KEYBANK NATIONAL ASSOCIATION, a national banking association, Plaintiff-Respondent,
PAL I, LLC, an Idaho limited liability company, Defendant-Appellant, and Brian Christensen, an individual; L.A. Parkinson, an individual; Barney Dairy, Inc.; D.J. Barney, an individual; William Davis, an individual; Lois Davis, an individual; Dell Ray Barney, an individual; and Dell J. Barney, an individual, dba Barney Towing & Recovery, Defendants.
[Copyrighted Material Omitted]
Smith, Driscoll & Associates, PLLC, Idaho Falls, for appellant. B.J. Driscoll argued.
Givens Pursley, LLP, Boise, for respondent. Amber N. Dina argued.
J. JONES, Justice.
This case involves a judgment creditor, PAL I, LLC, that levied and executed upon collateral in which KeyBank had a perfected security interest. PAL argued that because KeyBank did not file a third-party claim to the collateral in accordance with I.C. § 11-203, it waived its interest in the collateral. The district court held that a perfected security interest survives a creditor's failure to comply with I.C. § 11-203, that KeyBank's security interest extended to the proceeds PAL realized from the sheriff's sale of the collateral, and that KeyBank was entitled to judgment against PAL in that amount. PAL appealed to this Court and we affirm.
FACTUAL AND PROCEDURAL HISTORY
KeyBank made two separate loans to Tri-Steel. The first loan in the amount of $150,000 was made on April 16, 2007. Tri-Steel executed a security agreement, pledging as collateral for the loan all of its inventory, equipment, accounts, attachments, accessories, tools, parts, and supplies. On April 23, 2007, KeyBank filed a UCC financing statement, perfecting its security interest in the collateral. On December 5, 2008, KeyBank loaned Tri-Steel an additional $150,000. Again, Tri-Steel executed a security agreement which listed the same collateral as security. On February 23, 2010, KeyBank filed a UCC financing statement with the Idaho Secretary of State for the second loan, perfecting KeyBank's security interest in the collateral. Subsequently, Tri-Steel breached the terms of the promissory notes and security agreements with KeyBank, and KeyBank filed suit against Tri-Steel to recover the amounts owing.
PAL also filed suit against Tri-Steel, and on April 2, 2010, it recovered a judgment against Tri-Steel for $20,224.00. On April 5, 2010, PAL obtained a writ of execution against property owned by Tri-Steel— specifically catwalks/scaffolding, forklifts, screw guns, electrical cords, office desk/chairs, and computers. The Madison County Sheriff mailed third-party claim of exemption packets to KeyBank's Rexburg and Boise offices on April 26, 2010. KeyBank never returned the third-party claim forms. However, on April 28, 2010, KeyBank did mail a letter to PAL's counsel, informing him that KeyBank had a security interest in the levied property. The letter states in relevant part:
It has come to [KeyBank's] attention that [PAL has] caused the Madison County Sheriff to serve a Writ of Execution and a Notice of Attachment [on] property belonging to Tri-Steel.... As you can see from the enclosed UCC filing, KeyBank has perfected its security interest in all of this collateral.... I am having a difficult time understanding why you would instruct the Sheriff to seize property that clearly is subject to another creditor's secured interest.
On June 1, 2010, a default judgment was entered against Tri-Steel in KeyBank's lawsuit, adjudging Tri-Steel liable to KeyBank in the amount of $296,500.74, plus interest and attorney fees. On June 4, 2010, KeyBank sent the Madison County Sheriff a writ of execution instructing the Sheriff to seize the KeyBank collateral.
KeyBank continued to assert its claim to the collateral upon which PAL had levied. In a letter dated June 8, 2010, KeyBank asked the Madison County Sheriff to postpone PAL's sale of the Tri-Steel property because KeyBank had a perfected security interest in all of it. In the event the Sheriff proceeded with the sale, KeyBank requested that the proceeds of the sale be held in a trust account for KeyBank, given that its security interest extended to the proceeds of any sale. Despite KeyBank's communications, the sheriff's sale was not postponed and the disputed collateral was sold for
$16,884.41 on June 9, 2010. PAL never transferred any of the sale proceeds to KeyBank.
On August 16, 2010, KeyBank initiated the current action against PAL. KeyBank's Complaint states that " [a]s a secured creditor with priority over PAL I, a mere unsecured judgment creditor of Tri-Steel, KeyBank has a legal right to all resulting proceeds from the Auction of the KeyBank Collateral." PAL answered KeyBank's Complaint on September 27, 2010. Cross motions for summary judgment were submitted by the parties. Following a hearing to address the motions, the district court issued its Memorandum Decision denying PAL's motion for summary judgment and granting KeyBank's motion. On January 3, 2011, the district court entered judgment in favor of KeyBank in the amount of $16,844.41.
Following the district court's entry of judgment, PAL filed a motion for reconsideration, arguing that the district court's Memorandum Decision was contrary to established law and the rules of statutory construction. Following a hearing to address PAL's motion for reconsideration, the district court issued its Memorandum Decision on Reconsideration denying PAL's motion. PAL filed a timely appeal to this Court.
On March 23, 2011, PAL advised KeyBank that it would not be posting a surety bond or other security to stay execution of KeyBank's judgment. On May 19, 2011, KeyBank delivered a writ of execution to the Bonneville County Sheriff, directing the Sheriff to satisfy KeyBank's judgment " out of the personal property of [PAL]." An accompanying letter of instructions directed the Sheriff to attach and levy upon the following property: " all goods, chattels, moneys and other property, both real and personal ... specifically including but not limited to Defendant PAL I, LLC's claim, cause of action, and appeal rights associated with [this case]." PAL filed a claim of exemption under I.C. § 11-203, alleging numerous deficiencies in KeyBank's execution. In response, KeyBank filed a motion contesting PAL's claim of exemption. On August 31, 2011, the district court granted KeyBank's motion contesting PAL's claim of exemption and authorized KeyBank to proceed with collection of its judgment. The district court issued an additional judgment awarding KeyBank attorney fees and costs in the amount of $7,004.83 on November 4, 2011. PAL again filed a claim of exemption and sought a stay of execution of the judgment for fees and costs. The district court ultimately ordered that PAL post a supersedeas bond in order to stay execution with respect to that judgment. This Court entered an order on February 13, 2012, permitting the bonding issue to be raised in supplemental briefing.
ISSUES ON APPEAL
I. Did the district court err in holding that KeyBank's perfected security interest survived even though KeyBank failed to file a third-party claim under I.C. § 11-203?
II. Does the doctrine of quasi-estoppel bar KeyBank from recovering?
III. Did the district court err in holding that its interpretation of I.C. § 11-203 did not violate PAL's equal protection rights?
IV. Did the district court err in holding that PAL was required to comply with I.C. § 8-506A?
V. Did the district court err by requiring PAL to post a bond to stay execution of KeyBank's judgment for attorney fees and costs? 
VI. Is either party entitled to attorney ...