Wash. Fed. Sav. v. H. Craig Van Engelen And
| Decision Date | 16 November 2012 |
| Docket Number | No. 38484.,38484. |
| Citation | 153 Idaho 648,289 P.3d 50 |
| Court | Idaho Supreme Court |
| Parties | WASHINGTON FEDERAL SAVINGS, a United States Corporation, Plaintiff–Respondent, v. H. Craig VAN ENGELEN and, Kristen Van Engelen, Defendants–Appellants. |
Banducci Woodard Schwartzman PLLC, Boise, attorneys for appellants. Thomas Banducci argued.
Wishney Law, Boise, attorneys for respondent. Terry C. Copple argued.
Two real estate developers, a husband and wife, operated through various entities including a corporation and an LLC. In 2002, the corporation borrowed money from a lender; the developers, in their individual capacities, guaranteed this loan and all future advances. The corporation promptly repaid this loan. In 2005, the LLC twice borrowed money from the same lender. The lender originally insisted on a personal guaranty for these loans, but, in order to secure the developer's business, stated that no personal guaranty would be required.
In 2006–07, the corporation again borrowed money from the lender in six separate loans. The corporation defaulted on these six loans, and, after the lender foreclosed on the real estate that served as collateral for the loans, the lender sued the developers for the deficiency. The district court granted the lender's motion for summary judgment, holding that the developers' affirmative defenses (1) were barred by the statute of frauds, (2) failed for lack of consideration, and (3) raised no genuine issues of material fact. The developers timely appealed to this Court. We hold that the developers' affirmative defenses are neither barred by the statute of frauds nor fail for lack of consideration. However, because none of those defenses raise a genuine issue of material fact, we affirm.
Henry Craig Van Engelen and Kristen Lee Van Engelen (collectively "the Van Engelens"), a husband and wife, are experienced real estate developers. Due to the procedural posture of this case, we construe the following facts in their favor. The Van Engelens finance their projects through Van Engelen Development, Inc. ("VED"), of which they are the controlling shareholders, and Northwest Development Company, LLC ("NWD"), of which they are the controlling members.
In 2002, VED borrowed $126,000 from Washington Federal Savings ("Washington Federal"). The Van Engelens, in their individual capacities, personally guaranteed VED's repayment—as well as the repayment of any future advances by Washington Federal to VED—through a document titled "Continuing General Guaranty Agreement" (the "Continuing Guaranty"). The Van Engelens waived notice of such future advances, but retained the right to stop guaranteeing new loans made to VED by sending a written notice to Washington Federal. The Continuing Guaranty never mentioned NWD. VED paid back the 2002 loan in full within one year.
The Van Engelens forgot that they signed the Continuing Guaranty, which is unsurprising given that Mr. Van Engelen typically did not read such documents. Because they forgot about the Continuing Guaranty, the Van Engelens never sent a termination notice to Washington Federal in order to avoid personal liability for later loans to VED. In late 2004, Washington Federal approached the Van Engelens to solicit their business, without specifying whether it wished to loan money to NWD or VED. Soon thereafter, the Van Engelens learned of the proposed sale of a multimillion-dollar real estate development and construction project, the Carriage Hill Development Phases Three and Four (the "Carriage Hill Project"). After negotiating an agreement with the seller to purchase the Carriage Hill Project, the Van Engelens solicited proposals from various lenders, including Washington Federal.
In early 2005, Washington Federal submitted a proposal that would have required the Van Engelens to sign a personal guaranty. The Van Engelens refused, explaining that they had decided not to sign any more personal guarantees. Washington Federal accepted this condition and, as a result, NWD accepted two loans from Washington Federal. Upon signing one of the loans, Mr. Van Engelen asked whether there were "personal guarantees associated with this loan." A Washington Federal employee assured him that there were none, due to the Van Engelens' longstanding relationship with Washington Federal and the longevity of their company. At some point, the Van Engelens became confused about which entity received the 2005 loans. In affidavits submitted in 2010, the Van Engelens erroneously stated that these loans were to VED. In fact, these loans were made to NWD, and Washington Federal has not alleged that the Continuing Guaranty applies to these loans.
In 2006 and 2007, Washington Federal extended six loans to VED for development of the Carriage Hill Project. Washington Federal never reminded the Van Engelens of the existence of the Continuing Guaranty, although it customarily gave such a reminder. Eventually, VED defaulted on the six loans; after a foreclosure sale, a deficiency of $4,452,809.67 remained.
Washington Federal sued the Van Engelens for the balance on the 2006–07 VED loans pursuant to the Continuing Guaranty. The district court granted Washington Federal's Motion for Summary Judgment, rejecting the Van Engelens' numerous affirmative defenses. Ruling from the bench, the district court construed the Van Engelens' affirmative defenses as attempts to modify the Continuing Guaranty, and held that those defenses were barred by the statute of frauds and failed for lack of consideration. Separately, the district court recognized that the assurances regarding the 2005 NWD loans were irrelevant to the 2006 and 2007 VED loans because NWD and VED were separate entities. The district court rejected all of the Van Engelens' affirmative defenses, held that no genuine issues of material fact remained, and entered a final judgment from which the Van Engelens timely appealed to this Court.
A. Are the Van Engelens' affirmative defenses barred by the statute of frauds?
B. Do the Van Engelens' affirmative defenses fail for lack of consideration?
C. Do the Van Engelens' affirmative defenses present any genuine issues of material fact?
D. Is either party is entitled to attorney's fees on appeal?
"When reviewing a grant of summary judgment, this Court applies the same standard of review used by the district court in ruling on the motion." Mortensen v. Stewart Title Guar. Co., 149 Idaho 437, 441, 235 P.3d 387, 391 (2010). A grant of summary judgment is warranted 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 a judgment as a matter of law." I.R.C.P. 56(c). The moving party bears the burden of proving the absence of any issue as to any material fact. Blickenstaff v. Clegg, 140 Idaho 572, 577, 97 P.3d 439, 444 (2004). The facts must be liberally construed in favor of the non-moving party. Renzo v. Idaho State Dep't of Agric., 149 Idaho 777, 779, 241 P.3d 950, 952 (2010).
A. The Van Engelens' Affirmative Defenses Are Not Barred by the Statute of Frauds.
Idaho's statute of frauds requires most guaranty agreements to be evidenced by a writing signed by the guarantor. See I.C. § 9–505(2) ; I.C. § 9–506 (exceptions). Modifications to a contract may fall within the statute of frauds. See Southern v. Southern, 92 Idaho 180, 181–82, 438 P.2d 925, 926–27 (1968) ; USA Fertilizer, Inc. v. Idaho First Nat'l Bank, 120 Idaho 271, 275–76, 815 P.2d 469, 473–74 (Ct.App.1991) ; see also Best v. Edwards, 217 Ariz. 497, 176 P.3d 695, 699–700 (Ariz.Ct.App.2008) (collecting cases); Salt Lake City Corp. v. Big Ditch Irrigation Co., 258 P.3d 539, 549 (Utah 2011).
The Van Engelens do not allege that the Continuing Guaranty was modified. A modification, like a contract, requires a meeting of the minds. Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 112 P.3d 81, 93 (2005) ; Richard Barton Enters. v. Tsern, 928 P.2d 368, 373 (Utah 1996) ; Jones v. Best, 134 Wash.2d 232, 950 P.2d 1, 5 (1998) ; see also Thomas v. Thomas, 150 Idaho 636, 645, 249 P.3d 829, 838 (2011) (). Here, the Van Engelens did not recall signing the Continuing Guaranty, and therefore could not have had a meeting of the minds with Washington Federal regarding its modification. Their defenses are not based on changing the terms of the Continuing Guaranty. Rather, the Van Engelens allege that the Continuing Guaranty is unenforceable, or, if it is enforceable, that Washington Federal is not entitled to all of the damages that the district court awarded. Such defenses are not subject to the statute of frauds. See Ogden v. Griffith, 149 Idaho 489, 495, 236 P.3d 1249, 1255 (2010) (equitable estoppel); Garner v. Bartschi, 139 Idaho 430, 437, 80 P.3d 1031, 1038 (2003) (quasi estoppel); Burton v. Atomic Workers Fed. Credit Union, 119 Idaho 17, 22, 803 P.2d 518, 523 (1990) (equitable estoppel); Idaho Migrant Council, Inc. v. Nw. Mut. Life Ins. Co., 110 Idaho 804, 806–07, 718 P.2d 1242, 1244–45 (Ct.App.1986) (waiver).
Washington Federal claims that USA Fertilizer, Inc. v. Idaho First Nat'l Bank, 120 Idaho 271, 815 P.2d 469 (Ct.App.1991) is to the contrary. However, none of the affirmative defenses that the Van Engelens have raised were at issue in USA Fertilizer. Rather, the Court of Appeals held that the statute of frauds applied only "to the extent" that one of the parties argued that the terms of a written contract were changed by a subsequent telephone conversation. See id. at 275, 815 P.2d at 473.
Only one of the Van Engelens' defenses might be subject to the statute of frauds: their argument that the parties did not intend the Continuing Guaranty to apply to the 2006–07 VED loans. It is...
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