Insurer Sued In House Flipping

June 12--A homeowner says she was surprised to discover that a man she thought was renting her house, with plans to buy it, had demolished it instead.

Years later, Shammie Fisher is fighting in court to get compensation for the ruined house in North Boise.

The Idaho Supreme Court in May sided with Fisher in her appeal of a lower-court ruling that her insurance company did not have to cover the loss. The court sent the ruling back to the district court for reconsideration.

"I've never seen a case like this. I really haven't," said Fisher's lawyer, James G. Reid of the Boise law firm Kaufman Reid. "I've seen cases where people will enter into a sales contract and allow somebody to rent it for a certain amount of time, until they can get financing or money to complete the sale."

But that's not what happened to Fisher. According to court records:

Fisher's 1,152-square-foot midcentury house on North 34th Street was covered under an insurance policy with Garrison Property and Casualty Insurance Co. After she got married, she decided to sell the house.

Ron Reynoso was interested in buying it. Reynoso, who lived in the Treasure Valley at the time, signed a one-year purchase agreement in January 2012. The deal allowed him to rent the home starting that March, with the expectation of buying it.

'Never would have guessed'

Their agreement said Reynoso essentially planned to flip the house, making "certain improvements" and selling it by March 31, 2013, with the possibility of a six-month extension.

Reynoso then leveled the place.

"With the first two months, I was notified that the entire home had been destroyed ... including the structure and the fixtures therein," Fisher wrote in an affidavit. "I had no knowledge that Mr. Reynosa [sic] intended to destroy the home when he leased the property, and he was not authorized to do so."

Fisher said the only changes they discussed were cosmetic, such as new flooring, countertops, light fixtures and paint. She thought Reynoso, a contractor who remodeled kitchens and tiled bathrooms, would be living in the house while doing the work.

"It seemed like it would be a risk worth taking," said Fisher's husband, Michael Royce. "We woefully underestimated what the worst-case scenario was. I never would have guessed."

After the house was demolished, Reynoso promised to rebuild it. Fisher took him at his word, Royce said.

Reynoso started framing the new structure but walked away a few months later. Fisher then filed a claim with Garrison, an operating company of the United Services Automobile Association. The insurer denied payment, citing an exclusion in the contract for faulty, inadequate or defective work.

Reynoso told the Statesman that he left the Treasure Valley, and the unfinished house, after he was diagnosed with a degenerative disease.

In 2015, Fisher sued her insurer.

She did not sue Reynoso for two reasons, her lawyer said. First, he had left the state, and she could not find him.

"In addition, there was the practical aspect of it," Reid said. "She had no way of knowing if he had any assets to pay her, if she did sue him."

Reynoso: 'They knew'

Reynoso said the statements Fisher made in her lawsuit are wrong. He acknowledged never talking to Fisher about demolishing the house but said the agreement gave him the authority to do it.

"They knew that I was going to build a new house," he said. "The whole plan was to build a two-story, 3,400-square-foot house and sell it before the [agreement term] was up."

Fisher and her husband maintain that Reynoso never had permission to destroy the house.

"It was ridiculous, when we found out that was his plan," Royce said.

Documents filed with the initial lawsuit showed that Reynoso bought the house, including a hot tub and shed, for $153,000. He had applied for a loan to cover most of that. He agreed to pay $10,000 in earnest money up front, some of which went to the real estate agents.

He also agreed to pay $1,000 a month in rent until the home sale closed.

"They got their money," he said.

Royce said the couple planned to sell Fisher's house and use the funds to buy a larger home for their growing family, but instead they "were left with nothing." And the lawsuit itself has cost about $50,000 to $60,000 so far, he said.

Landlord beware

Reynoso filed for a "partial demo" of the house and its attached garage.

That May, he filed for a building permit for an "extensive remodel and addition" to more than triple the size of the garage, build a second story on the house, add 894 square feet to the main floor and build a 400-square-foot deck above the ground-level dining room and kitchen. Reynoso was listed as both the applicant and the owner.

The city permit records include a detailed blueprint of Reynoso's new house plans.

Reynoso valued the project at $280,619.

Later, Royce learned that the city had issued permits for the work. "Shouldn't somebody in this incident have [sought] some sort of permission?" he wondered. But city staff told him that contractors can pull permits on homes, he said.

Fisher and Reynoso exchanged cordial text messages after he demolished the house, according to records filed with the lawsuit. They communicated about Reynoso's rent being due, his construction schedule, a concrete seller placing a lien on the house because of Reynoso's unpaid bill, and Fisher's plans to put the house on the market.

By September, city records show the project had been abandoned.

Royce filed a grand-theft complaint with police in August 2013. He told police the crime occurred between January 2012 and August 2013. But county prosecutors reviewed the complaint and decided it should be sorted out in a civil case, not a criminal one.

Since then, Fisher and Royce have sold the property for an undisclosed price. The buyer tore down the framing Reynoso put up.

Reynoso has been disciplined twice since 2013 by the state contractors' board in other cases and has had his contractor registration revoked. One customer fired him for "substandard" work on a project he began after stopping work on the Fisher property.

Reynoso told the Statesman he quit working on the Fisher project because he was diagnosed with Huntington's disease and had to leave Boise. He said he now lives in Houston, where he is getting treatment. He said he is concerned that if Fisher prevails, the insurer "is going to come after me."

Meanwhile, the lot is now a dirt field with nothing on it but tire tracks and weeds.

Audrey Dutton: 208-377-6448, @audreydutton

The Statesman's Ruth Brown contributed.

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