NO. 95-329

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

JOHN P. TURNER,

Plaintiff, Respondent and

Cross-Appellant,

v.

MOUNTAIN ENGINEERING AND

CONSTRUCTION, INC., et al.,

Defendants, Appellants and

Cross-Respondents.

KERIN AND ASSOCIATES,

Plaintiff,

v.

AMERITRUST FINANCIAL .CORP., et al.,

Defendants

APPEAL FROM: District Court of the Eighteenth Judicial District,

In and for the County of Gallatin,

The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD:

For Appellant Johnston Excavating:

Gregory 0. Morgan, Attorney at Law, Bozeman, Montana

For Respondent and Cross-Appellant John P. Turner:

James A. McLean; Drysdale, McLean & Nellen, Bozeman,

Montana

George A. Guynes, Attorney at Law, Santa Fe,

New Mexico

For Plaintiff Kerin & Associates:

Jon M. Hesse, Attorney at Law, Livingston, Montana

For Defendant Figgins Sand & Gravel, Inc.:

Richard A. Ramler, Attorney at Law, Belgrade,

Montana

Filed:

itted on'~:Briefs : November 16, 1995

Decided: January 11, 1996
Justice W. William Leaphart delivered the Opinion of the Court.

This case arises out of a protracted dispute between the

mortgagee (Turner) and construction lien creditors who performed

work on the subject property. Turner executed on a foreign

judgment, foreclosed on mortgages owned by the judgment debtor, and

purchased the property at a sheriff's sale. The subject property

is located in Gallatin County, Montana, and is commonly known as

the t'Royal Village" subdivision.

On March 14, 1995, the Eighteenth Judicial District Court,

Gallatin County, entered its Memorandum and Order for Summary

Judgment, granting Turner's Motion for Summary Judgment and finding

his mortgages valid and superior to the construction liens. The

original mortgages were executed in 1982 and 1983. In 1987,

approximately eight years before the foreclosure sale, the

construction liens were filed pursuant to 5 71-3-535, MCA.

The District Court ordered Turner to prepare an appropriate

decree and order for foreclosure of the property. In addition, the

District Court awarded Turner his costs and attorney's fees against

defendants Kerin and Associates, Figgins Sand and Gravel, Inc., and

Johnston Excavating, Inc. (the lien creditors). On April 27, 1995,

the District Court amended its order, deleting its award of costs

and attorney's fees.

On May 5, 1995, the District Court entered its Judgment,

Decree of Foreclosure, and Order of Sale. On May 25, 1995, in the

interim between the judgment and the sheriff's sale, the lien

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creditors filed their notice of appeal to this Court; however, they

did not stay the proceedings or post a supersedeas bond. On June

22, 1995, a sheriff's sale was held to satisfy the four outstanding

mortgages and Turner purchased the subject property.

The lien creditors appeal from the District Court's Memorandum

and Order for Summary Judgment and Turner cross-appeals from the

court's amended order which deleted his award of costs and

attorney's fees.

We summarize the issues raised on the lien creditor's appeal

and Turner's cross-appeal as follows:

1 . Did the District Court err in finding that Turner's

mortgages had priority over the construction liens?

2 . Did the District Court err in finding that the statute of

limitations had not run on the "Valley Bank" and "Greiner"

mortgages?

3 . Did the District Court err in granting priority to the

"Greiner" mortgage even though the mortgage does not describe the

debt it secures and does not adequately identify the mortgagee?

4. Did the District Court err in granting Turner's motion

for summary judgment?

5 . Did the District Court err in amending its Memorandum and

Order for Summary Judgment when it deleted Turner's award of costs

and attorney's fees?

In light of the fact that the subject property has been sold

at a court-ordered foreclosure sale, Turner filed a motion to

dismiss the appeal as moot. The lien creditors assert that because

the judgment was satisfied by an involuntary payment or

performance, their appeal from the judgment is not thereby rendered

moot. We hold the issue of mootness to be determinative of issues

one through four.

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L.--.-- -
In so holding, we take this opportunity to clarify the

question of mootness as it relates to foreclosure actions. We have

long recognized that a question is moot when this Court cannot

grant effective relief. Martin Dev. Co. v. Keeney Co. (1985), 216

Mont. 212, 220, 703 P.2d 143, 147-48; State ex rel. Hagerty v. Rafn

(1956), 130 Mont. 554, 557-58, 304 P.2d 918, 919-20; State ex rel.

Begeman v. Napton (1891), 10 Mont. 369, 369-70, 25 P. 1045, 1045-

46. In Martin Dev. Co., this Court stated that:

It is equally well recognized that payment of a money

judgment by the judgment debtor does not, by itself,

render the cause moot for purposes of appeal. A defeated

party's compliance with the judgment renders his appeal

moot only where the compliance makes the granting of

effective relief by the appellate court impossible.

Martin Dev. Co., 703 P.2d at 147. Confusion, however, has arisen

due to the Court's attempt to distinguish between voluntary and

involuntary performance or compliance with a judgment. In a number

of our prior decisions dealing with foreclosure actions and

mootness, we have reasoned that, since foreclosure is involuntary

rather than voluntary, it will not give rise to a waiver of the

right to appeal from the judgment. See, e.g., Traders State Bank

of Poplar v. Mann (1993), 258 Mont. 226, 234, 852 P.2d 604, 609;

Moore v. Hardy (19881, 230 Mont. 158, 162, 748 P.2d 477, 480;

LeClair v. Reiter (1988), 233 Mont. 332, 335, 760 P.2d 740, 742;

First Nat'1 Bank in Eureka v. Giles (1986), 225 Mont. 467, 468, 733

P.2d 357, 358 (citing First Nat'1 Bank in Eureka v. Giles (Mont.

1986), 43 St.Rep. 1326, 1327-28). However, that voluntary versus

involuntary analysis, in the context of mootness, was in error.

Although the question of whether the appellant's compliance with a

4
judgment was voluntary or not has bearing on whether an appellant

has waived his or her right of appeal, it has no bearing on the

question of mootness.

The Rafn opinion is apparently the source of this voluntary

versus involuntary distinction; however, in later cases, Rafn's

characterization of the issue has been misstated. See, e.s.,

LeClair, 760 P.2d at 742. In Rafn -I the district court prohibited

the Montana Liquor Control Board from issuing beer and liquor

licenses to persons other than those who had permits from the

Blackfeet Tribe. -,Rafn 304 P.2d at 919. The district court

entered a writ compelling the Board to issue licenses to those

parties who had tribal permits. Rafn, 304 P.2d at 919. The Board

attempted to stay the issuance of the writ at the district court

and at this Court. This Court, however, was not in session. Thus,

the writs "were delivered to the [tribal permit holders] under

protest and involuntarily" and tribal permit holders began to sell

liquor and beer. -,Rafn 304 P.2d at 919. Nonetheless, the Board

members pursued their appeal and we held that:

[Blecause their compliance with the mandate of the lower

court was coerced by the threat of punishment for

contempt had they disobeyed, they have by obeying lost

none of their rights to appeal and that they are entitled

to a review here.

-IRafn 304 P.2d at 919. This Court went on to state that if the

involuntary or coerced compliance with the district court's order

were the only issue, this Court may have been able to hear the

merits of the appeal. ~,Rafn 304 P.2d at 919. The Court went on to

hold, however, that "we may not be called upon to review here, and

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perhaps reverse, if our review is to no purpose and our reversal

without effect." Rafn 304 -I P.2d at 920. The Rafn Court recognized

that the question was moot regardless of whether the Board,

voluntarily or involuntarily, had obeyed the writs issued. Rafn,

304 P.2d at 920.

The Court analyzed what effect reversing the district court

might have and recognized that since the licenses had already been

issued, the parties could not be returned to their respective

positions at the time of the applications. Thus, the Court held

that the appeal was moot. -,Rafn 304 P.2d at 920.

A party may not claim an exception to the mootness doctrine

where the case has become moot through that party's own failure to

seek a stay of the judgment. Gates v. Deukmejian (9th Cir. 1993),

987 F.2d 1392, 1408. In Gates -I the Ninth Circuit held that by

refusing to seek a stay of execution of the award, and by paying

the amounts awarded, the defendants mooted any error in the interim

award. Gates, 987 F.2d at 1408.

The question of mootness is different from the waiver of

appeal rights, which is a concept that has worked itself into our

prior mootness analysis. a, e.q., Traders State Bank, 852 P.2d

at 609; LeClair, 760 P.2d at 742; Moore, 748 P.2d at 480; First

Nat'1 Bank in Eureka, 733 P.2d at 358; Montana Nat'1 Bank of

Roundup v. State Dep't of Revenue (1975), 167 Mont. 429, 432-33,

539 P.2d 722, 724. In each of these opinions, we have mixed the

doctrine of waiver with our discussion of mootness. For example,

in Traders State Bank, we stated that:

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As in LeClair, Mann Farms and John Mann did not

voluntarily relinquish their real estate and personal

property to the Bank; the Bank foreclosed. We conclude

that the failure to post a supersedeas bond or otherwise

stay the proceedings below does not render Mann Farms or

John Mann's appeal moot.

Traders State Bank, 852 P.2d at 609. As this quote illustrates,

the issue of mootness was confused with the involuntary nature of

the foreclosure. This is in error. The issue of mootness is

separate and distinct from the question of waiver of appeal rights.

Complying with the judgment does not necessarily render the appeal

moot. However, if compliance is voluntary, the party may be said

to have waived any objection to the judgment. This is a different

question than the issue of mootness.

In deciding whether a case is moot, we determine whether this

Court can fashion effective relief. Martin Dev. Co., 703 P.2d at

147-48; Rafn 304 -I P.2d at 920. In a situation where a judgment has

been satisfied by an involuntary payment or performance, the party

cannot be deemed to have waived or acquiesced in the judgment such

that the appeal would be precluded by prior conduct which is

inconsistent with the appeal. However, that does not mean that the

appeal is not moot. -,Rafn 304 P.2d at 920-21. The fact that a

party has not voluntarily waived its right to appeal does not

necessarily mean that this Court can still provide effective

relief.

In Traders State Bank, relying on a passage in LeClair which

mischaracterized the holding in Rafn, we held that "where payment

or performance of a judgment by an appellant is involuntary, the

appellant does not acquiesce to the judgment and the right to

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appeal is not affected." Traders State Bank, 852 P.2d at 609

(citing LeClair, 760 P.2d at 742). We went on to state that "[w]e

expressly overruled Henke [Gallatin Trust and Sav. Bank v. Henke

(1969), 154 Mont. 170, 461 P.2d 4481 and, in effect First Sec. Bank

[First Sec. Bank of Kalispell v. Income Properties, Inc. (1984),

208 Mont. 121, 675 P.2d 9821 and held that the appeal was not moot

because the defendant had not voluntarily surrendered the

property." Traders State Bank, 852 P.2d at 609.

We now determine that this line of authority is unnecessarily

confusing and in error. Moreover, these decisions all resulted in

affirmances in favor of the foreclosing creditor and failed to

analyze the question of what, if any, relief could be fashioned in

the event of a reversal. & Rafn -I 304 P.2d at 920-21.

Accordingly, we overrule Traders State Bank, 852 P.2d at 609;

LeClair, 760 P.2d at 742; Moore - 748 P.2d at 480; First Nat'1 Bank

in Eureka, 733 P.2d at 358; and Montana Nat'1 Bank of Roundup, 539

P.2d at 724, to the extent that they hold that the voluntary versus

involuntary payment or performance distinction is dispositive on

the question of mootness.

In addition, we note that Rule 7(b), M.R.App.P., sets forth

the procedure to stay a foreclosure sale. Rule 7(b), M.R.App.P.,

provides:

Upon service of notice of appeal, if the appellant

desires a stay of execution, the appellant must, unless

the requirement is waived by the opposing party, present

to the district court and secure its approval of a

supersedeas bond which shall have two sureties or a

corporate surety as may be authorized by law. . . When

the judgment or order determines the disposition of

property in controversy as in real actions, replevin, and

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actions to foreclose mortgages, or when such property is

in the custody of the sheriff or when the proceeds of

such property or a bond for its value is in the custody

or control of the court, the amount of the supersedeas

bond shall be fixed at such sum only as will secure the

amount recovered for the use and detention of the

property, the costs of the action,

interest,

costs on appeal,

and damages for delay. On application, the

supreme court in the interest of justice may suspend,

modify, restore, or grant any order made under this

subdivision.

In the present case, the lien creditors failed to avail themselves

of the protection of a stay of the proceedings under Rule 7(b),

M.R.App.P. As Rule 7(b), M.R.App.P., makes clear, the lien holders

should have sought a stay of the foreclosure sale.

After considering the issue of mootness in the foreclosure

context, as well as Rule 7, M.R.App.P., we conclude that our

holdings in First Sec. Bank of KalisDell v. Income Prooerties,

-,Inc. Gallatin Trust and Sav. Bank v. Henke and State ex rel.

Haqertv v. Rafn, correctly set forth the doctrine of mootness

without interjecting the concept of waiver and the distinction

between voluntary and involuntary compliance.

Generally speaking, loss of property through foreclosure is

involuntary and will not give rise to a waiver of the right to

appeal from the judgment. For example, if the property has been

foreclosed upon but not yet sold, it may still be possible for this

Court to fashion a remedy. However, the underlying question we

must confront in determining whether an appeal is moot is not

whether the sale was involuntary, but, rather, whether or not this

Court is in a position to grant effective relief.

In Martin Dev. Co., this Court determined that the appeal was

9
not moot because, although a money judgment had been satisfied, no

property had changed hands, and no third party interests were

involved. The Court held that despite voluntary payment of the

judgment, effective relief could still be granted. Martin Dev.

co., 703 P.2d at 147-48. However, our holding in Martin Dev. Co.

contemplated a situation like the one raised in the instant case.

In Martin Dev. Co., we noted that certain factors were not present;

namely, that no property had changed hands and no third party

interests were involved. Both of those elements are present in the

case sub judice.

Here, the subject property has been sold at a sheriff's sale

and third party interests, albeit Turner's, are involved. Further,

there is no surplus from the sheriff's sale for the lien creditors

to attach. The appellants' status as lien creditors who did not

post a supersedeas bond or stay the proceedings at the District

Court pending appeal, along with the fact that no surplus was

recovered at the foreclosure sale, make it impossible for this

Court to grant effective relief. The parties cannot be returned to

the status guo. See Martin Dev. Co., 703 P.2d at 148; see also 9 - -

James W. Moore et al., Moore's Federal Practice 1 208.03 (2d ed.

1994) (stating that there is a particular danger of dismissal for

mootness and, thus, a special need for seeking a stay when the

district court refuses to enjoin or, as in this case, orders a sale

of the property).

As this Court recognized in Martin Dev. Co., when there is no

effective relief this Court can fashion, the appeal is moot.

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Martin Dev. co., 703 P.2d at 147-48. Appellants allowed

foreclosure sale to proceed, did not stay the proceedings, and did

not post a supersedeas bond. As has been recognized, there is a

danger of dismissal for mootness and, thus, a special need for

seeking a stay when the sale of property is ordered and is not

enjoined. A party who is confronted with a judgment ordering a

foreclosure sale and who allows the foreclosure sale to proceed

runs the risk that his appeal will thereby be rendered moot. Moore

et al., suura at 1 208.03.

In summary, the voluntary versus involuntary distinction still

has meaning in ascertaining whether an appeal is barred due to

waiver. Thus, if an appellant has voluntarily complied with, or

performed a judgment, that voluntary compliance may result in a

waiver of that party's right to appeal and, thus, it would be

unnecessary for this Court to address the question of mootness. In

a like manner, when compliance is involuntary, as in most

foreclosure actions, the appeal is not barred or waived, but may,

nevertheless, be moot to the extent that this Court cannot grant

any effective relief. That peril has come to pass in the instant

case. At this time, this Court cannot grant effective relief.

We therefore dismiss issues one through four of the appeal as

moot and proceed to a discussion of issue five, which was raised by

Turner on cross-appeal.

5 . Did the District Court err in amending its Memorandum and

Order for Summary Judgment when it deleted Turner's award of costs

and attorney's fees?

In 1987, Kerin filed suit to foreclose its construction lien.

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Figgins Sand & Gravel and Johnston Excavating were named as

defendants in the suit, and Figgins counterclaimed and crossclaimed seeking a determination of the priority of the liens and

foreclosure of its lien. In that action, the mortgagees who were

Turner's predecessors in interest were also named as defendants,

however, the action was stayed because of the bankruptcy petition

filed by Ameritrust, a mortgagee. Turner obtained an order from

the United States Bankruptcy Court for the Eastern District of

California abandoning the trustee's interest in the Royal Village

subdivision.

After obtaining this order, Turner filed suit to foreclose on

the Royal Village subdivision on December 30, 1992. In February of

1993, Turner's suit was consolidated with the lien creditors' suit.

In an attempt to invalidate Turner's mortgage and to obtain

priority and validity of their liens, the lien creditors filed

counterclaims and cross-claims. After a protracted dispute between

the lien creditors and Turner, both Figgins and Turner filed

motions for summary judgment. Turner's brief in support of his

motion for summary judgment included a request for attorney's fees

and referenced 5 71-3-124, MCA.

In its March 14, 1995, Memorandum and Order for Summary

Judgment, the District Court awarded Turner his costs and

attorney's fees pursuant to §§ 71-1-233 and 71-3-124, MCA. Lien

creditors moved the District Court to reconsider its award of costs

and attorney's fees and, on April 27, 1995, the District Court

entered its Order Amending Summary Judgment striking the award. On

12
cross-appeal, Turner argues that the lien creditors waived their

right to object to: the award of costs and attorney's fees and,

further, that the District Court was without the power to amend the

original award. Lien creditors rely on Rules 52(b) and 60(b),

M.R.Civ.P., as authorizing the District Court to amend its order.

Even assuming that the court had authority to amend the award, an

amendment as to § 7X-3-124, MCA, was not appropriate. Section ?I3-124, MCA, provides:

In an action to foreclose any of the liens provided for

by parts 3, 4, i5, 6, 8, or 10 of this chapter, the court

must allow as; costs the money paid for filing and

recording the &en and a reasonable attorney's fee in the

district and : supreme courts, and such costs and

attorneys' fees must be allowed to each claimant whose

lien is establ{shed, and such reasonable attorneys' fees

must be allowe@ to the defendant against whose property

a lien is clabmed, if such lien be not established.

[Emphasis added. 1

Section 71-3-124, MCA, required an award of attorney's fees to

the party successfu?ly defending the lien foreclosure. Carkeek v.

Ayer (1980), 188 Mont. 345, 348, 613 P.2d 1013, 1015. Thus, the

District Court was correct in its original order which granted

costs and attorney's fees to Turner pursuant to § 71-3-124, MCA

The proceedings evolved into a contest to determine the

priorities and validity of various construction liens and mortgages

as well as an actioniby Turner to foreclose on the mortgages. Lien

creditors and Turner were the principal parties to the litigation

and the priority of; the construction liens and their foreclosure

was central to the litigation. Here, Turner was not only

attempting to determine the priority of his mortgages and foreclose

on them, he was also defending against the construction lien

13
holders' foreclosure suits. Thus, the award was required by § 71-

3-124, MCA, and was proper.

We reverse and remand for a determination of Turner's costs

and attorney's fees pursuant to 5 71-3-124, MCA.

We concur.

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