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In re Kimmes

United States District Court, D. Idaho

March 25, 2015

In re LARRY T. KIMMES, Debtor.
v.
D.L. EVANS BANK, Defendant and Appellee. LARRY T. KIMMES, Plaintiff and Appellant,

MEMORANDUM DECISION

B. LYNN WINMILL, Chief District Judge.

INTRODUCTION

Pending before the Court is Appellant Larry T. Kimmes' appeal from the bankruptcy court's judgment in favor of Appellee D.L. Evans Bank. Kimmes also appeals the bankruptcy court's order awarding attorneys' fees and costs to the bank. For the reasons explained below, the Court will affirm.

BACKGROUND

Larry T. Kimmes is the president of G&L Land & Livestock, Inc. He operates a farm near Gooding, Idaho. In 2000, Kimmes began banking with D.L. Evans Bank after his friend and neighbor, Kelly Human, suggested that he bring his business to D.L. Evans. Human was a loan officer with the bank. The banking relationship went well for several years, but Human later transferred to a different branch office, and the bank assigned a variety of different loan officers to Kimmes over the years. The relationship eventually soured, and Kimmes now says the bank's conduct ultimately forced him into bankruptcy.

The parties entered into various loan agreements over the years, but two loans are particularly relevant to this appeal: Loan No. 4814 and Loan No. 5225. Both relate to the construction of Kimmes' home.[1] Kimmes obtained the first of these loans, No. 4814, in April 2008. He used the majority of these loan proceeds to pay off prior loans, but he used around $85, 000 of the loan money to help fund the construction of his home. See Excerpts of Record ("ER"), Dkt. 8, at 651:17. At trial, Kimmes testified that Chad Brown - the loan officer who took over Kimmes' account after Human left - promised that the bank would allow Kimmes to obtain a "conventional home loan" to fund the home construction. ER 331. No such loan was made, however, and Brown left the bank in the Fall of 2008. Kimmes claims that if the bank had followed through on its promise to grant him a conventional home loan, he would have owed $83, 000 less than he eventually owed the bank for financing the home construction. Opening Br., Dkt. 9, at 5.

Nevertheless, in May 2009, instead of refinancing his home with a conventional mortgage, Kimmes entered into Loan No. 5225 with the bank. The stated purpose of this loan was to refinance his home. See ER 785; Ex. 203. It was a closed-end, single-advance, variable-rate, ten-year term loan for $297, 000. Kimmes used most of the proceeds of this loan ($236, 738.70) to pay off the outstanding balance on Loan No. 4814. As security for this loan, the Kimmes and his wife granted the bank a deed of trust on their home. The deed of trust provide that a default would result from the "failure of [Kimmes] within the time required by this deed of trust to make payments for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien." ER 786; Ex. 204. Kimmes and his wife also expressly agreed that they "shall pay when due... all taxes, special taxes, [and] assessments...." ER 786; Ex. 204, at 2. Upon default, the bank had the option to foreclose the deed of trust by notice and sale. Ex 204, at 4.

In 2008 and 2009, the Kimmes did not timely pay their real property taxes. ER 787; Exs. 113, 115, 192. In addition, by June 2010, Kimmes was past due on several of his loans from the bank. ER 787; Ex. 164 at 12-13. In response, the bank commenced a foreclosure on the deed of trust for Loan No. 5225. ER 787; Exs. 204 and 218. The bank did not provide any informal notices to the Kimmes, despite its internal policy to provide at least three such notices, plus an opportunity to cure the default.

After the bank commenced foreclosure proceedings, the Kimmes filed a chapter 12 bankruptcy petition. The bank filed a proof of claim in the amount of $1, 375, 990.60. Kimmes objected, stating that "although the debtor agrees that an indebtedness is owed [to the bank], he objects as to the amount owed. It is believed that the amount owed is less than $1, 175, 000." See ER 788.

In October 2011, the bankruptcy court approved Kimmes' second amended chapter 12 plan. The plan stated that the bankruptcy court would resolve the parties' dispute regarding the bank's proof of claim and that Kimmes would pay an amount to be determined by the bankruptcy court. After the plan was approved, Kimmes commenced an adversary proceeding against the bank alleging, among other things, that the bank had (1) breached an agreement to grant him a "regular home loan, " and (2) improperly failed to remove $6, 760 in fees charged for insufficient funds. Based on these and other alleged wrongs, Kimmes' complaint asked the bankruptcy court to find that "nothing is owed with respect to [Loan Number 5225] and that the Chapter 12 Plan should be modified accordingly.'" See ER 792 (alterations by the bankruptcy court).

After a four-day bench trial, the bankruptcy court entered judgment in favor of the bank. See ER 819 (judgment stating that Kimmes owes "the full amount due on the loans identified in D.L. Evans' Proof of Claim...."). The bankruptcy court also awarded the bank approximately $23, 500 in attorneys' fees and costs. ER 912. Kimmes appeals the judgment and the order awarding attorneys' fees and costs to the bank.

STANDARD OF REVIEW

This Court has jurisdiction to entertain an appeal from the Bankruptcy Court under 28 U.S.C. ยง 158(a), which provides: "The district courts of the United States shall have jurisdiction to hear appeals... from final judgments, orders, and decrees" of bankruptcy judges. On appeal, the bankruptcy court's conclusions of law are reviewed de novo and its factual findings for clear error. In re Greene, 583 F.3d 614, 618 (9th Cir. 2009). A bankruptcy court's denial of a motion to amend a complaint is reviewed for an abuse of discretion. See Ventress v. Japan Airlines, 603 F.3d 676, 680 (9th Cir. 2010). An abuse of discretion occurs when a court "makes an error of law, rests its decision on clearly erroneous findings of fact, or when [the reviewing court is] left with a definite and firm conviction that the district court committed a clear error of judgment." United States v. Hinkson, 585 F.3d 1247, 1260 (9th Cir. 2009) (internal quotation marks and citation omitted).

ANALYSIS

Kimmes contends that the bankruptcy court erred by:

(1) denying his motion to amend his complaint;
(2) finding that the bank had not agreed to grant him a "regular home loan";
(3) finding that the bank had not agreed to forgive various insufficient-funds fees charged to his account;
(4) concluding that the bank had not breached the covenant of good faith and fair dealing;
(5) denying Kimmes' claim for $2, 000 in attorneys' fees related to an alleged wrongful ...

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