Union Bank, N.A. v. North Idaho Resorts, LLC
161 Idaho 583
| Idaho | 2017Background
- NIR (North Idaho Resorts) sold several properties to POBD under a March 9, 2006 purchase-and-sale agreement; Trestle Creek was among the parcels at issue.
- Pend Oreille Limited (a NIR partner) conveyed record title to Trestle Creek to POBD as part of the sale; NIR claimed an equitable/vendor’s lien and retained some unpaid conditional purchase-price rights.
- NIR and POBD executed a Partial Termination Agreement in March 2007 that, as originally recorded, included two different Exhibit A attachments; one attachment described Trestle Creek, the other did not. A corrected Partial Termination Agreement (removing the exhibit that listed Trestle Creek) was re-recorded in March 2009.
- POBD obtained a mortgage from Union Bank in March 2008, recorded before the 2009 corrected termination; Union Bank foreclosed after POBD defaulted.
- The district court found Union Bank was a good-faith encumbrancer that relied on the originally recorded Partial Termination Agreement, concluding NIR’s vendor’s lien (if any) was subordinated to Union Bank’s mortgage; the Idaho Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Union Bank) | Defendant's Argument (NIR) | Held |
|---|---|---|---|
| Whether NIR held an enforceable vendor’s lien requiring Union Bank’s mortgage to be subordinate | Union Bank argued its mortgage recorded in good faith and relied on the record (the Partial Termination Agreement) showing NIR’s rights released | NIR argued it retained a vendor’s lien because seller need not be record owner under I.C. § 45-801 and unpaid conditional purchase price retained value | Court did not reach statutory ownership question; held Union Bank’s mortgage was superior because it was a good-faith encumbrancer relying on the recorded Partial Termination Agreement |
| Whether the originally recorded Partial Termination Agreement released NIR’s rights in Trestle Creek as to subsequent encumbrancers | Union Bank argued the original filing (which included Trestle Creek in an exhibit) terminated NIR’s rights as of the time of the mortgage, and Union Bank lacked notice of any lien | NIR argued the corrected re-recording relates back to the original recording, so the correction removing Trestle Creek should defeat Union Bank’s priority; also argued Union Bank had actual knowledge of outstanding payment conditions | Court held the correction could not relate back against Union Bank because Union Bank recorded its mortgage in good faith before the correction and lacked actual or constructive notice of the mistake |
| Whether Union Bank had actual or constructive notice of NIR’s claimed lien (disqualifying it as a good-faith encumbrancer) | Union Bank contended there was no record notice and any extrarecord loan files did not impute constructive notice sufficient to defeat good faith | NIR pointed to bank credit memoranda and the dual Exhibit A attachments as putting Union Bank on notice of unresolved payment obligations and a recording mistake | Court held Union Bank lacked actual or constructive knowledge; the dual exhibits did not put a reasonably prudent encumbrancer on notice and the record alone supported Union Bank’s good-faith status |
| Whether relation-back doctrine allowed the 2009 corrected termination to affect Union Bank’s earlier-recorded mortgage | Union Bank argued relation back cannot impair a third party who recorded in good faith before correction | NIR argued corrected instrument should relate back to original filing date and thus negate the earlier recorded release | Court held relation back does not apply to defeat a third-party encumbrancer who intervened in good faith before the correction; Union Bank’s rights superseded NIR’s |
Key Cases Cited
- 154 Idaho 779 (Insight LLC v. Gunter) (statutory interpretation and legislative intent)
- 152 Idaho 215 (Benz v. D.L. Evans Bank) (definition of good faith encumbrancer; actual and constructive knowledge)
- 136 Idaho 192 (Kalange v. Rencher) (reliance on public record by encumbrancer)
- 116 Idaho 269 (Sartain v. Fid. Fin. Servs., Inc.) (relation-back doctrine for corrected deeds and third-party interveners)
- 140 Idaho 16 (Estate of Skvorak v. Sec. Union Title Ins. Co.) (standard of review for factual findings)