NO. 90-040
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
GREG PONCELET , D/B/A MONTANA READY MIX, -
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Plaintiff and Appellant, C ,
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-vs- . C- -
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SHARON A. ENGLISH; WHITECAP INTERNATIONAL, i--
INC., COLONIAL SAVINGS AND LOAN ASSOCIATION, I-> -
and FIRST AMERICAN TITLE AND ESCROW OF POLSON, r'
Defendants and Respondents. --
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APPEAL FROM: District Court of the Twentieth Judicia-1,
DisWict,
In and for the County of Lake, -.
The Honorable C.B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard J. Andriolo, Berg, Lilly, Stokes, Andriolo,
Bozeman, Montana
For Respondent:
Marshall Murray, Murray, Kaufman, Vidal & Gordon,
P.C., Kalispell, Montana
Submitted: May 3, 1 9 9 0
Decided: July 12, 1990
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
Appellant Greg Poncelet appeals from the determination of the
District Court, Twentieth Judicial District, Lake County, granting
summary judgment to Colonial Savings and Loan Association as to
lien priority. We affirm the District Court.
Appellant raises the following issues:
1. Whether Colonial Savings and Loan and Whitecap
International had notice of the appellant's prior recorded mortgage
despite the error in its legal description.
2. Whether the District Court erred in precluding priority
designation to appellant's prior recorded mortgage.
Respondent English executed a promissory note to appellant
Poncelet, secured by a mortgage on real property in Polson, Lake
County. The note and mortgage were recorded on June 2, 1986. The
mortgage was drafted by Poncelet without benefit of any title
insurance commitment. The description read:
Lot ''A1'of the Amended Plat of Lots 11 and 12 in Block
6, City of Polson, Lake County, Montana, according to the
official plat thereof on file and of record in the office
of the County Clerk and Recorder of Lake County, Montana.
This legal description was in error since the appropriate
description was:
Lot ''A1'of the Amended Plat of Lots 11 and 12 of Block
6 of Riverside Addition to the City of Polson, Lake
County, Montana, according to the official plat thereof
on file and of record in the office of the County Clerk
and Recorder of Lake County, Montana. (Emphasis added.)
On November 28, 1986, English executed and delivered a trust
indenture to First American Title and Escrow of polson as the
trustee, and Whitecap International, Inc. as the beneficiary, to
secure the payment of a loan of $79,926. The trust indenture was
recorded on December 4, 1986, and later assigned to Colonial
Savings and Loan Association.
Whitecap required the English loan to be secured by a mortgage
on English's real property in Polson. Whitecap had First American
examine the title to the real property. The record discloses that
First American was aware of an existing mortgage on property
belonging to English. Despite that knowledge, First American made
no follow-up inquiries regarding the English-Poncelet mortgage.
There is no dispute that a simple search of the grantor\grantee
index for Lake County would have revealed the English-Poncelet
mortgage and its reference number.
Poncelet initiated the foreclosure on the note and mortgage
given by English on November 17, 1987. In his complaint, Poncelet
sought the $32,545.05 balance on the note plus interest, a
reformation by the court of the legal description to include the
omitted language "of Riverside Addition, and all proceeds from the
sale of the property, plus any deficiency which might remain.
Colonial Savings and Loan, a named defendant, answered,
counterclaimed and cross-claimed on February 18, 1988. Colonial,
which had been assigned the Whitecap note and trust indenture,
raised as a counterclaim the inferior interest of Ponceletls
mortgage due to the error in legal description, and sought a
judicial declaration that it be declared null and void. In its
cross claim, Colonial sought judicial foreclosure on the trust
indenture, claiming English to be in default. Default for failure
to answer or otherwise plead as to the Poncelet claim was entered
against English on April 7, 1988. Similar default as to the
Colonial cross-claim against English was entered on June 29, 1988.
The District Court ordered foreclosure on the English-
Whitecap-Colonial trust indenture, reserving the question as to
validity and priority of the English-Poncelet mortgage. The court
also reformed the English-Poncelet mortgage to add the missing
language and decreed its foreclosure as against English only.
Colonial and Poncelet thereafter submitted briefs to the
District Court, and both parties moved for summary judgment. The
court determined that both the English-Whitecap-Colonial trust
indenture and the English-Poncelet mortgage were valid, but that
the latter was invalid, null, and void in relation to the former.
The court granted Colonial's motion for summary judgment and denied
Ponceletls motion. From this judgment, Poncelet appeals.
Poncelet maintains that Colonial and Whitecap had notice of
the Poncelet mortgage through First American Title and Escrow of
Polson, arguing that due to First American's actual notice of the
Poncelet mortgage, Whitecap and its successor Colonial are thereby
charged with notice.
The record discloses no evidence of actual notice of the
Poncelet mortgage on the parts of Whitecap or Colonial. Such
notice is crucial. Montana case law is clear on this point. The
form of recording of conveyance is paramount unless a party has
actual notice of a prior claim. Hastings v. Wise (1931), 89 Mont.
325, 297 P. 482; Angus v. Mariner (1929), 85 Mont. 365, 278 P. 996;
Baker v. Bartlett (1896), 18 Mont. 446, 45 P. 1084. While this
rule may have an undeniably harsh effect where Poncelet is
concerned, we cannot minimize the import of full compliance with
proper legal descriptions for the purpose of constructive notice
from recorded instruments. It was incumbent upon poncelet to make
certain that the recorded mortgage contained an accurate legal
description of the property.
In Ely v. Hoida (1924), 70 Mont. 542, 226 P. 525, a case on
all fours with the one at bar, this Court stated that in order to
give a mortgage priority as against a subsequent mortgagee, the
mortgage must describe the land covered by it with sufficient
accuracy to enable one examining the record to identify the land.
In the present case, as in m, the mortgage described land other
than the land intended to be mortgaged. The subsequent mortgagee
had no duty to inquire further when the mortgage appeared on its
face to describe some property but not specific property. The
Court E y stated:
l
When Bateman took her mortgage, if she desired to protect
herself against prior recorded conveyances or mortgages
of the property embraced therein, it was, of course, her
duty to examine the records. If she did so and
discovered that the Ely mortgage covered lots 17 and 18
in block 1, Lenox addition, even though she actually read
this instrument she was under no obligation to pursue her
inquiry further. There is nothing upon the face of the
Ely mortgage to indicate that there was any mistake or
imperfection therein. It contains as plain, simple, and
unambiguous a description as can be imagined, and one
reading it would have a right to assume that it was
correct, and would have no duty imposed upon him to go
beyond the record for the purpose of ascertaining that
the parties intended to cover land located entirely
outside the Lenox addition.
Ely, 70 Mont. 542 at 547-548.
The Court went on to state that "when the record of the
instrument appears by it description to relate to a certain and
definite tract of land, it is not constructive notice as to other
land which it was intended to, but did not, describe.!!
Clearly, neither the title company nor Whitecap or Colonial
had a duty to inquire further when the Poncelet mortgage appeared
to describe property outside the Riverside Addition. Rather, the
risk is and should be upon the first mortgagee to use care in
correctly and properly describing the property to protect against
subsequent purchasers or mortgagees. The District Court correctly
held the Poncelet mortgage to be inferior in priority to the
Whitecap-Colonial trust indenture.
Affirmed.
Justice
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) / Chief Justice