                IN THE SUPREME COURT OF THE STATE OF IDAHO

                                        Docket No. 41501

ALAN GOLUB and MARILYN GOLUB,             )
husband and wife,                         )
                                          )
    Plaintiffs-Respondents,               )
                                          )
v.
                                          )
KIRK-HUGHES DEVELOPMENT, LLC, a )
Delaware limited liability company; KIRK- )
HUGHES & ASSOCIATES, INC., a Nevada )
corporation; GERALDINE KIRK-HUGHES )                         Boise, December 2014 Term
and PETER SAMPSON, husband and wife,      )
                                          )                  2015 Opinion No. 14
    Defendants-Appellants,                )
                                          )                  Filed: February 4, 2015
and                                       )
KIRK-SCOTT, LTD., a Texas corporation;    )                  Stephen W. Kenyon, Clerk
INTERNAL REVENUE SERVICE;                 )
TOMLINSON NORTH IDAHO, INC., an           )
Idaho corporation; KELLY POLATIS, an      )
individual; DELANO D. and LENORE J.       )
PETERSON, husband and wife,               )
                                          )
    Defendants.                           )
_______________________________________ )
                                          )


       Appeal from the District Court of the First Judicial District of the State of Idaho,
       Kootenai County. Hon. Lansing L. Haynes, District Judge.
       The orders of the district court are affirmed.
       Campbell & Bissell, PLLC, Spokane, Washington, for appellants. Michael S.
       Bissell argued.
       Winston & Cashatt, Lawyers, Coeur d’Alene, for respondents. Michael T.
       Howard argued.
                                    _____________________
J. JONES, Justice
       The respondents, Alan and Marilyn Golub (Golubs), obtained a judgment in the amount
of $941,000 against the appellants and recorded the judgment in Kootenai County. Kirk-Hughes


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Development, LLC (KHD), owned a parcel of real property in the county and therefore the
judgment constituted a lien against its property. KHD now claims to have executed a deed of
trust on the property in favor of Kirk-Scott, Ltd. (KS), several years before Golubs acquired their
lien. Golubs filed an action for declaratory judgment, seeking a ruling that their judgment lien
had priority over KS’ unrecorded deed of trust. The district court granted summary judgment to
Golubs, finding that their lien had priority. KHD and the other appellants filed a timely appeal.
                                        I.
                       FACTUAL AND PROCEDURAL BACKGROUND
        In 2004, Alan Golub was the listing real estate agent for properties then owned by Sloan
and Peterson, who each sought to sell their properties near Coeur d’Alene, Idaho. Golub worked
with other real estate agents to persuade Geraldine Kirk-Hughes and Geraldine’s sister, Balinda
Antoine, to participate in a development project potentially involving the purchase of the
Peterson and Sloan properties, among others. In July 2004, KS, a company owned by Balinda,
purchased the Sloan property.
        The Peterson property was the largest and most expensive of the properties, being 518
acres. Golub had an agreement with Peterson that would entitle Golub to a commission for the
sale of the Peterson property if Peterson closed on the sale of his property with one of the
potential buyers Golub had provided to Peterson by early November 2004. 1 One of the potential
buyers provided to Peterson by Golub was Geraldine. In July 2004, Geraldine became a party to
a purchase and sale agreement to acquire the Peterson property for $6 million. However, this
agreement lapsed in October or November 2004, and the sale was not closed.
        In October 2004, Geraldine formed KHD to develop the real estate project. On
November 18, 2004, KS granted the Sloan property to KHD by warranty deed. The same day,
KHD purportedly executed a deed of trust in favor of KS, covering a portion of the Sloan
property, though it is unclear from the record exactly what portion. KHD’s warranty deed for the
Sloan property was recorded on November 19, 2004, but the deed of trust in favor of KS was not
recorded at that time.
        In March 2005, Kelly Polatis, a business associate of Geraldine, purchased the Peterson
property. Polatis then deeded the Peterson property to KHD either the same day he acquired it or
very close in time. Golub believed these were straw-person transactions to deny him his

1
 There is some question as to whether there was an extension for this agreement to continue beyond November
2004, but the substance of the extension agreement, if any, is not clear from the record.


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commission on the sale of the Peterson property. In an attempt to recover the lost commission,
Golubs sued Geraldine, KHD, Kirk-Hughes & Associates, Polatis, and Peterson in 2007.
Geraldine, KHD, and Kirk-Hughes & Associates defended against the action for a year and a
half, but on March 11, 2009, Golubs obtained a default judgment in the amount of $941,000
against them. Golubs believed that they were unable to immediately record this judgment
because Peterson remained in the action and that the judgment could not be considered final until
there was a judgment against all defendants in the action or the court issued a Rule 54(b)
certificate. For an unknown reason, when the court entered the default judgment, it did not sign
the 54(b) certificate. Golub was in the process of seeking a Rule 54(b) certificate to pursue
collection against the defaulted defendants when KHD filed for Chapter 11 bankruptcy on April
6, 2009.
       Despite the purported deed of trust obligation from KHD to KS, KHD did not list on its
bankruptcy forms any secured claims regarding the property allegedly covered by that instrument
and did not list KS as a creditor. Additionally, KS did not file a creditor’s claim in the
bankruptcy proceeding. On September 17, 2010, while KHD’s bankruptcy was pending, KS
attempted for the first time to record its 2004 deed of trust. Golubs recorded their judgment a few
weeks later, after the bankruptcy case was dismissed without discharge.
       In early 2013, after a second bankruptcy by KHD was dismissed without discharge,
Golubs filed an action for declaratory judgment to establish the priority of their judgment lien
over KS’ purported prior, unrecorded deed of trust. In response, KS filed a motion to set aside
the $941,000 default judgment entered in 2009 and a motion for summary judgment on the 2013
priority action. Golubs also moved for summary judgment on the issue of priority. The district
court denied KS’ motions and granted Golubs’ motion for summary judgment. Following this
order, KS moved under I.R.C.P. 59(a) to amend/alter the order. KHD joined in the motion. The
district court denied the motion and ordered sanctions against KS and KHD, apportioned equally
between the two. KHD timely appealed.
                                             II.
                                     ISSUES ON APPEAL
1.   Whether the district court erred in granting Golubs’ Motion for Summary Judgment.
2.   Whether the district court abused its discretion by awarding sanctions against KHD.
                                              III.
                                           ANALYSIS


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A.     Standard of review.
       The standard of review on appeal from the district court’s grant of summary judgment is
well-settled.
               On appeal from the grant of a motion for summary judgment, this Court
       utilizes the same standard of review used by the district court originally ruling on
       the motion. Summary judgment is proper “if the pleadings, depositions, and
       admissions on file, together with the affidavits, if any, show that there is no
       genuine issue as to any material fact and that the moving party is entitled to a
       judgment as a matter of law.” I.R.C.P. 56(c). When considering whether the
       evidence in the record shows that there is no genuine issue of material fact, the
       trial court must liberally construe the facts, and draw all reasonable inferences, in
       favor of the nonmoving party. If the evidence reveals no disputed issues of
       material fact, then only a question of law remains, over which this Court exercises
       free review.

Conner v. Hodges, 157 Idaho 19, 23, 333 P.3d 130, 134 (2014) (internal case citations omitted).
“Statutory interpretation is a question of law subject to free review.” J & M Cattle Co. v.
Farmers Nat’l. Bank, 156 Idaho 690, 692, 330 P.3d 1048, 1050 (2014). On discretionary matters,
“[a] district court does not abuse its discretion when it (1) correctly perceives the issue as
discretionary, (2) acts within the bounds of discretion and applies the correct legal standards, and
(3) reaches the decision through an exercise of reason.” Agrisource, Inc. v. Johnson, 156 Idaho
903, 914, 332 P.3d 815, 826 (2014) (internal citations omitted).
B.     The district court did not err in granting Golubs’ motion for summary judgment.
       The district court granted Golubs’ motion for summary judgment, holding that Golubs
had priority to the property in question because they were the first to duly record their interest. In
support of this motion, Golubs had proposed an interpretation of Idaho Code section 55-606 in
which the requirements of good faith and valuable consideration do not apply to one who
acquires a valid judgment lien. KHD counters with many of the same arguments regarding
Golubs’ actual/constructive notice made by KS in its appeal of this matter, all of which we
rejected. See Golub v. Kirk-Scott, Ltd., 2015 WL 402794, at *6−8 (Idaho 2015). In KS’ appeal,
we adopted an interpretation of Idaho Code section 55-606 that does not prevent a judgment
lienholder from having a priority claim over a prior, unrecorded interest where the judgment
lienholder did not acquire his/her interest in good faith and for a valuable consideration. Id. We
held that those statutory requirements cannot logically apply to judgment lienholders. Id. at *7.
Although in this appeal KHD raises three minor points not raised in Kirk-Scott, as discussed



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below, none of these additional arguments changes this Court’s decision.
      KHD argues that Golubs failed to raise their statutory interpretation argument before the
district court and that this is an “absurd interpretation” that would give judgment creditors an
automatic “super-priority” “over all other interests, despite actual or constructive notice of other
legitimate interests held by third-parties.”
        First, KHD is simply incorrect in asserting that Golubs did not previously raise this
argument. A review of the hearing transcript of Golubs’ motion for summary judgment shows
this interpretation was the primary argument Golubs made in support of their motion to the
district court.
        Second, in Kirk-Scott we rejected KS’ argument regarding Golubs’ requirement to give
valuable consideration as judgment lienholders. Here, KHD makes a different yet equally
unpersuasive argument concerning Golubs’ giving of valuable consideration. KHD argues that a
judgment lienholder is required to give valuable consideration for his/her interest but that the
Golubs did give that consideration here. It argues that “a judgment constitutes legal value, and in
this instance the lien stems from Golub’s realtor fees that were purportedly unpaid.” KHD
essentially argues that one who obtains a judgment gives valuable consideration for that
judgment in the form of the underlying obligation to which the judgment relates, and therefore,
that Golub gave consideration for his judgment by performing realtor services for KHD. KHD
fails to meaningfully develop this argument or cite any authority to support it, and this failure
simply underscores the fact that the requirement of consideration does not logically apply to an
interest acquired by means of a judgment. Golub cannot be considered to have bargained for his
judgment against KHD, and KHD cannot be considered to have agreed to provide that judgment
in exchange for Golub’s realtor services.
        Third, although KHD claims the interpretation of Section 55-606 we adopted in Kirk-
Scott would give judgment lienholders a super-priority over all other interests despite actual or
constructive knowledge of those other interests, this is a very exaggerated statement of the result
under our interpretation. As we stated there, the only way for a subsequent judgment lienholder
to get priority over prior interests is if the subsequent judgment lien “is first duly recorded.” In
contrast to KHD’s claim that our interpretation would give the judgment lienholder priority
despite “constructive notice of other legitimate interests held by third-parties,” a subsequent
judgment lienholder would never get priority over an interest when constructive notice is



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involved. Constructive notice arises only in the case that the prior interest is validly recorded.
And, if the prior interest is validly recorded, the subsequent interest cannot have priority, even
under the interpretation we adopted in Kirk-Scott.
        Because our analysis and conclusion reached in KS’ appeal apply equally well in this
case, and because KHD’s additional arguments on the matter are unpersuasive, as in Kirk-Scott,
here we affirm the district court’s grant of summary judgment to Golubs.
C.      The district court did not abuse its discretion by ordering the sanctions against
        Kirk-Hughes.
        Here, the district court sanctioned KHD under I.R.C.P. 11(a)(1). In August 2013,
following the court’s order denying KS’ Rule 60(b) motion to vacate the Golubs’ 2009 default
judgment, KS filed a Rule 59(a) motion to amend/alter that ruling. The district court found that
“Kirk-Hughes filed a Notice of Joinder in Kirk-Scott’s motion, which was signed by Kirk-
Hughes’s counsel.” Additionally, “Kirk-Hughes filed its notice of joinder in Kirk-Scott’s reply
brief; the notice was signed by Mr. Bissell” (KHD’s counsel). The district court found this
motion to have been inappropriately brought by KS and KHD because it was in substance a
motion asking the court to reconsider its decision on the Rule 60(b) motion to vacate the 2009
default judgment, and a motion to reconsider a Rule 60(b) judgment is expressly prohibited by
Rule 11(a)(2)(B).
        Although KHD phrases the issue in its statement of issues as: “Did the District Court
abuse its discretion by awarding sanctions against Kirk-Hughes,” KHD does not cite any
authority or make any arguments that the district court abused its discretion in determining
sanctions were appropriate in this case based on the filings submitted to that court. 2 Instead,
KHD argues only that the district court abused its discretion in apportioning liability to KHD for
half of the ordered sanctions. KHD bases this argument on the statement in Golubs’ attorney’s
affidavit on attorney fees that stated, “Because the Kirk-Hughes Defendants did not file any
additional pleadings, or advance arguments beyond simply joining in Kirk-Scott’s Motion, there
was no separate time devoted to responding to the Kirk-Hughes Defendants’ joinder.” Therefore,
our analysis here is limited to whether the district court erred in apportioning part of the ordered
sanctions against KHD. The only authority KHD offers to support its position is Campbell v.

2
 Though KHD has not argued the filed documents did not warrant sanctions, it is worth noting that in Kirk-Scott we
affirmed the district court’s determination that the sanctions were warranted based on the submitted filings. 2015
WL 402794, at *14.


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Kildew, 141 Idaho 640, 651, 115 P.3d 731, 742 (2005), cited for the proposition that the amount
of attorney fees incurred should serve as a guide to the amount of sanctions awarded.
        “The standard of review for an appellate court reviewing a trial court’s imposition of
sanctions pursuant to I.R.C.P. 11 is one of abuse of discretion.” Campbell, 141 Idaho at 649–50,
115 P.3d at 740–41. Rule 11(a)(1) provides that, when appearing on a filing with the court,
        [t]he signature of an attorney or party constitutes a certificate that the attorney or
        party has read the pleading, motion or other paper; that to the best of the signer’s
        knowledge, information, and belief after reasonable inquiry it is well grounded in
        fact and is warranted by existing law or a good faith argument for the extension,
        modification, or reversal of existing law, and that it is not interposed for any
        improper purpose, such as to harass or to cause unnecessary delay or needless
        increase in the cost of litigation.
I.R.C.P. 11(a)(1). If the filing is signed in violation of this rule,
        the court, upon motion or upon its own initiative, shall impose upon the person
        who signed it, a represented party, or both, an appropriate sanction, which may
        include an order to pay to the other party or parties the amount of the reasonable
        expenses incurred because of the filing of the pleading, motion, or other paper,
        including a reasonable attorney’s fee.
Id. “Traditionally, a court’s determination of whether to issue sanctions falls on whether an
attorney made a proper investigation into the facts and legal theories before signing and filing a
document.” Campbell, 141 Idaho at 650, 115 P.3d at 741. “Rule 11 sanctions must be sufficient
to deter the misuse of the judicial process. . . .” Id. at 651, 115 P.3d at 742.
        Here, the district court ordered sanctions against KS and KHD under Rule 11(a)(1),
correctly recognizing such sanctions to be discretionary under Slack v. Anderson, 140 Idaho 38,
89 P.3d 878 (2004). KHD is correct that this Court has approved using attorney fees as a guide to
the amount of appropriate sanctions. However, the Court has not said that is the only method of
determining an appropriate sanction, and Rule 11(a)(1) by its plain language states that the court
shall impose “an appropriate sanction, which may include” costs and fees. KHD argues, “It is
undisputed that Golub did not incur any attorney fees responding to the Kirk Hughes
defendants.” This misconstrues Golubs’ attorney’s language in his affidavit. He did not say that
no time was spent. He said “because there were no separate filings or arguments advanced by
the Kirk-Hughes defendants, beyond an equal split, there is no further way to allocate the
reasonable time spent responding to the Motion between the parties”; and “there was no separate
time devoted to responding to the Kirk-Hughes Defendants’ joinder.” (Emphasis added). Use of
the word “separate” shows that time was still spent by Golubs’ attorney in response to a motion


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in which KHD joined. Just because the time spent cannot be separated between the time spent
against each individual defendant, does not mean that time was not necessarily spent in
defending against the motion in which KHD joined.
       By joining in KS’ motion, KHD was essentially signing that motion as well, certifying to
the court that KHD had made a proper investigation into the facts and legal theories supporting
the motion. Therefore, because the district court found “counsel did not conduct a proper
investigation upon reasonable inquiry as required by Rule 11(a)(1),” any counsel that signed that
submission to the court is sanctionable. It is not the writing of the submissions to the court or the
physically filing them with the court that is prohibited by Rule 11(a)(1). What is prohibited is the
lending of one’s name to the inappropriately filed document.
       Additionally, as the Court stated in Campbell, the sanctions must be sufficient to have a
deterrent effect on the offending party. Although KHD argues it was not directly responsible for
any of the attorney fees incurred by Golubs, a sanction of $0 would not have any deterrent effect
on KHD’s inappropriate conduct in joining in the motion. The court ordered Golubs to prepare a
memorandum of costs and fees and a proposed apportionment between KS and KHD. Golubs
submitted a memorandum reporting $4,819 in attorney fees and requested that amount be split
equally between KS and KHD. The district court ordered payment of $4,800 to be divided
equally between KS and KHD. The $2400 KHD was ordered to pay is not an excessive amount
and appears to have a logical relationship to the amount of work performed by Golubs’ attorney
in defending against the motion. It also seems sufficient to have some deterrent effect. Because
KHD clearly engaged in conduct prohibited by Rule 11 and because the $2400 sanction against
KHD is a reasonable amount, logically tied to KHD’s conduct, the district court acted within the
scope of its discretion and consistently with applicable legal theories.
       The court issued a well-reasoned, eight-page decision regarding sanctions, concluding
that it was ordering these sanctions upon its own initiative because it found:
       Kirk-Scott’s and Kirk-Hughes’ Motion to Amend/Alter Judgment and supporting
       briefing were not (1) grounded in fact, (2) warranted by existing law or a good
       faith argument for the extension, modification, or reversal of existing law, (3)
       were interposed for the improper purpose of unnecessary delay and (4) did cause
       needless increases in the cost of litigation.
The court analyzed its power to order sanctions, the standard to apply when doing so, and the
specific conduct that made sanctions appropriate here. Therefore, it reached its decision by an
exercise of reason. Based on the foregoing analysis, we hold that the district court did not abuse


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its discretion in ordering $2400 in sanctions against KHD.
                                            IV.
                                        CONCLUSION
       We affirm the district court in all respects and award costs on appeal to Golubs. Costs to
Golubs.


       Chief Justice BURDICK, and Justices EISMANN and HORTON, and Justice Pro Tem
WALTERS CONCUR.




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