Liberty Bankers Life Insurance v. Witherspoon, Kelley, Davenport & Toole, P.S.

365 P.3d 1033, 159 Idaho 679, 2016 Ida. LEXIS 4
CourtIdaho Supreme Court
DecidedJanuary 6, 2016
Docket41993
StatusPublished
Cited by20 cases

This text of 365 P.3d 1033 (Liberty Bankers Life Insurance v. Witherspoon, Kelley, Davenport & Toole, P.S.) is published on Counsel Stack Legal Research, covering Idaho Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liberty Bankers Life Insurance v. Witherspoon, Kelley, Davenport & Toole, P.S., 365 P.3d 1033, 159 Idaho 679, 2016 Ida. LEXIS 4 (Idaho 2016).

Opinions

W. JONES, Justice.

I. Nature of the Case

This appeal involves the competing security interests of Liberty Bankers Life Insurance Company (“Liberty” or “Appellant”) and Witherspoon, Kelley, Davenport, & Toole, P.S. (“Witherspoon” or “Respondent”) in certain real and personal property located in Post Falls, Idaho (“Post Falls Landing” and the “Marina” respectively), which were formerly owned by the Point at Post Falls, LLC and Post Falls Landing Marina, LLC (collectively, “The Point”).

II. Factual and Procedural Background

In September of 2001, The Point, a business entity associated with Harry A. Green, purchased thirty-four acres of real property in Post Falls, Idaho. Witherspoon provided legal representation to The Point during the purchase. In September of 2004, to secure payment of legal fees and costs, The Point granted Witherspoon a promissory note in the principal amount of $164,171.85 (“Witherspoon’s Original Promissory Note”). Witherspoon’s Original Promissory Note was secured by a deed of trust to Post Falls Landing (“Witherspoon’s Original Deed of Trust”). Witherspoon’s Original Deed of Trust was recorded on October 4, 2004, in Kootenai County.

On August 26, 2005, Liberty and The Point entered into an agreement (the “Original Loan Agreement”) by which Liberty would loan $3,934,390 to The Point in exchange for a promissory note in the amount of the loan (“Liberty’s Original Promissory Note”), which was secured by a deed of trust to Post Falls Landing (“Liberty’s Original Deed of Trust”). Liberty’s Original Deed of Trust provides that “[n]o release of the conveyance [of the Post Falls property], or of the lien, security interest or assignment created and evidenced hereby, shall be valid unless executed by Beneficiary.”

As a condition to the Original Loan Agreement, Witherspoon entered into an agreement subordinating Witherspoon’s Original Deed of Trust to Liberty’s Original Deed of Trust (the “Original Subordination Agreement”). The Original Subordination Agreement stated that “[Liberty’s Original Deed of Trust] and any renewals or extensions thereof, shall unconditionally be and remain at all time [sic] a lien or charge on [Post Falls Landing], prior and superior to the lien or charge of [Witherspoon’s Original Deed of Trust].” (emphasis added). The Original Subordination Agreement was recorded on August 26, 2005.

Thereafter, Liberty subsequently modified its loan agreement with The Point six times. Witherspoon executed additional subordination agreements in conjunction with each of these loan modifications.

On August 30, 2006, and December 11, 2006, Liberty agreed to extend additional funds to The Point. These funds were used to construct the Marina. The Marina consists of 142 boat slips, a floating convenience store, and fuel pumps. The Point began operating the Marina in the summer of 2008.

On or around April 30, 2010, Liberty and The Point entered into a seventh modification of their loan agreement (the “Seventh LMA”). Under the Seventh LMA, the parties agreed to increase the outstanding principal balance of Liberty’s Original Promissory Note from $6,786,108.10 to $9,290,000.00 and to extend its maturity date to June 30, 2011. Like all of the previous loan modifications, the Seventh LMA was secured by Liberty’s Original Deed of Trust. The Seventh LMA was recorded on September 3, 2010.

On August 6, 2010, Witherspoon entered into the third modification of Witherspoon’s Original Deed of Trust. This modification granted Witherspoon a security interest in the Marina and its improvements, including [683]*683any rents, income, profits, insurance proceeds, and accounts receivable. On September 7, 2010, Witherspoon perfected its security interest in the Marina by filing a UCC financing statement.

On August 10, 2010, Witherspoon entered into a final amended subordination agreement with The Point (the “Final Subordination Agreement”). The Final Subordination Agreement stated that “[Liberty’s original Deed of Trust] shall unconditionally be and remain at all time [sic] a lien or charge on [Post Falls Landing], prior and superior to the lien or charge of [Witherspoon’s Original Deed of Trust].” Unlike the prior subordination agreements, the Final Subordination Agreement did not include the “and any renewals or extensions thereof’ language. The Final Subordination Agreement was recorded on September 3, 2010.

On June 30, 2011, Liberty’s Original Promissory Note — secured by Liberty’s Original Deed of Trust — matured. On August 12, 2011, Liberty directed the successor trustee of Liberty’s Original Deed of Trust to foreclose on Post Falls Landing. On August 18, 2011, the successor trustee recorded a notice of default.

In September of 2011, Liberty and The Point entered into an eighth modification of their loan agreement (the “Eighth LMA”). Under the terms of the Eighth LMA, Liberty agreed to reduce the amount of Liberty’s Original Promissory Note to $6,744,156.69 and to execute a release of Blocks A, D, and E of the Post Fall Landing property from Liberty’s Original Deed of Trust (the “Partial Release of Lien”). The Point, in turn agreed to issue a new promissory note in the amount of $2,545,843.31 (“Liberty’s New Promissory Note”), which would be secured by a new deed of trust (“Liberty’s New Deed of Trust”) on Blocks A, D, and E. This would have the effect of dividing Liberty’s $9.29 million dollar' loan to The Point into two separate loans (a construction loan and a non-construction loan).1

In this respect, the Eighth LMA stated:

23. The Loan and indebtedness evidenced by [Liberty’s Original Promissory Note] shall continue to be secured by [Liberty’s Original Deed of Trust] encumbering [Post Falls Landing]____
24. Contemporaneously with the execution of this Agreement, [The Point] is executing construction and development loan documents evidenced by [Liberty’s New Promissory Note] in the original principal amount of $2,545,843.31, payable to [Liberty] ..., secured by, among other things, a deed of trust encumbering [Blocks A, D, and E]----Since [Blocks A, D, and E are] part of [Post Falls Landing], Lender shall execute a Partial Release of Lien to release of [Blocks A, D, and E] from [Liberty’s Original Deed of Trust] securing [Liberty’s Original Promissory Note] modified by this agreement in exchange for a principal payment of $750,000.00 which shall be advanced by Lender under the $2,545,843.31 Promissory Note.

Liberty and The Point both executed the Eighth LMA, but it was never recorded. The Point executed Liberty’s New Promissory Note and Liberty’s New Deed of Trust, which also were never recorded. Liberty never executed the Partial Release of Lien.

On December 19, 2011, The Point filed for bankruptcy, which automatically stayed the trustee’s sale of the Point at Post Falls. On December 20, 2011, Liberty filed suit against Green, individually as a guarantor, to recover the debt owed to Liberty. Liberty v. Green, Kootenai County Case No. CV-11-10121.

On April 18, 2012, Liberty filed a proof of claim in The Point’s first bankruptcy proceeding and attached the Eighth LMA in support of its claim. In Liberty’s motion for relief from the automatic stay, filed July 12, 2012, Liberty stated that “On September 8, 2010, the parties agreed to and executed an Eighth Loan Modification Agreement____”

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Cite This Page — Counsel Stack

Bluebook (online)
365 P.3d 1033, 159 Idaho 679, 2016 Ida. LEXIS 4, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liberty-bankers-life-insurance-v-witherspoon-kelley-davenport-toole-idaho-2016.