Valiant Idaho, LLC v. JV L. L.C.

• Decision Date: 15 October 2018
• Docket Number: Docket No. 44584
• Citation: 164 Idaho 280,429 P.3d 168
• Court: Idaho Supreme Court
• Parties: VALIANT IDAHO, LLC, an Idaho limited liability company, Third Party Plaintiff-Cross Claimant-Respondent, v. JV L.L.C., an Idaho limited liability company, Defendant-Third Party Defendant-Cross Defendant-Appellant.

164 Idaho 280

429 P.3d 168

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

v.JV L.L.C., an Idaho limited liability company, Defendant-Third Party Defendant-Cross Defendant-Appellant.

Docket No. 44584

Supreme Court of Idaho, Boise, June 2018 Term.

Filed: October 15, 2018

Finney, Finney & Finney, P.A., Sandpoint, attorneys for Appellant. John A. Finney argued.

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

BEVAN, Justice.

JV L.L.C. ("JV") appeals, asserting that the district court erred in finding that Valiant Idaho, LLC ("Valiant") held a priority position in mortgages on real property located in Sandpoint, Idaho. JV also appeals the district court's award of costs against it, as well as a judgment by the district court that awarded sanctions against JV and its attorney. We affirm in part and vacate in part.

I. FACTS AND PROCEDURE

This is a foreclosure and lien priority case arising out of a failed golf course and residential housing development project in Sandpoint, Idaho (commonly known as the Idaho Club). The developer of the real property, Pend Oreille Bonner Development, LLC ("POBD"), took out several loans on the real property, agreed to promissory notes, and mortgaged the Idaho Club real property with several lenders, including JV and, as relevant to this appeal, three other lenders: RE Loans ("REL"), LLC, Pensco Trust Co., and Mortgage Fund ’08 LLC ("MF08") (collectively, the three "lenders"). JV's interest in the Idaho Club arose out of a mortgage (the "JV Mortgage") it recorded against five parcels (the "five parcels") on the Idaho Club property that JV sold to POBD. POBD ultimately defaulted on its obligations on the promissory notes associated with the mortgages. In addition to defaulting on the notes, POBD failed to pay property taxes to Bonner County (the "County") for several years and failed to pay various mechanics and materialmen, one of which was Genesis Golf Builders, Inc. ("Genesis").

Genesis sued POBD and others, including the three lenders, on October 13, 2009. It alleged breach of contract and sought to foreclose on its mechanic's lien against POBD's property interest in the Idaho Club. Cross-claims and counterclaims were alleged by several defendants. After two years of motion practice and an almost two-year bankruptcy stay, litigation resumed and Genesis’ claims were dismissed with prejudice. The three lenders successfully defended the priority of their respective mortgages against all of these claims and cross-claims. The district court called this part of the litigation the "Genesis Suit."

While the Genesis Suit was pending, in June-July 2014, REL, Pensco, and MF08 sold and/or assigned their interests in the Idaho Club to Valiant. The sale included promissory notes, loan documents, and the mortgages (collectively, the "Valiant Mortgages."). When Valiant purchased the REL mortgage and the Pensco mortgage, property taxes for tax years 2008-2014 were unpaid and outstanding against the Idaho Club real property. The County had already levied upon the real property and issued tax deeds in its favor. On July 2, 2014, prior to a tax sale by Bonner County, JV redeemed a portion of the Idaho Club golf course by payment of $140,999.86. In exchange for this payment, JV received a Redemption Deed from the County that was recorded in the Bonner County Recorder's Office on July 7, 2014. On that same date, Valiant redeemed the remainder of the real property subject to the County's tax deeds for a payment of $1,665,855.14. In exchange for this payment Valiant received a Redemption Deed from the County that was recorded on July 8, 2014.

Valiant entered the litigation by substituting itself as the real party in interest for the three lenders and it filed a Counterclaim, Cross-Claim, and Third-Party Complaint for Judicial Foreclosure against POBD, as well as to foreclose any interest that JV and others held in the Idaho Club. The district court called this part of the litigation the "Valiant Foreclosure." Extensive motion practice then ensued, which included a motion for summary judgment against JV, VP, Inc. ("VP") and North Idaho Resorts, LLC ("NIR").

Valiant's motion sought to establish that any rights retained by JV in the Idaho Club Property pursuant to the JV Mortgage were junior in right, title, and interest to Valiant's interest in the Idaho Club Property. Valiant based its argument on the fact that JV recorded subordination agreements that expressly subordinated its mortgage to Valiant's mortgages. The district court agreed, granting Valiant's motion for summary judgment, ruling that "it is undisputed that any rights retained by JV in the Idaho Club Property pursuant to the JV Mortgage are junior in right, title, and interest to Valiant's interest in the Idaho Club Property."

JV filed multiple motions for reconsideration, claiming several things. In one motion it claimed that it was subrogated to the first lien position the county had held for unpaid taxes under Idaho Code section 45-114. Another motion to reconsider raised several more issues. The district court granted that motion on two discrete questions that are not relevant to this appeal, namely whether the 2007 REL loan and Pensco notes had been satisfied and whether the legal description of the real property was legally sufficient. Even so, the court reaffirmed its prior decision relative to section 45-114 and confirmed the priority of Valiant's mortgages.

On July 20, 2016, after a four-day court trial, Valiant was awarded a judgment against POBD¹ in the amount of $21,485,212.26. The judgment also declared that Valiant's mortgages were prior in right, title, and interest to JV's mortgage and Redemption Deed. On the same day, the district court also entered a Decree of Foreclosure ordering the sale of one hundred fifty-six parcels of real property secured by Valiant's mortgages to satisfy the judgment. On August 22, 2016, the court awarded Valiant attorney fees against POBD in the amount of $731,275.48 and costs in the amount of $4,961.98. Also, "because POBD did not defend against the Valiant Foreclosure or participate adversely to Valiant at trial," the court assessed the remaining "costs as a matter of right and discretionary costs incurred by Valiant in the Valiant Foreclosure against JV, VP, and NIR in the total sum of $41,479.69. JV's portion of the costs totaled $15,554.88.

The Bonner County Sheriff noticed the sale of the Foreclosed Property to occur on November 7, 2016. On October 17, 2016, the Sheriff sent letters notifying all interested parties of the sale and posted/published the notice of sale. On November 2, 2016, just days before the sheriff's sale, JV filed a Motion and Application for Stay upon Posting a Cash Deposit and a Third Party Claim seeking to postpone the sale. Valiant responded the next day by filing a motion contesting the stay with supporting documents. Valiant also moved for sanctions against JV and its counsel. The district court held an expedited hearing on November 4, 2016 and dismissed JV's motion and third party claim with respect to the foreclosed property. On November 14, 2016, the district court entered its memorandum decision and order granting Valiant's motion for sanctions, ruling that JV's attempt to postpone the sheriff's sale at the last minute was "(1) ... presented for [ ] improper purposes, such as to harass, cause unnecessary delay, or needlessly increase the costs of litigation; [and] (2) the claims, defenses, and other legal contentions [therein] were not warranted by existing law ...." On December 6, 2016, the district court awarded Valiant a judgment for sanctions in the amount of $5,724.00.

JV posted no supersedeas bond or other security to prevent Valiant from executing upon the Judgment. As such, the sheriff's sale of the foreclosed property took place as scheduled on November 7, 2016. One parcel was purchased by a third party for $70,000.00, which was paid to Valiant to reduce the judgment amounts. The remaining one hundred fifty-five parcels were purchased by Valiant after it credit bid a portion of the judgment amount. The parcels purchased by Valiant included the five parcels described on the JV redemption deed. Valiant did not credit bid the entire Judgment amount at the sale; it is still owed $165,000.00, plus interest, pursuant to the Judgment.

II. ISSUES ON APPEAL

A. Did the district court err by not subrogating JV to Bonner County's right, title, claim, and interest to the five parcels based

upon the tax deed and JV's Redemption Deed?

B. Did the district court err in awarding Valiant sanctions against JV and JV's attorney?

C. Did the district court err in awarding costs to Valiant?

D. Is Valiant entitled to attorney fees on appeal under Idaho Code section 12-121 ?

III. STANDARD OF REVIEW

This Court reviews an appeal from an order of summary judgment de novo , and this Court's standard of review is the same as the standard used by the trial court in ruling on a motion for summary judgment. When ruling on a motion for summary judgment, disputed facts are construed in favor of the non-moving party, and all reasonable inferences that can be drawn from the record are drawn in favor of the non-moving party.

Curlee v. Kootenai Cty. Fire & Rescue , 148 Idaho 391, 394, 224 P.3d 458, 461 (2008) (internal citations omitted). Although circumstantial evidence can create a genuine issue for trial, a mere scintilla of evidence is insufficient to establish the existence of a genuine issue of material fact. Callies v. O'Neal , 147 Idaho 841, 846, 216 P.3d 130, 165 (2009). This Court has stated:

[T]he moving party is entitled to a judgment when the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case on which that party will bear the burden of proof at trial.

Venable v. Internet Auto Rent & Sales, Inc. , 156 Idaho 574, 581, 329 P.3d 356,...