No. 85-36 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

HOMER R. PULSE, JR., and MARGARET B. 

PULSE, husband & wife, 

Plaintiffs and Appellants, 

NORTH AMERICAN LAND TITLE COMPANY 

OF MONTANA, a corporation, and FIRST 

SECURITY BANK OF GLENDIVE, a Montana 

Banking corporation, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Seventh Judicial District, 

In and for the County of Dawson, 

The Honorable M. James Sorte, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

R. W. Heinema.n, Wibaux, Montana 

For Respondent : 

Gerald J. Navratil, Glendive, Montana 

Submitted on Briefs: Aug. 15, 1985 

Decided: October 15, 1985 

0C-i 15 5985 

Filed: 

Clerk 
Mr. Justice William E. Hunt, Sr., delivered the Opinion of 

the Court. 

Homer and Margaret Pulse appeal a final order of the 

District Court reforming a mortgage executed by Paul J. 

Hanson in favor of the Pulses so as to give priority to a 

Deed of Trust, executed contemporaneously with the mortgage, 

by Hanson in favor of defendant, First Security Bank of 

Glendive. We affirm. 

Appellants raise four issues for our consideration: 

First, whether the trial court erred in determining that both 

the Deed of Trust in favor of the Bank and the mortgage in 

favor of the Pulses were purchase money mortgages and that 

the priority between them was to be determined by the 

intentions of the parties? 

Second, whether there was clear, convincing, and 

satisfactory evidence to support the trial court's 

determination that the mortgage document from Hanson to the 

Pulses required reformation insofar as the terms "no 

exceptions" in that mortgage represented a mutual mistake 

inconsistent with the intention of the parties to the 

purchase and sale of the premises? 

Third, whether the preparation of the Purchase Agreement 

and mortgage by the Rank constituted the unauthorized 

practice of law? 

Fourth, whether the Bank owed the Pulses a fiduciary 

duty, and if so, did the Bank breach that duty? 

In 1966, Homer Pulse purchased commercial real property 

located in Glendive, Montana, known as the Sunshine Market. 

In 1981, Pulse decided to sell the Sunshine Market, as the 

market for the sale of commercial real estate was good. 
Pulse was contacted by Paul Hanson regarding the sale of the 

property. Hanson agreed. to purchase the Sunshine Market, 

provided he could obtain financing. Thereafter, Pulse and 

Hanson met at the First Security Bank of Glendive and 

discussed the proposed purchase and sale with Genevieve 

Remillard, the Senior Vice-President of the Bank. 

The Bank agreed to finance Hanson's purchase of the real 

estate and to prepare the necessary documents as "a service" 

to its customers. On September 9, 1981., the Pulses entered 

into a Purchase Agreement with Hanson. The Purchase 

Agreement, as prepared by the Bank, provided. that the 

significant terms of the sale were to be as follows: 

(a) Purchase price of sixty-nine thousand dollars 

($69,000 .OO) ; 

(b) HANSON to make a downpayment to PULSES 

sufficient to pay off an existing mortgage in the 

amount of $13,400.00 and, in addition, to provide 

PULSES a cash sum in the amount of $20,000.00; 

(c) PULSES to carry the balance of the sale price 

by way of a second mortgage. 

The Rank financed the purchase by lending to Hanson 

$33,400.00, an amount sufficient to satisfy the existing 

mortgage on the premises and to provide the Pulses with the 

additional $20,000.00 cash. As security for the loan to 

Hanson, Hanson was to execute a Deed of Trust to the premises 

in favor of the Bank. Testimony at the trial indicated that 

both the Pulses and Eanson advised the Bank that the Pulses 

were to receive a second mortgage from Hanson. 

On September 23, 1.981, Hanson simultaneously executed a 

mortgage in favor of the Pulses and a Deed of Trust in favor 

of the Bank. The Deed of Trust was filed on September 24, 

1981, at 2:25 p.m., and the mortgage was filed on September 

25, 1981, at 10:57 a.m. Both of these documents were drafted 
by an employee of the Bank. Neither of the mortgage 

documents bore any heading to the effect that either was a 

first or second mortgage. However, the mortgage from Hanson 

to the Pulses bore the notation "no exceptions" following the 

form language reading "free from all encumbrances excepting." 

At the trial, the Rank offered testimony that the 

inclusion of the terms "no exceptions" in the Pulses' 

mortgage was merely a typing error. 

Hanson made regular payments to the Bank for six months, 

commencing November 16, 1981, and terminating on April 15, 

1982. The Bank notified the Pulses that the Bank was 

prepared to foreclose its Deed of Trust due to Hanson's 

default. Thereafter, the Pulses agreed to accept the 

premises subject to the Bank's Deed of Trust. On July 26, 

1982, Hanson executed a Quit Claim Deed of the premises to 

the Bank in lieu of foreclosure. On August 4, 1982, pursuant 

to its agreement with the Pulses, the Bank executed a 

Warranty Deed of the premises to the Pulses, which included 

the typed notation that "This deed was given subject to a 

Deed of Trust given to First Security Bank of Glendive . . . 

which Deed of Trust the party of the second part assumes and 

agrees to pay. " In connection with the receipt of the 

Warranty Deed, the Pulses borrowed $1,254.98 from the Rank to 

bring the Deed of Trust current. Subsequently, the Pulses 

made regular payments to the Bank of $515.48 per month, 

consistent with the terms of the Deed of Trust, for 9 months, 

until May 16, 1983, at which time they ceased all payments. 

On May 24, 1983, the Pulses filed an action for a 

declaratory ruling that their purchase money mortgage 

received from Hanson was prior in time and right to the 

Bankf s Deed of Trust. After a trial. without a jury, the 
trial court ordered that the Pulses' mortgage from Ilanson 

sh.ould be revised so as to delete the terms "no exceptions." 

Further, the trial court ordered that the Bank's Deed of 

Trust was prior in time and right to the Pulses1 mortgage and 

that the Pulses were 1iabl.e to the Bank for the balance owing 

on the Deed of Trust. 

Appellants first contend that the Deed of Trust executed 

by Hanson in favor of the Bank is not a purchase money 

mortgage and not equal in priority to the mortgage executed 

by Hanson in favor of appellants. A purchase money mortgage 

is a mortgage on land executed to secure the purchase money 

by a purchaser of the land contemporaneously with the 

acquisition of the legal title thereto or afterward, but as 

part of the same transaction. According to section 71-3-114, 

MCA : 

Priority of purchase money mortgage. Except as 

otherwise provided by law, a mortgage given for the 

price of real property at the time of its 

conveyance has priority over all other liens 

created against the purchaser, subject to the 

operation of the recording laws. 

The Deed of Trust was executed by Hanson in favor of 

First Security Bank to secure the loan enabling Hanson to 

purchase the Sunshine Market. We agree with the trial court 

that this Deed of Trust is a purchase money mortgage. Since 

both the Deed of Trust and the mortgage are purchase money 

mortgages, we face the problem of determining priority 

between them. 

Testimony indicates that the Pulses agreed to accept a 

second mortgage to secure the unpaid balance of the purchase 

price. The Bank relied on this agreement and loaned Hanson 

the purchase money with the expectation they would have a 

first mortgage. Once the Bank determined to foreclose their 
mortgage, appellants pursued a course of conduct which 

supported the Eank's position as first mortgagee by accepting 

the property subject to the Rank's Deed of Trust and making 

payments on that property for 9 months. For these reasons we 

hold that the Bank's Deed of Trust is prior to the Pulses' 

mortgage. 

The second issue raised by appellants is whether there 

is clear, convincing, and satisfactory evidence to support 

the trial court's determination that the mortgage document 

from Hanson to the Pulses required reformation insofar as the 

terms "no exceptions" in that mortgage represented a mutual 

mistake inconsistent with the intentions of the parties to 

the purchase and sale of the premises. 

According to section 28-2-1611, MCA: 

When written contract may be revised by court. 

When, through fraud or a mutual mistake of the 

parties or a mistake of one party while the other 

at the time knew or suspected, a written contract 

does not truly express the intention of the 

parties, it may be revised on the application of a 

party aggrieved so as to express that intention, so 

far as it can be done without prejudice to rights 

acquired by third persons in good faith and for 

value. 

reforming the appellants' mortgage, the trial court found 

there was a mistake in the mortgage and it therefore did not 

reflect the intentions of the parties. We agree. 

A mistake of fact is defined as, "a mistake not caused 

by the neglect of a legal duty . . . . " Section 28-2-409, 

MCA. In determining whether the Bank made a mistake of the 

kind justifying reformation, the threshold question is 

whether the Bank neglected a legal duty. There is no doubt 

the Bank was negligent in its preparation of the appellants' 

mortgage. But in Montana, mere negligence may not be a bar 

to reformation of a contract. Instead, the negligence must 
amount to "the neglect of a legal duty." As we stated in 

Parchen v. Chessman (1914j, 49 Mont. 326, 142 P. f331, 635: 

The term "mistake" involves the conception that he 

to whom the fault expressed by it is imputed has 

been guilty of some degree of negligence which may 

or may not be excusable when viewed in the light of 

the circumstances of the particular case. Courts 

of equity are not bound by cast-iron rules. 

Here, the negligence of the Bank did not amount to the 

neglect of a legal duty. The Bank prepared the instruments 

as a service to and at the request of the appellants a.nd. 

Hanson. The Bank routinely typed first mortgages in which 

the terms "no exceptions" were necessary. The insertion of 

those terms in appellants1 mortgage was a typographical error 

by one of the Bank's secretaries. This mistake, while 

negligent, does not amount to the neglect of a legal duty 

which would preclude reformation. 

The mistake was mutual because the mortgage as written 

does not reflect the mutual intentions of the parties. 

Testimony indicated that the Bank would never accept a second 

mortgage in a situation such as this, and that appellants 

agreed to accept a second mortgage to secure the unpaid 

bal-ance of the purchase price. The Purchase Agreement 

reflects this agreement. When faced with the Bank's threat 

to foreclose their mortgage, appellants did not assert that 

theirs was the first mortgage, but instead accepted the 

property back subject to the Bank's Deed of Trust. 

Appellants brought the Deed of Trust current and made 

payments on the Deed for 9 months. Testimony and the 

partiesr actions indicate that the parties intended the Bank 

to receive a first mortgage, and appellants a second 

mortgage. 

A.ccording to section 28-3-304, MCA: 
When writing disregarded. When through fraud, 

mistake, or accident a written contract fails to 

express the real intention of the parties, such 

intention is to be regarded and the erroneous parts 

of the writing disregarded. 

Under the circumstances of this case, and under the relevant 

law, the trial court was justified in finding the terms "no 

exceptions" were in the mortgage hecause of mists-ke, that the 

mortgage as written did not reflect the mutual intentions of 

the parties, and that the mortgage should he reformed by 

deleting the terms "no exceptions." 

The third issue appellants raise is whether the 

preparation by the Bank of the Purchase Agreement, Mortgage, 

and Deed of Trust in connection with the transaction 

constituted the unauthorized practice of 1.aw. This issue is 

one of first impression in Montana, but has been addressed by 

a number of other jurisdictions. What constitutes the 

practice of law is not easily defined. In Cowern v. Nelson 

(Minn. 1940), 290 N.W. 795, 797, the Minnesota Court stated: 

The line between what is and what is not the 

practice of law cannot be drawn with precision. 

Lawyers should be the first to recognize that 

between the two there is a region wherein much of 

what lawyers do every day in their practice may 

also be done by others without wrongful invasion of 

the lawyer ' s field.. 

While there is a sizeable minority of cases which hold that 

the drafting or filling in of blanks in printed forms of 

instruments dealing with land may not constitute the 

unauthorized practice of law, the majority of cases take the 

contrary view. We agree with the majority. 

In the North Dakota case of Cain v. Merchant National 

Bank and Trust Co. (N.D. 1936), 268 N.W. 719, a suit was 

brought aqainst a bank and trust company seeking to enjoin 

the bank from preparing quitclaim deeds, warranty deeds, real 
estate mortgages, and the like. In dismissing the suit, the 

Court stated that: 

A person who is not a member of the bar may draw 

instruments such as simple deeds, mortgages, 

promissory notes, and bills of sale when these 

instruments are incident to transactions in which 

such person is interested, provided no charge is 

made therefor. 

268 N.W. 

The factors which we find are most important in resolving 

this question are three-fold: 

First, the real estate instruments must be prepared only 

incident to transactioi~s in which the maker is interested; 

Second, the instruments must be prepared without a 

separate charge; and 

Third, the preparation must not go beyond the fill-ing in 

of blank forms. 

In the case at bar, the Purchase Agreement, Mortgage, 

and Deed of Trust were prepared as "a service" for the 

appellants, at either a.ppellants' or Hanson's request, and at 

no charge to either. The instruments were prepared incident 

to the financing of Hanson's purchase of the Sunshine Market 

in which the Bank was an interested party. Finally, the Rank 

did not draft the Purchase Agreement, Mortgage, and Deed of 

Trust, their preparation consisted. of filling in blanks on 

preprinted forms. 

We hold that where, as here, a party merely fills in 

blanks on preprinted forms such as simple deeds, mortgages, 

and notes, without separate charge, and incident to real 

estate transactions in which the party is involved, this does 

not constitute the unauthorized practice of law. 

Next, appellants argue in favor of the existence of a 

fiduciary relationship between themselves and the Bank, 
through the Bank's employee, Remillard. In support, they 

cite our recent decision in Deist v. Wacholz (Mont. 1984), 

678 P.2d 188, 41 St.Rep. 286, in which we found that a 

fiduciary relationship existed between Deist and her bank. 

We stated in Deist: 

"As a general rule, the relationship between a bank 

and a depositor or customer does not ordi-narily 

impose a fiduciary duty of disclosure upon the 

bank. They deal at arms length. [Citations 

omitted] However, 'special circumstances' may 

dictate otherwise . . . ." (Quoting Tokarz v. 

Frontier Federal Savings & Loan Association (Wash. 

1983), 656 P.2d 1089, 1092.) 

In the Deist case, we found there to be: 

[Slubstantial, credible evidence . . . that the 

relationship between the Conrad National Bank and 

Joan Deist was more than than a simple 

debtor-creditor affair. Joan and her husband had 

dealt with the bank for about twenty-four years 

prior to his death. Both she and Russell had 

imposed trust and confidence in the advice of 

Eugene Gillette, who as an officer. was the 

alter-ego of the enterprise and, for all practical 

purposes, was the "bank" to Joan and other 

customers [Citations omitted.] Gillette acted as 

financial advisor to Joan after Russell's death 

with respect the ranch debt. Even though Joan's 

association with the Bank in this transaction did 

not extend over several years, the nature of the 

association and her reliance, combined with her 

husband's years of dealing with the bank on 

essentially the same matters, were sufficient to 

make out a prima facie case that a fiduciary 

relationship existed. 

Deist, 678 P.2d at 193, 194. 

However, in the case a.t bar, the special cj.rcumstances 

we found in Deist are not present. Neither the Bank nor its 

employees located a buyer for appellants as was the case in 

Deist. Instead Hanson approached. the Pulses. unlike Deist 

where a hank employee was an unnamed purchaser of Deist's 

ranch, First Security Bank was not a party to the transaction 

beyond. their role as Hanson's lender. There is persuasive 

testimony that the terms of the sale were formulated by 

Hanson and appellants and were not a product of the Bank's 
advice. In addition, although the Pulses had accounts with 

the Bank since 1.947, they did not use that Bank excl.usively, 

ha.ving accounts and certificates of deposit in other banks as 

well. Finally, the Pulses dealt with the loan department on 

only a few occasions prior to this transaction; once to 

finance the purchase of their residence, once to finance the 

purchase of the Sunshine Market, and a few small loans 

insured by the Small Business Administration. We do not 

believe that appellants' dealings with First Security Bank 

are of the exclusive repeated nature necessary to justify 

finding a fiduciary relationship. 

As an appellate court our duty is not to retry the case, 

but to determine if the trial court's determination is 

supported by substantial credible evidence. Conflicts in the 

evidence are to be resolved by the trial judge and will not 

be disturbed absent a clear preponderance of the evidence 

against such findings. Here, there is substantial credible 

evidence to support the findings of the trial court and we 

will not disturb those findings on appeal. 

ij , ," x / i,, ', , - , 6;': ,1,' c{, k C~(. tc~n,,.!~. ib rt, . -..-, 

Justice 

We Concur: T */