## Facts

- John E. Holley and Joan F. Holley were married for 23 years; during the marriage John operated a construction company treated as a community asset.
- In late 1980 and early 1981, John obtained credit from Twin Falls Bank & Trust Co. to operate the construction business, including a general line of credit that reached $65,000.
- John did not repay the line of credit as agreed. Rather than pursue collection, the bank “renewed” the obligations on June 26, 1981 by having John sign a new, unsecured promissory note for $125,000 (the prior $65,000 plus an additional $60,000 advance), due September 28, 1981.
- Joan did not sign the promissory note and did not provide financial information to the bank. The bank relied on a financial statement signed only by John that indicated spousal financial information was not required unless the spouse would be contractually liable or the spouse’s income was relied on for the credit request.
- At the time John signed the $125,000 note, John and Joan were living separate and apart.
- On August 28, 1981, a divorce decree was entered. The decree awarded John the construction business and additional real and personal property and assigned to John the obligation on the bank note; the property awarded to John was sufficient in value to satisfy the note. Joan received other community assets.
- John failed to pay the note when due on September 28, 1981. The bank again did not commence collection; instead, it executed an extension agreement with John that extended the due date to November 1981 in exchange for a security interest in all of John’s property.
- The bank failed to perfect its security interest. John later defaulted, filed bankruptcy, and received a discharge of the debt.
- Unable to collect from John, the bank sued Joan in 1984, claiming the obligation was a community debt and seeking to satisfy it from property awarded to Joan in the divorce.
- The district court granted summary judgment for Joan, concluding her property could not be used to satisfy the note, and awarded Joan costs and $4,500 in attorney’s fees under Idaho Rule of Civil Procedure 54(e) after finding the bank’s action was without foundation and frivolous.

## Issues

1. Whether the bank could collect John Holley’s $125,000 promissory-note debt from property awarded to Joan Holley in the divorce when Joan did not sign the note and the divorce decree assigned the obligation to John.
2. Whether the district court properly awarded Joan attorney’s fees under I.R.C.P. 54(e) on the ground that the bank’s suit against her was without foundation and frivolous.

## Decision

- Affirmed summary judgment for Joan; the bank could not satisfy the note from property awarded to Joan in the divorce.
- Affirmed the attorney’s-fee award of $4,500 to Joan under I.R.C.P. 54(e) based on the trial court’s finding that the bank’s claim was without foundation and frivolous.

## Legal Principles

- A creditor seeking to enforce a promissory note generally must look to the parties who are contractually bound on the instrument; a non-signing spouse is not personally liable on a note she did not execute absent an independent basis for liability.
- A creditor’s post-separation and post-dissolution course of dealing—such as renewing or extending a debt solely with one spouse and taking security only in that spouse’s property—supports treating the obligation as enforceable only against that spouse, not against the former spouse’s separately held, divorce-awarded property.
- When a divorce decree allocates a particular debt to one spouse along with sufficient assets to satisfy it, and the creditor thereafter deals only with that spouse regarding repayment and collateral, the creditor may not later shift the loss to the other former spouse’s awarded property.
- Under I.R.C.P. 54(e), a trial court may award attorney’s fees to the prevailing party when the opposing party’s claims are brought frivolously, unreasonably, or without foundation; an appellate court will uphold such an award absent an abuse of discretion.

## Conclusion

The Idaho Supreme Court held that Twin Falls Bank & Trust Co., having taken John Holley’s unsecured renewal note and later extended it and bargained for collateral only from John, could not collect the debt from Joan Holley or from the property she received in the divorce, and it upheld the fee award because the bank’s attempt to pursue Joan was without foundation and frivolous.


Twin Falls Bank & Trust Co. v. Holley, 723 P.2d 893 (1986)