*1 Humphrey Margaret Humphrey, H. and 824 P.2d wife; husband and Samuel V. Jordan BANK, The IDAHO FIRST NATIONAL Jordan, wife; and Barbara husband and and its successor interest West One McFadden, and Donnie B. dba McFad Bank, N.A., Idaho, Plaintiff-Appellant, Investments, Family den Counterclaim ants-Respondents-Cross Appellants, v. FOODS, INC., BLISS VALLEY an Idaho v. Walker, corporation; Thomas G. Jr. BANK, The IDAHO FIRST NATIONAL Walker, and Donna I. husband and and its successor interest West One wife; Robert A. Erkins and Bernardine Bank, Idaho, N.A., Counterdefendant- Erkins, wife; M. husband and Freder Appellant-Cross Respondent. Surbaugh ick L. and Carole W. Sur wife; baugh, Rodney husband and D. Frederick L. and Carole SURBAUGH W. Swartling Swartling, and Jean K. hus wife, Surbaugh, as husband and and as wife; Leforgee band and Rex S. and Surbaugh trustee for the Frederick L. wife; Cheryl Leforgee, E. and husband #50405; Rodney D. Retirement Trust Ridgeway Nancy A. N. Robert and Swartling Swartling, and Jean K. as wife; Ridgeway, husband and Robert J. wife, husband and and as trustee for Porter, Porter II and Karen L. husband Rodney Swartling D. Retirement wife; and Mark F. Grefenson and Hed #50402; Leforgee Rex Trust S. and Che Grefenson, wife; wig husband and Al wife, ryl Leforgee, E. and as husband Frost, lan R. Frost M. and Frances hus Leforgee, and as trustee for the Rex S. wife; Brumbach, Harry band and F. Jr. Plan; Chartered Pension Robert CPA Brumbach, and Janice L. husband and Ridgeway Nancy Ridgeway, A. and N. wife; Joyce Dale D. Stukenholtz and E. wife, for as husband and and as trustee Stukenholtz, wife; husband and Miles DDS, P.S., Ridgeway, A. the Robert Humphrey Margaret Humphrey, H. and Plan; Porter II and Pension Robert J. wife; and husband Samuel V. Jordan Porter, wife, and Karen L. as husband Jordan, wife; and Barbara husband and and as trustee for the Robert J. Porter McFadden, and Donnie B. dba McFad #50403; II Mark F. Retirement Trust Investments, Family den Defendants- Grefenson, Hedwig as Grefenson and Respondents. wife,
husband and and as the trustee the Mark F. Retirement for Grefenson L. and Frederick SURBAUGH Carole W. #50601; R. Frost and Fran Trust Allan wife; Rodney Surbaugh, and husband wife, Frost, husband and and ces M. as Swartling Swartling, D. and Jean K. the Allan R. Frost Retire as trustee for wife; Leforgee Rex and husband and S. #50701; Harry Brum F. ment Trust wife; Cheryl Leforgee, E. husband and Brumbach, bach, L. as and Janice Jr. Nancy Ridgeway A. and N. Robert wife, and as trustee husband and wife; Ridgeway, husband and Robert J. Brumbach, Harry F. Jr. Retirement Porter, Porter II and Karen L. husband #51101; Dale D. Stukenholtz Trust wife; F. and Hed Mark Grefenson Stukenholtz, Joyce as husband E. Grefenson, wife; wig Al husband and wife, Dale D. trustee for the and as Frost, M. hus lan R. Frost and Frances #52201; Trust Retirement wife; Brumbach, Stukenholtz Harry F. Jr. band Margaret Humphrey and Brumbach, Miles H. L. husband and and Janice wife; Humphrey, Samuel husband wife; Joyce E. Dale D. Stukenholtz Jordan, wife; hus Stukenholtz, and Barbara husband and Miles V. Jordan *2 wife, trustee for the band Retirement Trust
Samuel V. Jordan #51501; McFadden, and Donnie B. dba Counterclaimants-Respondents-Cross Investments, Family McFadden
Appella n ts,
v. BANK, The IDAHO FIRST NATIONAL its successor interest West One Bank, Idaho, N.A., Counterdefendant-
Appellant-Cross Respondent. INC., FOODS, VALLEY an Idaho BLISS corporation; and Robert A. Erkins and Erkins, Bernardine M. husband wife, Counterclaimants-Respondents,
v. BANK, The IDAHO FIRST NATIONAL and its successor in interest One West Bank, Idaho, N.A., Counterdefendant-
Appellant. WALKER, Thomas G. I. Jr. Donna Counter-claimants-Respondents-Cross Walker, wife, husband and Appella nt s,
v. BANK, The IDAHO FIRST NATIONAL and its successor in interest West One Bank, Idaho, N.A., Counterdefendant-
Appellant-Cross Respondent.
No. 18230. Idaho, Supreme Court of Boise. Sept. 1991. Rehearing Denial of On Feb. 1992. *4 Colo., Hart, Denver,
Holland & Boise, C. plaintiff-appellant. William for argued. McClearn Mauk, Boise, Skinner, de- & for Fawcett Valley Foods. fendant-respondent Bliss argued. Mauk William L. Boise,
Chandler, for de- Allyn, Dillion & B. Thomas fendant-respondent Erkins. argued. Chandler Welsh, Cosho, Humphrey, & Greener Boise, Walkers. defendants-respondents argued. H. Richard Greener Elam, Boyd, Boise, Burke & attorney, for defen- tax formed a limited partnership dants-respondents Surbaugh produce through pleurotus and market mush- (limited guarantors). Bliss, McFadden rooms on Erkins’ ranch outside Bobbi K. argued. Ranch, Dominick Idaho. Erkins owned White Arrow large geothermal spring which had a on it Hall, Farley, Blanton, Boise, Oberrecht & and, prior forming for some time for amicus curiae Idaho Bankers Ass’n. partnership Walker, limited with Thomas argued. Richard E. Hall researching had been seeking ways geothermal use spring develop BAKES, Chief Justice. growing operation. mushroom He had also (Idaho First) Idaho First National Bank seeking financing been from several brought this foreclosure action to collect sources, ultimately opted but for a limited approximately owing pursuant million $3.2 partnership in which he and Thomas Walk- to notes personal property and real and general partners er were the and several security instruments on a loan to Bliss private professional people and business Foods, (Bliss Valley Inc. Valley). The bank partners. They developed were limited obligors guarantors also sued as plan, private placement business memoran- general partners and limited of Bliss Val- da, subscription agreement began ley.1 *5 soliciting private funds from investors and Valley, Bliss Erkins Robert and Thomas lending period several institutions over a Walker, general partners primary and twenty-three several months. The Twin loan, guarantors twenty-three of the and invested, Falls area residents as limited partners limited who were also limited obli- partners, approximately million in the $1.1 gors guarantors2 liability and denied and ultimately negotiated business.3 Walker a raised a number of affirmative defenses million loan from Idaho First National $3.2 and counterclaims. At the conclusion of Bank. trial, entered million verdict $5.7 agreement, Under the terms loan against Idaho First on several of the bor- 24, finally August which was executed on rowers’ counterclaims. The trial court en- 1984, Valley up Bliss could borrow to $3.15 verdict, judgment tered on the released the 1, July million from Idaho First before obligations repay
borrowers from their to 1985, investments, partners’ but the own loan, any of the million and $3.2 awarded million, approximately were to be used $1.1 in attorney borrowers million fees $2.7 any made on the Idaho before draws were and costs. The trial court also denied Ida- Valley required First loan. Bliss was judgment ho First’s motion for notwith- begin making quarterly payments April on verdict, standing the remittitur and new 1, 1985, and to maintain a current debt-to- appeals trial. First now trial equity working capital ratio of 1.75:1 and partners court’s decision. The limited and $750,000 beginning October 1984. appeals. Walker have filed cross provided could occur The loan that default nonpayment upon several conditions: I. FACTS installment; warranty; fail- any breach of Erkins, condition, comply an Idaho ure covenant Robert busi- loan, nessman, Walker, agreement and Thomas a Twin Falls or contained in the unless Originally, Valley partner- parties specifi- referred to 1. Bliss was a limited that one or more ship referred to as Geo-Pleurotus Growers Lim- cally. However, partner- Partnership. ited when the changed ship incorporated, later the name was twenty-three partners limited consisted 3.The Foods, Inc., Valley and the loan doc- to Bliss uments were re-executed. We refer to the com- pany throughout people professional and their or business eleven individual, spouses, Donnie McFadden. and an Valley.” opinion this as "Bliss or had been clients of All but McFadden were attorney members of one Walker and were Walkers, parties—Bliss Valley, the 2. These four Walker, as ventures with more other business Erkins, twenty-three part- limited and the IV, particularly Part more described in throughout opin- infra. ners—will be referred to requires ion as “borrowers” unless the context days cured within 60 company. of written notice of tus of the The bank asked all default; Valley’s or if Bliss partners sign financial cir- the limited as- amended security sumption liability agreements, cumstances or the value of the which “substantially they affected in an adverse did. The bank later asked the limited manner.” specifically partners sign The loan document guaranty,” another “form provided Agreement contains which bank stated was needed for its “[t]his agreement Lender, audits, some, all, the entire between Bor- own internal but not rower and respect partners complied request. Guarantors with to the limited with this subject supersedes matter hereof and parties signed agree- Once the the loan any prior cancels understandings and ment, assumption liability agreements, agreements Lender, between Borrower and guaranties, project construction on the respect subject Guarantors with mat- began August part- with the ter hereof.”4 being expended ners’ contributions first. Hyder general Kamal was hired as the Both signed Walker and Erkins the loan manager project, Hyder, for the Rob- agreement general partners as the of the Erkins, son-in-law, Burk, ert and his John partnership, pursuant limited authority charge day-to-day opera- were in of the vested in them partnership the limited Erkins, Randy respon- tions. the son of agreement partnership and other doc- Erkins, employee dent Robert was also an agreement, uments. In addition to the loan in providing grow- involved sales and Walker, Erkins part- on behalf of the ing medium the mushrooms. nership, individually, signed notes and gave security por- the bank a interest prob- business encountered various tion of Erkins’ property real which many lems from the onset. The causes of business was to be located and on the problems disputed by par- were *6 equipment Valley. owned Bliss Addi- ties major part and constituted a of the tionally, Erkins and signed Walker both Negotiations trial of this case. on the general guaranties, part- and each limited agreement terms of the loan had extended signed assumption ner an liability agree- later into the summer of 1984 than had provided (1) ment which that each was lia- borrowers, anticipated by been the re- so ble for three times his or her initial limited existing greenhouses the construction on investment; (2) partnership obligations the improve- and the construction of other the partner of each separate limited were from 1984, began August, ments in late instead (3) partnership; that of the the bank June, 1984, plan as the had business bring separate against could any action proposed. unusually An cold winter partner limited regardless of whether or construction, delayed 1984-85 further brought not it also against an action the completed spring which was not until partnership.5 1985. Valley incorporated 3,1985. July Throughout spring
Bliss on summer of the contemplated original 1985, This was Hyder, the loan Erkins and John Burk Robert and, agreement pursuant agree- struggled complete phase to the loan to the initial ment, I) (Phase Idaho First was entitled to seek new the construction and to make the reflecting changed profitable, they loan documents the sta- ran into sever- business but agree- assumption liability agreement 4. Erkins testified that there were no side 5. The However, Walker, according ments with bank. Walker was proposed prepared by to $750,000 permitted testify, regard to with testimony, his "to ensure that all of the limited working capital requirement, during that savings partners be able to realize the tax would negotiations prior signing agreement the loan advantages previously or the tax which had [he] agree- "he ment that we would agreement and I reached an [Donald Chance] get they told would be able to them that go sign ahead and loan only get "The could out of this transaction." present provi- in its form with that they sign suggesting an as- reason I was application sion in it and that I would make agreement sumption of liabilities was for it, grant a waiver and that the bank would so any purposes.” purposes, tax not for particular that it was means to overcome this hurdle.” problems, including personnel 31, al expired difficulties which on December 1985. In among employees, 1986, themselves and other April, Valley Bliss and the bank en- production problems, growing concern tered into the first of a series of written from partners the limited and from the agreements, credit extension in which the regarding bank viability of the business agreed principal bank to defer payments and, subsequently, a claimed reluctance of repayment and extended the time for of the the bank to advance additional funds under 1, 1986, loan until June consideration for agreement, claiming the loan the borrowers acknowledging validity borrowers produc- were in default of the terms. The re-promising pay of the debt tion and sales of mushrooms were not keep payments debt interest cur- meeting original projections set out in January, rent. January, Between 1986 and plan, compa- business which caused the 1987, Valley sought Bliss and Idaho First ny meeting repayment difficulties in its granted five more similar credit extensions. obligations. Valley complied Bliss the credit exten- problems delays prompted agreements January,
These sion until when Valley request post- Bliss any payment bank to it failed to make on the loan. pone requirements or waive various Idaho brought First then this action agreement. Valley loan In late Bliss 11, 1987, against all borrowers on March requested working capital a waiver of the securing foreclose on the collateral principal payment covenants and the first agreement, debt and to enforce the loan 1,1985. April agreed due on Idaho First note, promissory assumption liability covenant, working capital waive but did guaranties, agreements, and credit exten- April not extend the 1 due date for the first agreements. sion principal payment, Valley which Bliss liability The borrowers denied on 20, 1985, May Hyder made. On wrote to documents, raising the loan several affirm- requesting principal Idaho First They defenses. filed counter- ative also payments begin April be rescheduled to against claims and amended counterclaims 1, 1986, 1, 1985, April instead of and that First, including a claim of RICO vio- the final draw date on the loan be extended lations, duty good faith breach of the 1, 1985, July from to December 1985. dealing, fiduciary duty, and fair breach of agreed Idaho First to extend the draw date faith, fraud, negli- breach of the tort of bad requested, only postponed but it *7 gent misrepresentation, tortious interfer- quarterly principal payment July due on rela- ence with Robert Erkins’ contractual 1985, requiring remaining principal pay- all tions, and a claim of defamation Robert Babcock, ments to be made. Bill the Idaho Erkins, the first time which was raised for charge overseeing First official in the in the amended counterclaim. Valley, suggested supe- loan to Bliss to his working capital requirement riors that the trial, objec- Before and over the bank’s through be extended November 1985. tions, realigned parties, the trial court However, response, superior, Babcock’s plaintiffs and designating the borrowers Chance, him ’til Donald instructed to “wait As a result the Idaho First as defendant. waiver, request customer default and essentially tort case proceeded case as a analyze then situation.” bank, fore- against the rather than as a proceeding against the borrowers. closure Finally, pro- because of dismal financial trial, jury re- a thirteen week After jections Valley and the fact that Bliss had 16, 1989. The turned its on June verdict up working capital kept with its First had not com- jury found that Idaho requirements, current ratio Idaho First violation, on fraud or a but mitted RICO gave Valley Bliss written notice of default counterclaims, remaining it returned 15, 1985, which, under the October First. against Idaho million verdict agreement, Valley $5.7 terms of the loan Bliss First jury found that Idaho Specifically, the sixty days Valley cure. Bliss re- had re- faith with the tort of bad committed plied, requesting Idaho First to forbear borrowers, fiduciary commitment, terminating spect to all breached from the loan duty Valley, owed to Bliss the Erkins and voluminous and much of in the it was partners, expert opinion. expert opin- the limited and breached the cov- form of The good hotly enant of ions dealing disputed, faith and fair owed were as was much of decision, Erkins, Walkers, Valley, to Bliss the other evidence. The wheth- partners. jury finding the limited er verdict of the jury The also found Court, dependent upon fact was the bank defamed Erkins Robert expert tortiously whose and whose evidence was interfered with his contractual Finally, believed. Reasonable men or women jury puni- relations. awarded could differ as to which side entitled damages tive guaran- to each of the limited to the verdict or to the Court’s decision. tors. The million $5.7 award included $3.1 yield I to the combined wisdom of the Valley million to Bliss for the bad faith jurors Judgment twelve and hold that the tort, approximately million to the Er- $2 jury’s based verdict should kins, $137,000 Walkers, to the approxi- stand. $360,000 mately guarantors. to the limited appeals judgment The bank from the equitable case, As to the issues in the motions, rulings post-trial raising on the
involving the bank’s foreclosure claim and issues, including following: numerous borrowers, the defenses filed (1) Did the in submitting court trial court err jury’s finding concluded that the jury to the the issue of bad faith tort? binding the verdict were on the court in its issues, equitable (a) determination of the in- admitting Did the trial court err in cluding the bank’s claim on the foreclosure highly prejudicial irrelevant and evi- making action. Without any findings of dence based on the bad faith tort law, fact or conclusions of claim? court denied
the bank’s foreclosure claim and released (2) Did the in submitting trial court err obligations borrowers from all repay jury to the the borrowers’ claim that principal and interest on the mil- $3.2 the bank owed borrowers a fiduci- lion loan obtained from the bank. The ary duty? judgment court entered jury’s on the ver- (3) Did Erkins have a viable claim for dict in favor of the borrowers for the total defamation, and was that claim barred $5,598,000.00. sum of The court then by the statute of limitations?
awarded all attorney borrowers’ fees and (4) submitting Did the trial court err in totalling $2,683,547.33. costs jury Erkins’ claim that the bank tortiously interfered with his contrac- post-trial First filed several mo- prospective tual relations and economic tions, including trial, motions for new re- advantage, and did the trial court im- mittitur, and JNOV. In its memorandum properly instruct on this motions, denying decision the trial claim? court held: (5) Did submitting the trial court err in conflicting evidence was throughout *8 jury to the the borrowers’ claim of position the trial and party of each punitive damages? placed was jury. my before the From (6) improperly Did the trial in- court
point jury of observation the could as jury regarding struct the the borrow- easily have come back with a verdict for ers’ claim that the bank breached its “the Bank”. If this had been a court duty good dealing? faith and fair trial, I would have found for Bank” “the (7) upon entering Did the trial err in my findings based own court fact from my judgment partners for the observation of the limited who my evidence and testify did not at trial? credibility determination of of witnesses. (8) by realigning
However, Did the trial court err say I jury’s cannot parties before trial? supported by verdict was not substantial evidence, (9) awarding nor the verdict was Did the trial court err in against weight attorney of the evidence. The fees and borrowers’ case, sides, evidence on both costs?
274 case____” appeal, partners
On cross the limited in the Carpenter v. Double R raise the following Co., issues: 602, 606, Cattle 108 Idaho 701 P.2d 222, (1985). 52(a)
(1)
226
Did
I.R.C.P.
reads in
failing
the trial court err in
part: “In
all actions tried
jury
submit to
the facts
partners’
the limited
jury
claim of
without a
negligent misrep-
advisory jury,
the Bank’s
with an
resentation?
the court shall find
specially
the facts
separately
state
its conclusions of
(2)
law
Did
allowing
the trial court err
thereon
entry
appropri-
and direct the
of an
partners
present
the limited
a de-
judgment____”
added.)
ate
(Emphasis
good
duty
part
fense of a
faith
on the
Thus,
regard
of the
to the
provide
Bank to
bank’s foreclosure
information?
of its notes
security,
regard
and with
(3) Did the trial court err in not submit-
to the borrowers’ defenses to that fore-
ting
jury
to the
fiduciary
a breach of
closure,
obligated
the trial court was
duty claim on behalf
of Walkers?
fact,
findings
make its own
conclusions
BOYLE, JJ.,
JOHNSON and
52(a);
of law and decision. I.R.C.P.
Car-
McKEE,
Tern.,
SCHROEDER and
JJ. Pro
penter
Co., supra.
v. Double R Cattle
concur.
However, the trial court did not make
any findings of fact.
decision on the
his
II
post-trial motions the trial court stated
FORECLOSURE PROCEDURE
that,
trial,
“If
I
this had been a court
would
We
analysis by
commence our
con
upon my
have found for ‘the Bank’ based
sidering the
relating
bank’s claims
findings
my
own
of fact from own observa-
proceeding.
foreclosure
The foreclosure of
my
tion
the evidence and
determination
mortgage
equitable pro
a note and
is an
credibility
The trial court
witnesses.”
247,
ceeding.
Young,
Steed v.
115 Idaho
judgment
nevertheless entered a
based
(1988);
275
However,
creating
duty by an insurer to an in-
disposition
in view of our
sured,
in
remaining
through
in
III
the breach of which can result
issues
Parts
X,
faith breach of an insur-
in
that a new trial is
the tort of “bad
which we conclude
contract,”
apply
not
in a debtor-
case,
ance
do
necessary in this
the trial court’s find-
opinion
relationship.
Unigard
The
credit
ings
fact and conclusions of law should
contracts are invari-
noted that insurance
upon
proceed-
be based
the evidence and
fixed,
whose
ably
standardized contracts
ings at the new trial.
negotiated and are exe-
terms are not
setting. The
cuted in a non-commercial
BOYLE, J., and SCHROEDER and
contract,
prepares
insurer
the insurance
McKEE,
Tern.,
JJ. Pro
concur.
ever,
seldom, if
reads—
while the insured
terms of the
much less understands—the
Ill
agreement.
contrast,
in-
alleged
loan
In
bank
BAD FAITH TORT
in this case was a commercial
volved
and a busi-
transaction between a bank
Regarding the
claim
borrowers’ tort
ne-
The bank loan under
ness borrower.
faith,
trial,
of bad
when this case went to
fixed,
“invariably
gotiation was not an
the trial court did not have the benefit of
in
contract ...
a non-com-
standardized
recent decision in
Canyon
our
Black
Rac
for
setting,” which was the basis
mercial
Club,
quetball
Inc. v. Idaho First Nation
Rather,
ruling
Unigard.
in
the Court’s
Bank,
119 Idaho
there is a valid contract between the
IV
ties.7
arguments
We have reviewed the
FIDUCIARY DUTY
of the
support
borrowers
of their
faith tort
bad
We next consider whether
the trial
claim,
them,
and the cases cited
and are
submitting
court erred in
nevertheless
convinced that our decision in
borrowers’ claim that Idaho First owed and
Canyon
Black
correct. The
was
bad faith
fiduciary duty
breached a
to them. The
tort,
genesis
peculiar
which had its
in the
trial court submitted the breach of fiduci
first-party
nature
of the
insurance
con-
ary duty
claim on behalf
all of the
Unigard,
White v.
tract,
explained
as
Walker,
except
borrowers
who was one of
application
first-party
has no
outside the
general partners
experi
and an
two
context,
clearly spelled
insurance
as we
out
attorney
negotiated
enced
and who
the loan
Canyon
Black
in the
partnership.
case. We adhere to with the Bank on behalf of the
our decision in Black
Canyon.8
dismissing
In
claim of
Walker’s
breach
partners
attempt
negotia-
7. The limited
further
to distin-
nished in the course of the settlement
tions,
guish
Canyon by claiming
Black
any
that it dealt
"shall not be admissible for
reason or
relationship,
22,
with a
while in
February
any
.lender-borrower
manner.” The court on
bank,
against
relationship
their case
1988, approved
stipulation
and stated that
However,
guarantor.
that of lender and
their
stipulation
"constitutes an order of this
attempt
distinguish
Canyon
per-
Black
is not
Nevertheless,
permitted
court.”
the court
twenty-three people
suasive. These
were not
borrowers to introduce evidence of these settle-
only guarantors,
partners
but also were limited
negotiations
theory
that the settle-
ment
on
partnership.
in the Geo-Pleurotus
The Idaho
negotiations
supporting the
ment
were evidence
partnership,
First loan was made to the
so the
spite
borrowers’ bad faith claims.
In
of the
borrowers,
partners
limited
are also
and their
prior
stipulation and the court’s
orders when
guarantors
as
does not distin-
additional status
offered,
that,
evidence was
the court ruled
guish them from the borrowers in Black Can-
normally
though compromises
"Even
admissible,
are
not
event,
any
disposition
yon.
our
of the bad
that,
respect
to the issues of
upon
faith tort
issue is based
much broader
faith,
of bad
I feel that it does remain
this case
policy considerations.
change
position
an issue.” The trial court's
law,
and one-
8. Much of the evidence in this three
view of the
incor-
resulted from
court’s
53,
support
half month trial was admitted in
porated
No.
into the bad faith Instruction
bad faith tort claim. Evidence which the trial
any
part
conduct on the bank's
which was
ruled
be inadmissible
court had earlier
would
"intentionally
the tort
unreasonable" constituted
was nevertheless admitted based
the trial
of bad faith. The trial court concluded that
ruling
the bad
court’s
that it was relevant to
negotiations were “intentional-
bank’s work-out
example,
claim. For
the trial court
faith tort
ly unreasonable.”
negotiations
be-
admitted evidence
settlement
specifically precludes
admission
I.R.E. 408
parties,
that the
tween the
based on the claim
negotiations
work-out
settlement
such as the
negotiated
bank
the settlement in bad faith
Furthermore,
proposals which were discussed.
bad
that evidence was relevant to the
therefore
rejection
faith
of the bad
our reversal and
negotiations
faith tort claim. The settlement
tort,
rejected
rationale
have
the trial court’s
we
negotiations, which were
related to work-out
evidence, which, under
for the admission of this
Valley
principals of Bliss
conducted between
408,
clearly inadmissible
Rule
Evidence
bank,
related to the infusion
and officers of
Coleman,
anyway.
114 Idaho
In Ross v.
equity capital and additional loan
of additional
capital,
(1988),
there
this Court held that
277
relationship will
Bank,
edging
fiduciary
that a
fiduciary duty against the
the trial
stated,
solely
attorney
through”
court
“Mr. Walker was an
“arise
a borrower-lender
who,
showed,
conclusively
juris-
had
relationship,
the evidence
cases from other
cite to
knowledge superior
plaintiffs’
to that of
there are some
dictions which hold that
representative as to all matters
fiduciary relationship
with which
in
a
instances which
representatives
he
of Idaho
dealt with
may arise
a lender and borrower.
between
Woell,
First.”
See,
v.
434
e.g., Union State Bank
(N.D.1989);
Wachholz,
N.W.2d 712
Deist v.
asserts that our recent decision
bank
(1984);
207,
208 Mont.
“We
it owed to them
disclose
have been unable
locate
case
problems
dealership
financial
fiduciary relationship
which a
held
owner’s
financial
solely through
a
involvement with
bank.
longstanding
arise
holding
no
relationship
fiduciary
owed
prior
creditor-debtor
deal-
bank
defendants,
Supreme
ings
duty to the
Court
the customer
between
explained the characteristics of a
expressed
bank.”
The rule
of Kansas
...
fiduciary duty
relationship
as follows:
above cases holds that
a
is
lender-borrower situation
a debtor-
imparts
posi-
a
fiduciary relationship
A
relationship,
fiduciary
and not
creditor
peculiar
placed by
tion of
confidence
relationship.
fiduciary
A
one individual
in another.
'primarily
person
duty to
is a
with a
act
176,
(citing
P.2d at
The South Carolina Court the customer is his trust and cently fiduciary duty defined a in relying as follows: confidence the bank and is so to counsel inform bank him. fiduciary implies party
The term
that one
superior position
inis
a
to the other and
Valley operation, except Donnie mushroom previously its Bank because of National Leas- McFadden. Professional/Executive project. The expressed support for the entity ing an formed for tax reduction was partnership interests which limited purposes participants each of the which reg- selling not to be partnership was were (the twenty-two partners limited in the Depart- security the Idaho istered as a with venture) Valley employed were Bliss Finance, private to but were ment of in turn leased their services back which prepared Consequently, Walker offering. practices maximize professional their Placement entitled “Private a document way re- tax benefits of individual their provi- Memorandum,” set out the which plans, etc. A substantial number tirement plan, part- limited sions of the business partners Valley Bliss limited were financial contained nership, and which in other ventures be- involved with Walker relevant to all other facts statements and Leasing sides the Professional/Executive mem- private placement project. These many them in as as five Company, some of separately for each prepared oranda were Walker and Erkins testi- ventures. Both sought whom Walker particular individual preparation of the documen- fied that in the part solicit, for the most included regard loan from Idaho to which with tation Memorandum, ultimately part- nership Agreement those who became limited and the making ners.9 and has relied in this investment therein, only on the information contained approximately Walker sent letters provided information him in otherwise individuals, inviting twelve them to a meet- writing by the General Partners or infor- 12, 1984, ing May Holiday at the Inn in mation from books and records of the Gen- Falls, plan Twin where the business By placing warranty eral Partners.” discussed them both Erkins and language subscription agreement, in the Walker, was, been, given and each or had he to make Walker testified that wanted private placement memorandum con- people going sure that who were cerning partnership offering.10 the limited make an investment had all of the informa- May meeting, many As a result of the 12th *14 partnership tion about the available signed partnership of the attendees limited them, provid- in the written documentation subscription agreements agreeing to enter it, ed, they provided had all been partnership capital. the and contribute their they and he assumed that had read it Later, not, including Three did Babcock. subscription signing their view partners the remainder of the limited who agreement dialogue to that effect. with ultimately joined Valley the Bliss limited trial, during the court Walker’s counsel partnership private place- received their stated, except dispute “There’s no at all for ment memorandum from Walker Mr. Donnie McFadden the other [that] [a]ll signed subscription agreements, according brought into the invest- individuals were subscription testimony. to Walker’s In the Walker, them by approached ment Mr. who agreement, copy a of which is attached to dispute There’s no about the investment. A, opinion Appendix this each subscriber about that.” that, undersigned re- warranted “The has [private upon this evidence the trial court placement] Memoran- Based ceived Walker, dum, general part- carefully concluded that and has reviewed the Part- experienced been en- Walker sent businessman who had 9. One of the individuals to whom "private placement variety the cock, memorandum” was Bab- gaged ventures in Cali- in a of business manager of the Idaho First National was in the horse fornia and Idaho and who Falls, expressed had an inter- Bank in Twin who Idaho, Hagerman, breeding at the business near investing partnership. est in the limited partner. He had been time he became a limited However, ultimately he Babcock concluded that the late 1970’s and a friend of Babcock’s since position invest because of his at the could not at Babcock's branch of the had banked glowingly project spoke bank. Babcock early Bank since the 1980’s. First National friend, and delivered his documents to his customer, bank Babcock had themselves been McFadden and partner, and sometime investment ventures, business involved in two or three McFadden, ultimately Donnie who became the mush- advised McFadden of Babcock first venture, partner twenty-third in the limited profit potential. Babcock venture and its room along the other eleven clients of Walker with McFadden, according to McFadden’s advised wives. Much of McFadden’s contact and their avail- testimony, another "slot” that if there was project initially came and information about the ought partnership to con- he able in the limited However, did, prior from Babcock. McFadden Later, split- investing. the two considered sider subscription agreement signing for one of ting opportunity When to invest. interests, Babcock’s partnership travel to the the limited not be able to he would they Babcock concluded that with Walker where White Arrow Ranch personally position with the physical participate bank, of his site and dis- because viewed the develop- project potential gave data and and its for of the financial cussed the he some private his ment. McFadden also submitted McFadden for he had to documents which that, placement for memorandum to his accountant while testified consideration. McFadden prior making in- the decision to (the his review pri- three-ring binder he had received the vest. memorandum), did not read placement he vate accountant personally it to his it but delivered testimony busi- his described the 10. Walker in family mem- and his McFadden for his review. being optimistic concerning plan as more ness accompanied mush- personally bers were project, private potential and the all room-growing who answered site Walker conserva- placement memorandum as a more regard questions to the investment. their project. tive evaluation of pur- Thereafter, August McFadden by Walk- was not solicited 11. Donnie McFadden partnership. in the limited his interest chased partnership. McFadden was an to enter the er ner, superior had the knowledge regarding that these during statements were made the loan transaction and the April, May mushroom months of and June of venture, representatives, agreement bank’s nine months after the loan and denied Walker’s claim that the bank consummated. Erkins first asserted the owed Walker a fiduciary duty. agree. claim of defamation in his We amended coun- 24, 1988, terclaim filed March beyond well Both the bank and the hoped borrowers two-year pro- statute of limitations monetarily benefit the loan transac- 5-219(5).13 However, scribed I.C. Er- § They tion. bargaining were at arm’s 15(c) kins asserts that under I.R.C.P. his length, according Walker, and each was defamation claim relates back to the initial looking out after its own interest. Each 12, 1987, May counterclaim filed which was was competently represented by qualified years less than two after at least some of representative fully capable who was the statements were made. In the alterna- protecting parties.12 interests of their tive, Erkins claims that Idaho First waived To hold the bank to the standard of a its statute of limitations defense. fiduciary transaction, financing thus Regarding requiring Erkins’ primarily it to act contention that for the benefit defamation claim itself, raised the amended borrower rather than “would *15 counterclaim put an relates back to obligation intolerable the initial upon banking counterclaim, 15(c) provides I.R.C.P. institutions and ordinary day-to-day convert “[wjhenever business the claim or defense transactions asserted fiduciary into rela- in tionships pleading the amended where none arose out of the were intended or an- conduct, transaction, ticipated.” or occurrence Denison set State Bank v. Ma- deira, attempted forth or 640 P.2d to be set forth in at 1243. Accordingly, we original pleading, reaffirm our recent in amendment relates decision Black Can- yon Club, original back to the date of the Racquetball Inc., pleading.” and conclude If, however, pleading that on this the amended record the sets trial court erred in submitting forth a cause new of action unrelated to borrowers’ claim of breach original fiduciary pled, transaction or duty to occurrence jury.
the amendment does not relate back to the
original
date of
pleading.
Black Can
BOYLE, JJ.,
JOHNSON and
Martin,
yon, supra; Wing v.
107 Idaho
McKEE,
SCHROEDER
Tern.,
JJ. Pro
(1984).
1172
P.2d
concur.
The Erkins’ initial counterclaim did
V
allege any
action,
defamation cause of
allege any
nor did it
part
conduct on the
DEFAMATION
give
the bank which would
to a def
rise
counterclaim,
In his amended
Er-
Robert
amation action
In
Robert Erkins.
kins raised a claim for defamation. The
good
claim of
duty
breach of the
faith
jury found in favor of him on his def-
dealing
original
fair
contained in the
amation claim. Idaho
challenges
First
counterclaim,
alleged
Erkins
that “Mr.
claiming,
award
among
things,
provided
Babcock
inaccurate and mislead
the claim was barred
the statute of
ing information to investors ...
the effect
limitations.
impact
of which was to have adverse
on the
upon
The defamation claim
Facility’s operations.
particular,
was based
Mr.
by Babcock,
several
provided
statements made
the Babcock
inaccurate and mislead
loan,
Idaho First officer in charge
ing
of this
concerning
information
the activities of
...,”
about Robert Erkins. The
Randy
record indicates
Erkins
son
counter-
12. Walker testified that he was
these
partnership.
was
diligent
types
financing negotiations
representing
the interests of the
experienced
and that he Within two
in
13.
tery,
5. An action for
5-219.
false
[******]
Actions
(2) years:
imprisonment
...
libel, slander, assault,
personal
or seduction.
injuries.—
bat-
However,
218, 5-219,
claimant Robert Erkins.
these
5-224 and 12
1977.”
U.S.C. §
allegations
added.)
only
9(h)
concern
Erkins’
(Emphasis
Robert
I.R.C.P.
states:
son, Randy,
only
then
relation to a
pleading
“In
the statute of limitations it is
implied
claim of breach of the
covenant of
generally
sufficient to state
that the action
good
dealing.
faith
fair
There
was no
barred,
allege
particularity
against any-
notice of a defamation claim
Session Law or the section of the Idaho
Therefore,
one.
we conclude that the def-
pleader
Code
which the
relies.”
alleged
amation claim
in the amended coun- Thus, the
bank’s assertion
the statute of
“conduct,
terclaim did not arise out of
limitations in
I.C.
5-219
its answer
§
transaction or occurrence set
forth”
the was sufficient to raise the statute
limita-
15(c).
original counterclaim.
I.R.C.P.
Ac-
tions as a defense to the Erkins defamation
cordingly, the defamation claim does not
action.
Engineering,
Resource
Inc. v. Sil-
filing
relate back to the
of the initial coun- er,
(1972);
94 Idaho
VI
prima
This instruction misstates the
facie
elements of the tort of interference with
TORTIOUS INTERFERENCE
party
by
contract
a third
as set forth
WITH CONTRACT
this Court in Barlow v. International Har-
Erkins’ amended counterclaim included a
Co.,
881,
vester
95 Idaho
284
(c)
Also,
management.
regard-
causing
intentional
interference
a
removed from
contract;
breach
ing
payments,
agreement
the lease
the loan
(d)
bank, signed by Erkins, provided
with the
injury
plaintiff
to
resulting
from
if
payments
breach.
that
the loan was
no
default
any
partners.
would
made to
of the
(emphasis
Id. at
285
plaintiff prove
that the
question, we
statement that
directly ruled on the
have not
cases,
prior
“improper”
under the
alluded to the tort
two
have
interference
Harvester,
767,
court,
95
v. International
in an
Barlow
listed in
that
factors
§
881,
(1974),
P.2d 1102
and Twin
Linde,
522
redefined the
opinion by Justice
D
City Distributing, Inc. v.
Falls Farm &
“wrongful interference with
tort as
Inc.,
351,
Co.,
528
Supply
B
96 Idaho
&
relationships”.
Top Serv.
economic
(1974). In
Falls Farm &
P.2d 1286
Twin
Co., 283
Shop, Inc. v. Allstate Ins.
Body
Distributing,
noted that
City
Court
1365,
(1978).
201,
P.2d
1368
Or.
582
adjoining
tearing
sign
down of a
in an
Thus,
inter-
a cause of action for tortious
building
competitor
a tres-
by a
“was both
from either the defen-
ference arises
possesso-
pass
appellant’s ownership
improper objective
an
pursuit
dant’s
sign
space,
ry rights
window
or the use of
harming
plaintiff
tort of ‘interfer-
as well as a common law
injury
in fact cause
wrongful means that
”
prospective advantage.’
96
ence with
business rela-
plaintiff’s
contractual or
359,
1294, citing
Idaho at
528 P.2d at
both
Serv.,
P.2d at 1368.
tionships. Top
Barlow,
Draft
supra, and the Tentative
interference is estab-
A claim for tortious
of Torts
No.
Restatement of the Law
lished
(2d),
(1969),
pp.
seq.
766A at
50 et
§
resulting
injury
interference
when
Prosser,
Torts,
pp.
Law of
130 at
949 et
§
wrongful by some mea-
to another is
1971).
(4th
seq.
ed.
beyond the fact
the interfer-
sure
case,
City
Since the Twin Falls Farm &
liability may
ence itself. Defendant’s
has not had occasion to address
this Court
improper motives or from
arise from
However,
again.
several of our
issue
means____
improper
No
the use of
neighboring
years.
states have
recent
privilege
unless the
question of
arises
Seattle,
City
112 Wash.2d
See Pleas v.
wrongful
interference would be
but
(1989); Top
lationships
in
regard
as outlined
those cases. A
to Erkins’ claim that
With
plaintiff,
prima
in order to establish a
intentionally
the bank
interfered with the
fa-
case,
any
claimed inten-
cie
must show
receipt
payments
of lease
from the real
prospective
a
tional interference with
eco- property which he had leased to Bliss Val
advantage resulting
injury
in
nomic
to the
ley,
facially
that claim
asserts a true Bar
plaintiff
wrongful by
“is
some measure
low-type tortious interference with a con
beyond the fact of the interference itself.”
tract, i.e.,
property
Erkins’ lease
real
Pleas,
plaintiff
287 erroneous, and that claim must be VIII reversed for a new trial. COVENANT OF GOOD FAITH
AND FAIR DEALING BOYLE, J., and SCHROEDER and jury The trial in court instructed the
McKEE, Tern., JJ. Pro concur. Instruction No. 39 that: Every imposes parties contract on all JOHNSON, J., VI(A). concurs Part obligation good the contract an of faith dealing performance
and fair its VII enforcement. “Good faith” means hon-
esty in fact in the conduct or transac- PUNITIVE DAMAGES tion concerned. good party duty Each owes a to exercise trial court submitted the issue dealings faith its and transactions with punitive damages jury, of which party. party If a fails to deal punitive damages found no in favor of Bliss honestly party, with the other it is liable Walkers, Erkins, Valley, the and the but duty good for a breach of the of faith. punitive damages assessed in various Additionally, Instruction No. 40 read: amounts, $4,000 $34,000, ranging from guaranty relationships, In all Idaho First partners-guarantors, favor of the limited guarantor duty owes to a of continuous $288,- punitive damage for a total of award good dealing. faith and fair 000. Because we have reversed the award instructions, Based those re- ccompensatory damages for the bad faith against turned a verdict Idaho First and in tort fiduciary duty and breach of causes $250,250, favor of Erkins for in favor of action, punitive damages award of $46,000, Walkers the amount of must likewise be reversed. Yacht Club partners in favor of the limited in the sum Service, Sales & Inc. v. First National $2,000 each. Idaho, 852, 864, Bank North 101 Idaho appeals, raising Idaho First several 464, (1980)(“The 623 P.2d 476 judgment in regarding errors is submission of this awarding compensatory this action dam jury. Initially, sue to the for the same reversed, ages must judg and thus the reason which we reversed the award of awarding punitive damages ment must like i.e., punitive damages, ad erroneous proceed wise be reversed for further support mission of evidence in of the bad ings.”). As have we noted in Parts III and fiduciary duty faith and breach of claims above, major portion IV of the evidence which should not have been issues in this at this trial related to the bad faith tort and case, judgment the verdict and on the cove claims, fiduciary obligation breach both good dealing nant of faith and fair must be erroneously of which were submitted to the set aside. v. Yacht Club Sales & Service retrial,
jury.
On
the evidence
well be
Idaho,
First National Bank North
su
different, and the trial court will need to pra. Additionally,
that In
we conclude
independently evaluate the evidence sub
contrary
struction No.
39
law
mitted at retrial to determine whether or
prior
our
established
cases.
not the evidence is sufficient to meet the
Surety,
In Luzar v.
107
Western
required
standard
in Cheney v. Palos
693,
(1984),
Court,
by stating, “Any
by
action
either
a material
in the terms
its
of
violates,
significantly im-
“inject
which
nullifies or
Nor does it
contract.
...
sub-
employment con-
pairs
benefit of the
parties’
terms into the
stantive
contract.”
implied-in-law
tract
is a violation of
Rather,
requires only
parties
that the
it
627,
289 being the inadequate an statement of re- for of the same contract. As in breach cases, quirements good implied may of the faith cove- other contract a claimant nant, may jury consequential damages the well the entitled to for have confused “dealing honestly” requirement implied good in the of Instruc- breach of covenant something tion the that “intentionally No. 39 with unrea- faith if “there is in contract requirement suggests they sonable” of the bad tort within the faith were in jury contemplation parties proved Instruction No. 53. The well of the are and certainty.” have concluded that under No. Tie Instruction with reasonable Brown’s & 53, Co., if party intentionally Chicago acted v. 115 Ida- unreason- Lumber Co. Title 56, 61, (1988). ably, 423, 764 might he also have “failed to deal ho P.2d 428 honestly In- party” with the other under Instruction did not suffi- Because No. 39 39, though struction No. even in both cases implied good the of ciently define covenant enforcing he merely rights his under dealing fair the circum- faith and the contract. appli- in which the is not stances covenant cable, judgment 39 adequately damages
Instruction No. did not of award implied inform the to the of relating of law for are re- breach covenant implied good of covenant faith as outlined versed.
in
The
of
Sorensen.
covenant
Metcalf
good
dealing
faith and
only
J.,
fair
is
violated
BOYLE,
and SCHROEDER and
violates,
by
party
when
either
“action
...
McKEE,
Tern.,
Pro
JJ.
concur.
significantly
nullifies or
impairs any bene-
JOHNSON, J., concurs in result.
fit
supra.
of the
contract.” Metcalf,
...
requires
The
parties
covenant
“that
IX
perform good
obligations
in
faith the
im-
posed by
agreement.”
their
v.
Badgett
REALIGNMENT OF THE PARTIES
Bank,
563,
Security State
116 Wash.2d
the trial court
reevaluate
On retrial
must
(1991).
The limited BOYLE, J., and SCHROEDER and court’s denial of their cross-appeal the trial Tern., McKEE, good duty part Pro concur. defense of a faith JJ. argue equitable against part- partners that the claim the limited 18. The limited do not 17. The ners, cross-appeal alleged they capacity partners, raise in their in their as limited errors They simply require a new trial. limited to their investment interest in the limit- reversal and that, argue partnership’s case is reversed and ed assets. The bank’s additional in the event this against partners the limited on their as- remanded for a new trial based on the claims bank, liability agreements guaranties issues sumption these two issues raised claims, jury. legal equitable are not claims. should be submitted to
291
provide
agree
the bank to
upon
information. We
to the
appeal
effect that
such an
with the trial
deny
parts
court’s decision to
appealed
where the
not
from are
defense. As
extensively
we discussed
intimately
not so
part
connected with the
in Part III regarding
above
faith
appealed
bad
from that a
reversal
tort, in
setting,
a contractual
the duties and
part
require
would
a reconsideration of
obligations
partners
are created
below,
the whole case in the court
the terms of the contract. “Courts
court
partial appeal
[can
such
can in-
interpret
agreement
an
to mean some
not]
quire only
respect
portion
thing
say,
interpolate
that it does not
nor
appealed from.”
...
[Citation omitted.]
something
into a contract
the contract does
general
is “the
principal
ap-
that an
[I]t
Bauscher,
Nuquist
itself contain.”
v.
peal from a distinct
independent part
89, 95,
(1951).
227 P.2d
See
judgment
of a
bring up
does not
*24
also,
Nazarene,
Ohms v. Church
64
parts
appellate
review the
262,
(1942);
Idaho
293 A APPENDIX GROWERSLIMITED PARTNERSHIP
GEO/PLEUROTUS AGREEMENT SUBSCRIPTION Partnership Growers Limited Geo/Pleurotus Box 0. P. West Street Second Falls, ID 83303-1892 Twin Subscription. applies undersigned hereby 1. Partner Part- Limited Growers Limited
become Geo/Pleurotus (the "Partnership"), limited nership partnership be formed the State with laws Robert under Erkins and A. (the the General Walker Thomas G. Partners"), Jr. Partners "General purchase number units limited (the "Units") partnership interest indicated below in accor- agreement terms dance Certificate (the Partnership Limited Agreement "Partnership Agreement") Memorandum, Confidential Private attached Placement (such May relating dated Units Confidential including Placement Memorandum all Private financial state- ments, exhibits schedules contained therein attached thereto, supplements thereto, amendments is herein "Memorandum"). subspription This rejected called Partners sole General in their discretion. *26 Representations 2. undersigned Warranties. The .And acknowledges, represents, warran'ts agrees and as follows: (a) The undersigned Memorandum, has received the carefully and has reviewed Partnership Agreement the Memorandum, and the and has relied making in only therein, investment the information contained provided information otherwise to writing him in the General or Partners information from books and of records the General undersigned Partners. The documents, understands all that records books and pertaining to this investment have been made available inspection attorney for his his accountant and/or Representative(s), his Purchaser as such term and/or Regulation is defined in D promulgated the under (the Securities Act of as "Act"), amended and him, and that books and records Partnership will available notice, reasonable inspec- for during tion investors reasonable at business hours principal place its undersigned business. The (s), his advisor any, if have had a reasonable and/or of, questions ask opportunity to and receive answers
ADMITTED [* EXHIBIT Date Partners, from, person or persons General or behalf, concerning acting offering on their
Units, questions have all such been answered and undersigned. No oral full satisfaction been made or have oral information representations undersigned advisor(s) or his furnished offering Units which were connection in the Memorandum. contained not (i) (b) undersigned has adequate, The means possible current needs and personal for his providing (ii) has no need contingencies, liquidity for in this (iii) investment, is able bear substantial an investment risks the Units an economic (iv) time, present and at period, could indefinite such complete loss investment. afford (c) undersigned's The commitment investments readily not marketable are not "dispropor- which worth his his net tionate investment his cause overall Units will commitment to become excessive. (d) undersigned recognizes The the Partner- peen only recently organized ship has has no operating history financial Units significant risks, investment an including involve captions under set forth those "Risk Factors" Income Tax "Certain Federal Considerations" Memorandum. (e) undersigned advisor(s) his and/or and/or (if Representative(s) applicable) Purchaser his have financial, knowledge experience such tax *27 matters to enable him business them to utilize and/or made available the information to him them in and/or Units, offering with the of the connection to evaluate and the prospective merits risks of the investment and investment make an informed respect to decision with Representative, Purchaser Each thereto. any, if has writing specific in the confirmed any details of and past, or present future all relationships, actual or comtemplated, between himself or his affiliates and any General Partners or the of their affiliates compensation any received or to be as received any relationships. result of such (f) undersigned The understands that Memo- the not has been filed randum with or any reviewed state securities or Federal administrators of because
-2- made the General Partners as to representation the offering. nature the or limited private the the undersigned understands that sale (g) The registered the been under Act has not Units the non-public exemption therefrom an for reliance undersigned the The understands that Units offerings. indefinitely or to be held unless sale may have registered is subsequently thereof transfer other amended, Act, or an exemption as from such under undersigned The is available. further registration Partnership obliga- is no that under understands on register the Units his or to assist to behalf tion exemption any registration. complying with from him (h) undersigned represents The that the Units soley purchased for his being own account are for only for purposes not account investment distribution,** person not for assignment any other that no person to others has resale or beneficial or indirect interest direct in such Units. (i) undersigned The understands that he not dispose sell able to his Units will
be there addition, public market be no under- th^m. that his signed right understands transfer subject be will Units conditions set forth Agreement, Partnership including consent Partners and' against restrictions General transfer transfer not unless violation Act applicable state securities laws (including investor standards). suitability The undersigned understands will the General Partners that consent to a trans- a Unit unless represents transferee fer he that suitability financial required meets standards unless initial subscriber an such are conditions Partners, by the General waived the General right, discretion, have Partners absolute consent transfer of a refuse Unit. (j) undersigned understands legends placed will certificates or other documents evidencing Units respect above *28 assignment, on restrictions resale or disposi- other tion of the Units. (k) undersigned; The if a corporation, partner- entity, ship, or other trust is authorized and other- qualified purchase to duly Units, wise" and hold the (i) entity has not been such formed specific the
-3- (ii) Partnership or Units in the acquiring of purpose under investor Rule accredited as an qualifies equity each under the Act and 501(a)(8) promulgated simulta- and delivered has executed thereof owner Subscription Agreement substan- neously herewith Agreement and a Purchase to tially identical Questionnaire. (l) represents undersigned and warrants that The the in to General Partners provided information all Questionnaire concerning or otherwise Purchaser the status, himself, position and financial his investor matters, or, partner- corporation, case of the in experi- entity, knowledge the and or trust ship, person business the and matters of financial in ence such decision behalf the investment making complete as the set and date entity, is correct any if there should be end hereof at the forth prior to“acceptance information such change in adverse immediately provide will the he subscription, his such information. Partners General individual, (m) if he undersigned, is an is The age. years least at (n) undersigned understands that if he shall The Partnership due any payment to the default in be Partnership Agreement, in his interest the to pursuant pursuant be sold terms Partnership may that Agreement he not be Partnership sale, any amount such as receive entitled Further, Agreement. Partnership provided Partnership that shall understands undersigned privileges against him rights, remedies have all equity, or and in at law addi- available are that tion, Partnership right have shall recover legal fees in connec- costs court reasonable therewith. tion (o) undersigned understands that The discus- consequences arising investment tax from sion Partnership as set forth in the memorandum consequences that actual tax in nature general Partnership investment undersigned depend on his individual circumstances. undersigned (p) understands can there thé Internal or assurance Revenue Code be no will thereunder applied amended regulations deprive its Partnership a manner such
-4- the all of tax they of some or benefits partners might receive, some of expect to and deductions by Partnership or allocation claimed of items income, loss, or gain, among deduction credit of challenged by the partners may not be Internal Revenue Service. THAT (q) UNDERSTANDS THE UNDERSIGNED THE UNITS TO AN EXEMPTION PURSUANT BEEN ISSUED FROM THE HAVE FEDERAL PROVISIONS OF THE REGISTRATION SECURITIES ACT EXEMPTION IS AS THE AVAILABLE OF AMENDED. UNDER §4(2) 505 OF REGULATION D THEREOF AND RULE PROMULGATED ACCORDINGLY, THE UNITS MAY NOT BE THEREUNDER. SOLD OR OR ABSENT REGISTRATION AN TRANSFERRED APPLICABLE EXEMPTION. Adoption Partnership Agreement. of The under- 3. agrees hereby adopts, accepts and to be bound all signed Partnership provisions Agreement of and per- and to terms imposed obligations upon therein all Limited form Partner purchased. Upon respect acceptance the Units to with of this by the General and subscription Partners formation Partnership, undersigned shall become a Limited Partner for purposes. all Special Attorney. Power 4. (a) undersigned, The executing Agree- ment, makes, irrevocably constitutes appoints each and the General his true and Partners attorney, lawful name, him and place for in his and stead his use benefit, and, acknowledge and execute necessary, extent file record: (i) Partnership Agreement all thereto;
amendments (ii) Any instrument may which required to be filed the Partnership, or which file; General Partners deem is advisable (iii)Any documents which be required effect continuation Partnership, admission or Partner, substitution a Limited or dissolution termination Part- provided nership, continuation, admission, such substitution dissolution termination are in accordance terms the Agreement Partnership. Limited
-5- *30 (b) grant authority: Such of (i) coupled Special Attorney of Power Is a interest, shall sur- irrevocable and an is with undersigned. incapacity of the the death or vive (ii) by either of the May be exercised by signing separately as Partners either General or, Limited attorney-in-fact each Partner for Partners, by the Limited listing of all after single signa- the executing any with instrument acting attorney-in- as a of General Partner ture them; all and fact for of (iii) assignment by the a survive Shall portion or a of his the whole Limited Partner of interest. Attorney supersede any does Special Power of This used to Partnership Agreement nor is it to the of part undersigned any rights. of of his Limited Partner the deprive simplified system provide execu- only to a intended is It required, undersigned shall If the execute documents. of tion days five after the the Partners within to General deliver and therefor, designations, request additional sych receipt of as the General attorney or instruments Partners of powers necessary. deem reasonably shall undersigned agrees to The Indemnification. 5. Partnership and the General hold harmless the indemnify employees respective affiliates agents, Partners losses, expenses costs damages, all against from fees) they by which incur attorneys' reasonable (including any fulfill undersigned of failure of reason by or reason Agreement, conditions or terms made under- representations and warranties breach Partnership Agreement, or in connection herein signed undersigned Partner- provided any document or Partners. General ship Miscellaneous. 6. (a) hereby grants undersigned Part- purchased Units security
nership interest payment undersigned secure Investor's Note, of which as Promissory form attached Memorandum, performance "C" Exhibit Agreement form Assumption Liabilities “K", being the Memorandum Exhibit attached (the "Assumption herewith Liabilities delivered Agreement").
6- *31 (b) defaults undersigned In the event the under Assump- or the Promissory Note the Investor's either Partnership and Agreement, the Liabilities the of tion and remedies set rights shall have all the lenders Note, herein, Promissory the and Investor's forth the Agreement, Partner- Assumption of Liabilities and law. ship Agreement provided as otherwise (c) proceeds any of such or From the foreclosure sale, Partnership may the amóHht of all the retain expenses connection incurred it with and costs sale, including sale and foreclosure or costs such any surplus the event attorneys' fees. reasonable sale, proceeds from foreclosure or such remains payments and deductions to all authorized after Partnership, surplus any remaining paid shall be such may undersigned. Partnership The become to any undersigned-recognizes at sale. The purchaser such may public Partnership be unable to effect a purchased part all a the Units so or be- sale prohibitions certain contained in the Act and cause and, therefore, applicable laws state securities compelled private may be resort to one or more to group purchasers to and restricted of offerees sales suitability agree, fulfill certain standards who acquire among things, other to such Units for their account, purposes only and not own investment to view distribution or The résale. undersigned private to though sales so made even consents such may prices upon be at sales terms less than such Units were public favorable if sold at The undersigned agrees private sales. sales made foregoing circumstances will under deemed been made in a commercially have reasonable manner. (d) Partnership shall right have hereunder, one successively enforce or more remedies concurrently, any
or such action shall stop or prevent Partnership pursuing from any further hereunder, remedy which it have under the Partner- ship Agreement tion, including, law without limita- right part on Partnership rights waive its hereunder an commence action Promissory Investor's Note Assumption Agreement of Liabilities though Assumption Agreement Liabilities was unsecured. .(e) any time, At time from time request Partnership, undersigned give, will execute, notice, file record financing and/or
-7- *32 statement, instrument, statement, continuation docu- Partnership may agreement or that the consider ment create, continue, perserve, necessary or to desirable granted security or interest validate the perfect may Partnership or consider which the neces- hereunder rights enforce its or desirable or- sary to exercise security respect with to such interest. hereunder (f) and represents agrees undersigned The that purchased own all be free will of the Units and he (other than the of all and encumbrances liens clear agrees security hereby) and that granted interest he security any interest in grant encumber or not or will Units, respect financing with to such statement file prior foregoing, without the permit any of the or Partnership hereby repre- and consent of the written aforesaid) has he not (except that heretofore sents so. done not undersigned The (g) agrees transfer or the Agreement, any undersigned's of assign this or herein, that agrees the and transfer further interest pursuant assignment acquired hereto Units or with only Partnership made be accordance shall applicable and all laws. Agreement (h) undersigned undersigned agrees cancel, Agreement this revoke may or or not terminate made agreement undersigned hereunder and any Agreement death or survive dis- this shall be binding shall ability undersigned executors, heirs, administrators, undersigned'8 assigns. successors (i) representations, Notwithstanding any warranties, agreements made acknowledgements or herein undersigned hereby does undersigned, or by the granted rights any any other manner waive undersigned state securities laws. under federal or agree- Agreement entire (j) constitutes This respect parties with among hereto ment only be amended subject matter hereof parties. writing by all executed (k) enforced, Agreement be governed This shall all respects construed accordance Any proceeding action the State Idaho. or laws party enforce remedy either or commenced Agreement implied granted right shall -8- in the Fifth District Court commenced State County of,,Twin Falls both *33 hereby jurisdic- personam
parties consent such and venue. tion (1) receipt days Within five of after written undersigned request from Partnership, agrees provide such information and to execute and deliver as reasonably necessary such documents to com- any and ply with all laws and ordinaces ta.-whi.ch Partnership subject. is Subscription Payment. of Method 7. under- acknowledging subscription the minimum thirty is signed, Units, (30,000) hereby subscribes for Units thousand payment as follows: down encloses $1.00 per I Units at Unit for aggregate r>- an^ n $_Zj payable investment folloi/s: (tól{ Twenty percent upon delivery execution this Subscription Agreement, per- eighty (80%) cent delivery execution Partners, them, General either an ,Note Investor's Promissory form attached to the Memorandum as Exhibit "C." Contingency. ThT-s Agreement 8. contingent upon purchase commitment of ^the minimum number of Units receipt Partnership loan commitments $3,150,000. amount less aggregate than page balance [The intentionally left blank.]
-9- TYPE OF OWNERSHIP
(Check One) (One signature required) Individual (Both survivorship parties right Tenants Joint sign) must *34 (Both parties sign) Common must Tenants (Both sign) Property parties Community must (Please copy instrument creating include Trust Trust) (Please Corporation include evidence authorization or purchase form of Articles resolutions By-Laws) Incorporation (Please Partnership Partnership Agree- copy of include ment) (registration) print here exact name Please Unit(s) investor desires -10-
SIGNATURE PAGE FOR INDIVIDUAL INVESTORS Husband/Investor Wife/lnvestor Signature Signature Security Number Security
Social Social Number Name Type or Type Print Print Name Address: Residence Residence Address: *35 at: Executed Executed at:
City City State State this_day this_day , 19 .
Mailing Address:
-11- ) OF STATE _ ) ss. ) County _ day me, this On before _ _1984, notary public undersigned, in and state, for county said appeared personally known to me __, name whose subscribed to" person within instrument acknowledged me that he executed same. WHEREOF, I IN WITNESS have my hereunto set hand seal, my official same affixed day year in this cer- above first written. tificate
Notary Public Residing at expires: Commission ) OF STATE _ ) ss. ) County of _ day me, On *36 _ before _, public notary undersigned, state, county said appeared
personally known to me to _¡__, whose name subscribed person the within instrument acknowledged to me that she executed same. WHEREOF, IN WITNESS I have my hereunto set hand seal, my official affixed same day year in this cer- first above written. tificate
Notary Public for_ Residing at_ expires: Commission -12-
SIGNATURE PAGE FOR CORPORATE INVESTORS (please print corporation type) Name
By: ___ agent) authorized (Signature
Title: _____________ No.:
Taxpayer Identification _________ Principal Address Corporate Offices ___________
Attention: at Executed _this_day City Stat<* ) OF STATE _ ) ss. ) County _ *37 day this me, On _ before _, undersigned, notary public county said state, personally appeared , known _ me President corporation _, whose _^ subscribed name within person instrument or who instrument behalf executed corporation said acknowledged corporation me such executed same. WHEREOF, IN WITNESS I have hereunto my set hand seal, my affixed official same day year first above certificate written.
NOTARY PUBLIC FOR Residing at_ Commission expires: -13- PAGE
SIGNATURE PARTNERSHIP INVESTORS FOR type) Partnership (please print Name By: _ _ partner general Signature
By: _ _;_ _i_ (if generalpartner required additional Signature Partnership Agreement) No.: Identification Taxpayer _ Business
Principal _ Address: Address, Mailing different: if
Attention: _this_day Executed at___ State City *38 -14- ) OF STATE _ ) ss. ) County of _ day , 1984, On this me, _ _ before undersigned, notary public state, in and county said , appeared personally known _ me to be one of partnership partners ____, partner one partners who subscribed partnership said instrument, foregoing name ts> acknowledged me that same said he executed partnership name. WHEREOF, WITNESS IN I have hereunto my set hand seal, my official affixed same day year cer- first above tificate written. NOTARY PUBLIC FOR Residing at_ expires:
Commission *39 -15- PAGE
SIGNATURE INVESTORS TRUST FOR type) (please print or Trust Name (please print type) Trustee
Name By: _r——i_ signature Trustee's _ __ Address: Trustee's
Attention: (cid:127) Executed at_ _this_day City State ) OF STATE _ } ss. )
County of _ day year On this _ _, me, notary public undersigned, said before state, appeared personally county known __, name person whose me to be subscribed the within acknowledged to me trustee instrument she executed trustee. same as such WHEREOF, I have hereunto my IN WITNESS set hand seal, day same year my affixed official cer- written. above tificate first
Notary Public for_ Residing at_ expires: Commission -16-
309
JOHNSON, Justice, concurring,
Court listed the elements of the tort of
concurring specially, concurring in
unjustified
intentional and
third-party inter-
result,
dissenting.
ference with valid contractual relations or
expectancies:
business
I
following parts
concur in the
of the
(1) the existence of a valid contractual
opinion:
(Facts),
(Bad
Court’s
I
III
Faith
(2)
relationship
expectancy;
or business
Tort),
(Fiduciary Duty),
(Defamation),
IV
V
knowledge of the relationship
expect-
or
VI(A) (Tortious Interference with Con-
ancy
part
interferor;
(3)
on the
of the
tract),
(Punitive Damages),
VII
and X
inducing
intentional interference
or caus-
(Cross Appeal).
ing a breach or termination of the rela-
I
specially
part
(Foreclosure
concur
II
tionship
expectancy;
(4)
or
resultant
Procedure).
view,
my
In
footnote 6 should
damage
party
relationship
whose
point out the effect of affirmative defenses
expectancy
or
disrupted.
has been
Ill
raised
borrowers and found
will,
defamation,
spite,
fraud, force, or
jury
established,
to have been
but which
coercion,
part
interferor,
on the
of the
counterclaims,
subject
were not the
i.e.:
ingredients,
are not
although
essential
(excuse),
Valley
(excuse),
Bliss
the Erkins
such
bearing
be shown for such
as
(equitable
Walkers
estoppel
quasi-
they may
privi-
have
the defense of
estoppel),
(waiv-
guarantors
the limited
lege.
er, estoppel,
duress).
If
Valley,
Bliss
the
it of
if the
good
deprive
definition of
faith contained in
would
relief
28-1-201(19)
legal
applies.
jury.
I.C.
The borrowers
were tried to a
can
issues
We
§
deny
faith
good
contend
the definition of
thus find no
to
Petitioner
reason
28-2-103(l)(b) applies.
in
precious
contained
I.C.
Steed his most
constitutional
§
(“
faith’ in the case of a merchant
right
by jury.
‘Good
to trial
honesty in fact and
observance
means
the
right
is
by jury
...
the
to a trial
Since
of
commercial
of fair
reasonable
standards
under
of the
“inviolate”
the Constitution
trade.”) This
dealing in the
definition does
Idaho,
party
equity
a
to an
ac-
State of
agree-
apply
security
not
here
the
because
right
jury
tion
a
a
trial on the
has
to
9,
2,
chapter
chapter
by
ment is covered
legal
pursuant
raised
to
causes of action
By
of
terms of
28-1-
the UCC.
the
I.C. §
counterclaim,
compulsory
his
unless
201,
apply un-
the definitions stated there
showing
“imperative
there is a clear
less there is an additional definition con-
circumstances” which would cause
applicable chapter
in the
tained
the UCC.
equity
“irreparable harm while
claimant
in
good
chap-
faith
There is no definition
jury
legal
in
cause.”
affording a
trial
ter 9.
Theatres,
Beacon
Inc.
view,
my
application
In
in this case of
250-51,
P.2d
BOYLE, and SCHROEDER and McKEE, Tern., JJ. Pro concur.
JOHNSON, Justice, concurring and dissenting.
I concur with the decision of the Court petition rehearing deny the of Bliss