Title: McCone Co Fed Cr Union v Rehbei

State: montana

Issuer: Montana Supreme Court

Document:

FILED
September 19 2007

DA 06-0467
IN THE SUPREME COURT OF THE STATE OF MONTANA.
2007 MT 242N
McCONE COUNTY FEDERAL CREDIT UNION,
Plaintiff and Respondent,

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SEEM RNEIN o LE On, FILED

Defendants, ser p92

 

JULIE R. REHBEIN, JUANITA CARRANZA,
and A. MARGARET CARRANZA,

 

Defendants, Counterclaimants and Appellants

 

APPEAL FROM: District Court of the Seventh Judicial District,
In and For the County of Richland, Cause No. DV 03-17
‘Honorable David Cybulsk, Presiding Judge

 

COUNSEL OF RECORD:
For Appellants:

R. W. Heineman, Attomey at Law, Wibaux, Montana
For Respondent

W. Scott Green, Patten, Peterman, Bekkedahl & Green, Billings, Montana
Lyle R. Panasuk, Attomey at Law, Sidney, Montana

 

Submitted on Briefs: August 9, 2007
Decided: September 19, 2007
Filed:
Justice John Wamer delivered the Opinion of the Court.
$1 Pursuant to Section 1, Paragraph 3(€)(v), Montana Supreme Court 1996 Intemal
Operating Rules, as amended in 2003, the following memorandum decision shall not be cited
as precedent. It shall be filed as a public document with the Clerk of the Supreme Court and
its case title, Supreme Court cause number and disposition shall be included in this Court's
‘quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
{2 Appellants, Julie R. Rehbein, Juanita Carranza and A. Margaret Carranza (collectively
referred to as Borrowers) appeal from an amended judgment entered in the Seventh Judicial
District Cour, Richland County, in favor of MeCone County Federal Credit Union (Credit
Union). The judgment orders foreclosure of a mortgage on real property owned by Rehbein,
and entry of a deficiency judgment against both Carranzas in the event the proceeds from the
sale on foreclosure are insufficient to satisfy the judgment. We affirm.

$8 The Borrowers executed a Promissory Note for $186,425.48 to the Credit Union. The
rote was secured by a mortgage on real property owned by Rehbein, and by a security
interest in all three of the Borrowers’ livestock, machinery and vehicles. The Borrowers did
not pay the note and it went into default.

44 Rehbein filed for bankruptcy, which resulted in Rehbein being personally discharged
from the debt tothe Credit Union. However, pursuant to the order ofthe bankruptcy court,
the mortgage on Rehbein’s real property remained a valid lien, Carranzas remained

personally liable forthe debt.
Y5 The District Court first ordered seizure and sale ofthe personal property securing the
Promissory Note. The proceeds of the sale were insufficient to pay the loan. After sale of
the personal property, the Credit Union sought foreclosure of its mortgage on Rehbein’s
realty.

6 Federal regulations require a credit union to charge off loan that has been defaulted
so that itis not shown as an asset. 12 C.F.R. § 702.402. The Credit Union charged off the
loan in question and issued a Form 1099-C, which it sent to the United States Internal
Revenue Service (IRS), Rehbein, and Juanita Carranza. The form indicated that the
remaining debt had been canceled.' However, realizing its mistake, the Credit Union issued

‘an Amended Form 1099-C stating that no portion of the debt had been cancelled. Borrowers

 

cite to nothing in the record indicating they have suffered adverse tax consequences as a
result ofthe initial Form 1099-C.

{7 The District Court concluded thatthe debt was not canceled by the initial Form 1099-
CC. Thus, the District Court foreclosed the mortgage, ordered sale ofthe real property, and

ordered that a deficiency judgment be entered against the Carranzas if the sale did not

 

generate enough to pay the debt. The District Court also assessed attorney fees and costs.
However, with the consent of the Credit Union, the District Court later entered an Amended
Judgment vacating the award of fees and costs.

{8 Borrowers appeal the District Court's judgment thatthe Borrowers" debtto the Credit

‘Union was not canceled by the issuing of the initial Form 1099-C, and vacating the award of

1 The Credit Union didnot sve «Form 1099-C in regards to A. Margaret Caran.
3
attorney fees and costs,
{9 Wereview a district court's findings of fact to determine whether those findings are
clearly erroneous. Johnston v. Palmer, 2007 MT 99, § 26, 337 Mont. 101, 4 26, 158 P.3d
998, 426. We review a district court’s conclusions of law to determine whether they are
correct. Johnston, § 26

{10 Though the Credit Union issued a Form 1099-C, it then issued an amended 1099-C
‘within three months, and before tax filing deadlines. Borrowers’ reliance on Franklin Credit
‘Mgt. v. Nicholas, 73 Conn. App. 830, 812 A.2d 51 (2002) is misplaced. Franklin is
inapposite to the facts presented. In Franklin the defendant produced no evidence that a

Form 1099-C was not intended to discharge the debt in question, or that the 1099-C had been

 

issued by mistake. Here, the District Court found thatthe intial Form 1099-C was issued by
mistake, and that the mistake was timely corrected. Substantial evidence supports these
findings and they are not clearly erroneous

{11 The Credit Union’s bookkeeping charge offis an accounting entry, The District Court
id not errin concluding as a matter of law that the filing of the Form 1099-C did not cancel
the debt

12 _ Itisnotnecessary to discuss an award of attomey fees and costs to the Credit Union as
‘without objection the District Court amended its judgment vacating any award of fees and
costs,

{13 Itismanifeston the face of the briefs and record before us that this appeal is without

‘merit because the findings of fact are supported by substantial evidence, and the legal issues
 

are clearly controlled by settled Montana law that the District Court correctly applied.

{14 Affirmed.

 

We Concur:

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