Presidents Report

QuinnStufflebeamDear ITLA Members,

I want to report back to the membership on my experience at the American Land Title Federal Conference in Washington D.C. this past May. This conference is designed for the members of the ALTA to gain edu-cation on government affairs that effect our industry and provide an opportunity to meet with our state congressmen to talk about issues that have an impact on our business.

This year was especially important as we talked with our Senators and Representatives about the upcoming changes with the new TRID rule. There were three things that ALTA wanted us to ask our congressmen to act on. First, we asked the CFPB for a hold harmless period of the new TRID rules after the August 1st im-plementation day. Second, we asked them to reach out to Director Cordray to change how the new rules require Title Premiums be disclosed. Finally, we wanted the congressmen’s support of the tax deductions from mortgage interest and the 1031 exchange tax code.

I’m pleased to report that I met with Senator Risch, Senator Crapo’s staff member, and Representative Simpson’s staff member and all three supported our propositions. All of the congressmen either signed letters to Director Cordray or supported a bill to delay enforcement of the TRID rules and clarification of how title rates are disclosed. In addition the Congressmen all supported protecting tax deductions for mort-gage interest and 1031 exchanges. We should be proud to be a part of ALTA and the strength they give our industry in having a voice in our federal government.

Before I wrap up my letter I want to share with you a few more principles from James P. Owen and his book, “Cowboy Ethics”.

Ride for the Brand

Mr. Owen’s seventh principle is entitled, “Ride for the Brand”. This seems pretty straight forward in that you should be loyal to your employer, right? Actually, that is not what riding for the brand is about. “The cowboy’s greatest devotion was to his calling and his way of life…In short, the cowboy gave allegiance and respect where they were deserved and returned.”, Owen.

From this perspective our “Brand” should be the customer. With the shift in regulations it is becoming more and more clear that we need to keep the customers best interest in mind at all times. If we ride for our customers our industry will continue to prove its value to those customers.

Talk Less Say More

“In the old Saturday Matinees, the cowboy was always a man of few words ~ the strong silent type. For whatever reason, cowboys avoided empty verbiage. They were doers, not talkers. And, when they did talk they got straight to the point.” Owen.

We all know that person that says a lot and nothing at the same time. In our fast paced world our fellow employees, bosses, and our customers want to us to quickly get to the point. There is true value in being able to save customer’s time by communicating efficiently to them. Mr. Owen said, “I’ve learned over the years that when it comes to communication with clients, the most important rule is keep it simple keep it true.”

As the dates of TRID implementation speeds towards us we need to take a minute to understand that these new rules are for our customers. We as an industry need to stand up and show how we have and will always be an integral part of real estate transactions. I look forward to the August 1st deadline as an opportunity rather than challenge.

Sincerely,
Quinn Stufflebeam

Pacific NW Convention August 6-8 at the Coeur d’ Alene Resort

CFPB causing you stress? Wondering how the new rules and forms will roll out August 1? Get some relief and learn and discover important feedback on this important matter from national, regional and local perspectives at the Pacific NW Convention August 6-8 at the Coeur d’ Alene Resort. Please see the agenda that follows outlining topics on point presented from your industry leaders. ALTA President elect John Hollenbeck leads the pack of speakers which also includes a panel discussion of lenders and realtors that will be moderated by ALTA. We’ve packaged this together with other timely topics impacting the industry and an economic report covering Idaho, Utah, Montana, Oregon and Washington. We’re topping it off with a business ethics presentation focusing on im-portant characteristics to incorporate into your business and personal life presented by Don Yaeger that is guaran-teed to be thought provoking, tearful and joyous. Also factor in the numerous colleagues you will see from the five states to network with and obtain different viewpoints as well as underwriter representatives and an anticipated 22 plus vendors offering services that help address CFPB issues. And, don’t forget the fantastic scenery, activities and golf that Coeur d’ Alene offers. Don’t miss out on this valuable and important conference to stay a step ahead.

While you’re registering online check out the revamped website. If you notice any changes that need to be made please let us know. Also check out the scrolling pictures showing off our state. We are a bit thin, especially in the mountain and panhandle areas. If you have a picture that does not have proprietary issues regarding publication and use please send in the picture for consideration on our site.

JUDICIARY REPORT

By Bob Rice

Golub v. Kirk-Scott, LTD, 157 Idaho 966, 342 P.3d 893 (2015).

This case involves the priority of a disputed real estate commission that resulted in a judgment in favor of the real estate agent and an unrecorded deed of trust given by the judgment debtor to a related entity. The real estate agent filed a declaratory action for a determination of the priority between the real estate agent’s judgment lien and the earlier executed, but later recorded, deed of trust.

The decision hinges on the interpretation of Idaho’s race notice statute, I.C. § 55-606 which provides:

“Every grant or conveyance of an estate in real property is conclusive against the grantor, also against every one subsequently claiming under him, except a purchaser or encumbrancer, who in good faith, and for a valuable consideration acquires a title or lien by an instrument or valid judgment lien that is first duly recorded. “ (emphasis added).

KHD executed a deed of trust in favor of Kirk-Scott on November 18, 2004. The deed of trust was not recorded at that time. Golub obtained a judgment against KHD on March 11, 2009. KHD filed a Chapter 11 bankruptcy on April 6, 2009. Golub did not record their Judgment prior to KHD filing bankruptcy. On September 17, 2010, while the bankruptcy was pending, Kirk-Scott attempted for the first time to record their deed of trust. Several weeks later, after the bankruptcy was dismissed (without KHD receiving a discharge), Golub recorded their judgment. Kirk-Scott never successfully recorded their deed of trust. It is undisputed that Golub had knowledge of the unrecorded deed of trust in favor of Kirk-Scott.

The issue in the case was whether a judgment lienholder must acquire his/her interest in good faith and for valuable consideration in order to have priority under Section 55-606. The Golub’s argued, and the Supreme Court agreed, that the plain reading of the statute means that one who is conveyed an interest in real property has priority against anyone claiming a subsequent right to the property except either (1) one who, in good faith and for valuable consideration, subsequently acquires an interest in that property by instrument and records that interest before the first interest is recorded, or (2) one who subsequently acquires a lien on that property by valid judgment and recordation of that judgment before the first interest is recorded.

The Supreme Court subsequently held that the requirements of good faith and valuable consideration to not apply to one who ac-quired a lien by means of a valid judgment.

ACI Northwest, Inc. v. Monument Heights, LLC, 157 Idaho 906, 342 P.3d 618 (2015).

This case is a sequel to Parkwest Homes, LLC v Barnson (Parkwest II), 154 Idaho 678, 302 P.3d 18 (2013). In Parkwest II the Su-preme Court held that an action to foreclose a mechanic’s lien on property encumbered by a deed of trust must name the trustee who holds legal title to the property. In this case ACI Northwest challenged the Supreme Court’s holding from Parkwest II. ACI was not successful in that challenge and the Parkwest II holding stands.

However there are a few take a ways from the ACI case that are worth mentioning. First, the Court attempted to limit the effect of ParkWest II to materialmen’s liens. They do this by stating several times that these liens are a creature of statute and that it is the statutes that require the trustee to be a party. The Court stated:

“ParkWest II issued a narrow holding grounded in Idaho Code section 45-510. Contrary to ACI’s and ITLA’s con-cerns, ParkWest II does not categorically expand the duties of a trustee or the nature of a deed of trust. The opin-ion focuses on the lien enforcement procedure provided by Idaho Code section 45-510 and the Court’s interpre-tation of that statute. The discussion of deeds of trust recites only the well-established law. The opinion does not support the proposition that a trustee is a necessary party to all real property litigation nor does it authorize an expansion of the law on actions against a trustee for breach of the trustee’s duties. Although cases cannot be read in a vacuum, this Court in ParkWest II plainly limited its holding to actions to foreclose a mechanic’s lien.”

Second, the Court suggested that new legislation is the best way to correct the holding in Parkwest II. The Court stated:

“Moreover, any change to the statutory procedure for mechanic’s lien enforcement is best suited for the legisla-ture. “The wisdom, justice, policy, or expediency of a statute are questions for the legislature alone.” Berry v. Koehler, 84 Idaho 170, 177, 369 P.2d 1010, 1013 (1962). “If the statute as written is socially or otherwise un-sound, the power to correct it is legislative, not judicial.”…Here, ACI’s and ITLA’s issue with the rule that a trus-tee is a necessary party is exclusively attributable to Idaho Code section 45-510 and the Court’s interpretation of that statute, which relies on precedent established almost one hundred years ago. Moreover, the legislature brought about the transition from a lien to title theory state with the enactment of the Trust Deeds Act in 1957. Long, 105 Idaho at 587, 671 P.2d at 1050. The legislature provided that a trust deed conveys legal title to the property to the trustee. I.C. §§ 45-1502(2)–(3), -1513. Thus, no matter how our case law characterizes the trus-tee’s interest or authority, even if minimal, the trustee still holds legal title under the statutes. Therefore, pursu-ant to Idaho Code section 45-510 and its statutory interpretation, the trustee is a necessary party to an action to foreclose a mechanic’s lien. Any change to this rule is a task for the legislature.”

Some Legislative change has already occurred. In the 2015 Legislative Session S1135aa was passed. This Bill, which will become law on July 1, 2015, amends I.C. §§ 45-507, 510 to exclude trustee’s of deeds of trust from being necessary parties for the filing of mechanic’s liens and the foreclosure of mechanic’s liens.

Greemfield v. Wirm;oger, Idaho Supreme Court Docket No. 41178-2013 (May 12, 2015)

This case involves disputes over the operation of a bed and breakfast, and the height of arborvitaes along a shared boundary, with-in a subdivision. The Idaho Supreme Court affirmed the district court’s determination that neither activity violated the subdivi-sion’s CCRs.

In 1994, the Wurmlingers built a home on their lot in the Park Place Subdivision near the Spokane River in Post Falls, Idaho. They operated a bed and breakfast in the home without incident until 2005, when Plaintiff Greenfield purchased the home immediately to the north. Ms. Greenfield complained that the height of the Wurlingers’ hedges blocked her view of the Spokane River. In 2006, Greenfield’s attorney wrote to the Wurmlingers stating that: 1) their operation of a bed and breakfast violated the Park Place Subdivision CCRs; and 2) the height of their arborvitaes (10’) violated both the CCRs and a city ordinance. The Wurlingers initially cut the hedges to 6’, but then allowed them to grow taller again after the city amended its ordinance to remove the limita-tion on the height of hedges. They continued to operate the bed and breakfast, but discontinued their occasional practice of allow-ing guests to hold weddings or events on the premises.

In 2010, the Wurmlingers returned from vacation to find that 4 to 6 feet had been cut from 10 of their arborvitaes. They later ex-perienced multiple instances of vandalism, including 14 instances of paint being sprayed or splashed on their property over 18 months.

Meanwhile, in September 2010, Greenfield brought an action against the Wurlingers seeking: 1) a declaration that the operation of the bed and breakfast and height of the arborvitaes violated the CCRs, along with an injunction restraining further violations; and 2) damages under theories of nuisance, and intentional or negligent infliction of emotional distress. By counterclaim, the Wurlingers sought damages for negligent or intentional emotional distress, common law trespass and timber trespass. The court and jury found for the Wurlingers, resulting in a judgment against Greenfield in the amount of $169,000.

On appeal, the Idaho Supreme Court affirmed the district court on all counts. In large part (not covered here), the Supreme Court generally refused to disrupt the jury’s findings with regard to the nuisance, trespass, and emotional distress claims. The court’s reasoning regarding the claims for declaratory relief under the CCRs follows.

Regarding the operation of the bed and breakfast, the CCRs limited use to “single family purposes,” but made an exception as fol-lows:

“home occupations of family members, which have no exterior visibility, are not prohibited provided they are conducted totally within the residence, are not open to the public, have no employees and do not generate extra vehicular traffic or street parking.”

Citing the well-established rule that CCRs are to be construed narrowly and without extension by implication, the Court found that the three-room bed and breakfast did not violate the CCRs. The operation had no employees, no exterior sign-age, and was not open to the public (instead taking only advance reservations). The appearance of the home and its use by the guests were consistent with normal residential activities. All of these facts persuaded the Supreme Court that bed and breakfast was not among the activities prohibited by the CCRs.

Regarding the height of the arborvitaes along the shared boundary, the CCRs provided that:

“No lot, lots or parcels, shall ever be enclosed or fenced by any fence or structure exceeding five (5) feet in height.”

The Supreme Court agreed with the District Court’s rejection of Greenfield’s argument that the arborvitaes constituted a “fence” under the CCRs. Fence height restrictions were set forth in section of the CCRs entitled “Building Restrictions,” and there was nothing indicating that the word “fence” included foliage. As with the use restriction, the Idaho Supreme Court refused to find by implication any prohibitions not expressly stated in the CCRs

Newsletter June 2015 Final – DOWNLOAD PDF