CMJ Properties v. JP Morgan Chase Bank , 162 Idaho 861 ( 2017 )

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 44526
CMJ PROPERTIES, LLC, an Idaho limited )
liability company, )
)
Plaintiff-Appellant, )
v. )
Boise, September 2017 Term
)
JP MORGAN CHASE BANK, N.A., a )
2017 Opinion No. 119
national banking association, )
)
Filed: November 29, 2017
Defendant-Respondent, )
and )
Karel A. Lehrman, Clerk
)
DOES 1-10, )
)
Defendants. )
_______________________________________ )
Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, Ada County. Hon. Richard D. Greenwood, District Judge.
The district court’s judgment is affirmed.
Angstman, Johnson & Associates, Boise, for appellant. Matthew T. Christensen
argued.
Parsons Behle & Latimer, Idaho Falls, for respondent. Jon A. Stenquist argued.
_____________________
BRODY, Justice
This is a quiet title action. A landowner brought suit against a lender to extinguish a deed
of trust that was recorded against the landowner’s property. The landowner claimed that the
lender’s time to foreclose the deed of trust had expired. The district court denied a motion to
enter default judgment in favor of the landowner, finding, among other things, that the statute of
limitations to foreclose the deed of trust had not run. The district court entered a judgment
dismissing the landowner’s suit. We affirm the district court’s judgment.
I. FACTUAL BACKGROUND
Cory Jakobson and others (“Jakobson”) owned the property at issue when a deed of trust
was granted to Washington Mutual Bank (“WMB”). The deed of trust secured a line of credit. A
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day after the deed of trust was granted to WMB, Jakobson transferred the property to CMJ
Properties, LLC (“CMJ”), via quitclaim deed. The deed of trust was later assigned to JP Morgan
Chase Bank (“Chase”) as successor in interest.
Jakobson stopped making payments on the credit line in May 2010 and filed bankruptcy
about five months later. On April 6, 2011, Chase terminated the credit line and subsequently
filed a motion for relief from stay to foreclose the deed of trust. The bankruptcy court granted the
motion for relief from stay, but Chase has not initiated foreclosure proceedings.
On June 17, 2016, CMJ filed a complaint against Chase to quiet title to the property. CMJ
alleged the deed of trust was no longer enforceable because the time for foreclosure had run. On
July 27, 2016, CMJ filed a motion for entry of default and default judgment because Chase failed
to appear. The district court entered default, but denied the motion for entry of default judgment,
finding that Chase’s time to initiate foreclosure proceedings had not run. The district court
entered a judgment dismissing CMJ’s claim. CMJ appeals the district court’s judgment.
II. STANDARD OF REVIEW
“This Court exercises free review over the district court’s conclusions of law to
determine whether the court correctly stated the applicable law and whether the legal conclusions
are sustained by the facts found.” PacifiCorp v. Idaho State Tax Comm’n, 153 Idaho 759, 767,
291 P.3d 442, 450 (2012).
The meaning and effect of a statute is a question of law over which this
Court exercises free review. Where the language of the statute is clear and
unambiguous, legislative history and other extrinsic evidence should not be
consulted for the purpose of altering the clearly expressed intent of the legislature.
The words must be given their plain, usual, and ordinary meaning, and the statute
must be construed as a whole.
State v. Hart, 135 Idaho 827, 829, 25 P.3d 850, 852 (2001) (internal quotations and citations
omitted).
III. ANALYSIS
A. The district court did not err when it declined to deem as admitted an allegation
that more than five years had passed since the maturity date of the credit line.
CMJ alleged in its complaint that “[m]ore than 5 years has passed since the credit line
maturity date (i.e., April 6, 2011 at the latest).” CMJ argues that this is a factual allegation, and
that the district court should have deemed this as admitted pursuant to Idaho Rule of Civil
Procedure 8(b)(6) because Chase defaulted. We disagree.
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It is well understood that factual allegations contained in a complaint are deemed
admitted when a defendant defaults. Holladay v. Lindsay, 143 Idaho 767, 772, 152 P.3d 638, 643
(Ct. App. 2006); see Davis v. Parrish, 131 Idaho 595, 598, 961 P.2d 1198, 1201 (1998); I.R.C.P.
8(b)(6). Courts are not required, however, to deem legal conclusions as admitted merely because
they were plead as factual allegations. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007);
see also Papasan v. Allain, 478 U.S. 265, 286 (1986) (“[F]or the purposes of this motion to
dismiss we must take all the factual allegations in the complaint as true, we are not bound to
accept as true a legal conclusion couched as a factual allegation.”); In re Wal-Mart Wage &
Hour Emp’t Practices Litig., 490 F. Supp. 2d 1091, 1100 (D. Nev. 2007) (“[T]he Court does not
necessarily assume the truth of legal conclusions merely because they are cast in the form of
factual allegations in the plaintiff’s complaint.”).
The district court had no obligation to accept as true CMJ’s allegation that more than five
years had passed since the credit line maturity date of April 6, 2011. The district court correctly
understood that determining the maturity date of a debt requires a legal conclusion based upon
the terms of the debt instrument. Regardless of Chase’s default, the district court was required to
analyze the debt instrument and determine as a matter of law what the maturity date was and
whether the time for filing a foreclosure action had run based upon the factual allegations. The
district court did not err in the process that it used when it denied CMJ’s motion for default
judgment.
CMJ also claims that the district court erred when it determined that there were
foundational issues with CMJ’s complaint, namely that it was unsworn and contained
insufficient information establishing how the lawyer who signed it had personal knowledge of
some of the events. The district court’s opinion clearly stated, “Even assuming counsel could
cure the foundation problems with his testimony, there are more fundamental issues with the
relief sought.” It is apparent from this statement that the district court did not rely on the deficits
in the complaint when making its final decision. Consequently, this issue is not dispositive, and
we will not address CMJ’s argument further. See J.R. Simplot Co. v. Bosen, 144 Idaho 611, 615,
167 P.3d 748, 752 (2006) (holding that testimony on which the trial court did not rely is
immaterial to the outcome and need not be addressed by this Court).
B. The district court did not err in interpreting the statute of limitations set forth in
Idaho Code section 5-214A.
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CMJ argues alternatively that if the maturity date of the credit line is a question of law,
the district court erred in interpreting the statute of limitations set forth in Idaho Code section 5-
214A. Specifically, CMJ argues the occurrence of an acceleration event (i.e., Jakobson’s default)
caused the credit line’s defined maturity date to change and triggered the start of the statute of
limitations period. We recently rejected a virtually identical argument in Baughman v. Wells
Fargo Bank, N.A., 162 Idaho 174, 395 P.3d 393 (2017).
Idaho Code section 5-214A states:
An action for the foreclosure of a mortgage on real property must be
commenced within five (5) years from the maturity date of the obligation or
indebtedness secured by such mortgage. If the obligation or indebtedness secured
by such mortgage does not state a maturity date, then the date of the accrual of the
cause of action giving rise to the right to foreclose shall be deemed the date of
maturity of such obligation or indebtedness.
In Baughman we explained that the first sentence of Section 5-214A applies when there
is a stated maturity date in the instrument at issue:
The first sentence of the statute states, “An action for the foreclosure of a
mortgage on real property must be commenced within five (5) years from the
maturity date of the obligation or indebtedness secured by such mortgage.” It is
clear from the second sentence of the statute that the reference to “the maturity
date of the obligation or indebtedness” is the maturity date stated in that
obligation or indebtedness. The second sentence states, “If the obligation or
indebtedness secured by such mortgage does not state a maturity date, then the
date of the accrual of the cause of action giving rise to the right to foreclose shall
be deemed the date of maturity of such obligation or indebtedness.” (Emphasis
added.) The second sentence only applies if the obligation or indebtedness does
not state a maturity date. The first sentence must then logically apply to an
obligation or indebtedness that does state a maturity date. Otherwise, the two
sentences would conflict.
Id. at 180–81, 395 P.3d at 399–400.
The debtor in Baughman, like in this case, argued that acceleration of the debt changed
the maturity date and triggered the start of the statute of limitations period. We rejected that
argument because there was no provision in the promissory note which altered the stated
maturity date in the event of acceleration:
In this case, the promissory note expressly stated that the maturity date
was March 1, 2047. There was no provision in the note providing that the
maturity date would change if the amounts owing under the note were declared
to be immediately due and payable because of a default. Therefore, the five-year
statute of limitations for foreclosure would not begin to run until March 1, 2047.
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Id. at 181, 395 P.3d at 400 (emphasis added).
Jakobson’s obligation to pay is set forth in an agreement called the “WaMu Mortgage
Plus Agreement and Disclosure” (the “Credit Agreement”). The Credit Agreement has a box
near the top of the document which states: “Maturity Date: 08/09/2037.” The maturity date is re-
stated in the deed of trust, “[t]he Credit Agreement provides that unless sooner repaid, the Debt
is due and payable in full thirty years from the date of this Deed of Trust which is 08/09/2037
(the “Maturity Date”).” Like in Baughman, there is no language in the deed of trust or the Credit
Agreement that changes the stated maturity date in the event of default or acceleration. The
maturity date is simply defined as 08/09/2037, and there is no language in the instruments which
alters that date. Under Idaho Code section 5-214A, the stated maturity date is when the statute of
limitations for foreclosure begins to run. As such, we affirm the judgment dismissing CMJ’s
complaint.
On a final note, CMJ argues that the district court erred by ruling that a successor in
interest with knowledge of an unsatisfied mortgage cannot quiet title against a mortgagee even
though the statute of limitations has run. See Trusty v. Ray, 73 Idaho 232, 237, 249 P.2d 814, 817
(1952). Given our ruling that the statute of limitations has not run, this issue is moot, and we
decline to reach the merits of the argument. See, e.g., Zylstra v. State, 157 Idaho 457, 468, 337
P.3d 616, 627 (2014) (declining to reach statute of limitations defense where tort claim defeated
on issue of causation).
C. Neither party is entitled to attorney fees.
Both parties seek attorney fees on appeal under Idaho Code section 12-121. “In order to
be eligible for an award of attorney fees under Idaho Code section 12-121, the party must be the
prevailing party on appeal.” Baughman, 162 Idaho at 183, 395 P.3d at 402. CMJ is not the
prevailing party, and therefore, not entitled to fees or costs.
Chase is also not entitled to fees. Before addressing the requirements of Idaho Code
section 12-121, it is important to recognize that Chase is in default. Although Chase argues in its
response brief that the district court’s entry of default was improper, it never made a motion to
set aside the default and only argues on appeal that the default should be set aside in the event
the Court were to find CMJ’s appeal arguments meritorious. We recently addressed the effect of
a default in Martinez (Portillo) v. Carrasco (Mendoza), 162 Idaho 336, 341, 396 P.3d 1218,
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1223 (2017), and explained that a default is separate from a default judgment. A party must not
only seek relief from a default judgment, but also from the default. Id.
In Martinez, we quoted the following language:
Upon the failure of the defendant to answer the complaint within the time allowed
by law, and upon the entry of default, in the absence of fraud, the right of the
defendant to participate in the litigation is terminated, and the subsequent filing of
an answer or demurrer on his part is unauthorized and void, unless upon
proceedings duly had, the default is first set aside.
See id. (quoting Kingsbury v. Brown, 60 Idaho 464, 469, 92 P.2d 1053, 1055 (1939)). The
statement that the defendant’s right to participate in the litigation is “terminated” upon default
requires clarification. Default does not necessarily cut off a defendant’s ability to participate in
the litigation altogether. In a tort case, for example, a defaulting defendant is generally allowed
to contest the amount of unliquidated damages. See 46 Am. Jur. 2d Judgments § 285 (1994). A
defaulting defendant can also contest the legal sufficiency of the complaint and its allegations to
support a judgment. See, e.g., Olson v. Kirkham, 111 Idaho 34, 37, 720 P.2d 217, 220 (Ct. App.
1986). A party in default cannot, however, bring an appeal seeking affirmative relief from this
Court. E. Idaho Econ. Dev. Council v. Lockwood Packaging Corp. Idaho, 139 Idaho 492, 496,
80 P.3d 1093, 1097 (2003).
Even though Chase is in default, it still had the ability to contest the legal sufficiency of
the complaint and effectively did so by participating as a respondent on appeal. Chase’s request
for attorney fees is part of its defense on appeal and is therefore proper. Having said that, the
requirements of Idaho Code section 12-121 as recently amended by the Legislature have not
been satisfied. Section 12-121 authorizes an award of attorney fees to the prevailing party where
the case is brought, pursued or defended “frivolously, unreasonably or without foundation.”
CMJ’s pursuit of this quiet title action was not frivolous or unreasonable. Although our decision
in Baughman essentially decided this matter, the Baughman decision was not issued until after
the briefing in this case was complete.
IV. CONCLUSION
The judgment dismissing the quiet title action is affirmed. Costs are awarded to Chase as
the prevailing party.
Chief Justice BURDICK, and Justices JONES and HORTON, and Justice Pro Tem
TROUT CONCUR.
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