Bennett v. Bank of Eastern Oregon

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 47346
BRET W. BENNETT, an individual, and )
MARY E. BENNETT, an individual, )
)
Plaintiffs-Appellants, Boise, June 2020 Term
)
v. )
Opinion Filed: August 31, 2020
)
BANK OF EASTERN OREGON, a )
Melanie Gagnepain, Clerk
national banking association, )
)
Defendant-Respondent. )
Appeal from the District Court of the Third Judicial District, State of Idaho,
Payette County. Susan E. Wiebe, District Judge.
The decision of the district court is reversed, judgment vacated and
remanded for further proceedings.
Law Office of D. Blair Clark, PC, Boise, for Appellants. Jeffrey P.
Kaufman argued.
Yturri Rose, LLP, Boise, for Respondent. Timothy J. Helfrich argued.
_________________________
BURDICK, Chief Justice
This appeal addresses whether a debtor can use Idaho’s single-action rule as a
sanction to quiet title against a deed of trust when the secured creditor has violated the rule
by filing an action against the debtor to recover on the debt before seeking satisfaction of
the debt by foreclosing on the property serving as security. Bret and Mary Bennett filed an
action to quiet title to their residence in Payette, Idaho, against the Bank of Eastern Oregon
(“BEO”), seeking to remove a judgment lien and a deed of trust. BEO filed a Rule 12(b)(6)
motion to dismiss for failure to state a claim upon which relief could be granted. The
district court granted the motion, reasoning that Idaho law did not provide for the Bennetts’
sought-after relief. We reverse the district court’s decision.
1
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2007, the Bennetts started a motorsports business in Ontario, Oregon, which
leased its premises from a different business entity owned by the Bennetts. In 2008, the
Bennetts personally guaranteed one or more loans between BEO and these businesses.
Among these loans was a $100,000 promissory note (“the Note”) that was secured by a
deed of trust on the Bennetts’ residence situated on the other side of the Snake River in
Payette, Idaho (“the Property”). The deed of trust designated 1st American Title Company
of Malheur County, Oregon as trustee. The parties signed the deed of trust on April 10,
2008. One day later, on April 11, 2008, BEO recorded the deed of trust in the Payette
County Recorder’s Office. By its terms, the deed of trust was set to mature on May 5,
2009.
The Bennetts later defaulted on the Note and other obligations to BEO. Rather than
seeking to foreclose on the Property for a breach of the Note’s terms, BEO successfully
pursued a collection action against the Bennetts in Oregon state court to recover on all of
the Bennetts’ debts, including the Note. On June 15, 2010, BEO domesticated the Oregon
state court judgment in Payette County pursuant to Idaho’s Enforcement of Foreign
Judgments Act. I.C. §§ 10-1301 to -1309. The abstract of judgment filed in Payette County
aggregated four separate obligations—including the Note—totaling $283,597.57, pre-
judgment interest, and late fees. BEO recorded the abstract of judgment with the Payette
County Recorder’s Office on June 17, 2010.
Roughly a month later, on July 16, 2010, the Bennetts filed for Chapter 7
bankruptcy in the U.S. Bankruptcy Court for the District of Idaho. During the Bennetts’
bankruptcy proceedings, BEO filed a proof of claim for $281,597.57 as an unsecured debt.
The bankruptcy estate disbursed $4,658.38 to BEO for its claim and the Bennetts’ personal
liability for that obligation was extinguished. The bankruptcy estate abandoned the
Property pursuant to 11 U.S.C. § 544(c). The Bennetts received their final bankruptcy
discharge on April 8, 2011.
Eight years after their bankruptcy discharge, the Bennetts filed a verified complaint
to quiet title to the Property against BEO. The Bennetts attached four documents: (1) the
deed of trust; (2) the abstract of judgment filed in Payette County; (3) BEO’s proof of
claim in the Bennetts’ bankruptcy; and (4) the bankruptcy trustee’s final account and
2
distribution report. The Bennetts alleged that both the deed of trust and its judgment lien
were unenforceable, and, thus, the Bennetts were entitled to a judgment removing the
encumbrances. Specifically, the Bennetts alleged that BEO took the position that its
security interest in the property was “substantially valueless” under Idaho Code section 15-
1503(2) by filing its abstract of judgment in Payette County before foreclosing on the
property and that BEO had let its judgment lien expire by failing to renew it. The Bennetts
also relied on Idaho Code sections 6-411, 6-412, and 6-413 to assert that they were entitled
to quiet title against the unenforceable instruments.
On June 4, 2019, BEO moved to dismiss the case under Idaho Rule of Civil
Procedure 12(b)(6). BEO argued that the judgment lien expired as a matter of law under
Idaho Code section 10-1110 and, thus, no longer encumbered the Property. BEO also
argued that the Bennetts could not quiet title against the deed of trust because (1) BEO’s
Oregon judgment did not qualify as an “action” under Idaho’s single-action rule; (2) the
Bennetts’ bankruptcy discharge did not impact the judgment lien because the bankruptcy
estate abandoned the property; and (3) Idaho case law provided that a party may not quiet
title against an unenforceable mortgage when the underlying obligation is unsatisfied.
After fielding additional briefing and holding a hearing on the motion to dismiss,
the district court granted BEO’s motion and entered its findings on the record at a June 19,
2019, hearing. The district court reasoned that the Bennetts could not quiet title against the
judgment lien because the lien was invalid as a matter of law as its expiration “operates
automatically.” The district court then determined that the single-action rule was
inapplicable to the proceedings because BEO was not attempting to foreclose on the
property. The district court next determined that there was no conflict between Idaho Code
sections 6-411 and 6-413 and Idaho case law stating that a debtor must pay the underlying
debt, even when collection and enforcement of that debt is barred by the statute of
limitations. The district court entered an order granting BEO’s motion to dismiss, and
entered a judgment dismissing the Bennetts’ claims with prejudice. The Bennetts timely
appealed.
II. ISSUES ON APPEAL
1. Whether the district court erred in concluding that the Bennetts failed to state a
claim for quiet title against BEO.
2. Whether either party is entitled to attorney’s fees on appeal.
3
III. STANDARD OF REVIEW
Under Idaho Rule of Civil Procedure 12(b)(6), a party may seek to have the court
dismiss a complaint for “failure to state a claim upon which relief can be granted.” I.R.C.P.
12(b)(6). When a district court grants a 12(b)(6) motion, this Court will review that
decision de novo. Paslay v. A&B Irrigation Dist., 162 Idaho 866, 868, 406 P.3d 878, 880
(2017) (citing Syringa Networks, LLC v. Idaho Dep’t of Admin., 159 Idaho 813, 823, 367
P.3d 208, 218 (2016)).
“A 12(b)(6) motion looks only at the pleadings to determine whether a claim for
relief has been stated.” Taylor v. McNichols, 149 Idaho 826, 833, 243 P.3d 642, 649 (2010)
(citing Young v. City of Ketchum, 137 Idaho 102, 104, 44 P.3d 1157, 1159 (2002)). “[T]he
non-moving party is entitled to have all inferences from the record and pleadings viewed in
its favor, and only then may the question be asked whether a claim for relief has been
stated.” Coghlan v. Beta Theta Pi Fraternity, 133 Idaho 388, 398, 987 P.2d 300, 310 (1999)
(citations omitted). “The issue is not whether the plaintiff will ultimately prevail, but
whether the party is ‘entitled to offer evidence to support the claims.’” Losser v.
Bradstreet, 145 Idaho 670, 673, 183 P.3d 758, 761 (2008) (quoting Sumpter v. Holland
Realty, Inc., 140 Idaho 349, 351, 93 P.3d 680, 682 (2004)).
If a 12(b)(6) movant presents “matters outside the pleadings” and the trial court
does not exclude them, then “the motion must be treated as one for summary judgment
under Rule 56.” I.R.C.P. 12(d). But where additional documents are incorporated by
reference in the complaint, the general rule is that the court may consider those
attachments when ruling on a 12(b)(6) motion. See Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 322 (2007) (“[C]ourts must consider the complaint in its entirety, as
well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to
dismiss, in particular, documents incorporated into the complaint by reference, and matters
of which a court may take judicial notice.”) (citing 5B Wright & Miller § 1357 (3d ed.
2004 and Supp. 2007)); cf. Taylor, 149 Idaho at 833, 243 P.3d at 649.
IV. ANALYSIS
On appeal, the Bennetts argue that the district court erred in granting BEO’s motion
to dismiss on two primary grounds. First, the Bennetts argue that BEO’s violation of
Idaho’s single-action rule—i.e., that BEO sought to recover from them personally on the
4
Note before seeking satisfaction from the Property—entitles the Bennetts to a court order
directing the trustee to reconvey legal title to them. Second, the Bennetts argue that Idaho
Code section 6-412 permits them to quiet title against the judgment lien resulting from
BEO’s domestication of the Oregon judgment because BEO has allowed that lien to
expire. For the reasons set forth below, we reverse the decision granting BEO’s motion to
dismiss, vacate the judgment dismissing the Bennetts’ claims, and remand for further
proceedings.
A. The Bennetts have stated a cause of action that could allow them to quiet
title against BEO for the deed of trust.
In Idaho, quiet-title actions have long been provided for by statute: “An action may
be brought by any person against another who claims an estate or interest in real or
personal property adverse to him, for the purpose of determining such adverse claim.” I.C.
§ 6-401; see Fry v. Summers, 4 Idaho 424, 425–26, 39 P. 1118, 1118 (1895).
The Bennetts argue that they are entitled to quiet title against the deed of trust on
alternate grounds. First, the Bennetts contend that this Court should look to Idaho’s single-
action rule as codified in Idaho Code section 45-1503(1). Because this rule requires a
secured lender to first seek satisfaction of the debt by foreclosing on the property used as
collateral, the Bennetts argue that the only way for BEO to have proceeded against them in
personam on the Note’s debt without violating the rule is if BEO met the prerequisite of
showing that its interest in the property was “substantially valueless” as defined by Idaho
Code section 45-1503(2). Because meeting this prerequisite would have also required BEO
to instruct the trustee to reconvey legal title to the Bennetts under Idaho Code section 45-
1503(3), the Bennetts assert that the reconveyance requirement should also be applied as a
sanction for failure to abide by the single-action rule. Alternatively, the Bennetts argue that
they are entitled to quiet title against an unenforceable deed of trust under Idaho Code
sections 6-411 and 6-413. In opposition, BEO argues that this Court’s decision in Trusty v.
Ray, 73 Idaho 232, 249 P.2d 814 (1952), provides that a debtor may not quiet title to a lien
created by a mortgage instrument when the debt has not been paid.
For the reasons below, we conclude that the Bennetts have stated a cause of action
enabling them to quiet title against BEO for the deed of trust and the matter should be
remanded to the district court to conduct additional proceedings, if any are necessary.
5
1. Idaho Code sections 6-411 and 6-413 have no application to deeds of trust.
While mortgages and deeds of trusts serve similar functions, the two instruments
are not interchangeable. For practical purposes, “a deed of trust is effectively a mortgage
with a power of sale[.]” ParkWest Homes, LLC v. Barnson, 154 Idaho 678, 684, 302 P.3d
18, 24 (2013). However, when a deed of trust is used as security for a loan, legal title
passes to the trustee (along with the power of sale). Id.; see also Long v. Williams, 105
Idaho 585, 587, 671 P.2d 1048, 1050 (1983) (“[W]ith 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 device.”). As such, a deed of trust does not create a
lien because a lien is a charge upon property that transfers no title. Compare I.C. § 45-101
(defining lien as “a charge imposed in some mode other than by a transfer in trust upon
specific property by which it is made security for the performance of an act.”) (emphasis
added), with I.C. § 45-109 (“Notwithstanding an agreement to the contrary, a lien, or a
contract for a lien, transfers no title to the property subject to the lien.”) (emphasis added).
So while the recordation of a mortgage creates a lien on property, the recordation of
a deed of trust does not. What it does do, however, is secure the beneficiary’s priority and
serves as notice that legal title to the property has passed to a trustee. Compare I.C. § 45-
108 (“A lien may be created by contract, to take immediate effect, as security for
the performance of obligations not then in existence . . . .”), with I.C. § 45-1513 (“A
deed of trust or transfer of any interest in real property in trust to secure the performance of
any obligation shall be a conveyance of real property.”) (emphasis added). This is what
the Idaho Trust Deeds Act refers to when it speaks of “the priority of the lien of the
trust deed,” despite its confusing use of “lien” language. I.C. § 45-1503(3).
We mention this substantive distinction between the two instruments to highlight
the interpretive distinction in this Court’s jurisprudence. After the Idaho Legislature passed
the Idaho Trust Deeds Act in 1957, this Court was asked to determine whether the
functional similarities between mortgages and deeds of trust were such that the terms
should be treated as interchangeable within Idaho’s statutory schemes. That is, whether the
laws that had long applied to mortgages should also be applied to deeds of trust.
Ultimately, this Court held in Frazier v. Neilsen & Co., 115 Idaho 739, 741, 769 P.2d 1111,
1113 (1989), that the terms were not interchangeable, reasoning that because the
6
Legislature enacted separate schemes for each instrument, the canons of statutory
interpretation required this Court to read each term narrowly.1
But Frazier is important not only because it demonstrates that this Court treats the
terms “mortgages” and “deeds of trust” distinctly, which is dispositive of the Bennetts’
reliance on Idaho Code section 6-411 and 6-412, but the Frazier decision also served as the
impetus for the Legislature’s enactment of Idaho Code section 45-1503(1)’s single-action
rule.
The central issue in Frazier was whether Idaho’s single-action rule codified in
Idaho Code section 6-1012 (which spoke only of “mortgages”) also applied to deeds of
trust. The statute had long been interpreted to require secured creditors to first sue to
foreclose on the property serving as security before filing an action to recover on the
underlying debt, unless the security was substantially valueless.3 See Birkeland v.
Clearwater Concentrating Co., 64 Idaho 122, 131, 127 P.2d 1047, 1050 (1942)
(commenting on how Idaho Code section 6-101 “prohibits the prosecution of any action
for the recovery of a debt that is secured by mortgage in any other manner or form than by
foreclosure action . . . .”) (citations omitted).
The long-cited purpose of the single-action rule is to protect a debtor’s credit from
double impairment. See Jeppesen v. Rexburg State Bank, 57 Idaho 94, 99, 62 P.2d 1369,
1371 (1936) (explaining that Idaho Code section 6-101’s precursor “was intended not to
allow the creditor to hold an [e]ncumbrance on his debtor’s property, and at the same time
proceed against him for a personal judgment, either with or without attachment, for to
allow the creditor to do so might, in any case, result in impairing the debtor’s credit in at
least double the amount of his debt[.]”); Frazier, 115 Idaho at 740, 769 P.2d at 1112; Elliott
v. Darwin Neibaur Farms, 138 Idaho 774, 781, 69 P.3d 1035, 1042 (2003); see also Fed.
Land Bank of Spokane v. Parsons, 118 Idaho 324, 327, 796 P.2d 533, 536 (Ct. App. 1990)
1
This was not the trend among other jurisdictions, and the Frazier Court acknowledged that other
jurisdictions had held that their laws applying to “mortgages” should be read to have equal application to
deeds of trust. See, e.g., Utah Mortg. & Loan Co. v. Black, 618 P.2d 43 (Utah 1980); McMillan v. United
Mortg. Co., 412 P.2d 604 (Nev. 1966); Bank of It. Nat’l Tr. & Sav. Ass’n v. Bentley, 20 P.2d 940 (Cal. 1933).
2
The relevant provision of that statute provides: “There can be but one action for the recovery of any debt, or
the enforcement of any right secured by mortgage upon real estate which action must be in accordance with
the provisions of this chapter.” I.C. § 6-101.
3
In this manner, Idaho’s single-action rule could also be characterized as a “security-first rule.”
7
(“Idaho law protects property not subject to the mortgage unless the value of the
mortgaged property is exhausted.”). In other words, a creditor may only impair the debtor’s
assets which were not pledged as collateral if there is a deficiency after foreclosing on the
pledged property.
However, despite this established precedent applicable to mortgages, the Frazier
Court noted that the Legislature, by enacting the Idaho Trust Deeds Act, created a “separate
scheme” which indicated its intent that mortgages and deeds of trust receive disparate
treatment under the law. Frazier, 115 Idaho at 741, 769 P.2d at 1113. This Court has since
adhered to that approach. See Liberty Bankers Life Ins. Co. v. Witherspoon, Kelley,
Davenport & Toole, P.S., 159 Idaho 679, 690 n.3, 365 P.3d 1033, 1044 n.3 (2016).
For that reason, we find the parties’ reliance on Idaho Code section 6-412 (a
mortgage statute cited by the Bennetts to support their position) and Trusty (a mortgage
case cited by BEO to support its position) is misplaced. Trusty stands for the proposition
that a party may not quiet title to property against a mortgage-holder where the mortgage
instrument has been rendered unenforceable by the passage of the statute of limitations. 73
Idaho at 236, 249 P.2d at 817. Even if the Legislature intended to legislatively overrule the
law as stated in Trusty with Idaho Code section 6-412, that statute would nevertheless have
no impact on the deed of trust at issue in this case because it, and its companion statutes,
speak only of mortgages, not deeds of trust:
An action may be maintained to quiet title to lands against any mortgage,
the enforcement and collection of which is barred by the Statute of
Limitations of the State of Idaho, and which, except for the fact that its
collection and enforcement is so barred, would constitute a lien upon such
lands.
I.C. § 6-411 (emphasis added).
The party seeking to maintain such action shall be entitled to a decree
quieting title to his lands against the lien of any such judgment or mortgage
upon proof that the collection and enforcement of such judgment or
mortgage is barred by the Statute of Limitations and without the necessity
of proving that any such judgment or the indebtedness secured by any such
mortgage has been paid.
I.C. § 6-413 (emphasis added).
2. Construing the pleadings in favor of the Bennetts, BEO violated the single-
action rule codified in Idaho Code section 45-1503(1) by seeking to recover
8
from the Bennetts on the Note personally before seeking to foreclose on the
Property.
After Frazier was decided, the Idaho Legislature amended the Idaho Trust Deeds
Act to legislatively enact the single-action rule so that it would apply to deeds of trust as it
applied to mortgages. 1989 Idaho Sess. Laws 861; see also Statement of Purpose, RS
22774C1, H.B. 274 (1989) (“The purpose of this legislation is to better define the current
law so that lending agencies, whether using mortgages or deeds of trust, be first required to
liquidate the secured property before proceeding to attach or liquidate any other assets a
borrower might have.”).
With that amendment, the beneficiary of a deed of trust securing an obligation may
not institute judicial action against the grantor to personally recover on the obligation
unless the beneficiary meets one of four conditions:
(a) The trust deed has been foreclosed;
(b) The action is one for foreclosure of mortgages on real property;
(c) The beneficiary’s interest in the property secured by the deed of trust is
“substantially valueless”; or
(d) The action is excluded from the meaning of “action” under Idaho Code section
6-101(3).
I.C. § 45-1503(1).
The Bennetts argue that BEO’s domestication of the Oregon judgment qualified as
an “action” because domestication of a foreign judgment is not listed as an excluded action
under Idaho Code section 6-101(3). In response, BEO argues that domestication of a
foreign judgment falls under a few of the referenced exclusions. Alternatively, BEO argues
that this Court should look to that section’s purpose statement to determine that the
domestication filing in Idaho does not qualify as an “action.”
As referenced in section 45-1503(1)(d), Idaho Code section 6-101(3) enumerates
certain proceedings or acts that a secured creditor can file against the debtor before
foreclosing on the property without running afoul of the single-action rule. The following
excluded proceedings are at issue here:
(c) To enforce a mortgage or other lien upon any real or personal property
collateral located outside of the state which is security for the same debt or
other obligation;
9
(d) To secure a judgment outside of this state on a debt or other obligation
secured by real property in this state and by real or personal property
collateral located outside this state;
....
(m) [A proceeding w]hich does not include the collection of the debt or
enforcement of the obligation or realization of the collateral securing the
debt or other obligation;
I.C. § 6-101(3).
The proper focal point for determining whether BEO violated the single-action rule
is the nature of the collection proceeding filed in Oregon state court—not the subsequent
domestication of that action’s eventual judgment. While the Bennetts advance the
domestication of the Oregon state court judgment as the focus of our inquiry, that view
misses the mark. As we have stated on previous occasions, domesticating a judgment is not
an action distinct from the action underlying the foreign judgment. Grazer v. Jones, 154
Idaho 58, 67, 294 P.3d 184, 193 (2013) (“An EFJA [Equal Force of Judgment Act4] filing
does not involve initiating a new case.”). As such, we decline to view it as a new action for
purposes of the single-action rule.
With the proper focal point on the Oregon state court collection action, we are
satisfied that none of the referenced exclusions apply. Subsection 6-101(3)(c) does not
apply because the Oregon collection action involved collateral (the Property) located in
Idaho, not “outside of the state.” Subsection 6-101(3)(d) does not apply because, while the
Oregon collection action was an action “[t]o secure a judgment outside [of Idaho],” there is
no suggestion in the pleadings that it was an action to recover debt secured by the Property
and collateral located outside of Idaho. While BEO’s action to collect on the Bennetts’
debts other than the Note may have included other debts which were separately secured by
property located in another state, the deed of trust on the Property was the sole security on
the Note. As such, the debt at issue (the Note) was not secured by “real property in this
state and by real or personal property collateral located outside this state.” I.C. § 6-
101(3)(d). Lastly, subsection 6-101(3)(m) does not apply because the Oregon collection
action was an action in furtherance of collecting or enforcing the underlying obligation on
4
I.C. §§ 10-1301 to -1309.
10
the Note. Accordingly, based on the facts as recited in the pleadings, BEO has instituted an
action directly against the Bennetts before seeking to recover on the security.
3. A debtor may use the single-action rule as a sanction in a quiet title action
against a creditor who has violated the rule.
Alternatively, BEO argues that, even if this Court determines that it violated the
single-action rule, the appropriate sanction is only to bar the foreclosure of the trust deed,
not invalidate the lien of the trust deed or require reconveyance. This, BEO claims, is in
line with Idaho Code section 6-101(2)’s requirement that “[t]he provisions of this section
must be construed in order to permit a secured creditor to realize upon collateral for a debt
or other obligation agreed upon by the debtor and creditor.”5 In effect, the parties appear to
agree that the single-action rule could be used as a shield if BEO were to attempt to
foreclose on the Property, but the Bennetts argue that it can also be used as a sword in a
quiet title action.
We conclude, based on the facts recited in the pleadings, that BEO’s violation of
the single-action rule renders its security interest in the property unenforceable, and the
matter should be remanded to the district court to conduct further proceedings if necessary.
As explained above, the Idaho Legislature modified the Idaho Trust Deeds Act to
include the single-action rule embodied in Idaho Code section 45-1503(1). See 1989
Idaho Sess. Laws 340, § 1. “When a statute is amended, it is presumed that the
legislature intended it to have a meaning different from that accorded to it before
the amendment.” Lincoln Cty. v. Fid. & Deposit Co. of Md., 102 Idaho 489, 491,
632 P.2d 678, 680 (1981) (citing Wellard v. Marcum, 82 Idaho 232, 351 P.2d 482
(1960)). Under the 1989 amendment, the only method by which a secured creditor is
permitted to initiate judicial action against the debtor to recover on a debt secured
by property in Idaho is spelled out in Idaho Code section 45-1503. Section 45-
1503(1) provides that if the beneficiary chooses to pursue the debtor in lieu of
foreclosure, the court must determine that the security interest is “substantially
valueless,” and, if it does, the beneficiary must enter a written request to the trustee
to reconvey whatever interest was held in trust back to the debtor. I.C. § 45-
5
This argument is unavailing because Idaho Code section 45-1503(1)(d) only incorporates Idaho Code
section 6-101(3) by reference, not section 6-101(2). Accordingly, section 6-101(2) has no bearing on how
this Court construes section 45-1503(1).
11
1503(3). Because the Legislature determined that the creditor could only seek to
recover from the debtor directly in the event that the security interest was
determined to be “substantially valueless” and then reconveyed back to the debtor,
it stands to reason that when a creditor skips this step, courts may presume that the
step should have been complied with. See I.C. § 45-1503(1) (applying to deeds of
trust); I.C. § 6-101 (applying to mortgages); see also Gebrueder Heidemann, K.G. v.
A.M.R. Corp., 107 Idaho 275, 282, 688 P.2d 1180, 1187 (1984) (stating that
plaintiffs are required to satisfy a secured debt primarily by foreclosure of the
mortgage unless the mortgage is defective or has become valueless) (citing
Edminster v. Van Eaton, 57 Idaho 115, 63 P.2d 154 (1936)).
Though BEO asserts that the sanction should be loss of the right to foreclose,
it fails to explain what legal interest the trustee would hold without that power of
sale. A deed of trust passes legal title, but that legal title only carries the power of
sale. So once that power of sale is terminated, the legal interest the trustee has in
the property is effectively eliminated. Thus, whether viewed as a loss of the power
of sale or BEO stating that its interest in the property is substantially valueless, the
consequence is that BEO’s security interest in the property is unenforceable and the
district court may quiet title in favor of the Bennetts.
We are not persuaded by BEO’s arguments that the “equitable principles”
that carried the day in Trusty—that is, a party who has not paid their debt may not
quiet title against a creditor who has let their power to foreclose lapse under the
statute of limitations—have any bearing on this outcome. Trusty rested on the age-
old maxim that “[h]e who seeks equity must do equity.” Gerken v. Davidson
Grocery Co., 50 Idaho 315, 317, 296 P. 192, 193 (1931). In other words, a party
cannot affirmatively seek to quiet title (an equitable remedy) when they ha ve not
satisfied their equitable duty to pay their debt. As such, this Court explained that a
sort of stalemate arises in this context. On the one hand, a court of equity will not
enforce a lien because the statute of limitations has run. Miller v. Monroe, 50 Idaho
726, 731–32, 300 P. 362, 364 (1931) (citing Mendini v. Milner, 47 Idaho, 439, 276
P. 313 (1929)). On the other hand, until the payment of the underlying debt, or until
12
a presumption of payment arises, a court will deny relief against the debt and refuse
to quiet title. Id.
This case presents no such stalemate, and debtors do not stand to reap a
windfall as BEO suggests. The creditor simply makes an election of remedies and
waives its security if it first sues on the debt without foreclosing its interest in the
property. See Sec. Pac. Nat’l Bank v. Wozab, 51 Cal. 3d 991, 1004, 800 P.2d 557, 565
(1990) (“When a secured creditor sues only on the underlying debt without seeking
to foreclose the security, he is precluded by section 726(a) from proceedin g against
the security in a subsequent action. . . . The creditor is deemed to have waived his
security . . . The judgment on the debt, however, is unaffected by the creditor ’s
failure to comply with the chronology required . . . .”). This case does not present a
circumstance where the lending party indulged a breach in the promissory note and
let the clock run out on its foreclosure remedy. Rather, BEO actively sought to
recover on its debt by filing suit and obtaining a judgment in Oregon state court. As
such, we see no reason why equity should deny the Bennetts the ability to quiet title
against the deed of trust when the debt was secured by a judgment against them
through BEO’s deliberate efforts. That BEO eventually let that judgment lien expire
plays no role in determining whether the Bennetts should be able to quiet title
against the deed of trust for BEO’s failure to abide by the single-action rule.
B. The Bennetts have stated a claim that would entitle them to quiet title
against the judgment lien.
The Bennetts also sought to quiet title to the judgment lien created by BEO’s
domestication of its judgment pursuant to Idaho’s Enforcement of Foreign Judgment
Act. 6 The district court dismissed this claim, reasoning that the lien did not cloud
the property’s title because it expired automatically as a matter of law. On appeal,
the Bennetts argue that Idaho Code section 6-412 entitles them to quiet title to the
expired lien, which, they claim, persisted in clouding their title even though it had
expired and become unenforceable. In response, BEO argues that the Bennetts
failed to preserve this issue below. BEO next argues that the district court correctly
6
I.C. §§ 10-1301 to -1309.
13
ruled that the lien expired as a matter of law and, thus, there was nothing to quiet
title against.
Idaho’s quiet-title statute permits “any person” to file suit against anyone
who claims an adverse “estate or interest.” I.C. § 6-401. The plaintiff must rely on
the strength of his title or interest—not any weaknesses or imperfections in his
adversary’s. See Rexburg Lumber Co. v. Purrington, 62 Idaho 461, 465, 113 P.2d
511, 513 (1941). Here, the Bennetts rely on Idaho Code section 6-412, which
provides:
An action may be maintained to quiet title to lands against any
judgment, the enforcement and collection of which is barred by the
Statute of Limitations of the State of Idaho and which, except for the
fact that its collection and enforcement is so barred by the Statute of
Limitations, would constitute a lien upon said lands.
I.C. § 6-412. Section 6-412’s companion statute, Idaho Code section 6-413 7
provides not only that the plaintiff may bring suit under such circumstances, but
that the plaintiff is entitled to a decree quieting title when collection and
enforcement of the judgment is barred by the statute of limitations. I.C. § 6-413. It
specifies that the plaintiff need not prove that the underlying judgment debt has
been paid. Id.
As a preliminary matter, we determine that the Bennetts did not waive this
issue below. While the Bennetts’ counsel admitted that “the title company may have
taken [the judgment lien] off [the title report] based upon some argument,” the
argument below was the same as it is on appeal—the Idaho Code provides them
with a right to quiet title against an expired judgment lien, even if it had been
removed from the title report.
Addressing the merits of the Bennetts’ argument, we determine that a
property owner may quiet title to an expired judgment lien. The plain language of
7
That statute provides:
The party seeking to maintain such action shall be entitled to a decree quieting title to his
lands against the lien of any such judgment or mortgage upon proof that the collection and
enforcement of such judgment or mortgage is barred by the Statute of Limitations and
without the necessity of proving that any such judgment or the indebtedness secured by any
such mortgage has been paid.
I.C. § 6-413.
14
Idaho Code sections 6-412 and 6-413 provide that a party may quiet title against a
judgment if that party can show that an action on an underlying judgment is barred
by the statute of limitations. To be clear, these statutes provide a remedy when the
judgment is barred by the statute of limitations, not when the judgment lien has
expired by operation of law. See Grazer v. Jones, 154 Idaho 58, 65, 294 P.3d 184,
191 (2013) (“A judgment lien is distinct from the underlying judgment, and
therefore the judgment does not expire merely because the lien has expired.”);
Platts v. Pac. First Fed. Sav. & Loan Ass’n of Tacoma, 62 Idaho 340, 348–49, 111
P.2d 1093, 1096 (1941) (“Expiration of the lien of a judgment does not extinguish
the judgment. It simply terminates the statutory security.”). As stated above, under
Idaho’s Enforcement of Foreign Judgment Act (“EFJA”), domesticating a foreign
judgment in Idaho does not create a new judgment. See Grazer, 154 Idaho at 67,
294 P.3d at 193 (“No new Idaho judgment is created by an EFJA filing.”). Rather,
domesticating a foreign judgment allows the out-of-state judgment to acquire a
judgment lien in the same manner, and subject to the same renewal and expiration
provisions, as a properly recorded Idaho judgment. See I.C. § 10-1302; see also I.C.
§§ 10-1110, -1111.
As such, for the district court to determine whether the underlying judgment
(here, the Oregon state court judgment) is “barred by the statute of limitations,” it
must assess the two methods by which a judgment creditor may “collect or enforce”
on a foreign judgment in Idaho: (1) an “action on a judgment”; and (2) a filing
pursuant to the EFJA. Grazer, 154 Idaho at 64, 294 P.3d at 190.
An “action on a judgment” is a “common-law cause of action based on the
debt represented by a judgment.” Id. (citations omitted). Under Idaho Code section
5-215, as it existed at the time the Oregon judgment was entered, an action on
judgment filed in Idaho was required to be brought within 6 years. I.C. § 5-215. 8
The abstract of judgment indicates that the Oregon judgment was entered on May 3,
2010. Construing the pleadings in the Bennetts’ favor, BEO never brought an action
on a judgment in Idaho before May 3, 2016. Thus, under this method of collection,
8
Idaho Code section 5-215 was amended in 2015 to increase the statute of limitations to 11 years. 2015
Idaho Sess. Laws 278.
15
the Bennetts are correct that an action to collect on the judgment is barred by the
statute of limitations.
As for the second method—an EFJA filing—the facts as stated in the
complaint demonstrate that BEO allowed its Oregon judgment to become
unenforceable. BEO domesticated the Oregon state court judgment and recorded a
certified abstract of judgment on June 17, 2010. By recording the abstract of
judgment pursuant to EFJA specification, BEO acquired a judgment lien against the
property under Idaho Code section 10-1110 (2011) that would expire on May 3,
2015. Because BEO never moved the Payette County district court to renew the
judgment lien under Idaho Code section 10-1111, the lien expired on May 3, 2015.
I.C. § 10-1111(1) (2011) 9; see also I.C. § 10-1110; Grazer, 154 Idaho at 66, 294
P.3d at 192 (clarifying that the correct date to measure a judgment lien’s life under
the EFJA is from the foreign jurisdiction’s entry of the judgment, not the date it was
recorded in Idaho). In addition, the Bennetts’ personal liability on the judgment was
discharged in bankruptcy on April 8, 2011. The Oregon state court judgment expired
on May 5, 2020, while this appeal was pending. See Or. Rev. Stat. § 18.194(2). As
such, BEO cannot “collect or enforce” the Oregon state court judgment for purposes
of Idaho Code section 6-412.
Even though judgment liens expire automatically if not renewed under the
EFJA, an expired judgment lien nevertheless constitutes a cloud on title redressible
by the quiet-title action. 10 Broadly speaking, a cloud on title “is an outstanding
instrument, record, claim, or encumbrance which is actually invalid or inoperative,
but which may nevertheless impair the title to property.” Beal v. Mars Larsen Ranch
9
Idaho Code section 10-1111(1) has since been amended to provide that the lien will not expire for 10 years,
rather than 5 years.
10
We acknowledge that some authority states that “no cloud is created by the fact that the determination of
the validity or invalidity of the pretended title or lien involves a question of law, whether it be simple or
difficult.” 78 A.L.R. 24 (Originally published in 1932). On the other hand, that same authority provides that
“[l]iens which were acquired by virtue of judgments or levies of execution, and which have become barred
by limitations or by delay in enforcing them, and sales based on such liens, have been set aside as clouds.” 78
A.L.R. 24 (Originally published in 1932). Idaho Code section 6-401 speaks to the latter statement of law. See
I.C. § 6-401; cf. Pugh v. Heating & Plumbing Fin. Corp., 161 P.2d 714, 722 (N.M. 1945) (construing a
similar statute as evidencing a legislative intent “that a lien has been extinguished or is unenforceable
because of the lapse of time, [and] does not preclude a court of equity from taking jurisdiction and quieting
title against it.”).
16
Corp., 99 Idaho 662, 667, 586 P.2d 1378, 1383 (1978) (quoting 65 Am. Jur. 2d
Quieting Title § 9). “A court of equity will not in general allow an otherwise clear
title to be clouded by a claim unenforceable at law or in equity.” Id. While BEO
argues that the broad scope of Idaho’s quiet title statute should be narrowly
construed as it is in derogation of the common law, the opposite is true. It is a
remedial statute supplementing, more than replacing, common-law and equity-based
jurisprudence; hence, it should be broadly construed. 11
The judgment lien obtained from the recording of the abstract of judgment
has expired, and the underlying judgment has also expired. As such, the lien is “an
encumbrance which is actually invalid or inoperative,” but “nevertheless impair[s]
the title to the property.” Beal, 99 Idaho at 667, 586 P.2d at 1383; cf. Maxwell v.
Twin Falls Canal Co., 49 Idaho 806, 814, 292 P. 232, 235 (1930) (“An instrument
that does not actually cast a cloud on the title may be exceedingly vexatious and
injurious, though it actually throws only a suspicion.”). Accordingly, the Bennetts
stated a claim upon which relief could be granted and the district court erred in
granting BEO’s motion to dismiss on this count.
C. BEO is not entitled to attorney’s fees on appeal under Idaho Code section
12-121.
BEO argues that attorney’s fees are appropriate under Idaho Code section 12-121
because this Court has found appeals to be frivolous where previous case law definitively
contradicts the claimant’s position. BEO argues that the Bennetts’ suit is in direct violation
of Trusty. BEO also cites to Cameron v. Neal, 130 Idaho 898, 902, 950 P.2d 1237, 1241
11
See 65 Am. Jur. 2d Quieting Title § 7 (“Statutes enlarging traditional quiet title actions are intended to
afford an easy, fast, and efficient way to quiet title to real estate and to make title to land clear and
indisputable, so that it may enter the channels of commerce and trade without the handicap of suspicion.
Because such statutes are remedial, they should be liberally construed and held to embrace any case coming
fairly within their scopes.”); id. § 8 (“In some jurisdictions, statutory remedies for the removal of clouds on
title are not exclusive and do not preclude a resort to equity for relief or preclude any other remedy or form of
action provided by law for quieting title. Such statutes supplement, rather than supplant, the traditional
procedure, and long-standing common law predating the quiet title statute provides an independent equitable
basis for quieting title.”); cf. Anderson v. Whipple, 71 Idaho 112, 121, 227 P.2d 351, 356 (1951), overruled
on other grounds by David Steed & Assocs., Inc. v. Young, 115 Idaho 247, 766 P.2d 717 (1988) (“Originally
equity’s jurisdiction to quiet title was strictly limited, but was greatly extended by statute in most of the states
when the ‘reformed’ or code procedure was adopted. Some, however, still limit the action to cases where the
plaintiff is in possession. But others, including Idaho, extend the jurisdiction to all suits involving conflicting
claims to an estate or interest in real property whether the plaintiff be in or out of possession.”).
17
(1997), where this Court held that a district court did not err in awarding attorney’s fees at
the trial level when the plaintiff’s position was in direct opposition to binding case law.
Inasmuch as we have not only determined that Trusty is inapplicable to the cause of
action before us, but also that the Bennetts have succeeded on appeal, BEO is not entitled
to attorney’s fees under Idaho Code section 12-121.
V. CONCLUSION
For the above reasons, we reverse the district court’s decision granting BEO’s
motion to dismiss, vacate the judgment of dismissal, and remand for further proceedings.
We award costs on appeal to the Bennetts as the prevailing party. I.A.R. 40(a).
Justices BRODY, BEVAN, STEGNER, and MOELLER CONCUR.
18