No. 92-267 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

MIDFIRST BANK, STATE SAVINGS BANK, 

Plaintiff and Respondent, 

LARRY D. RANIERI; UNITED STATES 

OF AMERICA - DEPARTMENT OF THE 

TREASURY - INTERNAL REVENUE SERVICE: 

and STATE MONTANA - DEPARTMENT 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Thomas Honzel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Carl A. Hatch; Small, Hatch, Doubek & Pyfer, 

Helena, Montana 

For Respondent: 

Mark E. Noenning; Hendrickson, Everson & Noennin, 

Billings, Montana 

Submitted on Briefs: December 3, 1992 

Decided: March 18, 1993 

Filed: 
Justice Karla M. Gray delivered the Opinion of the Court. 

Larry Ranieri appeals from an order of the First Judicial 

District Court, Lewis and Clark County, granting summary judgment 

in favor of Midfirst Bank. We affirm. 

We state the issues on appeal as follows: 

1) Did the District Court err in concluding that a deficiency 

judgment was available following judicial foreclosure of a deed of 

trust securing a single family dwelling that the borrower operated 

as rental property? 

2) Did the District Court err in determining that Midfirst 

Bank could cancel nonjudicial foreclosure proceedings prior to the 

trustee's sale and elect to foreclose judicially? 

The parties do not dispute the relevant facts in this case. 

Appellant Larry Ranieri (Ranieri) is a retired Army officer who has 

sold real estate and owned various rental properties. In 1982, 

Ranieri's daughter, Vicki, moved to Helena and purchased a 

townhouse located at 911 Hialeah in Helena. She attempted to 

finance the home through a HUD loan, but that financing fell 

through, leaving her with monthly payments significantly higher 

than anticipated. In July of 1983, Vicki moved to Wisconsin, and 

asked her father to either sell or rent the townhouse to cover the 

monthly loan payments. Ranieri obliged, although the rent he 

received was about $200 less than the monthly payment. In January 

of 1984, Ranieri began paying the difference between the rent and 

the loan payment for his daughter. He also claimed rental income 

and depreciated the property for tax purposes beginning in 1984. 

2 
In October of 1985, Ranieri attempted to refinance Vicki's 

loan in his name in hopes of lowering the monthly payments and 

possibly moving into the townhouse until he sold it. He withdrew 

his application, however, when his wife refused to move into the 

townhouse. Six days later, Ranieri accepted a warranty deed for 

the townhouse from his daughter. 

Renters continued to occupy the townhouse. Between renters in 

April of 1985, Ranieri stayed at the townhouse for approximately 

fifteen days while briefly separated from his wife. After 

reconciling, his wife agreed to move into the townhouse, and 

Ranieri again applied for refinancing. On November 4, 1985, he 

executed a Note and Trust Indenture to Midfirst Bank (Midfirst) to 

secure the new loan. Prior to closing, however, his wife rented 

another home; Ranieri and his wife did not move into the townhouse 

as planned. The current renters continued to reside at 911 

Hialeah. 

Shortly after the refinancing was completed, the Ranieris 

separated for approximately one year. During this separation, 

Ranieri lived with a friend or in his real estate office, "sleeping 

out of a suitcase." Between renters, he stayed at the townhouse 

twice, for approximately a week each time. He collected mail at 

his real estate office, however, and considered it his permanent 

residence. 

Throughout his ownership of the townhouse, Ranieri rented the 

townhouse to various tenants. From 1984 through 1990, Ranieri 

claimed rental income, depreciation and business deductions 
generated by the townhouse on his federal and state income tax 

returns. In total, he claimed in excess of $20,000 in rental 

income and over $50,000 of deductions. 

Ranieri defaulted on the trust indenture on November 1, 1989. 

In September of 1990, Midfirst initiated a nonjudicial foreclosure 

and sent notice of the trustee's sale; the sale was postponed once 

and then canceled altogether. Ranieri made no further payments. 

Midfirst then initiated judicial foreclosure proceedings. On 

November 9, 1990, Midfirst filed a complaint seeking a personal 

judgment and a deficiency judgment against Ranieri. Both parties 

moved for summary judgment. The District Court granted summary 

judgment for Midfirst, and entered a judgment and decree of 

foreclosure on April 27, 1992. Ranieri appeals. 

Did the District Court err in concluding that a deficiency 

judgment was available following judicial foreclosure of a deed of 

trust securing a single family dwelling that the borrower operated 

as rental property? 

Summary judgment is appropriate if no genuine issues of 

material fact exist and if the moving party is entitled to judgment 

as a matter of law. Rule 56(c), M.R.Civ.P. In this case, the 

parties do not dispute any genuine issue of material fact. 

Therefore, we review the District Court's legal conclusions to 

determine if they are correct, Steer, Inc. v. Department of 

Revenue (19901, 245 Mont. 470, 475, 803 P.2d 601, 603. 

The District Court concluded that Midfirst could collect a 

deficiency judgment following judicial foreclosure of Ranieri's 

trust indenture. The court determined that ~anieri did not qualify 

for the exception to deficiency judgments set out by this Court in 

4 
First State Bank of Forsyth v. Chunkapura (1987) , 226 Mont. 54, 734 

P. 2d 1203, which prohibits deficiency judgments foLlowing judicial 

foreclosure of trust indentures secured by occupied, single family 

residential property. The court reasoned that, because Ranieri 

resided at the townhouse for an insignificant amount of time and 

collected rents and depreciated the property, the Chunka~ura 

exception did not apply. 

On appeal, Ranieri argues that collecting rent from the 

property to make the loan payment does not make the property 

commercial in nature; therefore, he asserts, the rental of the 

townhouse does not prevent him from invoking the Chunkapura 

exception. He also argues that renters can occupy the property 

without disqualifying the borrower from Chunkamma's protection, 

claiming that his intent to make the townhouse his residence should 

bring him within Chunkapura. 

In Chunkapura, we held that a creditor seeking judicial 

foreclosure of an occupied, single family residential home secured 

by a trust deed cannot obtain a deficiency judgment. Chunkapura, 

734 P.2d at 1211. ~nterpreting Montana's Small Tract ~inancing 

Act, we concluded that a deficiency judgment under those 

circumstances would be inconsistent with the provisions and 

legislative intent of the Act. On rehearing, we carefully limited 

the holding to the facts of Chunka~ura--a trust deed secured by an 

occupied, single family residential property--and expressly 

excluded those trust deeds securing loans in commercial settings. 

Chunkapura, 734 P.2d at 1211. 
We subsequently have interpreted Chunka~ura in relation to 

three different factual scenarios. We refused to apply Chunkawura 

to a trust deed securing a commercial warehouse in Carpenters 

Employers Retirement Trust v. Galleria Partnership (1989), 239 

Mont. 250, 780 P.2d 608, We stated that the limited holding of 

Chunka~ura did not apply to a purely commercial loan. Galleria, 

780 P.2d at 613. 

Here, Ranieri has operated the townhouse as a rental unit 

since he obtained title from his daughter. He has claimed rental 

income and taken significant deductions on his federal income taxes 

related to the townhouse. The Internal Revenue Code allows these 

deductions only if incurred in the taxpayer's trade or business or 

for the production of income. See 26 U.S.C. 58 162-167. Ranieri's 

tax returns evidence his own perceptions and intentions regarding 

the commercial nature of the townhouse. 

Ranieri disagrees that the townhouse is commercial in nature. 

He argues that our decision in First Fed. Sav. & Loan v. Anderson 

(1989), 238 Mont. 296, 777 P.2d 1281, allows the borrower to rent 

out the property without changing its residential character to 

commercial. Ranieri overstates our fact-specific holding in 

Anderson. 

In Anderson, the family executed a trust deed to secure their 

residential dwelling, which they occupied for the following seven 

years. When they put the property up for sale, they rented it out 

for eighteen months to make the payments. Anderson, 777 P.2d at 

1282. We concluded that when the lender accepted the trust 
indenture, the deed related to occupied, single family residential 

property, and the fact that the family had rented it out briefly 

before sale did not preclude application of Chunkapura. Anderson, 

777 P.2d at 1284. 

Anderson involved residential property purchased and occupied 

as the family's primary residence; the family purchased the home 

with the loan secured by the trust indenture and immediately 

occupied it. In contrast, when Midfirst accepted the trust deed 

from Ranieri, Ranieri was operating the property as a rental unit, 

as he had for the preceding two years: indeed, he has never resided 

permanently in the townhouse. In addition, the eighteen month 

rental period prior to sale in Anderson, which followed a seven 

year occupation of the property as a residential dwelling, does not 

compare to the seven year rental arrangement managed by Ranieri. 

At the time of the trust indenture, Ranieri operated the townhouse 

as a rental unit, generating income and tax deductions, and he 

continued to do so throughout his ownership of the property. We 

conclude that the townhouse is commercial in nature. 

Ranieri also contends that Chunkapura does not require that 

the borrower reside in the property. We addressed this argument 

recently in First Western Fed. Sav. Bank v. Lence (Mont. 1992) , 839 

P.2d 1277, 49 St.Rep. 857. In Lence, the borrower purchased a 

condominium at Crystal Lake and secured the loan with a deed of 

trust. His primary residence was in Whitefish, although from 1977 

to 1985, he spent the summer months at the condominium; he also 

rented it out intermittently in 1990. Lence defaulted and the 
lender instituted judicial foreclosure proceedings, seeking a 

deficiency judgment. Lence, 839 P.2d at 1278. 

In allowing a deficiency judgment against Lence, we first 

focused on Lence's admission that the condominium was not his 

primary residence. Under Montana law, a person has only one legal 

residence, and we concluded that the Chunka~ura protection against 

deficiency judgments applies solely to that one legal residence. 

We also distinguishedthe nature of Lence's summer condominium from 

the residential properties in Chunkaoura and Anderson, which were 

purchased and utilized as the families1 primary residence. We 

stated: 

We conclude that the condominium at issue here, never 

intended or occupied as Lence's primary residence, does 

not qualify for the limitation on deficiency judgments 

established in Chunkapura and Anderson. To accept 

Lence's argument would pervert the limited nature of the 

Chunka~ura exception; it would allow a person to avoid 

the possibility of deficiency judgment on virtually 

unlimited numbers of properties by merely ensuring that 

each property was a residential unit and without regard 

to whether the property was ever intended or used as a 

personal, primary residence. Indeed, under Lence I s 

interpretation of Anderson, it would not be necessary 

that the borrower ever occupy the properties, so long as 

they were occupied by someone. Such results were not 

contemplated or intended by Chunka~ura and Anderson. . . 

w, 839 P.2d at 1280. Thus, we rejected in Lence Ranieri's 

argument that Chunka~ura applies if renters, rather than the 

borrower, occupy the property. Our decision in Lence requires that 

the property secured by the trust deed be the borrower's actual, 

personal, primary residence. 

As in Lence, the townhouse was never Ranieri's actual, 

personal, primary residence. Ranieri admits that the townhouse was 
not his primary residence; even during the times of separation from 

his wife, he considered his real estate office his primary 

residence. Even though Ranieri has claimed a continuing intent to 

move into the townhouse, this intent did not materialize, Ranieri 

has spent, at the most, one month at the townhouse over the seven 

year span. As such, pursuant to Lence, the Chunka~ura exception 

does not apply. 

In sum, the Chunkapura exception is limited to single family 

residential property occupied by the borrower as his or her primary 

legal residence. As discussed, Ranieri has not ltoccupiedtl the 

property, as required by our decision in Lence. Further, the 

townhouse is commercial, not residential, property in Ranierils 

hands. Thus, Ranieri is not eligible for the Chunkapura protection 

from a deficiency judgment. We hold that the ~istrict Court did 

not err in concluding that Midfirst was entitled to a deficiency 

judgment after judicial foreclosure of Ranieri's trust indenture. 

Did the District Court err in determining that Midfirst Bank 

could cancel nonjudicial foreclosure proceedings prior to the 

trustee's sale and elect to foreclose judicially? 

The District Court concluded that no provision in the Small 

Tract Financing Act prohibited Midfirst from canceling nonjudicial 

foreclosure and initiating judicial foreclosure proceedings against 

Ranieri. Ranieri contends that because Midfirst initiated 

nonjudicial foreclosure proceedings under the Small Tract Financing 

Act, it elected its remedy and could not thereafter cancel those 

proceedings and begin judicial foreclosure proceedings. 

Ranieri bases his argument primarily on § 71-3-315, MCA, which 
reads in pertinent part: 

Notice - sale - payment. A trust deed be foreclosed 

by advertisement and sale in the manner hereinafter 

provided: . . . 

(3) On the date and at the time and place designated in 

the notice of sale, the trustee or his attorney shall 

sell the property at public auction to the highest 

bidder. . . . [Emphasis added.] 

He concedes that the permissive "mayw in the introductory language 

gives the trustee the option of foreclosing by advertisement and 

sale; he contends, however, that once that option is chosen, the 

word lrsha1l1' in subsection (3) requires that the trustee complete 

the trustee's sale and all other procedures of nonjudicial 

foreclosure. 

A straightforward reading of the statute mandates our 

conclusion that the term qtshallll in subsection (3), and throughout 

the remainder of 5 71-1-315, MCA, merely describes the requisite 

procedures a trustee must follow if a sale is held. Here, the 

trustee's sale was not held; thus, those requirements are not 

applicable. The Small Tract Financing Act does not contain any 

provision prohibiting a trustee from canceling a noticed sale. 

Ranieri bases his next argument on 5 71-1-312, MCA, which 

allows the trustee to cancel nonjudicial foreclosure proceedings 

when the debtor pays the entire amount in arrears. He argues that 

because this statute describes a situation in which a trustee's 

sale may be canceled, a trustee cannot cancel a sale for any other 

reason. Ranieri claims that because he did not pay the arrearage, 

Midfirst cannot cancel the sale. Again, Ranieri misinterprets the 

statute and the purposes behind it. 

10 
Section 71-1-312, MCA, represents one of the distinguishing 

factors of nonjudicial foreclosure. Under traditional mortgage 

law, payment of the entire balance of the loan is required to halt 

foreclosure proceedings once instituted. With nonjudicial 

foreclosure, payment of only the amount in arrears reinstates the 

trust indenture. See Dietrich, David S . , The Morttana Judicial altd NOIEJudicial Foreclosure Sale: Analysis and Suggestions for Reform, 4 9 MONT . L . REV. 2 8 5 , 

294-297. Section 71-1-312, MCA, merely codifies this unique aspect 

of trust indentures. 

~anieri's interpretation of the Act would preclude a trustee 

from canceling a sale if the debtor paid off the entire obligation 

or if the lender chose for whatever reason to release the debtor 

from the obligation. The "quid pro quo" which supported the 

enactment of the Small Tract Financing Act did not include this 

concession by borrowers; Ranieri's interpretation would restrict 

trustees and burden borrowers to an extent not contemplated by the 

legislature. See Chunka~ura, 734 P.2d at 1210; Dietrich, p. 295. 

Finally, Ranieri contends that the legal doctrine of l'election 

of remediesT1 bars Midfirst's subsequent judicial foreclosure. 

Ranieri argues that by sending out the notice for the trustee's 

sale, Midfirst waived its remedy of judicial foreclosure. 

As a legal doctrine, election of remedies is the exercise of 

a choice of an alternative and inconsistent right or course of 

action. Massett v. Anaconda Copper Co. (1981), 193 Mont. 131, 136, 

630 P.2d 736, 739. It is well settled in Montana that an election 

exists only when a remedy is pursued to a final conclusion. State 
ex. re1 Crowley v. District Court (l939), 108 Mont. 89, 96, 88 P.2d 

23, 26; Glacier Campground v. Wild Rivers, Inc. (1978), 182 Mont. 

389, 401, 597 P.2d 689, 695. 

Here, although Midfirst sent notice of the trustee's sale, it 

did not pursue this remedy to its final conclusion. As such, 

Midfirst's initiation of nonjudicial foreclosure proceedings, later 

abandoned, did not constitute an election of remedies that 

precluded judicial foreclosure proceedings. 

We conclude that the District Court did not err in concluding 

that Midfirst could cancel nonjudicial foreclosure proceedings 

prior to the trustee's sale and proceed with judicial foreclosure. 

Af f inned 

We concur: 
March 18, 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the 

following named: 

Carl A. Hatch 

SMALL, HATCH, DOUBEK & PYFER 

Livery Square 

39 Neil Avenue 

Helena, MT 59601 

MARK E. NOENNXNG 

Attorney at Law 

324 Hart-Albin Building 

BiIlings, MT 591.01 

Bruce R. McGinnis, Tax Counsel 

Department of Revenue 

Mitchell Building 

Helena, MT 59620 

Bernard F. Hubley 

Attorney at Law 

6915 Bristol Lane 

Bozeman, MT 59715 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA