VALIANT IDAHO, LLC, an Idaho limited liability company, Cross Claimant-Third Party Plaintiff-Respondent,
NORTH IDAHO RESORTS, LLC, an Idaho limited liability company, Cross Defendant-Appellant.
from the District Court of the First Judicial District, State
of Idaho, Bonner County. Hon. Barbara A. Buchanan, District
judgment of the district court is vacated.
Vernon & Weeks, P.A., Coeur d'Alene attorneys for
Appellant. Susan P. Weeks argued.
McConnell Wagner Sykes & Stacey, PLLC, Boise, attorneys
for Respondent. Richard L. Stacey argued.
Idaho Resorts, LLC ("NIR") appeals an award of
discretionary costs and costs as a matter of right awarded
against it in Bonner County. NIR contends that the district
court abused its discretion by awarding discretionary costs
and that the court's award of some costs as a matter of
right was also erroneous. We vacate the judgment of costs and
FACTS AND PROCEDURE
an action arising out of a failed golf course and residential
development project in Bonner County known as the "Idaho
Club." On March 9, 2006, NIR entered into a Real
Property Purchase and Sale Agreement with Pend Oreille Bonner
Investments, LLC ("POBI") regarding the sale of a
golf course, a clubhouse and parcels of real property. NIR
did not record a purchase money mortgage against the real
property, instead filing a memorandum of sale giving notice
of its vendor's lien.
Oreille Bonner Development, LLC ("POBD"), a
successor to POBI, subsequently took-out several loans on the
real property, agreed to promissory notes, and mortgaged The
Idaho Club real property with three different lenders: RE
Loans, LLC, Pensco Trust Co., and Mortgage Fund '08 LLC
(the "lenders"). POBD ultimately defaulted on its
obligations on the promissory notes associated with the
mortgages. In addition to defaulting on the notes, POBD
failed to pay various mechanics and materialmen, one of which
was Genesis Golf Builders, Inc. ("Genesis").
brought suit against POBD on October 13, 2009, alleging
breach of contract and sought to foreclose on its
mechanic's lien against POBD's property interest in
the Idaho Club. Genesis also named multiple additional
defendants in its suit, including the lenders. Cross-claims
and counterclaims were alleged by several defendants. The
lenders successfully defended the priority of their
respective mortgages against all of these claims and
cross-claims. The district court called this part of the
litigation the "Genesis Suit."
the Genesis suit was pending, the three lenders assigned
their rights to Valiant Idaho, LLC ("Valiant").
Valiant entered the litigation by substituting itself as the
real party in interest for the lenders. Valiant then amended
the answers filed by the lenders previously, and filed a
Counterclaim, Cross-Claim and Third-Party Complaint for
Judicial Foreclosure against POBD, as well as to foreclose
any interest that NIR and others held in the Idaho Club. NIR
countered that it held an interest in the real property
superior to Valiant's. The district court called this
part of the litigation the "Valiant Foreclosure."
moved for summary judgment seeking a ruling that the
mortgages assigned to it were senior and superior to all
interests claimed by any other defendant, including NIR, in
the Idaho Club real property. Ultimately, the district court
granted Valiant's motion for summary judgment against
NIR, finding that NIR's interest in its vendor's lien
was subordinated to the mortgage loans because of a 2007
subordination agreement. The court's order held that
Valiant's mortgages were "senior to any right, title
and interest in the Idaho Club property" by NIR. NIR
filed a motion for reconsideration that was also denied by
the court. NIR did not participate further in the litigation
at that point.
other defendants (JV, LLC ("JV") and VP, Inc.
("VP")) survived summary judgment and their claims
were litigated in a four-day court trial. The district court
found in Valiant's favor, and on July 20, 2016, entered a
judgment awarding Valiant damages against POBD in the amount
of $21, 485, 212.26 for its breach of the promissory notes
underlying the mortgages. The judgment also declared that
Valiant's mortgages had priority over any property
interest claimed by NIR or others.
the trial involving VP and JV's defenses to the Valiant
Foreclosure, Valiant filed a memorandum of costs and attorney
fees against POBD, as well as against NIR,  JV, and VP
(hereinafter referred to as the "three
defendants"). To understand what went wrong with the
cost judgment entered against NIR it is important to begin
with Valiant's motion because it frames the issues
presented to the district court. Valiant argued that it was
entitled to attorney fees against POBD pursuant to the terms
of its mortgages and Idaho Code section 12-120(3) which
governs the award of attorney fees in commercial
transactions. It argued that it had a right to fees against
VP, JV, and NIR under Idaho Code section 12-121 because the
defenses raised by the three defendants were frivolous.
Valiant also sought costs against all four parties. It
claimed costs as a matter of right in the amount of $13,
755.39 and discretionary costs in the amount of $30, 593.64
(total costs of $44, 349.03). Valiant requested that VP, JV,
and NIR be held jointly and severally liable for the
attorney's fees under Idaho Code section 12-121 and the
majority of the costs.
Valiant filed its memorandum, NIR, VP and JV filed
objections. POBD did not file an objection. The district
court, after reviewing the parties' various filings,
determined that Valiant was the prevailing party. No one
challenged that determination on appeal.
district court awarded Valiant attorney's fees and costs
against POBD. As noted, the district court viewed the
litigation as two discrete parts - the three lenders'
defense of the original mechanic's lien claim and
Valiant's subsequent prosecution of a cross-claim for
breach of contract and a cross-claim and thirty party claims
for mortgage foreclosure. The district court awarded costs
and fees against POBD in connection with both parts. For the
Valiant Foreclosure (the part in which NIR, VP and JV
participated), the district court made the following award
Total Attorney's Fees
Total Costs as a Matter of Right
only costs as a matter of right awarded against POBD were the
service costs involved in initiating the Valiant Foreclosure
against twenty-eight other defendants who held an interest in
the real property at issue. The district court spared POBD
from the remaining costs totaling more than $41, 000 in large
part because POBD did not defend against the foreclosure or
participate adversely to Valiant. The district court
reasoned: "To avoid duplicate cost awards, and because
POBD did not defend against the Valiant Foreclosure or
participate adversely to Valiant at trial, the Court shall
assess the remaining costs as a matter of right and
discretionary costs incurred by Valiant in the Valiant
Foreclosure against JV, VP and NIR, and not against
district court then apportioned the remaining costs between
the three lenders, reasoning:
The Court is authorized by Idaho Rule of Civil Procedure 54
to apportion costs between the defendants. Recognizing that
NIR participated in pre-and post-trial motion practice, but
not in the court trial, this Court apportions the costs as
1. NIR is responsible for 0.25 of $41, 479.69 = $10, 369.93
2. JV is responsible for 0.375 of $41, 479.69 = $15, 554.88
3. VP is responsible for 0.375 of $41, 479.69 = ...