No. 82-88 

IN THE SUPREPI COURT OF THE STATE OF MONTANA 

1982 

AVCO FINANCIAL SERVICES 

OF BILLINGS ONE, INC. , 

Plaintiff and Appellant, 

DANIEL L. CHRISTIAENS, BEVERLY A. 

CHRISTIAENS , 1,ELVIN R. CEIRISTIAENS , 

LINDA K. CMRISTIAENS, ROBERT M. 

RODMAN AND SUSAN A. RODMAN, 

Defendants and Respondents. 

Appeal from: District Court of the Second Judicial District, 

In and for the County of Silver Bow 

Honorable Arnold Olsen, Judge presiding. 

Counsel of Record: 

For Plaintiff: 

John Leslie Hanmer , Butte, Montana 

For Defendants: 

Maurice A. Maf fei, Butte, Ilontana 

Submitted on briefs: August 19, 1982 

Decided-: October 14, 1982 

Filed OCT&qSZ 
Mr. Justice Fred J. Weber delivered the Opinion of the 

Court. 

Following the default by Daniel and Beverly Christiaens 

(~hristiaens) on a loan +e AVCO Financial Services (AVCO), 

fix 0 m 

AVCO obtained a judgment against Christiaens for $8,575.19. 

AVCO brought a declaratory judgment action to determine if 

the judgment constituted a lien on certain Silver Bow County 

property. The District Court of the Second Judicial District 

for Silver Bow County entered a judgment finding there was 

no effective lien. We vacate that judgment. 

The following issues will be considered on review: 

(1) Is a secured party first required to dispose of 

collateral given for security of a debt in order to reduce 

the amount of the judgment before seeking an alternative 

remedy. 

(2) If a junior encumbrancer purchases a senior encumbrancer ' s interest under a trust indenture and thereafter 

sells the property, does this constitute a foreclosure under 

Title 71, MCA, and is the secured party thereby precluded 

from pursuing further remedies. 

AVCO loaned Christiaens a sum of money on June 8, 

1978. As security for the loan Christiaens executed a 

promissory note and a security agreement in favor of AVCO 

which gave AVCO a lien on various household goods and on two 

older automobiles. AVCO also received a second trust indenture 

lien on real property on Excelsior Avenue in Butte owned by 

Christiaens. The first lien was held on this property by 

Nationwide Finance Company (Nationwide) . 

On September 28, 1979, the loan with AVCO was in default. 

AVCO filed an action against Christiaens and judgment was 

entered on November 1, 1979, by default against Christiaens 

for $8,575.19 plus costs and interest. 
The obligation due Nationwide was also in default and 

Nationwide noticed foreclosure on its trust indenture on the 

Excelsior Avenue property. The sale was conducted on November 

8, 1979, and AVCO, the second trust indenture lien holder, 

purchased the property at the trustee's sale. AVCO has 

subsequently sold the property on Excelsior Avenue at a 

loss. 

On November 1, 1979, the date of entry of judgment 

against Christiaens, they also owned interests of record in 

land described as plat 170-B located in Silver Bow County. 

On March 28, 1980, Christiaens sold their tract 170-B land 

to defendants Rodman for $70,000--of which $8,611.19 was 

held back by Summit Valley Title Company pending final 

determination of AVCO by way of their judgment lien. 

The first issue is whether a secured party is first 

required to dispose of collateral given for security of a 

debt in order to reduce the amount of the judgment before 

seeking an alternative remedy. 

In order to secure the loan with AVCO, Christiaens 

gave AVCO a lien on a 1969 Oldsmobile, a 1972 Chevrolet 

pickup, and household goods and furniture. After default 

AVCO did not attempt to take possession of any of the security. 

Christiaens testified that he drove the Oldsmobile "until 

the front end ball joints were real bad" and that he "parked 

the car and eventually it was junked out." Christiaens also 

testified that the transmission went out on the Chevrolet 

pickup and that he "finally sold it for parts." Most of the 

household goods and furnishings were left in the house on 

Excelsior Avenue, but the Christiaens still had the washer 

and drier. 

Mark Ayers, manager of the Butte AVCO office, testified 

that AVCO does not repossess a security if they feel that 

there was no way they would get their principal back by 
doing so. 

Christiaens contend that AVCO is first required to take 

possession of the collateral and first dispose of it in a 

reasonably commercial manner before attempting to acquire 

any deficiency and that since AVCO did not repossess any of 

the collateral it should be precluded from attempting to 

enforce its judgment on the sale of the tract 170-B land. 

Section 30-9-504(1), MCA, provides: "A secured party 

after default may sell, lease or otherwise dispose of any - 

or 

of the collateral in its then condition. . ." (Emphasis 

added.) In addition, section 30-9-501(1), MCA, provides: 

"When a debtor is in default under a security agreement, a 

secured party. . .may reduce his claim to judgment, foreclosure 

or otherwise enforce the security interest by any available 

judicial procedure." The Utah Supreme Court, in considering 

the same Uniform Commercial Code section allowed a secured 

party to "at its option, ignore that security [personal 

property] and satisfy its judgment from other property [real 

property] in the hands of the judgment debtor." Kennedy v. 

Banlc of Ephraim (Utah 1979), 594 P. 2d 881, 884. 

"[Tlhe creditor can ignore his security interest and 

obtain a judgment on the underlying obligation and proceed 

by execution and levy." J. White & R. Summers, Uniform 

Commercial Code, at 962-963 (1972). It may not always be 

practical for the secured party to first take possession of 

the collateral and attempt to sell it if the value of the 

collateral has so diminished that the proceeds from resale 

would clearly be insufficient to satisfy the debt. It may 

then be to the secured party's advantage to proceed by 

judgment and execution because in that way he can reach 

assets in addition to the collateral and can eliminate the 

two-step process of first selling the collateral and then 
suing for a deficiency. 

We hold that a secured creditor is not required to 

first take possession and dispose of collateral before 

obtaining a judgment and execution upon other property owned 

by the debtor. 

The second issue is if a junior encumbrancer purchases 

a senior encumbrancer's interest under a trust indenture and 

thereafter sells the property, does this constitute a foreclosure 

under ~itle 71, MCA, and is the secured party thereby precluded 

from pursuing further remedies. 

As part of the collateral, AVCO received a second lien 

in the form of a trust indenture on property that Christiaens 

owned on Excelsior Avenue. Nationwide had the first lien 

also in the form of a trust indenture. On November 8, 1979, 

Nationwide foreclosed and the property was sold by bid in 

conformance with Title 71, MCA, regarding trust indentures. 

AVCO was the sole bidder for $7,856.61--the amount due on 

Nationwide's balance. AVCO then sold the property through a 

Butte realtor. AVCO received a gross sale price of $8,200 

and after paying the taxes and selling expenses, AVCO netted 

approximately $6,711. 

Christiaens contend that when AVCO bought and sold the 

Excelsior Avenue property, AVCO proceeded under Title 71, 

MCA, and is prevented from any further recovery because of a 

deficiency under section 71-1-317, MCA, which provides: 

"When a trust indenture executed in conformity with this 

part is foreclosed by advertisement and sale, no other or 

further action, suit, or proceedings shall be taken or 

judgment entered for any deficiency against the grantor. . 

I' 

The contention on the part of Christiaens and the holding 

of the ~istrict Court suggests confusion as to the party who 
in fact foreclosed. AVCO did not foreclose on the Excelsior 

Avenue property. Nationwide did foreclose on that property 

in accordance with the procedure under Title 71, MCA, the 

"Small Financing Act." At the sale conducted by Nationwide, 

AVCO bid on the property in the amount owed to Nationwide 

and AVCO then received a trustee's deed covering the 

Excelsior Avenue property. The title which AVCO received by 

that trustee's deed had no relationship to AVCO's junior 

trust indenture lien, or to AVCO's judgment lien. Section 

71-1-318, MCA, describes the trustee's deed: 

"(3) The trustee's deed shall operate to 

convey to the purchaser, without right of 

redemption, the trustee's title and all 

right, title, interest, and claim of the 

grantor and his successors in interest and 

of all persons claiming by, through, or 

under them in and to the property sold. . ." 

The trustee's deed in this case transferred the title 

originally held by Nationwide as trustee and including all 

right, title and interest of the Christiaens and all those 

claiming through them in and to the Excelsior Avenue property. 

Such trustee's deed has the affect of eliminating the AVCO 

trust indenture lien under its junior trust indenture, and 

also eliminating the AVCO judgment lien. As a result of the 

trustee's deed, AVCO became the owner of the Excelsior 

Avenue property with a right to sell the same in any manner 

it chose. Under section 71-1-317, MCA, relied upon by the 

Christiaens, Nationwide was prohibited from taking a deficiency 

judgment. That section in no way applied to AVCO as a 

purchaser. AVCO therefore had the right to sell the Excelsior 

Avenue property without regard to section 71-1-317, MCA. 

AVCO did suffer a loss of approximately $1,145 when it sold 

the Excelsior Avenue property, but AVCO is not attempting to 

recover from Christiaens any part of that loss. AVCO is 

only seeking to recover the amount of its judgment entered 
on November 1, 1979, plus interest. 

We hold that AVCO is entitled to a declaratory judgment 

establishing that its judgment of November 1, 1979, constituted 

a lien upon the land described as plat 170-B, Silver Bow 

County. 

We vacate the judgment of the District Court in favor 

of the Christiaens, and direct the court to enter a judgment 

for AVCO in accordance with this opinion. 

We Concur: 

~LdLdl. %+ 

Chief Justice