Valiant Idaho, LLC v. VP Inc.

• Decision Date: 01 November 2018
• Docket Number: Docket No. 44585
• Citation: 164 Idaho 314,429 P.3d 855
• Court: Idaho Supreme Court
• Parties: VALIANT IDAHO, LLC, an Idaho limited liability company, Third Party Plaintiff-Cross Claimant-Respondent, v. VP INCORPORATED, an Idaho corporation, Defendant-Cross Defendant-Appellant.

164 Idaho 314

429 P.3d 855

VALIANT IDAHO, LLC, an Idaho limited liability company, Third Party Plaintiff-Cross Claimant-Respondent,

v.VP INCORPORATED, an Idaho corporation, Defendant-Cross Defendant-Appellant.

Docket No. 44585

Supreme Court of Idaho, Boise, June 2018 Term.

Filed: November 1, 2018

James, Vernon & Weeks, P.A., Coeur d'Alene, attorneys for appellant. Susan P. Weeks argued.

McConnell, Wagner, Sykes & Stacey, PLLC, Boise, attorneys for respondent. Richard L. Stacey argued.

BEVAN, Justice.

This is an appeal of a complex real estate foreclosure and lien priority lawsuit. The appellant VP Inc. ("VP") claims that the district court erred in multiple ways and that this case should be remanded for further proceedings. We affirm in part and vacate and remand in part.

I. FACTS AND PROCEDURE

This appeal arises from a failed golf course development project in Bonner County known as "The Idaho Club" undertaken by Pend Oreille Bonner Development, LLC ("POBD"). POBD took out several loans to finance the development of The Idaho Club and subsequently defaulted on them, failed to pay mechanics and materialmen for their services, and failed to pay Bonner County real property taxes.

On October 13, 2009, Genesis Golf Builders, Inc. ("Genesis Golf") filed a complaint, in part alleging breach of contract and seeking to foreclose on its mechanic's and materialman's liens against POBD's property interest in The Idaho Club. In its complaint, Genesis Golf also named seventeen other individuals and entities as defendants that may have had property interests in The Idaho Club—which included VP. Cross-claims and counterclaims were alleged by several defendants.

During this litigation, three lending companies, R.E. Loans, LLC ("REL"), Pensco Trust Co. ("Pensco") and Mortgage Fund '08 ("MF08") (the "three lenders") assigned and/or sold all of their right, title, and interest in their three loans with POBD to Valiant Idaho, LLC ("Valiant"). The loans were secured by three mortgages (collectively the "Valiant Mortgages") that provided parcels of The Idaho Club as collateral. VP had an interest in certain lots containing water and sewer infrastructure (the lagoon lots and the well lots) and it held utility easements for the same. VP obtained its interest in The Idaho Club from quitclaim deeds to four parcels and an alleged equitable servitude and prescriptive easements.

When Valiant purchased the REL mortgage and the Pensco mortgage, property taxes for tax years 2008-2014 were unpaid and outstanding against the real property securing the loans. Valiant redeemed the real property subject to Bonner County's tax deeds by paying the outstanding property taxes on The Idaho Club, and in exchange received and recorded a redemption deed in Bonner County. Valiant subsequently filed motions for substitution, allowing it to be substituted as the real party in interest for the three lenders. Valiant later amended its answer and filed a counterclaim, cross-claims, and a third-party complaint for judicial foreclosure against POBD, VP, and others.

On November 19, 2014, POBD stipulated to entry of judgment against itself. POBD stipulated that it owed certain balances on the REL debt, the Pensco debt, and the MF08 debt. It also stipulated that Valiant had paid property taxes.

On January 20, 2015, Valiant filed its first motion for partial summary judgment against VP and two other defendants JV, LLC ("JV") and North Idaho Resorts, LLC ("NIR"), seeking a ruling that its assigned mortgages had priority over any other defendant's property interest in The Idaho Club and seeking "a judgment that Valiant's interest in a portion of the Idaho Club property described in a redemption deed is senior to any right, title and interest of" VP. In response, VP filed the affidavit of Richard Villelli, VP's president, along with a memorandum in opposition. VP claimed that summary judgment was not appropriate for three reasons: (1) one of its parcels was not encumbered by the MF08 mortgage; (2) VP had prescriptive easement rights stemming from its infrastructure for the prescriptive period; and (3) VP had an equitable servitude upon the lots where its sewer lagoon, water systems, and pumping stations were located.

On April 14, 2015, the district court granted Valiant's motion for summary judgment, ruling that VP's interests were junior to the Valiant Mortgages as a matter of law and that the amount Valiant paid to redeem the property could be included with the amount due under the 2007 REL note. On April 29, 2015, VP filed its first motion for reconsideration without a supporting memorandum. This motion was never noticed for hearing. Valiant then filed what it deemed a "motion for entry of final judgment" on May 20, 2015, which requested that the district court: (1) make a determination of the real property described in the Valiant Mortgages and redemption deed; and (2) enter a judgment allowing foreclosure and sale of the encumbered property. This motion was filed and served more than 28 days before the hearing, so the court treated the motion as a second motion for summary judgment. The motion was accompanied by the declaration of C. Dean Shafer ("Shafer"), who was Valiant's title expert.

On June 16, 2015, the day before the hearing on Valiant's motion for entry of final judgment, VP filed a second motion for reconsideration, entitled "renewed motion for reconsideration and clarification." VP's second motion to reconsider was unsupported by additional evidence or testimony. VP filed no opposition to the motion for entry of final judgment, nor did it dispute the accuracy of Mr. Shafer's declaration. Yet at the hearing on Valiant's motion, VP argued that the motion was unfairly prejudicial. VP argued that Valiant had not proved sufficient foundation to foreclose upon the real property described in Valiant's original motion for partial summary judgment. It also asserted that Valiant did not assert priority over VP's alleged prescriptive easements and equitable servitude.

On June 23, 2015, the district court entered its memorandum decision and order granting Valiant's motion for entry of final judgment. The district court held that

VP failed to file any briefs or affidavits in opposition to Valiant's motion for entry of final judgment, as required by Rule 7(b)(3)(B) and (E). If the defendants wanted to dispute the legal description set forth in the Declaration of C. Dean Shafer, the proper mechanism was to file an opposing affidavit setting forth facts to the contrary. Having failed to do so, the Declaration of C. Dean Shafer stands on the record uncontroverted as to the issue of the proper legal description.

On July 21, 2015, the district court entered a memorandum decision and order denying VP's two motions to reconsider. In that memorandum the district court held:

To date, Mr. Shafer's testimony in the Shafer Declaration establishing which properties Valiant has priority and seeks to foreclose still remains uncontroverted. This [c]ourt has not received any opposing affidavit specifically controverting the legal description put into evidence by the Shafer Declaration.

The court also noted in a footnote that "[i]f the defendants wanted to dispute the legal description set forth in the Declaration of [Mr.] Shafer, the proper mechanism was to file an opposing affidavit setting forth facts to the contrary. Having failed to do so, the Declaration of [Mr.] Shafer stands on the record uncontroverted as to the issue of the proper legal description." The court also held that VP's claims for prescriptive easements and an equitable servitude did not survive summary judgment because VP failed to present sufficient evidence to establish a genuine issue of material fact as to those claims.

On July 22, 2015, Valiant filed a motion for order of sale of real property seeking to have the parcels encumbered by the Valiant mortgages sold together at the foreclosure sale and asking the court to determine the order in which the lots/parcels should be sold. This motion included a second Shafer declaration. The court granted Valiant partial relief. Valiant then moved to alter or amend the district court's order for sale which included a third Shafer declaration. VP responded that Shafer's third declaration created issues of fact about which real property was encumbered by the Valiant Mortgages.

On July 30, 2015, another defendant, JV, filed one more motion to reconsider the district court's order denying VP's second motion to reconsider. On August 4, 2015, VP introduced another declaration of Richard Villelli in opposition to the order of sale. On August 19, 2015, VP filed its third motion to reconsider, dubbed "North Idaho Resorts, LLC and VP, Inc.'s motion to reconsider and motion to alter and amend judgment." This motion argued that VP's alleged prescriptive easements and equitable servitude survived summary judgment because its opposition to the motion for partial summary judgment raised genuine issues for trial. The third motion to reconsider challenged no aspect of the final judgment order nor did it include any additional testimony.

On September 4, 2015, the district court granted JV's motion to reconsider, which nullified the court's prior decisions respecting the description of the real property subject to the Valiant Mortgages. The court held there was "a genuine issue of material fact as to the legal description based upon Mr. Shafer's altered opinion...." The court cautioned the defendants, however, that "if they will be disputing the accuracy of Mr. Shafer's legal description, they must comply fully with expert witness disclosure requirements." The court's order effectively nullified the district court's prior decisions respecting the description of the real property subject to the Valiant Mortgages. The court's order also specified that the "July 21st memorandum decision [is] affirmed in all other respects."

Valiant then filed a third motion for summary judgment on September 25, 2015,...