Case Title: Bank of Commerce v. Jefferson Ent

Citation: 

Docket Number: 40034

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2013-06-20T00:00:00Z

Document:
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IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 40034 
 
THE BANK OF COMMERCE, an Idaho 
banking corporation, 
 
       Plaintiff-Counterdefendant-Respondent, 
 
v. 
 
JEFFERSON ENTERPRISES, LLC, an 
Idaho limited liability company, 
 
       Defendant-Counterclaimant-Appellant. 
 
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Pocatello, May 2013 Term 
 
2013 Opinion No. 74 
 
Filed: June 20, 2013 
 
Stephen W. Kenyon, Clerk 
 
Appeal from the District Court of the Sixth Judicial District of the State of Idaho, 
Bannock County.  Hon. Robert C. Naftz, District Judge. 
 
The decree of foreclosure and judgment of the district court are affirmed. 
 
Able Law PC, Pocatello, for appellant. A. Bruce Larson argued. 
 
Nelson Hall Parry Tucker, P.A., Idaho Falls, for respondent. Brian T. Tucker 
argued. 
_____________________ 
 
J. JONES, Justice. 
 
The Bank of Commerce (“Bank”) instituted this action to foreclose two mortgages 
against the Pocatello real estate development of Jefferson Enterprises, LLC (“Jefferson”). 
Jefferson counterclaimed on a variety of grounds. The district court granted summary judgment 
in favor of the Bank, ordering foreclosure of the mortgages. We affirm.   
I. 
FACTUAL AND PROCEDURAL HISTORY 
 
In late 2005 and early 2006, Jefferson was engaged in the development of a large 
subdivision known as the Southern Hills Project (the “Project”) in the City of Pocatello. At that 
time, a Jefferson entity owned an eighty acre parcel of land (the “Eighty Acre Parcel”), which 
was encumbered by a mortgage held by D.L. Evans Bank (“D.L. Evans”). Another Jefferson 
2 
 
entity held an option to purchase an adjacent parcel of property known as the “Wood Parcel.” 
The option on the Wood Parcel was set to expire on May 10, 2006, and the owners were 
unwilling to extend it. Jefferson considered the Wood Parcel to be critical to the success of the 
Project and began seeking financing for its acquisition in the final days of 2005. 
 
Jefferson, acting through its managing member Dustin Morrison, initially sought 
financing through D.L. Evans, which held the mortgage on the Eighty Acre Parcel.  Morrison 
proposed a loan of $2.8 million, which D.L. Evans declined although indicating a willingness to 
lend $2.2 million. On April 21, 2006, Morrison approached Steve Worton, a loan officer with the 
Bank, seeking a loan in the amount of $2.8 million. Morrison contends he submitted an 
application for funding in that amount, which proposed that the Bank take a first priority 
mortgage on the Wood Parcel and a second priority mortgage (behind D.L. Evans) on the Eighty 
Acre Parcel.1 Morrison further alleges that there was an oral “pre-commitment” of sorts—that as 
part of the negotiations leading up to the approval of the loan the Bank agreed to take a second 
position mortgage on the Eighty Acre Parcel. However, Worton testified that beginning with 
their first conversation, Worton and Morrison understood the Bank would have a first position 
interest in both parcels. In any event, on the 9th of May the Bank’s Board of Trustees approved a 
loan in the amount of $2,223,805, on the condition that the Bank have a first position security 
interest on both the Eighty Acre Parcel and the Wood Parcel. 
 
Faced with the imminent expiration of the option to purchase the Wood Parcel, Morrison 
contacted D.L. Evans in an attempt to negotiate a subordination of its mortgage on the Eighty 
Acre Parcel. D.L. Evans would not agree to subordinate. Thus, in order to place the Bank in first 
position per the conditions of the loan, Jefferson had to pay off the existing mortgage before it 
could close on the Bank’s loan. The loan closed on May 10, 2006. The initial note is in the 
principal amount of $2,223,805, dated May 9, 2006, and secured by a mortgage recorded on May 
10, 2006. The following year, Jefferson gave the Bank an additional note, representing accrued 
interest on the first note. The second note is in the amount of $400,000,2 dated June 27, 2009, 
and secured by a mortgage recorded on June 27, 2007.  
                                                          
 
1 The loan application actually consisted of Morrison’s oral presentation and a “fairly thick binder” that had “tax 
returns, financial statements, and an appraisal of the property, projected sales and other information.” The binder 
apparently went to the Bank’s loan committee on May 8, 2006, as part of the loan package. 
2 This note was subsequently amended on February 21, 2008, to increase the loan amount by $20,062.20 and to 
extend the due date from January 1, 2008, to May 1, 2008.  
3 
 
 
When Jefferson defaulted on the notes, the Bank filed this action to foreclose on its 
mortgages. Jefferson counterclaimed on a number of grounds. The Bank subsequently moved for 
summary judgment. The district court issued a memorandum decision and order on January 17, 
2012, dismissing Jefferson’s counterclaims and ordering the foreclosure of the Bank’s 
mortgages. That same day, the district court issued a judgment that essentially summarized what 
it had done in the order and required that each party pay its own attorney fees and costs. The 
Bank timely moved for an award of attorney fees and costs, while Jefferson moved for 
reconsideration. On April 19, 2012, the district court entered: decisions denying the motion to 
reconsider and granting the request for attorney fees and costs; a decree of foreclosure ordering 
the sale of the mortgaged properties; and a judgment granting attorney fees and costs.3 Jefferson 
filed a timely appeal. 
II. 
ISSUES ON APPEAL 
I. 
Did the Bank breach an agreement to take a second position security interest in the 
Eighty Acre Parcel? 
II. 
Did the Bank breach the implied covenant of good faith and fair dealing? 
III. 
Did the Bank intentionally interfere with a prospective economic advantage? 
IV. 
Did the Bank commit fraud? 
V. 
Did the district court improperly dismiss Jefferson’s promissory estoppel claim? 
VI. 
Did the district court err in finding that a series of novations occurred? 
VII. 
Did the district court err in determining that the Bank’s mortgages should be 
foreclosed? 
VIII. Is either party entitled to attorney fees on appeal? 
III. 
DISCUSSION 
A. Standard of Review. 
 
This Court employs the same standard as the district court in reviewing a grant of 
summary judgment. Buku Properties, LLC v. Clark, 153 Idaho 828, 832, 291 P.3d 1027, 1031 
(2012). Summary judgment is proper when “the pleadings, depositions, and admissions on file, 
                                                          
 
3 It is unclear why it was necessary to enter two separate judgments. The first judgment, entered on January 17, 
2012, appears to have been premature and not particularly in compliance with I.R.C.P. 54(a). It decides the issue of 
attorney fees and costs, even though the parties had 14 days from entry to submit their respective requests for the 
same. I.R.C.P. 54(d)(5) and 54(e)(5). Further, that judgment does not appear to state the relief to which the Bank 
was entitled but, rather, essentially summarized the provisions of the memorandum decision and order. The decree 
of foreclosure appropriately set out the relief to which the Bank was entitled but the second judgment, also entered 
on April 19, dealt solely with the award of attorney fees and costs. The first judgment could easily have been 
foregone and the second judgment could have set out the critical relief portions of the decree of foreclosure.  
4 
 
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). “If the 
evidence reveals no disputed issues of material fact, then only a question of law remains, over 
which this Court exercises free review.” Conway v. Sonntag, 141 Idaho 144, 146, 106 P.3d 470, 
472 (2005). 
B. The Bank did not breach an agreement to take a second position security interest in 
the Eighty Acre Parcel. 
 
Jefferson contends that the Bank agreed to take a second position security interest in the 
Eighty Acre Parcel and subsequently breached the agreement by requiring that it satisfy and 
discharge the D.L. Evans mortgage as a condition of obtaining the loan. It proffers two theories 
in support of this contention. Jefferson first alleges that the initial mortgage, which it signed on 
May 10, 2006 (the “Mortgage”), explicitly stated such an agreement. Alternatively, Jefferson 
contends that the parties reached some sort of pre-commitment oral agreement to that same 
effect.  
1. The Mortgage. 
 
Jefferson argues on appeal that “[t]he Mortgage provided that encumbrances of record, 
such as the [D.L. Evans mortgage], would have priority over the lien of the Bank’s Mortgage.” 
This contention is based on the following language in the Mortgage: 
6. WARRANTY OF TITLE. Mortgagor covenants that Mortgagor is lawfully 
seized of the estate conveyed by this Mortgage and has the right to grant, bargain, 
convey, sell, and mortgage the Property and warrants that the Property is 
unencumbered, except for encumbrances of record. 
. . . . 
 
8. PRIOR SECURITY INTERESTS. With regard to any other mortgage, deed of 
trust, security agreement or other lien document that created a prior security 
interest or encumbrance on the Property and that may have priority over this 
Mortgage, Mortgagor agrees: 
 
A. To make all payments when due and to perform or comply with all 
covenants. 
 
B. To promptly deliver to Lender any notices that Mortgagor receives 
from the holder. 
 
C. Not to make or permit any modification or extension of, and not to 
request or accept any future advances under any note or agreement secured by, the 
other mortgage, deed of trust or security agreement unless Lender consents in 
writing. 
 
5 
 
In essence, Jefferson’s argument is that since these two provisions make reference to existing 
encumbrances, the Bank’s Mortgage was subject to any existing encumbrance, including the 
D.L. Evans mortgage. 
The Bank counters that this argument was not raised in district court and should not be 
considered on appeal. The Bank presents a series of other counterarguments in the 
alternative―that the Mortgage does not say what Jefferson claims it does; that there were no 
existing encumbrances to be subordinate to at the time the Mortgage was executed; and that the 
Mortgage was not subscribed by the Bank and thus is barred by the Statute of Frauds.  
 
This Court has repeatedly held: “To properly raise an issue on appeal there must either be 
an adverse ruling by the court below or the issue must have been raised in the court below, an 
issue cannot be raised for the first time on appeal.” Garner v. Bartschi, 139 Idaho 430, 436, 80 
P.3d 1031, 1037 (2003) (quoting McPheters v. Maile, 138 Idaho 391, 397, 64 P.3d 317, 323 
(2003)). Thus, since this argument was not presented to the district court, we will not consider it 
on appeal.4 
2. Statute of Frauds. 
For summary judgment purposes, the district court assumed: 
that the Bank agreed to loan money in accordance with the terms and conditions 
of the Board of Trustees approval of Jefferson’s loan application [and] that the 
conditions of the loan agreement provided, among other things, that the Bank 
would be secured on the 80 Acre parcel in a second priority position. 
 
In other words, the court accepted Jefferson’s contention that the Bank made a pre-commitment 
promise to lend and take a second priority position on the Eighty Acre Parcel.5 But, since the 
“promise to loan money involved much more than $50,000,” the court concluded that it needed 
                                                          
 
4 Even if the argument had been properly presented below, the argument simply does not wash. Paragraphs 6 and 8 
of the Mortgage are boilerplate provisions that say nothing about the priority of the Bank’s security interest. 
Paragraph 6 merely sets out standard terms regarding warranty of title, while paragraph 8 sets out typical covenants 
regarding payment of existing secured creditors. These provisions do not state that the Bank will take a second 
priority position and, even if they did, the Bank correctly notes that by the time the Mortgage was executed there 
was no prior mortgage of record―the D.L. Evans mortgage had already been paid, satisfied and discharged by 
Jefferson.  
 
5 What Jefferson seems to arguing is that the Bank’s approval of the loan on May 9 was the loan commitment, but 
that prior to the commitment the Bank, acting through Worton, had agreed with the terms of the application 
submitted by Jefferson―that the Bank would take a second priority mortgage on the Eighty Acre Parcel. One must 
keep in mind that the application, as indicated in footnote 1, consisted of an oral presentation and a binder of 
documents. No particular writing has been identified by Jefferson as containing the proposal for a second position 
mortgage.  
6 
 
to consider the Statute of Frauds to determine the breach of contract claim. The court concluded 
that because the alleged pre-commitment promise was not in writing it was barred by the Statute 
of Frauds so there was no valid contract to breach. 
 
Jefferson argues on appeal that the Mortgage was the written document reflecting the pre-
commitment, which would thus satisfy the Statute of Frauds. It then argues that if the Statute of 
Frauds bars anything, it bars the Bank’s statements that it “would require the subordination of the 
80 Acre mortgage or that it would have to be in a first security position on the property.” 
Alternatively, Jefferson contends that the Statute of Frauds, to the extent it applies, would only 
bar the actual promise to loan money, as opposed to the part of the agreement establishing the 
Bank’s priority position. 
 
The Bank responds in agreement with the district court. It argues that the Statute of 
Frauds requires any promise or commitment to loan $50,000, or more, to be in writing, whatever 
it is called. Because any alleged pre-commitment was oral, the Bank contends that it is barred by 
the Statute of Frauds. 
 
Idaho’s Statute of Frauds is set forth at I.C. § 9-505. It provides in relevant part that: 
In the following cases the agreement is invalid, unless the same or some note or 
memorandum thereof, be in writing and subscribed by the party charged, or by his 
agent. Evidence, therefore, of the agreement cannot be received without the 
writing or secondary evidence of its contents: 
. . . . 
5. A promise or commitment to lend money or to grant or extend credit in an 
original principal amount of fifty thousand dollars ($50,000) or more, made by a 
person or entity engaged in the business of lending money or extending credit. 
 
I.C. § 9-505. In applying this statute to a case with similar facts, this Court held an oral 
agreement to lend $50,000 or more to be “invalid because it clearly violates I.C. § 9-505(5).”  
Lettunich v. Key Bank Nat. Ass’n, 141 Idaho 362, 367, 109 P.3d 1104, 1109 (2005). 
 
The transaction at issue in Lettunich was quite similar to this one. Id at 365, 109 P.3d at 
1107. There, the borrower, Lettunich, approached the defendant bank to negotiate a loan for the 
purpose of buying out his partner’s interest in a cattle operation. Id. Three loans exceeding 
$50,000 were negotiated―one for real estate, a term loan to purchase cattle, and an operating 
line of credit for the cattle business―and the bank sent Lettunich a separate commitment letter 
for each loan. We stated that the commitment letters did not satisfy the writing requirement of 
I.C. § 9-505(5) because they were never executed by the proper parties. Id. at 367, 109 P.3d at 
7 
 
1109. Nevertheless, Lettunich contended that the bank had orally contracted to loan him the 
funds necessary to pay for cattle he purchased at a partnership dispersion auction because of 
assurances given to him by a bank representative both before and during the sale. Id. at 365−66, 
109 P.3d 1107−08. In an affidavit, Lettunich stated that the bank representative repeatedly 
assured him the bank would “finance the purchase of the cattle,” that the representative told him 
to “continue to purchase the cattle at the sale” when he sought further assurances, and that he 
“never would have purchased the cattle at the dispersion sale if [he] had known [the bank] was 
not going to honor its commitment.” Id. at 366, 109 P.3d at 1108. However, after Lettunich had 
committed to buy over $400,000 in cows, the bank ultimately “refused to fund the cattle term 
loan and operating line of credit.” Id. The Court held that the Statute of Frauds disposed of the 
matter, saying: 
Lettunich argues there was an oral agreement between the parties. Viewing the 
evidence in a light most favorable to Lettunich, even if we infer there was an oral 
agreement between the parties at least as far as loaning money to purchase cattle, 
the oral agreement is invalid because it clearly violates I.C. § 9-505(5). 
 
Id. at 367, 109 P.3d at 1109. Even though Lettunich presented a more compelling case for relief 
than Jefferson has, he was unable to avoid the Statute of Frauds bar without a sufficient writing.  
 
The Statute of Frauds bars any breach of contract claim here. Assuming, as the district 
court did, that there was in fact a pre-commitment to loan money and that the Bank agreed to 
take a second position on the Eighty Acre Parcel, no one claims that such an agreement was in 
writing. Indeed, Morrison stated repeatedly throughout his deposition that the alleged pre-
commitment was not in writing: 
Q. [Bank’s Counsel] Now, back to this idea of, as you called it, kind of a 
precommitment, was there a precommitment given to you in writing? 
A. [Morrison] There was nothing given to me in writing. 
Q. So this precommitment idea that you are referring to again related to what you 
claim Steve Worton told you? 
A. Everything was related to what Steve Worton told me because there wasn’t one 
thing in writing, nothing. There wasn’t an approval in writing, there wasn’t a list 
of conditions in writing, contingencies in writing. There wasn’t a formal request 
in writing. Nothing was in writing. 
. . . . 
Q. I am asking about this what you called kind of this preapproval, on this April 
25 approval when Steve Worton called you. 
A. Yes. Like I said, I don’t know if it was April 25, but it was prior to [May 9]. 
Q. But, again, that wasn’t in writing. 
8 
 
A. No. 
Q. Nothing in writing that said that the bank would take a second position of that 
property. 
A. No. 
 
As in Lettunich, any pre-commitment from the Bank to lend Jefferson $2.8 million6 and take a 
second position on the Eighty Acre Parcel would have had to be in writing. Because no writing 
exists, the Statute of Frauds bars any alleged oral agreement.  
 
With regard to Jefferson’s contention that the Statute of Frauds only bars enforcement of 
a promise to loan money, but not an agreement as to the priority to a security interest, we note 
two insurmountable hurtles. First, in a mortgage lending transaction the priority of a security 
interest is a critical and integral part that cannot be separated from the rest of the agreement. 
Both parties contend that the security provisions were a critical part of this transaction, although 
they disagree as to what those provisions were. Thus, the security provisions were an essential 
term of the lending agreement. See Chapin v. Linden, 144 Idaho 393, 397, 162 P.3d 772, 776 
(2007) (“[O]nce parties attempt to provide for security it becomes an essential term of the 
contract.”) Second, the best evidence of the actual agreement of the parties regarding priority is 
what actually occurred in the transaction. Here, Jefferson discharged the D.L. Evans mortgage 
prior to closing and the Bank took a first mortgage on both parcels of Project property. Without a 
writing that complies with the provisions of I.C. § 9-505(5) to prove that the actual agreement of 
the parties was to the contrary, Jefferson has absolutely no grounds to assert a breach of contract 
claim. 
In sum, there are no disputed material facts that show the Bank made a loan pre-
commitment or other oral agreement that complied with the Statute of Frauds. We thus hold that 
the Bank did not breach any agreement and affirm the district court’s conclusion in that regard. 
C. The Bank did not breach the implied covenant of good faith and fair dealing. 
 
Jefferson alleges that the Bank breached the implied covenant of good faith and fair 
dealing by “changing its position and requiring Jefferson to pay off the existing loan on the 80 
Acre parcel.” The district court did not directly address this issue, nor did the Bank. But, because 
the Bank acted in accordance with the parties’ agreement, we hold that the Bank did not breach 
the implied covenant. 
                                                          
 
6 Jefferson contended that the oral agreement was for a loan of $2.8 million with a second position on the Eighty 
Acre Parcel. However, he acknowledges that the Bank only agreed to lend $2.2 million. Jefferson seems to concede 
that it agreed to this alteration in the terms of the alleged pre-commitment agreement.  
9 
 
 
Idaho law “implies a covenant of good faith and fair dealing when doing so is consistent 
with the express terms of an agreement between contracting parties.” Noak v. Idaho Dep’t of 
Correction, 152 Idaho 305, 309, 271 P.3d 703, 707 (2012). “When it is implied, ‘[t]he covenant 
requires that the parties perform, in good faith, the obligations imposed by their agreement.’” Id. 
(quoting Idaho Power Co. v. Cogeneration, Inc., 134 Idaho 738, 750, 9 P.3d 1204, 1214 (2000)). 
Such a claim may only be asserted by parties to a contract. Id. Even then, one can maintain a 
claim for breach of the covenant only when he or she ‘is denied the right to the benefits of the 
agreement [the parties] entered into.’” Id. 
 
Jefferson simply cannot show that it was denied the benefit of any valid contract 
provision. As discussed above, the Bank did not agree that it would take second position on the 
Eighty Acre Parcel, nor did it agree that it would never change its position during the course of 
negotiations. As for the Bank “requiring” Jefferson to pay off the existing loan, the choice to do 
so was ultimately Jefferson’s: 
Q. [Bank’s Counsel] Whenever it was, were you at that point committed to accept 
that loan from the Bank of Commerce? 
A. [Morrison] Yes. 
Q. So you had to accept the loan? 
A. In a practical sense, yes, because I had to perform by a certain date, and I 
hadn’t been pursuing a loan with anybody else. 
Q. But I am saying legally were you obligated— 
A. No. 
Q. You weren’t obligated to accept the loan that the bank gave you. 
A. Not legally; I could have lost the project. 
 
Morrison’s admissions show that Jefferson was not in fact required to pay off the D.L. Evans 
mortgage. Had he wished not to, he should have simply not taken the loan. His decision to take 
the loan does not itself create a material issue of fact that the Bank acted in bad faith. We thus 
affirm the district court’s holding that the Bank did not breach the implied covenant of good faith 
and fair dealing. 
D. The Bank did not intentionally interfere with a prospective economic advantage. 
 
The district court found that the Bank did not “intentionally propose . . . a loan that would 
interfere with and cause Jefferson to lose any economic expectancy.” Thus, the court concluded 
Jefferson could not prove its claim for intentional interference with a prospective economic 
advantage. Jefferson contends that the Bank did intentionally interfere with a prospective 
economic advantage by requiring the D.L. Evans loan to be paid off, “inducing termination of 
10 
 
[Jefferson’s] economic expectancy.” It bolsters this by further arguing that “Worton also knew at 
the time of the closing that the only likely source of money to pay off the 80 Acre encumbrance 
would have been from Jefferson’s working capital.” Thus, Jefferson concludes, the Bank’s 
“actions in reducing Jefferson’s ability to service the Bank’s loan” ultimately led to “catastrophic 
loss.” The Bank responds that, as found by the district court, there is no proof the Bank 
intentionally interfered with Jefferson’s economic expectancies.  
 
 A plaintiff seeking to establish a claim for intentional interference with a prospective 
economic advantage “must show (1) the existence of a valid economic expectancy, (2) 
knowledge of the expectancy on the part of the interferer, (3) intentional interference inducing 
termination of the expectancy, (4) the interference was wrongful by some measure beyond the 
fact of the interference itself, and (5) resulting damage to the plaintiff whose expectancy has 
been disrupted.” Cantwell v. City of Boise, 146 Idaho 127, 137–38, 191 P.3d 205, 215–16 
(2008); see also Highland Enter., Inc. v. Barker, 133 Idaho 330, 338, 986 P.2d 996, 1004 (1999). 
With respect to the third element, intentional interference, this Court has held that “the plaintiff 
may show that the interference ‘with the other’s prospective contractual relation is intentional if 
the actor desires to bring it about or if he knows that the interference is certain or substantially 
certain to occur as a result of his action.’” Highland, 133 Idaho at 340, 986 P.2d at 1006. We 
further clarified that “[i]ntent can be shown even if the interference is incidental to the actor’s 
intended purpose and desire ‘but known to him to be a necessary consequence of his action.’” Id. 
Because “[w]hat motivates a person to act seldom is susceptible of direct proof,” culpable intent 
may be inferred from conduct substantially certain to interfere with the prospective economic 
relationship. Id. 
 
The Highland Court applied these rules in examining an environmental group that 
engaged in “direct action” activism—“non-violent protest of road building and timber harvesting 
such as burying people in the road, erecting tripods in the road and sitting in the tripod, and 
chaining people to equipment and gates in order to block work.” Id. at 335, 986 P.2d at 1001. 
The Court noted that the defendants were not directly targeting the plaintiff with these actions, 
and the defendants indeed testified that “the intention was not to deprive Highland of, you know, 
a major portion of their economic activities.” Id. at 340, 986 P.2d at 1006. Even so, the 
defendants realized that their “activities also affected Highland even though Highland was not 
the direct target.” Id. We concluded that: 
11 
 
It is reasonable to infer from the evidence of the appellants’ conduct presented at 
trial that the conduct was substantially certain to interfere with an economic 
advantage. The substantially certain aspect of appellants’ conduct allows a finding 
of intent. Even more, regardless of the assertion that Highland was not the 
intended target of their activities and saving the trees was the ultimate objective, 
intent can be shown even if the interference is incidental to the actor’s intended 
purpose and desire, but known to him to be a necessary consequence of his action. 
A reasonable conclusion from the appellants’ activities is that even if they 
intended only to harm the Forest Service and preserve the Cove/Mallard area, a 
necessary consequence of their actions would be that those constructing the roads 
would suffer financially. 
 
Id. at 340–41, 986 P.2d at 1006–07. This Court thus held that substantial evidence supported a 
conclusion that the Highland defendants intended to terminate Highland’s prospective economic 
advantage. Id. 
 
Here, the Bank did not intentionally interfere with Jefferson’s prospective economic 
advantage because, as the district court concluded, the intent element is missing. Jefferson 
simply argues that the Bank’s insistence that Jefferson pay off the D.L. Evans loan on the Eighty 
Acre Parcel was intentional interference. But this does not rise to the level of intentional 
interference as set forth in Highland.  
 
The Bank’s purported interference was not an act of sabotage or mischief as in Highland, 
but an insistence on a certain set of loan terms, and this insistence alone would not imply that 
Jefferson would “suffer financially” as a necessary consequence. For all the Bank knew, 
Jefferson could have simply declined the Bank’s offer and found financing elsewhere. Or, it 
could reasonably have assumed that Jefferson was not foolish enough to take a loan that 
Morrison knew his company could not possibly repay. Jefferson’s argument appears to boil 
down to a contention that the Bank acted in bad faith simply because it did not vigorously try to 
discourage the company from taking a loan that Morrison realized was risky from the start―that 
is, that the Bank should have saved Jefferson from itself.  In any case, simply because the Bank 
presented Jefferson with financing terms it preferred—which it accepted, and which ultimately 
did not work out in its favor—does not lead to an inference that the Bank knew that Jefferson 
would suffer financially. Indeed, the terms offered by the Bank, and accepted by Jefferson, are 
essentially the same as had been extended by D.L. Evans―a $2.2 million loan where D.L. Evans 
already held first position on one parcel and would obtain it on the other. There is no indication 
that either bank had some nefarious intent to cause injury to Jefferson or to cause its Project to 
12 
 
fail by extending or proposing such terms. Jefferson has proposed no motive on the part of the 
Bank for wishing to cause Jefferson’s Project to fail―a result which would require the Bank to 
pursue extended litigation to foreclose upon its mortgages. Therefore, we hold that there was no 
intentional interference on the part of the Bank and accordingly affirm the district court’s 
determination of this claim. 
E. Jefferson failed to make a showing of fraud. 
 
The district court found that the Bank did not commit fraud because there was no 
evidence of a false statement, or reliance on the part of Jefferson, regarding: 1) the Bank taking a 
second position on the Eighty Acre Parcel; or 2) an alleged promise to provide further financing. 
Jefferson argues to the contrary, claiming the Bank and its officers “made the materially false 
representation that the Bank had agreed to accept a second lien position on the 80 Acre parcel 
allowing Jefferson to profit . . . from the existing favorable financing arrangement and to 
preserve its ability to use its liquid assets.” It contends that there is “abundant circumstantial 
evidence” of fraudulent intent, but unhelpfully, does not provide citations to the record to back 
up this claim. The Bank responds that the district court correctly found no evidence of several of 
the required elements of fraud.  
 
For a fraud claim to succeed a plaintiff must “establish nine elements with particularity: 
(1) a statement or a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker’s 
knowledge of its falsity; (5) the speaker’s intent that there be reliance; (6) the hearer’s ignorance 
of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant 
injury.” Chavez v. Barrus, 146 Idaho 212, 223, 192 P.3d 1036, 1047 (2008) (citing Lettunich, 
141 Idaho at 368, 190 P.3d at 1110). In Chavez, the plaintiff failed to establish that a title 
company made a false statement, that she was aware of any statement, that she relied on it, or 
that she suffered an injury as a result. Id. Accordingly, we concluded that the lower court did not 
err in dismissing her fraud claim. Id. 
 
Similarly, Jefferson has not shown a genuine issue of material fact regarding its fraud 
claim. In particular, we find no evidence here that the Bank made an intentional misstatement of 
material fact. Jefferson states, with no citation to the record, that “[t]he Bank and its officers 
made the materially false representation that the Bank had agreed to accept a second lien position 
on the 80 Acre parcel,” and that “the Bank intentionally or negligently concealed the fact that it 
would or could change its position” thereafter. The record provides no factual support for these 
13 
 
allegations. Furthermore, Jefferson claims that it “had the ‘right to rely’ on the misrepresentation 
made by the Bank that it would not allow Jefferson and the related businesses to fail and that the 
Bank would provide operating funds to Jefferson to that end.” But Jefferson points to no 
evidence that shows the Bank ever made such a representation. Indeed, the sole colloquy used to 
support this allegation shows the contrary: 
A. [Morrison] Steve [Worton] says there is no way the bank wants [Jefferson] to 
fail, there is no way that the bank wants this to fail, there is no way the bank 
wants this as an asset. So do whatever you think is the right thing for you to do, 
but if you do this, my hunch is that you will be able to come back into this bank 
and they will consider whatever your loss was. . . . So we moved forward 
understanding that it would be the bank’s effort to mitigate this impact of this new 
requirement on our business. 
Q. [Bank’s Counsel] And that’s based on what you claim Steve Worton told you? 
A. He didn’t say those words, but yes. 
Q. And did he give you something in writing to that effect? 
A. He didn’t give me anything in writing for anything. 
Q. So as I understood what you said, these are operating funds you think he was 
promising you? 
A. No. The ability to operate without those funds. I don’t think he was promising 
it, I think he was using some common sense argument that there is no way that the 
bank won’t do this. 
Q. So you didn’t view that as a loan commitment from the bank? 
A. No, I didn’t. It was just one penny of a dollar’s worth of consideration on what 
to do at that crossroads at that point in the 11th hour. 
Q. Ultimately you decided that you would accept the terms that the bank offered 
and close the loan. 
A. Yes. But I mean there was a temporary atmosphere to that commitment, too. 
Q. What do you mean by that? 
A. Meaning I felt like that we would probably go back to the table afterwards and 
figure something else out. Because it was so clearly expressed to Steve that from 
a common sense point of view I cannot continue to operate my business as we are 
doing now without this working capital. 
Q. Now, you say you thought there would be. Are you saying there was a 
commitment on the part of the bank? 
A. No. 
Q. That’s just what you thought would happen. 
A. Yes. That was a consideration that I made in choosing to do what I did. 
 
(Emphasis added.) At best, this shows that Worton told Morrison that he had a “hunch” that the 
Bank would “consider” Jefferson’s loss if he came back for additional funds—but Morrison 
testified that even this minimal commitment was not Worton’s “exact words.” Assuming Worton 
said something close to Morrison’s approximation, he was prognosticating at best and not 
14 
 
promising to never change position, or promising to extend future financing. What Worton’s 
exact words were are anyone’s guess, but the undisputed evidence shows the Bank made no 
representations that it would not change its position, or that it would extend further funding. 
Rather, Morrison was relying on something he simply “thought would happen.” Without 
evidence of a material misstatement of fact, the Bank could not have committed fraud. Thus, we 
affirm the district court’s finding that no fraud occurred. 
F. The district court correctly dismissed Jefferson’s promissory estoppel claim. 
The district court found that Jefferson’s promissory estoppel claim failed for the same 
reason its breach claim failed: “no [loan] pre-commitment” was in writing. Because “there was 
no written pre-commitment agreement,” there was also “no valid or definite agreement”. Thus, 
the court found, Jefferson could not recover based on estoppel. Jefferson makes a convoluted 
argument on appeal, arguing again that the Mortgage terms were incorporated into the loan 
agreement, and offering conclusory statements, with no citations to the record, that the elements 
of promissory estoppel were met. The Bank agrees with the district court that there was no valid 
loan commitment prior to closing. “As such,” it contends, “the Bank should not be estopped from 
denying a nonexistent agreement which would have violated the Statute of Frauds.”  
Promissory estoppel, generally speaking, means that “[a] promise which the promisor 
should reasonably expect to induce action or forebearance on the part of the promisee or a third 
person and which does induce such action or forebearance is binding if injustice can be avoided 
only by enforcement of the promise.” Smith v. Boise Kenworth Sales, Inc., 102 Idaho 63, 67–68, 
625 P.2d 417, 421–22 (1981) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 90(1) (1973)). 
This Court has further found that: 
 [A] party seeking to avail itself of the doctrine must show that: “(1) the detriment 
suffered in reliance was substantial in an economic sense; (2) substantial loss to 
the promisee acting in reliance was or should have been foreseeable by the 
promisor; and (3) the promisee must have acted reasonably in justifiable reliance 
on the promise as made.” 
 
Id. (quoting Mohr v. Shultz, 86 Idaho 531, 540, 388 P.2d 1002, 1008 (1964)). 
 
In the Lettunich case, the plaintiff attempted to invoke the promissory estoppel doctrine 
under similar facts. There, a bank argued that, due to the Statute of Frauds, an alleged oral 
promise to lend could not be enforced. Lettunich, 141 Idaho at 366, 109 P.3d at 1108. Lettunich 
responded that, “promissory estoppel should be used in this case to prevent KeyBank from 
15 
 
denying the enforceability of an oral promise.” Id. at 367, 109 P.3d at 1109. This Court noted 
that because the promise did not comply with the Statute of Frauds, “there was no complete 
promise . . . to be enforced.” Id. We further explained that “[p]romissory estoppel is simply a 
substitute for consideration, not a substitute for an agreement between parties.” Id. Accordingly, 
though Lettunich “clearly suffered a detriment when he purchased cattle without a way to pay for 
them,” the “doctrine of promissory estoppel [was] of no consequence . . .  because there [was] 
evidence of adequate consideration.” Id. at 368, 109 P.3d at 1110. We reiterated that what was 
“lacking [was] a sufficiently definite agreement” and without such an agreement, estoppel was 
not appropriate. Id. 
 
The Lettunich holding disposes of Jefferson’s claim here. As noted above, any alleged 
oral pre-commitment from the Bank would not be valid for failure to comply with the Statute of 
Frauds. And just as promissory estoppel would not substitute for an invalid agreement in 
Lettunich, it will not do so here. Because there is “no complete promise . . . to be enforced” here, 
Jefferson is unable to avail itself of promissory estoppel. We thus affirm the district court’s 
decision on this claim. 
G. Novation is not an issue. 
 
In ruling on the Bank’s motion for summary judgment, the district court found that a 
series of novations “changed the terms of the original loan application by Jefferson.” However, it 
concluded that “ultimately Jefferson entered into a loan agreement with the Bank which 
extinguished all other pre-loan agreements that may have been contemplated by the parties.” 
Jefferson disputes this on appeal arguing that “[i]ssues of fact arising from the circumstances of 
this case raise the issue of whether or not the elements necessary to find novation are present,” 
without explaining those circumstances in detail or bothering to cite to the record. The Bank 
responds that even if a valid pre-loan commitment existed, “any such agreement was 
subsequently extinguished and substituted by the written $2.2 million agreement.”   
 
This Court has held that “novation is a species of accord and satisfaction,” and one that 
“results when an accord and satisfaction is reached by substitution of a new agreement or 
performance in place of the performance or compromise of the original obligation.” Harris v. 
Wildcat Corp., 97 Idaho 884, 886, 556 P.2d 67, 69 (1976). Logically, for a novation to exist, 
there must first be a valid agreement to be substituted for. 
16 
 
 
Novation is not a relevant issue in this appeal. The district court apparently considered it 
an issue based on the assumption for summary judgment purposes that the oral agreement 
alleged by Jefferson did exist. But, the court then determined that the oral agreement was 
subsequently amended by the parties to result in the actual agreement that was carried out at 
closing―the Bank loaning $2.2 million and taking a first mortgage against both parcels. 
However, since any alleged oral agreement was barred by the Statute of Frauds, there was no 
valid agreement to be novated. No subsequent agreement complying with the Statute of Frauds 
exists. The question of novation is superfluous to the outcome of this case. This is simply a case 
where Jefferson applied for a $2.8 million loan with a first mortgage on one parcel and a second 
on the other, the Bank countered with an offer to loan $2.2 million with a first mortgage on both 
parcels, and Jefferson accepted and closed on the Bank’s terms. 
H. The district court did not err in ordering foreclosure. 
In its final issue presented on appeal, Jefferson claims: "The District Court erred in 
determining that the Bank’s Mortgage should be foreclosed in that there are disputed materials 
[sic] of fact that would have precluded the entry of summary judgment allowing the foreclosure.” 
Jefferson presents no argument specifically in support of this issue, apparently assuming that it 
would necessarily follow if the Court were to reverse the judgment of the district court. Since we 
affirm, there are simply no grounds to find that the district court erred in ordering foreclosure of 
the mortgages.  
I. The Bank is entitled to attorney fees based on contract. 
 
The Bank claims entitlement to attorney fees on appeal, pointing out that in both of the 
notes and mortgages at issue here, Jefferson agreed to pay “all costs and expenses incurred by 
[the Bank] in enforcing or protecting [its] rights and remedies,” including attorney fees and costs. 
“Where a valid contract between the parties contains a provision for an award of attorney fees, 
the terms of the contract establish a right to attorney fees.” Lamprecht v. Jordan, LLC, 139 Idaho 
182, 186, 75 P.3d 743, 747 (2003). Since the notes and mortgages provide that Jefferson must 
pay the Bank’s attorney fees and costs, we award the Bank its fees and costs on appeal. 
IV. 
CONCLUSION 
 
We affirm the decree of foreclosure and judgment and award the Bank its attorney fees 
and costs on appeal. 
17 
 
 
Chief Justice BURDICK, and Justices EISMANN, W. JONES and HORTON CONCUR.