UNION BANK, N.A., a national banking association, Plaintiff-Respondent,
JV L.L.C., an Idaho limited liability company, Defendant-Appellant, and PEND OREILLE BONNER DEVELOPMENT, LLC, a Nevada limited liability company, NORTH IDAHO RESORTS, an Idaho limited liability company, DAN JACOBSON, an individual, SAGE HOLDINGS LLC, an Idaho limited liability company, TIMBERLINE INVESTMENTS, LLC, an Idaho limited liability company, STEVEN G. LAZAR, an individual, AMY KORENGUT, an individual, HLT REAL ESTATE LLC, PANHANDLE STATE BANK, an Idaho corporation, R.E. LOANS, LLC, a California limited liability company, WELLS FARGO FOOTHILL, INC., a Delaware limited liability company, PEND OREILLE BONNER DEVELOPMENT HOLDINGS, INC., a Nevada corporation, PENSCO TRUST CO. custodian f/b/a Barney Ng, a California corporation, MORTGAGE FUND '08 LLC, a California limited liability company, B-K LIGHTING, INC., a California corporation, FREDERICK J. GRANT, an individual, CHRISTINE GRANT, an individual, RUSS CAPITAL GROUP, LLC, an Arizona limited liability company, JOSEPH DUSSICH, an individual, MOUNTAIN WEST BANK, an Idaho corporation, STATE OF IDAHO, DEPARTMENT OF REVENUE AND TAXATION, MONTAHENO INVESTMENTS, LLC, a Nevada limited liability company, TOYON INVESTMENTS, LLC, a Nevada limited liability company, CHARLES W. REEVES and ANNE B. REEVES, husband and wife, ACI NORTHWEST, INC., an Idaho corporation, and DOES 1 through 20, inclusive, Defendants.
Opinion No. 7
from the District Court of the First Judicial District of the
State of Idaho, Bonner County. Hon. Michael J. Griffin,
judgment of the district court is affirmed.
Finney & Finney, P.A., Sandpoint, for appellant. John
Rives LLP, Boise, for respondent. Christopher Pooser argued.
(JV) appeals from the district court's grant of summary
judgment in favor of Union Bank, N.A. (Union
Bank) in a mortgage priority dispute. Union Bank
sought to foreclose a mortgage on a property known as
"Trestle Creek." JV claimed priority to the Trestle
Creek property through a mortgage recorded June 19, 2006.
Union Bank's mortgage was recorded March 25, 2008. Union
Bank moved for summary judgment, arguing that JV had
subordinated its lien to that of Union Bank. The district
court agreed and granted the motion. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
owned property located above the shores of Lake Pend Oreille
near Sandpoint, Idaho. That property included the Hidden
Lakes Golf Course and a nearby property known as "Moose
Mountain." In 1995, JV sold the properties to Richard
Villelli and his related entities. JV's position was
secured by a first priority mortgage on the Moose Mountain
property. Villelli was the managing member of North Idaho
Resorts, LLC (NIR).
January of 2005, NIR sold the golf course, the Moose Mountain
property, and a nearby lakefront property (Trestle Creek) to
Pend Oreille Bonner Investments, LLC, which then assigned the
property to Pend Oreille Bonner Development, LLC (POBD). The
purchase and sale agreement with NIR provided that POBD would
assume responsibility for paying existing loan obligations to
JV and R.E. Loans, LLC. As part of the agreement, POBD
obtained the Moose Mountain property subject to JV's
first priority mortgage. JV subordinated its lien on the
Moose Mountain property to R.E. Loans in exchange for a first
priority mortgage on the Trestle Creek property. JV's
mortgage was recorded June 19, 2006.
October 2007, Union Bank granted POBD a $5 million revolving
line of credit. In 2008, Union Bank converted the line of
credit into a $5 million loan under a revolving term note.
The note was secured by a mortgage on the Trestle Creek
property, recorded March 25, 2008. In June 2008, JV and POBD
entered into a Third Amendment to Indebtedness and to Real
Estate Security, and Subordination Agreement (Amendment). The
On the TRESTLE CREEK property the present first lien
priority of J.V., LLC shall be subordinate and inferior to
a new first lien priority of no more than $5, 000, 000.00.
received $30, 000 and an increased interest rate on its loan
to POBD for signing the Amendment.
August of 2008, JV signed a document titled
"Subordination Agreement." The Subordination
Agreement identified Union Bank and JV as the parties and
POBD as a borrower "bound by all terms, provisions and
conditions thereof." Union Bank did not sign the
Subordination Agreement. The Subordination Agreement
Creditor [JV] hereby subordinates the lien of Creditor's
Deed of Trust, but only as said lien encumbers and pertains
to the property described on Exhibit A [Trestle
Creek] hereto, to the lien of the mortgage dated March 7,
2008 and recorded March 25, 2008 as Instrument No. 748379 and
748380 (the "[Union Bank] Mortgage") to secure a
loan (the "[Union Bank] Loan") which [Union Bank]
has heretofore made to Borrower [POBD] which [Union Bank]
amount of Five Million Dollars ($5, 000, 000), the proceeds
of which Borrower has used to pay off the existing
indebtedness of Borrower and/or Holdings, Inc. and/or to pay
for the improvement and development of property encumbered by
Creditor's Deed of Trust, including the property
described on Exhibit A and/or interest, fees, and
charges payable to [Union Bank] on account of the [Union
(bold, underlining in original).
defaulted on the Union Bank loan. In May of 2011, Union Bank
filed an action to foreclose on all title and interest in
Trestle Creek. Because there were numerous liens on the
property, Union Bank named all of the lienholders as
defendants, including JV and NIR. JV filed an answer and
counterclaim against Union Bank and a cross-claim against NIR
asserting a priority interest in the Trestle Creek property.
Union Bank denied that JV possessed a superior claim to
Trestle Creek. After some litigation, the only remaining
parties that claimed a superior interest in Trestle Creek
were Union Bank, JV, and NIR.
March 2013, JV filed a motion for judgment on the pleadings.
JV claimed that the only facts alleged in Union Bank's
complaint showed that JV's mortgage, recorded June 19,
2006, was prior in time to Union Bank's mortgage,
recorded March 25, 2008. The district court denied the
motion, finding that based on the pleadings "there is an
issue as to whether or not the plaintiff may foreclose
JV's rights to the subject property."
1, 2013, Union Bank filed a motion for partial summary
judgment as to defendants NIR and JV. JV opposed the motion
and submitted the affidavit of James W. Berry in opposition
to the motion. Berry claimed that JV never entered into a
subordination agreement with Union Bank, there was no
consideration given for the agreement, and JV was
fraudulently induced to enter into the agreement. The
district court denied the motion with respect to NIR;
however, the district court granted the motion with respect
to JV concluding: "There is no genuine issue of material
fact that: 1) UB's mortgage was recorded after JV's
mortgage; and 2) that a valid [subordination] contract was
entered into, by which JV's mortgage was made inferior to
September 19, 2013, JV filed a motion to alter and amend the
district court's order granting partial summary judgment
and moved for reconsideration. JV again argued that it was
fraudulently induced to enter into the subordination
agreement and the agreement was invalid due to lack of
consideration. As evidence, JV submitted a copy of the
Amendment and three emails from POBD's attorney William
Sterling. The district court denied JV's motion
concluding that the Subordination Agreement was a fully
integrated contract and that JV's evidence was parol
evidence offered to contradict the terms of the contract. As
to JV's claim of fraud, the district court concluded:
"Without that parol evidence, there is no other
credible evidence of fraud. James W. Berry's self-serving
affidavit does not create a genuine issue of a material
March 2014, JV filed a motion to compel Union Bank to produce
a global settlement agreement it had reached with POBD. Union
Bank moved for a protective order. The district court ordered
a redacted copy of the agreement sent to both JV and NIR and
granted Union Bank's motion for a protective order.
trial was set for May 12, 2014. On April 29, 2014, JV filed a
pre-trial memorandum and witness and exhibit lists. JV's
pre-trial memorandum included the claim that the
Subordination Agreement was invalid, as well as the claim
that "JV holds the 1st priority Mortgage on the Trestle
Creek Real Estate, ahead of [Union Bank]." On April 30,
2014, the district court sent JV a letter which stated:
Trial will begin May 12, 2014 at 9:00 am. The first issue
that will be addressed is Union Bank's complaint against
North Idaho Resorts. After the plaintiff's evidence North
Idaho Resorts may present evidence in response to Union
After the claims between Union Bank and North Idaho Resorts
have been presented, then all issues between North Idaho
Resorts and Sage will be tried.
None of the issues between JV, LLC and Union Bank will be
re-litigated. The court's prior summary judgment disposed
of all issues between JV, LLC and Union Bank. JV, LLC may be
present in the courtroom as a spectator, but will not be at
On May 9, 2014, three days before trial, JV filed an
objection and a motion to reconsider.
At the commencement of the trial, the district court again
stated its intention to bifurcate the trial:
THE COURT: My intention is to bifurcate the issues remaining.
Today we're going to start with the Union Bank vs. North
Idaho Resorts. And Mr. Finney on behalf of JV, LLC filed an
answer to NIR's, North Idaho Resorts', counterclaim a
week or so ago. A week ago, I guess. If that was intended to
be an amended answer and counterclaim regarding Union Bank,
then that would be dismissed because they didn't have
permission to file it under Rule 15(c), in that, it's an
answer to North Idaho Resorts' crossclaim that was filed,
gosh, a long time ago, June 15th of 2012; that would be
second. In other words, it's my intention to do the first
part of this, and then thereafter to try the priorities
between North Idaho Resorts and JV, LLC.
the trial, the district court entered findings of fact and
conclusions of law holding that Union Bank's mortgage was
superior to any vendor's lien held by NIR and that
JV's mortgage was superior to NIR's lien. On June 14,
2014, the district court entered a final judgment of
foreclosure as to all parties in Union Bank's favor. On
September 19, 2014, the district court entered a final
judgment and Rule 54(b) certificate with respect to Union
Bank's claim against JV. JV timely appealed.
STANDARD OF REVIEW
12(c) governs motions for judgment on the pleadings. By its
terms, Rule 12(c) treats such motions similarly to motions
for summary judgment. Thus, the standard of review applicable
to lower courts' rulings on motions for summary judgment
also applies to motions for judgment on the pleadings."
Trimble v. Engelking, 130 Idaho 300, 302, 939 P.2d
1379, 1381 (1997). "Summary judgment is appropriate if
the pleadings, depositions, and admissions on file, together
with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Lockheed
Martin Corp. v. Idaho State Tax Comm'n, 142 Idaho
790, 793, 134 P.3d 641, 644 (2006). Furthermore, "[a]ll
doubts are to be resolved against the moving party, and the
motion must be denied if the evidence is such that
conflicting inferences may be drawn therefrom, and if
reasonable people might reach different conclusions."
G & M Farms v. Funk Irr. Co., 119 Idaho 514,
516-17, 808 P.2d 851, 853-54 (1991).
the district court grants summary judgment and then denies a
motion for reconsideration, this Court must determine whether
the evidence presented a genuine issue of material fact to
defeat summary judgment. This means the Court reviews the
district court's denial of a motion for reconsideration
de novo." Shea v. Kevic Corp., 156 Idaho 540,
545, 328 P.3d 520, 525 (2014) (internal quotations omitted).
process issues are generally questions of law, and this Court
exercises free review over questions of law."
Williams v. Idaho State Bd. of Real Estate
Appraisers, 157 Idaho 496, 504, 337 P.3d 655, 663 (2014)
(quoting Neighbors for a Healthy Gold ...