Liberty Bankers Life Insurance v. Witherspoon, Kelley, Davenport & Toole, P.S.
365 P.3d 1033
Idaho
2016

Background

  • The Point at Post Falls (The Point) granted Witherspoon a deed of trust in 2004 to secure legal fees; Witherspoon later perfected a UCC security interest in the Marina (2010).
  • Liberty made successive loans to The Point (2005 onward) secured by an original deed of trust; parties executed multiple loan modification agreements (LMAs), including a Seventh and an Eighth LMA.
  • The Eighth LMA (effective April 30, 2010; executed by Liberty Sept. 2011) contemplated splitting the loan: a new promissory note and a new deed of trust would encumber Blocks A, D, and E, and Liberty would execute a Partial Release removing those blocks from the Original Deed of Trust — but Liberty never executed the Partial Release or recorded the new deed.
  • Liberty foreclosed under the Original Deed of Trust in late 2012 and acquired Post Falls Landing by credit bid; Witherspoon sued, asserting (among other claims) that it held first priority in Blocks A, D, and E and in the Marina.
  • The district court found Liberty judicially estopped from contesting the Eighth LMA, ruled Blocks A, D, and E had been released to secure only the New Deed of Trust (so Witherspoon’s lien had priority), and held the Marina was personal property in Witherspoon’s priority.
  • The Idaho Supreme Court vacated those rulings and remanded: it rejected the judicial estoppel finding, held the Eighth LMA did not itself release Blocks A, D, and E (and Idaho Code § 45-108 does not convert the LMA into a deed of trust), declined to resolve the foreclosure-validity question on appeal, found Witherspoon not an intended third‑party beneficiary of the Eighth LMA, and remanded the fixture (Marina) determination for more specific factual findings.

Issues

Issue Plaintiff's Argument (Liberty) Defendant's Argument (Witherspoon) Held
1. Judicial estoppel over Eighth LMA Liberty: never gained a judicial advantage from calling the Eighth LMA "binding"; positions were consistent (binding but not enforceable absent performance). Witherspoon: Liberty took inconsistent positions in bankruptcy and other filings and gained benefits; estoppel should apply. Vacated district court's judicial estoppel ruling: court abused discretion by failing to find an advantage obtained in a judicial proceeding.
2. Whether Eighth LMA released Blocks A, D, and E from Original Deed Liberty: Eighth LMA required a contemporaneous Partial Release and new deed; without the release or recording, Original Deed remained encumbering all blocks. Witherspoon: entry into Eighth LMA effected the release and secured A, D, E by the New Deed, giving Witherspoon priority. Held for Liberty on this point: Eighth LMA did not itself effect the release; performance (Partial Release/recording) was required, and Liberty did not perform.
3. Application of I.C. § 45-108 to create/alter deeds of trust Liberty: § 45-108 governs liens but not deeds of trust; cannot convert an LMA into a recorded trust deed. Witherspoon: § 45-108 supports treating the contractual arrangement as creating security effective against third parties. Rejected Witherspoon: § 45-108 applies to liens, not deeds of trust; statute does not operate to create or release deeds of trust here.
4. Fixture status of Marina Liberty: Marina (or parts of it) are fixtures to the real property and passed with the trustee’s deed. Witherspoon: Marina is personal property (and it had a perfected security interest) so remained subject to its priority. Vacated and remanded: district court erred by over-emphasizing subjective intent; court must analyze fixture factors (annexation, adaptation, objective intent) separately for each Marina component.

Key Cases Cited

  • Sadid v. Idaho State Univ., 154 Idaho 88, 294 P.3d 1100 (2013) (judicial estoppel doctrine discussed)
  • McCallister v. Dixon, 154 Idaho 891, 303 P.3d 578 (2013) (standards for invoking judicial estoppel)
  • Doe v. Doe, 158 Idaho 614, 349 P.3d 1205 (2015) (judicial estoppel requires advantage from prior position)
  • Golub v. Kirk-Hughes Dev., LLC, 158 Idaho 73, 343 P.3d 1080 (2015) (summary judgment standard and inferences)
  • Big Wood Ranch, LLC v. Water Users’ Ass’n of Broadford Slough & Rockwell Bypass Lateral Ditches, Inc., 158 Idaho 225, 345 P.3d 1015 (2015) (bench-trial review and inferences)
  • Rayl v. Shull Enters., Inc., 108 Idaho 524, 700 P.2d 567 (1985) (fixture test and objective intent)
  • Chavez v. Barms, 146 Idaho 212, 192 P.3d 1036 (2008) (distinguishing liens from transfers of title)
  • Frazier v. Neilsen & Co., 115 Idaho 739, 769 P.2d 1111 (1989) (Idaho Trust Deeds Act treated deeds of trust separately from mortgages)
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