Monitor Finance, L.C. v. Wildlife Ridge Estates, LLC, 010919 IDSCCI, 45517

Docket Nº:45517
Opinion Judge:STEGNER, Justice.
Party Name:MONITOR FINANCE, L.C., a Utah limited liability company; and FIRST CAPITAL FUNDING, L.C., a Utah limited liability company, Plaintiffs/Respondents, v. WILDLIFE RIDGE ESTATES, LLC, an Idaho limited liability company, Defendant/Appellant; M&S DEVELOPMENT, LLC, an Idaho limited liability company, Defendants. WILDLIFE RIDGE ESTATES, LLC, an Idaho...
Attorney:Hearn Law PLC, Pocatello, for appellant. A. Bruce Larson argued. Cooper & Larsen, Chartered, Pocatello, for respondents. Ron Kerl argued.
Judge Panel:Chief Justice BURDICK, Justices HORTON, BRODY and BEVAN, CONCUR.
Case Date:January 09, 2019
Court:Supreme Court of Idaho
 
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MONITOR FINANCE, L.C., a Utah limited liability company; and FIRST CAPITAL FUNDING, L.C., a Utah limited liability company, Plaintiffs/Respondents,

v.

WILDLIFE RIDGE ESTATES, LLC, an Idaho limited liability company, Defendant/Appellant; M&S DEVELOPMENT, LLC, an Idaho limited liability company, Defendants.

WILDLIFE RIDGE ESTATES, LLC, an Idaho limited liability company, Counter-Claimant/Appellant,

v.

MONITOR FINANCE, L.C., a Utah limited liability company; and FIRST CAPITAL FUNDING, L.C., a Utah limited liability company, Counter-defendants/Respondents.

No. 45517

Supreme Court of Idaho

January 9, 2019

Appeal from the District Court of the Sixth Judicial District, State of Idaho, Bannock County. Robert C. Naftz, District Judge.

The judgment of the district court is affirmed.

Hearn Law PLC, Pocatello, for appellant. A. Bruce Larson argued.

Cooper & Larsen, Chartered, Pocatello, for respondents. Ron Kerl argued.

STEGNER, Justice.

This case involves the judicial foreclosure of a deed of trust encumbering real property in Pocatello, Idaho. Monitor Finance, L.C., and First Capital Funding, L.C., (collectively referred to as the Beneficiaries) are the holders of a deed of trust, which encumbers the real property claimed to be owned in fee simple by Wildlife Ridge Estates, LLC (Wildlife LLC).

Prior to this judicial foreclosure action being brought, Wildlife LLC filed suit against the Beneficiaries seeking to quiet title to the real property, which is subject to the Beneficiaries' deed of trust. In that previous action, Wildlife LLC alleged that the Beneficiaries no longer retained an interest in the property because the debt underlying the promissory note had been paid in full. By stipulation of the parties, that quiet title action was ultimately dismissed with prejudice.

Subsequently, the Beneficiaries initiated this action to foreclose the deed of trust based on their contention that the debt created by the promissory note had not been paid and was in default. The Beneficiaries moved the district court for summary judgment, contending that Wildlife LLC's affirmative defenses and counterclaim were barred by res judicata because the previous quiet title action brought by Wildlife LLC had been dismissed on its merits. The district judge granted the Beneficiaries' motion and denied Wildlife LLC's motion to reconsider. In doing so, the district court summarily dismissed Wildlife LLC's counterclaim and affirmative defenses. The district court ultimately entered summary judgment in favor of the Beneficiaries. Wildlife LLC now appeals that adverse summary judgment ruling, claiming, among other things, that the district court misapplied the doctrine of res judicata. For reasons set out in this opinion, we affirm the district court's decisions.

I. FACTUAL AND PROCEDURAL BACKGROUND

On December 29, 2005, Michael Millward (Millward) and Michael Williams (Williams) entered into a written agreement.1 That agreement provided, among other things, that: M&S Development (M&S), a limited liability company wholly owned by Millward and his wife, would purchase real property (a forty lot subdivision in Pocatello) for $230, 000. Following the payment, M&S would "own 55% of the development."[2] Millward and Williams would then each pay $25, 000 to buy out a remaining third-party's interest in the property, which would result in M&S then owning 62.5% of the property, and Williams owning the remaining 37.5%. M&S would form a limited liability company for the development of the project, with "each party" being a manager of the LLC. The LLC that resulted from this agreement was Wildlife LLC. Millward and Williams became the managing members of Wildlife LLC upon its creation.

On December 30, 2005, (the next day) the Beneficiaries loaned Millward and M&S $244, 000 to finance the purchase of the subject property.3 As evidence of the loan, Millward and M&S made and issued a Trust Deed Note to the Beneficiaries. Millward signed the Trust Deed[4]on behalf of M&S, the sole trustor. As a result of their actions, both Millward and M&S were contractually obligated to repay the loan described in the Trust Deed Note. Pioneer Title Company (Pioneer) became the trustee and holder of the deed. On June 13, 2006, M&S deeded the subject property to Wildlife LLC.

On March 3, 2008, the Trust Deed Note was modified to include additional amounts loaned which totaled $217, 400 (the modification). This additional loan was made in a series of advances by the Beneficiaries to Millward and M&S. Millward signed the modification on behalf of himself and M&S. He also signed on behalf of Wildlife LLC to acknowledge the modification. Williams, the other manager of Wildlife LLC, did not sign the modification.

On September 10, 2012, Millward filed for Chapter 7 Bankruptcy. Millward's bankruptcy filing resulted in an automatic stay precluding the commencement or active pursuit of an action against him personally. See 11 U.S.C. § 362(a). M&S was listed as community property, 100% owned by Millward and his wife, in the bankruptcy schedule. As a result, any action against M&S was also stayed. See id.

On March 12, 2015, Wildlife LLC filed an amended complaint in Bannock County district court to quiet title to the property (the first action). The suit named the Beneficiaries as defendants. That action did not include Millward or M&S as parties. In its amended complaint, Wildlife LLC alleged that the debt secured by the Trust Deed Note had been fully paid. As a result of the purportedly satisfied debt, Wildlife LLC requested that it be awarded a judgment quieting title in the property. Over a year later, Wildlife LLC stipulated to the dismissal of its amended complaint, with prejudice. On June 14, 2016, a judgment was entered dismissing Wildlife LLC's action with prejudice. (Nine days later, on June 23, 2016, Millward's bankruptcy case was closed.)

On October 7, 2016, the Beneficiaries filed the underlying judicial foreclosure action, naming Wildlife LLC and M&S as defendants. In their complaint, the Beneficiaries requested a judicial foreclosure sale of the property in order to satisfy the remaining debt under the promissory note. Millward was not named as a defendant.[5] Wildlife LLC answered on November 4, 2016, alleging a number of affirmative defenses, including a counterclaim asserting fraud, and requesting declaratory and injunctive relief. The Beneficiaries answered Wildlife LLC's counterclaim and asserted that Wildlife LLC's counterclaim and affirmative defenses were barred by res judicata, among other defenses. Subsequently, the Beneficiaries moved the district court for partial summary judgment, and on March 27, 2017, the district court issued its decision (first decision) granting that motion and dismissing Wildlife's affirmative defenses and counterclaim based on res judicata.

On March 30, 2017, the district court entered default against M&S for its failure to appear. On April 13, 2017, the Beneficiaries filed a second motion for summary judgment, requesting that the remaining issues be determined by the court. Those issues were whether an unpaid debt remained on the promissory note and the reasonable value of the property still encumbered by the deed of trust. Wildlife LLC opposed that motion and, in addition, submitted a motion for reconsideration in an attempt to reverse the district court's first decision that dismissed its counterclaim and affirmative defenses.

On June 14, 2017, the district court issued a Memorandum Decision and Order (second decision) denying Wildlife LLC's request for reconsideration and finding that an unpaid debt remained on the promissory note in the amount of $6, 814...

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