EIACA v. Neibaur

• Decision Date: 14 September 1999
• Docket Number: No. 24429.,24429.
• Citation: 987 P.2d 314,133 Idaho 402
• Court: Idaho Supreme Court
• Parties: EASTERN IDAHO AGRICULTURAL CREDIT ASSOCIATION, a federally chartered corporation, Plaintiff-Appellant, v. Ira L. NEIBAUR; Darwin P. Neibaur; June G. Neibaur, Steve Neibaur, Burke Neibaur, Ira Neibaur, Renea Hartley, Corinne Jones and Dana Lee Dorsey d/b/a Darwin Neibaur Farms, an Idaho general partnership; June G. Neibaur; and Monica (Neibaur) Davis, Defendants-Respondents, and Valley Bank of Idaho, N.A. n/k/a Key Bank of Idaho, an Idaho banking corporation; United States of America acting through Department of Treasury-Internal Revenue Service; Idaho State Tax Commission; Paul Chemical & Fertilizer, Inc.; Credit Bureau of Rupert, Inc.; and Does I through V, inclusive, Defendants.

987 P.2d 314

133 Idaho 402

EASTERN IDAHO AGRICULTURAL CREDIT ASSOCIATION, a federally chartered corporation, Plaintiff-Appellant, v. Ira L. NEIBAUR; Darwin P. Neibaur; June G. Neibaur, Steve Neibaur, Burke Neibaur, Ira Neibaur, Renea Hartley, Corinne Jones and Dana Lee Dorsey d/b/a Darwin Neibaur Farms, an Idaho general partnership; June G. Neibaur; and Monica (Neibaur) Davis, Defendants-Respondents, and Valley Bank of Idaho, N.A. n/k/a Key Bank of Idaho, an Idaho banking corporation; United States of America acting through Department of Treasury-Internal Revenue Service; Idaho State Tax Commission; Paul Chemical & Fertilizer, Inc.; Credit Bureau of Rupert, Inc.; and Does I through V, inclusive, Defendants.

No. 24429.

Supreme Court of Idaho, Twin Falls, March 1999 Term.

September 14, 1999.

Racine, Olson, Nye, Budge & Bailey, Pocatello, for appellant. John B. Ingelstrom argued.

Ling, Nielsen & Robinson, Burley, for respondents June Neibaur and Monica Davis. Brent T. Robinson argued; Westberg, McCabe & Collins, Boise, for respondent Neibaur Farms. Paul Larry Westberg argued.

Jensen & Burr-Jones, Burley, for respondent Ira Neibaur. Kent D. Jensen argued.

SCHROEDER, Justice.

Eastern Idaho Agricultural Credit Association (EIACA) appeals the dismissal of its action on promissory notes executed by Ira and Monica Neibaur in connection with farm loans made by EIACA. The action also sought foreclosure of real estate mortgages executed by Darwin Neibaur Farms, a partnership, securing in part the loans.¹ This appeal arises from the second legal action brought by EIACA on its claim. The first action was initiated in 1992 and was dismissed in 1994 by the district court for EIACA's failure to provide the statutory notices required by the Agricultural Credit Act of 1987(Act). That dismissal was affirmed by this Court in Eastern Idaho Agricultural Credit Ass'n v. Neibaur, 130 Idaho 623, 944 P.2d 1386 (1997) (Neibaur I).

I. BACKGROUND AND PRIOR PROCEEDINGS

On January 18, 1991, Ira and Monica Neibaur issued a promissory note in favor of EIACA and agreed to pay the principal sum of $612,683. On November 25, 1991, they executed another promissory note in the amount of $11,670, payable to EIACA. The promissory notes were secured by personal and real property owned by Ira and Monica Neibaur and by personal and real property owned by Darwin Neibaur Farms.

EIACA filed a complaint for foreclosure against the Neibaurs in 1992, alleging that the notes were due and payable in full on February 1, 1992, and that $212,935.19 in combined principal and interest remained outstanding on the notes. Neibaur I, 130 Idaho at 625, 944 P.2d at 1388. Prior to filing the action in 1992, EIACA sent a letter to the Neibaurs, dated January 21, 1992, indicating that their promissory notes "may be" distressed and provided a restructuring application and copy of the restructuring policy. Id. The letter stated that the restructuring application was due by March 12, 1992. Id.

EIACA's complaint alleged that the Neibaurs did not submit a timely restructuring application and, thus, all restructure rights under the Act had expired. EIACA sent a letter to the Neibaurs dated May 14, 1992, demanding full payment for the amounts in default on the promissory notes. The May letter acknowledged that the Neibaurs submitted a restructure application dated April 8, 1992, to EIACA on April 24, 1992, but the May letter advised that the application was not timely and that EIACA would not consider it. Id.

Both parties filed motions for summary judgment. On May 31, 1994, the district court denied EIACA's motion for summary judgment and granted the Neibaurs' motion for summary judgment. The district court concluded that because the loan was not due and because EIACA had not determined that the loan was distressed, the notice letter sent to the Neibaurs was premature and failed to meet the federal requirements for restructuring the Neibaurs' loans. Id. EIACA appealed the district court's decision. This Court affirmed the district court in an opinion released on March 7, 1997. On August 27, 1997, the Court issued a substitute opinion affirming the dismissal of EIACA's complaint for foreclosure without prejudice. Id. at 627, 944 P.2d at 1390.

Prior to the release of this Court's opinion in Neibaur I, but after oral argument, EIACA sent a new notice to the Neibaurs on December 6, 1996. The 1996 notice advised the Neibaurs that the loan had been determined to be distressed, as required by 12 U.S.C. § 2202a(b)(1), and that the Neibaurs had the right to submit an application for loan restructuring. A complaint initiating the present action was filed by EIACA twelve days later on December 18, 1996, in an apparent attempt to avoid expiration of the statute of limitations.

The Neibaurs removed the matter to the United States District Court and moved to dismiss EIACA's complaint. The federal court concluded that it did not have subject matter jurisdiction and remanded the case to Idaho state court on June 24, 1997. The Neibaurs renewed their motion to dismiss in state district court on August 6, 1997.

On September 11, 1997, EIACA formally considered and denied the restructure application submitted by Ira Neibaur on April 24, 1992. The district court entered its Opinion and Order dismissing the action on November 18, 1997. EIACA filed a motion to alter or amend or for reconsideration, but the motion was denied. On December 22, 1997, EIACA filed a notice of appeal. The final amended judgment was entered on January 22, 1998, dismissing without prejudice EIACA's complaint and awarding costs and attorney fees to the Neibaurs. Thereafter, EIACA filed an amended notice of appeal.

II.

EIACA COULD NOT RELY ON ITS CONSIDERATION OF THE RESTRUCTURE APPLICATION FIVE YEARS AFTER SUBMISSION OF THE APPLICATION.

EIACA argues that it has now formally evaluated the Neibaurs' April 24, 1992, restructure application and determined that the loan does not qualify for restructuring. EIACA relies on concurring opinions in Neibaur I in which two justices wrote they would have affirmed dismissal of EIACA's complaint based on 12 U.S.C. § 2202a(b)(3) which provides:

No qualified lender may foreclose or continue any foreclosure proceeding with respect to any distressed loan before the lender has completed any pending consideration of the loan for restructuring under this section.

12 U.S.C. § 2202a(b)(3) (1989). The justices stated their view that § 2202a(b)(3) required EIACA to complete consideration of the Neibaurs' 1992 restructure application before foreclosing. Neibaur I, 130 Idaho at 629, 944 P.2d at 1392 (Johnson, J., concurring in result). The concurrence reasoned that by not considering the application because of the alleged untimeliness, the application was still pending and, therefore, the institution of foreclosure proceedings was in violation of § 2202a(b)(3). Id. On the basis of this language, EIACA maintains that it was entitled to formally consider the Neibaurs' five-year-old restructure application and cure the defect noted by the concurring justices. However, EIACA's argument that it has now considered the application and cured the deficiency identified in Neibaur I fails.

Initially, the concurring opinion is not the holding of the Court. Nothing in the majority's opinion suggests that the restructure application survived beyond the improper filing of the complaint in Neibaur I. Nevertheless, assuming that EIACA could properly consider the Neibaurs' 1992 restructure application five years later, EIACA would have to acknowledge that the application was in fact viable and pending at the time Neibaur I was filed, as the concurring justices perceived. If the application was pending and undetermined at the time Neibaur I was filed, it was similarly pending and undetermined when the present action was filed on December 18, 1996. Since EIACA did not purport to consider the Neibaurs' 1992 restructure application until September 11, 1997, EIACA has again run afoul of § 2202a(b)(3), subjecting this action to dismissal.

EIACA's argument fails under the position stated in the concurring opinion. It also fails under the majority opinion of the Court which does not hold or indicate that the restructure application survived beyond the improper filing of the complaint in Neibaur I. Although the Act does not provide a time limit on how long the lender has to consider a restructure application, five years is unreasonable. Considering the 1992 application in 1997 does not meet the statutory goals behind restructuring applications.

III.

EIACA IS PRECLUDED FROM RELITIGATING THE VALIDITY OF THE 1992 NOTICE UNDER 12 U.S.C. § 2202a(b)(2).

EIACA argues that the January 21, 1992, notice complied with 12 U.S.C. § 2202a(b)(2)² because EIACA's second foreclosure action was filed on December 18, 1996, more than forty-five days after the 1992 notice was sent. EIACA maintains that § 2202a(b)(2) does not require that a lender make a determination that a borrower's loan is distressed in all cases before notice is sent and before each foreclosure action. Rather, § 2202a(b)(2)'s notice requirement applies to any borrower prior to foreclosure, unlike subsections (b)(1) and (b)(3), which by their terms specifically apply to distressed loans. Thus, irrespective of whether EIACA made a distress determination prior to its 1992 notice, the notice complied with § 2202a(b)(2).

In making this argument EIACA is attempting to litigate an issue that was already addressed in Neibaur I. In Neibaur I, this Court found that the 1992 notice was deficient. 130 Idaho at 627, 944 P.2d at 1390. In the present case EIACA is trying to relitigate the sufficiency of the 1992 notice by recasting the sufficiency issue in terms of the December 18, 1996, complaint. Assuming, arguendo, that EIACA's statutory construction argument is correct, the 1992 notice would not only satisfy § 2202a(b)(2) with respect to the December 1996 complaint,...