No. 92-187
IN THE SUPREME COURT OF THE STATE OF MONTANA
APPEAL FROM: District C o u r t of the ~ i n e t e e n t hJudicial District,
In and for the County of Lincoln,
The Honorable Robert S. Keller, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John A. Lence, Attorney at Law, Kalispell, Montana
For Respondent:
Steven E. ~ u m m i n g s ,Murphy, Robinson, Heckathorn &
Phillips, ~ a l i s p e l l ,Montana
Submitted on Briefs: August 13, 1992
Decided: September 29, 1992
Filed:
Justice Karla M. Gray delivered the Opinion of the Court.
John A. Lence appeals from the Judgment and Decree of
Foreclosure entered following a grant of summary judgment in favor
of First Western Federal Savings Bank by the Nineteenth Judicial
District Court, Lincoln County. We affirm.
We address the following issues:
1. Did the District Court err in designating its Judgment and
Decree of Foreclosure a final judgment?
2. Did the District Court err in concluding that a deficiency
judgment is available following judicial foreclosure of a deed of
trust securing a condominium not utilized as a primary residence?
3. Did the District Court err in refusing to delay a
sheriff's sale and determination of fair market value of the
property in question pending the outcome of separate litigation?
The basic facts of this case are not in dispute. On January
31, 1984, appellant John A. Lence (Lence) signed and delivered to
Montana Savings and Loan Association an adjustable rate promissory
note (note). Payment of the obligation evidenced by the note was
secured by a deed of trust signed by Lence, with Montana Savings
and Loan Association as beneficiary. The deed of trust describes
the property as "Unit No. 21 of Crystal Lakes Condominiums Club
House Units1! (the condominium). Respondent First Western Federal
Savings Bank (First Western) is the successor in interest to
Montana Savings and Loan Association and is the present owner and
holder of the note and deed of trust.
Lence purchased the condominium as a secondary residence: his
primary residence was in Whitefish, Montana. He lived at the
condominium during the summers from 1977 until approximately 1985.
Lence sold the property on February 1, 1986, and repossessed it on
December 22, 1989. Since the repossession, he has rented the
property on an intermittent basis. The property is the subject of
federal district court litigation by Lence and other Crystal Lakes
property owners for the right to use facilities at Crystal Lakes
Resort.
Lence defaulted on the note by failing to pay the monthly
installments due on December 1, 1989, and on the first day of each
month thereafter. The outstanding amount owed as of December 10,
1990, is $55,971.38, plus interest at a variable rate on the
principal balance.
First Western brought suit against Lence to foreclose the note
and deed of trust relating to the condominium and subsequently
moved for summary judgment. The District Court found the
undisputed facts to be essentially those stated above and granted
summary judgment, concluding that First Western was entitled to
judgment for the amounts owing and to have its deed of trust
foreclosed judicially as provided by law. In addition, the court
concluded that a deficiency judgment would be available to First
Western in the event the sheriff's sale did not net sufficient
funds to satisfy the debt. The deficiency judgment would be the
difference between the fair market value of the property at the
time of sale and the amount of the debt; a hearing would be held
for the purpose of determining the fair market value at that time.
Lence appeals from the final judgment and decree of foreclosure
entered March 3, 1992.
1. Did the District Court err in designating its Judgment and
Decree of Foreclosure a final judgment?
The District Court entered its Judgment and Decree of
Foreclosure on March 3, 1992; the Judgment included an order of
sale at public auction and the right of First Western to a
deficiency judgment if sale proceeds were insufficient. Lence
argues that the Judgment and Decree of Foreclosure is not a final,
appealable order.
In Federal Savings and Loan Ins. v. Hamilton (1989), 241 Mont.
367, 786 P.2d 1190, the mortgagors attempted a consolidated appeal
from an amended order granting summary judgment, decree of
foreclosure, and deficiency judgment to the mortgagee, and from a
subsequent notice of entry of deficiency judgment in the amount of
$99,306. In other words, they tried to appeal both the propriety
and the amount of the deficiency judgment. We concluded that the
amended summary judgment, decree of foreclosure and deficiency
judgment was a final order under Rule 1, M.R.App.P. Therefore, we
held that the appeal of the propriety of the deficiency judgment
entered with the summary judgment and decree of foreclosure was not
timely.
As we noted in Hamilton, foreclosure cases can involve two
final orders: first, the judgment/decree of foreclosure, which may
contain the right to a deficiency judgment: and second, the actual
entry of the deficiency judgment. Hamilton, 241 Mont. at 369.
Here, the Judgment and Decree of Foreclosure is, indeed, a final
judgment under Hamilton. The District Court did not err in so
designating it.
2. Did the District Court err in concluding that a deficiency
judgment is available following judicial foreclosure of a deed of
trust securing a condominium not utilized as a primary residence?
We first addressed the availability of deficiency judgments
after judicial foreclosure of trust deeds executed under Montana's
Small Tract Financing Act (Act) in First State Bank of Forsyth v.
Chunkapura (1987), 226 Mont. 54, 734 P.2d 1203. We traced the
history of the legislature's adoption of the Act, considered
decisions from other states with similar Acts on the question of
the availability of deficiency judgments, and held that deficiency
judgments are not allowed when trust indentures executed under the
Act are foreclosed by judicial proceedings. Chunka~ura,226 Mont.
at 56-58, 60-63. On rehearing, we carefully limited the opinion to
the facts of that case, namely, that the trust deed before us
"related to an occupied, single family residential property" and
held that prospective deficiency judgments for like property would
be invalid and of no effect. Chunkaoura, 226 Mont. at 67.
We addressed the availability of deficiency judgments under
the Act again in 1989, under somewhat different facts. In First
F e d e r a l S a v i n g s & Loan v . Anderson ( 1 9 8 9 ) , 238 Mont. 2 9 6 , 777 P.Zd
1281, the lender also sought a deficiency judgment after judicial
foreclosure of a trust deed under the Act. There, the Andersons
had occupied the dwelling as a family residence for seven years,
subsequently renting it for eighteen months while the property was
for sale in order to continue making the payments to the lender.
The lender argued that, because the Andersons no longer occupied
the property themselves and, in fact, rented it to others, they
were not entitled to the benefit of the Chunkauura holding. We
disagreed, holding that the property fit the Chunkauura exception
and that no deficiency judgment was available. Anderson, 238 Mont.
at 301.
Again, in Wash.-Ida.-Mont. Retirement v. Galleria (1989), 239
Mont. 250, 780 P.2d 608, we addressed the availability of a
deficiency judgment after judicial foreclosure of a trust
indenture. In Galleria, however, the property at issue was
commercial property. There, we noted that the Chunkauura
limitation on the availability of deficiency judgments was limited
to "trust deeds used as security for the financing of single
dwelling, occupied homes (the type of financing for which the Small
Tract Financing Act was argued to the legislature) ." Galleria, 239
Mont. at 258. We held that the Chunkauura limitation on deficiency
judgments did not apply to a trust indenture securing a purely
commercial loan.
The facts before us in the present case are not qualitatively
equivalent to those in Chunkauura or Anderson. Here, the trust
deed secured property utilized as a second residence during the
summers: Lence concedes that his primary residence remained in
Whitefish. He argues, however, that the property at issue is a
single family residential property which, under Chunka~ura,
precludes the availability of a deficiency judgment. He further
argues that the fact that he no longer occupies the property at
all, but has rented it intermittently, brings him within the facts
of Anderson. Lencefs hypertechnical attempt to make his factual
situation indistinguishable from Chunka~ura
and Anderson misses the
thrust of those decisions.
Lence's condominium was never intended to be, or occupied as,
his actual and primary residence. He purchased it as recreational
or seasonal property and utilized it as such for several years.
Under the laws of Montana, a person has one residence; the
residence is "where one remains when not called elsewhere for labor
or other special or temporary purpose. ... Section 1-1-215,
MCA. Lence cannot have two legal "residences" in Montana--a
primary residence in Whitefish and one to which he is "called for
special purpose1*in Lincoln County--and claim the benefits of the
laws of Montana with regard to both. That is the result he seeks
in asking this Court to preclude the availability of a deficiency
judgment to First Western.
In Chunka~uraand Anderson, we defined the property to which
the limitation on deficiency judgments applied based on the facts
before us in those cases. Both involved residential properties
purchased and utilized as the family's primary residence. We
conclude that the condominium at issue here, never intended or
occupied as Lence's primary residence, does not qualify for the
limitation on deficiency judgments established in Chunkapura and
Anderson. To accept Lence's argument would pervert the limited
nature of the Chunkapura exception; it would allow a person to
avoid the possibility of deficiency judgment on virtually unlimited
numbers of properties by merely ensuring that each property was a
residential unit and without regard to whether the property was
ever intended or used as a personal, primary residence. Indeed,
under Lence's interpretation of Anderson, it would not be necessary
that the borrower ever occupy the properties, so long as they were
occupied by someone. Such results were not contemplated or
intended by Chunka~uraand Anderson, and do not reflect the purpose
for which the Small Tract Financing Act was adopted by the Montana
legislature.
3. Did the District Court err in refusing to delay a
sheriff's sale and determination of fair market value of the
property in question pending the outcome of separate litigation?
The District Court determined that if the proceeds of the
ordered sheriff's sale proved insufficient to pay the amounts owing
to First Western and the expenses of the sale, a hearing would be
held to determine the amount of the deficiency judgment, if any, to
which First Western would be entitled. The purpose of the hearing
would be to determine the fair market value of the property; the
amount of any deficiency would then be based on the difference
between the fair market value and the amount owing to First
Western. While the District Court did not so state, the procedures
it ordered were those set forth by this Court for determining fair
market value in Galleria.
Lence contends that the District Court erred in refusing to
delay the sheriff's sale until the federal court litigation
concerning the Crystal Lakes owners' access to resort facilities is
completed. He cites no authority in support of this contention.
He simply asserts that "the fair market value of the property can
not be ascertained in this situation" and quotes a portion of First
Western's appraisal report to the effect that the value is totally
dependent on the future outcome of the federal lawsuit.
We do not disagree that the federal court litigation, if
unresolved at the time of the sheriff's sale, may have a
significant impact on the sale and the fair market value
determination made by the District Court. This lack of
disagreement does not equate, however, to agreement that the fair
market value of the property cannot be ascertained.
All property has a fair market value; such a value is
influenced by numerous factors and is always dependent, to some
degree, on the moment in time at which the value is established.
Indeed, while the appraisal report offered on behalf of First
Western indicates the significance of the pendency of the federal
litigation, that report goes on to make a fair market value
determination under then-current circumstances, including the
pending litigation. Simply put, it is the appraiser's job to make
such valuations. We are confident that the District Court, aided
by the evidence presented by the parties and, presumably, their
respective appraisers, will be able to determine the fair market
value of the condominium after the sheriff's sale if the need
arises.
Finally, we note that Lence has been in default on his
obligations to First Western since December 1989. First Western
cannot complete the judicial foreclosure and deficiency
determination and collect the amounts to which it is entitled by
law until such time as the present case reaches final resolution.
There is no reason in law or in equity to further delay its ability
to enforce its rights by awaiting the outcome of litigation in
which it is not involved and over which it has no control. We hold
that the District Court did not err in refusing to delay a
sheriff's sale and determination of fair market value of the
property pending the outcome of separate litigation.
Affirmed.
September 29, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
JOHN A. LENCE
Attorney at Law
69 North Main Street
Kalispell, MT 59901
Steven E. Cummings
MURPHY, ROBINSON, HECKATHORN & PHELIPS
P.O. Box 759
Kalispell, MT 59903
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA