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Eagle Equity Fund, LLC v. Titleone Corporation

Supreme Court of Idaho

November 25, 2016

EAGLE EQUITY FUND, LLC, an Idaho Limited Liability Company, Plaintiff-Appellant,
v.
TITLEONE CORPORATION, an Idaho Corporation; and COREY BARTON HOMES, INC., an Idaho Corporation, Defendants-Respondents, and FIDELITY NATIONAL TITLE COMPANY (fka Land America Transnation aka Transnation Title & Escrow, Inc.), a Delaware Corporation; CHICAGO TITLE INSURANCE COMPANY, a Nebraska or Florida Corporation (fka Ticor Title Insurance Company, a California Corporation); RBC REAL ESTATE FINANCE, INC.; ALLIANCE TITLE & ESCROW CORP., a Delaware Corporation; DAS INVESTMENTS, LLC, an Idaho Limited Liability Company; and JOHN DOES III-X, unknown individuals and/or companies, Defendants.

         2016 Opinion No.139

         Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Jason Scott, District Judge.

         The judgments of the district court are affirmed. Attorney fees and costs on appeal are awarded to respondent TitleOne and respondent Corey Barton.

          Eagle Law Center, LLC., Eagle, attorneys for appellant. Paul R.Mangiantini argued.

          Givens Pursley, LLP, Boise, attorneys for respondent TitleOne. Thomas Dvorak argued.

          Richard W. Mollerup, Boise, attorney for respondent Alliance Title.

          Fisher, Pusch & Krueck, LLP, Boise, attorneys for respondent Corey Barton. David T. Krueck argued.

          Hawley, Troxell Ennis & Hawley, Boise, attorneys for respondent DAS Investment.

          W. JONES, Justice

         I. Nature of the Case

         This case arises out of an allegedly improper reconveyance (the "Reconveyance") of a junior deed of trust (the "EEF Deed of Trust") held by Appellant, Eagle Equity Fund, LLC ("EEF"). The Reconveyance, which was executed by Respondent, TitleOne Corporation ("TitleOne"), had the effect of divesting EEF of its security interest in the collateral property (the "Property"). Because EEF was divested of its security interest, it did not receive notice when the Property was later sold to DAS Investments, LLC ("DAS"). Being unaware of the sale, EEF had no opportunity to participate in the sale process. Shortly thereafter, DAS resold the Property to Corey Barton Homes, Inc. ("CBH"), for a profit. On discovering the sale and resale of the Property, EEF sued TitleOne, DAS, and CBH, among others, on a litany of counts including tortious interference and negligent reconveyance of the EEF Deed of Trust.

         The district court made three findings that are now challenged on appeal. First, the district court dismissed on summary judgment EEF's claims for tortious interference with a prospective economic advantage and negligent reconveyance under Idaho Code section 45-1205. It reasoned that each of those claims requires a showing of damages and EEF had failed to provide evidence of any loss of monetary value resulting from the Reconveyance. Second, the district court found that even if EEF had shown damages, the three year statute of limitations on its claim for negligent reconveyance under Idaho Code section 45-1205, which had begun to run on the date of the Reconveyance, had expired. Third, the district court refused to allow EEF to amend its complaint to add a quiet title claim against CBH. It reasoned that such an amendment would be futile because both DAS and CBH were bona fide purchasers.

         On appeal, EEF argues that: (1) the Reconveyance damaged EEF by depriving it of the opportunity to insert itself into the sale of the Property; (2) the statute of limitations had not run on EEF's negligent reconveyance claim under Idaho Code section 45-1205 because it should have been calculated from the date of the sale rather than from the date of the Reconveyance; and (3) DAS and CBH were not bona fide purchasers because they had inquiry notice of EEF's interest.

         II. Factual and Procedural Background

         In November 2006, Galiano LLC ("Galiano") acquired the Property, a 29.63 acre parcel of real property in Kuna, Idaho, which it planned to develop and subdivide into sixty separate residential lots. In order to finance the development of the Property, Galiano, through its managing member, Edward I. Mason, sought loans from RBC Centura Bank ("RBC") and EEF.

         On November 17, 2006, RBC loaned Galiano $6, 063, 300 under two separate promissory notes (collectively the "RBC Loan"). The RBC Loan was secured by a first priority deed of trust against the Property (the "RBC Deed of Trust"), which was recorded in the real property records of Ada County, Idaho.

         Also on November 17, 2006, EEF loaned Galiano $725, 500 (the "EEF Loan" and, with the RBC Loan, the "Loan Agreements"). The EEF Loan was secured by the EEF Deed of Trust, a second priority deed of trust against the Property, which was recorded in the real property records of Ada County, Idaho.

         In conjunction with the Loan Agreements, EEF, RBC, and Galiano entered into a subordination agreement (the "Subordination Agreement") providing that the EEF Deed of Trust was junior and subordinate to the RBC Deed of Trust.

         Over three years later, on January 25, 2010, TitleOne executed the Reconveyance of the EEF Deed of Trust, despite the fact that the EEF Loan had not been paid by any party. TitleOne appears to have had no justification for executing the Reconveyance, which it did without EEF's knowledge or consent.[1]

         In 2011 Galiano was unable to make payments on the RBC Loan as they came due. At that time Galiano still owed RBC roughly $3.4 million. In or around May 2012, Galiano sought and obtained RBC's permission to short sell the Property to DAS for $860, 000.[2] The Property was sold to DAS on May 17, 2012, by general warranty deed. EEF did not receive notice of the sale, did not consent to the sale, and was not aware of the sale when it occurred.

         Over the course of a year after purchasing the Property, DAS sold each of the lots to CBH. According to EEF, the total resale price of the lots was $1.13 million, ...


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