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Tamarack’s never-ending foreclosure

T.J. AngstmanMost readers are probably aware of the legal problems that have plagued the Tamarack resort in Valley County since the foreclosure began almost six years ago. While this isn’t the longest foreclosure in the history of the United States, it is the longest foreclosure I am aware of in Idaho.

The foreclosure has taken a long time due to a variety of factors, but the main one has been a fight between contractors and the lender, a syndicate organized and managed by Credit Suisse, over priority of liens. Contractor liens attached when work started on the Tamarack construction contracts. Contractors who started before the loan was recorded can “prime” the bank loan, even if there is no balance owed to the contractor at the time the bank loan was recorded. What matters is that the work commenced before the bank loan was recorded. This type of lien is called “inchoate” because it is a secret lien that exists before anything in writing is ever filed in the public record.

In the Tamarack case, several contractors were able to use their senior priority dates to prime the Credit Suisse syndicate’s $250 million loan. The court issued judgments and decrees of foreclosure in favor of these contractors and the purchaser of the Fairmont hotel site (that claim was based upon a vendee’s lien because the hotel developers had already paid a substantial earnest money deposit).

Foreclosure sales have already started on these judgments. To date the following sales have been conducted:

  1. Scott Hedrick Construction: one Trillium townhome
  2. Oz Architects/Tamarack Designs: 15 Trillium townhomes
  3. Banner/Sabey: Village Plaza
  4. BAG Holdings: Fairmont residences in the Whitewater neighborhood and the Fairmont Hotel and related sites immediately east of Village Plaza and north of Lake Wing

The only purchasers at these sales have been the lien creditors who submitted a “credit bid” for the amount of their lien claim. Nobody appeared and bid more money.

These sales do not signify an end to Tamarack saga. Rather, they signal the beginning of the end. Each property sold by the sheriff is subject to a right of redemption in favor of other lien holders who were junior in priority. A right of redemption gives these junior claimants the opportunity to purchase the property for the amount of the prior bids. This right exists for a short period of time, either six months for smaller parcels or 12 months for large ones.

Two more sheriff sales are likely to be conducted this year:

  1. MHTN Architects: Lake Wing
  2. Credit Suisse: the balance of the resort not previously sold to private owners or the lien claimants listed above, tentatively scheduled for Dec. 5

The golf course lender at Tamarack Resort is also pursuing a foreclosure sale, but is on a delayed schedule due to the purchase of the golf course note by Green Valley holdings with funds that were misappropriated by Green Valley’s principal Matt Hutcheson from a number of retirement plans managed by Hutcheson.

Further complications have developed because Credit Suisse was insured with title insurance through Stewart Title. Stewart has sued the Credit Suisse Syndicate to try to avoid liability on the title insurance. It appears that Stewart is losing this battle, as the court has dismissed many of Stewart’s theories and even allowed Credit Suisse to pursue punitive damages for bad faith insurance practices. Despite this, Stewart has not stepped up to pay off the lien claims. If the rights of redemption expire before Stewart settles the claims, it could be a very costly mistake for Stewart, since the lien holders could demand more than their lien amounts to settle.

Thus, ownership of Tamarack is fragmented. A new owner will need to reassemble the pieces before the saga can end.  The important first steps have begun to clear title to all the pieces that are needed for a functioning resort. The next step will be the acquisition of these pieces by a resort developer who can put it all back together.

T. J. Angstman is the managing member of Angstman Johnson, a Boise-based law firm. He represented the owners of Tamarack Resort on their loan guarantees and obtained dismissal of Credit Suisse’s $250 million claim on the Tamarack loan guarantee. Angstman is representing the court-appointed trustee for the retirement funds that are now the owners of the golf course loan at Tamarack Resort.

About T.J. Angstman