Idaho Trust Bank v. Christian

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 39781-2012
IDAHO TRUST BANK, an Idaho )
corporation, f/k/a IDAHO TRUST ) Boise, May 2013 Term
NATIONAL BANK, )
) 2013 Opinion No. 61
Plaintiff-Respondent, )
) Filed: May 23, 2013
v. )
) Stephen W. Kenyon, Clerk
MICHAEL R. CHRISTIAN, an individual, )
)
Defendant-Appellant. )
)
Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, in and for Ada County. The Hon. Cheri C. Copsey, District Judge.
The judgment of the district court is affirmed.
Barry L. Marcus, Marcus Christian Hardee & Davies, Boise, argued for appellant.
Fredric V. Shoemaker, Greener Burke Shoemaker Oberrecht, Boise, argued for
respondent.
EISMANN, Justice.
This is an appeal out of Ada County from a summary judgment granted against the
appellant in an action to recover on his personal guaranty. We affirm the judgment of the district
court.
I.
Factual Background.
On December 8, 2006, Trinity Investments, LLC (Borrower), an Idaho limited liability
company, executed and delivered to Idaho Trust National Bank (Lender) a promissory note in
the principal amount of $5,625,000.00 to develop a parcel of real property and construct
townhouses upon it. Borrower was to make monthly payments of accrued interest and to pay the
outstanding principal, plus accrued interest, on December 8, 2007. Borrower and Lender later
entered into several agreements to change the terms of the note to reduce the principal and
extend the date of maturity. The note was secured by a construction deed of trust on the real
property being developed. Michael R. Christian (Guarantor) executed the promissory note as a
member of Borrower, and he also signed a guaranty of Borrower’s indebtedness to Lender.
Borrower ultimately defaulted on the loan, and Lender brought a lawsuit against it to
recover on the promissory note. During that proceeding, they stipulated to have a receiver
appointed to market and sell the real property that was the collateral for the note. The receiver
was authorized to sell the townhouse units for 80% of their appraised value without court
approval. Guarantor signed the stipulation appointing the receiver as attorney in fact for
Borrower. By June 2011, the receiver had sold all of the remaining properties. Those sales did
not generate sufficient funds to pay the sums owing on the note.
On May 13, 2011, Lender brought this action to recover from Guarantor the balance
owing by Borrower on the note. The district court granted Lender’s motion for summary
judgment and denied Borrower’s motion for reconsideration. On March 7, 2012, the district
court entered judgment in favor of Lender against Guarantor in the sum of $1,743,448.01, plus
interest in the amount of $7,687.68. Guarantor timely appealed.
II.
Did the District Court Err in Holding that the Guaranty Agreement
Is Not Ambiguous?
Guarantor contends that Lender could not recover a deficiency judgment against
Borrower because the property was sold by the receiver rather than by foreclosing on the deed of
trust and that the guaranty is ambiguous as to whether it extends to debts not enforceable against
Borrower. We need not decide whether Idaho Code section 45-1512 applies where the property
subject to the deed of trust is not sold at a foreclosure sale but is sold by a receiver pursuant to
the agreement of the grantor of the deed of trust. The guaranty states, “For good and valuable
consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment
and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge
of all Borrower’s obligations under the Note and the Related Documents.” (Emphasis added.)
According to Guarantor, the definition of “Indebtedness” in the guaranty is ambiguous as to
whether it includes debts that are not enforceable against Borrower.
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The guaranty agreement defines indebtedness as follows:
The word “Indebtedness” as used in this Guaranty means all of the
principal amount outstanding from time to time and at any one or more times,
accrued unpaid interest thereon and all collection costs and legal expenses related
thereto permitted by law, reasonable attorneys’ fees, arising from any and all
debts, liabilities and obligations of every nature or form, now existing or hereafter
arising or acquired, that Borrower individually or collectively or interchangeably
with others, owes or will owe Lender. “Indebtedness” includes, without
limitation, loans, advances, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of Borrower, and
any present or future judgments against Borrower, future advances, loans or
transactions that renew, extend, modify, refinance, consolidate or substitute these
debts, liabilities and obligations whether: voluntarily or involuntarily incurred;
due or to become due by their terms or acceleration; absolute or contingent;
liquidated or unliquidated; determined or undetermined; direct or indirect;
primary or secondary in nature or arising from a guaranty or surety; secured or
unsecured; joint or several or joint and several; evidenced by a negotiable or non
negotiable instrument or writing; originated by Lender or another or others;
barred or unenforceable against Borrower for any reason whatsoever; for any
transactions that may be voidable for any reason (such as infancy, insanity, ultra
vires or otherwise); and originated then reduced or extinguished and then
afterwards increased or reinstated.
The definition consists of two sentences. Guarantor contends there is a conflict between
the first and second sentences, thereby creating an ambiguity. The first sentence states that
indebtedness means outstanding principal, unpaid interest, all collection costs, and reasonable
attorney’s fees “that Borrower . . . owes or will owe lender.” Guarantor argues that the conflict
and resulting ambiguity occurs because the word “owes” should mean “subject to an enforceable
obligation to pay,” but the second sentence of the definition states that an indebtedness includes
loans and debts that are “barred or unenforceable against Borrower for any reason whatsoever.”
Guarantor asserts that the two sentences in the definition should not be read together, but that the
first sentence should be considered the primary definition of indebtedness and the second
sentence should be considered the conflicting secondary definition.
“Whether a contract is ambiguous is an issue of law.” McDevitt v. Sportsman’s
Warehouse, Inc., 151 Idaho 280, 283, 255 P.3d 1166, 1169 (2011). “For a contract term to be
ambiguous, there must be at least two different reasonable interpretations of the term or it must
be nonsensical.” Swanson v. Beco Constr. Co., 145 Idaho 59, 62, 175 P.3d 748, 751
(2007)(Citations omitted). As counsel for Guarantor admitted during oral argument, the parties
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to a contract are free to define in the contract words that are used therein, even if those
definitions vary from the normal meanings of the words. Id. Because the word “indebtedness”
is defined in the contract, we have no need to address Guarantor’s asserted definition of the word
“owes.”
The guaranty defines the indebtedness that it covers. There is no logical basis for
Guarantor’s argument that the first sentence of the contractual definition should be considered
the primary definition and the second sentence the secondary definition. Both sentences together
define the term. Under the definition written in the parties’ contract, “ ‘[i]ndebtedness’ includes,
without limitation, loans, advances, debts, . . . and liabilities of Borrower . . . whether: . . .
barred or unenforceable against Borrower for any reason whatsoever.” Thus, whether Lender
could recover additional sums against Borrower is irrelevant. It is entitled to recover those sums
against Guarantor under the unambiguous terms of the guaranty. The district court did not err in
granting Lender’s motion for summary judgment.
III.
Is Either Party Entitled to Recover Attorney Fees on Appeal?
Both parties seek an award of attorney fees on appeal pursuant to Idaho Code section 12-
120(3). Guarantor bases its request for an award of fees on the part of the statute entitling the
prevailing party to recover reasonable attorney fees in “any civil action to recover . . . in any
commercial transaction.” Lender bases its request upon the part of the statute entitling the
prevailing party to recover reasonable attorney fees in “any civil action to recover on . . . [a]
guaranty.”
Because Guarantor is not the prevailing party on appeal, he is not entitled to an award of
attorney fees under that statute. Harger v. Teton Springs Golf and Casting, LLC, 145 Idaho 716,
719, 184 P.3d 841, 844 (2008). Lender is the prevailing party on appeal, and it is therefore
entitled to an award of attorney fees under the statute. Washington Fed. Sav. v. Van Engelen,
153 Idaho 648, 658, 289 P.3d 50, 60 (2012).
IV.
Conclusion.
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We affirm the judgment of the district court. We award respondent costs on appeal,
including reasonable attorney fees.
Chief Justice BURDICK, Justices J. JONES, W. JONES, and HORTON CONCUR.
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