No. 89-320
IN THE SUPREME COURT OF THE STATE OFMONTANA 1989

THE FEDERAL LAND BANK OF SPOKANE, Plaintiffand Respondent,-vsDON and MARY LOU REILLY, Defendantsand Appellants.

APPEAL FROM: District Court of the Fourth ~udicial ~istrict, Inand for the County of ~avalli, The Honorable Douglas

### ark in, Judgepresiding.
COUNSEL OF RECORD:
ForAppellant:
DonReilly and Mary Lou ~eilly, pro se,~amilton, Montana
For Respondent:


### W. Arthur Graham;Graham & Reep,

### is sou la, Montana

Submitted onBriefs: Sept. 27, 1989 Decided: December 

### 1, 1989Justice John C. Sheehy delivered the opinion of the Court.

Federal Land Bank of Spokane (FLB) filed suit against Don Reilly and Mary Lou Reilly in District Court of the Fourth Judicial District, Ravalli County, for unlawful detainer and forpossession of realproperty purchased by FLB at a nonjudicial foreclosure sale. The court adjudged Don and Mary Lou ~eilly guilty of unlawful detainer, dismissed their counterclaims,and ordered them to surrenderpossession of the premises. Reillys appeal from that judgment. We dismiss the appeal because the issues stated by the Reillys
on appeal relate to matters handled and decided by the Federal bankruptcy court. The state district court had no part in deciding those issues. The issues raisedby Reillys are: 1. Whether Federal bankruptcy law prohibited sale of the realproperty. 2. Whether Federal bankruptcy law removed the trustee of thedeed of trust,thus renderinghim powerless to proceed with the sale. 

### 3. Whether the trial court erred in ruling the sale could proceed. On February 18, 1977, Reillys executed a promissory note, secured by deed of trust, to Federal Land Bank of Spokane for the purchase of a ten acre parcel in ~avalli County,Montana. The loanwas in the amount of $48,000,with annual installments of $4,466.04 due on February 

### 1 of each year until the year 2007. Reillys defaulted on their obligationby failing tomake the February 1, 1985 and the February 1, 1986 annual

### installments. In addition, Reillys were also in default for failing to pay taxes on the property amounting to $1,938.40. On January 2, 

### 1986, Reillys filed a Chapter 11 bankruptcy petition with the United States Bankruptcy Court for the District of Montana. On 

### ~pril 2, 

### 1986, FLB filed a motion for relief from the automatic stay ofbankruptcy. The court granted relief on August 8, 1986,thereby allowing FLB to foreclose on the deed of trust. On March 13, 1987, Farm Credit Bank of Spokane (successor by merger to the FLB), purchased theproperty at a nonjudicialtrustee's sale. Reillys filed an action and sought a preliminary injunction in the Bankruptcy Court in February of 1987, alleging that the deed of trust on the property was void,due to an error in the legal description. The Bankruptcy Court dismissed the complaint on October 13, 1987,ruling that the parties intended to transferavalid security interest in the property, and that the error was not fatal to its validity. Reillys appealed to theU.S. BankruptcyAppellate Panel. The appeal was referred to the U. 

### S. District Court of Montana, Judge

### atf field presiding. The appealwas dismissed with prejudice on~pril 27, 1988,and the stay pending appeal lifted. On May 4, 1989, Reillys were served with a notice of termination of tenancy at will and notice to quit. Reillys continued in their occupation of thepremises. On June 9,1988, on themotion of creditors, the Chapter 11 case was converted to a Chapter 7 case,despite objection by Reillys. On June 10, 1988, Reillys were served by FLB with a notice of unlawful detainer and notice to quit. ~eillys continued tomaintain possessionof the premises. Accordingly, FLB filed a complaint with the District Court of Ravalli County on July 8, 1988, alleging wrongfuldetainer and seeking possession of the property. FLB moved for summary judgment. Reillysmoved for dismissal and filed
a counterclaim, alleging fraud, bad faith, breach of fiduciary duty, tortious interference with contract, and materialmisrepresentation. The District Court, Judge Harkin presiding, stated in its memorandum and order of March 3, 1989, that Reillys' assertions that the foreclosure sale was improper was not substantiated by facts. As to the counterclaim, the court determined that it had no jurisdiction to determine the merits of the counterclaim, as the Reillys no longer had standing as Chapter 

### 7debtors. The ~eillys appealed to this Court. The ~eillysraise issues which are based solely on bankruptcy law. The issuesraisedwere previously decided by the united States ~istrict Court or are oneswhich should be decided by the federal courts. Under 28 U.S.C. 

### 5 1334, the united States District Court (including the U.S. Bankruptcy Court) has original and exclusive jurisdiction of matters arising under ~itle 11 of the united States Code. In addition, Reillys are collaterally estopped from raising the issues on appeal,as the parties, subject matter, issues,and capacitiesof theparties are the same throughout the bankruptcy and the ~istrictCourt proceedings in this matter. Stapleton v. ~irst security Bank (1983), 207 Mont. 248, 258, 675P.2d 83, 88. Questions regarding the automatic stay and FLB's right to foreclosure have been decided by the Bankruptcy Court and on appeal to theunited States Appellate Courts for the Ninth Circuit. Collateral estoppel was designed to prevent just this type of prolonged and repetitive litigation. ~ccordingly,the appeal is dismissed. The Bank has asked for damages under Rule 32,M.R.App.P. We determine nouseful purpose would now be served in awarding damages in view of thisdismissal. Costs to the ank.

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