Court Opinion

ID: 878382
Source: CourtListenerOpinion
Date Created: 2013-06-04 22:36:18.447288+00
Date Added: 2024-06-11T13:02:12.769293
License: Public Domain

No. 84-22
              IN THE SUPREME COURT OF THE STATE OF MONTANA
                                      1984

FIRST NATIONAL BANK IN BOZEMAN, a
National Banking corporation,
                    Plaintiff and Respondent,

ROBERT K. POWELL and VICTORY
POWELL,
                      Defendants and Appellants.

APPEAL FROM:       District Court of the Eighteenth Judicial District,
                   In and for the County of Gallatin,
                   The Honorable Thomas Olson, Judge presiding.

COUNSEL OF RECORD:

      For Appellant:

              Landoe, Brown, Planalp, Kommers and Lineberger,
              Bozeman, Montana: Gene I. Brown argued, Bozeman
     For Respondent :
              Berg, Coil, Stokes & Tollefsen, Bozeman, Montana
              Michael C. Coil argued, Bozeman, Montana

                                 submitted:   September 19, 1934
                                   Decided:   October 11, 1984

Filed: Q G i 1 :   984

                                 Clerk
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of
the Court.
      In an action by First National Bank to have Powells vacate
their family residence pursuant to a foreclosure sale on a
trust     indenture, the      Eighteenth    Judicial      District    Court
entered a judgment in favor of the Bank.            Powells appeal.       We
affirm.
      Robert Powell, a real estate appraiser in Bozeman, and
Victory Powell, the owner of a mortgage firm, Treasure State
Mortgage, purchased the family residence, involved in this
appeal, in 1970.
      In August, 1978, Victory Powell invested in commercial
property on College Street in Bozeman.                   She financed the
total purchase price        ($69,500) through First National Bank
(the Bank)     in   Bozeman.      The   Bank   required      security      in
addition to     the      commercial property       for    100%    financing.
Without suggestion from the bank, Mrs. Powell offered her
personal residence as the additional collateral.                 The deed of
trust, subject of this appeal, executed by Mrs. Powell listed
the commercial lot as Parcel No. 1 and the Powell residence
as   Parcel No.     2.      Neither   the   deed    of     trust    nor   the
accompanying trust indenture designated either parcel                     as
primary or secondary security for the debt.                  However, the
Powells understood that the College Street property primarily
secured the commercial investment loan while their personal
residence provided a secondary security en lieu of the down
payment.     Mrs. Powell was not represented by counsel at the
closing, nor did she consult with her attorney to review the
financial documents.
      In the summer of 1979 Mrs. Powell became delinquent on
monthly loan i-nstallments. In a letter dated June 3, 1980,
she informed the Bank that she intended to "bring the account
up to date within the next month or two."                      With the debt
remaining in default, Victory Powell made a verbal offer in
the fall of 1981, to return the deed on the commercial
property in return for a full release from the Rank on the
deed of trust dated August 30, 1978.                Mrs. Powell testified
that she never received a written response from the Bank.
Mrs. Powell attempted to sell the commercial lot for two
years without success.
       In the meantime, the Powells assigned the rental income
of $400/month to the Bank to apply against their $700 monthly
obligation.         Despite this assignment, a negative accrual
status remained on the loan.
       The   Bank    issued   notice     of      trustee's       sale    in   the
foreclosure     action   pursuant      to     the    Montana      Small    Tract
Financing Act.       On May 12 and 14, 1982 the Bank apprised Mrs.
Powell of the amount required to satisfy the loan or, in the
alternative, the required payment to bring the loan current.
Mrs.   Powell    would   have    avoided       foreclosure with           either
payment.     Two Bank employees testified that Mrs. Powell did
not respond.
       The trustee's sale was held on July 28, 1982.                     Victory
Powell attended the foreclosure sale without representation.
Several Rank officers and the Bank attorney were present.
       Prior to the sale the agent for the trustee, American
Land Title, inquired whether the parcels were to be sold
separately or together.         The Bank responded that the parcels
were to be offered individually.            When it was suggested that
Powell's residence be offered first Victory Powell made no
objection.          Victory Powell did not bid upon her family
residence.      The Bank's bid of $100 was accepted as purchase
price for the Powell's residence.             Bidding on the commercial
property     resulted    in   purchase      by      the   Bank     for    $1.00.
Trustee's deeds to the subject properties dated July 28, 1982
were issued to the Bank.
        Approximately    two   and   one-half    weeks      after   the
foreclosure sale, on August 13, 1982 the Bank, through its
counsel, requested the Powells vacate their home.             The Bank
again served notice upon the Powells on August 27, 1982.
Powells refused to surrender possession.
        The District Court held that the Bank rightfully sold
the Powell's family residence at the foreclosure sale and
ordered the Powells to vacate their home and to pay back rent
in the amount of $ 5 0 0 per month from September, 1982.
        Powells submit this issue on a-ppeal:
        Did the trial court err in holding that a foreclosure
sale on a trust indenture primarily secured by commercial
investment property was lawful when the First National Bank
in Bozeman ordered the appellants1 personal residence be sold
first?
        The unambiguous language of the trust indenture grants
authority to the trustee to determine the order in which
parcels of real estate securing the indebtedness may be sold.
Paragraph 19 of the trust indenture provides in pertinent
part:
        "19. After the lapse of such time as may then be
        required by law following the recordation of said
        notice of default, and notice of sale having been
        given as then required by law, Trustee, without
        demand on Grantor, shall sell said property at the
        time and place fixed by it in said notice of sale,
        either as a whole or in separate parcels, and such
        order as it may determine (but subject to any
        statutory right of Grantor to direct the order in
        which such property, if consisting of several known
        lots or parcels, shall be sold), at public auction
        to the highest bidder for cash in lawful money of
        the United States, payable at time of sale."
        Despite   this   discretionary    language,   the    trustee's
authority is not boundless.          55   Am.   Jur. 2d, Mortgages,
section 727 explains restrictions imposed upon the trustee's
power in foreclosure procedures as follows:
     ". . .  On the other hand, it has been ruled that
     even where a mortgage or deed of trust vests a
     discretion in the trustee to sell the encumbered
     premises as he thinks best, such discretion is not
     an arbitrary one, but generally is subject to the
     control and direction of the debtor, who may choose
     the mode of offering the property for sale."
     As   this     is   a    case of     first impression we      cite   a
Minnesota     Supreme       Court's    analysis   of   this   issue   with
approval.    The Minnesota Court held:
     ".      .
        . Where a homestead is subject to a mortgage
    which also covers other lands, the owner is
    entitled, upon seasonable demand, to have the land
    other than the homestead         first applied   in
    satisfaction of the mortgage."      Mulroy v. Sioux
    Falls Trust & Savings Bank of Sioux Falls (1925),
    165 Minn. 295, 206 N.w.~%J 461, 462.
     The determinative          factor is a       requisite "seasonable
demand"     made   by    the    landowner/mortgagor expressing         the
preferred order of sale.
    Applying these legal principles to the facts of this
appeal we find no abuse of the trustee's discretion relative
to the order in which he sold the two parcels securing the
Powell's defaulted commercial loan.               Prior to the auction,
Mrs. Powell was informed that the trustee proposed to offer
the Powell's residential property first and the investment
commercial parcel second.             It is undisputed that Mrs. Powell
made no objection to her home being auctioned first.                   She
never suggested a preference that either piece of real estate
be sold before the other.             Even after the bank had purchased
her home for $100 and her investment property for $1.00 at
the foreclosure proceeding, Mrs. Powell never complained to
or objected to the manner or order of the sale.
     It is a proper election of the debtor at the time of the
sale to demand a specific order in which the separate parcels
are to be sold.         In the instant case, Mrs. Powell failed to
exercise this right.     She made no objection to the trustee's

proposal that the Powell family residence be sold first.          She
acquiesced   in   the   order   of   sale   and   deferred   to   the
discretionary authority of the trustee.
     The judgment of the District C

We concur:

 344s,a/,,
Chief Justice