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First Federal Savings Bank of v. Riedesel Engineering

September 14, 2012

FIRST FEDERAL SAVINGS BANK OF
TWIN FALLS,
PLAINTIFF-APPELLANT,
v.
RIEDESEL ENGINEERING, INC., AN STEPHEN W. KENYON, CLERK IDAHO CORPORATION,
DEFENDANT-RESPONDENT,
AND
PAGE ENTERPRISES, INC., AND TITAN
COMMERCIAL CONTRACTORS, INC.,
AS SUCCESSOR BY MERGER TO PAGE
ENTERPRISES, INC.,
DEFENDANTS.



Appeal from the District Court of the Fifth Judicial District of the State of Idaho, in and for Twin Falls County. The Hon. Randy J. Stoker, District Judge.

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

2012 Opinion No. 120

The judgment of the district court is reversed.

This is an appeal out of Twin Falls County from a judgment holding that a mechanic's lien had priority over a mortgage. The judgment was predicated upon the district court's refusal to permit the mortgagee to withdraw an admission made in open court by its counsel that the mechanic's lien was valid. We reverse the district court and hold that the mechanic's lien was invalid because the lien does not show that it was verified before a person entitled to administer oaths.

I.

Factual Background.

In 2006, Page Enterprises, Inc., began development of a subdivision on certain real property located in Twin Falls County. It retained Riedesel Engineering, Inc. (Claimant), to perform engineering services in connection with the development, and Claimant commenced work on June 29, 2006.

On August 24, 2006, Page Enterprises granted First Federal Savings Bank of Twin Falls (Lender) a mortgage in the real property to secure the payment of a promissory note in the principal sum of $715,162.00, plus interest. Lender recorded the mortgage on the same day.

On May 11, 2007, Claimant recorded a claim of lien against the real property in the sum of $87,801.23. The claim stated that Claimant began performing labor and providing materials on June 29, 2006, and ceased doing so on August 30, 2008.

On September 12, 2007, Page Enterprises granted Lender a second mortgage in the real property to secure payment of a promissory note in the sum of $1,128,187.00. A portion of that sum was used to pay Claimant. That mortgage was recorded the following day. Also recorded on September 13th were a "Release of Claim of Lien" and a "Lien Waiver," both executed by Claimant and dated August 28, 2007. The release stated that the claim of lien recorded on May 11, 2007, "is hereby released and satisfied in full, as to the [real] property." The waiver stated that for the sum of $84,963.11, Claimant "hereby waives and relinquishes any liens or rights to liens for all labor, work, material, machinery or fixtures provided by the undersigned prior to the date hereof for use at [the real property]." It further stated that the waiver was "an absolute waiver and release of all liens and rights to liens of the undersigned for all labor, work, material, machinery, or fixtures provided prior to this date whether or not the undersigned has been paid in full to such date."

On December 27, 2007, Page Enterprises merged with Titan Commercial Contractors, Inc., and in connection with that merger Page Enterprises quitclaimed the real property to Titan. On October 27, 2008, Claimant filed a second claim of lien against the real property. It asserted that $48,549.58, plus interest, was due and owing under the contract for engineering services that were completed on March 26, 2006.*fn1

On January 26, 2009, Lender filed this action to foreclose its two mortgages. It named as defendants Page Enterprises, Inc.; Titan Commercial Contractors, Inc.; and Claimant. Page Enterprises did not answer or otherwise defend this action, and on March 6, 2009, default was entered against it. On April 6, 2009, Claimant filed a counterclaim, cross-claim and third-party claim seeking to foreclose its lien filed on October 27, 2008.

On April 27, 2009, Lender moved for summary judgment. With respect to its cause of action against Claimant, Lender argued that Claimant had waived its first lien and that the mortgages had priority to its second lien.

On May 7, 2009, Lender filed a notice that Titan Commercial Contractors, Inc., had filed a petition in bankruptcy on April 9, 2009. On October 15, 2009, the bankruptcy court released the real property from the automatic stay imposed by 11 U.S.C. § 362(a). On October 22, 2009, Lender filed an amended motion for summary judgment stating that it was seeking only to foreclose its mortgages and was not seeking any relief personally against Page Enterprises, Inc., and Titan Commercial Contractors, Inc. Claimant filed a motion for summary judgment on November 9, 2009.

Oral argument on the motions for summary judgment was held on January 11, 2010. During the argument on the motions, the district court asked Lender's counsel whether there was any dispute as to whether Claimant's lien was valid, and Lender's counsel stated that Lender was only challenging the priority of the lien and did not challenge the validity of the lien. The dialogue was as follows:

THE COURT: With regard to Riedesel's claim for a lien, regardless of priority, is there any dispute that they do in fact have a lien on this property? Now whether it's prior to First Federal's or subsequent to First Federal's is of course the issue, but is ...


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