Cayne et al v. Washington Trust Bank et al

Filing 174

MEMORANDUM DECISION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT granting in part and denying in part 89 Defendants Motion for Summary Judgment; granting in part and denying in part 99 Plaintiffs Motion for Summary Judgment. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

ROBERT CAYNE and PHYLLIS CAYNE, husband
and wife; RONNIE RIVERA, individually; SEAN
RIVERA, individually; KEN McELROY and
LAURA McELROY, husband and wife; and the
same on behalf of themselves and on behalf of all
others similarly situated,

Case No. 2:12-cv-00584-REB
MEMORANDUM DECISION AND
ORDER ON CROSS-MOTIONS FOR
SUMMARY JUDGMENT

Plaintiffs,
vs.
WASHINGTON TRUST BANK, a Washington
corporation; and WEST SPRAGUE AVENUE
HOLDINGS, LLC, a Washington limited liability
company; and JOHN/JANE DOE I-V,
Defendants.
SUMMARY OF THE CASE AND DECISION
Plaintiffs are individuals who bought into an exclusive and expensive golf course
development that began to take shape in 2004 on the western shores of Lake Coeur d’Alene, in
northern Idaho. Most joining the golf course resort purchased a building lot in the real estate
development surrounding the golf course, and a membership in the golf course club itself, known as
“the Club at Black Rock.” Those interested were required to make an up front payment of a socalled “membership deposit,” which increased in amount over time but was always in the tens of
thousands of dollars at a minimum and over $100,000 at its most expensive. On top of that, the
members paid monthly dues to the golf club.
The Club at Black Rock closed in the late fall of 2010, after it fell into financial distress and
several months after defendant Washington Trust, the bank whose loans were secured by the Club’s

MEMORANDUM DECISION AND ORDER - 1

real and personal property, took over ownership of nearly the entirety of the Club’s assets, in a
work-out agreement with the Club’s developer, Marshall Chesrown. The Club continued to operate
as it had before the change in ownership until the bank sold the golf course to a third-party, and after
the members of the Club at Black Rock were informed that the memberships were terminated, and
the Club was being closed.
The former members of the Club at Black Rock want a return of their membership deposits.
The membership agreement described when, and if, a member was entitled to a refund of the
membership deposit. The former members contend that Washington Trust owes them a refund of
those deposits, because Washington Trust assumed that liability when they took ownership of the
golf course assets, which included an assignment of the Membership Agreement and related
agreements. Washington Trust vigorously disputes that it has responsibility for the membership
deposits, which – depending upon which side answers the question – total approximately $29
million. Someone in this case will ultimately be left holding that bag. Right now, it is the former
members. They contend it should be the bank.
Currently pending before the Court are Cross-Motions for Summary Judgment (Dkts. 89,
99) filed by Plaintiffs1 and Defendants Washington Trust Bank and (its wholly owned subsidiary)
West Sprague Avenue Holdings, LLC (sometimes collectively referred to as the “Bank” or
“Washington Trust”). For the reasons discussed herein, Plaintiffs’ Motion for Summary Judgment
is granted in part and denied in part, and Defendants’ Motion for Summary Judgment also is granted
in part, and denied in part. In the decision that follows: (1) the Court holds as a matter of law that
the Bank took an assignment of the Membership Agreement and related Membership Plan which
contain the details of when the members have a right to a refund of their membership deposits; (2)
the Court holds as a matter of law that the right to a refund of the membership deposits was

1

The Plaintiff class is represented by named Plaintiffs Robert Cayne and Phyllis Cayne,
Ronnie Rivera, Sean Rivera, Ken McElroy and Laura McElroy.
MEMORANDUM DECISION AND ORDER - 2

triggered when the memberships were terminated and the golf course facilities closed to the
members; (3) the Court holds as a matter of law that the Bank did not make an express assumption
of the liability for the membership deposits, having made express disclaimers of any such type of
liability in the work-out agreement; and (4) the Court holds that there are genuine issues of material
fact which preclude summary judgment for either side, and which will require resolution at trial, on
the remaining ultimate issue of whether the Bank impliedly assumed liability for the membership
deposit refunds because of its actions and conduct in the manner in which it took ownership of the
Club and its facilities, and in the manner in which the Club continued to operate it until it was
ultimately sold.
PROCEDURAL BACKGROUND AND SUMMARY OF THE CLAIMS AND DEFENSES
Plaintiffs filed their lawsuit in Idaho state court, after which Defendants removed it to
this Court. Plaintiffs brought three claims for relief: (1) breach of contract (as to the Membership
Agreement and Membership Plan); (2) misrepresentation and/or constructive fraud; and (3) violation
of the Idaho Consumer Protection Act (“ICPA”). (Dkt. 1-1.) Defendants filed a Motion for
Judgment on the Pleadings, which was denied as to the breach of contract claim. The constructive
fraud/misrepresentation claim and the ICPA violation claim were dismissed, but with leave to
amend. (Dkt. 13.) Plaintiffs did not seek to amend the dismissed claims.
The parties stipulated to class certification (Dkt. 54), which was the subject of the Court’s
December 11, 2013 certification order (Dkt. 57). The pending cross-motions for summary judgment
followed, and argument was heard upon the same in Coeur d’Alene on May 5, 2015.
The now-defunct Club at Black Rock (the “Club”) was marketed to be a world-class golf
resort and residential community for the wealthy, located on the edge of Lake Coeur d’Alene in
Northern Idaho. During its development, the legal entity that owned the Club assets and operated the

MEMORANDUM DECISION AND ORDER - 3

Club was the “Club at Black Rock, LLC” (the “LLC”).2 The LLC borrowed more than $12 million
in various loans from Washington Trust Bank, secured by various assets, including the real and
personal property connected with the operation of the Club.3 By late 2010, the LLC was in
significant financial distress, and facing the threat of foreclosure. The Bank was concerned about its
collateral, because of the length of time required to pursue such a foreclosure, and because there
were other unpaid creditors. The possibility of an involuntary bankruptcy also loomed, and in either
scenario the Bank was concerned that the golf club would be shut down, a result which the Bank
feared would greatly diminish the value of its primary piece of collateral. To avoid such an end, the
Bank sought and obtained a work-out agreement with the LLC by which the Bank accepted a deed
in lieu of foreclosure in order to obtain immediate possession and ownership of the secured real
estate and improvements, and by which the Bank also obtained immediate possession and ownership
of the associated personal property, chattels and paper through a bill of sale. The Bank released the
LLC from any possible deficiency and released Marshall Chesrown from his personal guarantee
upon the largest of the unpaid loans. The deed in lieu of foreclosure, and its related bill of sale
agreement, were entered into on August 11, 2010. From that date the Bank was the owner of all that
used to be the Club at Black Rock, previously operated by the LLC.

2

For clarity, the Court will use “the LLC” to refer to the legal entity. It will use “the
Club” to refer to the golf course and related facilities.
3

The record contains various information about the nature of the loans made to the LLC,
and the attenuated connection between the loans and the LLC. There appears to be no
disagreement that the loan proceeds were not used exclusively on assets of or improvements to
the Club, but rather in large part upon other ventures being pursued by the primary principal of
the development and its related operations, Marshall Chesrown. Similarly, there does not appear
to be any disagreement as to the fact that value of the security interests held by the Bank in the
assets of the LLC, at least at the time of the defaults upon such loans and the time period
involved in this dispute, fell short of the amount of the total indebtedness. The Bank officials
said that they were making such large loans to Chesrown’s business interests in part upon his
“global cash flow.” See Francis Decl. Ex 4, Perko Dep. 253:14-18; Burnside Decl. Ex. 15, Heath
Dep. 80:18-22.
MEMORANDUM DECISION AND ORDER - 4

As the workout agreement was being negotiated and in the months that followed its
completion, the Bank actively sought to sell the Club as a going-concern. The Club remained open
through the remainder of the 2010 summer and fall golfing season, before being closed on October
31, 2010. Contemporaneously with its closure the Bank sold the Club to a third-party, which took
the name “The Golf Club at Black Rock, LLC.” Before the new owner re-opened the doors to the
golf course under its ownership, the Plaintiffs received a letter informing them that the Club was
“terminating all membership agreements effective at 5:00 p.m. on October 31, 2010.” Springel
Decl. Ex. ZZ.
The Plaintiffs contend that the Bank had assumed the duties of the LLC in the operation of
the Club -- including the LLC’s duties under the Membership Agreement -- as a result of the
assignment of that contract from the LLC to the Bank. The Plaintiffs further contend that closure of
the Club and the termination of the memberships triggered the duty to refund the membership
deposits under the Membership Agreement and its related Membership Plan, and that under the
applicable agreements between the Plaintiffs and the LLC and the applicable agreements between
the LLC and Washington Trust, Washington Trust became responsible to refund the membership
deposits. Washington Trust disputes any such liability, arguing that the agreements it had between
itself and the LLC expressly disclaimed the possibility of any such liability and that it did not take
on such a liability, either expressly or impliedly.
STATEMENT OF FACTS
A.

The Development and Financing of The Club at Black Rock, LLC

1.

Developer and managing member Marshall Chesrown created the Club at Black Rock, LLC

(the “LLC”) to develop, own, and operate a private golf club named the Club at Black Rock (the
“Club”) to promote his contemporaneous development of luxury home sites along the golf course

MEMORANDUM DECISION AND ORDER - 5

and Lake Coeur d’Alene in Idaho.4 He had a 99% interest in the LLC. Defs.’ SOF ¶ 2; Burnside
Decl. Ex. 12, Chesrown Dep. 11:24-12:1, 12:13-24, 101:24-102:1, 146:10-14.
2.

Between 2004 and 2010, Washington Trust made four loans to the LLC amounting to

over $12 million. These loans were secured by a deed of trust on the golf course and club house,
and security interests in its equipment, vehicles, boats, trailers, inventory, equipment, furniture,
fixtures and accounts receivable. Mr. Chesrown personally guaranteed the first loan, made in June
2004, of $10 million.5 Defs.’ SOF ¶ 10; Oberst Decl. ¶¶ 3-4, Ex. 21, Ex. 23, Ex. 24, Ex. 25, Ex. 26,
Ex. 27, Ex. 28, Ex. 29, Ex. 30, Ex. 31; Perko Dep. 195:5-13, 207:18-20; 253:16-18; Chesrown Dep.
114:18-116:1; 153:19-154:1, 155:3-156:8 ; Heath Dep. 80:18-22, 175:15-21, 192:19-193:2, 193:710; Burnside Decl. Ex. 16, Oberst Dep. 297:24-298:6; Springel Decl. Exs. H-M, Ex. D, Perko Dep.
17:16-18:4.
B.

Membership in the Club at Black Rock

3.

The Membership Agreement was a contract between each member and the LLC, whose

rights and obligations were also governed by the incorporated Membership Plan. See Membership
Agreement (Dkt. 92-1).
4.

The Membership Plan described the membership amenities at the Club, including the

Club facilities, Club operations, membership rights, and dues and charges. Membership Plan (Dkt.
92-1).
5.

The Agreement required each member to pay a membership deposit (this ranged

from $40,000 to $125,000, increasing in amount as the number of members grew) and monthly dues

4

To repeat, the Club at Black Rock, LLC was the legal entity that developed the Club at
Black Rock. The “LLC” refers to the legal entity. The “Club” refers to the golf course and
related facilities.
5

Washington Trust Relationship Manager Mark Perko testified that the primary source
of repayment for the 2004 loan was intended to come from “[s]ources of cash generated by the
club” and “Mr. Chesrown’s personal financial statement.” Pls.’ SOF ¶ 13; Perko Dep. 20:15-20,
40:2-11.
MEMORANDUM DECISION AND ORDER - 6

and charges in exchange for use of the Club’s facilities.6 Defs.’ SOF ¶ 3; Pls.’ SOF ¶ 3.
6.

Members were entitled to a refund of the Membership Deposit within thirty days of the

following: (1) termination of the Membership Plan; (2) termination of any category of membership;
or (3) the discontinuance of operation of all or substantially all of the Club facilities. Membership
Agreement, p. 4. See also Membership Plan, p. 14.
7.

The Membership Agreement provided that: “In the event that the Club facilities are sold and

the buyer assumes liability for the repayment of the Membership Deposit, the [member] shall look
solely to the new for owner for repayment of the Membership Deposit and the seller shall be
released from all liability for the repayment thereof. In the event of a sale of the Club facilities, the
buyer shall take title subject to the terms and provisions of the then existing Membership Plan.”
Membership Agreement, p. 4. See also Membership Plan, p. 14.
8.

The members of the Plaintiff class are all former members of the Club. Defs.’ SOF ¶ 1;

Pls.’ SOF ¶ 1.
9.

Dean Oberst, Commercial Special Assets Manager at Washington Trust, was aware of the

Membership Agreement and Membership Plan. Dean Emmanuels, Washington Trust Vice
President and Chief Appraisal Officer, knew the deposits were refundable. Pls.’ SOF ¶ 16, ¶ 38;
Springel Decl. Ex. E, Emmanuels Dep. 132:2-17; 156:6-157:8; 164:3-165:6; Ex. F, Oberst Dep.
27:8-15; 31:13-32:12; 85:11-25.
C.

Financial Difficulties Surrounding the LLC and Related Chesrown Entities

10.

Between 2004-2009, the LLC operated at multi-million dollar annual operating losses.

Defs.’ SOF ¶ 7; Pls.’ SOF ¶ 26; Perko Dep. 30:4-23; 90:1-7; Springel Decl. Ex. G, Von Buchwaldt
Dep. 65:21-24; Ex. O; Ex. X.
11.

From 2003 to 2010, the LLC listed “Club Member Deposits” as a long-term liability on its

6

Plaintiffs contend that the membership deposits ranged from $5,000 to $175,000 and
cite to Plaintiff’s Ex. BBB in support. For purposes of this motion, the exact amount of the
membership deposits is not relevant.
MEMORANDUM DECISION AND ORDER - 7

balance sheet. By March 31, 2010, the liability was calculated at $ 29,505,182.00. Defs.’ SOF ¶ 6;
Oberst Decl. ¶ 8, Ex. 39; Burnside Decl. Ex. 14, Rountree 1st Dep. 39:2-13.
12.

In 2009, Washington Trust purchased the Black Rock marina and beach/sales office

properties used by Club members. These properties previously were owned by other Chesrownowned entities, and not the LLC. Washington Trust President Jack Heath testified that these
properties were purchased because aggregating the real estate would make it more valuable. Pls.’
SOF ¶ 29; Springel Decl. Ex. N, Chesrown Dep. 146:23-148:1; Ex C., Heath Dep. 85:4-86:24,
216:5-16.
13.

In the summer of 2010, the LLC solicited Club members to serve on a long-range planning

committee, to advise it and Club members on options for restructuring. Defs.’ SOF ¶ 12; Francis
Decl. Ex. 7
14.

In letters to Club members in 2010, the long-range planning committee recommended that

the best solution would be to convert the Club to a member-owned club. However, the LLC and
Club members could not agree on how this should occur. Chesrown testified that his priority was
for the Club to remain open and that was a prerequisite to any deal he would agree to. Defs.’ SOF
¶¶ 13-14; Francis Decl. Exs. 8-9; Oberst Decl. ¶ 7; Oberst Dep. 86:14-24, 87:22-88:23; Heath Dep.
153:23-154:2 ; Burnside Decl. Ex. 6, Gorton Dep. 43:3-22; Chesrown Dep. 134:23-136:15.
15.

At this time in 2010, the LLC had a number of unpaid creditors. Also in 2010, Washington

Trust became concerned about the possibility of an involuntary bankruptcy originating with other
creditors that the Bank believed could cause “significant delay to preserving the asset” (that is,
Washington Trust’s security for its unpaid loans). Pls.’ SOF ¶ 37; Perko Dep. 55:7-10, 57:18-25;
Oberst Dep. 55:19-56:4, 61:18-62:5; Oberst Decl. ¶ 7 (“the Bank did not want to proceed with
bankruptcy or foreclosure because both can take months or years to complete . . . [t]o achieve a
faster resolution than bankruptcy or foreclosure would allow, and to best protect the value of the
collateral, the Bank agreed to executed a deed in lieu of foreclosure.”); Heath Dep. 178:17-20 (“the

MEMORANDUM DECISION AND ORDER - 8

decision to take the deed in lieu of foreclosure” was because “we [didn’t] have to go through an
extended foreclosure process.”)
16.

Washington Trust, as reflected in internal memoranda, believed that “preservation of the

membership base” was critical to the Club’s value and that there would be more value if there were
active members interested in buying the Club. Pls.’ SOF ¶ 34; Defs.’ SOF ¶¶ 15-16; Heath Dep.
156:6-12; Springel Decl. Ex Y.
17.

Washington Trust knew it could “let the golf course go to seed,” but believed that doing so

would make the asset worth much less. On the other hand, the Bank believed that keeping the golf
course open and maintained would preserve its value. Pls.’ SOF ¶ 33; Defs.’ SOF ¶ 16; Heath Dep.
43:21-45-7; Oberst Dep. 86:18-24.
D.

Deed in Lieu of Foreclosure

18.

To avoid the prospect of either a voluntary or involuntary bankruptcy, and to protect against

foreclosure and a possible deficiency, Washington Trust and the LLC agreed to a work out of the
unpaid loans which included an Agreement for Deed in Lieu of Foreclosure (“DIL Agreement”), an
accompanying Non-Merger Warranty Deed in Lieu of Foreclosure (“Warranty Deed”), and a Bill of
Sale and Assignment (“Bill of Sale”). These agreements were executed effective August 11, 2010.
Defs.’ SOF ¶ 17; Oberst Decl. ¶ 7; DIL Agreement, Non Merger Warranty, Bill of Sale (Dkt. 92-2-3).
19.

The DIL Agreement released the LLC from its indebtedness on the four outstanding loans

secured by the golf club’s real and personal property. The Bank also agreed to release Chesrown
from the individual guaranty he made on the $10 million loan in 2004. The Warranty Deed
transferred the real property to the Bank and the Bill of Sale transferred the associated personal
property to the Bank, as detailed more specifically below. Id.
20.

The LLC’s 2010 Tax Return reported nearly $28 million in “Cancellation of Debt” income

related to the membership deposits as a result of the DIL Agreement. Pls.’ SOF ¶ 56; Springel Decl.

MEMORANDUM DECISION AND ORDER - 9

Ex. AAA.
21.

In the DIL Agreement, Washington Trust and the LLC agreed that “transfer of the

Property[7]to [Washington Trust] in lieu of foreclosure is necessary to allow for continued operation
of the Club as set forth in Section 6.3.” DIL Agreement Recital G.
22.

Section 6.3 of the DIL Agreement, titled “Post-Closing Obligations,” provided that after the

Closing, the Bank was required to: “reasonably endeavor to continue stabilized operations of the
Club, at least through the 2010 season, at a level of service and amenities that is consistent with the
prior operation of the Club, provided that the membership is maintained with a sufficient number of
dues paying members to sustain operation of the Club as reasonably determined by [Washington
Trust].” DIL Agreement § 6.3.
23.

In a provision addressing representations and warranties made by the LLC to the Bank,

Section 7.4 reads: “[The LLC] acknowledges and agrees that acceptance by [Washington Trust] of
title to and [the LLC’s] interest in the Property pursuant to the terms of this Agreement shall not
create any obligations on the part of [Washington Trust] to third parties that have claims of any kind
whatsoever against [the LLC] with respect to the Property and that [Washington Trust] does not
assume or agree to discharge any liabilities pertaining to the Property that occurred prior to the date
of Closing, except as specifically assumed by [Washington Trust.] The [LLC] agrees to indemnify
and hold [Washington Trust] free and harmless from and against any losses, damages, costs, or
expenses, including attorneys’ fees, pertaining to claims and liabilities relating to the Property,
resulting from events that occurred prior to the date of Closing. No person not a party to this

7

The “Property” included both the “Real Property” and “Personal Property.” DIL
Agreement, Recital C. The Real Property was defined as “NNA, Coeur d’Alene, Idaho, 83814,
Parcel Nos. 0-0770-000-00A-0, 0-0770-000-00A-B, 0-0778-000-00C-A, 0-0778-000-00C-B, 00776,008-001,A, 0-0770-000-00C-C.” DIL Agreement, Recital A. The Personal Property was
defined as: “any and all Equipment, Inventory, Chattel Paper, Accounts, General Intangibles,
Furniture, Fixtures, Vehicles, and Vessels, including any and all food, wine, and beverage
inventory, as more particularly described on Exhibit B.” Id., Recital B.
MEMORANDUM DECISION AND ORDER - 10

Agreement shall have any ‘third-party beneficiary’ or other right hereunder.” DIL Agreement
§ 7.4.
24.

Section 9.10 of the DIL Agreement, titled “No Partnership,” described the “relationship

between [Washington Trust] and [the LLC] is that of debtor and creditor. Nothing contained in this
Agreement will be deemed to create a partnership or joint venture between [Washington Trust] and
[the LLC], or between [Washington Trust] and any other party, or to cause [Washington Trust] to be
liable or responsible in any way for the actions, liabilities, debts, or obligations of [the LLC].” DIL
Agreement § 9.10.
25.

Section 9.12 was titled “No Third-Party Beneficiaries” and reiterated the language of the last

sentence of Section 7.4: “The provisions of this Agreement are solely for the benefit of [Washington
Trust] and [the LLC], and do not inure to the benefit of, or confer rights upon, any third party.” DIL
Agreement § 9.12.
26.

The Bill of Sale and Assignment, executed contemporaneously with the DIL Agreement,

served to “grant, bargain, sell, convey, assign, and transfer unto [Washington Trust]” the following:
“All Equipment;” “All inventory, chattel paper, accounts, furniture, and all fixtures, excluding
Alcoholic Liquor as defined in Idaho Code 23-105;” . . . “All deposits and bonds of the Club;” . . .
“All assignable permits, licenses, contracts, approvals, applications and agreements, of every kind
and nature, relating to the Club, including, without limitation, all building permits and
environmental and subdivision approval; but excluding any permits and licenses relating to
Alcoholic Liquor as defined in Idaho Code 23-105. . .” Bill of Sale (emphasis added). There is no
reference in any of the conveyance agreements that address by specific name the membership
deposits that are referenced in the Membership Agreement; however, neither is there any reference
in the conveyance agreements that specifically indicates by name that the Membership Agreement is
not one of the agreements otherwise included in the above described paragraph from the Bill of Sale.
27.

Washington Trust President Heath testified that the Bank “took the things that were required

MEMORANDUM DECISION AND ORDER - 11

to operate the Club. . .” Pls.’ SOF ¶ 50; Heath Dep. 111:1-5.
28.

Section 5.2 required that the LLC deliver, at closing, all insurances policies, all keys to

access the Property, and all Certificates of Title to Property. DIL Agreement § 5.2.
29.

Section 2.1(c) confirmed that, upon a default, the various security agreements gave

Washington Trust the power to deal with “the Personal Property” in Washington Trust’s own name
or that of the LLC. DIL Agreement § 2.1(c).
30.

Section 2.2 stated, in part: “The [LLC] should have no further interest or claim in or to the

Personal Property conveyed by the Bill or Sale and Assignment, or the proceeds or profits of any
kind whatsoever which may be derived from the Personal Property.” DIL Agreement § 2.2.
31.

The Deed in Lieu Agreement, and related documents (including the Warranty Deed and

Bill of Sale), were executed on August 11, 2010. Pls.’ SOF ¶ 48; Defs.’ SOF ¶ 17.
32.

On August 23, 2010, Washington Trust assigned the assets transferred by the LLC to its

wholly owned subsidiary, West Sprague Avenue Holdings, LLC. Pls.’ SOF ¶ 49; Defs.’ SOF ¶ 19;
Springel Decl. Ex. YY.
E.

The Operation of the Club After Execution of the DIL Agreement

33.

At Washington Trust’s request, Black Rock Development8 assigned Washington Trust its

declarant’s rights to the Black Rock Homeowners’ Association (“HOA”). Pls.’ SOF ¶ 52; Oberst
Dep. 39:16-40:17; 42:21-43:12.
34.

Dean Oberst, Special Assets Manager and Washington Trust, said the assignment of the

HOA’s declarant rights was important to the Bank for two reasons: (1) if the Bank was the
declarant, it would not be charged HOA dues and (2) a potential buyer would interested in “getting
all of the rights that are available”. Pls.’ SOF ¶ 52; Oberst Dep. 39:16-43:20.

8

Black Rock Development was a separate and distinct entity from the LLC and the Club
at Black Rock. It was also owned by Chesrown. It had no loans or collateral with Washington
Trust.
MEMORANDUM DECISION AND ORDER - 12

35.

Following this, the former HOA board members,9 who had been appointed by Chesrown,

resigned. In their place, Washington Trust appointed persons it controlled – Oberst, Julie Shiflett10
and Clay Hatch11 – to the HOA’s Board of Directors. Pls.’ SOF ¶ 53; Springel Decl. Exs. DD, EE.
36.

After the DIL Agreement and related agreements were executed, Washington Trust sought a

third-party management company to run the Club because “...the Bank is in the business of banking,
not golf course management.” However, the Bank could not find a willing third-party management
company to operate the Club. Pls.’ SOF ¶ 58; Oberst Dep. 104:11-106:5; Oberst Decl. ¶ 9 (“...the
Bank is in the business of banking, not golf course management”); Heath Dep. 42:12-13 (“We are a
financial institution”).
37.

Washington Trust decided to use members of the preexisting management team (who had

operated the Club as employees of the LLC) to manage and conduct golf club operations. This
arrangement continued through October 31, 2010, when the Club was shut down. Pls.’ SOF ¶ 59;
Oberst Dep. 104:11-19, 110:24-111:20.
38.

As part of that decision by the Bank, Andy Gorton, who previously had been general

manager of the Club, continued to oversee daily operations. Pls.’ SOF ¶ 64; Springel Decl. Ex. HH,
Gorton Dep. 14:8-15:13, 17:19-18:14.
39.

Because Chesrown (the former owner) no longer had any involvement in the Club,12 Gorton

believed that he needed a written agreement that allowed Gorton and his colleagues to operate the

9

These were Chesrown, Chad Rountree and Nancy Nick. Springel Decl. Ex. DD. Chad
Rountree was the LLC’s CFO. According to the Membership Plan, Nancy Nick was the
Membership Director.
10

Shiflett was a consultant for the Bank, whose role is discussed in more detail infra.

11

Hatch was a Washington Trust employee.

12

See Facts ¶ 45, supra, in which Chesrown testified that he no longer had any
involvement with the Club after the DIL Agreement.
MEMORANDUM DECISION AND ORDER - 13

Club going forward.13 An agreement was drafted, but not signed, and Gorton and his colleagues ran
the Club under a verbal agreement with the Bank. After the DIL Agreement was signed, Gorton
managed and operated the facilities for the benefit of the members, in the same manner as had been
done prior to the DIL Agreement. This included paying the bills, maintaining all the contracts for
landscaping, equipment maintenance, stocking supplies for the golf course, paying any accounts
payable, performing appropriate repairs and the like. Pls.’ SOF ¶¶ 65-66; Gorton Dep. 134:9135:23, 139:1-147:9.
40.

Any unpaid accounts of the 200 some vendors of the Club at the time the DIL Agreement

was signed were paid in full, as were any expenses that were incurred afterwards. Pls.’ SOF ¶ 78;
Gorton Dep. 89:19-91:5.
41.

Following the DIL, the Club continued to operate as if there was no change in ownership.

Members could still golf and use the spa and gym, among other amenities. Pls.’ SOF ¶ 77; Gorton
Dep. 49:20-24; Burnside Decl. Ex.14, Rountree 1st Dep. 181:17-24.
42.

Heath, the President of Washington Trust, was also a member of the Club.14 He testified

that the Club continued as normal and “as a member it didn’t appear that there were any changes.”
Heath Dep. 93:18-94:8, 95:15-20, 115:22-116 :1. He continued to be charged dues. Id.
43.

Revenue totaling $1,898,211.32 was collected from August 11, 2010 until year end. At a

minimum, inferences can be drawn from the record that the revenue belonged to the Bank, but was
deposited into the LLC’s checking account and used to pay Club expenses from that account. (The
Bank controlled the LLC account, having been assigned the account – held at Washington Trust – as

13

Although a written agreement was never signed, one was drafted. Washington Trust
attorney, Thomas Bassett, testified that the purpose of the written agreement was to guarantee
that someone was there to manage the facilities because ownership had changed hands. Pls.’
SOF ¶ 61; Springel Decl. Ex. BB, Bassett Dep. 56:13-57:15.
14

In addition to Heath, Washington Trust Board Chairman Peter Stanton was also a
member of the Club.
MEMORANDUM DECISION AND ORDER - 14

part of the DIL and other conveyance agreements.) This revenue primarily consisted of receipt of
member dues and charges. Pls.’ SOF ¶ 79; Chatters Decl. ¶ 7; see Rountree 1st Dep. 102:5-12. The
Bank contends “it was employees of Debtor and Debtor’s affiliated entities, alone, [who] billed
members for monthly dues and collected member dues . . . [t]hese employees deposited this money
in Debtor’s bank accounts. The Bank contends that it had no authority to sign Debtor’s checks, did
not receive club member checks, and did not decide to whom Debtor would cut checks or what bills
to pay.” Defs.’ SOF ¶ 21.
44.

Post-DIL,15 memberships were suspended if the members did not pay their dues. Pls.’ SOF

¶ 84; Gorton Dep. 67:25-68:4, 179:14-25.
45.

Marshall Chesrown was not involved in Club operations post-DIL. He did not have

communication with the persons working at the Club. He said that any employees were not his.16

15

The Court uses the phrase “post-DIL” to refer to the time period from August 11,
2010, when the DIL transaction closed, to October 31, 2010, when the Club facilities were
closed.
16

Chesrown’s deposition was taken on November 4, 2014. On January 16, 2015, in
connection with Defendant’s Motion for Summary Judgment, Chesrown submitted a declaration
in which he stated: “After the DIL, the existing management team and Debtor’s [the LLC]
existing employees continued to maintain the golf course and operate the golf club through the
end of the 2010 season (October 31, 2010). These employees (both management and staff) were
never Bank employees - they were exclusively employees of the Debtor or one of my other
entities.” Chesrown Decl. ¶ 2 (Dkt. 93).
“The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an
affidavit contradicting his prior deposition testimony.” Kennedy v. Allied Mut. Ins. Co., 852
F.2d 262, 266 (9th Cir. 1991). The reasoning behind such a rule is, “if a party who has been
examined at length on deposition could raise an issue of fact simply by submitting an affidavit
contradicting his own prior testimony, this would greatly diminish the utility of summary
judgment as a procedure for screening out sham issues of facts.” Id. However, the rule should
be applied with caution. For that reason, two important limitations exists. First, the sham
affidavit rule “does not automatically dispose of every case in which a contradictory affidavit is
introduced to explain portions of earlier deposition testimony . . . rather the district court must
make a factual determination that the contradiction was actually a “sham.” Id. at 266-67.
Second, the inconsistency between a party’s deposition testimony and subsequent affidavit must
be clear and unambiguous to justify striking the affidavit. Minor inconsistencies that result from
an honest discrepancy or mistake afford no basis for excluding an affidavit. See Messick v.
MEMORANDUM DECISION AND ORDER - 15

Pls.’ SOF ¶ 62; Chesrown Dep. 178:18-25; 209:11-210:1.
46.

On September 1, 2010, Washington Trust contracted with “CFO Outsourcing, LLC” to

provide the services of Julie Shiflett, whose job was to provide Washington Trust with
recommendations and advice on how to “preserve the asset [that is, the Club].” Defs.’ SOF ¶ 25;
Pls.’ SOF ¶¶ 70, 72, 73; Oberst Decl. ¶ 11; Springel Decl. Ex. MM, Shiflett Dep. 31:16-32:7.
47.

According to Shiflett, “having an ongoing club helps preserve the value of the asset . . . any

business is more valuable if it’s ongoing and has ongoing activities than if it’s dormant. So having
an ongoing, active club . . . helps with the value of the real estate.” Pls.’ SOF ¶ 72; Shiflett Dep.
31:16-32:7.
48.

Shiflett recommended what expenses of the Club should be paid, based on cashflow inflows

and shortfalls between revenue and expenses (including pre-DIL expenses). Shiflett could not
demand that Washington Trust add money into the LLC account. Pls.’ SOF ¶ 72; Shiflett Dep.
40:15-41:4; 97:7-17.
49.

In less than three months, Washington Trust added between $445,402.11 and $ 721,362.53

of the Bank’s money to pay for Club expenses, by placing various internal transfers into the LLC
bank account between August 11, 2010 and October 29, 2010.17 Defs.’ SOF ¶ 23; Pls.’ SOF ¶¶ 71,

Horizon Indus., 62 F.3d 1227, 1231 (9th Cir. 1995).
Chesrown’s affidavit does not seek to clear up a mistake or discrepancy, nor is it a minor
inconsistency. In Chesrown’s deposition, he was asked if the [employees] continued to be his
(meaning the LLC’s) employees. His response: “No. I had no communication with them at all.”
Chesrown Dep. 178:18-25. Chesrown’s declaration directly contradicts this testimony, stating
“These employees were never Bank employees – they were exclusively employees of the [LLC]
or one of my other entities.” This is not a minor inconsistency nor is it ambiguous. In his
deposition, Chesrown swears under oath that the employees who continued on at the Club were
not his. In his declaration, Chesrown states they were employees of one of his entities. This is a
direct contradiction. To the extent that ¶ 2 of the Chesrown Declaration creates an issue of fact,
it is striken from the record.
17

There is a discrepancy between the parties’ statement of facts and the record as to how
many dollars Washington Trust (including West Sprague) transferred to the LLC. Although it is
a rather large discrepancy, the exact amount is not material for this decision. What is material is
MEMORANDUM DECISION AND ORDER - 16

75 Oberst Decl. ¶ 10, Ex. 40; Shiflett Dep. 40:15- 41:4; Oberst Dep. 129:6-11.
50.

After the DIL Agreement was signed, 134 payments totaling $325,710.72 were made from

the LLC’s checking account to vendors of the Club for pre-DIL invoices. Pls.’ SOF ¶ 91; Chatters
Decl. Ex. A.
51.

Sales taxes for pre-DIL sales were also paid post-DIL. Pls.’ SOF ¶ 82; Rountree 1st Dep.

227:15-229:25.
F.

A New Owner Purchases the Club at Black Rock from Washington Trust

52.

Washington Trust sold the Club to “The Golf Club at Black Rock, LLC,” ( the “New

Buyer”) an entity formed by ten members of the previously existing Club at Black Rock. The
purchase price was $6 million. The sale was accomplished through an “Asset Purchase
Agreement,” which closed on November 1, 2010. Defs’ SOF ¶ 26; Oberst Decl. ¶ 12, Ex. 43.
53.

The New Buyer would not purchase the Club with the existing Membership Plan (and

related Membership Agreements) in place. Therefore, the New Buyer made the termination of any
preexisting memberships a condition of purchase. Pls.’ SOF ¶ 90; Francis Decl. Ex. 10, Magnuson
Dep. 34:14-23; Oberst Dep 161:19-24.
54.

The New Buyer’s attorney, John Magnuson, testified that Washington Trust “was always

consistent [in saying] that [it] did not have the ability to terminate the plan . . .” Magnuson did not
care who terminated the memberships, but required that it be done in order to have a “clean slate.”
Magnuson Dep. 126:10-22.
55.

On October 29, 2010, Marshall Chesrown, purporting to act by authority as the managing

member of The Club at Black Rock, LLC, sent a letter to the members of the Club at Black Rock
notifying them that effective October 31, 2010 at 5:00 p.m., all membership agreements would
terminate and the Club facilities were closed effective that date. Pls.’ SOF ¶ 95; Springel Decl. Ex.

that Washington Trust was depositing substantial sums of money into the LLC’s bank account to
cover expenses to operate the Club.
MEMORANDUM DECISION AND ORDER - 17

ZZ.
56.

Beginning on November 1, 2010, anyone who wanted to use the club facilities at the golf

course had to purchase a new membership with the new entity, The Golf Club at Black Rock, LLC,
pay a deposit and sign a new membership agreement. Pls.’ SOF ¶ 96; Springel Decl. Ex. WW,
Magnuson Dep. 33:16-34:9.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate where a party can show that, as to any claim or defense,
“there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). One of the principal purposes of the summary judgment “is to
isolate and dispose of factually unsupported claims . . . .” Celotex Corp. v. Catrett, 477 U.S. 317,
323-24 (1986). It is “not a disfavored procedural shortcut,” but is instead the “principal tool[ ] by
which factually insufficient claims or defenses [can] be isolated and prevented from going to trial
with the attendant unwarranted consumption of public and private resources.” Id. at 327. “[T]he
mere existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986). There must be a genuine dispute as to a material fact – a fact “that may affect the
outcome of the case.” Id. at 248.
The evidence must be viewed in the light most favorable to the non-moving party, and the
Court must not make credibility findings. See id. at 255. Direct testimony of the non-movant must
be believed, however implausible. See Leslie v. Grupo ICA, 198 F.3d 1152, 1159 (9th Cir. 1999).
On the other hand, the Court is not required to adopt unreasonable inferences from circumstantial
evidence. See McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).
When parties submit cross-motions for summary judgment, the Court must consider each
party’s evidence, regardless under which motion the evidence is issued. Las Vegas Sands, LLC v.
Nehme, 632 F.3d 526, 532 (9th Cir. 2011). The Court must independently search the record for

MEMORANDUM DECISION AND ORDER - 18

factual disputes. Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136
(9th Cir.2001). The filing of cross-motions for summary judgment—where both parties essentially
assert that there are no material factual disputes—does not vitiate the court's responsibility to
determine whether disputes as to material fact are present. Id.
The moving party bears the initial burden of demonstrating the absence of a genuine dispute
as to material fact. See Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). To carry this
burden, the moving party need not introduce any affirmative evidence, but may simply point out the
absence of evidence to support the nonmoving party’s case. See Fairbank v. Wunderman Cato
Johnson, 212 F.3d 528, 532 (9th Cir. 2000). This then shifts the burden to the non-moving party to
produce evidence sufficient to support a jury verdict in her favor. See Devereaux, 263 F.3d at 1076.
The non-moving party must go beyond the pleadings and show “by her [ ] affidavits, or by the
depositions, answers to interrogatories, or admissions on file” that a genuine dispute of material fact
exists. Celotex, 477 U.S. at 324.
ANALYSIS AND HOLDINGS
Plaintiffs bring a single breach of contract claim. Plaintiffs allege they are entitled to a
refund of their membership deposits from Washington Trust, under the terms of the Membership
Agreement and Membership Plan stemming from the termination of their Club memberships on
October 31, 2010. Plaintiffs contend the Bank is in breach because Plaintiffs never received a
refund. The Bank contends that the Plaintiffs have no right of refund, or in any event, certainly no
right of refund from the Bank.
The pending motions are resolved if the record establishes as a matter of law that the Bank
assumed, or did not assume, the obligation to refund the membership deposit. The Court, for
reasons discussed below, finds that some of the issues raised by the cross-motions for summary
judgment are appropriate for judgment as a matter of law, but that there are genuine issues of
material fact that preclude summary judgment for either party as to the ultimate question of whether

MEMORANDUM DECISION AND ORDER - 19

the refund obligation under the Membership Agreement was impliedly assumed by Washington
Trust.
A.

The Applicable Burden of Proof.
The parties disagree over the appropriate standard of proof in this case. The Bank contends

that Plaintiffs must prove “by clear and unequivocal evidence” that Washington Trust assumed the
refund liability, relying upon Murr v. Selag, 747 P.2d 1302 (Idaho 1987). Plaintiffs contend that the
burden of proof is a preponderance of the evidence.
This Court has previously held that the interpretation of the DIL Agreement is governed by
Washington law.18 The Idaho case cited by Defendants, Murr v. Selag, does indeed hold that an
assignee’s assumption of an assignor’s liabilities must be proved clearly and unequivocally. 747
P.2d at 1309. However, the DIL Agreement is not governed by Idaho law and even though the
Murr decision draws upon a Washington case, People’s Savings & Loan v. Cram, 19 P.2d 667
(Wash. 1933), in making its holding, the actual holding of People Savings & Loan is inapposite in
its facts.
Rather, the pertinent holding in People Savings and Loan is tied to real property mortgages and
emphasizes that as to a preexisting mortgage debt, an “obligation of a grantee to assume and pay a
mortgage debt need not be expressed in any particular language, but it must unequivocally show his
undertaking to be answerable for it.” Id. at 667. The only other Washington court addressing
People Savings & Loan (and indeed the only other decision besides Murr to reference it) is Perkins
v. Brown, 38 P.2d 253 (Wash. 1934), also a case considering whether a mortgage debt has been
assumed. Id. at 256. Whatever the peculiarities of those early decisions, which dealt with a
principle now long embedded in real property conveyance law, there is nothing that this Court
gleans from the holdings in those cases (and Defendants offer no other authority for their position)

18

In an earlier order, the Court also held that Idaho law applied to the Membership
Agreement. (Dkt. 37.)
MEMORANDUM DECISION AND ORDER - 20

that imposes a heightened burden of proof upon cases involving non-mortgage debt liabilities.
Hence, the Court finds, based upon the referenced cases, that the “clear and unequivocal” standard
is limited to the assumption of a mortgage debt. Accordingly, the burden of proof which Plaintiffs
must meet in order to prevail on their claim is a preponderance of the evidence.
B.

Defendants Did Not Pursue Article 9 Remedies, and Plaintiffs Bring a Breach of
Contract Claim, Not an Equitable Claim, but the General Principles of Successor
Liability Are Still Applicable to This Case.
1.

The Bank Chose to Go Around Statutory Foreclosure Procedures

The Bank brings Article 9 of the Uniform Commercial Code into its general arguments
about not having any liability for refunding the membership deposits. There is language in Article 9
which codifies common law protections against successor liability, and there are other provisions of
Article 9 that apply as a general matter to the original lending transactions between the Bank and the
LLC and the collateral taken as security for such loans in the context of how the loans were made
and how the security was perfected, and so forth.
However, the Bank would analyze the facts of this case as if the Bank had realized on its
collateral under the UCC, thus entitling itself to the statutory protections against successor liability
that might exist in that setting.19 However, the Bank did not follow UCC remedies. It diverted from

19

Washington Trust also seeks refuge in § 9-402, which provides that the “existence of a
security interest, agricultural lien, or authority given to a debtor to dispose of or use collateral,
without more, does not subject a secured party to liability in contract or tort for the debtor’s acts
or omissions.” The statute only addresses the existence of a security interest (or other lien).
The DIL Agreement and related documents (Warranty Deed and Bill of Sale) did not create
security interests. Rather, they were documents that “granted, bargained, sold, and conveyed”
the LLC’s real property and personal property to Washington Trust – dispensing, as it were, of
security interests held by the Bank in a manner that transferred ownership of such property to the
Bank, for the convenience of the Bank and in a manner intended to operate outside of the
statutory process. After the DIL Agreement, Washington Trust did not have a “mere” security
interest that would not subject them to liability under § 9-402. In that sense, the DIL Agreement
and related documents arguably fit in the “without more” identified in § 9-402 as the exception
MEMORANDUM DECISION AND ORDER - 21

doing so. There is no indication in the record that the Bank took the sorts of steps that would
characterize such a process – such as notice to other creditors, pursuing a commercial reasonable
sale, or meeting the requirements of Idaho law for foreclosure on real property.20 Even the title of
the main agreement – the “Deed in Lieu of Foreclosure” -- is an indication that the Bank did not
pursue foreclosure.
As discussed supra, the Bank officers themselves acknowledge that the Bank did not pursue
a UCC foreclosure course. Bank President Jack Heath testified that the reason the Bank made “the
decision to take the deed in lieu of foreclosure” was so that “we don’t have to go through an
extended foreclosure process.” (Heath Dep. 178:17-20.) Dean Oberst corroborated that view,
saying that “the Bank did not want to proceed with bankruptcy or foreclosure because both can take
months or years to complete....[t]o achieve a faster resolution than bankruptcy or foreclosure would
allow, and to best protect the value of the collateral, the Bank agreed to execute a deed in lieu of
foreclosure.” (Oberst Decl. ¶ 7.)
In their motion, Defendants state they proceeded under UCC § 9-604 (RCW 62A.9A-604;
I.C. § 28-9-604). This provision merely permits a secured party to make a choice, when a security
agreement covers both real and personal property, to move against the security either (1) under
Article 9 as to the personal property or (2) under real property law as to both the real and personal
property. This is not a right of remedy (as compared, for instance, to repossession or foreclosure21);
to the general rule.
20

For example, RCW 62A.9A-621 and I.C. § 28-9-621 each require that notification be
given to certain parties when a secured party desires to accept collateral in full or partial
satisfaction of the obligation.
21

See, e.g., RCW 62A.9A-610/I.C. § 28-9-610 (repossession); RCW 62A.9A-620/I.C.
§ 28-9-620 (acceptance).
MEMORANDUM DECISION AND ORDER - 22

rather, it is an election of which path of remedy that the secured creditor will pursue. Washington
Trust did neither. The Bank did not elect Article 9 remedies, nor did the Bank elect judicial
foreclosure remedies. Instead, the Bank chose to proceed through a contracted work-out with both
the debtor and the personal guarantor, by which the Bank agreed to take ownership of the broad
collection of real and personal property associated with operating the Club, along with the contracts,
agreements, and related intangible pieces of the business, in exchange for a full release of any
obligation owed under the unpaid loans, either from the LLC or guaranteed by Chesrown. The Bank
did so for what was believed, apparently, to be appropriate business reasons, but the choice was not
without risk.
Hence, the connection to Article 9 largely evaporated once the Bank decided to pursue a
work-out agreement with the LLC and Chesrown that was intended to, as the Bank clearly
acknowledges, avoid the delays associated with either judicial or non-judicial foreclosure and rather
to obtain everything needed to continue to keep the Club operating, as quickly as possible. That was
the primary purpose of pursuing the DIL and the Bill of Sale, and the Bank gave up on the
possibility of collecting anything further from the LLC or from Chesrown on his personal guaranty,
by agreeing not to seek any further recovery from the LLC, or any recovery at all from Chesrown on
his guaranty. At that point in time, the Bank had chosen not to use statutory remedies to recover the
remaining loan debt.
2.

Even if Article 9 is Not Directly Applicable, the Analysis is Much the Same

For the reasons described above, to the extent that the Bank would argue that UCC
provisions dealing with successor liability dictate the Court’s rulings on the issues raised by the
pending cross-motions, the argument is misplaced on the facts of this case. As a practical matter,

MEMORANDUM DECISION AND ORDER - 23

however, the germane arguments that would apply to successor liability generally in the UCC
context still are at the center of the issues to be decided by the Court, and the bulk of the Bank’s
motion centers on the argument that “a corporation purchasing the assets of another corporation
does not, by reason of the purchase of assets, become liable for the debts and liabilities of the selling
corporation.” Uni-Com v. Argus Publishing, Inc., 737 P.2d 304, 311 (Wash. App. 1987).22 The
Plaintiffs do not dispute the existence of this general rule, but argue that it does not apply here.
There are four exceptions to this general rule, which are: (1) the purchaser expressly or
impliedly agrees to assume the liability; (2) the purchase is a de facto merger or consolidation; (3)
the purchaser is a mere continuation of the seller; or (4) the asset transfer is for the fraudulent
purpose of escaping liability. Id. Importantly, for purposes of a ruling upon this particular defense,
the doctrine of successor liability (and the claim that one might bring based upon the doctrine) is
equitable in nature. Id. at 314.
Plaintiffs say the issue is quickly answered – they have brought a breach of contract claim

22

Uni-Com involves a successor corporation foreclosing upon a security interest in the
predecessor corporation’s assets. 737 P.2d 304, 307 (Wash. App. 1987). In the foreclosure, the
successor took the predecessor’s intangibles, inventory and accounts receivable. Id. The court
analyzed the case under successor liability and the four related exceptions. It held that where a
corporation was acting as a secured creditor to protect its interest and there was a manifestation
to only pay some of the debts and not all, there was no implied assumption to pay on the
promissory note at issue. Id. at 311-12. The court also held that the successor acted pursuant to
a valid, perfected security interest under the Uniform Commercial Code and gave the
predecessor adequate consideration. Id. at 314. “The doctrine of successor liability is equitable
in nature and was not intended to impose the burden of paying unsecured debts upon a secured
creditor.” Id.
The Uni-Com case is distinct from the facts here. The Uni-Com holding relied, in part,
upon the fact that the case involved a secured creditor foreclosing upon a valid security interest.
It then analyzed the case under successor liability law. While Washington Trust did have
security interests in secured collateral, it chose to proceed in lieu of foreclosure.

MEMORANDUM DECISION AND ORDER - 24

and successor liability is an equitable remedy, which they are not raising. Therefore, whatever the
law of successor liability may be, particularly as to any defense raised by the Defendants premised
upon the general rule, it is simply inapplicable. The Court has taken a close look at this issue and
agrees with Plaintiffs – both because they have not asserted a successor liability claim, and because
it is unavailable to them in any event upon this record. When there is an adequate remedy at law,
courts will not exercise equity jurisdiction. See Roon v. King County, 166 p.2d 165, 168 (Wash.
1946) (“Equity does not intervene when there is a complete and adequate remedy at law”); Hull v.
Giesler, 331 P.3d 507, 518 (Idaho 2014). Because the breach of contract claim represents an
adequate remedy at law for Plaintiffs, an equitable successor liability claim simply cannot be raised.
Defendants would ask the Court to recast Plaintiffs’ claim for relief as an equitable claim
based upon successor liability. There is no basis for doing so, other than it would give the Bank
some additional shade from the glare of the potential membership deposit liability. But that is not a
reason based upon the legal principles at play, and the Plaintiffs are entitled to choose their
remedies. Hence, there is no place for defenses to a successor liability claim in this case. Such a
claim is simply not at issue. However, for the reasons that are described to follow and as to which
the parties are in agreement, the question of whether the Bank is liable to refund the membership
deposits because it took an assignment from the LLC of the Membership Agreements and the
Membership Plan is answered under an analysis essentially the same as would be applied to decide a
successor liability claim in equity.23

23

Defendants state that whatever theory upon which these issues is analyzed (whether
breach of an assigned contract or successor liability) is not significant: “It does not matter
whether the Court analyzes this case under assignee or successor liability principles. Both
bodies of law invoke the same broad transferee liability principles, and both share the same
starting presumption: the transferee/assignee/successor does not assume liability absent proof of
MEMORANDUM DECISION AND ORDER - 25

C.

The Black Rock Membership Agreement and Plan were Assigned to Washington Trust
through the DIL Agreement and Related Documents, Including the Bill of Sale.
The Court finds as a matter of law that the Membership Agreement and Plan were assigned

to Washington Trust under the DIL Agreement and its related agreements. In reaching that
conclusion, the Court first looks to the language of the DIL Agreement and the accompanying Bill
of Sale and Assignment. The express assignment language of the Bill of Sale, which conveyed the
Personal Property from the LLC to Washington Trust, included “all assignable . . . contracts, . . .
licenses,. . . and agreements, of every kind and nature, relating to the Club . . . .”24 It is uncontested
that the Membership Agreement was a contract in existence at the time of the DIL Agreement was
executed. Washington Trust knew it existed. Among other things, Jack Heath, the president of the
Bank, was a member of the Club, and therefore had his own Membership Agreement. Further, both
Dean Oberst (Commercial Special Assets Manager) and Dean Emmanuels (Washington Trust Vice
President) knew of the Membership Agreement and the refundable nature of the membership
deposits. (Emmanuels Dep. 132:2-17; 156:6-157:8; 164:3-165:6; Oberst Dep. 27:8-15; 31:13-32:12;
85:11-25.) Significantly, the Membership Agreement could have been excluded from the Bill of
Sale (as was the liquor license), but it was not.
Next, the Court considers the motives and the goal of the Bank. Prior to the execution of the
DIL Agreement, both Heath and Oberst testified that the Bank had many alternatives available to it,

assumption.” Defs.’ Response at 6 (Dkt. 119). The factors relevant to whether an assignee has
assumed liabilities under an assigned contract are the same factors that are addressed under
whether there was an express or implied assumption under successor liability.
24

Significantly, the Bank expressly excluded certain assets from this list, such as “any
permits and licenses relating to Alcoholic Liquor as defined in I.C. 23-105.” Accordingly to
Oberst, Washington Trust and its subsidiary West Sprague could not hold a liquor license or sell
alcohol. Oberst Dep. 105:10-14.
MEMORANDUM DECISION AND ORDER - 26

including foreclosure,25 but that the fastest and most favorable resolution in the collective mind of
the Bank was to obtain a deed in lieu of foreclosure. (See Oberst Decl. ¶ 7; Heath Dep. 141:15-24,
178:16-20.) As described earlier, the Bank made intentional decisions intended to insure that it
would own, so that it could in turn sell, a fully functioning championship golf club, with a pristine
course, intact amenities and a stable base of members – not a closed golf course “gone to seed.”
In the same vein, Section 2.2 of the DIL Agreement made clear that the LLC “ shall have no
further interest or claim in or to the Personal Property conveyed by the Bill of Sale and Assignment,
or to any proceeds or profits of any kind whatsoever that may be derived from the Personal
Property.” (Emphasis supplied.) This provision eliminated the LLC’s interest in any of the Personal
Property conveyed, which included “all contracts . . . and agreements.” Hence, as a matter of law,
whatever had been in the LLC’s basket of property and contract assets before the DIL Agreement
and the Bill of Sale were executed was handed over in its entirety to the Bank, less only the property
that was specifically excluded. That basket contained, among many other things, the Membership
Agreement.
D.

Did the Bank Assume the Membership Deposit Refund Obligation as the Assignee of
the Membership Agreement and Related Contracts?
1.

As a Matter of Law, there Was No Express Assumption of the Membership
Deposit Refund Obligation

Washington law is consistent with black letter contract law in recognizing that once a
contract is assigned, the “assignee stands in the shoes of the assignor.” Paullus v. Fowler, 367 P.2d

25

Bank officials repeatedly refer to “preserving the asset” in their depositions. But once
the DIL was executed, the Property was no longer collateral. The Bank now owned that
Property.
MEMORANDUM DECISION AND ORDER - 27

130, 135 (Wash. 1961). For executory contracts,26 such as the Membership Agreement,27 the general
rule includes the proviso that the assignee is only liable on the underlying obligations if there is an
express assumption of those obligations. Hardinger v. Fullerton, 5 P.2d 987, 989 (Wash. 1931).
Such an express assumption can take place at the outset through a written promise by the assignee to
assume a specific obligation. Or it can occur over time, by implication, where the assignee’s
conduct manifests an intent on the part of the assignee to be bound to such liabilities. Northern Pac.
Ry. Co. v. Sunnywide Val. Irrigation Dist., 527 P.2d 693, 695 (Wash. App. 1974) (reversed on other
grounds).
Necessarily, proof of an implied assumption of contractual liabilities is a heavily factintensive exercise in which all circumstances must be considered, such as the subject matter of the
contract, the assignee’s acts and words, whether there was acquiescence in the terms of the contract
that might implicate contractual liabilities, whether there was performance of such obligations, and
whether there was acceptance of its benefits. Id. On this record, there was an express assignment of
the Membership Agreement to the Bank as described above. However, to place responsibility on
the Bank to refund the membership deposits, as called for in the Membership Agreement, requires
proof of an assumption of that liability by Washington Trust. The Count concludes as a matter of
law there was no such express assumption in writing of such a liability. As set forth in the facts, the
Bank generally disclaimed any responsibility for the debts or other liabilities of the LLC. There was

26

An executory contract is a contract that has not been fully completed or performed, or
in which the obligation relates to some future event. Lewis v. Boehm, 947 P.2d 1265, 1268
(Wash. App. 1997).
27

The Membership Agreement was assigned through the DIL, Bill of Sale and related
documents as discussed supra.
MEMORANDUM DECISION AND ORDER - 28

no express assumption of the membership deposit refund liability. Further, even if not directly
pinpointed to the membership deposits, there are multiple instances contained in the relevant
documents which evidence general and specific disclaimers of liability on the part of the Bank for
the liabilities of the LLC.
Perhaps an argument could be made from this record that simply because the Membership
Agreement and Membership Plan were part of the bundle of contract rights assigned to the Bank,
there must also be a genuine issue of material fact as to whether the assignment constituted an
express assumption of the membership refund liability.28 The Court has given careful consideration
to that possibility, based upon its independent review of the record. However, the Court is more
than satisfied that on the facts of this record no reasonable juror could conclude anything but that the
Bank sought (at least in the written documents) to expressly disclaim and avoid liability for debts, or
potential liabilities, such as refunding the membership deposits, and that such evidence establishes
as a matter of law that there was no express assumption of the membership refund liability.
2.

A Genuine Issue of Material Fact Exists as to Whether the Membership Deposit
Refund Liability was Impliedly Assumed by Washington Trust.

As previously described, an implied assumption requires consideration of all the
circumstances, such as the subject matter of the contract, the assignee’s acts and words, and whether
he acquiesced in the terms of the contract, performed its obligations, or accepted its benefits. For
example, in Northern Pacific Railway Co. v. Sunnyside Valley Irrigation District, 527 P.2d 693
(Wash. App. 1974), the defendant irrigation district had agreed to take over, maintain, and operate a

28

This argument exists regardless of whether such a liability was choate at the time of
the assignment of the agreement and thereby somehow clearly excluded, as the Bank would
argue, or whether it was only inchoate at that time, as the Plaintiffs contend.
MEMORANDUM DECISION AND ORDER - 29

drainage system from the county.29 Part of the drainage system included a culvert on property
owned by the railroad company, which had given the county a permit to construct and utilize the
culvert.
The permit contained an indemnity provision, which later came into play when a canal break
overwhelmed the capacity of the culvert, causing damage to the railroad’s property. The irrigation
district contended that it had no responsibility under the indemnity provision granted by the county
to the railroad, but the court disagreed: “Here, the [irrigation district’s] beneficial use of the culvert
is so entwined with the indemnity provision that as to [the railroad company], [the irrigation district]
cannot be heard to deny that it assumed the obligation.” Id. at 695. The court reasoned that the duty
to operate and maintain the drainage system was inseparable from the duty to hold the railroad
harmless from any loss or damage occasioned by the use of that system. Id.
A similar analysis, with facts analogous to this case, was employed in Dahlhjelm Garages v.
Mercantile Ins. Co. of Am., 270 P. 434 (Wash. 1928). In Dahlhjelm Garages, the plaintiff
purchased a vehicle under a conditional sales contract. The contract covered the purchase price, and
the installment payments for the same, and an additional charge “to cover insurance and carrying
charges” for the seller to maintain insurance on the vehicle for the life of the sales contract. 270 P.
at 435-36. The seller later assigned the contract to the defendant, Pacific Finance Corporation, after

29

The contract between the irrigation district and the county specifically stated: “The
Sunnyside Irrigation District shall perform all necessary Operation and maintenance work during
the period when the betterment and rehabilitation of the drains is under way, and upon
completion of such betterment and rehabilitation work, the Sunnyside Irrigation District shall
Operate and maintain all drains in such condition as to provide at all times the designed capacity
of such drain for seepage, waste and run-off waters from lands within Drainage District No. 9,
including waters that shall flow thereon from lands lying at a higher elevation. All such
operation and maintenance shall be performed without cost to the County, Drainage District No.
9, or the United States.” Id. at 694, n.1.
MEMORANDUM DECISION AND ORDER - 30

which the vehicle was involved in an accident not covered by an insurance policy Pacific Finance
had acquired on its own, which was not the original policy. Id. The question was whether Pacific
Finance assumed the obligation to keep the automobile adequately insured. The court concluded it
did. At the time Pacific Finance acquired the sales contract, a number of installment payments
including the additional insurance charge remained due into the future. Pacific Finance collected
these installment payments from the Plaintiff buyer and applied the payments to its own use. The
payments were not voluntary; rather, they were paid pursuant to the terms of the contract. The court
reasoned that Pacific Finance, in exacting and accepting these payments, assumed the corresponding
duty to perform the conditions of the contract, namely maintaining adequate insurance. Because it
failed to do so, the court found it was liable for the damages Dahlhjelm suffered. Id. at 436.
The Court finds strong evidence in this record to support Plaintiffs’ claim that the
membership deposit refund obligation was assumed by the Bank, and such evidence – both direct
and inferential – certainly withstands Defendants’ motion for summary judgment on that issue. The
Court considered carefully whether such evidence was sufficient to rule as a matter of law that the
Bank had impliedly assumed such liability, but ultimately concluded that there is potentially
conflicting evidence in the record upon which reasonable minds could differ as to whether liability
was assumed. The Court will discuss some of both sides of that evidence below. On balance, the
Court concludes it cannot grant summary judgment to either party and the issue will need to be
resolved by the trier of fact.
a.

“Continued Operation” of the Club

In the DIL itself, Washington Trust agreed, and Marshall Chesrown insisted, that the Bank
would “reasonably endeavor to continued stabilized operation of the Club” through at least the 2010

MEMORANDUM DECISION AND ORDER - 31

season, “at a level of services and amenities that is consistent with the prior ownership of the Club,
provided that membership is maintained with a sufficient number of dues paying members to sustain
operation . . .” DIL Agreement, § 6.3. This “continued operation” provision was echoed in other
parts of the DIL Agreement, including Recital G and Section 9.11.30
b.

The Bank Took Ownership of the Club and its Facilities and the Club
Remained Open During its Ownership

The Bank took title and ownership of all the LLC assets that comprised the real property
and personal property and operated the Club for the entire remainder of the 2010 golfing season - a
period of approximately 80 days spanning nearly three months. That ownership did not end until the
Bank’s sale of the Club assets to The Golf Club at Black Rock, LLC on November 1, 2010. During
that time period, the Club remained open at all times. Andrew Gorton (the Club general manager)
and Bank President Jack Heath (a Club member) testified there was no change in how the Club
operated over that time, from how it had been operated pre-DIL. Certainly one inference from such
evidence is that the Bank figuratively put on golf shoes instead of wingtips, and ran the Club. From
outward appearances, nothing had changed. Members had the access to the same services and
amenities. They paid the same dues.31 To continue operation, vendors and other creditors of the
Club had to be paid and the Bank did pay such liabilities - both for those incurred pre-DIL and those
incurred post-DIL. The Bank did so to maintain the Club as a going-concern, because the Bank
believed that an operating private golf club would be more attractive to potential purchasers.

30

Recital G stated a deed in lieu of foreclosure was “necessary to allow for continued
operation of the Club.” Section 9.11 stated that Washington Trust should “consider the best
interests of Club membership” prior to any assignment or transfer of the DIL Agreement, or the
Property.
31

The obligation of members to pay dues came from the Membership Plan.

MEMORANDUM DECISION AND ORDER - 32

Washington Trust even took the declarant rights to the homeowners’ association, which were not
previously held by the LLC, and appointed its employees and consultant Shiflett to the association’s
board of directors.
The Bank argues, however, that it intended to hire a third-party golf course management
company to manage the Club, but after that effort failed the Club’s general manager, Andrew
Gorton, and other LLC employees and Club staff continued to work at the Club. The Bank contends
that it was those persons and the LLC, not the Bank, managing the Club during that time period.
Both Heath and Oberst testify to this effect. (See Oberst Dep. 104:24-105:3; Heath Dep. 42:6-13,
96:7-10, 189:15-17.) Gorton did continue with the same duties and responsibilities he had under
the LLC’s ownership. However, Gorton testified that because the LLC no longer owned the Club,
he believed he needed a written management or agency agreement with Washington Trust, but one
was never reached. (See Gorton Dep. 134:9-135:23.32,33)
c.

The Club’s “Monies” and the Bank’s Infusion of Capital into the LLC’s
Checking Account

Most of the Bank’s argument in support of who was actually “running” the Club focuses
upon who was collecting the money and paying the bills of the Club. After the DIL, the Club
continued to operate in the red, as it always had. In order to keep the Club open, and operating as a
going concern, Washington Trust infused its own funds into the LLC’s bank account to pay bills left
unpaid at the time ownership transferred and to keep the Club operating after the change in

32

Gorton also testified, however, that post-DIL he “reported to Marshall” and “mostly
called Chad [Rountree].” Gorton Dep. 66:2-3, 11.
33

Also added into the mix is Chesrown’s deposition testimony following the DIL, the
Club employees were “not his,” and his contradictory declaration that they were. See, supra,
note 16.
MEMORANDUM DECISION AND ORDER - 33

ownership. These transfers totaled in the several hundred thousand dollars. They were not loans.
(See Oberst Dep. 128:7-9).
Washington Trust hired an outside consultant, Julie Shiflett, to offer her advice and
recommendations on what were essential expenses and what expenses it should fund. The Bank
made the ultimate decision about whether to put additional monies into operating the Club when the
revenues of the Club were not sufficient to meet expenses - no one else.
Both pre-DIL expenses, including pre-DIL invoices and pre-DIL sales taxes, and postDIL expenses were paid. Washington Trust places emphasis on the fact that these payments came
from the LLC’s bank account and were signed by Rountree, the LLC’s financial officer. The Bank
points out that none of the Bank’s employees was a signatory on the checking account, so it is true
that no one at the Bank had the ability to sign any of the checks. However, the language contained
at § 2.1(c) of the DIL gave the Bank “full power” to deal with the “Personal Property”34 or proceeds
thereof in its own name or that of the Club which would include the LLC’s checking account at
Washington Trust. Along that same vein, § 2.2 of the DIL stated that the LLC had “no interest or
claim” in any “proceeds of the Personal Property.”
Members continued to pay dues that were deposited into the Club’s checking account - these
amounted to a significant portion of a total revenue stream of nearly $2 million collected from
August 11, 2010 until the Club was sold.
d.

DIL Provisions

Washington Trust points to provisions in the DIL Agreement to support its argument that not

34

That “Personal Property” included accounts and “all other intangible property used in
connection with the use, operation . . . of the Club.”
MEMORANDUM DECISION AND ORDER - 34

only was the refund liability not assumed, it was expressly disclaimed. The most significant of these
contentions is based upon Section 7.4 of the DIL, which provides:
The [LLC] acknowledges and agrees the acceptance by [Washington Trust] of title to and
[the LLC]’s interest in the Property pursuant to the terms of this Agreement shall not create
any obligations on the part of [Washington Trust] to third parties that have claims of any
kind whatsoever against [the LLC] with respect to the Property and that [Washington Trust]
does not assume or agree to discharge any liabilities pertaining to the Property that occurred
prior to the date of Closing, except as specifically assumed by [Washington Trust].
(Emphasis added).
The LLC also agrees in this section to indemnify and hold Washington Trust free and
harmless from any liabilities resulting from events prior to closing. Washington Trust contends that
the refund liability was an existing obligation at the time the DIL was executed (because the
membership deposits had been listed as liabilities on the LLC’s financial records) and therefore, this
section expressly disclaims liabilities to third parties that occurred prior to closing.
Although the Court agrees that there was not an express assumption of the refund obligation,
this provision of the DIL does not protect the Bank from Plaintiffs’ claim that there has been an
implied assumption. Section 7.4 is an acknowledgment and agreement on behalf of the LLC that
Washington Trust is not liable or responsible for claims that occurred prior to Closing and that the
LLC will indemnify Washington Trust for any such claims or liabilities. Implicit in the very fact of
a indemnification is the predicate fact of an underlying claim or liability that Washington Trust is
required to pay. Hence, the Bank might raise a claim against the LLC if held liable to the Plaintiffs
for the membership deposit refunds, but that right of indemnification is not a separate defense, as a
matter of law, against the Plaintiff’s claim seeking to recover such amounts from the Bank.
Additionally, central to the Bank’s argument regarding Section 7.4 is its contention that the
membership deposits previously had been treated as a “liability” on the LLC’s annual balance
MEMORANDUM DECISION AND ORDER - 35

sheets. However, the characterization of the membership deposit refunds on the LLC balance sheets
is not dispositive as to whether they are considered a “liability” for purposes of Section 7.4 to
preclude Plaintiffs’ claims in this lawsuit. The unilateral characterization given to an accounting
entry by the LLC does not govern its character for every other purpose. As discussed further below,
the Court finds that the Plaintiffs’ right to a refund did not accrue until the Club facilities were
closed and their memberships terminated effective October 31, 2010. This occurred after the DIL
closed on August 11, 2010.35 Hence, Plaintiffs would say their claims were not pre-closing
liabilities.
Washington Trust also cites provisions from the DIL in which third party beneficiary rights
are disclaimed (Sections 7.4,36 9.1237) and language providing that there is no partnership between
Washington Trust and the LLC that would make the Bank responsible for any liabilities or
obligations of the LLC (Section 9.1038). Washington Trust argues from such provisions that
35

See In re QR Properties, LLC, 485 B.R. 20 (Bankr. D. Mass. 2013), involving a
similar situation involving claims against a successor corporation for refunds of membership
deposits to a country club. The court, having found the successor corporation was a “mere
continuation” of the predecessor corporation and thus succeeded to the liabilities of the
predecessor, ultimately held the members were not entitled to a refund. The country club bylaws
provided for a refund only if the country club and its facilities were permanently discontinued.
Because the facilities and operations were never permanently discontinued, the members were
not entitled to a refund. Put simply, the refund obligation was not triggered. Id. at 28. The first
part of this holding is directly relevant to the facts of this case. The second part of the holding
involves facts not present in this case.
36

The last sentence of Section 7.4: “No person not a party to this Agreement shall have
any ‘third-party beneficiary’ or other right hereunder.”
37

“The provisions of this Agreement are solely for the benefit of [Washington Trust] and
[the LLC], and do not inure to the benefit of, or confer rights upon, any third party.”
38

“The relationship between [Washington Trust] and [the LLC] is that of debtor and
creditor. Nothing contained in this Agreement will be deemed to create a partnership or joint
venture between [Washington Trust] and [the LLC], or between [Washington Trust] and any
MEMORANDUM DECISION AND ORDER - 36

Plaintiffs cannot enforce the refund obligation under the Membership Agreement without first
establishing that they are third party beneficiaries to the DIL.
Plaintiffs, contend, however, that they are not bringing their claims for breach of contract on
the DIL Agreement as third party beneficiaries (rather, they are suing as parties to contracts assigned
to the Bank), nor are they arguing there was a partnership or other joint venture relationship between
the LLC and the Bank.39
E.

The Refund Obligation was Triggered
Washington Trust also argues that there is no evidence that it was the one to close the Club

facilities or that it required the LLC to terminate the membership agreements. It is undisputed that it
was a demand from the New Buyer that the memberships be terminated prior to the closing of the
sale. It was Mr. Chesrown purportedly, on behalf of the LLC, who wrote the letter to members on
October 29, 2010 notifying them that their memberships were terminated effective October 31,
2010. However, the Bank owned the Club and everything about the Club, and the agreements with
the Members had been assigned to the Bank. Only the Bank could close the sale with the new

other party, or to cause [Washington Trust] to be liable or responsible in any way for the actions,
liabilities, debts, or obligations of [the LLC].”
39

Plaintiffs also contend that, regardless of what these provisions say, in contract
construction “specific provisions control over general provisions.” See, e.g., Foote v. Viking Ins.
Co. of Wisconsin, 790 P.2d 659, 661 (Wash. App. 1990). Plaintiffs argue that other, more
specific, provisions in the DIL, such as its promise to keep members’ best interests in mind and
to continue operation of the Club, clearly show that the members were indeed intended third
party beneficiaries, and that any general provision (such as § 9.12) in the DIL inconsistent with
that is unenforceable. (See Pls.’ Resp at 18.) These issues are mooted by the Court’s ruling that
the Plaintiffs are bringing a first-party breach of contract claim on the Membership Agreement
and Membership Plan, which were assigned to the Bank. However, the fact of this provision
also may be evidence arguably relevant to the jury’s decision upon whether the Bank impliedly
assumed the membership deposit refund liability.
MEMORANDUM DECISION AND ORDER - 37

buyer. The LLC had no dog in that fight. The memberships were terminated as announced in the
Chesrown letter, but it was the memberships in a Club owned by the Bank, not the LLC, that were
terminated. (Other than the Bank officers who were members of the Club, or involved in the
purchase of the Club by The Golf Club at Black Rock, LLC, the members had no obvious reason to
know of the details of the Bank’s work-out agreement with Chesrown and the LLC.) In that respect,
it makes no difference whether the letter had been written by Marshall Chesrown or Jack Heath.40
As of October 31, 2010, the members of the Club were no longer able to access the Club facilities
and their memberships were terminated.41 Once the memberships were terminated and the facilities
closed to the members, the refund obligation in the Membership Agreement/Plan was triggered.
When those refunds were not made within 30 days, the agreement was breached as a matter of law.
CONCLUSION
By virtue of the DIL Agreement and Bill of Sale the Membership Agreement and
Membership Plan were assigned to Washington Trust. Washington Trust took over the operation of

40

The Court has considered the Bank’s reliance upon testimony from John Magnuson,
the attorney for the new buyer, to the effect that the Bank consistently said it did have the
authority to terminate the memberships. His testimony in that regard is no different, nor is its
import any more persuasive, than the repeated statements by the Bank that the Bank was not
operating the Club. Regardless, even if the Bank says it did not have the authority to terminate
the memberships, the Bank had taken an assignment of the Membership Agreement and the
refund obligation was triggered when the facilities were closed to members effective October 31,
2010. The only remaining question is whether the Bank impliedly assumed liability for the
membership deposit refund obligations triggered by the closing of the Club.
41

Plaintiffs take issue with Defendants’ attempt to characterize the Asset Purchase
Agreement as occurring on October 28, 2010. By doing this, Plaintiffs argue that Defendants are
attempting to make it appear the “termination” (and triggering event) occurred after the Bank
sold the assets to the New Buyer. Thus, the refund obligation was not triggered when the Bank
owned the Property. The Asset Purchase Agreement was signed on October 28, 2010. The
transaction closed on November 1, 2010. See Magnuson Decl. ¶¶ 3-4, Exs. A, B.
MEMORANDUM DECISION AND ORDER - 38

the Club beginning on August 11, 2010 and continued until October 31, 2010. It kept the Club open
to the existing members with the same services and amenities. Member dues were collected.
Memberships were suspended if dues were not paid. Washington Trust put its own funds into the
Club to keep it afloat. Whether these actions, and the other surrounding facts, mean the Bank
impliedly assumed the refund obligation is a question for a jury. As of October 31, 2010, the
Club’s facilities were closed to the existing members and their memberships were terminated. This
initiated the refund obligation. When those refunds were not made to Plaintiffs within 30 days, the
agreement was breached. See Shawyer v. Huckleberry Estates, LLC, 93 P.3d 685, 692 (Idaho 2004).
The Court holds: (1) as a matter of law that the Bank took an assignment of the Membership
Agreement and related Membership Plan which contain the details of when the members have a
right to a refund of their membership deposits; (2) as a matter of law that the right to a refund of the
membership deposits was triggered when the memberships were terminated and the golf course
facilities closed to the members; (3) as a matter of law that the Bank did not make an express
assumption of the liability for the membership deposits, having made express disclaimers of any
such type of liability in the work-out agreement; and (4) that there are genuine issues of material fact
which preclude summary judgment for either side, and which will require resolution at trial, on the
remaining ultimate issue of whether the Bank impliedly assumed liability for the membership
deposit refunds because of its actions and conduct in the manner in which it took ownership of the
Club and its facilities, and in the manner in which the Club continued to operate it until it was
ultimately sold.

MEMORANDUM DECISION AND ORDER - 39

ORDER
Based on the foregoing, IT IS HEREBY ORDERED:
(1)

Plaintiffs’ Motion for Summary Judgment (Dkt. 99) is GRANTED IN PART and
DENIED IN PART;

(2)

Defendants’ Motion for Summary Judgment (Dkt. 89) is GRANTED IN PART and
DENIED IN PART.

DATED: September 1, 2015

Honorable Ronald E. Bush
U. S. Magistrate Judge

MEMORANDUM DECISION AND ORDER - 40