Great Falls Nat. Bank v. McCormick

• Decision Date: 20 December 1968
• Docket Number: No. 11503,11503
• Citation: 448 P.2d 991,152 Mont. 319
• Parties: The GREAT FALLS NATIONAL BANK, a national banking corporation, Plaintiff and Respondent, v. James R. McCORMICK and Velma W. McCormick, husband and wife; Richard O. Nickerson and Carol J. Nickerson, husband and wife, et al., Defendants and Appellants.
• Court: Montana Supreme Court

Page 991

448 P.2d 991

152 Mont. 319

The GREAT FALLS NATIONAL BANK, a national banking corporation, Plaintiff and Respondent, v. James R. McCORMICK and Velma W. McCormick, husband and wife Richard O. Nickerson and Carol J. Nickerson husband and wife, et al., Defendants and Appellants.

No. 11503.

Supreme Court of Montana.

Submitted Nov. 21, 1968.

Decided Dec. 20, 1968.

Dzivi & Conklin, William Conklin (arrgued), Louis D. Nybo (appeared), Great Falls, for defendant-appellants.

Luxan & Murfitt, Howard J. Luxan, Jr. (argued), Helena, Church, Harris, Johnson & Williams, William A. Reid (appeared), Great Falls, for plaintiff-respondent.

JOHN C. HARRISON, Justice.

This is an appeal from a judgment on the pleading entered in favor of the plaintiff, the Great Falls National Bank, in accordance with Rule 12(c), Montana Rules of Civil Procedure. The issue was the alleged unconstitutionality of the Small Tract Financing Act of Montana, Chap. 177, Laws of 1963, codified as sections 52-401 through 52-417, R.C.M.1947.

This was an action to quiet title to certain real property, comprising less than 3 acres, situated in Great Falls, Montana. The plaintiff bank was the beneficiary under a trust indenture, executed in behalf of all parties, authorized by the Small Tract Financing Act of Montana (hereinafter referred to as the Act). Defendants, James R. McCormick and Velma W. McCormick, husband and wife, executed the trust indenture and defendants Richard O. Nickerson and Carol J. Nickerson, husband and wife, were their successors in interest. Suffice to say the defendants breached the terms of their trust indenture and the plaintiff elected to foreclose in accordance with the provisions of the Act and the trust indenture. All requirements as to notice were satisfied.

All parties concerned agree that this is a test case and is presented to determine if the Hon. Robert J. Nelson, district judge of the eighth judicial district, was correct in upholding the constitutionality of the Act and was justified in granting the judgment on the pleadings in favor of the plaintiff. We agree that Judge Nelson was correct in his findings.

Two issues are presented for our consideration:

(1). Whether the Small Tract Financing Act of Montana is unconstitutional as special legislation under Art. V, § 26, of the Montana Constitution and whether it is a denial of equal protection of the law as is guaranteed to us by Amendment 14 to the United States Constitution.

(2). Whether inadequate notice of sale provisions of the Act authorize the deprivation of property without due process of law.

At the outset we set out the terms and provisions of the Act as they apply to this case. Section 52-402, R.C.M.1947, states the policy behind this enactment:

'Because the financing of homes and business expansion is essential to the development of the state of Montana, and because such financing, usually involving areas of real estate of not more than three acres, has been restricted by the laws relating to mortgages of real property, and because more such financing of homes and business expansion is available if the parties can use security instruments and procedures not subject to all the provisions of the mortgage laws, it is hereby declared to be the public policy of the state of Montana to permit the use of trust indentures for estates in real property of not more than three acres as hereinafter provided.'

The Act permits the use of trust indentures in place of the conventional real estate mortgages, trust deeds or other security instruments when the property involved encompasses less than 3 acres; the use of trust indentures is optional-not mandatory. The instrument may be foreclosed by judicial procedure or by advertising and sale as is provided in the statute. After foreclosure proceedings have begun the beneficiary must give notice to the debtor 120 days before the sale-during this time the debtor may pay all delinquent installments and reinstate the transaction and halt the sale. There is no dificiency judgment connected with the sale nor is there any right of redemption.

Defendants maintain since the Act only applies to real estate transactions involving less than 3 acres of land that this constitutes special legislation and is therefore unconstitutional under the Constitution of Montana, Art. V, § 26. It is true that the Act does set up a class-all real property less than 3 acres; this does not mean that the Act becomes unconstitutional as a result. Hill v. Rae, 52 Mont. 378, 158 P. 826, L.R.A.1917A, 495. It may be classified as constitutional if the class that is established is reasonable and treats all those equally that are within that class. State v. Safeway Stores, Inc., 106 Mont. 182, 76 P.2d 81. There is a presumption in favor of the Act being constitutional and the classification being reasonable.

'It must be remembered that in the matter of classification, the Legislature enjoys broad discretion and is not required to go as far as it might in enacting a law. The question of classification is primarily for the Legislature. The presumption is that it acted on legitimate grounds of distinction, if any such grounds existed.' State v. Safeway Stores, Inc., supra.

Now we consider if the classification was reasonable. The preamble of the Act declares that its purpose is to foster housing and business expansion which will in turn promote the economic development of the state. This in itself is a legitimate and recognized purpose. As we said in Hill v. Rae,supra, any classification which fosters development of the state and adds to its prosperity is a reasonable classification. In the usual mortgage foreclosure the mortgagee could by judicial proceedings delay the reacquisition of the property for approximately 18 months. During this time all the money so far invested is tied up-unavailable for further financing to the public. The purpose of the Act was to remedy this situation by making foreclosure available by advertisement and sale; a period taking only 120 days. During argument it was represented that when property is sold, outside buyers are more willing to buy because they can take possession immediately and have no fear of the property being redeemed by the original owner. Usually these sales realize the full market value of the property; the same does not hold true in a foreclosure by judicial proceedings. Logically, it naturally follows that investors are more willing to risk their money in states that provide for this type of procedure.

Defendants attack the Act's 3 acre classification on the basis that it favors rural property owners over urban owners. It is true that this 3 acre classification usually applies to home and business operations...