Federal Land Bank of Spokane v. Gallatin County

• Decision Date: 02 February 1929
• Docket Number: 6378.
• Parties: FEDERAL LAND BANK OF SPOKANE v. GALLATIN COUNTY et al.
• Court: Montana Supreme Court

274 P. 288

84 Mont. 98

FEDERAL LAND BANK OF SPOKANE v. GALLATIN COUNTY et al.

No. 6378.

Supreme Court of Montana

February 2, 1929

Appeal from District Court, Gallatin County; J. J. Lynch, Judge.

Action in equity by the Federal Land Bank of Spokane against Gallatin County and others. From a judgment sustaining a demurrer to the complaint filed by defendant named and others, plaintiff appeals. Affirmed.

C. C Rowan, of Red Lodge, for appellant.

Walter Aitken, of Bozeman, for respondents.

GALEN J.

This is an action in equity instituted to correct error committed in foreclosure proceedings resulting in damages to the plaintiff in consequence of the sale on execution of certain real estate in Gallatin county. The defendants Gallatin County Charles Scollard, and Geo. K. Clarke, as receiver of the Home State Bank, appeared and filed a joint special and general demurrer to the plaintiff's complaint. Such demurrer having been by the court sustained, judgment was thereupon entered in favor of the demurrants dismissing plaintiff's complaint as to them with their costs, from which the plaintiff has appealed.

The only question presented is as to the sufficiency of the complaint to state a cause of action. Plaintiff's amended complaint filed in the action, to which the demurrer is directed, is very voluminous. Summarized briefly so as to make the facts alleged understandable as a preface to our determination, it appears that on August 17, 1923, the plaintiff loaned to the defendants William S. Wade and Ethel A. Wade, husband and wife, $11,000 on their promissory note secured by a real estate mortgage, duly recorded September 4 1923, covering a tract of land in Gallatin county comprising 480 acres; "that the plaintiff made said loan to said defendants and accepted said note and security of said mortgage solely because said premises and improvements were used and mortgaged as one parcel or farm, and would not have made said loan except for its reliance upon the fact that said land and each and every part thereof, as well as each and every part of the buildings upon said premises, was given by said defendants and accepted by plaintiff as security for each and every part of said loan and indebtedness."

Subsequently the defendant Home State Bank of Manhattan obtained a second mortgage upon the same land, and before the foreclosure sale hereinafter mentioned such bank became insolvent, and at the time of the sale was in the hands of the defendant Geo. K Clarke as receiver. In October, 1925, the mortgagors being in default under the provisions of the plaintiff's mortgage, the same was placed in the hands of its attorneys for foreclosure according to law, with directions to make bid in plaintiff's behalf for the entire amount due. Such attorneys filed an action to foreclose the mortgage in the district court of Gallatin county in October, 1925, but did not allege that the mortgage was executed upon the land as a unit, and did not ask that the land be sold as a single tract, although when the mortgage was executed, long prior thereto, and now, the mortgaged premises comprised one contiguous tract or farm, with one set of buildings for the entire ranch. All defendants in the action having defaulted, and their default having been duly entered, the cause was brought on for trial in March, 1926, and the attorneys representing the plaintiff made proof therein "and caused a decree and judgment of foreclosure to be made, signed and filed. * * * At such hearing last aforementioned, * * * such proof showed all of said land described in said mortgage as one tract or farm, mortgaged to plaintiff to secure one indivisible indebtedness, and that there was no proof whatever offered to show that such land could be, or was subdivided, or consisted of more than one parcel, and no proof whatever to authorize the court to order said property sold in any other manner than as one single and sole tract or parcel of land to pay the said indebtedness, * * * therefore the court found at such hearing and trial, and intended to incorporate as a part of its decree therein, an order to the sheriff * * * to sell said land, and the whole thereof, in one tract or parcel;" the language of the decree in this respect being as follows: "That all and singular the mortgaged premises mentioned in the complaint * * * or so much thereof as may be sufficient to raise the amount due the plaintiff for the principal and interest, costs and attorney fees, money expended under the terms of said mortgage, and the costs of suit and expense of said sale, and which may be sold separately without material injury to the parties interested, be sold at public auction by the sheriff of Gallatin county, Montana, in the manner prescribed by law and according to the rules and practice of this Court, and that said sheriff issue his certificate of sale therefor, and after the time for redemption has expired execute a deed to the purchaser or purchasers of said mortgaged premises on sale."

It is then alleged: "That said court intended by its said language, 'in the manner prescribed by law and according to the rules and practice of this court,' and did mean to say, and that this court should so declare the language of said decree to mean, 'be sold at public auction by the sheriff of Gallatin County, Montana, in one parcel in the manner prescribed by law and according to the rules and practice of this Court,' and that the language of said decree shows that said court intended that said land should be sold in one parcel, for such decree authorizes only one certificate of sale to be issued by said sheriff." A certified copy of the decree was placed in the hands of the sheriff for execution, and the property was thereupon advertised for sale and sold on April 10, 1926. On or about March 22, 1926, plaintiff's attorneys advised plaintiff that the defendant William S. Wade had demanded that the land be sold in separate parcels of 40 and 80 acre tracts, and that it was therefore necessary to so sell same according to law. That plaintiff's officers, acting upon such advice of its attorneys, and believing the same to be correct, acting under a mistake of law as to the plaintiff's rights in the matter, thereupon instructed its attorneys and agents to make bid for it at the sale for the full amount due upon the mortgage, and in bidding on such 40 and 80 acre tracts to take into consideration the value and location of the buildings on the premises. That at such sale the defendant William S. Wade was not present in person to demand that the sale be made of separate tracts, but that the defendant Geo. K. Clarke, receiver of Home State Bank, was present in person, and then and there, believing that the law required the sheriff to sell the property in 40-acre tracts upon demand of such receiver, the sheriff sold the land on the 10th day of April, 1926, in separate 40 and 80 acre tracts instead of selling same as one piece or parcel as required by law and the decree of the court. The 40-acre tract on which the buildings and improvements valued at $4,000 are located was separately sold to the plaintiff for the sum of $1,600, whereas it should have sold for the sum of $5,600, its proportionate value of the entire tract. "That the plaintiff's said attorneys and plaintiff permitted said sale to be made in separate parcels instead of in one tract, solely because of their mistake of law as to the rights of the plaintiff, and believing that said receiver had a right to require the sale in separate forty and eighty acre tracts; that such mistake of law was concurred in by said receiver, and said receiver believed that such sales were required to be made in separate parcels upon his demand; that the plaintiff did not learn of its rights under the law, and learn as to what the law was upon such sale until about the month of March, 1927, and that plaintiff thereupon immediately tendered back to said receiver the amount of $1,705.08 with interest," which had been transmitted to the plaintiff after the defendant Geo. K. Clarke, as receiver of the Home State Bank, on or about October 28, 1926, had made redemption of the 40-acre tract with the improvements thereon, which tract with the improvements on the land was worth $5,600, and should have been bid in for that amount but for the mistake made by the plaintiff's attorneys, and each of the other tracts of land were also bid in by plaintiff's attorneys for more than their proportionate value, if the separate tract upon which the improvements are located is subject to separate redemption.

It is alleged: "That said purported redemption of said forty-acre tract aforementioned by said Geo. K. Clarke, Receiver of Home State Bank, was not a legal redemption, and was and is null and void for the reason that said receiver never duly and legally, or in any other manner, obtained an order of the court appointing him as receiver, authorizing him to redeem said forty acre tract of land, and never secured any authority whatever from the court to take any steps whatever with reference to said purported redemption, and did not use receivership funds therefor."

It is further alleged: "That subsequent to the commencement of this action and about April 29, 1927, said Geo. K. Clarke Receiver of Home State Bank, a corporation, attempted to sell and assign to the defendant Gallatin County, a municipal corporation, all his right, title and interest in said purported redemption, and in and to said forty-acre tract of land * * * and executed a written transfer thereof, which said transfer was thereupon filed in the office of the Clerk and Recorder of Gallatin County, at Bozeman, Montana, and attached to said purported Certificate of Redemption and Certificate of sale; that such purported transfer...