## Facts

- Summitt, Inc. owned a 142-acre parcel and agreed to purchase an adjoining 18-acre parcel from Patrick and Monica Gunter for \$799,000.
- Summitt obtained a \$616,000 loan from Independent Mortgage Ltd. Co. (IM), secured by a mortgage on both the 142 acres and the 18-acre parcel being purchased.
- For the remaining purchase price, Summitt executed a deed of trust in favor of the Gunters on the 18-acre parcel.
- IM knew Summitt intended to give the Gunters a deed of trust for the balance, but the Gunters were unaware of IM’s mortgage when they entered the transaction.
- IM’s mortgage was executed earlier the same day as the Gunters’ deed of trust; both instruments were recorded the next day, with IM’s mortgage recorded first.
- Summitt defaulted on both obligations.
- IM’s mortgage was assigned to Insight LLC and related parties, who asserted priority over the Gunters’ deed of trust.

## Issues

1. Whether IM’s mortgage, as assigned to Insight, was a purchase money mortgage as to the 18-acre parcel.
2. Whether, under Idaho’s race-notice recording system, the IM/Insight mortgage had priority over the Gunters’ deed of trust.

## Decision

- The Idaho Supreme Court held that IM’s mortgage was a purchase money mortgage as to the 18-acre parcel.
- The Court rejected the trial court’s characterization of the mortgage and the sale as separate, independent transactions, treating them as one continuous purchase transaction.
- The Court held the trial court clearly erred in finding notice sufficient to defeat the IM/Insight mortgage’s priority.
- Applying race-notice principles and the recording sequence, the Court ruled the IM/Insight mortgage had priority over the Gunters’ deed of trust.
- The Court vacated the judgment and remanded for further proceedings consistent with its priority determination.

## Legal Principles

- A purchase money mortgage is given to secure funds used to acquire title to the property and is part of the transaction by which the buyer obtains ownership.
- A mortgage can retain purchase money status even if the lender takes additional security beyond the property being purchased.
- Under a race-notice recording statute, priority generally goes to the interest that (1) is recorded first and (2) is taken without notice of a competing interest that would defeat priority.
- When acquisition financing and conveyance steps operate as a continuous transaction, the purchase money mortgage is treated as part of that integrated purchase for purposes of characterization and priority.

## Conclusion

The Idaho Supreme Court concluded that the lender’s mortgage was a purchase money mortgage tied to the buyer’s acquisition of the 18-acre parcel and, because it was recorded first without disqualifying notice, it took priority over the sellers’ later-recorded deed of trust; the contrary judgment was vacated and the case remanded.


Insight LLC v. Gunter, 154 Idaho 779, 302 P.3d 1052 (Idaho 2013)