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IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 44583

VALIANT IDAHO, LLC, an Idaho limited 

liability company,

Cross Claimant-Third Party Plaintiff-

 Respondent,

v.

NORTH IDAHO RESORTS, LLC, an Idaho 

limited liability company,

 Cross Defendant-Appellant.

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Boise, June 2018 Term

Filed: October 11, 2018

Karel A. Lehrman, Clerk

 Appeal from the District Court of the First Judicial District, State of Idaho, 

Bonner County. Hon. Barbara A. Buchanan, District Judge.

The judgment of the district court is vacated.

James, Vernon & Weeks, P.A., Coeur d’Alene attorneys for Appellant. 

Susan P. Weeks argued.

McConnell Wagner Sykes & Stacey, PLLC, Boise, attorneys for Respondent. 

Richard L. Stacey argued.

___________________________________

BEVAN, Justice

North Idaho Resorts, LLC (“NIR”) appeals an award of discretionary costs and 

costs as a matter of right awarded against it in Bonner County. NIR contends that the 

district court abused its discretion by awarding discretionary costs and that the court’s 

award of some costs as a matter of right was also erroneous. We vacate the judgment of 

costs and remand. 

I. FACTS AND PROCEDURE

This is an action arising out of a failed golf course and residential development project in 

Bonner County known as the “Idaho Club.” On March 9, 2006, NIR entered into a Real Property 

Purchase and Sale Agreement with Pend Oreille Bonner Investments, LLC (“POBI”) regarding

the sale of a golf course, a clubhouse and parcels of real property. NIR did not record a purchase 
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money mortgage against the real property, instead filing a memorandum of sale giving notice of 

its vendor’s lien. 

Pend Oreille Bonner Development, LLC (“POBD”), a successor to POBI, subsequently 

took-out several loans on the real property, agreed to promissory notes, and mortgaged The 

Idaho Club real property with three different lenders: RE Loans, LLC, Pensco Trust Co., and 

Mortgage Fund ’08 LLC (the “lenders”). POBD ultimately defaulted on its obligations on the 

promissory notes associated with the mortgages. In addition to defaulting on the notes, POBD 

failed to pay various mechanics and materialmen, one of which was Genesis Golf Builders, Inc. 

(“Genesis”).

Genesis brought suit against POBD on October 13, 2009, alleging breach of contract and 

sought to foreclose on its mechanic’s lien against POBD’s property interest in the Idaho Club. 

Genesis also named multiple additional defendants in its suit, including the lenders. Cross-claims 

and counterclaims were alleged by several defendants. The lenders successfully defended the 

priority of their respective mortgages against all of these claims and cross-claims. The district 

court called this part of the litigation the “Genesis Suit.”

While the Genesis suit was pending, the three lenders assigned their rights to Valiant 

Idaho, LLC (“Valiant”). Valiant entered the litigation by substituting itself as the real party in 

interest for the lenders. Valiant then amended the answers filed by the lenders previously, and 

filed a Counterclaim, Cross-Claim and Third-Party Complaint for Judicial Foreclosure against 

POBD, as well as to foreclose any interest that NIR and others held in the Idaho Club. NIR 

countered that it held an interest in the real property superior to Valiant’s. The district court 

called this part of the litigation the “Valiant Foreclosure.” 

Valiant moved for summary judgment seeking a ruling that the mortgages assigned to it 

were senior and superior to all interests claimed by any other defendant, including NIR, in the 

Idaho Club real property. Ultimately, the district court granted Valiant’s motion for summary 

judgment against NIR, finding that NIR’s interest in its vendor’s lien was subordinated to the 

mortgage loans because of a 2007 subordination agreement. The court’s order held that Valiant’s 

mortgages were “senior to any right, title and interest in the Idaho Club property” by NIR. NIR 

filed a motion for reconsideration that was also denied by the court. NIR did not participate 

further in the litigation at that point.

Two other defendants (JV, LLC (“JV”) and VP, Inc. (“VP”)) survived summary 

judgment and their claims were litigated in a four-day court trial. The district court found in 
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Valiant’s favor, and on July 20, 2016, entered a judgment awarding Valiant damages against 

POBD in the amount of $21,485,212.26 for its breach of the promissory notes underlying the 

mortgages. The judgment also declared that Valiant’s mortgages had priority over any property 

interest claimed by NIR or others. 

After the trial involving VP and JV’s defenses to the Valiant Foreclosure, Valiant filed a 

memorandum of costs and attorney fees against POBD, as well as against NIR,1 JV, and VP 

(hereinafter referred to as the “three defendants”). To understand what went wrong with the cost 

judgment entered against NIR it is important to begin with Valiant’s motion because it frames 

the issues presented to the district court. Valiant argued that it was entitled to attorney fees 

against POBD pursuant to the terms of its mortgages and Idaho Code section 12-120(3) which 

governs the award of attorney fees in commercial transactions. It argued that it had a right to fees

against VP, JV, and NIR under Idaho Code section 12-121 because the defenses raised by the 

three defendants were frivolous. Valiant also sought costs against all four parties. It claimed 

costs as a matter of right in the amount of $13,755.39 and discretionary costs in the amount of 

$30,593.64 (total costs of $44,349.03). Valiant requested that VP, JV, and NIR be held jointly 

and severally liable for the attorney’s fees under Idaho Code section 12-121 and the majority of

the costs. 

After Valiant filed its memorandum, NIR, VP and JV filed objections. POBD did not file 

an objection. The district court, after reviewing the parties’ various filings, determined that 

Valiant was the prevailing party. No one challenged that determination on appeal. 

The district court awarded Valiant attorney’s fees and costs against POBD. As noted, the 

district court viewed the litigation as two discrete parts – the three lenders’ defense of the 

original mechanic’s lien claim and Valiant’s subsequent prosecution of a cross-claim for breach 

of contract and a cross-claim and thirty party claims for mortgage foreclosure. The district court

awarded costs and fees against POBD in connection with both parts. For the Valiant Foreclosure 

 1 Valiant contends for the first time on appeal that NIR has waived its right to appeal because it did not join in the 

objection to costs and attorney’s fees filed by VP in this case. The same attorneys represented VP and NIR in the 

district court, but the objection filed by that law firm was titled “VP, Inc.’s Opposition to Valiant Idaho’s 

Memorandum of Costs and Attorney Fees” and the introductory sentence of the opposition stated that “VP . . . 

submits this opposition.” Even so, the opposition memorandum advanced arguments on behalf of both NIR and VP. 

We apply I.R.C.P. 8(e) to this question, which directs that we construe the pleadings “as to do justice.” See also 

I.R.C.P. 1(b) (“These rules should be construed and administered to secure the just . . . determination of every action 

and proceeding.”). The district court considered the opposition as having been made on behalf of NIR as well as VP, 

and we do likewise. NIR therefore did not waive its right to pursue its objection in this appeal.
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(the part in which NIR, VP and JV participated), the district court made the following award 

against POBD:

Valiant Foreclosure

Total Attorney’s Fees $579,460.50

Total Costs as a Matter of Right $2,869.34

TOTAL COSTS $582,329.84

The only costs as a matter of right awarded against POBD were the service costs 

involved in initiating the Valiant Foreclosure against twenty-eight other defendants who held an 

interest in the real property at issue. The district court spared POBD from the remaining costs 

totaling more than $41,000 in large part because POBD did not defend against the foreclosure or 

participate adversely to Valiant. The district court reasoned: “To avoid duplicate cost awards, 

and because POBD did not defend against the Valiant Foreclosure or participate adversely to 

Valiant at trial, the Court shall assess the remaining costs as a matter of right and discretionary 

costs incurred by Valiant in the Valiant Foreclosure against JV, VP and NIR, and not against 

POBD.” 

The district court then apportioned the remaining costs between the three lenders, 

reasoning:

The Court is authorized by Idaho Rule of Civil Procedure 54 to apportion costs 

between the defendants. Recognizing that NIR participated in pre-and post-trial 

motion practice, but not in the court trial, this Court apportions the costs as 

follows:

1. NIR is responsible for 0.25 of $41,479.69 = $10,369.93

2. JV is responsible for 0.375 of $41,479.69 = $15,554.88

3. VP is responsible for 0.375 of $41,479.69 = $15,554.88

The district court denied Valiant’s request for attorney’s fees against the three 

defendants, concluding: “Though some of the claims and defenses raised by JV, NIR and VP 

lacked any factual or legal basis, viewing the entire course of the litigation, this Court does not 

believe that JV, NIR or VP defended this action frivolously, unreasonably, or without 

foundation.” 

NIR timely filed its appeal thereafter, challenging only the court’s award of these costs 

against it.
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II. STANDARD OF REVIEW

This Court has long held that “[t]he award of costs as a matter of right and discretionary 

costs is subject to the trial court’s discretion. I.R.C.P. 54(d)(1)(C, D).” Great Plains Equip. Inc. 

v. Nw. Pipeline Corp., 136 Idaho 466, 474, 36 P.3d 218, 226 (2001). In considering whether the 

district court abused its discretion in ruling on a request for costs, this Court reviews:

Whether the trial court: (1) correctly perceived the issue as one of discretion; (2) 

acted within the outer boundaries of its discretion; (3) acted consistently with the 

legal standards applicable to the specific choices available to it; and (4) reached 

its decision by the exercise of reason. 

Lunneborg v. My Fun Life, 163 Idaho 856, ___, 421 P.3d 187, 194 (2018). The party opposing an 

award of costs bears the burden of demonstrating there was an abuse of discretion by the district 

court. Hayden Lake Fire Prot. Dist. v. Alcorn, 141 Idaho 307, 313, 109 P.3d 161, 167 (2005).

III. ANALYSIS

A. The district court’s award of costs constituted an abuse of discretion.

Idaho Rule of Civil Procedure 54(d) allows the trial court to award a prevailing party its 

costs incurred in prosecuting an action. The question for appeal is whether the district court

abused its discretion in granting costs against NIR. 

NIR’s initial challenge is that the district court failed to recognize its discretion here. 

Although the district court did not explicitly state it was making a discretionary decision about

costs, it is “clear from the record that the district court recognized [the award of costs] as one of 

discretion.” Hall v. State, 151 Idaho 42, 50, 253 P.3d 716, 724 (2011). The district court clearly 

articulated the Rule and separately analyzed its awards of costs as a matter of right and 

discretionary costs. The district court also stated that it was “authorize[d]” to award discretionary 

costs under Idaho Rules of Civil Procedure 54—not that it had to do so. And by citing Rule 

54(d)(1)(D), the district court referred to such costs as “discretionary costs” throughout its 

memorandum decision and determined that certain discretionary costs were “necessary and 

exceptional, reasonably incurred, and should in the interest of just be assessed against [NIR].” 

(Emphasis added). Therefore, although the district court made no explicit statement that the grant 

of costs is a discretionary matter, the court viewed its decision-making process as a discretionary 

one.

As noted, nearly the entire cost burden for the Valiant foreclosure, including the litigation 

guarantee purchased before commencement of the Valiant foreclosure, has been borne by three 
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defendants: JV and VP, both of which litigated the case through trial, and NIR, which 

unsuccessfully defended a summary judgment motion and lost a motion to reconsider. We

recognize our standard of review, and acknowledge the preeminent position of the district court 

to review the entirety of the seven-year case and award costs as it determined was equitable; 

however, even under that deferential standard of review we conclude that the district court 

abused its discretion in the way that costs were awarded here. 

As noted above, the court awarded a sizeable judgment, exceeding $21 million, against 

POBD. The court also found that POBD was responsible for attorney fees, which it awarded 

against POBD in an amount exceeding $700,000. Discretionary costs were also awarded against 

POBD in the sum of $1,312.24, as were costs as a matter of right in the sum of $3,649.74. The 

most-expensive cost item in this suit was the litigation guarantee, which amounted to 

$20,705.00. 

When reviewing matters involving the discretion of the court we apply the four-prong 

Lunneborg test set forth above. Here we conclude that the district court understood its discretion 

and acted within the outer boundaries of that discretion. We hold, however, that the court erred 

regarding the other two prongs of discretion: acting consistently with the legal standards 

applicable to the specific choices available to it and reaching its decision by the exercise of 

reason.

1. The district court abused its discretion by using a formulaic analysis in this case.

As noted, the district court awarded costs against the three defendants on a percentage 

basis. The only explanation noted by the court for this conclusion is that the court “is authorized 

by Idaho Rule of Civil Procedure 54 to apportion costs between the defendants.” The authority 

that the court relied on only allows for an apportionment when “a party to an action prevailed in 

part and did not prevail in part . . . .” I.R.C.P. 54(d)(1)(B). Thus, by apportioning costs 

according to its formula, without providing any additional reasoning, the court failed to properly 

apply the applicable legal standard while exercising its discretion. This is not to say that trial 

courts cannot assess costs to non-prevailing co-defendants in a proportionate way, based on their 

respective responsibilities for those costs; however, when a court does so, it must provide the 

basis for its reasoning, particularly stating why the costs should be apportioned among the 

adverse parties in the manner designated by the court. The court’s order here failed to state those 

reasons, other than intimating that NIR did not participate at trial, and thus was ordered to pay a 
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smaller percentage. The court’s percentage itemization alone is insufficient to establish that the 

court exercised reason in reaching its decision. 

As noted, the trial court gave NIR some credit for not appearing at the trial in this case by 

assessing only 25% of the total costs against it, rather than 33% of those costs, which would have 

amounted to an equal splitting of 1/3 for each defendant which opposed Valiant in the 

foreclosure case. While the court’s decision had the effect of reducing NIR’s cost obligation by 

8% compared to an equal split, using such a formula for apportioning costs, without more, was

inadequate. The district court’s opinion awarding costs did not go into great detail why the 25% 

amount was an appropriate landing spot in its analysis, other than “[r]ecognizing that NIR 

participated in pre- and post-trial motion practice, but not in the court trial.” Such a perfunctory 

declaration is insufficient in circumstances like this case, when a party is not an active participant 

in the trial. As a result, “our role is to note the error made and remand the case for [the trial court 

to make] appropriate findings. Gem State Ins. Co. v. Hutchison, 145 Idaho 10, 15–16, 175 P.3d 

172, 177–78 (2007) (citing Miller v. Haller, 129 Idaho 345, 351, 924 P.2d 607, 613 (1996)).

2. The district court abused its discretion in awarding some costs as a matter of right 

against NIR. 

Rule 54(d) allows the district court to award certain enumerated costs “as of right” to the 

prevailing party in a litigation. The Rule provides that those costs are awardable, as long they are 

reasonably incurred, I.R.C.P. 54(d)(1)(C), without the need for much additional analysis by the 

court. That said, we hold that for a party to be responsible to pay for such costs, one factor which 

the court must consider is whether the party was an active participant in the litigation when the 

costs were incurred. The court’s summary findings here do not adequately address this question.

The court awarded costs as a matter of right against NIR for these items: Court filing 

fees, witness fees, expenses of certified copies of documents admitted as evidence in hearings or 

at trial, costs of preparing models, maps, pictures, photographs or other exhibits not to exceed 

$500, and charges for reporting and transcribing depositions. NIR was held responsible for 25% 

of the total sum awarded for these costs. 

Rule 54(d)(1)(C)(iii)-(iv) makes it clear that witness fees and travel costs are limited to 

witnesses who testify at trial. Similarly, Rule 54(d)(1)(C)(vi)-(vii) makes it clear that costs for 

certified documents and other exhibits pertain only to those items admitted at a trial or hearing. 

Given the express language of these rules, NIR should not be taxed with any amount of these 
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costs where it did not participate in the trial or hearings2 at issue. NIR’s absence from the trial 

means that it is not responsible for any amount of costs as a matter of right that were incurred

relating solely to the trial. For example, the costs for “documents admitted as evidence” at trial, 

costs for “preparation of models, maps, pictures, photographs or other exhibits admitted at trial,” 

or “witness fees or travel expenses for witnesses to attend the trial,” see id. subsections iii-vii, are 

not the responsibility of NIR. Thus, the court’s blanket award of 25% of those costs against NIR 

violated the legal standard applicable to awarding such costs. 

The deposition costs, however, present a different question. Rule 54(d)(1)(C)(x) provides 

that the prevailing party is entitled to “charges for reporting and transcribing of a deposition 

taken in preparation for trial of an action, whether or not read into evidence in the trial of an 

action.” Similarly, Rule 54(d)(1)(C)(xi) covers the “charges for one (1) copy of any deposition 

taken by any of the parties to the action in preparation for trial of the action.” There is no 

requirement that the deposition be used at trial, and thus there is no requirement that ongoing 

participation in the litigation is a prerequisite for awarding such costs. The timing of a deposition 

should not necessarily determine who is responsible for the cost. Here, there may have been 

depositions taken before NIR became a party to the action that benefitted NIR or saved the 

company from the expense of taking its own deposition of a particular witness. Whether, and 

how much, NIR should be assessed with a portion of these deposition costs will be left to the 

district court on remand. Evans v. Sawtooth Partners, 111 Idaho 381, 387, 723 P.2d 925, 931 

(Ct.App. 1986).

3. The district court’s award of some discretionary costs constituted an abuse of 

discretion. 

NIR asserts that the district court failed to apply the applicable legal standards when it 

awarded discretionary costs. Idaho Rule of Civil Procedure 54(d)(1)(D) provides:

[A]dditional items of cost not enumerated in, or in an amount in excess of that 

listed in subpart (C) may be allowed on a showing that the costs were necessary 

and exceptional costs, reasonably incurred, and should in the interest of justice be 

assessed against the adverse party. The trial court, in ruling on objections to 

discretionary costs, must make express findings as to why the item of 

discretionary cost should or should not be allowed. 

 2 The parties and district court may have to re-examine which hearings NIR participated in and when the costs were 

incurred to determine what, if any, costs should be awarded in this category.
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Thus, to be awardable, discretionary costs must: 1) be necessary; 2) be exceptional; 3) be 

reasonably incurred; and 4) in the interest of justice be assessed against the adverse party. The 

trial court must also “make express findings” about why discretionary cost items should or 

should not be allowed. As we recognized in Hayden Lake Fire Prot. Dist. v. Alcorn, 141 Idaho 

307, 109 P.3d 161 (2005):

The district court may in its discretion award a prevailing party certain costs 

where there has been “a showing that the costs are necessary and exceptional, 

reasonably incurred, and should in the interests of justice be assessed against the 

adverse party.” I.R.C.P. 54(d)(1)(D). Any party opposing the award will bear the 

burden of demonstrating an abuse of discretion by the trial court. I.R.C.P. 

54(d)(1)(C),(D); When ruling upon objections to discretionary costs the district 

court is required to make express findings as to whether the costs are reasonable, 

necessary, and exceptional and should be awarded against the adverse party in the 

interests of justice. I.R.C.P. 54(d)(1)(D); Perry v. Magic Valley Reg'l Med. Ctr.,

134 Idaho 46, 60, 995 P.2d 816, 830 (2000)(where trial court failed to describe 

the circumstances giving rise to its allowing or disallowing certain costs the 

reviewing court could not determine if the trial court had applied the correct legal 

standard).

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In reviewing a grant or denial of discretionary costs, the key issue is whether the 

record indicates express findings by the district court as to whether a cost was 

necessary, reasonable, exceptional and should be awarded in the interests of 

justice. The district court does not have to engage in a lengthy discussion of these 

factors.

141 Idaho at 315, 109 P.3d at 169 (internal quotations and citations omitted). 

Invariably, disputes over discretionary costs seem to center on whether the cost is 

“exceptional” and whether it is just to assess the adverse party with it. Several years ago, this 

Court recognized in Hoagland v. Ada County, 154 Idaho 900, 914, 303 P.3d 587, 601 (2013), 

that the Court had been inconsistent with its handling of what constitutes an “exceptional” cost. 

The Court compared and contrasted the results in six different cases, concluding that it needed to 

clarify what makes a case exceptional and the criteria that trial courts should consider:

We therefore clarify that numerous complaints, depositions and expert 

testimony does not render a case in and of itself exceptional. Rather, courts should 

assess the context and nature of a case as a whole along with multiple 

circumstances. The mere fact numerous experts were retained or numerous 

amendments were filed does not standing alone render a case exceptional. 

Particular standards a court should consider include, but are not limited to, 

whether there was unnecessary duplication of work, whether there was an 

unnecessary waste of time, the frivolity of issues presented, and creation of 

unnecessary costs that could have been easily avoided. Most importantly, 
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however, a court should explain why the circumstances of a case render it 

exceptional. 

Hoagland, 154 Idaho at 914, 303 P.3d at 601 (emphasis added). The key point from this 

pronouncement is that the Court’s suggested “standards a court should consider” are not limited 

to blame-worthy conduct. While such misdeeds may support an award of an exceptional 

discretionary cost, we take this occasion to note again that a cost is not exceptional simply 

because it is labeled as such. Moreover, costs other than those attributable to Rule 11-type 

misconduct can also be exceptional. The takeaway is that a cost cannot simply be labeled as 

“exceptional” without adequate explanation. Counsel seeking an award of discretionary costs, 

and trial courts awarding the same must provide reasons why a particular cost is exceptional. 

Here, the district court was required to make express findings about the general character 

of costs and why they were necessary, reasonable, exceptional, and should be awarded in the 

interest of justice. The district court made these five express findings about discretionary costs:

1. The witness fees Valiant paid in excess of the $20.00 per day were necessary 

and exceptional, reasonably incurred, and should in the interest of justice be 

assessed against defendants.

2. The case required the scanning and copying of thousands of pages of

documents. Mr. Stacy estimates that approximately 27,000 documents were 

produced in discovery; nearly 200 documents were scanned into exhibits for 

trial; and hard copies of all exhibits were required for the witnesses and record 

at trial. These costs were necessary and exceptional, reasonably incurred, and 

should in the interest of justice be assessed against the defendants.

3. In order to ensure that every person or entity with an interest in the Idaho Club 

Property was named as a defendant in the Valiant Foreclosure, Valiant 

obtained and paid for a Litigation Guarantee. This Litigation Guarantee was 

critical to the foreclosure action, and the Court finds that it was a necessary 

and exceptional cost, reasonably incurred, and should in the interest of justice 

be assessed against the defendants.

4. Counsel for Valiant is located in Boise, Idaho. Valiant incurred significant 

travel expenses to and from the multiple hearings that were necessary in the 

Valiant Foreclosure. Although this Court has found no frivolous conduct on 

the part of the defendants, at several of those hearings, counsel for one or 

more of the defendants presented oral arguments not supported by any legal 

authority or raised issues and claims that had already been determined on 

summary judgment. Because of the complexity of the case, it was necessary 

for counsel to appear in person and not by telephone. Thus, the court finds

these travel costs were necessary and exceptional, reasonably incurred, and 

should in the interest of justice be assessed against the defendants. 

5. Similarly, because Valiant had to defend against multiple motions for 

reconsideration by the defendants, some of which contained claims 

unsupported by any legal authority or that had already been determined on 
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summary judgment, the Court finds certain other cost were also necessary and 

exceptional and reasonably incurred, and in the interest of justice should be 

assessed against the defendants. They include Valiant’s (i) outsourced 

photocopy expenses; (ii) in-house photocopy expenses; (iii) postage expenses; 

(iv) courier costs; (v) telephone expenses; and (vi) cost of computer-assisted 

research.

As an initial matter, the cost for computer-assisted research is not to be included in an 

award of costs. Such expenses may only be included as part of an attorney fee award. I.R.C.P. 

54(e)(3)(K) (“the reasonable cost of automated legal research (Computer Assisted Legal 

Research), if the court finds it was reasonably necessary in preparing a party’s case” may be 

considered in determining the amount of an attorney fee award). The district court abused its 

discretion when it included computer-based research as a discretionary cost.

Other than for the litigation guarantee, which we will discuss separately, the court’s 

findings as to travel expenses, photocopy expenses, postage expenses, courier costs, and 

telephone expenses require additional findings to support the court’s exercise of discretion. The 

district court did not consider the Hoagland factors when it decided to award scanning, postage, 

courier and copying costs here. As we noted in Hoagland, “approximately 27,000 documents 

were produced in discovery; nearly 200 documents were scanned into exhibits for trial and hard 

copies of all exhibits were required for the witnesses and record at trial.” 154 Idaho at 914, 303 

P.3d at 601. Without an explanation of why these discretionary costs were exceptional (there is 

nothing particularly exceptional about producing 27,000 documents in modern litigation), the 

district court’s decision cannot stand.

We also part ways with the district court’s holding NIR responsible for costs because of

“multiple motions for reconsideration [filed] by the defendants.” NIR filed one such motion. It 

was also held responsible for travel costs for several “hearings [where] counsel for one or more 

of the defendants presented oral arguments not supported by any legal authority or raised issues 

and claims that had already been determined on summary judgment.” If these were hearings at 

which NIR was making such arguments, they are rightly responsible for those costs; however, if 

they were not part of such hearings, or did not make unsupported legal arguments, it is 

inappropriate to hold them responsible for those charges. The court must address this distinction 

in its findings upon remand.

We also note that the failure to award any of these discretionary costs to POBD, whose 

default generated this litigation in the first place, to be an abuse of discretion. While the court 
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found that it was awarding most the costs against JV, VP and NIR because “POBD did not 

defend against the Valiant Foreclosure or participate adversely to Valiant at trial, . . .” the trial 

court must also consider the “interests of justice” requirement for awarding costs, and include the 

primary party responsible for those costs in its calculation. In apportioning costs in the future, we 

recognize that the judgment as to POBD is final and cannot be reopened. Even so, POBD’s 

proportionate share must be considered and factored-into the court’s future apportionment of 

costs among the remaining three parties – NIR, JV and VP.

Which party, if any, should bear the cost of the litigation guarantee is the biggest issue on 

appeal. The district court made that call in favor of Valiant, noting the complexity of the 

litigation and finding expressly that the guarantee was critical to ensure that proper parties were 

named as defendants. The district court’s decision stated:

In order to ensure that every person or entity with an interest in the Idaho 

Club Property was named as a defendant in the Valiant Foreclosure, Valiant 

obtained and paid for a Litigation Guarantee. This Litigation Guarantee was 

critical to the foreclosure action, and the Court finds that it was a necessary and 

exceptional cost, reasonably incurred, and should in the interest of justice be 

assessed against the defendants.

The district court’s decision certainly used the language embodied in Rule 54, but it 

cannot be stretched to explain why the litigation guarantee constituted an exceptional cost as 

required by this Court’s decision in Hoagland. The failure to make a required finding means that 

the decision does not reflect the exercise of reason and constitutes an abuse of discretion. See

Lunneborg, 163 Idaho at ___, 421 P.3d at 194. NIR seems to be urging the Court to adopt the 

position that a litigation guarantee is never exceptional. We will not go that far, particularly in a 

case such as this where the litigation guarantee was not part of the record and we do not know its

terms and conditions. While we agree with the premise that the type of title work reflected in a 

litigation guarantee is an essential part of every foreclosure action, purchasing a legal instrument 

that gives the foreclosing party financial recourse in the event of a title mistake may in fact be 

beyond the ordinary where it reflects unusual risks of loss associated with multiple parcels, 

overlapping encumbrances, and numerous parties. What financial recourse the litigation 

guarantee at issue provides and why it was purchased are things that should be considered on 

remand.

If the district court determines that the litigation guarantee was an exceptional cost, it 

must also re-examine how to apportion that cost among the four parties that Valiant moved 
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against. The district court apportioned no responsibility for the litigation guarantee to POBD. 

The district court’s stated justification for limiting POBD’s responsibility for costs was that 

POBD did not defend against the foreclosure or participate adversely to Valiant at trial. This 

reasoning simply does not hold up when it comes to the litigation guarantee. The litigation 

guarantee was purchased to ensure that the proper parties were named in the complaint. The need 

for this expense resulted from POBD’s breach of contract and had nothing to do with POBD’s 

conduct during the litigation. It is incongruent for the district court to assess POBD with over

$700,000 in attorney’s fees associated with the foreclosure, but exonerate it from liability for the 

litigation guarantee. While POBD did not appeal the fee award against it, the company’s 

responsibility for the litigation guarantee must be re-examined in the context of determining 

what portion, if any, NIR should be assessed in the interest of justice. Given the factors set forth 

in Hoagland, a starting point for the inquiry would be examining whether NIR engaged in any 

conduct or took any position prior to the commencement of the litigation which caused or 

contributed to the need for the litigation guarantee. Without any such evidence, it is difficult to 

see why a third party lien holder in a judicial foreclosure action should be taxed with the cost of 

a litigation guarantee. 

IV. ATTORNEY FEES

Valiant requests attorney fees on appeal under Idaho Code section 12-121 and Idaho 

Appellate Rule 41 because Valiant contends that NIR’s appeal was brought frivolously, 

unreasonably, and without foundation. Under these authorities, only the prevailing party has a 

right to fees. Clayson v. Zebe, 153 Idaho 228, 236, 280 P.l3d 731, 740 (2012). Since Valiant has 

not prevailed it is not entitled to attorney fees. 

V. CONCLUSION

For the reasons stated, the district court’s judgment awarding costs against NIR is vacated 

and this case is remanded for further consideration by the district court consistent with this 

Opinion. Costs are awarded to NIR.

Chief Justice BURDICK, Justices HORTON, BRODY and Justice pro tem

SCHROEDER, CONCUR.