No. 84-22 INTHE SUPREME COURTOF THE STATE OF MONTANA 1984

FIRSTNATIONAL BANK IN BOZEMAN, a National Banking corporation, Plaintiff and Respondent,

ROBERT K. POWELL andVICTORY POWELL, Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District, Inand for the County of Gallatin, TheHonorable ThomasOlson,Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Landoe, Brown,Planalp,Kommers and Lineberger, Bozeman,Montana: Gene I. Brown argued,Bozeman For Respondent: Berg,Coil, Stokes & Tollefsen, Bozeman,Montana Michael C. Coil argued, Bozeman,Montana

submitted: September 19, 1934 Decided: October 11,1984

Filed: QGi

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ClerkMr. Justice Frank B. Morrison, Jr., delivered the Opinion of the Court. In an actionby FirstNationalBank tohave Powellsvacate their family residence pursuant to a foreclosure sale on a trust indenture, the Eighteenth Judicial District Court entered a judgment in favorof the Bank. Powellsappeal. We affirm. Robert Powell, a real estate appraiser in Bozeman, and Victory Powell, the owner of a mortgage firm,Treasure State Mortgage, purchased the family residence, involved in this appeal, in 1970. In August, 1978,Victory Powell invested in commercial property on College Street in Bozeman. She financed the total purchase price ($69,500) through First National Bank

(the Bank) in Bozeman. The Bank required security in addition to the commercial property for 100% financing. Without suggestion from the bank, Mrs. Powell offered her personal residenceas the additionalcollateral. The deed of trust, subjectof this appeal,executed by Mrs. Powell listed the commercial lot as ParcelNo. 1 and the Powell residence

as Parcel No. 2. Neither the deed of trust nor the accompanying trust indenture designated either parcel as primary or secondary security for the debt. However, the Powellsunderstood that theCollege Streetproperty primarily secured the commercial investment loan while their personal residence provided a secondary security en lieu of the down payment. Mrs. Powell was not represented by counsel at the closing,nor did she consult with her attorney to review the financialdocuments. In the summer of 1979 Mrs. Powellbecame delinquent on monthly loan i-nstallments. In a letter dated June 3, 1980, she informed the Bank that she intended to "bring the accountup to date within the next month or two." With the debt remaining in default, Victory Powell made a verbal offer in the fall of 1981, to return the deed on the commercial property in return for a full release from the Rank on the deed of trust dated August 30, 1978. Mrs. Powell testified that she never received a written response from the Bank. Mrs. Powell attempted to sell the commercial lot for two years without success. In the meantime, the Powells assigned the rental income of $400/monthto the Bank to apply against their $700monthly obligation. Despite this assignment, a negative accrual statusremained on the loan. The Bank issued notice of trustee's sale in the foreclosure action pursuant to the Montana Small Tract FinancingAct. On May 12 and 14, 1982 the Bank apprisedMrs. Powell of the amount required to satisfy the loan or, in the alternative, the required payment to bring the loan current. Mrs. Powell would have avoided foreclosure with either payment. Two Bank employees testified that Mrs. Powell did not respond. The trustee's sale was held on July 28, 1982. Victory Powell attended the foreclosure sale without representation. Several Rank officers and the Bank attorney were present. Prior to the sale the agent for the trustee,American Land Title, inquired whether the parcels were to be sold separately or together. The Bank responded that the parcels

were to be offered individually. When itwas suggested that Powell's residence be offered first Victory Powell made no objection. Victory Powell did not bid upon her family residence. The Bank's bid of $100 was accepted as purchase price for the Powell's residence. Bidding on the commercial property resulted in purchase by the Bank for $1.00.Trustee'sdeeds to the subjectpropertiesdated July 28, 1982

were issued to the Bank. Approximately two and one-half weeks after the foreclosure sale, on August 13, 1982 the Bank, through its counsel, requested the Powells vacate their home. The Bank again servednotice upon the Powells on August 27, 1982. Powellsrefused to surrenderpossession. The District Court held that the Bank rightfully sold the Powell's family residence at the foreclosure sale and ordered the Powells tovacate theirhome and topay back rent in the amountof $500per month from September, 1982. Powells submit this issue on a-ppeal: Did the trial court err in holding that a foreclosure sale on a trust indenture primarily secured by commercial investment property was lawful when the First National Bank in Bozeman ordered the appellants1personal residencebe sold first? The unambiguous language of the trust indenture grants authority to the trustee to determine the order in which parcels of real estate securing the indebtednessmay be sold. Paragraph 19 of the trust indenture provides in pertinent part:"19. After the lapse of such time asmay then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Grantor, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and such order as it may determine (but subject to any statutory right of Grantor to direct the order in which suchproperty, if consistingof severalknown lots or parcels, shall be sold), at public auction to the highest bidder for cash in lawful money of the United States,payable at time of sale." Despite this discretionary language, the trustee's authority is not boundless. 55 Am. Jur. 2d, Mortgages,section 727 explains restrictions imposed upon the trustee's power in foreclosure procedures as follows: 

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. . On the other hand, it has been ruled that even where a mortgage or deed of trust vests a discretion in the trustee to sell the encumbered premises as he thinks best, such discretion is not an arbitrary one, but generally is subject to the controland directionof thedebtor, whomay choose themode of offering theproperty for sale." As this is a case of first impression we cite a Minnesota Supreme Court's analysis of this issue with approval. The Minnesota Court held: 

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# . Where a homestead is subject to a mortgage which also covers other lands, the owner is entitled, upon seasonable demand, to have the land other than the homestead first applied in satisfaction of the mortgage." Mulroy v. Sioux Falls Trust & Savings Bank of Sioux Falls (1925), 165 Minn. 295, 206 

### N.w.~%J461, 462. The determinative factor is a requisite "seasonable demand" made by the landowner/mortgagor expressing the preferred order of sale. Applying these legal principles to the facts of this appealwe find no abuse of the trustee's discretion relative to the order in which he sold the two parcels securing the Powell's defaulted commercial loan. Prior to the auction, Mrs. Powellwas informed that the trustee proposed to offer the Powell's residential property first and the investment commercialparcel second. It is undisputed that Mrs. Powell made no objection to her home being auctioned first. She never suggested apreference that eitherpiece of real estate be sold before the other. Even after the bank had purchased her home for $100 and her investment property for $1.00 at the foreclosure proceeding, Mrs. Powell never complained to

or objected to themanner ororder of the sale. It isaproper electionof the debtor at the time of the sale to demand a specific order in which the separateparcels

are to be sold. In the instant case,Mrs. Powell failed toexercise this right. She made no objection to the trustee's proposal that the Powell family residence be sold first. She acquiesced in the order of sale and deferred to the discretionary authority of the trustee. The judgment of the District C

We concur: 

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