No. 80-462
IN THE SUPREME COURT OF THE STATE OF MONTANA
CONSOLIDATED DAIRIES OF LAKE COUNTY, INC.,
Petitioner and Respondent,
AMERICAN ABSTRACT AND TITLE CO., FIRST
CITIZENS BANK OF POLSON, DOUGLAS K. STAM,
et al.,
Respondents and Appellants.
Appeal from: District Court of the Fourth Judicial District,
In and for the County of Lake.
Honorable Jack L. Green, Judge presiding.
Counsel of Record:
For Appellants:
Hash, Jellison, O'Brien and Bartlett, Kalispell,
Montana
James C. Bartlett argued, Kalispell, Montana
Mike Greely, Attorney General, Helena, Montana
For Respondent:
John R. Frederick argued, Polson, Montana
Williams Law Firm, Missoula, Montana
Richard Ranney argued, Missoula, Montana
Submitted: ~ p r i l22, 1981
Decided :JUN 10 1981
Clerk
Mr. J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e Opinion of
the Court.
This is an a p p e a l from a judgment setting aside a
t r u s t e e ' s s a l e and d i r e c t i n g t h a t t h e s a l e be r e c o n d u c t e d .
Once in a great while the wrath of mother nature
t e m p e r s e v e n t h e power and a u t h o r i t y o f l a w . On t h e q u i e t
Sunday e v e n i n g o f May 1 8 , 1 9 8 0 , i n t h e n o r t h w e s t c o r n e r o f
t h e United States, an explosion occurred with a magnitude
and e n e r g y o f 500 H i r o s h i m a a t o m i c bombs. A dust cloud of
unknown toxicity spread over the e n t i r e Northwest. News
r e p o r t s i n d i c a t e d t h a t t h e e x a c t n a t u r e and p o s s i b l e e f f e c t s
of t h e d u s t were undetermined. P e o p l e were s t r o n g l y a d v i s e d
to remain at home, but if they had to go out, t o wear
p r o t e c t i v e masks. A psychological s h o c k wave o f unbelief
q u i c k l y r o l l e d a c r o s s t h e P a c i f i c Northwest.
When t h e d u s t had s e t t l e d and t h e p a n i c s u b s i d e d , it
was discovered that a relatively dormant volcano in the
State of Washington, Mount St. Helens, had erupted and
continued eruptive a c t i v i t y . During a p e r i o d of f o u r d a y s
t h i s p a r t of t h e l i v i n g world stood s t i l l . Towns and c i t i e s
seemed deserted and abandoned. The o n c e g r e e n landscape
b u d d i n g w i t h s p r i n g c o l o r s a g a i n s t a b l u e s k y was g r a y and
bleak.
Prior t o t h i s marvel of n a t u r e ' s power, a group of
people in the Polson, Montana, area were conducting
b u s i n e s s , u n s u s p e c t i n g t h a t i n a few d a y s t h e y would h a v e a
rendevous w i t h n a t u r e . . .
That group c o n s i s t e d of p e t i t i o n e r - r e s p o n d e n t herein,
Consolidated D a i r i e s o f Lake C o u n t y , I n c . , and a p p e l l a n t s
h e r e i n , t h e t i t l e company ( A m e r i c a n A b s t r a c t and T i t l e C o . ) ,
t h e bank ( F i r s t C i t i z e n s Bank o f P o l s o n ) , t h e S t a m s ( D o u g l a s
K. and L e n o r e Kay S t a m ) and t h e B l a n k e n h o r n s ( C h a r l e s E . and
Karen K . B l a n k e n h o r n ) .
The Blankenhorns own a house and lot in Polson,
Montana. This real property is subject to (1) a trust
indenture in favor of the bank securing a $46,000 note,
f i l e d of r e c o r d September 1 5 , 1977, and ( 2 ) a mortgage i n
favor of Consolidated, securing a promissory note for
$55,000 f i l e d of record August 17, 1979. At t h e end of
1979, Blankenhorns d e f a u l t e d i n p a y m e n t s on t h e bank n o t e .
Consequently, t h e bank i n s t r u c t e d t h e t r u s t e e of the t r u s t
i n d e n t u r e , which was t h e t i t l e company, t o h o l d a t r u s t e e ' s
s a l e o f t h e p r o p e r t y p u r s u a n t t o t h e t r u s t i n d e n t u r e and t h e
Small T r a c t Financing A c t . ( S e c t i o n 71-1-301 e t s e q . , MCA).
The title company, acting through its president,
R u s s e l l Harshberger, proceeded t o n o t i c e such a s a l e . After
s u b s t i t u t i n g a t t o r n e y J a m e s B a r t l e t t a s t r u s t e e , a n amended
n o t i c e of t r u s t e e ' s s a l e was f i l e d o f r e c o r d on J a n u a r y 1 6 ,
1980. T h i s amended n o t i c e r e c i t e d t h a t t h e p r o p e r t y would
be s o l d " a t p u b l i c a u c t i o n t o t h e h i g h e s t b i d d e r i n c a s h " on
May 21, 1980, at ll:00 a.m. at the entrance to the
c o u r t h o u s e o f Lake C o u n t y i n P o l s o n . C o p i e s o f t h i s amended
n o t i c e w e r e m a i l e d t o t h e B l a n k e n h o r n s and t o C o n s o l i d a t e d .
As it t u r n e d o u t , May 2 1 , 1 9 8 0 , was a n u n f o r t u n a t e
choice. On May 18, 1980, the Mount St. Helens volcano
erupted. On May 1 9 , 1980 ( M o n d a y ) , Lake C o u n t y and m o s t o f
w e s t e r n Montana was c o v e r e d w i t h a l a y e r o f f i n e volcanic
ash.
On t h a t same d a y , i n response t o t h i s ash f a l l o u t ,
t h e Montana D e p a r t m e n t o f H e a l t h and E n v i r o n m e n t a l S c i e n c e s
issued a "Declaration of Emergency, Findings of Fact and
Emergency Order to All Persons in the State of Montana."
This order, among other things, ordered closure of "all
off ices of local, county and state government, including
authorities, joint meetings, and other public bodies . . .
all retail trade establishments with certain exceptions
. . . banks, credit agencies other than banks . . . real
estate off ices . . . all schools and universities, and in
general all business establishments with certain necessary
exceptions." In addition, "all unnecessary use of motor
vehicles [was] prohibited."
The District Court took judicial notice of the
conditions prevailing during this period of ash fallout and
the reactions and attitudes of the general population.
People were essentially confined to their homes both by fear
for their health if they ventured outdoors and by the widely
publicized order described above.
On May 21, 1980, the day for which the trustee's sale
was noticed, Lake County and most of western Montana were
still subject to the above order and to the ash fallout.
The title company was not open for business. The Lake
County Courthouse was closed. Lake County was released to
an "alert" level on May 22, 1980, and all restrictions were
lifted on May 23, 1980.
On May 21, 1980, at 11:OO a.m. Russell Harshberger
proceeded to the courthouse steps. He "proclaimed to the
public" that the sale noticed for that time and place was
postponed to May 27, 1980, at the same place at 11:OO a.m.
No one was there to listen to the proclamation.
Later that day, Doug Stam came to Harshberger's
office and was informed of the time and place of the
postponed sale. The n e x t working day after restrictions
were lifted, the bank inquired of Harshberger what had
happened. The bank was i n f o r m e d o f t h e t i m e and p l a c e o f
the postponed sale. No other persons or organizations
( o t h e r t h a n a t t o r n e y B a r t l e t t ) w e r e n o t i f i e d by H a r s h b e r g e r
or t h e t i t l e company o f t h e d a y and t i m e o f t h e postponed
sale or that it had been postponed. In particular,
C o n s o l i d a t e d was n o t n o t i f i e d . No n o t i c e s were p o s t e d n o r
advertising conducted concerning the postponement of the
sale.
On May 2 7 , 1 9 8 0 , a t a r o u n d 10:OO a . m . , a f f i d a v i t s of
p u b l i c a t i o n and p o s t i n g w e r e f i r s t r e c o r d e d . A t 11:OO a.m.
Harshberger proceeded t o t h e courthouse s t e p s . Present a t
t h i s t i m e were a d i r e c t o r o f t h e bank, C h a r l e s Blankenhorn,
an employee of the title company, and the Stams. The
b i d d i n g was s t a r t e d a t $ 5 1 , 3 5 6 . 6 6 . The s o l e b i d was t h a t o f
t h e Stams f o r $51,357.66.
The Stams' bid of $51,357.66 was accepted, and in
f i v e minutes they presented Harshberger with a cashier's
c h e c k i n t h a t amount. F o l l o w i n g t h e s a l e , t h e t i t l e company
d i d n o t i n f o r m o r n o t i f y C o n s o l i d a t e d t h a t t h e s a l e had b e e n
accomplished. There is evidence that the property in
q u e s t i o n was w o r t h b e t w e e n $ 7 5 , 0 0 0 and $ 8 5 , 0 0 0 .
Consolidated f i l e d a p e t i t i o n i n t h e D i s t r i c t Court
of t h e Fourth J u d i c a l D i s t r i c t of t h e S t a t e o f Montana t o
set aside the t r u s t e e ' s s a l e . A l l p a r t i e s f i l e d answers to
the petition. The parties filed an agreed statement of
facts and stipulated to have the cause submitted to the
D i s t r i c t C o u r t b a s e d on t h a t s t a t e m e n t .
The District Court entered findings of fact,
conclusions of law, and order setting the trustee's sale
aside. American A b s t r a c t , the trustee, and t h e b a n k , as
b e n e f i c i a r y , have a p p e a l e d .
The D i s t r i c t C o u r t f o u n d , i n t h e u n i q u e c i r c u m s t a n c e s
p r e s e n t e d by t h e f a c t s o f t h i s case, two s e p a r a t e r e a s o n s
for setting aside the trustee's sale. First, the
p o s t p o n e m e n t o f t h e s a l e m e r e l y by o r a l p r o c l a m a t i o n a t t h e
time and p l a c e f i x e d i n t h e n o t i c e o f s a l e was n o t l e g a l l y
sufficient notice under the Small Tract Financing Act,
section 71-1-301 et seq., MCA, as applied t o t h e unique
circumstances of t h i s c a s e . Second, if the Small Tract
F i n a n c i n g A c t were i n t e r p r e t e d t o p e r m i t t h e t y p e o f n o t i c e
o f p o s t p o n e d s a l e employed by t h e t r u s t e e i n t h i s c a s e , t h e n
the A c t , a s applied t o Consolidated i n t h i s case, would be
u n c o n s t i t u t i o n a l a s v i o l a t i n g t h e due process c l a u s e of t h e
U n i t e d S t a t e s and Montana C o n s t i t u t i o n s .
The relevant statute is section 71-1-315(3), MCA,
which p r o v i d e s :
". . . The p e r s o n making t h e s a l e may, f o r
any c a u s e h e deems e x p e d i e n t , p o s t p o n e t h e
s a l e f o r a p e r i o d n o t e x c e e d i n g 1 5 d a y s by
p u b l i c p r o c l a m a t i o n a t t h e t i m e and p l a c e
f i x e d i n t h e n o t i c e o f s a l e . No o t h e r n o t i c e
o f t h e p o s t p o n e d s a l e need be g i v e n . "
The relevant contractual provision of the trust
i n d e n t u r e is:
"14. . . . The p e r s o n c o n d u c t i n g t h e s a l e
may, f o r a n y c a u s e h e d e e m s e x p e d i e n t ,
postpone t h e s a l e f o r a period n o t exceeding
f i f t e e n ( 1 5 ) d a y s by p u b l i c p r o c l a m a t i o n by
s u c h p e r s o n a t t h e t i m e and p l a c e f i x e d i n
t h e N o t i c e o f S a l e , and no o t h e r n o t i c e o f
t h e p o s t p o n e d s a l e need be g i v e n ..
."
Appellants contend that the title company c o m p l i e d
with t h e c o n t r a c t u a l p r o v i s i o n s of t h e t r u s t i n d e n t u r e and
f u l l y complied w i t h t h e Small T r a c t Financing A c t . Thus,
appellants argue, the District Court was without authority
to set aside the trustee sale. We disagree.
While the notice by public proclamation at the time
and place fixed in the notice of sale was sufficient to meet
the technical requirements of both the law and the trust
indenture instrument, it was not sufficient in the present
case. As a practical matter, because of the volcanic
eruption and the declared emergency, potential purchasers,
subsequent lienholders and the public in general were not
able to attend at the time and place fixed in the notice of
sale.
Where potential purchasers, subsequent lienholders,
and the public in general are E ---- t i c a x- legally
rac -
and
prevented from traveling to and attending at the time and
place noticed for the sale, the giving of notice of a
postponed sale only by "public proclamation at the time and
place fixed in the notice of sale" is a futile act, of no
practical or legal significance. The provisions of section
71-1-315(3), MCA, apply to normal situations where there is
no state of general emergency preventing potential
purchasers, subsequent lienholders and the public in general
from attending at the time and place fixed in the notice of
sale.
Under the circumstances of this case, notice of a
postponed sale only by "public proclamation at the time
fixed in the notice of sale" is not reasonably calculated to
apprise all interested parties of the details of the
postponed sale, and so is in violation of the due process
clause of the United States and Montana Constitutions.
Great Falls National Bank v. McCormick (1968), 152 Mont.
3 1 9 , 4 4 8 P.2d 9 9 1 .
It was practically and legally difficult for the
general public, potential purchasers and lienholders to
attend the time and place of the notice of the sale.
Because of these facts, the "public proclamation" of the
postponed sale a t the time and p l a c e of the trustee sale
would n o t h a v e t h e e f f e c t o f n o t i f y i n g a l l t h o s e i n t e r e s t e d
p e r s o n s o f t h e t i m e and p l a c e o f t h e p o s t p o n e d s a l e and a l l
i n t e r e s t e d p a r t i e s were n o t a p p r i s e d o f t h e n o t i f i c a t i o n .
The D i s t r i c t C o u r t d i d n o t l o o k a t t h e l i t e r a l w o r d s
of t h e s t a t u t e , b u t i n s t e a d l o o k e d t o a l l o f t h e f a c t s and
the i n t e n t of the legislation. Postponing a noticed s a l e
o n l y b y way o f a p u b l i c p r o c l a m a t i o n a t t h e time and p l a c e
where no one was present and no interested person could
l e g a l l y o r p r a c t i c a l l y be p r e s e n t a t and g i v i n g no f u r t h e r
n o t i c e of t h e postponed s a l e is n o t c a l c u l a t e d t o o b t a i n a
fair price for the property, nor was it reasonably
c a l c u l a t e d t o a p p r i s e a l l i n t e r e s t e d p a r t i e s of t h e pendency
of the action.
We affirm the District Court in setting aside the
trustee sale and find proper the remedy t o reconduct the
t r u s t e e s a l e a s p r o v i d e d i n t h e judgment.
W e concur :
PA&
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g.$Git?
Chief J u s t i c e