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Agstar Financial Services, ACA v. Gordon Paving Co., Inc.

Supreme Court of Idaho

February 27, 2017

AGSTAR FINANCIAL SERVICES, ACA, Plaintiff-Respondent,
v.
GORDON PAVING COMPANY, INC.; NORTHWEST SAND & GRAVEL, INC.; BLACKROCK LAND HOLDINGS, LLC; BRANDON HANSEN, an individual; BRIAN HANSEN, an individual; CAROL HANSEN GPC NEVADA TRUST; CRAIG HANSEN GPC NEVADA TRUST; CANYON EQUIPMENT AND TRUCK SERVICE, INC.; DOE ENTITIES OWNED BY BRIAN, BRANDON AND CRAIG HANSEN, Defendants-Appellants.

         2017 Opinion No. 18

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

         The judgment of the district court is reversed.

          Robinson & Tribe, Rupert, for appellants. Brent T. Robinson argued.

          Givens Pursley LLP, Boise, for respondent. Kersti Kennedy argued.

          J. JONES, Justice Pro Tem.

         Gordon Paving Company, Inc., Northwest Sand & Gravel, Inc., Blackrock Land Holdings, LLC (collectively, "Gordon Paving"), Brandon Hansen, an individual, Brian Hansen, an individual, Carol Hansen GPC Nevada Trust, Craig Hansen GPC Nevada Trust, Canyon Equipment and Truck Service, Inc., and Doe Entities owned by Brian, Brandon, and Craig Hansen (collectively "Guarantors") appeal from the judgment entered following the district court's denial of their motion to set aside default in a breach of personal guarantee action brought by AgStar Financial Services, ACA ("AgStar"). We affirm.

         I.

         FACTUAL AND PROCEDURAL BACKGROUND

         Between 2007 and 2008, Gordon Paving borrowed $10 million from AgStar. In addition to real and personal property collateral, the indebtedness was secured by separate guarantee agreements executed by Guarantors. By 2012, Gordon Paving had defaulted and AgStar sued for foreclosure.

         On June 19, 2013, the district court entered a Judgment and Decree of Foreclosure against Gordon Paving. AgStar purchased the real property collateral at a foreclosure sale with credit bids totaling $7, 200, 000. Following the sale, AgStar moved for entry of a deficiency judgment for the difference between the unpaid judgment as of the time of the sale and its credit bids for the real property. The district court denied AgStar's motion for a deficiency judgment, finding that the reasonable value of the properties that AgStar purchased by credit bids was nearly two million dollars greater than Gordon Paving's indebtedness. Gordon Paving appealed to this Court. In an Opinion issued on February 24, 2017, we held that Gordon Paving's indebtedness to AgStar had been fully satisfied and discharged. AgStar Financial Services v. Northwest Sand and Gravel, Docket No. 42932 (AgStar I).

         On June 1, 2015, AgStar brought the present action against Guarantors, advancing a number of theories, including breach of personal guarantee. On July 8, 2015, AgStar filed its Application for Entry of Default against Guarantors. On July 9, 2015, the district court entered default against all defendants.

         On July 15, 2015, Guarantors filed a motion to set aside the default and moved to dismiss the action based on res judicata. On October 19, 2015, the district court heard the motions and denied the motion to set aside the default, holding that Guarantors had not shown the existence of a meritorious defense. The district court then entered a judgment against Guarantors on the cause of action based on breach of their personal guarantees. AgStar agreed to dismiss the other claims with prejudice because the judgment on the guarantees represented the total remaining amount due on Gordon Paving's indebtedness. On November 12, 2015, AgStar moved for an award of attorney fees and costs. On December 18, 2015, the district court awarded AgStar attorney fees and costs after Guarantors failed to file a timely objection. Guarantors timely appealed.

         II.

         STANDARD OF REVIEW

         A court may set aside an entry of default for good cause. I.R.C.P. 55(c). The power of a trial court to grant or deny relief under Rule 55(c) is discretionary. McGloon v. Gwynn, 140 Idaho 727, 729, 100 P.3d 621, 623 (2004). "When a default judgment is predicated upon an erroneously entered default, the judgment is voidable." Id. Because judgments by default are not favored, a trial court should grant relief in doubtful cases ...


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