Farm Credit Bank of Spokane v. Stevenson

• Decision Date: 24 February 1994
• Docket Number: No. 20347,20347
• Citation: 125 Idaho 270,869 P.2d 1365
• Parties: FARM CREDIT BANK OF SPOKANE, successor in merger, the Federal Land Bank of Spokane, a corporation, Plaintiff-Respondent, v. Lynn E. STEVENSON, a single man, Defendant-Appellant, and The United States of America, acting through the Internal Revenue Service; and Shannon and Jane Doe Wolf, his wife, if married; First Interstate of Idaho, N.A., a corporation; Zane Harrison, Gene Hatch, Eileen Wood, Willard Wilson, Jim Kram and Arden Drake, Defendants. Boise, November 1993 Term
• Court: Idaho Supreme Court

Page 1365

869 P.2d 1365

125 Idaho 270

FARM CREDIT BANK OF SPOKANE, successor in merger, the Federal Land Bank of Spokane, a corporation, Plaintiff-Respondent, v. Lynn E. STEVENSON, a single man, Defendant-Appellant, and The United States of America, acting through the Internal Revenue Service; and Shannon and Jane Doe Wolf, his wife, if married; First Interstate of Idaho, N.A., a corporation; Zane Harrison, Gene Hatch, Eileen Wood, Willard Wilson, Jim Kram and Arden Drake, Defendants.

No. 20347.

Supreme Court of Idaho,

Boise, November 1993 Term.

Feb. 24, 1994.

Hawley, Troxell, Ennis & Hawley, Boise, for appellant. Steve Hardesty argued.

Service, Gasser & Kerl, Pocatello, for respondent. Ron Kerl argued.

McDEVITT, Chief Justice.

I BACKGROUND AND PROCEDURE

On June 11, 1981, the Federal Land Bank of Spokane (the "Bank") loaned appellant, Lynn E. Stevenson ("Stevenson"), $1,000,000 for the purchase of farm land. The loan was secured by a mortgage on the land. Installment payments on the loan were scheduled for the first day of each year, the first coming due January 1, 1982. Stevenson did not pay the first installment as scheduled, and made an interest payment on March 16, 1982. Stevenson made no additional payments until November of 1990.

On July 26, 1984, the Bank filed a complaint of foreclosure against Stevenson. The district court entered a judgment of $1,612,398.02 against Stevenson. On February 18, 1988, Stevenson applied to restructure his loan, as provided by the Federal Agricultural Credit Act, 12 U.S.C. § 2202a (1987) ("ACA"). Stevenson's application was denied. Stevenson appealed the denial to the Credit Review Committee, which upheld the decision not to allow restructuring.

Stevenson filed a petition for Chapter 11 bankruptcy on February 14, 1990. Stevenson and the Bank agreed to settle their claims through a stipulation filed in the bankruptcy proceedings. Under the terms of the stipulation, the Bank was allowed a secured claim of $785,000, and the remainder of the Bank's claim was discharged. Under the stipulation, Stevenson was to make one $100,000 payment on October 1, 1990, and an interest payment of $82,825.72 on December 1, 1990. Stevenson would pay the remaining $685,000 in 25 installments, due the first day of December each year. Stevenson paid the initial $100,000 payment 31 days after it was due, and the first installment 30 days after it came due.

On September 10, 1991, Stevenson's bankruptcy attorney telephoned the Bank's attorney and indicated that Stevenson wished to modify the stipulation because of cash flow problems. Based on several factors, including the conversation between the Bank's attorney and Stevenson's attorney, the loan's repayment history, and Stevenson's past financial information, the Bank determined that the loan was "distressed." ¹ On September Between the time he received the notice and defaulted on the loan, Stevenson moved the bankruptcy court to modify his Chapter 11 reorganization plan. The bankruptcy court denied Stevenson's motion. In re Stevenson, 138 B.R. 964 (Bankr.D.Idaho 1992). Stevenson appealed the ruling to the federal district court, which affirmed the bankruptcy court's ruling. 148 B.R. 592 (D.Idaho 1992). Stevenson thereafter appealed the decision to the Ninth Circuit Court of Appeals, where the case is still pending.

[125 Idaho 272] 16, 1991, the Bank issued Stevenson a notice of his right to apply to restructure, as required by the ACA. Stevenson did not apply to restructure the loan.

The Bank filed a complaint to foreclose May 21, 1992. Stevenson filed a motion to dismiss the complaint, arguing that the pending bankruptcy action divested the district court of subject matter jurisdiction. The Bank then filed a motion for summary judgment under I.R.C.P. 56.

After hearing argument on October 2, 1992, the court ruled that it had jurisdiction, granted the Bank's motion for summary judgment, and entered a decree of foreclosure and order of sale. Stevenson conveyed the property that is the subject of this suit to Black Canyon Farms, Inc. ("Black Canyon") on January 5, 1993. Black Canyon is an Idaho corporation wholly owned by Stevenson.

On appeal, Stevenson contends that the Bank did not properly notify him of his right to apply to restructure the loan, and that the Bank's failure should estop it from foreclosing. Stevenson also argues that the amended decree of foreclosure and order for sale violates I.C. § 11-304 because it requires that the property be sold as one parcel, rather than in separate lots.

The Bank presents two additional issues on appeal. The Bank first contends that the issues Stevenson raises are moot because he conveyed the property subject to the mortgage to a third party. The Bank also argues that it is entitled to an award of attorney fees on appeal.

II STANDARD OF REVIEW

When faced with an appeal from a summary judgment, this Court employs the standard of review properly applied by the trial court when originally ruling on the motion. East Lizard Butte Water Corp. v. Howell, 122 Idaho 679, 681, 837 P.2d 805, 807 (1992); Washington Fed. Sav. & Loan Ass'n v. Lash, 121 Idaho 128, 130, 823 P.2d 162, 164 (1992). In order to determine whether judgment should be entered as a matter of law, the trial court must review the pleadings, depositions, affidavits, and admissions on file. I.R.C.P. 56(c). On review, as when the judgment is initially considered by the trial court, this Court liberally construes the record in the light most favorable to the party opposing the motion, drawing all reasonable inferences and conclusions in that party's favor. Tolmie Farms v. J.R. Simplot Co., Inc., 124 Idaho 607, 862 P.2d 299, 301 (1993); Doe v. Durtschi, 110 Idaho 466, 469, 716 P.2d 1238, 1241 (1986). If reasonable people could reach different conclusions or draw conflicting inferences from the evidence, the motion must be denied. Durtschi, 110 Idaho at 470, 716 P.2d at 1242. However, if the evidence reveals no disputed issues of material fact, the trial court should grant summary judgment. I.R.C.P. 56(c); Olsen v. J.A. Freemen Co., 117 Idaho 706, 720, 791 P.2d 1285, 1299 (1990).

In the present case, Stevenson argues that he should be able to assert the Bank's alleged noncompliance with the ACA notice procedures as an equitable defense to the foreclosure. The burden of proving the elements of this defense rests with Stevenson, the party asserting the defense. Pace v. Hymas, 111 Idaho 581, 585, 726 P.2d 693, 697 (1986).

If a party moves for summary judgment on the basis that no genuine issue of material fact exists with regard to an element of the non-moving party's case, the non-moving party must establish the existence

                [125 Idaho 273]  of an issue of fact regarding that element.  Olsen, 117 Idaho at 720-21, 791 P.2d at 1299-300.   The non-moving party is not required to present evidence on every element of his or her case at that time, but must establish a genuine issue of material fact regarding the element or elements challenged by the moving party's motion.  Id. at 720, 791 P.2d at 1299 (citing Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986));  see also Badell v. Beeks, 115 Idaho 101, 102, 765 P.2d 126, 127 (1988) (The non-moving party must "make a showing sufficient to establish the existence of an element essential to that party's case on which that party will bear the burden of proof at trial.")
                

III THE ISSUES PRESENTED BY THIS APPEAL WERE NOT RENDERED MOOT BY STEVENSON'S CONVEYANCE OF THE PROPERTY

Because mootness brings into question whether this Court is presented with a justiciable controversy on appeal, see Weldon v. Bonner County Tax Coalition, 124 Idaho 31, 36, 855 P.2d 868, 873 (1993), we will first address the Bank's motion to dismiss the appeal. The Bank contends that the sale of the mortgaged property to Black Canyon extinguished Stevenson's interest in the outcome of this appeal. The Bank reasons that Stevenson no longer has a "personal stake" in the outcome of the appeal, rendering the issues presented by it moot.

This argument ignores the fact that foreclosure is an equitable proceeding. Summers v. Martin, 77 Idaho 469, 295 P.2d 265 (1956). As a suit in equity, the Bank's action is against Stevenson personally, not against the property that is the subject of the suit. See Summers v. Martin, 77 Idaho 469, 295 P.2d 265 (1956) (equity proceedings are in personam not in rem). Moreover, the bankruptcy stipulation states that the order is binding on Stevenson's "assigns," which, in this case, would be Black Canyon. This appeal presents a "real and substantial controversy admitting of specific relief through a decree of a conclusive character...." Weldon, 124 Idaho at 36, 855 P.2d at 873 (quoting Harris v. Cassia County, 106 Idaho 513, 516, 681 P.2d 988, 991 (1984)). As such, the issues presented on appeal are not moot. Cf. Sewell v. Neilsen, Monroe, Inc., 109 Idaho 192, 194, 706 P.2d 81, 83 (Ct.App.1985).

IV THE BANK COMPLIED WITH THE ACA NOTICE REQUIREMENTS

Stevenson assigns error to the district court's failure to allow him to assert the Bank's failure to comply with the ACA as an equitable defense. The district court's order, however, concluded that, while the ACA might provide an equitable defense, Stevenson did not prove the elements of the defense. The court's decree of foreclosure and order for sale states that it granted judgment as a matter of law because of "Stevenson's failure to make a showing sufficient to establish the existence of any element essential to his stated defense...." Our inquiry is therefore limited to determining whether Stevenson made a sufficient showing to raise a question of material fact regarding the Bank's compliance with the ACA notice requirements.

Stevenson does not allege any procedural defects or infirmities within the notice itself, but asserts that, when the Bank sent him notice of his right to restructure, the loan was not yet distressed...