Foothill Indus. Bank v. Mikkelson, 5304

• Decision Date: 03 February 1981
• Docket Number: No. 5304,5304
• Citation: 623 P.2d 748
• Parties: FOOTHILL INDUSTRIAL BANK, a Colorado corporation, Appellant (Defendant), v. Thomas T. MIKKELSON and Kaye D. Mikkelson, d/b/a Tom's Welding Service, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

Page 748

623 P.2d 748

FOOTHILL INDUSTRIAL BANK, a Colorado corporation, Appellant (Defendant), v. Thomas T. MIKKELSON and Kaye D. Mikkelson, d/b/a Tom's Welding Service, Appellees (Plaintiffs).

No. 5304.

Supreme Court of Wyoming.

Feb. 3, 1981.

Margaret A. Taylor and Michael A. Maycock, of Daly, Maycock & Anderson, P. C., Gillette, for appellant.

Dwight F. Hurich, of Hawkey & Sowada, Gillette, for appellees.

Before ROSE, C. J. ^*, McCLINTOCK, RAPER ^**, THOMAS and ROONEY, JJ.

McCLINTOCK, Justice.

Foothill Industrial Bank ¹ appeals from judgment of the district court of Campbell County, Wyoming, awarding $2,500.00 compensatory and $500.00 punitive damages to Thomas and Kaye Mikkelson. The action grew out of the publication on December 6, 1979, of a notice of real estate mortgage foreclosure sale, in which Foothill claimed default by the Mikkelsons in the covenants of a mortgage delivered as security for a loan. On November 28, the Mikkelsons had filed suit to enjoin the foreclosure ² and only the one publication was made. On December 20, the Mikkelsons filed the present action seeking damages for alleged abuse of process and libel. The Mikkelsons base their right of recovery on allegations that there was no default, the notice was false, and the proceedings were instituted for a malicious purpose, therefore constituting both abuse of process and libel, with resulting injury. Foothill's position is that there were defaults justifying foreclosure and that in any event a privileged situation existed with no showing of actual malice. It also asserts the right to proceed with the foreclosure. Although implicitly finding that the Mikkelsons had failed to comply with some of the covenants of the security instruments, the trial court found that "(t)here was no default on which a foreclosure could be based," entered judgment for the plaintiffs and denied the bank's prayer for foreclosure.

THE SECURITY AGREEMENT

Mr. and Mrs. Mikkelson purchased a parcel of land in Campbell County with the intention of constructing a building thereon to house a welding shop. Foothill loaned them $70,000.00 at an annual interest rate of 16%. The total amount of the obligation, including finance charge, was $116,795.28, payable in 84 installments of $1,390.42, due on or before the first day of each month beginning August 1, 1978. As part of the loan transaction the Mikkelsons executed four instruments: A Promissory Note, Security The note permits the holder thereof, "in lieu of acceleration of maturity," to charge 5% of any installment not paid within 10 days of the due date. But at the opinion of the holder the unpaid balance may become

Agreement, Financing Statement, Disclosures; a Mortgage Deed with Release of Homestead; a Deed of Trust; and a Security Agreement Certificates of Deposit.

"... immediately due and payable without notice or demand if (a) any payment required by this note is not made when due, or (b) a default or event of default occurs under any loan or security agreement or other instrument executed as security for or in connection with this note ...."

The mortgage contains covenants to pay the indebtedness, pay all taxes and assessments and keep the buildings thereon insured in an amount not less than $116,795.28. In case of default in the payments, "or in case default shall be made in any of the covenants and agreements hereof, then the whole indebtedness hereby secured with the interest thereon shall become due and payable," and the mortgagee may proceed pursuant to law to foreclose on and sell the property.

The deed of trust contains covenants promptly to pay all principal, interest and other sums of money due, keep the improvements insured in an amount not less than the amount due, and promptly pay all taxes, assessments and other liabilities, obligations and encumbrances as they become due. Time is of the essence and if there is any default in payment or breach of any of the covenants the whole of the indebtedness may "at the option of the legal holder thereof, become due and payable and this Deed of Trust be foreclosed in the manner and with the same effect as if said indebtedness had matured." Indulgence in not exercising the option to accelerate shall not, even though repeated, be construed as a waiver of the right to exercise the option at any time thereafter.

By the terms of the fourth instrument, a certificate of deposit in the amount of $10,000.00 was deposited with the bank as additional security for the loan. Foothill is authorized to sell the collateral and apply the proceeds against the debt. The debtor waives any right "to require Secured Party to proceed against any person, exhaust any collateral, or pursue any other remedy which Secured Party may now or hereafter have."

On September 29, 1978, Foothill released a portion of the mortgaged premises so that the Mikkelsons could convey this portion to John A. Brown and Everett Jack Pownall. The bank financed this purchase and provided funds so that an additional building could be constructed. The Mikkelsons contend that this conveyance was made in violation of protective covenants pertaining to the subdivision in which the premises are located.

THE TRANSACTIONAL HISTORY

All transactions relating to the repayment of the loan were recorded by the bank on an installment loan ledger card. It shows that all installments due through January of 1979 were paid within the ten-day grace period. Beginning in February and running through September, the payments were consistently late and a late-charge in the amount of $69.52 was entered for each of those months except March and May. No payment at all was received in July, but Robert Stevens, an assistant vice-president of the bank, testified that on August 20 the bank received $2,780.74 by wire exchange from a Gillette bank and on August 30 an additional $332.00. Mikkelson testified that these amounts were forwarded on advice of his attorney after he had been informed by telephone conversation with Stevens that the bank would receive no more payments. Sometime during August or early September, the matter was turned over to a Cheyenne legal film for handling. On September 11 the Cheyenne attorneys addressed a letter to the Mikkelsons advising them that the note and mortgage were past due, that default had occurred and "We shall begin foreclosure proceedings ten days after your receipt of this letter."

... this correspondence constitutes Foothill Industrial Bank's written notice of intent to foreclose the mortgage by advertisement and sale.

However, the ledger card shows that on that same day a late-charge of $69.52 was entered. The July and August payments were not credited on the ledger card until September 25 and 26, when Stevens was advised to do so by the bank's attorneys.

Although the attorney's letter of September 11 indicates that it was to be sent by certified mail, the date of delivery is not shown. Mikkelson testified to the receipt thereof without mention of the date. Mrs. Mikkelson testified that it could have been received around September 14. On that date, although as she testified not because of the letter, she issued and mailed to Foothill a check in the amount of $1,459.94 (being the amount of the monthly payment, plus $69.52, the amount of late-charge). The issuance of this check was substantiated by a copy of the appropriate page of the check register kept by the Mikkelsons, but Stevens testified that the check was never received by Foothill, and the Mikkelsons admitted that it had never been paid by their Gillette bank.

Notwithstanding the attorneys' statement that foreclosure would be commenced ten days after receipt of the notice, no publication was commenced until December 6. Prior to that, but at a time not shown by testimony of either party, the Mikkelsons received from the bank's attorneys a typewritten copy of the notice that was published on December 6. This notice states that written notice of intent to foreclose had been given to the mortgagors by "certified mail with return receipt, mailed to the last known address of the record owner on September 11, 1979." However, the loan ledger card shows that on October 2, 1979, the bank credited the mortgage account with a payment in the amount of $1,390.42, crediting this to the payment due September 1, 1979. The card also shows payments in the same amount received and credited November 8 for the October payment; December 3 for the November payment; January 7, 1980 for December; and February 5 for January. At the trial on March 6, Stevens testified to the application in this manner and further that no other payments had been received as of that date. No late-charges were entered after September 11.

It is not clear from the published notice just what specific defaults Foothill claimed to exist. It stated therein:

"That default has been made in the payment of said mortgage note and in the terms and conditions of the mortgage described above in that the said Thomas T. Mikkelson and Kay (sic) D. Mikkelson, d/b/a Tom's Welding Service, have not made the payments as required by the said mortgage and mortgage note; that in accordance with the terms and provisions of said mortgage, the mortgagee has elected and does hereby elect to declare the entire remaining indebtedness due and payable and that there is now due, owing and unpaid as of the date of this notice the sum of $97,329.40, principal and interest included, less rebate in the amount of $32,551.00 resulting in the total amount due the mortgagee as of the date of this notice, of $64,778.40...." ³

PROCEEDINGS IN THE TRIAL COURT

The complaint is in two counts, the first for an alleged abuse of process and the second for libel. The first count says nothing about the status of the obligation, but alleges that the foreclosure was induced by the fact that the developer of the property wanted to have the two severed portions of Foothill's answer admitted the publication but denied...