Porcello v. Estate
| Decision Date | 03 August 2020 |
| Docket Number | Docket No. 46443 |
| Citation | 470 P.3d 1221,167 Idaho 412 |
| Court | Idaho Supreme Court |
| Parties | Jennifer PORCELLO, Plaintiff-Counterdefendant-Respondent, v. The ESTATE OF Anthony J. PORCELLO, the Estate of Annie C. Porcello, and Kalyn M. Porcello, as Personal Representative, Defendants-Counterclaimants-Appellants. The Estate of Anthony J. Porcello, the Estate of Annie C. Porcello, and Kalyn M. Porcello, as Personal Representative, Third Party Plaintiffs-Appellants, v. Mark Porcello, Third Party Defendant-Respondent. |
Stoel Rives LLP, Boise, for appellants Estates of Anthony J. Porcello and Annie & Kalyn Porcello, as personal representative. W. Christopher Pooser argued.
Ramsden Marfice Ealy & DeSmet, Coeur d'Alene, for respondent Jennifer Porcello. Michael Ramsden argued.
Smith + Malek, PLLC, Coeur d'Alene, for respondent Mark Porcello. Peter J. Smith IV argued.
This case involves interpretation of a promissory note and a deed of trust involving a home and real property located in Hayden Lake, Idaho. In the summer of 2014, Mark and Jennifer Porcello, who were married at the time, sought to purchase this property. After making various pre-payments, the amount the couple needed to purchase the property was roughly $312,000. While Mark and Jennifer could not qualify for a conventional loan themselves, they hoped that another property in Woodinville, Washington, which was owned by Mark's parents, and in which Mark and Jennifer claimed an interest, could be sold to assist in the purchase of the Hayden Lake property. In an effort to help Mark and Jennifer purchase the property, Mark's parents, Annie and Tony Porcello, obtained financing through a non-conventional lender. In the end, the transaction became quite complicated. Annie and Tony ultimately took out a short-term, "hard money" loan1 from Legacy Group Capital (LGC), with two properties (including the Woodinville property) serving as collateral. Due to the lender's requirements, and the ownership of other property by Mark and his parents, the amount borrowed by Annie and Tony ballooned to $648,500 and greatly exceeded the amount needed by Mark and Jennifer to close on the Hayden Lake property. Nevertheless, Annie and Tony's lawyer drafted a promissory note for Mark and Jennifer to sign which equaled the amount borrowed by Annie and Tony. In turn, Mark signed a promissory note and deed of trust for the Hayden Lake house, in the same amount and with the same repayment terms as the loan undertaken by his parents. Jennifer initially resisted signing the Note and Deed of Trust, but ultimately, after speaking to the lawyer who drafted the documents, signed them. With the funding provided, Mark and Jennifer purchased the Hayden Lake property.
In mid-2016, Annie and Tony sought non-judicial foreclosure on the Hayden Lake property, claiming that the entire balance of the note was due and owing. By this time Mark and Jennifer had divorced, although Jennifer still occupied the Hayden Lake home. In response to the foreclosure proceeding, Jennifer filed suit against her former in-laws seeking a declaratory judgment and an injunction, arguing that any obligation under the note had been satisfied in full when the Woodinville property sold, notwithstanding the language of the note encumbering the Hayden Lake property. Annie and Tony answered Jennifer's complaint by filing a counter-claim against her and a third-party complaint against Mark.
After a trial extending over eight days in April and May 2018, the district court granted Jennifer's request for a declaratory judgment. By this time, Annie and Tony had died and were substituted for as parties in the litigation by their respective estates. The district court also denied the estates’ request for judicial foreclosure, and dismissed their third-party claims against Mark. The district court held that the Note and Deed of Trust were latently ambiguous because the amount of the Note was more than twice the amount Mark and Jennifer needed in order to purchase the Hayden Lake property. Because the district court concluded the note and deed of trust were ambiguous, it considered parol evidence to interpret them. Ultimately, the district court found the Note and Deed of Trust conveyed the Hayden Lake property to Jennifer and Mark "free and clear" upon the sale of the Woodinville property.
Annie's and Tony's estates timely appealed the district court's decisions. For the reasons set out below, we vacate the judgment of the district court and remand for further proceedings.
This case involves three generations of the Porcello family, multiple properties in three different states, and several real estate transactions between a married couple Ann Porcello (Annie) and Anthony Porcello (Tony), their son, Mark Porcello (Mark), and his now ex-wife Jennifer Porcello2 (Jennifer). As noted, both Annie and Tony died during the pendency of this dispute. Their estates have since been substituted for each of them. The personal representative of both estates is Kalyn Porcello (Kalyn), who is Mark's daughter from a previous marriage. The estates of Annie and Tony will be collectively referred to as "the Estates" in this opinion. The first names of the parties are being used to refer to them to avoid confusion with other family members who share the common surname.
The various parties’ finances, assets, and relationships are confusingly intertwined. Although the real property which is the subject of the Note and Deed of Trust in this case is the Hayden Lake property, several other properties are relevant to the underlying dispute. The first is a property located in Woodinville, Washington. Annie and Mark purchased this property jointly in 2012, with partial financing provided by Wells Fargo from a loan obtained by Annie and Tony.3 This property will be referred to as the Woodinville property. The second is a home located in Indian Wells, California, which was originally owned by Annie as her separate property. This home is situated on Via Venito, a street in Indian Wells. This property has been and will continue to be referred to as the Via Venito property. The third property is a home in Bellevue, Washington. Mark leased this property with an option to purchase it. This property will be referred to as the Bellevue property.
This case also involves three loans undertaken by Annie and Tony. The first loan—the one most closely associated with the Note and Deed of Trust in this case—was a short-term "hard money" loan provided by Legacy Group Capital (the Legacy loan) in the amount of $648,500. The Legacy loan was secured by both the Woodinville property and the Via Venito property. The second and third loans were both conventional loans provided by Evergreen Mortgage Company (Evergreen) to Annie and Tony which in many respects replaced the Legacy loan. The first Evergreen loan was collateralized by the Woodinville property. The second Evergreen loan was collateralized by the Via Venito property.
Further complicating matters is the fact that multiple generations of the Porcello family have also been involved in two jewelry businesses that were owned and operated by various family members. While the two businesses evidently used to work closely together, several conflicts arose between them that left the parties "entrenched in their respective positions[,]" as the district court put it. Litigation relating to those entities has also ensued. This ongoing litigation and the parties’ commingling of finances have also made it difficult to parse out contributions to the various real estate transactions conducted by Mark and his parents.
Finally, Mark and Jennifer themselves have been married twice and have had a turbulent relationship. Mark and Jennifer were first married from 2003 to 2007. Following their reconciliation and second marriage, which began in 2013 and ended in 2015, the Woodinville property was purchased.4 The transaction that is the subject of this case—purchase of the Hayden Lake property—was entered into during Mark and Jennifer's second marriage. Mark and Jennifer divorced for the second time in 2017, and Jennifer was awarded ownership of the Hayden Lake home in the divorce proceedings. Jennifer continues to live there with her daughters. Notably, the district court found that, despite their "long, often acrimonious relationship[,]" Mark and Jennifer's testimony was consistent with each other's and made logical sense.
With this background, the specific facts of the case are as follows.
Mark and Annie decided to purchase a home together in Woodinville, Washington, in 2011. The purchase price was $401,000. Annie paid $93,000 as a down payment.5 Annie and Tony took out a loan from Wells Fargo for the balance and titled the Woodinville property in their names only. The district court found that Renovations were needed on the Woodinville home, to which Mark, Annie, and Jennifer each contributed, although the amounts contributed by each continue to be disputed. The district court found that Jennifer contributed sweat equity and that Mark had been reimbursed by Annie for some of the renovation costs.
In 2013, Mark and Jennifer's relationship again deteriorated; Mark moved out of the Woodinville home briefly, during which time he stopped making monthly payments on the Wells Fargo mortgage. During this period of time, Mark and Jennifer were involved in several family law issues in Washington state courts, and Annie sought to evict Jennifer from the Woodinville home. Jennifer asserted she had an equitable interest in the home; however, this interest was not...
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