No. 86-523
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
AVECO PROPERTIES, INC.,
a Kontana corporation,
Plaintiff and Respondent,
-vs-
E. J. NICHOLSON, a/k/a
ELDON J. NICHOLSON
Defendant and Appellant.
APPEAL FROM: The District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable John S. Henson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Datsopoulos, MacDonald & Lind; Christopher B. Swartley
argued, Missoula, Montana
For Respondent:
Worden, Thane & Raines; Ralph B. Kirscher argued,
Missoula, Montana
Submitted: June 3, 1987
Decided: December 22, 1987
Filed: &C 22.1987 -
Mr. Justice William E. Hunt, Sr. delivered the Opinion of the
Court.
Nicholson, as defendant and contract buyer, appeals a
grant of summary judgment entered by the District Court,
Fourth Judicial District, Missoula County, granting specific
performance of a contract for deed to plaintiff respondent
Aveco Properties, Inc. (Aveco), the successor in interest to
the contract seller.
Affirmed in part and reversed in part.
Appellant buyer asks us to consider issues one, two and
three on appeal; and respondent Aveco has raised issues four,
five and six. These six issues are set forth as follows:
1. Did the District Court err when it refused to
determine that contracts for deeds are mortgages under the
laws of the State of Montana and that plaintiff-respondent
Aveco should be required to proceed through ordinary
procedures associated with mortgage foreclosure in this case?
2. If the District Court erred when it refused to
determine that a contract for deed is in fact a mortgage,
then does it not fo1l.o~that the plaintiff-respondent as a
successor in interest to the vendor under the contract at
issue is barred from the recovery of any deficiency judgment
on the obligation secured?
3. Did the District Court err in requiring appellant to
post a $34,408.83 supersedeas bond?
4. Did the District Court properly determine that Aveco
is entitled to specific performance (acceleration of
payments) under the contract for deed?
5. Did the District Court properly determine that Aveco
is entitled to have the property sold if appellant fails to
pay the remaining balance?
6. Did the District Court properly determine that Aveco
is entitled to a deficiency judgment if proceeds are
insufficient to pay the accelerated balance and other monies
owing pursuant to the contract?
On December 1, 1977, E. J. Nicholson purchased certain
real property from Hidden Valley Ranches under a contract for
deed. On February 28, 1985, respondent Aveco purchased the
seller's interest in the contract for deed from Hidden Valley
Ranches and an assignment of seller's interest was executed.
Nicholson was a partner in Hidden Valley Ranches at one time.
The original purchase price of the property in question was
$26,842.52. The contract requires annual installments of
$2,836.72 due on the first day of December of each year after
1977 until the full amount of principal and interest is paid.
Nicholson made annual installments in the years of 1978
through 1984--seven annual installments. Nicholson failed to
make an annual installment on December 1, 1985. On December
9, 1985, Aveco sent Nicholson a notice of default which was
received on December 17, 1985. Nicholson failed to make the
required payment within the thirty day default period set-
forth in the contract for deed.
On January 23, 1966, Aveco notified Nicholson of its
intention to declare the entire principal balance and accrued
interest immediately due and payable. Nicholson did not pay
the remaining balance on the contract which amounted to
$23,081.08, plus accrued interest at the rate of 8% percent
per annum from December 24, 1984.
On January 29, 1986, Aveco, as seller's assignee, filed
its complaint seeking specific performance of the contract
for deed compelling Nicholson to pay the full sum due,
together with interest and requesting an order directing that
the property be sold by the Sheriff of Ravalli County at an
auction not later than 90 days after the entry of the decree
for specific performance. Aveco took the deposition of
Nicholson, and on March 26, 1986, filed its motion for
summary judgment.
The matter was heard on April 15, 1986, and thereafter
the court entered its order and opinion granting summary
judgment specifying the legal reasons for the judgment. The
court relied primarily on Glacier Campground v. Wild Rivers,
Inc. (1979), 182 Mont. 389, 597 P.2d 689. In discussing
Glacier Campground, the court said that it rejected
Nicholson's suggestion that the document be declared a
mortgage rather than a contract because:
In invoking this statute, [ S 71-1-232 (1985)
formerly S 93-6008, R.C.M. 19471 defendants contend
that a contract for deed, in effect, is a purchase
price mortgage. They further argue that public
policy dictates that the statute be read so as to
apply to "all purchase money situations where a
deficiency could be obtained". Such contentions
ignore the fact that a contract for deed and a
purchase money mortgage are not one and the same
thing with two different names. They are two
distinct legal creatures.
Glacier Campqround, 597 P.2d at 698.
The District Court further noted that Glacier Campground
specifically states that because contracts for deed and note
mortgage transactions differ from one another
Therefore " [t]he statutory prohibition against
deficiency judgments in mortgage foreclosures is
not a prohibition against awarding specific
performance by granting a money decree and further
providing that in the event the decree is not paid,
the property shall be sold and the proceeds applied
in satisfaction of the money decree." Renard v.
Allen, 237 Or. at 413, 391 P.2d at 780, and cases
subsequently cited.
Glacier Campground, 597 P.2d at 698.
On May 23, 1986, the District Court issued a final
judgment granting Aveco specific performance of the contract
for deed and judgment as follows:
1. Granted Aveco judgment for principal, interest,
attorney fees, costs advanced and late charges.
2. Granted the appellant Nicholson until June 9,
1986, to pay that judgment including all accrued
costs and fees incurred by the respondent.
3. Provided for the docketing of the judgment with
authority for the respondent to file his transcript
of judgment in any jurisdicti-on.
4. Provided that if the buyer did not satisfy the
judgment then the respondent could sell "any
interest held by the Defendant in the real
property" at a sheriff's sale with delivery of the
deed after the period of redemption pursuant to
Title 25, Ch. 13, MCA.
5. Provided that any deficiency from the sale will
continue as a judgment to the extent of the
deficiency after the sale.
6. Provided the appellant a statutory right of
redemption pursuant to Title 25, Ch. 13, MCA and
provided that any purchaser would be entitled to
immediate possession after the sale and for
delivery of the deed from the sheriff to purchaser
after the period of redemption.
7. Provided for delivery of possession from the
appellant at the time of the sale and remedy in the
event he failed to do so with writ of assistance.
8. Describes the property authorized to be sold..
9. Authorized the escrow agent to release the
papers to complete the chain of title. Delivery
authorized to be made to the sheriff, plaintiff or
plaintiff ' s counsel.
ISSUE 1
DID THE DISTRICT COURT ERR WHEN IT REFUSED TO
DETERMINE THAT CONTRACTS FOR DEEDS ARE MORTGAGES
UNDER MONTANA LAW AND THAT THE PLAINTIFF-
RESPONDENT, AVECO, SHOULD BE REQUIRED TO PROCEED
THROUGH ORDINARY PROCEDURES ASSOCIATED WITH
MORTGAGE FORECLOSURES?
Nicholson first argues the District Court erred by not
asserting its equitable powers to declare the contract for
deed actually to be a mortgage and by not requiring Aveco to
proceed through the ordinary procedures associated with
foreclosure.
We cannot agree with Nicholson that a contract for deed
should be treated as a mortgage in this situation. A
contract for deed is a different legal concept than a
purchase money mortgage under the laws of this state.
Although certain similarities do exist between the two, it is
clear that the Legislature intended to distinguish between a
mortgage and a purchaser under a contract for deed. See
Glacier Campqround, 597 P.2d at 698.
A mortgage is defined in 5 71-1-101, MCA, as a contract
"by which specific property is hypothecated for the
performance of an act, without the necessity of a change of
possession. " Certain foreclosure and redemption rights and
proceedings flow from a mortgage transaction under the
subsequent sections of the mortgage statutes. See S
71-1-201, et seq., MCA.
A purchaser under a contract for deed is described in 5
70-20-115, MCA, as
(a) any person who:
(i) has entered into a contract with the record
owner of real property in which it was agreed that
the record owner will deliver the deed to the
property to the purchaser when certain conditions
have been met, such as completion of payments by
the purchaser; and
(ii) has recorded the contract or an abstract of
the contract in accordance with Title 70, chapter
21;
(b) any assignee or successor of a person included
under subsection (a), if such assignee or successor
has also recorded the contract or an abstract of
the contract in accordance with Title 70, chapter
21 . . ..
The Legislature is the more appropriate body to decide
whether this issue need be changed. It is this Court's
responsibility to construe the statutes as they currently
exist. Although appellant expresses valid concerns on this
issue, the appropriate forum for this matter is not with this
Court. The statutes are clear. A contract for deed is not
the same legal concept as a mortgage under Montana law. A
contract for deed therefore need not be treated as a mortgage
for purpose of foreclosure. No error was made on this issue
by the District Court.
ISSUE 2
IF THE DISTRICT COURT ERRED WHEN IT REFUSED TO DETERMINE
THAT A CONTRACT FOR DEED IS IN FACT A MORTGAGE, THEN DOES IT
NOT FOLLOW THAT THE PLAINTIFF-RESPONDENT AS A SUCCESSOR IN
INTEREST TO THE VENDOR UNDER THE CONTRACT AT ISSUE IS BARRED
FROM THE RECOVERY OF ANY DEFICIENCY JUDGMENT ON THE
OBIjIGATION SECURED?
Because of our holding in issue 1, this issue is moot.
ISSUE 3
DID THE DISTRICT COURT ERR IN REQUIRING APPELLANT TO
POST A $34,408.83 SUPERSEDEAS BOND?
Appellant's final contention is that the District Court
erred in requiring that he post a supersedeas bond in the
amount of $34,408.83 after he moved that court for a stay of
execution on judgment pending appeal. Rule 7 (a), M.R.App. P.
provides in relevant part:
When the judgment or order determines the
disposition of property in controversy as in real
actions, replevin, and actions to foreclose
mortgages, or when such property is in the custody
of the sheriff or when the proceeds of such
property or a bond for its value is in the custody
or control of the court, the amount of the
supersedeas bond shall be fixed at such sum only as
will secure the amount recovered for the use and
detention of the property, the costs of the action,
costs on appeal, interest, and damages for delay.
On application, the supreme court in the interest
of justice may suspend, modify, restore, or grant
any order made under this subdivision.
Under the foregoing rule, the real property that is the
subject of the contract between the parties is in the control
of the District Court. The amount of the judgment is
$28,398.67. The supersedeas bond exceeds the judgment by
approximately $6,000.00. The amount of the money judgment is
at this time unknown, for if Nicholson decides not to
complete the contract by paying the balance due, a deficiency
judgment cannot be computed until after the sheriff's sale.
In the meantime, the land itself is security for the
judgment. It was, moreover, premature to allow Aveco to
docket the judgment as it now exists in other jurisdictions.
It is our determination that the supersedeas bond in this
case should not have exceeded $6,000.00. Therefore, under
the power vested in this Court in Rule 7(a), M.R.App.P., we
exonerate and discharge the obligation on the supersedeas
bond for the amount in excess of $6,000.00.
ISSUE 4
DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS
ENTITLED TO SPECIFIC PERFORMANCE (ACCELERATION OF PAYMENTS)
UNDER THE CONTRACT FOR DEED?
Section 27-1-411, MCA, provides that:
Except as otherwise provided in this part and Title
28, chapter 2, parts 16 and 17, the specific
performance of an obligation may be compelled when:
(4) it has been expressly agreed in writing,
between the parties to the contract, that specific
performance thereof may be required by either party
or that damages shall not be considered adequate
relief.
Section 27-1-414, MCA, provides that the right to
specific performance must be mutual
(1) When either of the parties to an obligation is
entitled to a specific performance thereof
according to the provisions of 27-1-411, the other
party is also entitled to it, though not within
those provisions.
(2) Neither party to any obligation can be
compelled specifically to perform it unless the
other party thereto has performed or is compellable
specifically to perform everything to which the
former is entitled under the same obligation,
either completely or nearly so, together with full
compensation for any want of entire performance.
While we hold that the trial court properly ordered the sale
of the land, in the deficiency judgment and right of
redemption it provided that only the "interest held by the
defendant" is to be sold. Because $ 27-1-414, MCA requires
mutuality of performance, Aveco's interest must also be sold
to give meaning to the statute. Here, specific performance
is a requirement to transfer title of the real property. -
See
also Naylor v. Hall (1982), 201 Mont. 59, 651 ~ . 2 d1010;
Maxted v. Barrett (19821, 198 Mont. 81, 643 P.2d 1161; and
schultz v. Campbell (1966), 147 Mont. 439, 413 ~ . 2 d879.
When the sale is of the interest of both the plaintiff and
defendant, equitable and legal title are merged and there is
nothing left to be performed. The purchaser at the sale will
then receive a title subject to the right of redemption of
the defendant. We affirm the District Court's order of
specific performance.
ISSUE 5
DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS
ENTITLED TO HAVE THE PROPERTY SOLD IF APPELLANT FAILS TO PAY
THE REMAINING BALANCE?
The contract between the seller and defendant Nicholson
provided that the seller could upon default of buyer
" ... at their option declare al.1 sums provided to be paid
to them to be immediately due and payable and may take all
legal means to collect the same."
As assignee of the sellers, Aveco elected to ask for
specific performance and sale of land in its compl-aint. This
procedure was not contested by the defendant.
We held in SAS Partnership, Etc. v. Schafer (1982), 200
Mont. 478, 653 P.2d 834, and cases therein cited that:
... it is proper for the District Court on remand.
to enter a decree of specific performance with a
provision that if the entire balance is not paid
within a specified time period the property should
be sold with the net proceeds applied to satisfy
the money obligation owed . . ..
SAS Partnership, 653 P.2d at 838.
The District Court did not err when it ordered the
property sold upon defendant's failure to pay the remaining
balance.
ISSUE 6
DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS
ENTITLED TO A DEFICIENCY JUDGMENT IF PROCEEDS ARE
INSUFFICIENT TO PAY THE ACCELERATED BALANCE AND OTHER MONIES
OWING PURSUANT TO THE CONTRACT?
Again we turn to Glacier Campground. There we held
that once specific performance on a contract has been
ordered, there is nothing inequitable about awarding a
deficiency judgment on any unsatisfied amount after the sale
of the land in controversy. - -
Glacier Campground, 597 P.2d at
698.
Nicholson is obligated to Aveco for the amount of the
judgment on the contract upon which he defaulted. If, after
the property is sold there is a deficiency of the amount
owed, Aveco could sue Nicholson for the difference. To award
a deficiency judgment in the present proceeding is judicially
economical and may ultimately be less expensive for Nicholson
with respect to costs and fees. The risk of forfeiting
payments already made while still being obligated for the
remainder of the contract purchase price is a risk presently
taken by anyone entering into a contract for deed such as the
one entered into by Nicholson. The deficiency judgment is
contingent on the outcome that the sale of the property does
not net enough to satisfy Aveco's judgment against Nicholson.
We hold that the District Court was correct in awarding
Aveco a deficiency judgment.
Affirmed in part and reversed
We Concur: 7
4
Chief Justice