On February 14, 2023, the Court released a unanimous decision in Treasure Valley Home Solutions, LLC v. Chason. This post will focus on the Court’s analysis of when a real estate transaction is a commercial transaction such that attorney’s fees can be awarded under Idaho Code § 12-120(3), as that analysis may create confusion for lower courts.
By way of background, Treasure Valley Home Solutions, LLC (“TVHS”), described as “an Idaho limited liability company that buys and sells properties,” submitted an offer to purchase Richard Chason’s personal residence. A dispute arose about whether the parties had entered a contract for the purchase, and the Court ultimately determined that they had not.
As the prevailing party, Chason requested his attorney’s fees under Section 12-120(3). That provision allows recovery of attorney’s fees in civil actions to recover on a contract relating to a “commercial transaction.” A commercial transaction is statutorily defined as “all transactions except transactions for personal or household purposes.”
The district court held that TVHS intended to purchase the property for commercial development, thus the contract at issue was a commercial transaction and Chason was entitled to his attorney’s fees under Section 12-120(3). On appeal, the Court disagreed, finding that “the record does not support the conclusion that the transaction itself was commercial” in part because “Chason submitted no evidence that the property was to be used for a commercial purpose.”
The analysis might have ended with that factual determination, but the Court then considered the legal question of when a real estate transaction is a commercial transaction. In so doing, the Court rejected Chason’s proposed bright-line rule that all real estate transactions constitute commercial transactions. But by rejecting such a rule, the Court may have unintentionally created confusion about what distinguishes a commercial real estate transaction from a non-commercial real estate transaction.
What is clear is that there must be a “commercial element to the property.” That requirement is met when the property is used only for a commercial purpose, such as commercial grazing. It is also met when there is mixed-use of the property such as a property used for family retreats and logging or a property with a residence and a pasture for commercial ranching. Chason fell short here, as he presented “no evidence establishing that the real property at issue had a commercial element.”
What is unclear is if there is also a requirement that both parties to the transaction have a commercial interest in the property. At times, the Court suggested the answer is yes. For example, the Court wrote that “the parties must have mutuality of commercial purpose” and Chason failed “to establish symmetry of commercial purpose in the sale.” Those lines could mean that even if the record showed TVHS intended to commercially develop the property—which would be consistent with the Court’s description of the entity as “an Idaho limited liability company that buys and sells properties”—the putative contract would still not relate to a commercial transaction because Chason did not share that commercial purpose as the property was his personal residence.
While the Court’s opinion could be read that way, it seems wrong that the purchase of a property for commercial development would not be a commercial transaction just because the prior use of the property was non-commercial. And the Court’s application of the “mutuality” or “symmetry” requirement, if intentional, was dictum given the lack of evidence of a commercial element to the property.