McNeill Family Trust v. Centura Bank

• Decision Date: 08 January 2003
• Docket Number: No. 02-59., No. 02-43, No. 02-44
• Parties: McNEILL FAMILY TRUST, Appellant (Defendant/Third Party Plaintiff), v. CENTURA BANK, Appellee (Plaintiff), and Sandra Dvorscak, Appellee (Defendant), and Meinhold, Stawiarski, Shapiro & Codilis, LLP; Lynn M. Janeway, individually; and Hayley Belt, individually, Appellees (Third Party Defendants). Centura Bank, Appellant (Plaintiff), v. McNeill Family Trust, Appellee (Defendant/Third Party Plaintiff). McNeill Family Trust, Appellant (Defendant/Third Party Plaintiff), v. Centura Bank, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

60 P.3d 1277

McNEILL FAMILY TRUST, Appellant (Defendant/Third Party Plaintiff), v. CENTURA BANK, Appellee (Plaintiff), and Sandra Dvorscak, Appellee (Defendant), and Meinhold, Stawiarski, Shapiro & Codilis, LLP; Lynn M. Janeway, individually; and Hayley Belt, individually, Appellees (Third Party Defendants).

Centura Bank, Appellant (Plaintiff), v. McNeill Family Trust, Appellee (Defendant/Third Party Plaintiff).

McNeill Family Trust, Appellant (Defendant/Third Party Plaintiff), v. Centura Bank, Appellee (Plaintiff).

Nos. 02-43, 02-44, 02-59.

Supreme Court of Wyoming.

January 8, 2003.

Kate M. Fox of Davis & Cannon, Cheyenne, Wyoming; and Wm. Daniel Elsom and Teresa Elsom of Elsom & Elsom, Lawyers, Cody, Wyoming, Representing McNeill Family Trust.

Gary R. Scott of Hirst & Applegate, P.C., Cheyenne, Wyoming, Representing Centura Bank.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] Centura Bank commenced a foreclosure by power of sale proceeding on a first mortgage which was in default with $87,320.82 due. Centura's attorneys apparently intended to cancel or postpone the sale because they had failed to notify a second mortgagee but did not do so. No bank representative attended the sale, and Bob G. McNeill, on behalf of the McNeill Family Trust (McNeill Trust), made the only bid in the amount of $20,000. The district court found the McNeill Trust's bid price so low as to be unconscionable, and that finding, together with Centura's mistakes, justified the exercise of equitable power to set the sale aside. In an effort to return all parties to the positions they held prior to the sale, the district court ordered Centura to pay the McNeill Trust's attorney fees and costs. We reverse both the decision to set aside the original foreclosure sale and the award of attorney fees and remand to the district court.

ISSUES

[¶ 2] We rephrase the issues as follows:

I. Did the district court err when it found an unconscionably low sale price required the foreclosure sale be set aside?

II. Was the award of attorney fees and costs to the McNeill Trust supported by law?

FACTS

[¶ 3] On March 27, 1996, the Shoshone First Bank loaned Robert and Sandra Dvorscak $89,625 and took a first mortgage on their Cody residence which had an appraisal value of $119,500. In September of 1996, U.S. Bank, formerly First Bank, made a $30,000 home equity loan to the Dvorscaks and took a second mortgage on the property. The first mortgage was assigned to Centura in March of 1997.

[¶ 4] The Dvorscaks filed a petition for Chapter 7 bankruptcy protection on November 12, 1997, listing the debts on the real property and provided notice to Centura and U.S. Bank. Pursuant to 11 U.S.C. § 362(a), an automatic stay went into effect when the bankruptcy was filed which precluded any creditor from taking legal action against the Dvorscaks or their bankruptcy estate property without first obtaining an order for relief from stay from the federal bankruptcy court. In March of 1998, Centura referred the Dvorscaks' mortgage to the Colorado law firm of Meinhold, Stawiarski, Shapiro & Codilis, LLP (Centura's attorneys) for foreclosure proceedings. Centura's attorneys obtained a title report, which did not reflect U.S. Bank's second mortgage, and began a foreclosure by power of sale proceeding pursuant to Wyo. Stat. Ann. §§ 34-4-101 through 34-4-113 (LexisNexis 2001) by notifying interested parties and publishing the notice of foreclosure in the Powell Tribune. Centura's attorneys did not obtain relief from the bankruptcy stay prior to commencing the foreclosure process. U.S. Bank subsequently advised Centura's attorneys of the second mortgage, and the attorneys apparently intended to cancel or postpone the scheduled foreclosure sale to allow notification of U.S. Bank and a restarting of the process. However, they failed to do so.

[¶ 5] Mr. McNeill, trustee of the McNeill Trust, saw the published foreclosure sale notice and attended the June 24, 1998, sale. The only other person in attendance was Richard Moser, a deputy sheriff who was there to conduct the sale. Mr. McNeill bid $20,000, and Deputy Moser accepted the bid. Either Deputy Moser or the sheriff's office support staff telephoned Centura's law firm for instructions regarding the appropriate payee of the check. Deputy Moser informed Mr. McNeill that Centura was the appropriate payee. Mr. McNeil went to the bank, obtained a certified check for $20,000 in the name of Centura Bank as the payee, returned it to the sheriff's office, and obtained a certificate of purchase. When Mr. McNeill returned home, his wife advised him an attorney for Centura had left a telephone message. Mr. McNeill returned the telephone call, and the parties discussed the validity of the foreclosure sale as well as the possible exchange of money for Mr. McNeill's surrender of the certificate of purchase. A June 25, 1998, letter from the law firm to Mr. McNeill documented the telephone call and cautioned that litigation could follow if the "erroneous" sale was not resolved.

[¶ 6] Centura's attorneys filed a lawsuit¹ on July 27, 1998, naming Mr. McNeill, the Dvorscaks,² the Park County sheriff, and U.S. Bank³ as defendants and asserting:

10. As a result of mistake and the Sheriff's failure to ascertain the status of Centura's bid and inquire into the absence of a Centura representative [at the foreclosure sale]; as a result of lack of notification to [U.S.] Bank of the sale as required to protect its due process rights; and as a result of Centura's mistake in not withdrawing or postponing the sale, the Mortgagors, Centura, and [U.S.] Bank have all been deprived of their rights to obtain reasonable value for the property, to bid in the amounts of their liens, and/or to redeem the amounts of their liens from the sale in order to fully protect their interests.

11. Because of the sale, Defendant McNeill has received an improper and inequitably huge windfall.

The prayer for relief requested the sale be declared void and of no effect, the $20,000 payment be returned to Mr. McNeill, and a new sale be held. In October of 1998, Centura's attorneys filed a motion to dismiss contending they had just learned the Dvorscaks' Chapter 7 bankruptcy was filed prior to the foreclosure sale and, therefore, the sale was void because it was conducted in violation of the automatic stay. The district court stayed the action pending resolution of these issues by the bankruptcy court. Centura filed a motion for relief from stay in the bankruptcy court asking that the sale in violation of the stay be held void and the stay be lifted to allow Centura's state court action to proceed. The McNeill Trust and Mrs. Dvorscak filed objections. After a hearing, the bankruptcy court granted the motion for relief thereby permitting the state court proceedings to go forward and validating the foreclosure sale because "[t]o hold otherwise would unfairly reward Centura." Centura filed a motion for reconsideration which was denied; however, it did not appeal the bankruptcy court's holding that the automatic stay did not void the sale.

[¶ 7] Thereafter, in the state court action, the sheriff was dismissed, the McNeill Trust was substituted for Mr. McNeill as a defendant, and Centura filed an amended complaint making the same claim—the sale was void for violation of the automatic stay—that had been unsuccessful in the bankruptcy court. Centura's attorneys then filed a motion for judgment on the pleadings requesting that the district court declare the foreclosure sale void for unilateral mistakes, lack of notice to U.S. Bank, unjust enrichment by the McNeill Trust, irregularity of the sale, and unconscionability. The district court converted the motion to one for summary judgment and granted it ordering that all the parties be returned to their presale status. The court also directed Centura to pay the McNeill Trust's attorney fees and costs of $82,458 in order to fully restore the parties to the presale circumstances. The McNeill Trust appealed the summary judgment, and Centura appealed the award of attorney fees.

STANDARD OF REVIEW

[¶ 8] This case presents no factual disputes. Centura admits committing unilateral mistakes that inadvertently led to the foreclosure sale being held as originally scheduled. The district court granted summary judgment to Centura and invoked its equitable power to restore the parties to their preforeclosure sale status.

[¶ 9] This court has long recognized the foreclosure of a mortgage lien to be an equitable action. Marple v. Wyoming Production Credit Association, 750 P.2d 1315, 1317 (Wyo.1988); Baldwin v. McDonald, 24 Wyo. 108, 156 P. 27, 32 (1916). We have also embraced the concept that, "by adoption of the Wyoming Rules of Civil Procedure[,] `the distinction between actions at law and suits in equity has been abolished.' W.R.C.P. 2." Hyatt Brothers, Inc. ex rel. Hyatt v. Hyatt, 769 P.2d 329, 332 n. 2 (Wyo.1989). As one result of this abolition, we have approved the use of summary judgment in actions which were historically equitable in nature. Id.

[¶ 10] The Oklahoma Court of Civil Appeals, addressing a similar circumstance, held:

The underlying action, being one to foreclose a mortgage lien, is equitable in nature. Ordinarily, in reviewing a case of equitable cognizance a judgment will be sustained on appeal unless it is found to be against the clear weight of the evidence or is contrary to law or established principles of equity. But because this comes to us from an order granting summary judgment the appellate standard of review is de novo.

Abboud v. Abboud, 2000 OK CIV APP 116, ¶ 4, 14 P.3d 569, ¶ 4 (citations omitted). This court has often expressed the standard of review that summary judgment is proper "when there is no genuine issue of material fact in dispute and the moving party is entitled to judgment as a matter of law." Paulson v. Andicoechea, 926 P.2d 955, 957 (Wyo. 1996). We examine ...