Neel v. First Federal Sav. and Loan Assoc. of Great Falls

• Decision Date: 05 January 1984
• Docket Number: No. 83-219,83-219
• Citation: 41 St.Rep. 18,675 P.2d 96,207 Mont. 376
• Court: Montana Supreme Court
• Parties: Helen Foster NEEL, Plaintiff and Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOC. OF GREAT FALLS, a Federal Assoc., Defendant and Respondent.

Page 96

675 P.2d 96

207 Mont. 376

Helen Foster NEEL, Plaintiff and Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOC. OF GREAT FALLS, a Federal Assoc., Defendant and Respondent.

No. 83-219.

Supreme Court of Montana.

Submitted Oct. 28, 1983.

Decided Jan. 5, 1984.

Regnier & Lewis, Stephen D. Roberts argued, Great Falls, for plaintiff and appellant.

Dzivi, Conklin & Nybo, E. Lee LeVeque and William Conklin argued, Great Falls, for defendant and respondent.

HARRISON, Justice.

This appeal is from the District Court's summary judgment that appellant's homestead declaration is invalid and that the amendments to Section 70-32-104(2), MCA are not to be retroactively applied. The question posed is whether amendments raising the exemption amount should be applied to debts incurred before the effective date of the amendment, and the constitutionality of such an application. We reverse.

The issues in this case are:

(1) Was the property description in appellant's homestead declaration sufficient to create a valid homestead exemption?

(2) Must the amendment to Section 70-32-104(2), MCA, raising the exemption amount to $40,000 be retroactively applied to all who filed homestead declarations prior to forced sales of their homesteads, without reference to when the debts were incurred?

(3) If the amendment is applied retroactively, does that application violate the Contract Clause of the U.S. and Montana Constitutions?

(4) Is a married person entitled to the full homestead exemption on his/her individual interest in the homestead property?

The material facts in this case are not in dispute and were stipulated to by the parties in the District Court. On July 25, 1979, appellant and Louise Manzer executed and delivered to respondent a mortgage note to secure a loan used to buy property at 412-422 Fourth Street North in Great Falls, Montana. The loan was secured only by the mortgage to that property, and respondent did not inquire of, or request appellant's personal residence be used as additional collateral for the loan. Appellant's husband did not participate in obtaining the loan, or sign any of the documents, nor was their personal residence put up as collateral for the loan.

On July 21, 1980, appellant and her husband executed and recorded a declaration of homestead, as husband and wife, on their personal residence located at 402 Fifth Avenue North, in Great Falls. The property description on that declaration described the property as, "Lot 1; Block 191; First Addition to Great Falls, Montana." (Emphasis added.) The correct legal description of the property is, "Lot 1; Block 191; town or townsite, Great Falls, Montana." (Emphasis added.) As of September 1, 1980, the Ownership Book of Cascade County listed the homestead declaration with the correct legal description of the property. There is only one Block 191 in the official plat of Great Falls. Respondent's loan officer who negotiated the loan had actual knowledge prior to approval of the loan that appellant and her husband owned and occupied as their residence, the property at 402 Fifth Avenue North in Great Falls.

A foreclosure action on the mortgage was filed by respondent on October 17, 1980. Judgment was entered in respondent's favor on June 29, 1981, and the mortgaged property was ordered sold. The property was sold for less than the loan amount, and respondent recovered a deficiency judgment in the amount of $44,344.95, plus costs and interest.

An execution writ was issued against appellant on September 9, 1981, and was levied the following day on her residence at 402 Fifth Avenue North. Proper notice of the sale of appellant's home was given, and on September 28, 1981, respondent filed a "Petition to Appoint Appraisers to Appraise Homestead after Levy of Execution Pursuant to Section 70-32-203, MCA."

On October 2, 1981, appellant filed this action seeking a declaratory judgment on the effect of several amendments to the Montana Homestead statutes which became effective October 1, 1981. The amendments increased the exemption amount from $20,000 to $40,000, and allowed the homestead declaration to be filed after judgment had been entered against the declarant. Appellant sought a judgment declaring that the amount of exemptions claimed before the effective date of the amendments, automatically increased to $40,000; and that the amendment allowing a declarant to file his homestead declaration after judgment has been obtained exempts that homestead from forced sale if the declaration is filed before such forced sale. On October 5, 1981, the District Court granted a stay of the execution proceedings pending a decision on the declaratory judgment action.

The case was submitted on cross motions for summary judgment and briefs were filed by both parties. In the meantime, appellant filed a new homestead declaration on October 1, 1982, containing a corrected legal description. Judgment was entered on March 22, 1983, wherein the District Court, per Judge H. William Coder, found appellant's original homestead declaration invalid because of the misdescription, and that the new declaration did not invoke the amendments because the amendment was effective after entry of the deficiency judgment. From this judgment the appeal is taken.

The first issue is whether the misdescription of plaintiff's homestead property in the July 21, 1980, declaration of homestead renders the declaration invalid. The validity of a homestead declaration with an incorrect or an inadequate legal description is an issue of first impression in this Court. The respondent relies heavily upon McCarthy v. Kelley (1922), 63 Mont. 233, 206 P. 782, and Yerrick v. Higgins (1899), 22 Mont. 502, 57 P. 95. In McCarthy, supra, the claimant attempted to claim her homestead on an amount of real estate considerably in excess of that allowed by the statue and this Court found the declaration of homestead void. In Yerrick, supra, the Court disallowed an exemption on the plaintiff's property in which he attempted to exempt some 2,100 square-feet in excess of the one fourth of an acre allowed by law. That exemption was not allowed even though the Court acknowledged that the excess could be taken off the east side of the lot without disturbing any of the dwellings. In each of these cases the reasoning was that the claimants had attempted to exempt more property than was allowed by law. There were no statutory provisions for removing the excess from the claimed amount, therefore it could not be determined which property was being claimed and the declarations were held invalid. In addition respondent cites Esten v. Cheek (9th Cir.1958), 254 F.2d 667, as a case on all fours with this case. That particular case involved a bankruptcy where the claimant incorrectly described her property as Lot 204, Tract 5069, but in her declaration of bankruptcy, she declared homestead property located at Lot 104, Tract 5069. The court in its opinion admitted that the declaration was faulty only as to one point, and otherwise conformed with all the homestead laws of California. It reversed a bankruptcy judge who had allowed the exemption holding that no reformation was possible.

Appellant cites the Montana cases, Oregon Mortgage Co. v. Dunbar (1930), 87 Mont. 603, 289 P. 559; Williams v. Sorenson (1938), 106 Mont. 122, 75 P.2d 784; and Howe v. Messimer (1929), 84 Mont. 304, 275 P. 281. Dunbar, supra, dealt with a homestead declaration on ten more acres than were owned by the claimant, but less than the statutory amount. This Court upheld the validity of the homestead, reasoning that the Yerrick and McCarthy rationale did not apply. There could be no mistake as to what was claimed by the declarant.

We have carefully examined the cases cited above and other cases in the briefs and find that the weight of authority on this issue is on appellant's side. As this Court noted in State v. Lensman (1939), 108 Mont. 118, 88 P.2d 63, "It is not every error in a description which will invalidate a proceeding or conveyance." 108 Mont. at 125, 88 P.2d at 66, citing State ex rel. Arthurs v. Board of County Commissioners (1911), 44 Mont. 51, 118 P. 804, and Howe, supra. Further, this Court has stated in Williams, supra, that: "A substantial compliance with the statute is sufficient and technical objections will not defeat an exemption claim." 106 Mont. at 126, 75 P.2d at 786.

In each of these Montana cases the Court looked to the purpose of the particular requirement in determining whether the defect would void the entire declaration. Where the defect would not work to the detriment of another party the declaration was upheld. The purpose of including the legal description of the property in homestead declarations, is to put all the world on notice as to what property is affected by the declaration. Following the rationale of these prior Montana cases, if the property can be found by the legal description contained on the declaration, then the declaration should be valid. In the present case, the appellant is further aided by the fact that the respondent knew where the property was located and knew it was the subject of the homestead declaration. Combined with the rule that Montana homestead laws will be liberally construed in favor of the claimant, Dunbar, supra, this leads us to hold that the defect does not invalidate the declaration in this case.

The second issue raised on appeal is whether the plaintiff's homestead exemption is limited to her exemption rights as of the time she entered into her contract debt with the defendant. Section 70-32-104(2), MCA, as amended October 1, 1981, states:

"Such homestead, in either case, shall not exceed in value the sum of $40,000. However, in any proceedings instituted to determine the value of such homestead, the assessed value of the land which included appurtenances, if any, and of the dwelling house as appears on the last completed assessment roll preceding the institution of such...