Appeal from the District Court of the Fifth Judicial District of the State of Idaho, in and for Blaine County. The Hon. Robert J. Elgee, District Judge.
The opinion of the court was delivered by: Eismann, Justice.
The judgment of the district court is reversed in part and affirmed in part.
This is an appeal from a judgment holding that a vendee's lien created in connection with a rescinded real estate contract had priority over a deed of trust that the vendor had granted to a bank to secure a loan to the vendor to construct a house on the property; awarding the vendee interest on her payments under the real estate contract; and awarding the vendee attorney fees pursuant to Rule 37(c) of the Idaho Rules of Civil Procedure. We reverse the part of the judgment holding that the vendee's lien secures accrued interest that the vendee is entitled to recover from the vendor and affirm the remainder of the judgment.
On June 7, 2007, Leslie Benz (Buyer) entered into a contract to purchase for the sum of $2,743,500 a townhouse that was to be constructed in Ketchum. The seller under the contract was designated as "Rutherford and/or Assigned to the development LLC 'East Avenue Bluff, LLC,' " which was a limited liability company of which John Rutherford and Stacey (Belton) Rutherford, husband and wife, were the sole members. Ms. Rutherford signed the contract, but it provided that the seller's interest would be assigned to East Avenue Bluff, LLC (Seller) on June 11, 2007, and it was so assigned. Ms. Rutherford was a managing agent of the limited liability company. She was also the listing agent for the real property, and the Rutherfords were part owners of the listing broker, Sun Valley Brokers, LLC.
The contract required Buyer to make three, nonrefundable payments of earnest money, which were to be applied to the purchase price. The first was $100,000 to be paid before June 8, 2007, and the second was $400,000 to be paid on or before June 21, 2007. Those payments were to be delivered to Sun Valley Brokers, LLC, and deposited into its trust account. Buyer made the first payment when she signed the contract and the second payment on June 25, 2007. The contract provided that the first two payments would be released to Seller "upon the simultaneous closing of the acquisition of the Property by Seller from a third party seller." On August 29, 2007, Buyer and Seller signed an addendum stating that those payments are to be released to Seller "non refundable on or before 08/30/2007." The third earnest money payment was $250,000 to be paid to Seller on or before November 1, 2007.
Seller sought a construction loan from the Ketchum branch of D. L. Evans Bank (Bank) in the sum of $2,650,000. Bank's internal documents show that it knew of the contract between Seller and Buyer; of Buyer's payment of earnest money totaling $500,000; and of the third earnest money payment of $250,000 due by November 1, 2007. On August 29, 2007, Seller obtained the construction loan from Bank in the sum of $2,650,000. As security for the loan, Seller executed a deed of trust granting Bank a lien in the property upon which the townhouse was to be constructed and an adjoining lot upon which Seller was to construct another townhouse. Bank recorded the deed of trust on August 30, 2007. Bank also required that the Rutherfords guarantee the loan. On November 13, 2007, Buyer made the final earnest money payment of $250,000.
The construction of Buyer's townhouse was substantially completed and the sale was scheduled to close on February 6, 2009. Just prior to closing, Buyer was informed that the Rutherfords had filed bankruptcy. It was also discovered that Seller had failed to pay in excess of $213,000 in construction expenses. As a result, the closing did not occur as scheduled. Between February 10, 2009, and May 7, 2009, numerous mechanics' and materialmen's liens were filed against the property. Buyer conducted negotiations with Seller until June 2009 in an attempt to see if Buyer could obtain clear title and still purchase the townhouse, but those negotiations were unfruitful. On July 7, 2009, Buyer gave Seller written notice that the contract was rescinded "for failure of consideration, failure to provide marketable and insurable title, and failure to timely close the transaction," and Buyer demanded return of the $750,000 in earnest money that she had paid.
The earnest money was not returned, and on August 12, 2009, Buyer commenced this action against Bank and various lienholders to foreclose her vendee's lien. Default judgments were entered against the holders of the mechanics' and materialmen's liens.
Bank commenced non-judicial foreclosure proceedings of its deed of trust. Pursuant to the stipulation of the parties, the district court entered an order on February 10, 2010, providing, in part, that the trustee's sale could proceed and that if Bank purchased the property at the sale, it would pay Buyer the amount, if any, that her vendee's lien had priority over Bank's deed of trust. Bank then purchased the property at the sale.
On April 5, 2010, Buyer moved for summary judgment against Bank. The district court heard oral argument on the motion on May 3, 2010, and orally announced that it would grant the motion. On May 18, 2010, Buyer filed a memorandum of costs seeking an award of court costs and an award of attorney fees in the sum of $34,980.00 pursuant to Idaho Code section 12- 120(3). On May 27, 2010, Bank filed a motion to disallow the requested attorney fees on the ground that section 12-120(3) did not apply.
On May 19, 2010, the district court entered a written order granting Buyer's motion for summary judgment. In the order, the court also stated that Buyer was entitled to prejudgment interest at the rate of 12% per annum from February 6, 2009, the date the sale transaction was scheduled to close. On May 27, 2010, Bank filed a written objection to the prejudgment interest.
On June 29, 2010, the district court heard the issue of court costs, attorney fees, and prejudgment interest. In an order entered on July 12, 2010, it granted Bank's motion to disallow Buyer's request for an award of attorney fees. The court also held that Buyer's vendee's lien had priority over Bank's deed of trust and that the amount of the vendee's lien was the total of Buyer's payments; interest on those payments from February 6, 2009, the date of Seller's default; and court costs. The court entered judgment in favor of Buyer on July 12, 2010.
On July 12, 2010, Buyer filed a motion for an award of attorney fees in the sum of $16,920 pursuant to Rule 37(c) of the Idaho Rules of Civil Procedure. The basis of the motion was that Bank had denied a request for admission asking it to "[a]dmit that D.L. Evans Bank knew, or should have known, the terms of the purchase and sale contract between East Avenue Bluff, LLC and Leslie Benz, including the payment release provisions and dates, prior to closing on its loan to East Avenue Bluff LLC." After the parties had briefed and argued the motion, the district court entered an order on October 4, 2010, holding that Buyer was entitled to an award of attorney fees for Bank's failure to admit the request for admission and it awarded Buyer attorney fees in the sum of $9,915 as expenses incurred in proving the truth of the matter. On February 8, 2011, the court entered an amended judgment adding the attorney fee award to the prior judgment. Bank timely appealed both judgments.
Were There Genuine Issues of Material Fact that Precluded the Granting of Buyer's Motion for Summary Judgment?
Bank lists as an issue on appeal, "Were there factual questions appearing in the record or unsupported findings of fact, making entry of the summary judgment improper?" Bank contends that there are material facts that were unsupported by evidence in the record. Summary judgment is appropriate only if the evidence in the record and any admissions show that there is no genuine issue of any material fact regarding the issues raised in the pleadings and that the moving party is entitled to judgment as a matter of law. Infanger v. City of Salmon, 137 Idaho 45, 47, 44 P.3d 1100, 1102 (2002). In arguing that summary judgment was improper, Bank points to various statements of the district court that it contends were not supported by any evidence in the record.
The first challenged statement is that the district court allegedly said, "$500,000.00 got paid and applied right to the bank's deed of trust." Actually, the court never made that statement. Apparently, Bank's counsel is used to reading condensed transcripts that have the pages arranged vertically, rather than horizontally. Counsel combined the last five words on page 74 ("It [$500,000] got paid and applied") with the first seven words on page right below it, which was page 76 ("right to the bank's deed of trust."), thus taking the first part of one sentence and the last part of another to create a quotation the district court never said. The complete sentence that begins on page 74 is, "It [$500,000] got paid and applied just as plaintiff's contract called for it to be paid and applied, which was to allow East Avenue Bluff to purchase the lot that the bank looked to for their security." The sentence that begins on page 75 and ends at the top of page 76 is as follows, "I only have to determine that Ms. Benz's lien is prior in time and right to the bank's deed of trust."
Bank challenges several statements reflecting the district court's belief that Seller used Buyer's payments totaling $400,000 to purchase the real property upon which the townhouse was to be constructed. When orally explaining its decision to grant Buyer's motion for summary judgment, the district court made various challenged statements that are highlighted below in context.
There was $400,000 used of the - of Ms. Benz's money to purchase the lot. And I agree with Ms. Wygle that in order for East Avenue Bluff to borrow the money from the bank, the bank knew how this arrangement between East Avenue Bluff and Ms. Benz was going to work, and the bank knew that before East Avenue Bluff would have title to the property and before their deed of trust would attach to the property, East Avenue Bluff had to close the property - had to close on the sale from the party they were buying it from, and they used - that was known to the bank that they were - that East Avenue Bluff was using Ms. Benz's money to do that. That's how and why the bank went along with this deal. They knew where the money was coming from Ms. Benz and how it was being used and how East Avenue Bluff was using it.
Bank also challenges the district court's statement in its order granting summary judgment that "Plaintiff's payments were used to acquire or improve the subject real property which fact was known and relied upon by the Bank."
The contract included a provision stating, "Buyer understands that Seller shall use deposit proceeds to secure the Property and to develop it with four townhomes," but Bank is correct that there is nothing in the record indicating that Seller actually used Buyer's earnest money payments to acquire and improve the land upon which the townhouse was to be constructed. However, immaterial issues of fact do not prevent the granting of summary judgment. J.R. Simplot Co. v. Bosen, 144 Idaho 611, 615, 167 P.3d 748, 752 (2006). What Seller did with the funds paid by Buyer pursuant to the contract has nothing to do with whether Buyer has a vendee's lien.
The next challenged statement by the district court, highlighted in the following quotation, is, "Here the bank knew of and benefited and expected to benefit from Ms. Benz making that last contractual payment and had a provision in their loan agreement with East Avenue Bluff as to when and how that payment would be distributed." Bank asserts, "It was uncontroverted that no $250,000.00 payment was made to D.L. Evans Bank." Bank challenges the district court's statement by mischaracterizing what the district court said. The court did not state that Buyer made any payment to Bank, or that Bank ultimately received the entire payment of $250,000. It said that Bank knew of, benefited from, and expected to benefit from that payment.
In opposition to Buyer's motion for summary judgment, Bank filed the affidavit of Bruce Hunsaker, a Bank vice president, who averred that he is custodian of Bank's file, that at all times relevant he was a member of the senior loan committee, and that he had personal knowledge of the proceedings leading up to Bank's approval of the loan. Attached to his affidavit was an internal bank document stating that approval of Bank's loan to Seller was contingent upon the requirement that "[w]hen the additional $250,000 earnest money is received, $182,000 will be applied to the loan." Thus, a portion of the $250,000 payment was to be applied by Seller to its loan from Bank. However, in his deposition Mr. Hunsaker stated that Seller did not make any payments to Bank. Thus, although Bank knew of and expected to benefit from the $250,000 payment, it apparently did not actually benefit from that payment. Nonetheless, whether Seller actually paid the Bank the $182,000 is immaterial. The vendee's lien is not dependent upon any of vendee's funds being paid to a subsequent encumbrancer, such as Bank.
The final challenged statement made by the district court during the hearing was, "They had the contract between East Avenue Bluff, LLC and Ms. Benz." Bank asserts, "There was absolutely nothing in the record before the trial court relating to a copy of the contract being in the possession of D.L. Evans Bank at any time." This statement by Bank's counsel would charitably be described as disingenuous.*fn1
In stating that Bank had the contract, the district court may simply have relied upon Bank's memorandum in opposition to Buyer's motion for summary judgment, wherein Bank's counsel wrote: "Early in the loan approval process, D. L. Evans Bank was made aware of the Benz contract to purchase the property. They required a copy of the contract and the addendum, which was included in the loan file and considered by the senior loan committee in approving the loan." (Emphasis added.) Now, Bank's counsel contends that Bank never had a copy of the real estate contract. Nevertheless, there was evidence in the record supporting the district court's statement.
An internal memorandum of Bank that was written by its loan officer and dated July 25, 2007, states: "The purchaser Leslie Benz will have contributed $500,000 non-refundable earnest money at closing of the land purchase. Mrs. Benz will also deposit an additional $250,000 on or before November 1st, 2007 as indicated in the purchase agreement." (Emphasis added.) The loan officer would not have known what was shown by the purchase agreement unless he had a copy of it.*fn2 During his deposition, Mr. Hunsaker was questioned about a statement in a memorandum dated July 31, 2007, prepared a Bank loan analyst who wrote that "[t]he home has been pre sold to Leslie Benz for $2.744MM, who has already committed $500M of non refundable earnest money to the project, with an additional $250M on or before November 1st." Mr. Hunsaker was asked, "How would the loan officer know about the pre-sale?," and he answered, "From the contract." In Mr. Hunsaker's affidavit filed by Bank in opposition to the motion for summary judgment, he stated: "Early in the loan approval process, D.L. Evans Bank was made aware of the Benz contract to purchase the property. The Senior Loan Committee required a copy of the contract to be included. It also required confirmation that Ms. Benz's financial condition would allow her to complete the purchase." (Emphasis added.) Thus, at some point prior to making the loan, the Bank's records show that it reviewed the contract, and that fact was confirmed by Mr. Hunsaker.
Did the District Court Err in Holding that Buyer's Vendee's Lien Had Priority Over Bank's Deed of Trust?
Idaho has a statutory vendee's lien set forth in Idaho Code sections 45-803 and 45-804, which provide as follows:
[45-803] The liens of vendors and purchasers of real property are valid against every one claiming under the debtor, except a purchaser or ...