New Phase Invs., LLC v. Jarvis
| Decision Date | 29 June 2012 |
| Docket Number | No. 38447.,38447. |
| Citation | 153 Idaho 207,280 P.3d 710 |
| Parties | NEW PHASE INVESTMENTS, LLC, Plaintiff/Counterdefendant/Respondent, v. Joshua M. JARVIS aka Joshua Michael Jarvis, Defendant/Crossdefendant/Respondent, and DAFCO, LLC, an Idaho limited corporation, Defendant/Counterclaimant/Crossclaimant/Third–Party Plaintiff/Appellant, and Rebecca Chiappini–Jarvis; Snake River Funding, Inc., an Idaho corporation; Idaho Department of Commerce And Labor; Internal Revenue Service; United Subcontractors, Inc., d/b/a Bob's Insulation, a Utah corporation; Neils & Joe's Les Schwab Tire Store, Inc.; a/k/a Neils & Joe's O.K. Tire, Inc., an Idaho corporation, Defendants/Crossdefendants, and Amerititle, Inc., an Oregon corporation; First American Title Company, Inc., an Idaho corporation; John Sommers d/b/a S & H Plumbing; H–K Contractors, Inc., an Idaho corporation; Russ Rudy d/b/a/ Affordable Tile & Flooring ; Wade Allen Thueson d/b/a Mountain Central Vacuum Systems; Burns Concrete, Inc., an Idaho corporation; Medical Recovery Services, LLC, an Idaho limited liability company, Third–Party Defendants. |
| Court | Idaho Supreme Court |
Holden, Kidwell, Hahn & Crapo, P.L.L.C., Idaho Falls, for appellant. Charles A. Homer argued.
Beard St. Clair Gaffney, PA, Idaho Falls, for respondents New Phase. Jared W. Allen argued.
Joshua Jarvis, respondent pro se.
This appeal arises from a dispute between two competing creditors, DAFCO, LLC, and New Phase Investments, LLC. DAFCO appeals from the district court's determination on summary judgment that DAFCO's deed of trust—although first recorded—was void under I.C. § 32–912 because it encumbered community real property but was not signed by both spouses. Because I.C. § 32–912 was enacted for the protection of the community rather than third-party creditors, we find that New Phase may not invoke that statute to void DAFCO's competing encumbrance. We reverse.
Joshua and Rebecca Jarvis were married on June 30, 2006, and remained married throughout the proceedings below. Joshua acquired a piece of real property in Idaho Falls (the "Property") on March 7, 2008. Although the warranty deed conveyed the Property to Joshua as "a married man dealing with his sole and separate property," the parties do not dispute that it was community property. Joshua planned to build a spec home on the Property and, in furtherance of that end, obtained several construction loans using the Property as collateral.
On March 13, 2008, Joshua executed a deed of trust in favor of Snake River Funding, Inc. to secure the amount of $268,000, and that deed was later assigned to DAFCO, LLC. The deed of trust was recorded in Bonneville County on March 18, 2008. It is undisputed that Rebecca did not join in the execution of this first-recorded trust deed. On April 3, 2008, Joshua obtained a $42,000 loan secured by another deed of trust executed in favor of New Phase Investments, LLC, again without Rebecca's signature.
Although Joshua defaulted on those obligations in the summer of 2008, New Phase agreed to loan him additional money secured by new deeds of trust.1 Joshua and Rebecca, acting together, executed two deeds of trust in favor of New Phase on October 28, 2008, as well as a third deed of trust on November 3, 2008. The trust deeds secured amounts of $42,000,2 $63,600, and $140,000, respectively, and were recorded in Bonneville County on their dates of execution.3
On February 3, 2010, New Phase filed a complaint in district court, seeking to foreclose on its three deeds of trust. DAFCO filed a counterclaim, cross-claim, and third-party claim for foreclosure of its own trust deed. Each party moved for summary judgment, DAFCO claiming priority because its trust deed was recorded first and New Phase claiming priority on the basis that DAFCO's deed of trust was void under I.C. § 32–912, which requires both spouses to sign an encumbrance of community real property. On August 5, 2010, the district court granted summary judgment to New Phase because: (1) in the absence of Rebecca's signature, DAFCO's deed was void under I.C. § 32–912 and (2) no equitable defenses to application of the statute applied. The court subsequently granted New Phase's request for a decree of foreclosure.
Neither Joshua nor Rebecca appeared in the action to challenge either creditor's trust deeds, and the district court ordered default against them both. The district court also granted DAFCO default judgment against Rebecca, finding that any interest she had in the property was subordinate to that created by the DAFCO trust deed. In addition, the court entered a judgment in favor of DAFCO against Joshua in the amount of $311,751.38. DAFCO timely appealed to this Court from the summary judgment and the decree of foreclosure.
This Court reviews a motion for summary judgment pursuant to the same standards as the district court. Mackay v. Four Rivers Packing Co., 145 Idaho 408, 410, 179 P.3d 1064, 1066 (2008). Summary judgment is appropriate where "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." I.R.C.P. 56(c). This Court reviews questions of law de novo. Martin v. Camas County ex rel. Bd. of Comm'rs, 150 Idaho 508, 511, 248 P.3d 1243, 1246 (2011). The interpretation of a statute is a question of law over which this Court exercises free review. Gonzalez v. Thacker, 148 Idaho 879, 881, 231 P.3d 524, 526 (2009).
The threshold issue in this case is whether one creditor of the community may invoke I.C. § 32–912 to attack another creditor's encumbrance. The district court found the statute to be "plain and unambiguous," stating, On appeal, DAFCO argues that New Phase lacks standing to enforce the provisions of Section 32–912 because "the Legislature did not intend for the statute to be used as a sword in disputes between competing creditors of the community." New Phase counters that this Court has never found that only members of the community may invoke the benefits of the statute, highlighting the language in Thomas v. Stevens, 69 Idaho 100, 105, 203 P.2d 597, 599 (1949), that "a contract to convey community real property which is not signed and acknowledged by both husband and wife is void" and "such a contract is unenforceable, against strangers to the community." New Phase also argues that as the beneficiary of validly executed deeds of trust, it stepped into the shoes of the community and succeeded to its rights, including the right to invoke the statute.
When faced with a question of statutory interpretation, this Court takes the following approach:
The objective of statutory interpretation is to derive the intent of the legislative body that adopted the act. Statutory interpretation begins with the literal language of the statute. Provisions should not be read in isolation, but must be interpreted in the context of the entire document.... When the statutory language is unambiguous, the clearly expressed intent of the legislative body must be given effect, and the Court need not consider rules of statutory construction.
State v. Schulz, 151 Idaho 863, 866, 264 P.3d 970, 973 (2011) (quoting Farber v. Idaho State Ins. Fund, 147 Idaho 307, 310, 208 P.3d 289, 292 (2009) ).
Section 32–912 provides:
Either the husband or the wife shall have the right to manage and control the community property, and either may bind the community property by contract, except that neither the husband nor wife may sell, convey or encumber the community real estate unless the other joins in executing the sale agreement, deed or other instrument of conveyance by which the real estate is sold, conveyed or encumbered....
Accordingly, this Court has often held that "a contract to convey community real property which is not signed and acknowledged by both husband and wife is void." Thomas, 69 Idaho at 105, 203 P.2d at 599; Lovelass v. Sword, 140 Idaho 105, 108–09, 90 P.3d 330, 333–34 (2004). However, we have also repeatedly stated that the purpose of the statute is "the protection of the community." Finlayson v. Waller, 64 Idaho 618, 626, 134 P.2d 1069, 1072 (1943) ; Tew v. Manwaring, 94 Idaho 50, 53, 480 P.2d 896, 899 (1971) (); Brown v. Burnside, 94 Idaho 363, 366, 487 P.2d 957, 960 (1971) ().4
Here, the district court erred in finding that the protections of Section 32–912 extend to parties other than members of the marital community. That provision only mentions the rights of the husband and wife in dealing with community property, saying nothing about any rights of third parties. A reading of the provision in the context of the entire chapter is similarly enlightening. Idaho Code § 32–916 provides: "The property rights of husband and wife are governed by this chapter, unless there is a marriage settlement agreement entered into during marriage containing stipulations contrary thereto." (emphasis added). Indeed, the language of Section 32–912 is couched as a restraint on members of the community, rather than an immutable rule of real property conveyances. The statute prohibits...
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