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Terra-West, Inc., An Idaho Corporation v. Idaho Mutual Trust

December 23, 2010

TERRA-WEST, INC., AN IDAHO CORPORATION, PLAINTIFF-RESPONDENT,
v.
IDAHO MUTUAL TRUST, LLC, AN IDAHO LIMITED LIABILITY COMPANY, DEFENDANT-APPELLANT, AND MIKE URWIN ENTERPRISES, INC., AN IDAHO CORPORATION; RED CLIFF DEVELOPMENT, INC., AN IDAHO CORPORATION; ALLOWAY ELECTRIC CO., INC., AN IDAHO CORPORATION; ELECTRIC WHOLESALE SUPPLY CO., INC., AN IDAHO CORPORATION; KRISTEN R. THOMPSON, AN INDIVIDUAL; DEFENDANTS.



Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. The Honorable Ronald J. Wilper, District Judge.

The opinion of the court was delivered by: J. Jones, Justice.

ALL PERSONS IN POSSESSION OR CLAIMING ANY RIGHT TO POSSESSION,

2010 Opinion No. 136

The order of the district court is affirmed.

Idaho Mutual Trust, LLC, appeals the order of the district court granting the motion of Terra-West, Inc., for leave to file an amended complaint. We affirm.

I. Background

In 2006, Red Cliff Development, Inc., contracted with Terra-West, Inc., to provide excavation and irrigation related labor and materials for the development of a 40-acre subdivision in Caldwell. After Terra-West commenced work on the property, Red Cliff entered into an agreement with Mike Urwin Enterprises, Inc., wherein Urwin purchased the property and assumed all obligations under Red Cliff‟s contract with Terra-West. Terra-West began work in August of 2006 and performed under the contract until November 30, 2007, at which point work was stalled until Urwin could procure governmental approval for certain irrigation projects.

On December 6, 2007, Terra-West recorded a mechanic‟s lien against the property (the first lien) because it had not been fully compensated for its work to date under the agreement with Urwin. Idaho Mutual Trust, LLC, had previously obtained an interest in the subject property evidenced by a deed of trust dated February 6, 2007. Sometime after Terra-West filed the first lien, Urwin received governmental approval to complete the work on the subdivision, and Terra-West completed the work on May 25, 2008. Because Terra-West still had not been fully paid under the agreement, on May 30, 2008, it filed an action to foreclose on the first lien, naming Idaho Mutual as a party because of its interest in the property. Idaho Mutual responded by filing a motion to dismiss pursuant to Idaho Rule of Civil Procedure (I.R.C.P.) 12(b)(6), arguing that the lien claim was defective in that it contained an acknowledgement clause rather than an oath. On September 3, 2008, the district court ruled in favor of Idaho Mutual, concluding that the statement in the lien representing that the signer was "knowledgeable of the matters stated therein and verily believes the same to be true and just" was insufficient to satisfy the requirement in Idaho Code section 45-507(4) that the lien claimant verify by oath that he or she believed the lien to be just. Idaho Mutual, however, was not dismissed from the case and the suit continued on Terra-West‟s other causes of action.*fn1

In the meantime, on August 12, 2008, Terra-West recorded a second mechanic‟s lien against the property (the second lien),*fn2 encompassing all the work Terra-West had performed up to the date of completion.*fn3 Less than six months later,*fn4 on January 16, 2009, Terra-West filed a motion with the district court for leave to file an amended complaint to foreclose the second lien. Terra-West attached a copy of the proposed amended complaint to the motion. Idaho Mutual filed a memorandum opposing the motion for leave to file the amended complaint, arguing that (1) the district court was jurisdictionally barred from enforcing the second lien because Terra-West did not commence proceedings to foreclose the lien within six months of the date the second lien was recorded as required by Idaho Code section 45-510 and (2) that the claims in the amended complaint could not relate back to the claims asserted in Terra-West‟s original complaint. The district court disagreed, holding that the second claim of lien "arises out of the transaction set forth in the original pleading [the first complaint to foreclose on the first lien] and therefore the amendment relates back to that date." While the district court discussed whether a motion for leave to amend a complaint is sufficient to commence proceedings in a mechanic‟s lien foreclosure action, the district court did not reach a conclusion on that issue. The district court granted Terra-West‟s motion to amend on April 22, 2009, and Terra-West filed the amended complaint the following day, which was more than eight months after the second lien was recorded. Idaho Mutual subsequently filed a motion in the district court for permission to file an interlocutory appeal of the district court‟s order granting Terra-West‟s motion to amend, which was denied by the district court. Idaho Mutual then sought and received permission from this Court to file an interlocutory appeal pursuant to Idaho Appellate Rule 12.

II. Issues on Appeal

I. Whether a motion for leave to amend a complaint "commences proceedings" to enforce a mechanic‟s lien pursuant to Idaho Code section 45-510.

II. Whether either party is entitled to attorney fees on appeal.

III. Discussion

A. Standard of Review

The I.R.C.P. provide that leave of court to amend a pleading shall be freely given when justice so requires. Idaho R. Civ. P. 15(a). A district court‟s decision to grant or deny a motion to amend a pleading is reviewed by this Court under an abuse of discretion standard. Indian Springs, LLC v. Indian Springs Land Inv., LLC, 147 Idaho 737, 750, 215 P.3d 457, 470 (2009). To determine whether the district court abused its discretion in granting the motion to amend, we look at whether the district court: (1) correctly perceived the issue as one of discretion; (2) acted within the boundaries of its discretion and consistent with the legal standards applicable to the specific choices available to it; and (3) reached its decision by an exercise of reason. Id.

B. Timeliness

Idaho Mutual‟s interlocutory appeal is predicated upon the notion that Terra-West‟s second lien is unenforceable because of Terra-West‟s failure to comply with the time requirements of Idaho Code section 45-510. Under the mechanic‟s lien statute, "[n]o lien . . . binds any building, mining claim, improvement or structure for a longer period than six (6) months after the claim has been filed, unless proceedings be commenced in a proper court within that time to enforce such lien." I.C. § 45-510 (emphasis added). Idaho Mutual argues that because the second lien was recorded on August 12, 2008, and the amended complaint seeking to foreclose the lien was not filed until April 23, 2009, the lien no longer existed and the district court abused its discretion in allowing Terra-West to amend its complaint. Idaho Mutual argues that Terra-West was required to initiate a separate action by filing a new complaint to foreclose the second lien, and then move to consolidate the second lawsuit with the pending action, in order to commence proceedings within the statutory time period. Terra-West, on the other hand, argues the district court was correct in holding that the second claim of lien addressed in the amended complaint arose from the same transaction as the ...


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