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Monitor Finance, L.C. v. Wildlife Ridge Estates, LLC

Supreme Court of Idaho

January 9, 2019

MONITOR FINANCE, L.C., a Utah limited liability company; and FIRST CAPITAL FUNDING, L.C., a Utah limited liability company, Plaintiffs/Respondents,
v.
WILDLIFE RIDGE ESTATES, LLC, an Idaho limited liability company, Defendant/Appellant; M&S DEVELOPMENT, LLC, an Idaho limited liability company, Defendants. WILDLIFE RIDGE ESTATES, LLC, an Idaho limited liability company, Counter-Claimant/Appellant,
v.
MONITOR FINANCE, L.C., a Utah limited liability company; and FIRST CAPITAL FUNDING, L.C., a Utah limited liability company, Counter-defendants/Respondents.

          Appeal from the District Court of the Sixth Judicial District, State of Idaho, Bannock County. Robert C. Naftz, District Judge.

         The judgment of the district court is affirmed.

          Hearn Law PLC, Pocatello, for appellant. A. Bruce Larson argued.

          Cooper & Larsen, Chartered, Pocatello, for respondents. Ron Kerl argued.

          STEGNER, Justice.

         This case involves the judicial foreclosure of a deed of trust encumbering real property in Pocatello, Idaho. Monitor Finance, L.C., and First Capital Funding, L.C., (collectively referred to as the Beneficiaries) are the holders of a deed of trust, which encumbers the real property claimed to be owned in fee simple by Wildlife Ridge Estates, LLC (Wildlife LLC).

         Prior to this judicial foreclosure action being brought, Wildlife LLC filed suit against the Beneficiaries seeking to quiet title to the real property, which is subject to the Beneficiaries' deed of trust. In that previous action, Wildlife LLC alleged that the Beneficiaries no longer retained an interest in the property because the debt underlying the promissory note had been paid in full. By stipulation of the parties, that quiet title action was ultimately dismissed with prejudice.

         Subsequently, the Beneficiaries initiated this action to foreclose the deed of trust based on their contention that the debt created by the promissory note had not been paid and was in default. The Beneficiaries moved the district court for summary judgment, contending that Wildlife LLC's affirmative defenses and counterclaim were barred by res judicata because the previous quiet title action brought by Wildlife LLC had been dismissed on its merits. The district judge granted the Beneficiaries' motion and denied Wildlife LLC's motion to reconsider. In doing so, the district court summarily dismissed Wildlife LLC's counterclaim and affirmative defenses. The district court ultimately entered summary judgment in favor of the Beneficiaries. Wildlife LLC now appeals that adverse summary judgment ruling, claiming, among other things, that the district court misapplied the doctrine of res judicata. For reasons set out in this opinion, we affirm the district court's decisions.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         On December 29, 2005, Michael Millward (Millward) and Michael Williams (Williams) entered into a written agreement.[1] That agreement provided, among other things, that: M&S Development (M&S), a limited liability company wholly owned by Millward and his wife, would purchase real property (a forty lot subdivision in Pocatello) for $230, 000. Following the payment, M&S would "own 55% of the development."[2] Millward and Williams would then each pay $25, 000 to buy out a remaining third-party's interest in the property, which would result in M&S then owning 62.5% of the property, and Williams owning the remaining 37.5%. M&S would form a limited liability company for the development of the project, with "each party" being a manager of the LLC. The LLC that resulted from this agreement was Wildlife LLC. Millward and Williams became the managing members of Wildlife LLC upon its creation.

         On December 30, 2005, (the next day) the Beneficiaries loaned Millward and M&S $244, 000 to finance the purchase of the subject property.[3] As evidence of the loan, Millward and M&S made and issued a Trust Deed Note to the Beneficiaries. Millward signed the Trust Deed[4]on behalf of M&S, the sole trustor. As a result of their actions, both Millward and M&S were contractually obligated to repay the loan described in the Trust Deed Note. Pioneer Title Company (Pioneer) became the trustee and holder of the deed. On June 13, 2006, M&S deeded the subject property to Wildlife LLC.

         On March 3, 2008, the Trust Deed Note was modified to include additional amounts loaned which totaled $217, 400 (the modification). This additional loan was made in a series of advances by the Beneficiaries to Millward and M&S. Millward signed the modification on behalf of himself and M&S. He also signed on behalf of Wildlife LLC to acknowledge the modification. Williams, the other manager of Wildlife LLC, did not sign the modification.

         On September 10, 2012, Millward filed for Chapter 7 Bankruptcy. Millward's bankruptcy filing resulted in an automatic stay precluding the commencement or active pursuit of an action against him personally. See 11 U.S.C. § 362(a). M&S was listed as community property, 100% owned by Millward and his wife, in the bankruptcy schedule. As a result, any action against M&S was also stayed. See id.

         On March 12, 2015, Wildlife LLC filed an amended complaint in Bannock County district court to quiet title to the property (the first action). The suit named the Beneficiaries as defendants. That action did not include Millward or M&S as parties. In its amended complaint, Wildlife LLC alleged that the debt secured by the Trust Deed Note had been fully paid. As a result of the purportedly satisfied debt, Wildlife LLC requested that it be awarded a judgment quieting title in the property. Over a year later, Wildlife LLC stipulated to the dismissal of its amended complaint, with prejudice. On June 14, 2016, a judgment was entered dismissing Wildlife LLC's action with prejudice. (Nine days later, on June 23, 2016, Millward's bankruptcy case was closed.)

         On October 7, 2016, the Beneficiaries filed the underlying judicial foreclosure action, naming Wildlife LLC and M&S as defendants. In their complaint, the Beneficiaries requested a judicial foreclosure sale of the property in order to satisfy the remaining debt under the promissory note. Millward was not named as a defendant.[5] Wildlife LLC answered on November 4, 2016, alleging a number of affirmative defenses, including a counterclaim asserting fraud, and requesting declaratory and injunctive relief. The Beneficiaries answered Wildlife LLC's counterclaim and asserted that Wildlife LLC's counterclaim and affirmative defenses were barred by res judicata, among other defenses. Subsequently, the Beneficiaries moved the district court for partial summary judgment, and on March 27, 2017, the district court issued its decision (first decision) granting that motion and dismissing Wildlife's affirmative defenses and counterclaim based on res judicata.

         On March 30, 2017, the district court entered default against M&S for its failure to appear. On April 13, 2017, the Beneficiaries filed a second motion for summary judgment, requesting that the remaining issues be determined by the court. Those issues were whether an unpaid debt remained on the promissory note and the reasonable value of the property still encumbered by the deed of trust. Wildlife LLC opposed that motion and, in addition, submitted a motion for reconsideration in an attempt to reverse the district court's first decision that dismissed its counterclaim and affirmative defenses.

         On June 14, 2017, the district court issued a Memorandum Decision and Order (second decision) denying Wildlife LLC's request for reconsideration and finding that an unpaid debt remained on the promissory note in the amount of $6, 814, 076.41. The district court did not establish a value for the property at that time.

         The district court entered a Judgment, Decree of Foreclosure and Order of Sale. Wildlife LLC appeals from the district court's decisions granting summary judgment, foreclosing it from making its case, and allowing judgment to be entered in favor of the Beneficiaries.

         II. QUESTIONS PRESENTED ON APPEAL

         A. Were Wildlife LLC's affirmative defenses and counterclaim properly barred by the district court under the doctrine of res judicata?

         B. Did the district court properly reject Wildlife LLC's claim that the Beneficiaries' foreclosure action was precluded by the applicable statute of limitations?

         C. Did the district court properly conclude that res judicata did not apply to the Beneficiaries' foreclosure action?

         D. If the Beneficiaries are the prevailing parties, are they entitled to attorney's fees under I.A.R. 41, Idaho Code section 12-120, or Idaho Code section 12-121?

         III. STANDARD OF REVIEW

         "This Court reviews a motion for summary judgment pursuant to the same standards as the district court." Berkshire Invs., LLC v. Taylor, 153 Idaho 73, 80, 278 P.3d 943, 950 (2012). "The court must grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." I.R.C.P. 56(a). "All reasonable inferences that can be drawn from the record are to be drawn in favor of the nonmoving party, and disputed facts are liberally construed in the nonmoving party's favor." Marek v. Hecla, Ltd., 161 Idaho 211, 214, 384 P.3d 975, 978 (2016). Questions of law are reviewed de novo, and "[w]hether an action is barred by res judicata is a question of law." Berkshire Invs., 153 Idaho at 80, 278 P.3d at 950.

         "[W]hen reviewing a trial court's decision to grant or deny a motion for reconsideration, this Court utilizes the same standard of review used by the lower court in deciding the motion for reconsideration." Fragnella v. Petrovich, 153 Idaho 266, 276, 281 P.3d 103, 113 (2012). "When deciding the motion for reconsideration, the district court must apply the same standard of review that the court applied when deciding the original order that is being reconsidered." Id. As such, this Court reviews the district court's denial of Wildlife LLC's motion for reconsideration under the summary judgment standard. Id.

         IV. ANALYSIS

         A. Wildlife LLC's affirmative defenses and counterclaim were correctly barred by the application of res judicata.

         In its initial assignment of error, Wildlife LLC contends the district court erred in granting the Beneficiaries' motion for summary judgment and dismissing Wildlife LLC's affirmative defenses and counterclaim. Wildlife LLC asserts that the Beneficiaries, Millward, and M&S engaged in fraud, which, if true, could preclude the Beneficiaries from recovering on their claims.[6] The district judge granted the Beneficiaries' motion for summary judgment as to Wildlife LLC's affirmative defenses and counterclaim, finding that res judicata precluded Wildlife LLC from pursuing them.

         "The doctrine of res judicata covers both claim preclusion (true res judicata) and issue preclusion (collateral estoppel)." Ticor Title Co. v. Stanion, ...


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