Case:
Idaho Development, LLC v. Teton View Golf Estates, LLC, Docket No. 37123
Court:
Supreme Court of Idaho
Date Issued:
December 12, 2011
Judge:
Opinion Author: W. Jones, Justice
Concurring in Opinion: Burdick, Chief Justice; Eismann, Justice; Horton, Justice
Specially Concurring: J. Jones, Justice
Issue:
Whether equitable subordination should be applied outside of the bankruptcy context.
Summary of Ruling:
Idaho Development, LLC (“Idaho Development”) advanced 1.1 million dollars to Teton View Golf Estates (“Teton View”), a joint venture in which Idaho Development had a 33.3% interest. Idaho Development obtained a promissory note from Teton View that was secured by a deed of trust. After Teton View failed to pay according to the terms of the note, Idaho Development filed a complaint to foreclose its deed of trust against all junior interests.
DePatco, Inc. (“DePatco”) recorded a lien on the property after Idaho Development recorded its deed of trust. Ordinarily, therefore, Idaho Development’s interest would have priority over DePatco’s. DePatco filed a motion for partial summary judgment to recharacterize Idaho Development’s advancement of $1,100,000 as a capital contribution and, alternatively, to equitably subordinate Idaho Development’s lien to its own. The Supreme Court’s analysis of the recharacterization issue is summarized here.
On the issue of equitable subordination, the Supreme Court agreed with the district court that equitable subordination is not the law in Idaho. The majority of courts to have considered the issue have declined to apply equitable subordination outside of the bankruptcy context. Alaska is the only state to not follow the majority. The Court stated: “[T]his Court declines to create new law by applying it here for the first time.”
Link to Opinion:
Teton
Link to Court:
http://www.isc.idaho.gov
Attorneys of Record:
For Appellant:
Alan R. Harrison
For Respondent ZBS:
Holden, Kidwell, Hahn & Crapo
Karl R. Decker argued.
For Respondent DePatco, Inc.:
Fuller & Carr
Mark Fuller argued.
For Respondent Schiess & Associates:
Beard, St. Clair, Gaffney, P.A.
Summary Author:
Van Lityouvong
