David Kosmann v. Leo Gilbride

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 43296
DAVID KOSMANN, )
) Boise, November 2016 Term
Plaintiff- Respondent, )
) 2016 Opinion No. 146
v. )
) Filed: December 12, 2016
LEO GILBRIDE, )
) Stephen W. Kenyon, Clerk
Defendant-Appellant. )
)
)
_____________________________________
Appeal from the District Court of the Third Judicial District of the State
of Idaho, Canyon County. Hon. Juneal Kerrick, District Judge.
The judgment of the district court is affirmed.
.
Kaufman Reid, PLLC, Boise, attorneys for appellant. James G. Reid
argued.
Greener Burke Shoemaker Oberrecht, PA, Boise, attorneys for respondent.
Loren K. Messerly argued.
_______________________________
W. JONES, Justice
I. NATURE OF THE CASE
Appellant, Leo Gilbride (“Gilbride”), contends that the district court erred by refusing his
request for attorney’s fees. The underlying dispute arose out of a sale of real property between
Respondent, David Kosmann (“Kosmann”), and Gilbride, which was executed with the alleged
understanding that Gilbride would re-convey the property back to Kosmann at a later time. After
purchasing the property, with down payment funds provided by Kosmann, Gilbride refused to re-
convey the property to Kosmann. Accordingly, on January 25, 2013, Kosmann filed a complaint
against Gilbride alleging, inter alia, unjust enrichment and demanding specific performance of
Gilbride’s promise to re-convey the property. The district court dismissed the specific
enforcement claim, awarded Kosmann $30,990 based on his unjust enrichment claim, and denied
both parties’ claims for attorney’s fees.
On appeal, Gilbride argues that he was entitled to attorney’s fees pursuant to the Real
Estate Purchase and Sale Agreement, or Idaho Code section 12-120(3).
II. FACTUAL AND PROCEDURAL BACKGROUND
This case arises from Kosmann’s sale of real property to Gilbride and an alleged oral
agreement for Gilbride to re-convey the property back to Kosmann at a later time. Kosmann
owned real property commonly known as 1020 W. Homedale Road, Caldwell, Idaho 83607 (the
“Property”). The Property consists of a home, two shops, and an acre of open field.
In the summer of 2011, Kosmann became unable to make his mortgage payments. He
owed about $260,000 on the Property, but it only appraised for $130,000. After failed attempts to
refinance his loan, Kosmann contacted Justin McCarthy, a real estate agent. McCarthy explained
that there were investors who would be available to purchase the Property and rent it back to
Kosmann. After two sale and lease back agreements fell through with separate parties, Kosmann
introduced McCarthy to Gilbride.1 Gilbride and Kosmann first met in May 2012, and by “June or
July . . . [Gilbride] offered to help [Kosmann] as a friend.” Kosmann and Gilbride had similar
backgrounds in the military. Gilbride offered to help Kosmann with the understanding that
Gilbride would obtain the loan, but Kosmann would pay the down payment, closing costs, and
also pay Gilbride “a couple hundred extra a month for his trouble until such time [Kosmann]
could regain possession of the home.”
Under this arrangement, Gilbride allegedly orally promised to help Kosmann obtain a
short sale2 of the Property and thereafter: (1) allow Kosmann to reside and operate his restoration
business at the Property, and (2) allow Kosmann an opportunity to buy the Property back at a
later time. On September 24, 2012, Kosmann and Gilbride executed the Real Estate Purchase
and Sale Agreement (the “REPSA”). The REPSA provided as follows: “Offer is contingent upon
3rd party bank (GMAC) releasing the mortgage as paid in full, and releasing rights to pursuit of a
deficiency judgment. Seller will rent the property back from the buyer for a term of not less than
1 year.” A short sale was arranged with the lender, GMAC, but in order to get the short sale
1
The specific facts regarding McCarthy’s role in this transaction are unclear. Nonetheless, his apparent willingness
to be involved in this fraudulent transaction raises serious concerns regarding his professional ethics.
2
“A short sale occurs when a property is sold at a price lower than the amount the homeowner owes on the
mortgage, and the homeowner's mortgage lender(s) agrees to the ‘short’ payoff. A lender might accept a short sale
with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly
loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the
property.” Buying a Short Sale Property, Freddie Mac, http://www.freddiemac.com/purchasemarket/ssfaq.html.
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approved, Kosmann and Gilbride were required to sign a Short Payoff Arms-Length Affidavit,
which included the following:
There are no agreements, understandings or contracts between the parties that the
Borrower will remain in the Mortgage Premises as a tenant or later obtain title or
ownership of the Mortgaged Premises, except to the extent that the Borrower is
permitted to remain as a tenant on the Mortgaged Premises for a short term, as is
common and customary in the market, but no longer than ninety (90) days, in
order to facilitate relocation.
...
There are no agreements, understandings or contracts relating to the current sale
or subsequent sale of the Mortgage Premises that have not been disclosed to
[GMAC].
...
Each signatory understands, agrees and intends that the Servicer and Investor are
relying upon the statements made in the affidavits as consideration for the
reduction of the payoff amount of the Mortgage and agreement to the sale of the
Mortgage Premises.
Before closing, Kosmann paid Gilbride $29,990 to cover the down payment and closing
costs of the sale. When it came time to sign at closing, in late December 2012, Kosmann learned
that the total closing costs were $31,600. Accordingly, he paid Gilbride an additional $1,000.
The short sale resulted in GMAC being defrauded: GMAC was led to believe, according
to the Short Payoff Arms-Length Affidavit, that no understanding existed between Kosmann and
Gilbride relating to Kosmann later obtaining ownership of the Property or remaining in
possession of the Property for more than 90 days. In fact, such an understanding existed.
Apparently, Gilbride was not satisfied with only defrauding GMAC because after the
transaction closed, Gilbride turned on his co-conspirator. On December 27, 2012, Kosmann
received a Residential Rental Agreement (“Rental Agreement”) from Gilbride, which required a
rental payment of $1,733 per month. Kosmann testified that the Rental Agreement did not
contain any of the terms that had been previously agreed upon, namely, that rent would be “a
couple of hundred beyond the costs of the loan [and] insurance” and that they would enter a “90-
day lease option to buy.” Simply put, Gilbride was attempting to double-cross Kosmann.
Kosmann did not sign the Rental Agreement. Recognizing that Gilbride was “not going to honor
any of his word and do any of the things that he said he was going to do,” Kosmann set up a
meeting to talk with Gilbride. At the meeting, it became clear to Kosmann that Gilbride was
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“changing the deal rapidly and . . . forcing [him] to sign [the Rental Agreement] within 24
hours.”
On January 25, 2013, Kosmann filed a complaint and demand for jury trial, which
demanded specific performance and alleged: (1) breach of contract; (2) breach of implied
covenant of good faith and fair dealing; and (3) unjust enrichment. On February 19, 2013,
Gilbride filed an answer and counterclaim alleging breach of contract and demanding the
ejectment of Kosmann from the Property. By order entered August 9, 2013, the district court
granted Gilbride’s motion for summary judgment dismissing the breach of contract and breach of
covenant of good faith and fair dealing claims. On August 14, 2013, Kosmann filed an amended
complaint adding an allegation of fraud against Gilbride. On September 17, 2013, Gilbride filed
an answer to the amended complaint and also amended his counterclaim to include an allegation
of unlawful detainer.
A four-day jury trial commenced on January 27, 2015. At the conclusion of Kosmann’s
case-in-chief, Gilbride moved for an order dismissing the remaining claims against him. The
district court: (1) reserved decision on the motion to dismiss as it related to Kosmann’s fraud
claim against Gilbride; (2) denied the motion as to the unjust enrichment claim; and (3) granted
Gilbride’s motion to dismiss the specific performance claim “because the evidence did not
establish a contract sufficiently definite in its terms to be specifically enforced.” The parties
stipulated to conduct the remainder of the trial as a bench trial.
On March 30, 2015, the district court issued its Memorandum Decision Following Court
Trial. Therein, the district court concluded as follows: (1) Kosmann was entitled to $30,990 for
his unjust enrichment claim; (2) Kosmann’s remaining claims were dismissed; and (3) Gilbride
was entitled to judgment regarding his counterclaim for ejectment. The district court issued a
judgment consistent with its memorandum.
On April 10, 2015, Gilbride filed a motion for attorney’s fees and costs. Therein, he
argued, inter alia, that he was entitled to costs and attorney’s fees as the prevailing party under
Idaho Rule of Civil Procedure 54 in conjunction with Idaho Code section 12-120(3) and the
attorney’s fees provision of the REPSA.
On April 27, 2015, Kosmann filed a memorandum opposing Gilbride’s motion for
attorney’s fees and costs. Therein, Kosmann argued, inter alia, that: (1) Gilbride was not a
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prevailing party, and (2) Idaho Code section 12-120(3) was inapplicable to the case because a
commercial transaction was not the gravamen of the lawsuit.
A hearing was held on the parties’ respective motions for attorney’s fees and costs on
June 11, 2015. On June 18, 2015, the district court issued its Order on Motions to Disallow Costs
and Fees. The district court held as follows: (1) Kosmann was not a prevailing party because
Gilbride prevailed on the main issue in the litigation, that is, whether Kosmann was entitled to
specific performance of, or damages for, Gilbride’s breach of the alleged oral agreement; (2)
Gilbride prevailed on the primary issue in this litigation and was therefore entitled to $1,732.25
for costs as a matter of right under Idaho Rule of Civil Procedure 54(d)(1); (3) Gilbride was not
entitled to attorney’s fees under Idaho Code section 12-120(3) because he did not establish that
the gravamen of the action involved a commercial transaction; and (4) Gilbride was not entitled
to attorney’s fees pursuant to the terms of the REPSA because the main issue of the litigation
was an alleged oral agreement that was “entirely separate and distinct from the [REPSA].” The
district court issued an amended judgment reflecting its decision to award Gilbride costs as a
matter of right.
Gilbride timely appealed the district court’s decision regarding attorney’s fees.
III. ISSUES ON APPEAL
1. Whether the district court erred when it concluded that neither the REPSA, nor Idaho
Code section 12-120(3) supported an award of attorney’s fees.
2. Whether either party is entitled to attorney’s fees on appeal.
IV. STANDARD OF REVIEW
“The awarding of attorney fees and costs is within the discretion of the trial court and
subject to review for an abuse of discretion.” Smith v. Mitton, 140 Idaho 893, 897, 104 P.3d 367,
371 (2004). “When a judgment on appeal reaches the correct conclusion, but employs
reasoning contrary to that of this Court, we may affirm the judgment on alternate grounds.”
Martel v. Bulotti, 138 Idaho 451, 454–55, 65 P.3d 192, 195–96 (2003).
V. ANALYSIS
A. We affirm the district court’s decision not to award attorney’s fees on alternate
grounds.
Gilbride makes two arguments. First, he argues that the district court erred when it
concluded that he was not entitled to attorney’s fees pursuant to the attorney’s fees provision in
the REPSA. Second, Gilbride argues that the litigation “stemmed from a commercial
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transaction;” thus, he contends that the district court erred in concluding that Idaho Code section
12-120(3) did not apply.
Kosmann characterizes Gilbride’s first argument as “an overly broad and erroneous
interpretation of the [REPSA].” He argues that the district court correctly concluded that the
REPSA did not support an award of attorney’s fees to Gilbride. Specifically, Kosmann notes that
the main issue of the litigation—the alleged oral agreement to re-convey the Property—was
entirely separate from the REPSA. Kosmann also argues that the district court correctly
concluded that Idaho Code section 12-120(3) was not applicable.
Both Kosmann and Gilbride encourage this Court to engage in an analysis of the
attorney’s fees provision in the REPSA and Idaho Code section 12-120(3). However, analyzing
the REPSA and Idaho Code 12-120(3) is not necessary. Rather, the attorney’s fees issue
presented by this appeal is resolved by our decision in Trees v. Kersey. 138 Idaho 3, 56 P.3d 765(2002).
Trees involved two general contractors: (1) Kersey, who was able to bid on projects, and
(2) Trees, who was unable to do so because he lost his public works license and bonding
capacity. Id. at 5, 56 P.3d at 767. Kersey agreed to bid on projects, procure the bond, insurance,
and pay the bills, and Trees would be responsible for everything else, including acting as the
general contractor on the job. Id. Their relationship soured when Kersey refused Trees’ request
for accounting on two jobs. Id. Trees filed a complaint alleging breach of contract and fraud. Id.
at 6, 56 P.3d at 768. The district court ruled in favor of Trees, and Kersey appealed. Id. This
Court held that the agreement between the parties violated the provisions of Idaho’s Public
Works Contractors License Act and was illegal and void. Id. at 8, 56 P.3d at 770. Further, this
Court held that because the parties’ agreement was void, neither should be permitted to claim the
benefit of Idaho Code section 12-120(3). Id. at 12, 56 P.3d at 774. In so holding, this Court cited
Whitney v. Continental Life & Acc. Co., 89 Idaho 96, 105, 403 P.2d 573, 579 (1965), which
stands for the proposition that “if a contract is void as against public policy, then the court will
refuse to enforce it and will leave the parties in the identical situation in which it found them.”
Trees, at 12, 56 P.3d at 774. In sum, Trees demonstrates that parties who enter an agreement that
is illegal or void against public policy are not permitted to benefit from a contractual attorney’s
fees provision or an attorney’s fees statute.
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The agreement orchestrated by McCarthy and executed by Kosmann and Gilbride was
fraudulent and violated public policy. As noted above, by signing the Short Payoff Arms-Length
Affidavit, both Kosmann and Gilbride represented to GMAC that there was no underlying
agreement or understanding between them to re-convey title back to Kosmann; however, an
underlying agreement—albeit an unenforceable agreement—in fact existed. Thus, the entire real
estate transaction hinged on a misrepresentation to GMAC and violated public policy. Therefore,
pursuant to Trees and the cases cited therein, neither party will be permitted to benefit from
Idaho Code section 12-120(3) or the attorney’s fees provision in the REPSA. In conclusion,
neither the law, nor this Court will offer assistance to parties engaging in conduct that is illegal
or violative of public policy.
B. Neither party is entitled to attorney’s fees on appeal.
Gilbride argues that he is entitled to attorney’s fees on appeal pursuant to the REPSA and
Idaho Code section 12-120(3). Kosmann argues that he is entitled to attorney’s fees according to
Idaho Code section 12-121 because Gilbride’s appeal was frivolous, unreasonable and without
foundation. Alternatively, Kosmann argues that Idaho Appellate Rule 11.2 supports an award of
attorney’s fees because Gilbride brought the appeal with the improper purpose of “trying to
benefit from his deceit and to further harm Kosmann financially.”
Neither party is entitled to attorney’s fees on appeal for the same reasons stated above—
this Court refuses to assist wrongdoers.
VI. CONCLUSION
The judgment of the district court is affirmed.
Chief Justice J. JONES and Justices EISMANN, BURDICK and HORTON, CONCUR.
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