EnVision Real Estate School and Consulting Inc.

Case Law & Hot Topics

Rewind E1188

Janis and Chris Mooney

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ROARK V. BENTLEY, DOCKET (FEBRUARY

27, 2004) This case involves a boundary dispute between adjoining property owners Dale and Terry Bentley (Bentleys) who acquired their property in Ada County in 1996 (Bentley Farm) and Raymond Roark, who purchased property which lies directly to the north of the Bentley Farm, on February 28, 1973 (Roark property). In 1967, John Bentley, Dale Bentley's

predecessor in interest, improved the Bentley Farm by constructing the Creason Lateral which was located several feet south of the original property line adjoining the Roark property. That lateral was used as the boundary line for 29 years. At issue is the ownership of the 24, 583 square foot strip of property (Disputed Strip) which lies between the Creason Lateral and the Roark property. In 1996, Roark subdivided his property and the Ada County assessor designated the Roark property as "Lot 18, Blk 1" for tax purposes. From that time forward, Roark paid taxes based upon this lot and block number description. On April 5, 2002, Roark filed a complaint to quiet title to the Disputed Strip, asserting adverse possession under both an oral and written claim (I.C. §§ 5-290 and 210) claiming that he had actually and continually occupied the land under a claim of right for more than five years. He also alleged that the Creason Lateral physically separated the Disputed Strip from the Bentleys property and therefore operated as a substantial enclosure. Of particular interest in this case is that Roark claimed that he paid all taxes on the Disputed Strip since 1973 and provided the trial court with tax records demonstrating that he at least had paid taxes on the property described as Lot 18 Block 1 since 1996. At a summary judgment hearing the Bentleys conceded Roark satisfied all the elements of adverse possession except for the tax payment requirement. The trial court granted summary judgment in favor of Roark, finding he had satisfied the tax payment requirement by paying taxes based on lot and block number, as the Roark property was then described. The title was quieted in Roark October 14, 2002. The Bentleys, in a motion to reconsider, argued that the Bentley Farm and the Roark property are not assessed by lot number for tax purposes; rather they are assessed according to a township and range description which was contained in the original deeds to each property. The Bentleys argued that this distinction is important because, for tracts of land which border on the quarter section or half section, the Ada County assessor assesses the tract of land for taxes up to that line. The trial court denied the motion for reconsideration and the Bentleys appeal. In finding that the district court did not err in granting summary judgment in favor of Roark, the Supreme Court set out the elements of adverse possession which

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include the requirement for an actual payment of taxes assessed with regard to the disputed property. The Court went on to say however that the Supreme Court in the past had fashioned several exceptions to the general rule which, when applied, have the effect of satisfying the tax requirement. They described the "lot number" exception to the tax requirement as follows: [I]n the case of boundary disputes between contiguous landowners, where one landowner can establish continuous open, notorious and hostile possession of an adjoining strip of his neighbor's land, and taxes are assessed by lot number or by government survey designation, rather than by metes and bounds description, payment of the taxes on the lot within which the disputed tract is enclosed satisfies the tax payment requirement of the statute. The reason behind the lot number exception is that when the taxes are assessed according to some generic description, it is impossible to determine from the tax assessment record the precise quantum of property being assessed. In addition, when both the record owner and the adverse occupant paid taxes on a subject parcel during the period of adverse possession, the adverse possessor prevails, because the doctrine of adverse possession focuses primarily on the conduct and actions of the adverse claimant. The Court stated that the exceptions to the requirement for payment of taxes stand for the proposition that unless the exact quantity of land taxed is made clear by a metes and bounds description, or there is evidence the adverse possessor did not pay any taxes on the property, the presumption is that the adverse possessor paid taxes and that element of the statute is satisfied. They went on to say that the issue in this particular case is whether the lot number exception applies in a situation where the adverse possessor's land is described by a lot and block description for tax purposes, but the adjoining owner's land is described by a township and range description for tax purposes, and both parties claim to have paid taxes on the disputed parcel.

WAKELAM V. HAGOOD (OCTOBER 28, 2011)

Wakelam and Ressler were high bidders on real property owned by Hagood and

offered without reserve at an “absolute” auction. When presented with the

purchase and sale agreements, Hagood refused to sign, claiming the price was

much lower than he intended. Wakelam and Ressler filed suit to enforce the

auction sale. The district court held the sale unenforceable because it failed to

satisfy the statute of frauds’ requirement that agreements for the sale of real

estate be in writing.

The Supreme Court reversed. The Court began by holding that auction sales are

not exempted from the statute of frauds, and failure to comply with the writing

requirement renders the sales agreement unenforceable. The Court went on to

hold the writing requirement in these sales had been satisfied. A writing must

contain all necessary “conditions, terms and descriptions” to comply with the

statute of frauds, but that does not mean every term must be specifically set forth

in the writing itself. It is sufficient that the person to be charged agrees to a Page 3

“definite method for determining a particular provision, such as the purchase

price.” In this case, Hagood signed a Representation Agreement containing all the

essential terms of a sales contract and agreeing the identity of the purchaser and

sales price would be determined by a definite method -- the highest bid at an

absolute auction. Wakelam and Ressler were the high bidders and both signed

Purchase and Sale Agreements containing the essential terms. Thus, an

enforceable sale agreement came into effect between the parties, in satisfaction

of the statute of frauds.

CONCLUSION

Auction sales are subject to the statute of frauds requirement that, to be

enforceable, the conditions, material terms, and property description be in

writing. If a property owner makes a written offer to sell to the high bidder at an

auction, and provided the offer contains all other essential terms, he will be bound

to sell the property to the high bidder whose bid is accepted at the auction.

FIRST FEDERAL SAVINGS BANK OF TWIN

FALLS V. RIEDESEL ENGINEERING, INC. (SEPTEMBER 14, 2012)

Riedesel Engineering, Inc. (Claimant) was hired by and performed engineering

services for a developer of a subdivision in Twin Falls County. Claimant also filed a

mechanics lien against the property. Claimant’s lien had a priority date earlier than

Lender’s. The developer then granted First Federal Savings Bank (Lender)

mortgages in the property to secure promissory notes, which Lender duly

recorded. When the developer went out of business, Lender brought an action to

foreclose, naming the developer and Claimant. Claimant counterclaimed, asserting

that its mechanics lien had priority. The district court found in favor of the

Claimant. Lender appealed.

The Supreme Court reversed, holding that the Claimant’s lien was invalid because

it was not properly “verified” in accordance with the requirements of the

mechanic’s lien statute. To be valid and enforceable, a mechanic’s lien must

comply with the requirement of I.C. § 4507(4) that the claim of lien be “verified by

the oath of the claimant, his agent or attorney, to the effect that the affiant

believes the same to be just.” This requirement is met by a “formal declaration”

made in the presence of an authorized officer, such a as a notary. Here, the notary

block recited only that the notary had “witnessed” the claimant’s signature; it did

not state that the claimant “was sworn before” the notary. The Court held that

Claimant’s recital at the beginning of the claim, “I [Claimant], being first duly

sworn, depose and say . . . ” failed to substantially comply with the oath

requirement, because it did not state that Claimant was sworn by a person

authorized to administer oaths. Absent a statement that the Claimant was “sworn”

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and “by a person authorized to administer oaths,” the lien claim failed to satisfy

statute’s requirements, and was invalid.

CONCLUSION

The Court requires strict compliance with the requirement that the lien claim

demonstrate the claimant was “sworn by a person authorized to administer

oaths.” Many notary blocks do contain sufficient verbiage, such as “subscribed and

sworn to by me this __ day. . . .” However, if the notary purports only to witness

the claimant’s signature, the lien claim will be deemed invalid under this case.

Also, it is not merely the recital that is required; the notary is actually required to

take the oath. Thus, if the claim is signed on a date other than the date the claim is

notarized (which would demonstrate the oath was not given “in the presence of”

the official), the lien claim could be held to be invalid.

LEXINGTON HEIGHTS DEVELOPMENT LLC

V. CRANDLEMIRE (MAY 27, 2004) Roger and Elizabeth Crandlemire (the Crandlemires) owned a 95-acre parcel of real property, and on February 17, 1999, they entered into a contract to sell approximately ninety acres of that property to Lexington Heights Development, LLC, (Lexington Heights). The contract described the property being sold as “the real property situated in Ada County, Idaho located at 1400 West Floating Feather

Road, consisting of approximately ninety (90) acres ․, however excluding the residential dwelling (which will include no more than five acres) and improvements identified below (herein called ‘Premises').” The contract provided that the “the precise size, location, dimensions and configuration” of the five-acre parcel excluded from the sale would be determined as follows: A precise legal description of the Premises will be prepared as a result of an ALTA survey to be obtained by Seller. It is understood and agreed that Seller may sell to a third party the existing residential dwelling situated on the Premises together with no more than five (5) acres immediately surrounding the proposed residential development (which five (5) acres will include the existing tennis court, volleyball court, and swimming pool), the precise size, location, dimensions and configuration of which shall be mutually determined by Seller and Buyer. It is further understood and agreed that within the said excluded five (5) acres, Seller may make available to United Water Corporation a site for a water storage tank provided; however, that all negotiations respecting the location, design, construction and landscaping of the said water storage tank shall be conducted by both parties and any agreement thereon must be approved by both parties. Lexington Heights was purchasing the property for development, and the purchase price was to be $20,000 per acre if the City of Eagle approved development with a gross density of fewer than two residential dwelling units per acre and $22,500 per acre if the City approved a higher gross density. Lexington Heights paid $300,000 in earnest money, and the Crandlemires executed a deed of trust on the entire

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property to secure repayment of the earnest money in the event that certain contingencies did not occur. One of those contingencies was that within two years Lexington Heights would receive approval from all necessary governmental agencies permitting development of the property at a density of not less than one residential dwelling per two acres. Under the zoning in existence at the time, residential lots had to be five acres or larger in size. The property was surveyed on May 4 and 5, 1999, and three legal descriptions were prepared:  one for the entire property, one for 4.54 acres to be retained by the Crandlemires, and one for 0.46 acres to be conveyed to United Water Corporation. Mr. Crandlemire personally participated in identifying for the surveyor the five acres he wanted excluded from the sale. In early 2000, the Crandlemires desired to explore the possibility of selling the five acres they would retain to a third party, who would develop it as a retirement community in connection with Lexington Heights's proposed development. Because exploration of that concept would require that the development be delayed, the parties on October 30, 2000, executed a second real estate contract (the Agreement). The Agreement provided that it “supersedes all prior agreements between the parties hereto, whether in writing or otherwise; and any such prior agreement shall have no force or effect upon the date of execution of this Agreement.” The Agreement set the closing on December 31, 2001. Even though legal descriptions had been prepared for the entire property, the property to be retained by the Crandlemires, and the property to be conveyed to United Water Corporation, the Agreement did not use or refer to those legal descriptions to describe the property to be sold. It simply repeated the property description contained in the first contract, including the provision setting forth how the “the precise size, location, dimensions and configuration” of the five-acre parcel excluded from the sale would be determined. In May 2001, the third party eventually decided not to pursue development of the retirement community, and the respondent Blake Mayes (Mayes) investigated purchasing the five acres from the Crandlemires and an additional two acres from Lexington Heights, once it acquired the ninety acres. In August 2001, Mayes informed Lexington Heights that he would like to purchase ten to seventeen additional acres, but Lexington Heights rejected that proposal. In September 2001, Lexington Heights informed Mr. Crandlemire that its project had been delayed long enough and that it wanted to proceed with the closing. Mr. Crandlemire responded by proposing that the price for the property be increased by $200,000, which Lexington Heights refused to do. The Crandlemires refused to close the sale to Lexington Heights. On January 17, 2002, they sold forty acres of the property to Mayes. On February 21, 2002, Lexington Heights filed this lawsuit against the Crandlemires and Mayes alleging six causes of action. It sought specific performance of the Agreement;  damages for breach of the Agreement;  damages for fraud and deception based upon the sale of the forty acres to Mayes;  damages for negligence based upon Mayes' conduct in removing signs giving notice of a public hearing to be held on February 19, 2002, in connection with Lexington Heights's proposed development of the property;  damages for intentional interference with prospective economic advantage based upon the sale of the forty acres to Mayes;  and an order expunging from the public records the deed to Mayes and holding

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that Mayes and the Crandlemires are estopped from asserting any claim to the ninety acres. The Crandlemires answered and filed a counterclaim seeking damages for breach of the Agreement and slander of title, forfeiture of the earnest money, and an order expunging from the public records the deed of trust and the recorded Agreement. Mayes also answered and filed a counterclaim seeking damages for slander of title and an order expunging the deed of trust and the recorded Agreement. On January 13, 2003, the Crandlemires moved to dismiss the complaint on the grounds that the Agreement was not enforceable because it lacked mutuality of remedy and/or obligations and because material terms were uncertain, incomplete, and ambiguous. The district court treated these motions as motions for summary judgment. On January 27, 2003, it issued a memorandum decision granting the motions on the grounds that the Agreement was unenforceable because it did not contain a sufficient legal description of the property being sold and because it lacked mutuality of obligation due to the contingencies in the Agreement. The district court granted the motions by memorandum decision entered on January 27, 2003. On February 10, 2003, the district court entered judgment dismissing the complaint. Lexington Heights timely filed a motion for reconsideration, which the district court denied by memorandum decision entered on March 16, 2003. Lexington Heights then timely appealed. CONCLUSION The Supreme Court affirmed the partial summary judgment of the district court.

STAFFORD V. WEAVER (MAY 17, 2001) In 1994, Frank Stafford, Sr. (“Stafford”) purchased a roughly triangular-shaped piece of property located in Canyon County. The property is bounded on the north by Laster Lane, owned by Canyon County;  on the east by an approximately four hundred foot long private lane leading to a 4.26 acre lot, owned by Weaver;  and along the southwest hypotenuse by a 5.25 acre

parcel referred to as Lot 16, also owned by Weaver. Driving along Laster Lane, one would first pass Lot 16, then Stafford's property at 4912 Laster Lane, then the private lane at 4920 Laster Lane, and then Dorothy Bright's (“Bright”) property at 4918 Laster Lane.

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In 1995, Stafford and Weaver hired and jointly paid for Greg Skinner to survey their property boundaries. Based upon Skinner's survey, fences were built along either side of Weaver's private lane and Weaver improved the lane by adding gravel and grading a road up to the fence. In May 1997, Stafford hired John T. Eddy to perform a new survey of the property. According to the Eddy survey, Skinner had placed the boundary between Stafford's property and Weaver's lane ten feet too far west. Thus, the fence and Weaver's lane were encroaching on Stafford's property. On March 20, 1998, Weaver sued Stafford for trespassing on Lot 16. A trial was held on May 27-29, 1998. In order to determine whether Stafford had trespassed, the trial court had to determine the actual boundary between Lot 16 and Stafford's property. In Weaver v. Stafford, 134 Idaho 691, 8 P.3d 1234 (2000), the Supreme Court upheld the trial court's determination of the location of the southwest boundary line. On September 9, 1998, one month before the trial court issued its decision in Weaver v. Stafford, Stafford filed this action. Weaver filed a Motion to Dismiss Stafford's complaint, which concerned the location of the southwest boundary. The district judge granted the motion. The district judge denied Stafford's request for a Rule 54(b) certification of the order granting Weaver's motion to dismiss. Weaver then filed a motion for summary judgment on Count I of the complaint. On September 15, 1999, the district judge issued his order granting summary judgment to Weaver. The district judge found that the boundary between Stafford's property and Weaver's private lane had been established by the agreement of the parties. CONCLUSION The district court properly granted summary judgment for Weaver.

REID V. DUZET (JULY 1, 2004) In May 1979, Wilfred Vedder and Michael Caldero negotiated an oral agreement transferring a portion of Vedder's property to Caldero in exchange for a well and water rights owned by Caldero. Because of the odd shape of the property transferred to Caldero, this portion of land is referred to as the “top hat” property. In contemplation of the land transfer, Vedder and Caldero visually marked the agreed boundary of the property to be exchanged with rock piles and wooden stakes. When the legal description of the top hat property was drafted by Vedder, the description in the deed did not match the boundaries as agreed to by Vedder and Caldero, and a large portion of the property visually marked as belonging to Caldero was described in the deed as belonging to Vedder. Neither party had a survey performed to ensure the property description matched the agreed boundaries. Thereafter, the Vedder property passed to Janice Magnusen and then to Reid. Caldero sold the top hat property and, after several intervening owners, it ended up in the hands of the Duzets. After she purchased the property in 1999, Reid had a survey performed and at that time discovered the discrepancy between the deed description and the boundaries as agreed upon by Vedder and Caldero. Reid subsequently brought this action

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against the Duzets to quiet title to the property in question, according to the legal description set forth in her deed. After a court trial, the district judge ultimately entered amended findings of fact and an amended judgment, determining that Vedder and Caldero had established a definite boundary through landmarks visible to all parties and therefore, a boundary by agreement was created. Thus, the landmarks as established by Vedder and Caldero controlled and Reid was not entitled to quiet title to the land in question. CONCLUSION We uphold the district judge's decision declining to quiet title in Reid and legally establishing the boundaries of the Duzets' property according to the original agreement between Vedder and Caldero as determined by the amended findings and conclusions. The orally agreed upon boundaries between Vedder and Caldero prevail over the subsequent mistaken deed description, where Reid had notice that the disputed portion of the top hat property was claimed by the Duzets at the time she purchased it.

THORN SPRINGS V. SMITH (JULY 2, 2002)

Clarence Smith owned a 600 acre ranch which he transferred in 1976 to his children: Rosemary, Bernadine, Susan, Dan and Deryl. The siblings did not get along; however, from 1976 to 1990 the ranch was operated as a partnership. The district court found that there had been discussions between the siblings and their father that each of the children would be entitled to a 5 acre parcel

from the ranch. The discussions were never put in writing. In 1990, Susan sold her interest in the ranch and any claim to a 5 acre parcel to her siblings who incorporated as Thorn Springs Ranch, Inc. (Thorn Springs). Deryl then lived on the ranch on 5 acres, known as the homestead, for approximately 15 years. In 1998 Deryl approached Dan wanting to sell his interest in the corporation. Deryl began discussions with the corporation whose spokesperson was Glen (Bernadine’s husband). Glen and Deryl discussed the possible sale by Deryl of his interest in the corporation to Thorn Springs for a sale price between $150,000 and $200,000 as well as a possible reservation of 5 acres for Deryl. The district court found that Deryl repeatedly told Glen that he wanted to keep the 5 acres he had lived on for the previous 15 years. In May of 1998 Thorn Springs sent Deryl a written proposal offering him $150,000 for payment of “all other considerations”. Deryl signed the May 7th proposal.

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However, Glen and Deryl still continued to negotiate the terms of the sale. On May 21st, Deryl sent Glen a “drop dead” letter telling him that he refused to sell his interest for $150,000 and give up the 5 acres upon which he had lived for 15 years. He also drew a detailed sketch of the 5 acres he wanted, acknowledging that, as drawn, the parcel might be less than 5 acres. That same day Deryl and Glen had another telephone conversation. The district court found that Deryl reiterated that he either wanted his 5 acres and the $150,000 or he wanted an additional $60,000, which represented the fair market value of the 5 acres. Glen had his attorney draw up the final agreement which was signed by Deryl and Thorn Springs on June 18, 1998. The problem was that the May 7th proposal and the June 18th agreement differed from each other in their terms. Prior to signing the June 18th agreement Deryl reviewed a survey dated May 28th which showed three 5 acre parcels. Parcel 2 substantially matched the sketch he had sent to Glen and represented the homestead upon which Deryl had lived for 15 years. Believing that Glen had relayed his demands to the other siblings and that he was being given his parcel (5 acres) plus the $150,000 Deryl signed the June 18

th agreement

which only provided for payment of $150,000 but no 5 acres. On September 29, 1998 Thorn Springs filed a complaint seeking the ejection of Deryl from the homestead property. Deryl refused to leave, claiming the oral agreement between he and Glen had modified the June 18th agreement. The alleged modification allowed Deryl to keep his 5 acres in exchange for his signature on the June 18

th

agreement. The district court found that an oral agreement between Deryl and Glen had modified the terms of the May 7th proposal providing that Deryl would receive his 5 acre parcel in exchange for his signature on the June 18th agreement. Further, the court found that the statute of frauds did not preclude the oral agreement because Deryl had partially performed by signing the June 18th agreement. The court, in addition, granted Deryl the remedy of specific performance awarding him his 5 acre parcel. On appeal Thorn Springs alleged that the case lacked clear and convincing evidence required to establish a specifically enforceable oral contract. In that regard the court said that to show a complete definite and certain oral contract, the material terms must identify the parties, the subject matter, the price and a reasonably clear property description. Further with regard to the remedy of specific performance the court said “a greater degree of certainty” is required than is needed to sustain a judgment for damages at law. On the statute of frauds issue the court cited Idaho Code § 9503 as preventing oral contracts for the sale of land. However, they said, an exception to the statute of frauds applies if a party can prove the existence of an enforceable contract with clear and convincing evidence of part performance. Even though there was conflicting evidence so that the case really turned on the creditability of Deryl or Glen, the evidence, according to the Supreme Court, established that the five (5) siblings were always told that they would receive a 5 acre parcel from the ranch. The record was replete with testimony that Deryl demanded either his 5 acres or $60,000, and that he would not have signed the June 18th agreement without his demand being met. Glen and Deryl had many conversations and exchanged correspondence regarding the proposed sale. Deryl’s part performance in executing the June 18th agreement was the result of the totality of the circumstances surrounding the proposed sale. The basic facts of the case supported, in the Supreme Court’s opinion, the district court’s findings. Deryl and Glen negotiated a proposed sale that was embodied in the May 7th proposal. Both men continued to negotiate the terms of the May 7th proposal. Deryl reasonably relied on Glen to convey his demands to the other shareholders. Following his demand of his 5 acres or $60,000, which was accompanied by a detailed sketch of the property. Deryl did not base the oral agreement on the survey; instead, he

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used it to confirm that parcel 2, which he felt matched the description in his sketch.

CONCLUSION

The Supreme Court affirmed the district court’s ruling.

FRENCH V. LANG/KNAPP (FEBRUARY 26, 2001)

On March 25, 1960, Albert Lang (now deceased) and Minnie Lang (Langs) and Edward Waggoner and Laura Waggoner (Waggoners) entered into an agreement that granted the Waggoners an easement over the Langs' land in order to give them access to the Spokane River. The easement provided in relevant part: NOW, THEREFORE, in consideration of the exchange of mutual promises between the grantors [Waggoners] and the grantees [Langs], the grantors do hereby grant an easement to the grantees, their heirs and assigns, for road purposes for ingress and egress, over a strip of land 14 feet in width across the following described real property: SE1/414 of NE1/414 and E1/212 of SE1/414 of Section Eight (8), Township 50, North Range 5, W.B.M. As partial consideration for the aforesaid easement, the grantees [Langs] grant the grantors [Waggoners] and their immediate families the right to use the road across the grantees' property described above, to reach the Spokane River for the purpose of fishing on the banks thereof. In 1984 Edwin and Darlene Knapp (Knapps), the successors in interest to the Waggoners, executed an agreement with the Langs which relocated the Langs' road easement but which left the other terms of the 1960 agreement unchanged. Darlene Knapp is the daughter of the Waggoners and had acquired the property from her parents. Darlene Knapp is therefore the “immediate family” of the Waggoners. Minnie Lang and her son currently own the Lang property as joint tenants with rights of survivorship. On August 23, 1993, the Knapps entered into a one-year real estate listing agreement with Pete Montemayer, a real estate agent with Jack Hatch Realty. In November of 1993 Keith and Leah Oxford (Oxfords) offered to purchase the property. Frank Sbicca, who was also a real estate agent for Jack Hatch Realty, represented the Oxfords. This offer was contingent on the Oxfords being able to sell their own property. The Oxfords were unable to close because they were having trouble selling their property and obtaining financing.

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At some point French became interested in purchasing the property for purposes of a residential development. On April 29, 1994, Montemayer informed Mary Ann Holmes, a real estate agent who represented French and Lawrence J. King (King is not part of this appeal but was a plaintiff in the proceedings below), that the Oxfords would be unable to close on the property. Holmes informed French that the Oxfords could not close. French visited the property and made an offer to purchase. The Knapps were not willing to release the Oxfords from the sales agreement and were not willing to accept French's offer. French then agreed to a three-way transaction in which the Oxfords would purchase the property from the Knapps in exchange for a warranty deed and would immediately quitclaim the property to French. Montemayer was to receive a commission as the listing agent, Sbicca was to receive no commission, and Holmes would receive a commission as the selling agent. This transaction was closed on May 3, 1994. At the time of the transaction between the Oxfords and French, the Knapps had already left the title company where the transaction occurred. French received a copy of the property title report and copies of the 1960 and 1984 easement agreement at the closing. She reviewed the documents with Holmes. According to French, Montemayer and Sbicca made representations that she would have access to the Spokane River by virtue of the easement agreements. The Property Condition Report, completed by the Knapps, shows an “X” placed in the “yes” column to the question “Does the property have a recorded easement or access to a county or public road?” French believed that she had access to the Spokane River from her property. In April of 1996 French visited the property and discovered a gate and several ‘No Trespassing’ signs that restricted her access to the Spokane River. The Langs had placed these signs on the property. French filed a complaint seeking a declaratory judgment that she held an appurtenant easement over the Langs' property, and alleged claims for breach of the easement, fraud, unjust enrichment, civil conspiracy to defraud, violation of the Idaho Consumer Protection Act, and violation of the “statute of frauds.” The Langs and the realtors moved for summary judgment. The district court ultimately granted summary judgment in favor of all defendants on all issues. French appeals these rulings. The Supreme Court agreed with the district court and stated: French has drawn

these people into litigation attempting to expand an easement in gross, a personal

easement of limited scope for family members, into an appurtenant easement to a

planned subdivision for numerous strangers. French's claims are unreasonable,

lacking in foundation and frivolous.

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"Polybutylene" is a trade/brand name of pipe. o Widely used in residential/commercial properties in `70s—

mid 80s.

Polybutylene pipe is subject to deterioration and leaks caused by chlorine and chemicals in drinking water.

o The problems usually first occur with Polybutylene fittings. o The pipe ages much more slowly than the plastic fittings,

however it is a potential "time bomb."

Slow-leak failure of the pipe or fittings provides moisture source for rot, mold and related water damage

Cox v. Shell Oil, et al.: National class action lawsuit settled in November 1995. One billion dollar settlement fund to finance repair/replacement of poly pipes.

Interior - Polybutylene used inside your home can be found near the water heater, running across the ceiling in unfinished basements, and coming out of the walls to feed sinks and toilets.

o Warning: In some regions of the country plumbers used copper "stub outs" where the pipe exits a wall to feed a fixture, so seeing copper here does not mean that you do not have poly.

Usually gray colored and flexible with "plastic" or copper fittings inserted into pipe and held with compression bands.

1. How to Tell if You Have Polybutylene Piping?

Exterior - Polybutylene underground water mains are usually blue, but may be gray or black (do not confuse black poly with polyethylene pipe). It is usually 1/2" or 1" in diameter, and it may be found entering your home through the basement wall or floor, concrete slab or coming up through your crawlspace; frequently it enters the home near the water heater. Your main shutoff valve is attached to the end of the water main. Also, you should check at the water meter that is located at the street, near the city water main. It is wise to check at both ends of the pipe because sometimes copper pipe enters the home, and poly pipe is at the water meter.

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3. Is the presence of Polybutylene Pipe a material fact requiring disclosure?

In some jurisdictions: No, unless...there is indication that the particular pipes involved have failed or are likely to fail in the future. (e.g., North Carolina)

In Idaho: Yes. o Idaho Code §54-2083(1)—"Adverse material fact" means a

fact that would significantly affect the desirability or value of the property to a reasonable person or which establishes a reasonable belief that a party to the transaction is not able to or does not intend to complete that party's obligations under a real estate contract.

o Idaho Code §54-2086—Duties to a Customer...(d) To disclose to the buyer/customer all adverse material facts actually known or which reasonably should have been known by the licensee.

o Idaho Code §54-2087—Duties to a Client...(a) Disclosing to the client all adverse material facts actually known or which reasonably should have been known by the licensee.

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FHA Mortgages must now use HUD recommended Radon testing recommendation form.

Form reiterates EPA and U.S. Surgeon General testing recommendation.

Buyers must execute the form before or with the sales contract.

Call EPA: (800) SOS-Radon hotline.

View: hud_mortgage-ltr.pdf (77KB adobe acrobat pdf file)

Form: hudform_92564-cn.pdf (83 KB adobe acrobat pdf file)

Radon brochure—The Idaho Indoor Environment Program (IMP), Division of Health, announces the availability of a new point of sale brochure for licensees and their clients entitled, "Dealing with Radon in Real Estate Transactions". The key message is if you like a home, buy it-- radon can be reduced either before or after the sale. The brochure was designed with input from practicing Realtors as well as scientists and technicians. Free copies are available by calling 1-800-445-8647.

Radon Video—A 20-minute video has also been developed for buyers that have identified a concern and want good, detailed information. The video covers why radon is a concern in Idaho and elsewhere, as well as how it is reliably measured, with detailed footage on mitigation techniques for both new and existing homes. Limited copies of the video are available by calling 1-800-445-8647.

A. Entrusted Money & Property vs. Non-Entrusted

There were conflicting views under Idaho Code § 54-2041

whether money placed in the possession of the broker that was

to be delivered to a third party who would be ultimately

responsible for the safekeeping of the money or property should

be considered “entrusted property.” Entrusted Property: any and money or property placed in the

broker’s possession, except where the parties to the

transaction have instructed the broker in writing to deliver

the money or property to a third party and have no further

control over the safekeeping or disposition of the money or

property.

See Guideline 15

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I.C. § 54-2041(1) now reads;

(1) A licensed Idaho real estate broker shall be responsible for all

moneys or property entrusted to that broker or to any licensee

representing the broker. For purposes of this section, moneys or

property shall not be considered entrusted to the broker or to any

licensee representing the broker when the parties to the transaction

have instructed the broker or its licensees, in writing, to transfer such

moneys or property to a third party, including, but not limited to, a

title, an escrow or a trust company if upon transfer, the broker or its

licensees have no right to exercise control over the safekeeping or

disposition of said moneys or property.

Instructions to hand money over to 3rd party must be in

writing.

Subsection (1) now recognized Non-Entrusted Money. This

subsection is intended to cover those situations where the

parties to the transaction intend for the broker to act like a

courier service. o Example: buyer and seller agree that a third party

other than the broker will hold the earnest money.

Buyer visits broker’s office and instructs broker to

deliver earnest money check to the third party. Does

the broker first have to create a trust account and

deposit the check in that account prior to delivering

the check to the third party?

The broker is NOT responsible for establishing a trust

account and depositing money into the broker’s real estate

trust account where the money is not entrusted to the broker

(4) A licensed real estate broker shall not be responsible for

depositing moneys into the broker’s real estate trust account, nor

responsible for creating a real estate trust account with an approved

depository as set forth in section 54-2042, Idaho Code, when the

parties to the transaction have instructed the broker or its licensees,

in writing, to transfer such moneys to a third party, including, but

not limited to, a title, an escrow or a trust company. Provided

however, a broker shall be responsible for maintaining a record of

the time and date that said moneys or property was transferred from

the broker to a third party. I.C. § 54-2041(4)

Broker Duties for handling Non-Entrusted Money o Deliver money per written instructions of the parties o Must maintain a record of the time and date the money

or property was transferred. Page 17

Broker is still responsible for creating and depositing money

into the broker’s real estate trust account when money is

“Entrusted” to the broker.

B. When Does Broker Have To Deposit Entrusted Money Into

Trust Account?

Current statute § 54-2041(2): “Immediately upon

receipt, the broker shall deposit entrusted moneys in a

neutral, qualified trust account, and shall properly care

for any entrusted property. Practical Problem: many contracts say earnest money

is to be deposited upon acceptance. However, party

paying the earnest money has already written a check

to the broker for safekeeping. Common practice was to paper clip the check in the

file until acceptance. Possible violation? According to

the letter of the law yes.

I.C. § 54-2041(2) (effective July 1 2009) now reads:

(2) Unless otherwise instructed by the parties in writing to deposit

entrusted moneys on a later day, immediately upon receipt, the

broker shall deposit entrusted moneys in a neutral, qualified trust

fund account pursuant to section 54-2042, Idaho Code, and shall

properly care for any entrusted property.

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WALKER V. BOOZER (JULY 13, 2004)

During the 1960's, the road in question, Ruud Road, was an unimproved mountain road consisting of two tire tracks. Over the years, Ruud Road was improved. By the mid-eighties, Ruud Road had been graded, graveled and was approximately eleven to twelve feet wide at most locations. In the mid-eighties, the Bonneville County planning and zoning administrator required some of the property that Ruud Road traversed be platted into subdivisions which complied

with the county zoning and subdivision ordinances. The property was platted into several subdivisions, including the Ramey-Keller, Quaker Haven Estates, and the Ruud Subdivisions. In the early to mid-nineties, as an accommodation to the Quaker Haven Subdivision residents, the Wiemers, who owned Lot 49 of the Ruud Subdivision, cut approximately three feet into the sloping bank on their property right before the turnoff on Ruud Road onto Quaker Haven Road, thereby allowing people to access Quaker Haven Road from the uphill direction on Ruud Road. Jonathan and Amy Walker (Walkers) became interested in purchasing a lot in the Quaker Haven Subdivision in 1994. Prior to purchasing the lot, Mr. Walker measured the width of Ruud Road approximately six feet downhill from the concrete post at the intersection of Ruud Road and Quaker Haven Road. The northwest edge of the traveled surface of Ruud Road was twenty-two feet northwest of the Ramey-Keller Subdivision at that location. The useable width of the surface of Ruud Road at that point was approximately seventeen and a quarter feet. On November 7, 1994, Lot 4, Block 2, of the Quaker Haven Estates Subdivision was deeded to the Walkers. Kenneth and Lisa Boozer (Boozers) purchased Lot 49 of the Ruud Subdivision from the Wiemers in April of 2001, and during the late summer of 2001 the Boozers placed rocks along Ruud Road near its intersection with Quaker Haven Road. The rocks narrowed Ruud Road so that the northwest edge of the traveled surface was approximately sixteen and a quarter feet from the Ramey-Keller Subdivision. Placement of the rocks limited the useable width of Ruud Road to approximately eleven or twelve feet and made reasonable access to Quaker Haven Road while traveling uphill on Ruud Road impossible. In November of 2001, the Boozers replaced the rocks with concrete barriers. The concrete barriers continued to limit the width of the useable roadway surface to approximately eleven or twelve feet. The Boozers also placed a barrier across their driveway, which prohibited people from accessing Quaker Haven Road by turning their cars around in the Boozers' driveway and approaching Quaker Haven Road from the downhill direction.

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The Plaintiffs/Respondents Jonathan Walker, et al. (Quaker Haven Owners), owners of property in the Quaker Haven Estates Subdivision, brought suit on November 29, 2001, to define and fix the width of a deeded road easement for ingress and egress across property owned by the Defendants/Appellants, the Boozers, in the adjacent Ruud Subdivision. The Boozers counterclaimed for an order enjoining the Quaker Haven Owners from widening the road easement beyond the original grant, and for contribution from the Quaker Haven Owners to maintain the easement. In their Answer and Counterclaim, the Boozers admitted that a deeded easement existed at the location in question. On December 6, 2001, the Quaker Haven Owners filed a Motion For Preliminary Injunction seeking removal of several concrete barriers the Boozers had placed at the edge of the roadway easement to limit further encroachment on their property. A hearing on the Motion was held on December 13, 2001, after which the district court granted the preliminary injunction on the condition that the Quaker Haven Owners post a $10,000 bond. After trial, the district court found that there was a deeded grant of easement for the benefit of residents of Quaker Haven Subdivision. The district court also found that since the width of the easement was not defined in the deed granting the easement or the Ruud Subdivision plat recorded with the County on July 27, 1988, the court was authorized to prescribe the width of the easement so as to provide “reasonable access” to the owners within Quaker Haven Subdivision. The district court then fixed the width of the easement near the intersection of Ruud Road and Quaker Haven Road at twenty-four feet, with two feet of the easement reserved for landscaping to prevent erosion. The district court denied the Boozers' Counterclaim for contribution for maintenance of the easement. CONCLUSION The judgment of the district court is affirmed in part and reversed in part. The district court's conclusion that the easement should be 22 feet of road surface in width, plus two feet of the embankment, for a total width of 24 feet, and that it is within the boundaries of the historical use of the easement is supported by substantial and competent evidence.

HUGHES V. FISHER (JANUARY 27, 2006) In the 1960s, the Pothiers sold to the Rickers Tax Lots 7353 and 7354, the property

at issue in this consolidated case. The Rickers gave their neighbors permission to

use an upper path which crossed their property to access Bald Mountain, but were

unaware of a lower path (the Path). In 1975, the Rickers sold both lots to Dick

Matthews. Sometime during 1975, others in the neighborhood began using the

Path, but there was no evidence as to whether Matthews gave permission to use

the Path. Matthews sold the property to Fisher in 1978. Fisher lived on the

property from 1978 to 1992, during which time he and his family used the Path to

access Bald Mountain. Apparently, Fisher gave permission to use the Path to

anyone who asked and was friendly to other users. When Fisher moved off the

property in 1992, he instructed his tenants, who also used the Path, to allow the

Page 21

neighbors and the public to use it. In 2000, Fisher proposed to develop the

portion of his property over which the Path crossed. Hughes, opposed to the

development which would have blocked their use of the Path, filed an action on

August 14, 2000, to establish a prescriptive right to use the Path. The court found

the use of the Path by Hughes was impliedly permissive, precluding Hughes from

acquiring prescriptive rights under Idaho law. The district court also concluded

Hughes used the Path along with the public and did not perform an independent

act to signify to Fisher they were claiming an adverse right.

CONCLUSION

The district court's denial of a prescriptive easement in Hughes' favor is affirmed,

as the plaintiffs failed to show the required elements by clear and convincing

evidence.

SCHNEIDER V. HOWE (APRIL 11, 2006) In 1978 the plat for the subdivision was approved and recorded in Jefferson County. This plat identifies a “road easement” and dedicates the easement to perpetual public use. Schneider owns property directly to the south of the subdivision. If developed, the easement would extend an existing roadway to

connect with Schneider's property. In 1995 the Appellants, Montie and Chris Howe (the Howes), bought a lot in the subdivision. A portion of the easement crosses the Howe lot, and the Howes' deed indicates that the property is subject to all easements. The following year, the Howes built a garage, but did not obtain a building permit until nearly two years after the garage was complete and after Schneider had contacted them regarding the development of the easement. Following his wife's death, Schneider probated her estate and became aware of the plat of the subdivision providing an easement that leads directly to his real property. Considering subdividing his property, Schneider met with the Howes to discuss the possibility of Schneider using the easement. The Howes and their neighbors, the Davises, refused to consider removing the obstructions located on the easement. After these negotiations failed, Schneider filed a complaint. He sought a declaratory judgment clarifying the respective rights and obligations of the parties and declaring his right to use the roadway easement;  he also sought an injunction requiring the Howes to remove the garage located on the easement. The Howes filed a motion for summary judgment, but the district court denied this motion

Page 22

and granted Schneider's request for a declaratory judgment affirming the existence of the easement. While this case was pending, the Howes and other homeowners in the subdivision petitioned Jefferson County to vacate the easement. The county refused their request, and the homeowners sought judicial review of that matter in district court. That case is still pending, having been stayed during the instant appeal. Although the district court stayed various matters in both this case and the appeal of the county's refusal to vacate the easement, ultimately it entered a final judgment in this matter. Its final judgment confirmed the existence of a public road easement shown on the duly recorded plat of the subdivision, and stated:  “[Schneider], having established the existence of the public road easement confirmed herein, is entitled to use it as a public roadway following its development in accordance with county specification.” CONCLUSION Supreme Court affirmed the district court’s decision .

CANNON V. MARTIN (DECEMBER 28, 2001)

Howard and Lois Belk owned farmland located in Canyon County, Idaho. The

farm consisted of seven fields totaling 113.6 acres, which had been rented to

various tenants for many years. In October of 1995, William Ekberg, brother of

Lois Belk, advertised the land for rent in the newspaper. Defendants Allen and

Meliah Martin (“Martin”) responded to the advertisement. A meeting to discuss

the leasing of the farmland was attended by Mr. Martin, Mr. Ekberg, Plaintiffs Gary

Belk and Carole Cannon (“Plaintiffs” or “Respondents”), who were the son and

daughter of the Belks, and Carole's husband, Warren Cannon.

At the meeting, the parties agreed upon the fields that were to be leased;  that the

lease was a cash lease;  that the payment of rent would be due after harvest;  that

the payment of rent would be secured by a crop lien;  and that the lessors would

pay real property and water assessments on the property. Martin took

possession of the land immediately thereafter and began preparation work for the

upcoming farm season.

A written lease was prepared by Ms. Cannon's attorney in December 1995 but not

signed until the parties met again in late February or March of 1996. In between

the negotiation of the lease and the signing, both Howard and Lois Belk passed

Page 23

away;  Ms. Cannon was appointed personal representative of their estates and

signed the lease in that capacity. At no time prior to the signing of the lease did

the Plaintiffs review the lease. Before signing the lease, Martin requested that

the date of termination be changed from August 15, 1996 to November 15, 1996.

Both Mr. Martin and Ms. Cannon initialed the change. No other changes were

made to the lease. The lease, as written, provided for rent in the amount of

$1,476.80. A farm products financing statement for security of the payment of

rent was also signed and subsequently filed.

On November 15, 1996, Martin did not pay the rent but retained possession of the

farmland;  two fields of unharvested corn remained. By letter dated November

27, 1996, Plaintiffs demanded payment of the rent, an accounting and requested

that Martin not re-enter the property without permission. A second demand

letter was sent to Martin's attorney on December 2, 1996. On December 4, 1996,

the parties entered into an interim agreement allowing the harvesting of the corn

to be completed. The agreement stated that the amount of rent was disputed

and provided that the proceeds from the sale of the crops on the farmland would

be placed in an interest bearing trust account up to the disputed amount. For a

variety of reasons, including weather and mechanical breakdowns, by December

19, 1996, Martin had not yet completed the harvest of the corn. Respondents

engaged Sam Hall to combine one of the corn fields. On January 8, 1997, Martin

engaged Sam Hall to combine the second field. The Cannons paid Sam Hall

$1,191.30 for combining the two corn fields.

A complaint was filed April 17, 1997, whereby Plaintiffs sought reformation of the

lease, payment of rent, reimbursement for the corn-harvesting expenses, recovery

of interest and for attorney fees and costs. Martin filed an amended answer and

counterclaim requesting specific performance of the lease and recovery of his

attorney fees and costs. The case was tried without a jury on July 15 and 16,

1998. On the first day of trial, the district court heard and denied Martin's

motion in limine seeking to prevent extrinsic evidence from being presented.

Following the trial, the district court issued its Memorandum Decision and Order

finding that a valid lease, with a termination date of November 15, 1996, existed.

The trial court also determined that the parties had agreed to a rental fee of $130

per acre for 113.6 acres, thereby totaling $14,768.00 rather than the $1,476.80

stated in the rental provision of the lease. The basis for the district court's

conclusion was that the lease contained a unilateral mistake made by the Plaintiffs

of which Martin had knowledge. The court therefore reformed the rental

provision of the lease to $14,768.00. Further, the district court awarded the

corn-harvesting expenses paid by the Cannons. Attorney fees were not awarded

by the district court because the Plaintiffs had not identified the statute

authorizing an award of fees.

A hearing was held to reconsider the denial of attorney fees and costs and to

determine if prejudgment interest should have been awarded. On October 22,

1998, the district court entered an order granting attorney fees and costs to

Plaintiffs pursuant to Idaho Code § 12-120(3), and awarded prejudgment interest Page 24

from November 15, 1996 together with discretionary costs. Following the

hearing the parties stipulated to $7,500 as the amount of attorney fees to which

the Plaintiffs were entitled. On November 23, 1998, the district court filed its

amended judgment awarding rent, prejudgment interest, harvest costs,

discretionary costs, attorney fees and court costs to the Plaintiffs. The Martins

then pursued an appeal

CONCLUSION

The Court affirms the trial court's finding that the lease contained a unilateral

mistake to which Martin had knowledge. The district court properly reformed

the lease to reflect the parties' intent.

GARNER V. BARTSCHI (NOVEMBER 14, 2003)

During the spring of 2000, Ivan Garner began looking for property to establish an elk ranch. He contacted Flinders Realty & Exchange Inc. (“Flinders Realty”) to assist with his search and

Alice Edwards, a realtor who worked for Flinders Realty, began looking for suitable property. Shortly thereafter, Edwards located property that appeared to meet Garner's wishes and arranged a meeting for Garner to meet with the Bartschis, the owners of the property. While visiting the property, Don Bartschi and his son, Jeff, showed Garner and Edwards around the property, pointing out the boundaries of the parcel. Garner was interested in obtaining the property;  however, the parties were unable to reach an agreement. In the spring of 2001, the Bartschis contacted Edwards to see if Garner might be interested in purchasing the property. After talking with Garner, Edwards let Don Bartschi know that Garner was still interested in obtaining the property. The Bartschis and Garner met, discussed the transaction and entered into a Real Estate Purchase and Sale Agreement on April 24, 2001. The Real Estate Purchase and Sale Agreement stated that closing would occur no later than July 30, 2001. Bartschis and Flinders Realty also entered into an Exclusive Seller Representation Agreement (“Representation Agreement”) on April 25, 2001. Both agreements describe the property as “approx. 500 acres of mountain property.” A subsequent addendum to the Real Estate Purchase and Sale Agreement was entered into and signed by Garner and Melba Bartschi. The addendum contains the statement “Acreage:  As deemed by Bear River County Platt and Tax Notices to be 512 acres. Survey Ordered.”

Page 25

On May 13, 2001, Don Bartschi died. Ms. Bartschi sent a notice to Garner on July 25, 2001, that she was repudiating and rescinding the agreement. In October 2001, Garner and Flinders Realty filed suit seeking specific performance of the Real Estate Purchase and Sale Agreement and damages resulting from the breach of the Representation Agreement. Ms. Bartschi filed a counter-suit alleging undue influence, breach of contract and fraud. Both parties filed motions for summary judgment. The district court granted Ms. Bartschi's motion for summary judgment, dismissed Garner's and Flinders Realty's motions for summary judgment and awarded attorney fees and costs to Ms. Bartschi. The district court found that the property descriptions contained in the Real Estate Purchase and Sale Agreement and the Representation Agreement were too ambiguous to grant summary judgment. The district court further found that the description was inadequate and not enforceable at law. CONCLUSION The Court holds that the property descriptions in the Real Estate Purchase and Sale Agreement and the Representation Agreement are insufficient and therefore, the remedy of specific performance is unavailable to Garner or Flinders Realty.

LOVELASS V. SWORD (APRIL 28, 2004) On or about May 8, 1997, Gary and Carole Sword entered into an agreement with Keith Lovelass to purchase the real property which is the subject of this action. At the time of this agreement, Keith Lovelass represented to the Swords that he owned the property. In fact he did not own the property. Keith Lovelass and Mr. Sword executed a written memorandum, providing as follows: Sold to Keith Lovelass, 1978 GMC P.U. VIN# TKL148J506028, for the sum of $3000. As down payment on 10 acres of property at Athol and house at 27320 Old 95 (34,5000) 5-8-97 The Swords obtained possession and began living on the property in May 1997. According to the Swords, the property had apparently been a “drug house,” contained various chemicals, hundreds of used hypodermic needles and other garbage, was filthy and not suitable for human habitation. The Swords expended considerable time, labor and funds to render the property reasonably safe and habitable. In accordance with the agreement the Swords made two payments of $200 each to Keith Lovelass in June and July of 1997. In approximately August of 1997, when the Swords could not locate Keith Lovelass to make a payment, Mr. Sword telephoned Keith's father, Gerald Lovelass (“Mr.Lovelass”). Mr. Lovelass advised Mr. Sword that he, not his son, owned the property. Mr. Lovelass went to the property the following day and discussed the situation with Mr. Sword. According to Mr. Sword, Mr. Lovelass agreed that the price of $34,500 was fair, but that the payments needed to be $306 per month, rather than $200 per month in order to cover his payment on the property. Mr. Lovelass told Mr. Sword that he was going to discuss the situation with his wife and that he would see what he could do about getting their truck back.

Page 26

Shortly after their initial encounter, Mr. Sword went to Mr. Lovelass's home and again discussed the real property. According to Mr. Sword, Mr. Lovelass said that he could not get the truck back for him and agreed to “carry the paper” until the Swords were able to obtain financing. Mr. Sword testified that he understood Mr. Lovelass's statements to mean that he was agreeing to honor the terms of his son's agreement and sell the property to the Swords with the only change being the increase in the monthly payment. Mr. Lovelass, however, denies that such an agreement ever existed, claiming that he agreed to allow the Swords to remain as renters until he decided what he wanted to do with the property. Over the following three years, the Swords made the monthly payments of $306 to Mr. Lovelass, missing only two and one-half or three and one-half payments. During this same period-from the summer of 1997 until the fall of 2000-the Swords also made substantial improvements to the house and property. These improvements included an addition to the house, installation of a new roof, the addition of a water cistern and pump system, repairs to the plumbing and electrical system and an extensive cleanup of the property. Carol Sword testified that at some point after June of 1999, Mr. Lovelass told her that he had changed his mind about selling them the property. He advised the Swords that they could purchase the property for its appraised value. He denied that there was any contract or agreement for the Swords to purchase the property. Mr. Lovelass thereafter served Swords with a 30-day notice to terminate tenancy in late August 2000. Following some contact and discussions between the parties through their respective counsel, the Swords tendered the payment that was due in September. Mr. Lovelass accepted this payment. When the October 2000 payment was tendered, it was refused. On November 2, 2000, the Lovelasses filed a Complaint for Eviction and Slander of Title against the Swords. The Swords filed an Answer and Counterclaim, seeking an order of specific performance of the oral contract or, alternatively, a lien against the subject real estate for the reasonable value of repairs, improvements and additions made by the Swords while occupying the property. The matter was tried before the district court which made findings of fact and conclusions of law followed by a judgment which provided in pertinent part that the Swords were entitled to performance of the oral land sale contract. The Lovelasses appealed. CONCLUSION The decision of the district court that the Swords are entitled to enforcement of a land sale contract is reversed. The case is remanded to the district court to determine if there remains in the case a claim for unjust enrichment by the Swords for the substantial improvements to the property.

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In real estate, stigmatized property is property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include murder, suicide, or even AIDS, in addition to a belief that a house may be haunted. PSYCHOLOGICALLY IMPACTED DEFINED. As used in this chapter Idaho Code § 55-2801, "psychologically impacted" means the effect of certain circumstances surrounding real property which include, but are not limited to, the fact or suspicion that real property might be or is impacted as a result of facts or suspicions including, but not limited to the following: (1) That an occupant or prior occupant of the real property is or was at any time suspected of being infected or has been infected with a disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place; (2) That the real property was at any time suspected of being the site of suicide, homicide or the commission of a felony which had no effect on the physical condition of the property or its environment or the structures located thereon; or (3) That a registered or suspected sex offender occupied or resides near the property.

INCENTIVE PROGRAMS

In a competitive real estate market, agents sometimes try to

solicit clientele using various incentive schemes; something that

sets the agent apart from other agents and appeals to the

customers’ desire for reward. Some of these incentive programs Page 29

are flat prohibited and, if not, must still be carefully considered

before they are implemented.

Commission Sharing

Idaho Code § 54-2054 allows a broker to share any part of

his/her commission, fee or compensation. However this sharing is

limited to a buyer or seller in a transaction or to another licensed

real estate agent, provided that this is not done in a manner which

creates a double-contract or misleads another broker, lender, title

company or government agency. Other than this incentive to the

buyer or seller in a pending transaction, licensees may not split,

share or assign fees to anyone who is not a party to the transaction.

Agreeing to contribute part of your fees to help a buyer

make their down payment is permitted, but that fact must be

disclosed to the buyer’s lender or it could be considered a form of

double contracting. See, § on Double Contracting, infra.

Finder’s fees or “bird dog” fees are also prohibited. Any

offer of monetary value by an Idaho licensee, to any other person

who is not licensed, for the purpose of inducing that person to

secure prospects to buy, sell, option or dispose of an interest in

property is prohibited. {Note, the term “monetary value” is not

defined in the Code, so even a token gift of nominal value is

arguably included.} The Commission interprets this statute to

mean that if there is any intent by the licensee to compensate a

non-licensed person for a referral of customers or conversely if the

non-licensee expects to be compensated for referring customers, it

is illegal. {Note, Real Estate Commission Guideline No. 10 states

however that the presentation of a gambling devise or the

happening or outcome of an event, including a sporting event, the

operation of casino gambling including, but not limited to,

blackjack, craps, roulette, poker, baccarat, or keno, but does not

include: . . . (4) merchant promotional contests and drawings

conducted incidentally to bona fide nongaming business

operations, if prizes are awarded without consideration being

charged to the participate; . . ..” Gambling also is a misdemeanor.

See, Idaho Code § 18¬3802.

Guaranteed Sales Plans.

Another kind of incentive program that has been popular in

recent years is the Guaranteed Sales Plan (GSP). A GSP is an

incentive to property owners to list with the offering broker on the

pretext that if the broker doesn’t find a buyer for the property in a Page 30

given time-frame, the broker will buy it. Typically, there is a

written agreement between a broker and a seller whereby the

broker agrees to purchase the seller’s property within a specified

period of time and at a specified price if the property is not sold in

accordance with the terms of the listing or other terms acceptable

to the seller. GSP’s are not prohibited. However, the Real Estate

Commission has expressed (in Guideline No. 6) its concern that if

brokers choose to utilize GSP’s they should do so very carefully.

According to the Commission, a broker offering a GSP must

provide, in writing, to the prospective seller all of the details of the

plan including the exact price for which the property would be

purchased by the broker and the circumstances under which this

will occur. The plan must also include an explanation of the

reason(s) for any difference between the listing price and the price

which the broker agrees to pay under the plan. Although it seems

to go without saying, the Commission’s Guideline also states that

no broker should offer a GSP or enter into one unless that broker

has adequate financial resources to actually purchase the property

in accordance with the plan.

A GSP must also include a provision indicating that the

broker’s obligation to purchase the property is enforceable only at

the option of the seller. This is obviously intend to avoid after-the-

fact recriminations from sellers who don’t believe that any

legitimate marketing effort was exerted by the broker, thus

allowing the broker to purchase the property on his/her own

account. The Commission also requires that any advertising or

promotion of a GSP must be done in a manner which is not

misleading and all interested parties should be pre-disposed to any

information which restricts their eligibility to participate in the

plan. Last, the Real Estate Commission demands strict compliance

with the Idaho Consumer Protection Act as well as any rules of

consumer protection promulgated by the Idaho Attorney General’s

office.

IDAHO REAL ESTATE COMMISSION Guideline #6

GUARANTEED SALES PLANS (GSPs)

1. A “guaranteed sales plan” (GSP) is defined as a written agreement between a broker and a seller whereby the broker agrees to purchase the seller’s property within a specified period of time and at a specified price if the property is not sold in accordance with the terms of the listing or on other terms acceptable to the seller. Page 31

2. A broker offering a GSP should provide in writing to the prospective seller all of the details of such plan. These detail should include the exact price for which the property would be purchased, the exact circumstances under which the commitment to purchase will be honored, and the reason(s) for any difference between the listing price and the price which the broker agrees to pay.

3. No broker should offer any GSP or enter into any GSP unless the broker has adequate financial resources to meet the commitment. A broker offering a GSP should, if requested, provide to the seller a statement that the broker has sufficient financial resources to satisfy his/her commitment.

4. A broker offering a GSP should give good market exposure to each property covered by any such plan, and shall present to the seller all offers received for each property.

5. A GSP should include a provision clearly stating that the broker’s obligation to purchase property is enforceable only at the option of the seller.

6. A broker offering a GSP is free to advertise and promote the plan as a service of the broker available to sellers who qualify. However, a broker may NOT advertise the plan in a manner which is likely to mislead the seller to believe that the plan is available without restriction, unless the plan is indeed available without restriction. The broker who advertises a GSP should, prior to taking any listing, advise the seller whether the seller qualifies for the plan, and if so, explain any restrictions or conditions that apply to the seller. The broker is advised to obtain a written confirmation from the seller that the terms of the GSP have been explained, and that the seller understands that he does/does not qualify for the plan.

7. Brokers may NOT use a GSP as a false inducement to sign a listing agreement. Idaho law protects consumers by prohibiting misleading advertising. A broker advertising a GSP, or any other product or service, should be familiar with the state laws protecting consumers from unfair and misleading advertising, namely, section 54-2053 of the Idaho Real Estate License Law, and the Attorney General’s Rules of Consumer Protection. Excerpts from these advertising laws are set forth below.

DOUBLE CONTRACTING Page 32

A double contract is defined as two or more contracts of sale, loan applications, or any other agreement, written or oral, one of which is not made known to the lender, which is intended to enable the buyer to obtain a larger loan than the actual sale price would allow or to enable the buyer to qualify for a loan which he/she otherwise could not obtain. See, Idaho Code § 54-2004(19).

A real estate agent/broker who uses, agrees to use, or knowingly permits the use of a double contract engages in prohibited conduct under Idaho Code § 54-2054. But wait, there’s more! Doing this is “deemed flagrant misconduct and dishonorable and dishonest dealing” by the Real Estate Commission. See, Idaho Code § 54-054(5). As you might imagine there are consequences for this. Most of them aren’t good.

Here are a few species of double contracts that are used far more often than you might imagine.

Silent Second or “Discounted” Deeds of Trust

Typically, lenders make real estate loans based upon two main considerations: 1) the credit worthiness of the buyer; and 2) the value of the collateral given as security for the loan (the real estate). Lenders determine the value of the collateral by having the property appraised and by considering what the buyer is willing to pay. However, because of the inexact science of appraisal, appraisers often end up valuing the property at the amount the buyer has agreed to pay. According to age-old economic principals, buyers usually don’t pay more for a property than it is worth unless there is some mechanism in place for value to go back to the buyer thereby inducing him to pay an inflated price.

Anytime value is coming back to the buyer, the lender has a right to know so that it can decide whether that value should be treated as a “rebate” or as a price concession. For example, say a buyer has secured financing which would otherwise require her to bring $20,000.00 in cash (as a down payment) to closing. The seller however agrees to accept $10,000.00 in cash and carry a second deed of trust on the property for the remaining $10,000.00 of down-payment money. This is not disclosed to the lender. No harm done, Right? The buyer gets the house she wants, gets the loan she wants and the seller gets the price he Page 33

wants. Wrong. The “silent” second deed of trust is the equivalent of a misstatement or omission of a material fact to the buyers. Same situation where Seller agrees to carry a second deed of trust to allow buyer to qualify for a loan, but they have a side agreement to discount the second. Both are examples of loan fraud and double contracting.

This sort of activity may seem harmless (and may even be harmless) unless the investors who purchase these loans on the secondary market like Fannie Mae or Freddy Mac discover the circumstances and demand that the originating wholesale lender repurchase the loan; then even a conscientious buyer who has never been late on a payment may find his loan “called”. He may even have a Grand Jury Subpoena awaiting his attention. When this occurs, you can be assured that any agents who participated in the arrangements will be carefully scrutinized also. One does not have to be a borrower to be guilty of loan fraud.

Converting debt to down payment

Another form of double contracting that takes place all too often is the process of converting consumer debt to down payment. One way this takes place is where the buyer “Bob” finds a home which is listed by a very motivated seller “Sam”. The problem is Bob has no cash for a down payment and a lot of consumer debt. The debt makes it hard for Bob to qualify for a loan. To solve this dilemma, Bob goes to Sam and they agree to write a purchase and sale agreement for some amount more than Sam’s asking price on the assumption that the house will appraise for about the contract amount. Thus, Bob can secure a loan on the property with enough additional “boot” to payoff his credit cards and bar tab. Life is good. However, without the lenders’ full knowledge and consent to such an arrangement, this is loan fraud. It may also constitute a double contract if there is, for example, a side agreement between Bob and Sam to “forgive” Bob’s down payment.

The same scenario sometimes occurs where a buyer and seller agree that the buyer will be given credit for “sweat equity” perhaps for work on the property (enhancing its value) during a pre-sale occupancy. The parties are valuing the buyer’s contribution to enhancing the property in a form of consideration in the sale contract. This cannot be concealed from the lender or it is also a form of double-contract. Likewise, the value assigned to the buyers’ sweat equity better bear some relationship to the actual value of the sweat equity. Giving a buyer a $5,000.00 Page 34

“sweat equity” credit for a weekend’s worth of landscaping work looks a little fishy.

One last variant of double contracting involves the use of false documents to procure financing. This takes place where a borrower applies for a loan not by using a falsified application but rather by providing the loan underwriter with “dummy” supporting documents. This often occurs in investor driven markets, where buyers will seek financing based upon the rental income that the property will supposedly generate. The investor will falsify lease agreements, profit and loss statements and similar documentation for the purpose of showing the loan underwriter that the property has historically generated enough income to cover the payments on the loan being sought. While the loan application itself may be completely true and accurate, the supporting documentation isn’t. When it turns out the property actually has a high vacancy rate, or lower rents, the investor is unable to make payments, and the lenders’ investigation into the property’s income history will usually reveal the ruse.

A. Idaho Code § 54-2055

LICENSEES DEALING WITH THEIR OWN PROPERTY. (1) Any actively licensed Idaho broker, sales associate, or legal business entity shall comply with this entire chapter when that licensee is buying, selling or otherwise acquiring or disposing of the licensee's own interest in real property in a regulated real estate transaction. (2) A licensee shall disclose in writing to any buyer or seller that the licensee holds an active Idaho real estate license, if the license directly, indirectly, or through a third party, sells or purchases an interest in real property for personal use or any other purpose; or acquires or intends to acquire any interest in real property or any option to purchase real property. (3) Each actively licensed person buyer or selling real property or any interest therein, in a regulated real estate transaction, must conduct the transaction through the broker with whom he is licensed, whether or not the property is listed.

B. "Personal Transaction" Page 35

With the changes to the law, licensees must now conduct their personal transactions through the broker with whom they are licensed. For purposes of this law, a licensee's "personal transaction" is any transaction in which the licensee acquires or disposes of an interest (any interest) in property through a "regulated real estate transaction." See, Idaho Code § 54-2004(33) for definition of regulated transaction.

C. Two Main Requirements 1. Must disclose licensee status to seller (or buyer). 2. Must conduct the transaction through the licensee's supervising broker. (See IREC Guideline #24)

D. Representation Agreement Law does not require licensee to enter into an agency agreement with his broker. However, agency representation confirmation must still be accurate in the purchase and sale agreement. Law does not require licensee to give himself/herself the agency disclosure brochure. However, licensee must disclose to others that he/she is a licensee.

E. Complications

"Conduct through"—What does it mean?

Licensee from North Idaho wants to sell her property in Boise and use an agent in Boise.

o Licensee must still use her own brokerage, however, a co-listing could be arranged to effectively market the property.

Licensee wants to buy another licensee's property; Which broker do they use?

o Both.

Broker supervision, after the fact notice of purchases.

FSBO licensee still has to run transaction through his/her office.

Paragraph (2) requires disclosure of licensed status, even if it is a corporation, marital community, L.L.C., partnership, etc., that you have interest in.

o Disclosure is required no later than presentation of an offer to purchase

IDAHO REAL ESTATE COMMISSION

Guideline #24

Rev. August 2007

LICENSEE’S PERSONAL TRANSACTIONS TO BE

CONDUCTED THROUGH THE BROKER WITH WHOM HE IS

LICENSED Under Idaho law, all active licensees are required to conduct their

personal real estate transactions through the broker with whom they are

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licensed, regardless whether the property is listed. See section 54-2055,

Idaho Code. The law states:

54-2055. LICENSEES DEALING WITH THEIR OWN PROPERTY.

(1) Any actively licensed Idaho broker, sales associate, or legal business

entity shall comply with this entire chapter when that licensee is buying,

selling or otherwise acquiring or disposing of the licensee's own interest

in real property in a regulated real estate transaction.

(2) A licensee shall disclose in writing to any buyer or seller that the

licensee holds an active Idaho real estate license, if the licensee directly,

indirectly, or through a third party, sells or purchases an interest in real

property for personal use or any other purpose; or acquires or intends to

acquire any interest in real property or any option to purchase real

property.

(3) Each actively licensed person buying or selling real property or any

interest therein, in a regulated real estate transaction, must conduct the

transaction through the broker with whom he is licensed, whether or not

the property is listed.

Question: Must the licensee’s broker always be the “responsible

broker” for the transaction? If not, how can the transaction “be

conducted through” the licensee’s broker?

Answer: The Commission recognizes there are transactions for which it is impractical to have the licensee’s broker act as the “responsible broker.” The purpose and intent of subsection (3) is to ensure that the licensee’s broker is made aware of and able to supervise transactions for which he might be held liable. The Commission finds that this purpose is satisfied if the licensee timely provides a copy of each transaction document to his broker, even if the original document is provided to a different broker who is the “responsible broker for the transaction.” Question: Must the licensee enter an Agency Representation

Agreement with his Brokerage? Answer: No. Although the licensee is required to conduct his personal

transactions through his brokerage, he and the brokerage are NOT

required to enter a written agreement for agency representation. An

individual licensee buying or selling property is necessarily acting on his

own behalf. However, whether the brokerage agrees to represent the

licensee and act as his agent is a decision left to the brokerage and its

licensee, and is not required by the law.

The law permits the brokerage and the licensee to enter a written

agreement for agency representation, in which case the brokerage will

owe its licensee, for that transaction, those duties owed a client under

section 54-2087, Idaho Code. Absent a written agreement for agency

representation, the relationship of the brokerage to the licensee in the

transaction is that of a “non-agent” to a “customer.” Whatever brokerage

relationship is chosen, it must be indicated accurately in the

Representation Confirmation (check the box) section of the Purchase and Page 37

Sale Agreement. And, of course, the licensee always is required to make

written disclosure of the fact that he is actively licensed.

Question: Must the licensee give himself the Agency Disclosure

Brochure? Answer: No. Complying with the License Law does NOT require that

the licensee give himself a copy of the Agency Disclosure Brochure.

This requirement, contained in Section 54-2085, Idaho Code, does not

apply where the “prospective buyer or seller” is an active Idaho licensee.

Question: Will my errors and omissions insurance policy provide

coverage for my personal transactions? Answer: Not likely. Insurance contracts vary. However, errors and

omissions policies typically exclude from coverage the licensee’s

personal transactions. Coverage may exist for the brokerage under the

brokerage’s separate policy. All licensees should pay careful attention to

the exclusion and exemption provisions of any policy of insurance he or

she maintains.

Question: Which transactions have to be conducted through the

licensee’s broker?

Answer: Questions have also arisen as to which transactions fall within the scope of subsection (3), requiring that the transaction be run through the broker with whom the licensee is licensed. The answers will depend on the identity of the “person” buying or selling the property, and whether that person is “actively licensed”. A “person” is either an individual or a legal business entity. Unless the “person” buying or selling is actively licensed, the requirement does not apply.

Example #1 Mary Smith is an active licensee. She is married to John, who is not

licensed. John works for ABC, Inc., a business that owns real property

and constructs new homes. John and Mary are the sole shareholders in

ABC, Inc. ABC, Inc. is not licensed.

Question: Does the law require that ABC, Inc.’s sales of its new homes

by ABC, Inc. be conducted through a responsible broker?

Answer: No. In this case, ABC, Inc. is the “person” selling property.

Because ABC, Inc. is not an “actively licensed person”, the requirement

of subsection (3) does not apply. However, under the broad language of

subsection (2), 54-2055, Idaho Code, Mary Smith is required to disclose,

in writing, that she is an active licensee.

Example #2 Same facts as in #1. Mary and John have agreed to buy their neighbor’s

ranch, and to make the purchase in their own names, “Mary and John

Smith”. The ranch property is not on the market.

Question: Must the transaction be conducted through Mary’s broker?

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Answer: Yes. Because Mary is one of the persons buying the property,

and because she is “actively licensed”, the transaction must be conducted

through Mary’s broker, “whether or not the property is listed”. Mary will

also have to make written disclosure of her status as an active licensee.

Example #3 Same facts as in #1. John wants to buy a small lot and building for use in

connection with his own personal hobbies. John will handle the

transaction and Mary will not be involved at all. (The funds used are not

John’s sole and separate property.)

Question: Must the transaction be conducted through Mary’s broker?

Answer: Yes. Even if the property is purchased for exclusive use by John, the property will still belong to the marital community, and Mary will acquire a community “interest therein.” Therefore, the transaction must be conducted through Mary’s broker. Again, Mary is also required to disclose her status as an active licensee.

What is “first substantial business contact”?

• Open house? • Telephone conversation? E-mail? MLS auto send? • Taking someone in your car? • Does your broker have an office policy about this?

What are the TWO obligations of the agent?

• Give the consumer the blue brochure • Maintain a receipt from the consumer • Obligations are the same whether the consumer is a

buyer or seller What other forms of receipts are acceptable?

• Transactional forms Page 39

• Receipt book What do I do with the receipt after it’s signed?

• Maintain in transaction file • 3 years after calendar year the transaction is completed

What are the duties owed to a customer?

Perform necessary and customary acts to assist in the purchase or sale of real estate

Perform these acts in good faith and with honesty and reasonable care

Properly account for money or other property placed in the licensee’s care

Disclose “adverse material facts” which are, or should be, within the licensee’s knowledge.

IF your customer has entered into a compensation agreement or customer services agreement with the brokerage, must be available to the customer to receive and timely present all written offers and counteroffers What does it take to enter into an agency agreement?

• Not a signed copy of the blue brochure • Not a compensation agreement • Only a signed representation agreement

What does it mean to recommend consulting with experts? • What about a plumber? Could he be considered an expert?

What is confidential client information?

• Not info about the property, only info pertaining to your client

What is limited dual agency with assigned agents?

o The brokerage will assign individual licensees (“Assigned Agents”) to act solely on behalf of each party

o The assigned agent has a duty to promote your best interests, even if your interests conflict with those of the other party

o This includes negotiating a price and maintaining confidential information

o The designated broker of the brokerage must remain a limited dual agent for BOTH clients

o DB cannot be one of the assigned agents o The DB will ensure his assigned agents fulfill their duties

to their respective clients

Doesn’t work with agents who are part of the same team Page 40

Can’t do assigned agents within a brokerage? Options:

• Everyone is a limited dual agent • Someone is a non-agent

After explaining the types of agency offered in the brokerage, the consumer asks, “What do you think is best? How do you answer this question?

Know what types of agency YOUR brokerage office policy allows

Honestly tell them what you think

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BLACKMORE V. RE/MAX TRI-CITIES (JULY

6, 2010) The Blackmores entered into a purchase and sale agreement for the purchase of residential property; the property was represented by Re/Max and its agents. The terms of the agreement provided that the sale was contingent on the results of a “well inspection” satisfactory to the Blackmores. The Blackmores had discussions with the

Re/Max agents about the type and extent of water testing to be done. However, prior to any water testing results being relayed to them, verbally or in writing, the Blackmores signed a contract addendum waiving all contingencies and accepting the property “as is,” in exchange for a reduced sales price. The sale closed. Approximately one year later, when they noticed their son experiencing health issues, the Blackmores tested their well and discovered the presence of arsenic. The Blackmores sued Re/Max and its agents, claiming the defendants owed them a duty of care concerning the well testing. The district court held that the defendants owed no such duty and granted summary judgment in favor of the defendants. The Supreme Court affirmed the district court’s order. While specific performance is an extraordinary remedy, it is presumed appropriate for breach of a real estate purchase and sale agreement. The Court agreed with the district court’s reasoning verify the accuracy of completeness of the test results, that is not reduced to writing. The Re/Max defendants owed no duty to the Blackmores because such agreement, even if made verbally, was not memorialized in a written instrument. CONCLUSION Although this case referenced an “as is” clause in the contract, it is beyond the scope of this case law update to delve into the legalities or nuances of “as is, where is” or inspection clauses. The takeaway from this case focuses on a licensee’s agency duties to a client under the Brokerage Representation Act. The License Law expressly eliminates the duty to inspect or verify inspection results, except where the licensee agrees, in writing, to undertake this duty on behalf of a client. Therefore, be careful in written correspondence not to “agree” to undertake or verify testing for a client if that is not your intention. Also, when negotiating a transaction and the other side agrees to conduct a test, make sure that agreement is in writing. As a reminder, the courts will generally give greater weight to the handwritten language on a preprinted form contract over the boilerplate language of the form.

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The Supreme Court held that Stewart Title acted diligently in attempting to remedy the access issues, stating that acting diligently did not require infallibility. The Court also held that, as the express terms of the policy allowed for Stewart Title to abandon representation of the insured’s legal interests and instead pay the amount of coverage under the policy, Stewart Title did not breach the policy by paying the policy limits rather than pursuing the appeal on behalf of Mortensen. CONCLUSION Whenever access is in question or whenever an easement for access is part of the purchase of real property, a buyer should always explore the full extent of the easement and the ability to use that same easement for future development. Title insurance that includes coverage of access should be obtained in these situations. Particular attention should be paid to the stated limits of the title insurance policy (typically the purchase price for the property) with an understanding that virtually all such policies will include language allowing for the insurer to pay the limits rather that fight a case for the insured.

MORTENSEN V. STEWART TITLE GUAR. CO. (JULY 1, 2010)

Vernon Mortensen owned a parcel of land near Coeur d’Alene for which he purchased title insurance from Stewart Title insuring both title and access to the property. The Mortensen property was only accessible via a primitive access road that ran through his neighbor’s property. Mortensen had a valid easement over part, but not all, of this access road. Mortensen wanted to develop a subdivision on a portion of his land which would require improving and widening the access road. The neighboring property owner would not grant permission to Mortensen to widen or improve the access road. Mortensen sent a demand letter to Stewart Title demanding that, pursuant to the title insurance policy, Stewart Title take steps to ensure access to the property. Stewart Title, without the knowledge of Mortensen, requested that the neighboring property owner quitclaim the portion of their property not subject to the express easement. The neighboring property owner denied the request. Thereafter, Mortensen entered the neighbor’s property, bulldozed a gate, and began widening and improving the access road. The neighbors sued for trespass, negligence and quiet title and won. In the meantime, Stewart Title procured a quitclaim deed from the neighbor’s predecessor in interest for a piece of property that would purportedly allow for an access road. Another lawsuit involving quiet title to this property was also brought and won by the neighbors. Stewart Title began pursuing an appeal of the neighbor’s lawsuits. After motions to reconsider the decisions in those cases were denied, Stewart Title opted to pay the limits of the title insurance policy instead of pursuing any further appeal. Mortensen sued Stewart Title for breach of the title insurance policy by failing to act diligently in obtaining the quitclaim deed to create access and by refusing to further pursue the appeals on behalf of Mortensen. The district court found that Stewart Title did not breach the title insurance policy. Mortensen appealed.

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COWARD V. HADLEY (DECEMBER 20, 2010)

This case involves three neighboring lots in a subdivision. Lots 1, 2 and 11 were owned by a single party. The owner sold Lots 1 and 2, but reserved an express, 12-foot easement over the back of Lots 1 and 2 for “alley” access to Lot 11. The owner later sold Lot 11, noting the easement on the deed. Eventually, the owner of Lot 11 quitclaimed the easement back to the owners of Lots 1 and 2. However, the “alley” was occasionally used by the owners of Lot 2 to reach the back of their property. Hadley eventually acquired Lot 1 and Coward eventually acquired Lot 2. At some time during their ownership, the parties realized that a fence between them partially encroached on each other’s lots, and therefore the parties executed a Boundary Agreement, whereby they agreed that each owned title to their respective lot unaltered by any legal or equitable theory. The Cowards eventually began to use the “alley” to construct a garage at the rear of their lot. The Cowards filed an action for a declaratory judgment that they had acquired an easement by prescription over Hadley’s Lot 1 to reach the back of their Lot 2. The district court held that the Cowards did not have an easement. The Supreme Court held that the Cowards did not have either an express or implied easement over the alley, affirming the district court’s decision. An express easement did not exist as the original easement was appurtenant to Lot 11 and, therefore, did not create an easement over Lot 1 for the benefit of Lot 2. An express easement does not grant rights in the easement to the holders of parcels other than the dominant estate. An implied easement (by prior use or by necessity) does not exist as the Cowards failed to show necessity at the time the unity of ownership of the two lots was severed. Lot 2 was always bounded by a public road. Note: Elements required to establish an easement by necessity are: 1) unity of title and subsequent separation of the dominant and servient estates, 2) necessity of the easement at the time of severance; and 3) great present necessity for the easement. Elements required to establish a prescriptive easement are: 1) open and notorious, 2) continuous and uninterrupted, 3) adverse and under a claim of right, 4) with actual or imputed knowledge of the owner of the tenement, and 5) for the statutory period of 20 years. CONCLUSION Buyers should pay special attention to who the “dominant” estate is in an easement. Though an easement may exist, if it is for the benefit of another property --regardless of who is actually using the easement -- it does not grant an express easement to any other party. Even if an existing easement has been traditionally used by one property, if that property does not have a recorded right to use the easement, then access cannot be presumed. An implied easement is generally difficult to establish as the party claiming the easement must prove necessity, among other things.

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In addition to losing the easement case, the court awarded attorneys fees against the plaintiffs because it found this application of the law was well established, and the case was considered frivolous.

FULLER V. CALLISTER (MAY 6, 2011)

Callister entered into a commercial real estate purchase and sale agreement with Fullers to buy property adjacent to Ten Mile Road in Meridian. The highway district had been trying to acquire a portion of that property for a right-of-way to expand the road, and the parties executed an addendum wherein Callister agreed to deed over a portion of the property to the highway district and transfer the proceeds to the Fullers.

Days later, Callister assigned the agreement to Liberty Partners, with the consent of the Fullers, and the Fullers executed a warranty deed conveying the property to Liberty. The warranty deed contained no reference to the conveyance to the highway district or reservation of proceeds, nor any reference to the addendum. Later, Liberty entered into a purchase and sale agreement with the highway district, conveying a portion of the property purchased from the Fullers and receiving over $83,000. The Fullers asked Liberty for these funds pursuant to the terms of the addendum. When Liberty refused, the Fullers filed suit against both Liberty and Callister. The district court granted summary judgment against the Fullers, holding (1) that the purchase and sale agreement and the addendum had merged in to the warranty deed and were no longer enforceable; and (2) that Callister’s assignment to Liberty relieved Callister of all obligations under the agreement. The Supreme Court vacated the district court’s decision, finding error on two dispositive questions of law. First, the Court held that the doctrine of merger did not apply to the addendum’s reservation of the highway district’s right-of-way proceeds. Merger applies where “the right claimed under the contract would vary, change, or alter the agreement in the deed itself, or infers in the very subject matter with which the deed deals.” The Court found that the addendum’s reservation was not part of the deed’s conveyance, but was collateral to and independent of it, and therefore the doctrine of merger did not apply. Second, the court held that Callister’s assignment of the agreement to Liberty did not operate to release Callister from his obligations to the Fullers. The court distinguished between an “assignment” and a “novation”: A party to a contract may not assign an obligation so as to avoid liability on the contract and shift liability to the assignee, unless the assignee assumes the obligation of the assignor with the consent of the other party to the contract and the latter releases the assignor from further liability; in such case there is a

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novation. Although the Fullers consented to the assignment, there was no clear acceptance of a novation. Accordingly, Callister had not been released. CONCLUSION A party to a real estate contract generally has the right to assign his rights in that contract. However, he may not unilaterally assign his contractual obligations. In order to be relieved of further liability, the other party to the contract must consent to the assignment of obligation and release the assignor from further liability. The other party’s consent to the assignment of the contract will not suffice. Arranging to assign a contract is a matter best left to an attorney, to ensure it’s done correctly in accordance with the wishes of the parties. Real estate licensees who prepare assignment documents might be considered to engage in the unauthorized practice of law, and may subject themselves to liability for deficiencies or errors.

STEVENSON V. WINDERMERE REAL

ESTATE/CAPITAL GROUP, INC. (MARCH

22, 2012)

The Stevensons (Buyers) contracted to purchase a condominium from Jefferson (Seller). Pursuant to the terms of the contract, Buyers deposited $38,000 earnest money with Windermere, Seller’s broker. Upon Buyers’ authorization, Windermere transferred the funds to Seller. Seller then paid Windermere $9,500 partial commission pursuant to a separate brokerage representation

agreement that obligated Seller to pay Windermere for procurement of a ready, willing and able buyer. When Seller later decided not to sell to the Buyers, Buyers demanded “full refund of their earnest money” under the clear and unambiguous terms of the contract. When the deposit was not returned, Buyers sued both Seller and Windermere. Seller settled with Buyers, agreeing to refund their earnest money less the $9,500 commission he paid to Windermere. Buyers in turn agreed to forego their right to a full refund from Seller and to seek recovery of the remaining $9,500 from Windermere – who was not a party to the purchase and sale contract – based on a claim of unjust enrichment. On summary judgment, the district court dismissed Buyers’ claim against Windermere, holding Buyers had failed to show they conferred a benefit upon Windermere or that it

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was unjust for Windermere to retain a commission to which it was contractually entitled. The Supreme Court affirmed. Although Buyers had conferred a benefit on Seller when they paid the earnest money deposit in accordance with the purchase and sale agreement, Buyers conferred no benefit on Windermere, who was not a party to that contract. Seller was free to use the earnest money as he wished, subject to the contract requiring he convey the property to Buyers or refund their deposit. Seller chose to pay on his separate obligation to Windermere. Thus, Windermere received a benefit in the same fashion as would any other creditor. The Court was unwilling to extend the unjust enrichment doctrine to allow a party conferring a benefit on the unjustly enriched party to “claw back” the benefits the unjustly enriched party transferred to its creditors. To do so, reasoned the court, would inject a measure of unreliability into every commercial transaction. Buyers argued that a “constructive trust” should be imposed upon the funds Windermere received from the Seller. However, because this theory was never asserted in the district court, the Supreme Court would not consider the issue since it was raised for the first time on appeal. In a series of footnotes, the Court found it remarkable that the Buyers would give up their clear and unambiguous contractual right to a “full refund” from the Seller. The Court also noted that Buyers could have elected to rescind the contract and assert their statutory vendees’ lien granted by I.C. § 45-804. The Court could “discern no equitable basis for inflicting the consequences of the [Buyers] inexplicable settlement with [Seller] upon Windermere.” CONCLUSION This case illustrates the risks to buyers who agree to release earnest money deposits to the Seller before closing -- the Seller may spend the money. And if he does and goes broke, he might not be able to provide a refund, even if the contract requires otherwise. Likewise, although a buyer has a statutory vendee’s lien in the property, such lien may be of little worth if the property is already excessively encumbered. Although the Court was critical of Buyers’ settlement with Seller for less than the full refund, they may have no better option. In any case, because Windermere had earned its commission, it had no duty, under any contract or principals of equity, to give it back.

SUMPTER V. HOLLAND (APRIL 23, 2004) In March 1998 the Sumpters entered into an Exclusive Buyer Representation Agreement with Holland Realty, Inc. and Wettstein (“Holland”) in which Holland agreed to represent the Sumpters in the purchase of an unimproved lot and in the construction of a custom-built home on it. The Sumpters allege in their complaint that Wettstein, a Holland agent, recommended that the Sumpters hire Clarence Pond to construct their home, but failed to inform them that Pond had been experiencing financial difficulties in his business. The Sumpters further allege that Wettstein informed them they could not purchase title insurance to

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insure them against potential lien claims on the property and home, and failed to advise them they should seek professional advice regarding the purchase agreement and availability of lien protections. After the Sumpters signed the contracts on the property and home, Pond constructed the home but failed to pay for materials delivered by suppliers, including Franklin Building Supply Co. (“Franklin”). After the home was completed, Pond filed for bankruptcy and Franklin filed a lien on the Sumpters' property. Franklin subsequently filed a lien foreclosure action against the Sumpters in district court and, though the Sumpters prevailed at trial, the decision was appealed and this Court issued a decision March 4, 2004, reversing the lower court decision in part. The Sumpters filed their complaint against Holland in November 2002, asserting as damages the attorney fees they had paid to defend the lien foreclosure suit against Franklin. Holland subsequently moved for a Rule 12(b)(6) dismissal, which the trial court granted, finding that Holland and Wettstein were engaged in rendering professional services as contemplated by I.C. § 5-219(4). Accordingly, the two-year statute of limitations set forth for professional malpractice actions governed this case, and the district judge found the Sumpters had filed their complaint after the two-year period. The district judge also found that, even though the Sumpters asserted their action was for breach of contract, in reality it was a tort claim and the five-year breach of contract statute of limitations in I.C. § 5-216 did not apply. The Sumpters appeal the district court's dismissal. CONCLUSION We hold that real estate agents do not provide professional services for purposes of the professional malpractice statute of limitations in I.C. § 5-219(4). We also hold that the cause of action brought by the Sumpters lies in tort, not in contract, and therefore the four-year statute of limitations of I.C. § 5-224 applies here. Accordingly, the Sumpters filed their suit against Holland within the applicable statute of limitations period and the district court erred in dismissing the Sumpters' complaint. This case is reversed and remanded to the trial court for further proceedings.

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