Title: CONSOLIDATED DAIRIES v AMERICAN AB

State: montana

Issuer: Montana Supreme Court

Document:

No. 80-462 IN THE SUPREME COURT OF THE STATE OF MONTANA CONSOLIDATED DAIRIES OF LAKE COUNTY, INC., Petitioner and Respondent, AMERICAN ABSTRACT AND TITLE CO., FIRST CITIZENS BANK OF POLSON, DOUGLAS K. STAM, et al., Respondents and Appellants. Appeal from: District Court of the Fourth Judicial District, In and for the County of Lake. Honorable Jack L. Green, Judge presiding. Counsel of Record: For Appellants: Hash, Jellison, O'Brien and Bartlett, Kalispell, Montana James C. Bartlett argued, Kalispell, Montana Mike Greely, Attorney General, Helena, Montana For Respondent: John R. Frederick argued, Polson, Montana Williams Law Firm, Missoula, Montana Richard Ranney argued, Missoula, Montana Submitted: ~ p r i l 22, 1981 Decided : JUN 1 0 1981 Clerk Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. T h i s is an appeal from a judgment s e t t i n g a s i d e a t r u s t e e ' s s a l e and d i r e c t i n g t h a t t h e s a l e be reconducted. Once i n a g r e a t w h i l e t h e wrath of mother n a t u r e tempers even t h e power and a u t h o r i t y of law. O n t h e q u i e t Sunday evening of May 18, 1980, i n t h e northwest c o r n e r of t h e United S t a t e s , an e x p l o s i o n occurred w i t h a magnitude and energy of 500 Hiroshima atomic bombs. A d u s t cloud of unknown t o x i c i t y spread over t h e e n t i r e Northwest. N e w s r e p o r t s i n d i c a t e d t h a t t h e e x a c t n a t u r e and p o s s i b l e e f f e c t s of t h e d u s t were undetermined. People were s t r o n g l y advised t o remain a t home, b u t i f t h e y had t o go o u t , t o wear p r o t e c t i v e masks. A p s y c h o l o g i c a l shock wave of u n b e l i e f q u i c k l y r o l l e d a c r o s s t h e P a c i f i c Northwest. When t h e d u s t had s e t t l e d and t h e p a n i c s u b s i d e d , it was d i s c o v e r e d t h a t a r e l a t i v e l y dormant volcano i n t h e S t a t e of Washington, Mount S t . Helens, had e r u p t e d and continued e r u p t i v e a c t i v i t y . During a p e r i o d of four d a y s t h i s p a r t of t h e l i v i n g world s t o o d s t i l l . Towns and c i t i e s seemed d e s e r t e d and abandoned. The once green l a n d s c a p e budding w i t h s p r i n g c o l o r s a g a i n s t a b l u e sky was g r a y and b l e a k . P r i o r t o t h i s marvel of n a t u r e ' s power, a group of p e o p l e i n t h e P o l s o n , Montana, a r e a w e r e c o n d u c t i n g b u s i n e s s , unsuspecting t h a t i n a few days t h e y would have a rendevous w i t h n a t u r e . . . That group c o n s i s t e d of p e t i t i o n e r - r e s p o n d e n t h e r e i n , Consolidated D a i r i e s of Lake County, I n c . , and a p p e l l a n t s h e r e i n , t h e t i t l e company (American A b s t r a c t and T i t l e C o . ) , t h e bank ( F i r s t C i t i z e n s Bank of P o l s o n ) , t h e Stams (Douglas K . and Lenore Kay Stam) and t h e Blankenhorns ( C h a r l e s E. and Karen K . Blankenhorn) . The Blankenhorns own a house and l o t i n Polson, Montana. T h i s r e a l p r o p e r t y is s u b j e c t t o (1) a t r u s t i n d e n t u r e i n favor of t h e bank s e c u r i n g a $46,000 n o t e , f i l e d of record September 1 5 , 1977, and ( 2 ) a mortgage i n f a v o r o f C o n s o l i d a t e d , s e c u r i n g a p r o m i s s o r y n o t e f o r $55,000 f i l e d of record August 1 7 , 1979. A t t h e end of 1979, Blankenhorns d e f a u l t e d i n payments on t h e bank n o t e . Consequently, t h e bank i n s t r u c t e d t h e t r u s t e e of t h e t r u s t i n d e n t u r e , which was t h e t i t l e company, t o hold a t r u s t e e ' s s a l e of t h e p r o p e r t y p u r s u a n t t o t h e t r u s t i n d e n t u r e and t h e Small T r a c t Financing A c t . ( S e c t i o n 71-1-301 e t s e q . , MCA). The t i t l e company, a c t i n g through its p r e s i d e n t , R u s s e l l Harshberger, proceeded t o n o t i c e such a s a l e . A f t e r s u b s t i t u t i n g a t t o r n e y James B a r t l e t t a s t r u s t e e , an amended n o t i c e of t r u s t e e ' s s a l e was f i l e d of r e c o r d on J a n u a r y 1 6 , 1980. T h i s amended n o t i c e r e c i t e d t h a t t h e p r o p e r t y would be s o l d " a t p u b l i c a u c t i o n t o t h e h i g h e s t bidder i n cash" on May 2 1 , 1 9 8 0 , a t l l : 0 0 a.m. a t t h e e n t r a n c e t o t h e courthouse of Lake County i n Polson. Copies of t h i s amended n o t i c e were mailed t o t h e Blankenhorns and t o Consolidated. A s it turned o u t , May 21, 1980, was an u n f o r t u n a t e c h o i c e . On May 1 8 , 1980, t h e Mount S t . Helens volcano e r u p t e d . On May 1 9 , 1980 (Monday), Lake County and most of western Montana was covered w i t h a l a y e r of f i n e v o l c a n i c a s h . On t h a t same day, i n response t o t h i s ash f a l l o u t , t h e Montana Department of Health and Environmental S c i e n c e s i s s u e d a " D e c l a r a t i o n of Emergency, F i n d i n g s of F a c t and Emergency Order to All Persons in the State of Montana." This order, among other things, ordered closure of "all off ices of local, county and state government, including authorities, joint meetings, and other public bodies . . . all retail trade establishments with certain exceptions . . . banks, credit agencies other than banks . . . real estate off ices . . . all schools and universities, and in general all business establishments with certain necessary exceptions." In addition, "all unnecessary use of motor vehicles [was] prohibited." The District Court took judicial notice of the conditions prevailing during this period of ash fallout and the reactions and attitudes of the general population. People were essentially confined to their homes both by fear for their health if they ventured outdoors and by the widely publicized order described above. On May 21, 1980, the day for which the trustee's sale was noticed, Lake County and most of western Montana were still subject to the above order and to the ash fallout. The title company was not open for business. The Lake County Courthouse was closed. Lake County was released to an "alert" level on May 22, 1980, and all restrictions were lifted on May 23, 1980. On May 21, 1980, at 11:OO a.m. Russell Harshberger proceeded to the courthouse steps. He "proclaimed to the public" that the sale noticed for that time and place was postponed to May 27, 1980, at the same place at 11:OO a.m. No one was there to listen to the proclamation. Later that day, Doug Stam came to Harshberger's office and was informed of the time and place of the postponed s a l e . The n e x t working day a f t e r r e s t r i c t i o n s were l i f t e d , t h e bank i n q u i r e d of Harshberger what had happened. The bank was informed of t h e time and p l a c e of t h e postponed s a l e . No o t h e r p e r s o n s o r o r g a n i z a t i o n s ( o t h e r t h a n a t t o r n e y B a r t l e t t ) were n o t i f i e d by Harshberger o r t h e t i t l e company of t h e day and time of t h e postponed s a l e o r t h a t it had b e e n p o s t p o n e d . I n p a r t i c u l a r , Consolidated was n o t n o t i f i e d . No n o t i c e s were posted nor a d v e r t i s i n g conducted concerning t h e postponement of t h e s a l e . On May 27, 1980, a t around 10:OO a.m., a f f i d a v i t s of p u b l i c a t i o n and p o s t i n g were f i r s t recorded. A t 1 1 : O O a.m. Harshberger proceeded t o t h e c o u r t h o u s e s t e p s . P r e s e n t a t t h i s time were a d i r e c t o r of t h e bank, C h a r l e s Blankenhorn, an employee of t h e t i t l e company, and t h e Stams. The bidding was s t a r t e d a t $51,356.66. The s o l e bid was t h a t of t h e Stams f o r $51,357.66. The Stams' bid of $51,357.66 was a c c e p t e d , and i n f i v e minutes t h e y p r e s e n t e d Harshberger w i t h a c a s h i e r ' s check i n t h a t amount. Following t h e s a l e , t h e t i t l e company d i d n o t inform o r n o t i f y Consolidated t h a t t h e s a l e had been accomplished. There is evidence t h a t t h e p r o p e r t y i n q u e s t i o n was worth between $75,000 and $85,000. Consolidated f i l e d a p e t i t i o n i n t h e D i s t r i c t Court of t h e Fourth J u d i c a l D i s t r i c t of t h e S t a t e of Montana t o set a s i d e t h e t r u s t e e ' s s a l e . A l l p a r t i e s f i l e d answers t o t h e p e t i t i o n . The p a r t i e s f i l e d an agreed s t a t e m e n t of f a c t s and s t i p u l a t e d t o have t h e c a u s e submitted t o t h e D i s t r i c t Court based on t h a t s t a t e m e n t . The D i s t r i c t C o u r t e n t e r e d f i n d i n g s o f f a c t , c o n c l u s i o n s of law, and o r d e r s e t t i n g t h e t r u s t e e ' s s a l e a s i d e . American A b s t r a c t , t h e t r u s t e e , and t h e bank, a s b e n e f i c i a r y , have appealed. The D i s t r i c t Court found, i n t h e unique c i r c u m s t a n c e s p r e s e n t e d by t h e f a c t s of t h i s c a s e , two s e p a r a t e r e a s o n s f o r s e t t i n g a s i d e t h e t r u s t e e ' s s a l e . F i r s t , t h e postponement of t h e s a l e merely by o r a l proclamation a t t h e time and p l a c e f i x e d i n t h e n o t i c e of s a l e was n o t l e g a l l y s u f f i c i e n t n o t i c e under t h e Small T r a c t Financing A c t , s e c t i o n 71-1-301 e t s e q . , MCA, a s a p p l i e d t o t h e unique c i r c u m s t a n c e s of t h i s c a s e . Second, i f t h e Small T r a c t Financing A c t were i n t e r p r e t e d t o p e r m i t t h e type of n o t i c e of postponed s a l e employed by t h e t r u s t e e i n t h i s c a s e , t h e n t h e A c t , a s a p p l i e d t o C o n s o l i d a t e d i n t h i s c a s e , would be u n c o n s t i t u t i o n a l a s v i o l a t i n g t h e due p r o c e s s c l a u s e of t h e United S t a t e s and Montana C o n s t i t u t i o n s . The r e l e v a n t s t a t u t e is s e c t i o n 71-1-315(3), MCA, which provides: ". . . The p e r s o n making t h e s a l e may, f o r any cause he deems e x p e d i e n t , postpone t h e s a l e f o r a p e r i o d n o t exceeding 1 5 days by p u b l i c proclamation a t t h e t i m e and p l a c e f i x e d i n t h e n o t i c e of s a l e . No o t h e r n o t i c e of t h e postponed s a l e need be g i v e n . " The r e l e v a n t c o n t r a c t u a l p r o v i s i o n of t h e t r u s t i n d e n t u r e is: "14. . . . The person conducting t h e s a l e may, f o r a n y c a u s e h e deems e x p e d i e n t , postpone t h e s a l e f o r a p e r i o d n o t exceeding f i f t e e n ( 1 5 ) days by p u b l i c proclamation by such person a t t h e time and p l a c e f i x e d i n t h e N o t i c e of S a l e , and no o t h e r n o t i c e of t h e postponed s a l e need be g i v e n . . ." A p p e l l a n t s contend t h a t t h e t i t l e company complied w i t h t h e c o n t r a c t u a l p r o v i s i o n s of t h e t r u s t i n d e n t u r e and f u l l y complied w i t h t h e Small T r a c t Financing A c t . Thus, appellants argue, the District Court was without authority to set aside the trustee sale. We disagree. While the notice by public proclamation at the time and place fixed in the notice of sale was sufficient to meet the technical requirements of both the law and the trust indenture instrument, it was not sufficient in the present case. As a practical matter, because of the volcanic eruption and the declared emergency, potential purchasers, subsequent lienholders and the public in general were not able to attend at the time and place fixed in the notice of sale. Where potential purchasers, subsequent lienholders, and the public in general are E r a c t i c a x ---- - - and legally prevented from traveling to and attending at the time and place noticed for the sale, the giving of notice of a postponed sale only by "public proclamation at the time and place fixed in the notice of sale" is a futile act, of no practical or legal significance. The provisions of section 71-1-315(3), MCA, apply to normal situations where there is no state of general emergency preventing potential purchasers, subsequent lienholders and the public in general from attending at the time and place fixed in the notice of sale. Under the circumstances of this case, notice of a postponed sale only by "public proclamation at the time fixed in the notice of sale" is not reasonably calculated to apprise all interested parties of the details of the postponed sale, and so is in violation of the due process clause of the United States and Montana Constitutions. Great Falls National Bank v. McCormick (1968), 152 Mont. 319, 448 P.2d 991. I t was p r a c t i c a l l y and l e g a l l y d i f f i c u l t f o r t h e g e n e r a l p u b l i c , p o t e n t i a l p u r c h a s e r s and l i e n h o l d e r s t o a t t e n d t h e time and p l a c e of t h e n o t i c e of t h e s a l e . Because of t h e s e f a c t s , t h e " p u b l i c proclamation" of t h e postponed s a l e a t t h e time and p l a c e of t h e t r u s t e e s a l e would n o t have t h e e f f e c t of n o t i f y i n g a l l t h o s e i n t e r e s t e d p e r s o n s of t h e t i m e and p l a c e of t h e postponed s a l e and a l l i n t e r e s t e d p a r t i e s were n o t a p p r i s e d of t h e n o t i f i c a t i o n . The D i s t r i c t Court d i d n o t look a t t h e l i t e r a l words of t h e s t a t u t e , b u t i n s t e a d looked t o a l l of t h e f a c t s and t h e i n t e n t of t h e l e g i s l a t i o n . Postponing a n o t i c e d s a l e o n l y by way of a p u b l i c proclamation a t t h e time and p l a c e where no one was p r e s e n t and no i n t e r e s t e d person could l e g a l l y o r p r a c t i c a l l y be p r e s e n t a t and g i v i n g no f u r t h e r n o t i c e of t h e postponed s a l e is n o t c a l c u l a t e d t o o b t a i n a f a i r p r i c e f o r t h e p r o p e r t y , n o r was it r e a s o n a b l y c a l c u l a t e d t o a p p r i s e a l l i n t e r e s t e d p a r t i e s of t h e pendency of t h e a c t i o n . W e a f f i r m t h e D i s t r i c t Court i n s e t t i n g a s i d e t h e t r u s t e e s a l e and f i n d proper t h e remedy t o reconduct t h e t r u s t e e s a l e a s provided i n t h e judgment. W e c o n c u r : PA& g.$Git? , - , C h i e f J u s t i c e