No. 88-392

INTHE SUPREME COURT OF 

### THE STATE OF MONTANA
1989

FIRSTBANKWESTERN MONTANA MISSOULA, Plaintiffand Respondent,-vsVERNONT T. GREGOROFF and LUANNE GREGOROFF,
Defendantsand Appellants.

APPEAL FROM: District Court

### of the Second Judicial District, Inand for theCounty of SilverBow, The HonorableMark P. Sullivan,Judgepresiding.

COUNSELOF RECORD:

ForAppellant: David L. Holland argued,Butte,Montana David J. Wing argued, Butte, Montana

For Respondent: Corette, Smith,Pohlman & Allen; Lisa Swan Semansky %rgued and R.D. Corette,Jr. argued, Butte,Montana a 3- =3 4 0 >*< <-:, -3 L,: Submitted: January 10, 1989

!Lj ,i Decided: March 2, 1989 

# - (N -. LL
.- 0 cr3-'r. Filed: cc -%- c m LLJ:: --P CT .'4-0 c3

4 

### x ClerkMr. JusticeJohn ConwayHarrison delivered the Opinion of the Court.

Appellants Vernon and Luanne Gregoroff challenge the constitutionality of Montana's Claim and Delivery statutes, under which their trailerwas seized by the Butte-Silver Bow County sheriff. Appellants allege they were denied procedural due process when the District Court, upon motion of respondent First Bank Western Montana, ordered the seizure of the trailerwithoutproviding notice of or opportunity for

an immediate post-seizure hearing. The appellants'motion to quash the claim and delivery order was denied, and respondent's motion for summary judgment was subsequently granted. This appeal arises from the District Court's order and judgment entered against the appellants. We affirm,but remand for clarification of the judgment. In 1983, Gregoroffs purchased a fifth-wheel trailer from Rangitsch Brothers in Missoula, Montana. The purchase

was financed through respondent First Bank Western Montana

(hereinafter referred to the Bank). Gregoroffs simultaneously executed a retail installment contract which granted a security interest in the trailer to theBank. Gregoroffs ultimately defaulted on the installment contract, and the Bank was unable to locate the trailer for several months after the default. After locating the Gregoroffs, the Bank unsuccessfully attempted to have the note payments brought current. The Gregoroffs were informed by Bank employee Donna Duffy that they must eithermake the late note payments under the contract or turn the trailer

over to the Rank. Mr. Gregoroff informedDuffy that hewould not surrender the trailer, but would be taking a job in Arizona which would enable him to make the note payments.Although he informed Duffy that he,Mrs. Gregoroff and their young daughter were living in the trailer, he did not specifically state that he was taking his family or the trailer toArizona. On September 16, 1986, the Bank commenced a Claim an Delivery action against the appellants, asprovided forund-er S 27-17-101 et seq., MCA. Lisa Swan Semansky, counsel for the Bank, made an ex parte appearance before District Judge Arnold Olsen for Claim and Delivery of the trailer. No notice was given to the Gregoroffs that the Bank was seeking

a courtordered delivery. Recause Judge Sullivan was not available, the matter

was heard by Judge Olsen. At the request of the Judge, the Motion was presented in the Clerk of Court's office, not in the courtroom, and, therefore, no record.was made of the hearing. The Bank's motion for Claim and Delivery was supported by a bond in an amount double the value of the property, as required by 5 27-17-205,MCA. Thebond.ensures the defendant is protected in the event the seizure is determined to be unlawful. Additionally, Semansky attached to themotion the Bank's complaint and an affidavit of Donna Duffy. The affida~ritstated inpart: 10. Rased on information and bel-ief, Gregoroffs are using and living in the 1983 40 Foot Aluma Lite fifth-wheel trailer, SerialNo. KR381V29DW002152, and thereby are decreasing itsvalue.
11. The 

# ... trailer 

# .

# . . is decreasing in valueby virtue of the fact that such property decreases in value with age.14. Based on her conversation with Defendant Vernon Gregoroff on September 15th, 1986, when he refused to relinquish possession of the 1983 40 footAluma Lite fifth-wheel trailer, this affiant believes that Gregoroffs will take the trailer to Arizona some time within the nextweek. Judge Olsen signed the order and the seizure was completed the evening of September 17, 1986, by the Butte-Silver Bow County sheriff. The trailer, which contained most of the Gregoroffs' personal belongings, was taken to Rangitsch Brothers' lot 

### inMissoula. On October 1, 1986, Gregoroffs filed amotion to quash the order. District JudgeMark Sullivan denied this motion, nearly fourteenmonths later,onDecember 31, 1987. The Bank then filed a motion for summary judgment on its complaint January 20, 1988. Thismotion was granted, and judgment

### was entered for the Bank onMay 18, 1988. Gregoroffs appeal from this judgment. Gregoroffs raise four issues forreview: 1. Does S 27-17-203(2),MCA, violate the due process clause of the Fourteenth Amendment of the United States Constitution? 2. Does § 27-17-203(2), MCA, violate Article 11, Section 17of the Montana Constitution? 3. Did the District Court err ingranting its order to seize the property without a hearing in open court as requiredby the statute? 

### 4. Did the District Court err in granting the order based on a fatallydefectiveaffidavit?IssueNos. 1and 2 Does § 27-17-203(2), MCA, violate due process guarantees of the United States and Montana Constitutions? Appellants argue S 27-17-203(2)

### , MCA, is unconstitutional because it allows a court ordered seizure ofproperty without requiring notice of or opportunity for an immediate post-seizure hearing. We disagree. Section 27-17-203, MCA,provides: The sheriff shallmake no seizure unless anorder from a judge of the courthaving jurisdiction of the cause is attached to the affidavit. The judge may sign such an order ifhe is satisfied:



### (1) that theparty seekingpossession of the property has made a prima facie showing of his right to possession and the necessity for seizure at a show cause hearing before him with at least 3 days' notice to theperson inpossession of the property; if such person cannot be found for personal service, notice posted on the property and in three public places in the county where the property is located is sufficient service for this purpose; or (2) that the delay caused by notice and a hearing would seriously impair the remedy sought by the party seeking possession. Evidence of such impairment must be presented in open court, and the court must set forthwith specificity the reasons why such delay would seriously impair the remedy sought by the person seeking possession. In Mitchell v. W.T. Grant Co. (1974),41.6U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406, the Supreme Court modified its earlier position that a hearing must always precede a court ordered seizureofproperty. The Courtheld that Sniadachv.Family Finance Corp. (1969), 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349, and Fuentes v. Shevin (19721, 407 U.S. 67, 92 S.Ct. 1983, 32 Ij.Ed.2d 556, did not categorically require a pre-seizurehearing in every situation. Their import, however, is not soclear as petitioner would have it: they merely stand for the proposition that a hearing must be had before one is finally deprived of his property and do not deal at all with the need for a pre-termination hearing where a full and immediate post-termination hearing is provided. The usual rule has been 

### "[wlhere only property rights are involved, mere postponement of the judicial enquiry is not a denial of due process, if the opportunity given for ultimate judicial determination of liability is adequate." Phillips v. Commissioner, 283 U.S. 589, 596-597

(1931). Mitchell, 416U.S. at 611. Similar to Louisiana's sequestration procedure outlined in Mitchell, Montana's Claim and Deliveryprocedure balances and protects the interests of both parties involved in the action. Subsection (2) of S 27-17-203, MCA, is an extraordinary remedy, and we in no way countenance abuse of its provisions. However, we conclude the statutes doprovide the constitutional safeguards required by 

### the United States and Montana Constitutions. A pre-hearing seizure may only be obtained under circumstances which indicate the plaintiff's remedy would be seriously impaired. The plaintiffmust swear to facts which support this claim, and must file a bond in an amountdouble the value of the property to protect the defendant. Additionally, the delivery order can only be obtained from,and under the supervision of, a judge or justice of the peace, not a court clerk or adminis1trative officer. Moreover, Montana's statutes allow the defendant to file a bond to immediately regainpossession of theproperty. While S 27-17-203(2),MCA, doesnot provide for a postseizure hearing, a defendant may immediately apply for a motion to quash the order, which the appellants did in this action. Additionally, under Rule 1,M.R.App.P., a defendant can promptly seek review by this Court of a denial of that motion. Furthermore, as mentioned in Mitchell, a final judicial determination of liability follows the seizure, at which time the defendant can challenge the validity of the Claim and Delivery order. The appellantsknew they had defaulted under the terms of the retail installment contract. The terms of the contract gave the Bank the right to repossess the trailer when the appellants defaulted. Such a property interest distinguishes this case from Fuentes, supra. Furthermore, the appellants were notified by the Bank in writing, and by Duffy in person, that the trailer would be repossessed if a resolution could not be reached. No satisfactory effort to resolve the delinquencywas made and, therefore, it came as no surprise to the appellants when the trailer was seized. As noted in Mitchell, 416 U.S. at 610, 

### "[t] he requirementsof due processof law 'arenot technical,nor is any particular form of procedure necessary."' We conclude the substantial rights of the appellants have been protected and that the Claim and Delivery statutes are not unconstitutional.IssueNo. 3 Appellants argue the District Court erred because the Bank's attorney met with Judge Olsen, and the order was signed, in the Clerk of Court's office, not in "open court" as required by the statute. While appellants raise a technical argument, the Judge's decision to meet with Semanskyand hear the evidence in the Clerk ofCourt's office does not constitute reversibleerror. Subsection (2) of S 27-17-203, MCA, onl:? requires the evidence be presented in open court. It does not require a record of the hearing be made. The "open court" language requires the plaintiff or his attorney be present before the judge or justice when the ex parte motion for Claim and Delivery is made, and prevents the plaintiff from obtaining the order merely upon written application. Judge Olsen was acting in his official, judicial capacity when he heard the evidence and concluded sufficient evidence was present to issue the order.

IssueNo. 4 Finally, appellants argue it was error to issue the order based on an affidavit which contained the conclusory allegations of employee Duffy. We again disagree. Section 27-17-201, MCA, requires that an affidavit, by the person claiming theproperty or someone inhis behalf, state: (1) facts which establish reasonable belief that the person claiming the property is the owner or is lawfully entitled to possession and that the seizure is necessary to prevent the removal.or destruction of the property;

(2) that the property is wrongfully detained by the defendant;(3) that the same has not been taken for a tax, assessment, or fine, pursuant to statute,or seized under an execution or an attachment against theproperty of the person claiming the property or, if so seized, that it isby statute exempt from seizure;and (4) a particular description of the property and the actual value of the property. The affidavitcontained theserequired statementsand alleged two grounds for a Claim and Delivery order: that the trailer

was depreciatingby the appellants' dailyuse of the trailer, and that Gregoroff's employer had just completed work in Butte, Montana and was beginning another job in Arizona within the next week. While mere depreciation was not the type of serious impairment contemplated by the statute, threat of removal of theproperty from the jurisdictiondoes satisfy that requirement. The statutes require the judge be satisfied by the evidence that the delay caused by a hearing would seriously impair the remedy sought. As disclosed bv the Claim and Delivery order, Judge Olsen found that a delay would seriously impair the remedy. Evidence indicates that Defendant Vernon T. Gregoroff is employed by Acme Cement and Concrete of Spokane,Washington. The job that Acme Cement and Concrete was doing inButte,Montana ended theweek of September 15th, 1986. Acme Cement and Concrete will begin anew job inArizona. Defendant Vernon 

### T. Gregoroff will continue to be emploved bv Acme Cement and Concrete inArizona. Since Vernon T. Gregorof f and Luanne Gregoroff live in the property described in Exhibit "A", they will be moving the property described. in Exhihit "A" to Arizona.Removing the property described in Exhibit "A" to Arizona would preclude Plaintiff from recovering possession of the property described in Exhibit "A". Judge Olsen subsequently submitted two affidavits which express his understanding of the procedures of this case. The first affidavit states he signed the order without any hearing. The second affidavit states he signed the order because sufficientevidence waspresentedwhich satisfied him "that any delay caused by notice and a hearing would seriously impair repossession of the trailer by plaintiff-claimant in this case." We conclude Duffy's affidavit, supported by the verified complaint presented sufficient evidence to enable the Judge to conclude that notice and delay would seriously impair the Bank's remedy of repossession. Finally,we recognize a problem in the judgment. The judgment states the Bank is entitled to recover $16,058.67 plus legal interest and costs, but it does not account For the value of the trailer which has been seized. It is not disputed that the Bank is not entitled to both the trailer and its value. Section 27-17-401,MCA, entitles a plaintiff to judgment for possession of the property (orthe value of the property if delivery cannot be had)

# . Since the Bank is

now in possession of the trailer, it is not also entitled to its value. Additionally, while the order and judgment mentions attorney's fees in the amount of $10,000.85, it apparently only entitles the Bank to the value of the trailer, legal interest and costs, but no attorney's fees. However, we do not rule on this issue,but point out that, in any case, the contract does limit attorney's fees to 15% of the amount owed.We affirm, but remand this case to the District Court to clarify its judgment on thesepoints accordingly.

We concur: R