and Storey Jones Hayden, husband and wife, Third-Party Defendants.
• Court: Idaho Supreme Court

215 P.3d 485

147 Idaho 765

Michael L. CHANDLER, individually and doing business as Loomis Construction, Plaintiff, v. David HAYDEN and Storey Jones Hayden, husband and wife, City of Sun Valley, a municipal corporation, Bank of America, N.A., a national banking association, Robertson Stephens, Inc., a corporation, Blue Jeans Equities West, a corporation, United States of America, Department of the Treasury, Roberts OCHI, LLC and Does 1 through 10, inclusive, Defendants.

First American Title Insurance Company, Plaintiff-Cross-Appellant, v. Michael L. Chandler, individually and doing business as Loomis Construction, Defendant-Cross-Respondent.

Michael L. Chandler, individually and doing business as Loomis Construction, Third-Party Plaintiff, v. David Hayden and Storey Jones Hayden, husband and wife, Third-Party Defendants.

No. 33695.

Supreme Court of Idaho, Boise, June 2009 Term.

August 24, 2009.

Lawson & Laski, PLLC, Ketchum, for appellant/cross-respondent Michael Chandler. Ed Lawson argued.

Robertson & Slette, PLLC, Twin Falls, for respondent/cross-appellant First American Title Insurance Co. Gary Slette argued.

HORTON, Justice.

This is a lien priority case. Appellant/Cross-Respondent Michael Chandler, an individual doing business as Loomis Construction, appeals the district court's grant of summary judgment subordinating Chandler's mechanics' lien to Bank of America's deed of trust. Bank of America obtained title insurance from Respondent/Cross-Appellant First American Title Insurance Company (First American). Prior to issuing the title insurance policy to Bank of America, First American required Chandler to sign an indemnity agreement (the Agreement) promising that Chandler would release any mechanics' lien that may have or could gain priority over Bank of America's deed of trust within 20 days of filing the mechanics' lien. First American appeals the district court's denial of First American's two motions for summary judgment seeking specific performance of the Agreement. Both Chandler and First American appeal the district court's award of attorney fees to First American below. We vacate the district court's grant of summary judgment and award of attorney fees and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

David and Storey Hayden hired Chandler to construct a new home on their property located in Sun Valley, Idaho. Chandler performed work on the property from October of 2000 through November of 2003.

In November of 2000, the Haydens informed Chandler that they were acquiring a $5 million construction loan from Bank of America, using the real property to secure the loan. Before issuing the loan, Bank of America obtained title insurance through First American, insuring that its deed of trust was the first lien on the real property. Before issuing the title insurance policy, First American inspected the property and determined that Chandler had already performed substantial work on the house. As a condition to issuing the title insurance policy to Bank of America, First American required Chandler and the Haydens to sign the Agreement. Chandler and the Haydens signed the Agreement, and First American issued the title insurance policy.

The Agreement specified that Chandler and the Haydens would submit current, audited financial statements to First American concurrently with their execution of the Agreement. However, the Haydens submitted financial statements that were approximately six months old after First American issued the title insurance policy, and Chandler did not submit any financial statements to First American. After receiving the title insurance policy, Bank of America released the loan proceeds to the Haydens. The Haydens, facing financial difficulties, used $3.5 million of the loan proceeds to pay other debts.

In November 2003, the Haydens' financial condition deteriorated to the point where they could no longer proceed with the construction of the home. On December 30, 2003, Chandler recorded a mechanics' lien on the real property in the amount of $1,491,020.33.¹ Subsequently, Robertson Stevens, Inc. (Robertson Stevens) acquired a judgment against the Haydens in excess of $20 million and recorded the judgment in Blaine County. Bank of America thereafter acquired Robertson Stevens as a subsidiary.

In May 2004, Chandler filed a foreclosure action against the Haydens, Bank of America, and Robertson Stephens. Robertson Stephens and Bank of America counterclaimed and sought to foreclose on their liens. In November 2004, First American, having been tendered the defense of Bank of America under the title insurance policy, filed the instant action against Chandler seeking specific performance of the Agreement. First American sought an order from the district court requiring Chandler to release his mechanics' lien. To that end, First American filed two motions for summary judgment, both of which the district court denied.

First American subsequently filed a third motion for summary judgment asking the district court to subordinate Chandler's mechanics' lien to Bank of America's deed of trust, which the district court granted. First American sought an award of attorney fees and costs in the amount of $30,563.85. The district court awarded First American $17,143 in costs and attorney fees. Chandler timely appealed and First American timely cross-appealed.

II. STANDARD OF REVIEW

When this Court reviews a district court's ruling on a motion for summary judgment, it employs the same standard properly employed by the district court when originally ruling on the motion. Cherry v. Coregis Ins. Co., 146 Idaho 882, 884, 204 P.3d 522, 524 (2009) (citing Farmers Ins. Co. of Idaho v. Talbot, 133 Idaho 428, 431, 987 P.2d 1043, 1046 (1999)). Summary judgment is proper when there is no genuine issue of material fact and the only remaining questions are questions of law. Id. (citing Harwood v. Talbert, 136 Idaho 672, 677, 39 P.3d 612, 617 (2001); I.R.C.P. 56). This Court liberally construes all disputed facts in favor of the nonmoving party and draws all reasonable inferences and conclusions supported by the record in favor of the party opposing the motion. Lockheed Martin Corp. v. Idaho State Tax Comm'n, 142 Idaho 790, 793, 134 P.3d 641, 644 (2006).

III. ANALYSIS

Chandler argues that the district court erred when it granted First American's third motion for summary judgment and awarded First American costs and attorney fees below. First American argues that the district court erred when it denied its first two motions for summary judgment and when it excluded certain attorney fees in the award below. First American also asks this Court for an award of attorney fees on appeal.

A. The district court erred when it granted First American's third motion for summary judgment.

In pertinent part, the Agreement provided:

In the event that any Mechanics' Lien or Liens are filed against the Property, Indemnitor shall within twenty (20) days of such filing:

A. Cause a release of the Mechanics' Lien or Liens to be filed of record in the County Recorder's Office; or

B. Cause a release of any Liens filed to be recorded by posting a surety bond with the district court; or

C. Deposit with First American an amount sufficient in First American's absolute subjective opinion to protect First American or its insured against such Mechanics' Lien or Liens, which amount First American shall specify; or

D. Take action with respect to the Mechanics' Lien or Liens as First American shall, in its absolute subjective discretion, authorize Indemnitor in writing to undertake, provided that any such authority shall not be a waiver by First American to, at any time, require Indemnitor to comply with any one of subparagraphs A, B, or C herein above set forth, within five (5) days of First American's written revocation of authority to undertake all action pursuant to this subparagraph D and demand for compliance with said subparagraph A, B, or C.

The district court concluded that the Agreement was unambiguous. However, the district court determined that it would be inequitable to order Chandler to specifically perform the Agreement. The district court instead ordered that Chandler's mechanics' lien be deemed inferior to Bank of America's deed of trust. Chandler argues the district court erred when it granted First American's motion for summary judgment subordinating his lien to Bank of America's deed of trust because: (1) the district court failed to address Chandler's equitable defenses concerning the formation and enforceability of the Agreement; (2) First American did not present evidence to support a claim for contract reformation; and (3) First American is not entitled to the remedy of specific performance. In view of our resolution of Chandler's first two claims, we do not reach Chandler's third claim.

1. The district court erred by failing to address Chandler's affirmative defenses concerning the formation and enforceability of the Agreement before granting summary judgment.

Chandler asserted five defenses concerning the formation and enforceability of the Agreement: (1) fraud in the inducement; (2) mutual mistake; (3) equity only aids the vigilant and diligent; (4) unconscionability; and (5) changed circumstances. The district court did not address Chandler's affirmative defenses because it concluded that it was interpreting the meaning of a contract between the parties as a matter of law. Chandler argues that he raised genuine issues of material fact concerning the formation and enforceability of the Agreement, and therefore the district court could not grant First American's third motion for summary judgment. We agree.

There is a preliminary issue that we must decide before turning to the substance of Chandler's argument. When ruling on a motion for summary judgment, the trial court must determine whether the evidence, when construed in the light most favorable to the nonmoving party,...