No. 88-60
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
LARRY L. HANNAH, MARK WHIPPLE,
ROBERT C. SLACK, et al.,
Plaintiffs and Respondents,
-vs-
RANDY L. MARTINSON, JOHN NICHOLS,
LOWELL KLATT, and VALLEY BANK OF
BELGRADE, et al.,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Morrow, Sedivy & Bennett; Terry Schaplow, Bozeman,
Montana
For Respondent:
Moore, Rice, O'Connell & Refling; Dorothy L. Brownlow,
Bozeman, Montana
Submitted on Briefs: June 2, 1988
Decided: July 7, 1988
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Plaintiffs brought an action seeking to quiet title to
certain real property located within Gallatin County.
Following a hearing on the parties' motions for summary
judgment, the District Court of the Eighteenth Judicial
District, Gallatin County, issued a judgment and decree
quieting title in plaintiffs. This appeal followed. We
affirm.
Although the parties argue extensively as to whether a
judgment lien is an "encumbrance" within the meaning of S
70-21-304, MCA; whether a judgment lienholder is an
"encumbrancer"; and whether a judgment lien takes priority
over an unrecorded deed. We conclude there is but one issue.
Does a judgment lien attach to real property which has been
transferred to another party by means of an unrecorded deed
prior to the docketing of the judgment?
Plaintiffs are the original owners of Tract 17 of
Certificate of Survey 471, Gallatin County. Plaintiffs
subsequently sold the property to Byron G. Pride by written
contract for deed. Pride in turn sold the property to
defendant Martinson by a separate contract for deed dated
January 30, 1979. A notice of Martinson's interest was
recorded by the Gallatin County Clerk and Recorder shortly
thereafter.
When Pride defaulted on his contract, plaintiffs honored
the agreement with Martinson, who thereafter made contract
payments directly to plaintiffs.
On January 15, 1981, Martinson executed and delivered a
quit claim deed conveying his interest in the property to
defendant Nichols. Martinson also executed a warranty deed
to Nichols of the same real property on January 15, 1981.
However, the quit claim deed was not recorded until October
22, 1982, and the warranty deed was not recorded until June
14, 1983. In the meantime, Nichols had made the contract
payments directly to the plaintiffs until he defaulted on
April 13, 1983. Upon his default, plaintiffs repossessed the
property and brought the instant action.
Defendant Klatt is the only person who disputes
plaintiffs' claim to title. Klatt had obtained a judgment
against Martinson on September 24, 1981. The judgment was
subsequently docketed on September 28, 1981, after the time
Martinson had delivered deeds of his interest in the property
to Nichols, but before the deeds were recorded. This appeal
followed the District Court's determination that Klatt's
judgment lien did not attach to the real property.
Section 25-9-301 (2), MCA, provides, in pertinent part:
From the time the judgment is docketed, it becomes
a lien upon - - property - - judgment
all real of the
debtor . .. owned a him- -
- at the time or which he
may afterward acquire until t h e i e n ceases.
(Emphasis added.)
We note at the outset that Martinson never "owned" the
property in fee simple. A vendee purchasing real property
pursuant to a contract for deed holds an equitable title.
Estate of Wooten (1982), 198 Mont. 132, 643 P.2d 1196; Kern
v. Robertson (1932), 92 Mont. 283, 12 P.2d 565. Legal title
remains vested in the vendor until such time as the
contractual provisions are fully performed. Kern, supra;
Wooten, supra. Our first task is therefore to determine
whether the holder of an equitable title is an "owner" of
real property within the meaning of S 25-9-301, MCA. Upon
review of the applicable statutes, we conclude that an
equit-able ownership interest is sufficient.
In the instant case the phrase "all real property of the
judgment debtor ... owned by him at the time" does not, on
its face, indicate whether the legislature intended to
include fee simple title, legal title, equitable title or
other interest in the property. However 5 25-13-501, MCA,
which provides for execution against the real property
interests of a judgment debtor other than ownership in fee
simple, clearly demonstrates a legislative intent to make a
judgment lien operative against all real property interests.
Equitable title is, therefore, an ownership interest which is
subject to judgment liens. Accord, Fulton V. Duro (1daho
1985), 700 P.2d 14; Cascade Sec. Bank v. Butler (wash. 19771,
567 P.2d 631; Mutual Building & Loan Assoc. of Las Cruces v.
Collins (N.M. 1973), 516 P.2d 677. Consequently, we now turn
to the issue at hand.
The issue of the legal effect of judgment liens is not
unknown to Montana jurisprudence.
In the case of Vaughn v. Schmalsle (1890), 10 Mont. 186,
25 P. 102, the court was asked to determined the legal
position of a prior unrecorded mortgage and judgment lien
obtained pursuant to a statute substantially identical to 5
25-9-301, MCA. The court held:
A judgment is not a specific lien on any particular
real estate of the judgment debtor, but a general
lien upon all his real estate, subject to all prior
liens, either legal or equitable, irrespective of
any knowledge of the judgment creditor as to the
existence of such liens.. ..
... the judgment creditor acquires thereby no
higher or better right to the property or assets of
the debtor than the debtor himself had when
judgment was rendered, unless he can show some
fraud or collusion to impair his rights. Correct
statement of the rule is that the lien of a
judgment creates a preference over subsequently
acquired rights, but in equity it does not attach
to the mere legal title to the land as existing in
the defendant at its rendition, to the exclusion of
a prior equitable title in a third person. Guided
by these considerations, the court ... will
protect the equitable rights of third persons
against the legal lien, and will limit --- to
that lien
the actual interest which the judgment debtor had
- - estate - - - - the judgment -
in the at the time was
rendered. (Emphasis added.)
10 Mont. at 194-195, 25 P. at 103. See also Rockefeller v.
Dellinger (1899), 22 Mont. 418, 56 P. 822; Clack v. Clack
(1935), 98 Mont. 552, 41 P.2d 32.
Application of the Vaughn rationale demonstrates the
error of Klatt Is contention that his judgment lien attached
even though Martinson's interest had been transferred. A
judgment lien can only attach to the actual interest of the
judgment debtor. Vaughn, supra. See also Short et al. v.
Karnop et al. (1929), 84 Mont. 276, 275 P. 278 (attaching
creditor is neither a bona fide purchaser nor an encumbrancer
of the attached property and therefore succeeds to and
acquires only the rights of his debtor.) It can not attach
to an interest which does not exist, nor can a judgment lien
claim superiority as against a valid prior transfer.
A judgment lien can only bind an interest in real
property when the debtor himself, during the existence of the
judgment lien, could voluntarily transfer or alienate the
interest. See Clack, 98 Mont. at 567, 41 P.2d at 37. As a
matter of fact, the subsequent default by Nichols of the
contract for deed, which caused a termination by Hannah, on
April 13, 1983, itself would wipe out any lienable interest
of Martinson in the property.
In light of our determination that the judgment lien
failed to attach, the issue whether a judgment lien is an
encumbrance, and the lien holder an encumbrancer within the
meaning of the recording statutes, is moot.
The judgment is affirmed.
Justice /t-
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Justices