Court Opinion

ID: 880264
Source: CourtListenerOpinion
Date Created: 2013-06-04 23:59:50.98094+00
Date Added: 2024-06-11T13:13:31.404564
License: Public Domain

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

THE FEDERAL LAND BANK OF SPOKANE,
                Plaintiff and Respondent,
       -vs-
DON and MARY LOU REILLY,

                Defendants and Appellants.

APPEAL FROM:    District Court of the Fourth ~udicial~istrict,
                In and for the County of ~avalli,
                The Honorable Douglas ark in, Judge presiding.
COUNSEL OF RECORD:
       For Appellant:
                Don Reilly and Mary Lou ~ e i l l y ,pro se, ~amilton,
                Montana
       For Respondent:
                W. Arthur Graham; Graham   &   Reep,   is sou la, Montana

                                   Submitted on Briefs:      Sept. 27, 1989
                                   Decided:      December 1, 1989
Justice 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 for possession of real property purchased by FLB
at a nonjudicial foreclosure sale. The court adjudged Don
and Mary Lou ~ e i l l y guilty of unlawful detainer, dismissed
their counterclaims, and ordered them to surrender possession
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 raised by Reillys are:
     1. Whether Federal bankruptcy law prohibited sale of
the real property.
     2. Whether Federal bankruptcy law removed the trustee
of the deed of trust, thus rendering him 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 loan was 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 obligation by failing to make
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 ~ p r i l2, 1986, FLB filed a
motion for relief from the automatic stay of bankruptcy. 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 the property at a nonjudicial trustee'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 transfer a valid security interest in the
property, and that the error was not fatal to its validity.
     Reillys appealed to the U.S. Bankruptcy Appellate Panel.
The appeal was referred to the U. S. District Court of
Montana, Judge atf field presiding. The appeal was dismissed
with prejudice on ~ p r i l27, 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 the premises.
     On June 9, 1988, on the motion 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 to maintain possession of the premises.
     Accordingly, FLB filed a complaint with the District
Court of Ravalli County on July 8, 1988, alleging wrongful
detainer and seeking possession of the property. FLB moved
for summary judgment. Reillys moved for dismissal and filed
a counterclaim, alleging fraud, bad faith, breach of
fiduciary duty, tortious interference with contract, and
material misrepresentation.
     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 7 debtors. The ~eillysappealed to this
Court.
     The ~eillys raise issues which are based solely on
bankruptcy law. The issues raised were previously decided by
the united States ~istrictCourt or are ones which 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 ~ i t l e11 of the united States Code.
     In addition, Reillys are collaterally estopped from
raising the issues on appeal, as the parties, subject matter,
issues, and capacities of the parties are the same throughout
the bankruptcy and the ~istrict Court proceedings in this
matter.   Stapleton v. ~ i r s tsecurity Bank (1983), 207 Mont.
248, 258, 675 P.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 the united 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 no
useful purpose would now be served in awarding damages in

                              t       7
view of this dismissal. Costs to the ank.
                                            L rb~,
                                          Justice     I

We Concur:                        i