First Interstate Bank of Idaho v. Gill

• Decision Date: 01 February 1985
• Docket Number: No. 15363,15363
• Parties: FIRST INTERSTATE BANK OF IDAHO, a National Banking Association, Plaintiff-Appellant, v. Peter A. GILL; W. Dennis Leslie and Shirley Leslie, husband and wife, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 196

701 P.2d 196

108 Idaho 576

FIRST INTERSTATE BANK OF IDAHO, a National Banking Association, Plaintiff-Appellant, v. Peter A. GILL; W. Dennis Leslie and Shirley Leslie, husband and wife, Defendants-Respondents.

No. 15363.

Supreme Court of Idaho.

Feb. 1, 1985.

M. Jay Meyers, Pocatello, for plaintiff-appellant.

Craig R. Jorgensen and L. Lamont Jones, Pocatello, for defendants-respondents.

HUNTLEY, Justice.

BAC, Ltd., a partnership composed of a general and a limited partner, gave its promissory note to First Interstate Bank ("Bank") for a loan of $250,000. BAC also gave the Bank a deed of trust to some Chubbuck property to secure the loan. The note was signed by Gill, Christensen, and Bishop as partners, and in their individual capacities.

Thereafter, Bishop was released by a modification agreement, and Leslie replaced him as grantor agreeing to accept all the terms of the original promissory note. Mr. and Mrs. Leslie pledged their First Interstate Savings account and Idaho First certificates of deposit as additional security for the loan as modified. They signed a pledge agreement which stated generally that Leslies' pledge would stand until the debt was paid in full; and that Leslies agreed to waive the right to require the bank to proceed against or exhaust any other collateral before exerting its right of set-off against Leslies' pledged collateral. Finally, Leslies agreed that their collateral would stand regardless of whether their personal liability terminated, or whether action against them was barred by the statute of limitations.

Later BAC transferred the Chubbuck property to Chubbuck Associates, Ltd., in which Leslie was a limited partner.

The $250,000 note was not repaid. A trustee's sale date was set (pursuant to non-judicial trust deed foreclosure proceedings), but was stayed by bankruptcy proceedings filed by Chubbuck Associates.

Eventually the Bank commenced proceedings in Idaho District Court, pleading the loan and pledge agreements, and seeking encashment, application of the pledged account and CDs, and deficiency judgments against Gill, Christensen, and Leslie. Gill and Christensen filed for bankruptcy. Leslies answered the Bank's complaint alleging the Bank must first exhaust its remedies against the Chubbuck property prior to setting off against the account and the CDs.

In April, 1982, the Chubbuck property was sold at a trustee's sale to the Bank for $302,000. Leslie was present with counsel.

In May, 1982, the Bank gave written notice to Leslie that it intended to apply the savings account and the CDs to the debt, and requested written objection. Leslies did not respond, but instead counterclaimed and moved for summary judgment on the grounds that the Bank had not filed an action for deficiency judgment pursuant to I.C. § 45-1512, thus waiving its right to set-off. The trial court held that the Bank by failing to file an action pursuant to I.C. § 45-1512 had waived the right to apply the value of the savings account and the CDs to the debt. Summary Judgment was granted to Leslies; they were awarded the savings accounts and the CDs, plus interest thereon. The trial court also awarded attorney's fees to Leslies on the ground that the Bank had acted unreasonably and without foundation in setting off the savings account and CDs.

We reverse and remand for further proceedings consistent with this opinion.

It cannot be disputed that funds deposited with a bank become its property, and its obligation becomes one to pay out an equal amount on demand. Meyer v. Idaho First National Bank, 96 Idaho 208, 525 P.2d 990 (1974). A bank also has a general lien on all property in its possession belonging to a customer for the balance due it from the customer in the due course of business. I.C. § 45-808. In addition, the record shows that the Leslies voluntarily pledged their assets to the bank as collateral for the loan. In their pledge agreement they granted to the Bank the right to set-off their savings account and CDs against any deficiency in payment on the...