Patricia McKay v. Thomas G. Walker

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 42434
PATRICIA MC KAY, )
) Boise, December 2015 Term
Plaintiff-Appellant, )
) 2016 Opinion No. 31
v.
)
THOMAS G. WALKER, and COSHO ) Filed: March 23, 2016
HUMPHREY, LLP, a limited liability )
partnership, ) Stephen Kenyon, Clerk
Defendants-Respondents. )
Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, Ada County. Hon. Jason D. Scott, District Judge.
The judgment of the district court is affirmed.
Ellis Law, PLLC, Boise, for appellant. Allen B. Ellis argued.
Anderson, Julian & Hull LLC, Boise, for respondents. Yvonne Dunbar argued.
_______________________________________________
HORTON, Justice.
Patricia McKay appeals the grant of summary judgment in favor of Thomas Walker and
Cosho Humphrey, LLP, in a legal malpractice action. McKay contended that Walker negligently
drafted a property settlement agreement by failing to include provisions that would have resulted
in a judgment lien against payments owed to her husband which were secured by a mortgage.
The district court concluded that because a mortgage is personal property and not real property,
the failure to include a description of the real property subject to the mortgage and the
mortgage’s instrument number would not have resulted in the creation of a security interest.
Based upon this legal conclusion, the district court held that Walker had not breached a duty to
McKay and the alleged breach was not the proximate cause of any damages. McKay argues the
district court erred in its conclusion. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2007, Patricia McKay was divorced from her husband Darwin McKay (Darwin).
McKay hired Thomas G. Walker and Cosho Humphrey, LLP (collectively Walker) to represent
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her during the divorce proceedings. McKay and Darwin entered into mediation and on October
20, 2007, reached a settlement that was documented in a three-page handwritten agreement (the
Agreement). At the time, Darwin had deals with Status Corporation (Status) involving two
parcels of real estate: the Home Farm, which Status was scheduled to purchase in March of
2008; and the Albrethsen property, which had been deeded to Status in 2006 and was subject to a
mortgage loan in favor of Darwin. The Agreement required Darwin to pay McKay $800,000 if
the Home Farm transaction closed in March of 2008. If the transaction did not close as
scheduled, Darwin’s obligation was reduced to $500,000. The Agreement further provided that if
the Status deal did not close by March 30, 2008, and Darwin had not paid McKay $500,000 by
September 30, 2008, Darwin would once again be obligated to pay McKay $800,000.
The Agreement did not address security for Darwin’s obligation to McKay. McKay was
aware of this, as she sent Walker an email on October 21, 2007, expressing her concerns
regarding the absence of collateral securing Darwin’s obligation and the possibility that Darwin
would manipulate the timing of the closing of the Home Farm transaction in order to reduce his
obligation to her by $300,000. Walker attempted to obtain security guaranteeing Darwin’s
obligation but Darwin rebuffed those efforts.
In November of 2007, the Agreement was formalized in a “Property Settlement
Agreement Incorporated and Merged with and into Judgment and Decree of Divorce” (PSA). As
the title suggested would occur, the PSA was merged into Darwin and McKay’s decree of
divorce. The PSA did not contain the legal description of the Albrethsen property nor the
instrument number of the mortgage on the Albrethsen property.
Status failed to pay the balance owed on the Albrethsen property. Litigation ensued,
resulting in Darwin being awarded a $1.2 million judgment against Status. Status did not satisfy
Darwin’s judgment; rather, because a title insurance company had mistakenly insured the first-
priority position of multiple Albrethsen property lienholders, including Darwin, the title
insurance company paid Darwin the judgment amount in exchange for assignment of the
judgment.
The Home Farm deal with Status did not close as scheduled. Darwin did not pay McKay
the $500,000 prior to September 30, 2008. Thus, under the terms of the PSA, Darwin was
required to pay McKay $800,000. Darwin did not make the required payment and McKay
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initiated contempt proceedings on January 30, 2009. The contempt action resulted in a settlement
in which McKay and Darwin agreed to new terms which supplanted the PSA.
McKay believed that the financial terms of her settlement with Darwin were less
favorable than would have been the case if the PSA had been drafted in a fashion to secure
payment of Darwin’s obligations. On November 25, 2009, McKay initiated the present action
against Walker, alleging that he negligently drafted the PSA by failing to include a legal
description of the Albrethsen property and the instrument number of the Albrethsen mortgage.
McKay claims that if these provisions had been included in the PSA, McKay would have had a
judgment lien against the Albrethsen proceeds by operation of Idaho Code section 11-1110
following recordation of the judgment incorporating the PSA.
Walker moved for summary judgment, contending that he did not breach a duty of care to
McKay and the alleged failures in drafting the PSA were not the proximate cause of McKay’s
inability to receive the payment Darwin owed her. The district court initially denied Walker’s
motion for summary judgment. The district court found that statements Walker made in an
October 23, 2007, email to McKay prior to the execution of the PSA misstated the applicable law
regarding whether the Albrethsen mortgage would be subject to a judgment lien, and that such a
misstatement might constitute a breach of the standard of care.
Walker moved for reconsideration, arguing that the district court had erroneously
interpreted the October 23, 2007, email as relating to the Albrethsen mortgage when it had
actually referred to the Home Farm. The district court denied Walker’s motion for
reconsideration after finding that the email was susceptible to multiple reasonable interpretations.
Walker filed a second motion for reconsideration, again advancing arguments regarding
the email correspondence between Walker and McKay prior to the execution of the PSA.
McKay’s response directed the district court’s attention back to her pleadings as to the allegedly
negligent conduct by Walker. Her complaint did not advance a claim that Walker had provided
negligent advice regarding the effect of the PSA. Instead, she claimed that Walker had
negligently drafted the PSA. In its memorandum decision on Walker’s second motion for
reconsideration, the district court described McKay’s position regarding Walker’s motion for
summary judgment:
McKay’s response to the second motion to reconsider endeavors to draw
the Court’s focus away from the e-mail exchange on which the Court’s two prior
decisions had focused. Indeed, despite that McKay was on the winning side of
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those decisions, she repeatedly emphasized that the alleged malpractice is not
embodied in the e-mail exchange; instead, it is the failure to draft the PSA in a
way that, when recorded, would create a security interest in her ex-husband’s
mortgage on the Albrethsen Property. This is one representative passage:
“Defendants mistakenly perceive that their alleged liability is based on an email
sent 30 days before the PSA was executed. . . . However, the actual negligence is
the failure to construct a PSA which will . . . give plaintiff a secured position.”
This is another: “[T]he malpractice is based on the failure to draft and record a
PSA that would protect plaintiff’s interest. The malpractice is not the
representations set forth in the October 23, 200[7] e-mail from Mr. Walker.”
McKay’s counsel continued with that theme during the hearing on the second
motion to reconsider. He stated unequivocally during the hearing that nothing in
the e-mail exchange constitutes malpractice.
(emphasis and alteration in original).
The district court granted Walker’s motion for reconsideration and entered summary
judgment in favor of Walker. The district court explained the only two elements of malpractice at
issue were whether Walker breached his duty to draft the PSA to protect McKay’s interests, and
whether his failure to do so was the proximate cause of McKay’s pecuniary injuries. The district
court held that Walker could not have breached his duty by failing to include a legal description
of the Albrethsen property and the instrument number of the mortgage in the PSA because a
mortgage, as personal property, was not subject to a judgment lien under Idaho Code section 10-
1110. McKay timely appealed.
II. STANDARD OF REVIEW
“In an appeal from an order granting summary judgment, this Court’s standard of review
is the same as the standard used by the district court in ruling on a motion for summary
judgment.” Thomas v. Medical Center Physicians, P.A., 138 Idaho 200, 205, 61 P.3d 557, 562
(2002). “All disputed facts are to be construed liberally in favor of the non-moving party, and all
reasonable inferences that can be drawn from the record are to be drawn in favor of the non-
moving party.” Oats v. Nissan Motor Corp. in U.S.A., 126 Idaho 162, 164, 879 P.2d 1095, 1097
(1994). Summary judgment is appropriate “if the pleadings, depositions, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” I.R.C.P. 56(c).
“This Court exercises free review over questions of law.” Rhoades v. State, 149 Idaho
130, 132, 233 P.3d 61, 63 (2010). “On review, the interpretation of a statute is an issue of law
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over which this Court exercises free review.” Insight LLC v. Gunter, 154 Idaho 779, 783, 302
P.3d 1052, 1056 (2013).
III. ANALYSIS
As previously discussed, the district court granted Walker’s motion for summary
judgment after McKay emphasized that she was not claiming that Walker provided inaccurate
advice. The district court observed:
The alleged breach of duty, again, has to do with the drafting of the PSA, not with
the advice rendered in connection with reaching a divorce settlement. Thus, while
McKay’s briefing at times criticizes Walker and Cosho Humphrey for allegedly
giving her a mistaken impression about the extent to which her ex-husband’s
payment obligations under the PSA were secured, any shortcoming in the advice
she received in that regard is not the basis for her claim. And, even if it were the
basis for her claim, McKay has not shown a causal relationship between any
allegedly erroneous advice and her claimed damages.
As before the district court, McKay’s appellate briefing includes references to allegedly
inaccurate advice that Walker gave prior to the execution of the PSA. These references are not
sufficient to present an issue on appeal.
McKay does not challenge the district court’s characterization of her claim; rather,
McKay argues the district court erred in its legal conclusion that a mortgage is personal property
and not real property.
The district court reasoned that the definition of real property found in Idaho Code
section 55-101 is simply not broad enough to include a mortgage. Thus, because “every kind of
property that is not” real property is defined as personal property by Idaho Code section 55-102,
the mortgage on the Albrethsen property was personal property. The district court reasoned that,
because the mortgage on the Albrethsen property was not subject to operation of Idaho Code
section 10-1110, the mortgage could not have been the subject of a judgment lien, regardless of
the manner in which Walker drafted the PSA. Accordingly, the district court concluded that
Walker did not breach a duty to McKay by failing to include the Albrethsen property’s legal
description and the mortgage instrument number in the PSA because McKay would not have
obtained a security interest in the mortgage proceeds.
McKay does not challenge the district court’s reasoning flowing from its initial premise
that the Albrethsen mortgage was personal property, i.e., that if the mortgage was personal
property then Walker’s alleged shortcomings in drafting the PSA did not breach a duty to
McKay nor was it the proximate cause of damages. Instead, McKay asserts that the district court
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erred when it concluded that a mortgage is personal property not subject to Idaho Code section
10-1110. We disagree.
Idaho Code section 10-1110 provides:
A transcript or abstract of any judgment or decree of any court of this state
or any court of the United States the enforcement of which has not been stayed as
provided by law . . . may be recorded with the recorder of any county of this state
. . . and from the time of such recording, and not before, the judgment so recorded
becomes a lien upon all real property of the judgment debtor in the county, not
exempt from execution, owned by him at the time or acquired afterwards at any
time prior to the expiration of the lien . . . .
I.C. § 10-1110 (emphasis added).
Two Idaho statutes define real property. Idaho Code section 73-114(2) provides
definitions applicable to “the compiled laws” unless another meaning is “otherwise apparent
from the context” of a specific statute. Idaho Code section 73-114(2)(e) states: “ ‘Real property’
is coextensive with lands, tenements and hereditaments, possessory rights and claims.” I.C. § 73-
114(2)(e) (emphasis added). The only term in the statute that might conceivably apply to
mortgages is “possessory rights.” Black’s Law Dictionary defines “possessory interest” as “[t]he
present right to control property, including the right to exclude others, by a person who is not
necessarily the owner.” Black’s Law Dictionary 1284 (9th ed. 2009). The Restatement (First) of
Property states that a possessory interest in land exists where a person has: “(a) a physical
relation to the land of a kind which gives a certain degree of physical control over the land, and
an intent so to exercise such control as to exclude other members of society in general from any
present occupation of the land . . . .” Restatement (First) of Property § 7 (1936). The focus on
present rights of possession found in these definitions, as distinguished from the future,
contingent right to sell property that a mortgage creates, leads us to conclude that a mortgage is
not real property as defined by Idaho Code section 73-114(2)(e).
Idaho Code section 55-101 is the other statute providing a definition of “real property.”
The definition found in that statute includes: (1) “Lands, possessory rights to land, ditch and
water rights, and mining claims, both lode and placer;” (2) “That which is affixed to land”; and,
(3) “That which is appurtenant to land.” I.C. § 55-101. A mortgage is not land. A mortgage does
not create a possessory right to land. A mortgage is not a ditch or water right nor is it a mining
claim. A mortgage is not affixed to land nor is it appurtenant1 to land. In short, a mortgage
1
Black’s Law Dictionary explains the meaning of appurtenant as follows:
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simply is not real property as defined by Idaho Code section 55-101. Because a mortgage is not
real property, it is personal property. I.C. § 55-102.
McKay claims that Ogden v. Griffith, 149 Idaho 489, 236 P.3d 1249 (2010), supports her
contention. There, we stated that a deed of trust was an interest in real property. McKay contends
that because a mortgage is analogous to a deed of trust a mortgage is also an interest in real
property. McKay’s reliance in Ogden is misplaced. McKay’s implicit premise is that all interests
in real property are necessarily real property. That is not the case. “A mortgage creates only a
security interest in real estate and confers no right to possession of that real estate on the
mortgagee.” Restatement (Third) of Property (Mortgages) § 4.1(a) (1997) (emphasis added).
Even a deed of trust is not considered a possessory interest in land under Idaho case law. In Long
v. Williams, 105 Idaho 585, 587–88, 671 P.2d 1048, 1050–51 (1983), this Court explained that
with the adoption of the Trust Deeds Act in 1957, Idaho “transitioned from a ‘lien theory’ state
to a ‘title passes’ state where a deed of trust is employed as a security.” Id. We further explained
that a trustee is not granted the right to possess the property and “even though title passes for the
purpose of the trust, a deed of trust is for practical purposes only a mortgage with power of sale.”
Id.McKay contends that many Idaho statutes treat a mortgage as a real property interest,
including: Idaho Code sections 45-902, 45-908, 55-811, and 55-813; however, a simple reading
of those statutes indicates that mortgages are treated “in like manner” or “with the formalities
required of” real property. The statutes themselves make it clear there is a distinction.
Finally, McKay contends that: “During the twentieth and twenty-first centuries, the term
‘real property’ has evolved beyond only tangible property and the common law rarely addresses
the arcane mining terms set forth in that section.” This Court is not free to ignore the definitions
of real property provided by the Idaho Legislature in Idaho Code sections 73-114 and 55-101
because we view them as anachronistic nor are we free to amend them by judicial fiat under the
guise of statutory construction. To the contrary, we are bound to apply their plain meaning. For
A thing is “appurtenant” to something else when it stands in relation of an incident to a principal
and is necessarily connected with the use and enjoyment of the latter. A thing is deemed to be
incidental or appurtenant to land when it is by right used with the land for its benefit, as in the
case of a way, or water-course, or of a passage for light, air, or heat from or across the land of
another.
Black’s Law Dictionary 94 (5th ed. 1979) (emphasis in original).
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that reason, we hold that a mortgage is not real property subject to a judgment lien under Idaho
Code section 10-1110 and affirm the district court’s grant of summary judgment.
IV. CONCLUSION
We affirm the judgment of the district court and award costs on appeal to Walker.
Chief Justice J. JONES and Justices EISMANN, BURDICK and W. JONES, CONCUR.
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