Whitefish Credit Union v. Prindiville
| Citation | 381 Mont. 443,362 P.3d 53 |
| Decision Date | 24 November 2015 |
| Docket Number | No. DA 15–0155.,DA 15–0155. |
| Parties | WHITEFISH CREDIT UNION, Plaintiff and Appellant, v. Mary Kay PRINDIVILLE, George W. Prindiville, Lloyd Shinn, Barbara Shinn, Barry Rothschild, and John Doe(s) 1–10, Defendants and Appellees. |
| Court | United States State Supreme Court of Montana |
For Appellant: Sean S. Frampton, Johnna J. Preble, Morrison & Frampton, PLLP; Whitefish, Montana.
For Appellees: Judah M. Gersh, Viscomi & Gersh, PLLP; Whitefish, Montana (for Mary Kay and George W. Prindiville), Kira I. Evans, George B. Best, Best & Westover Law Office; Kalispell, Montana (for Lloyd and Barbara Shinn, and Barry Rothschild).
¶ 1 Whitefish Credit Union (WCU) appeals from the Eleventh Judicial District Court, Flathead County, challenging the District Court's determination that a hearing was required to determine the fair market value of a foreclosed property, as well as the District Court's valuation of the property and denial of a deficiency judgment.
¶ 2 WCU raises several issues that we restate as follows:
1. Did the District Court err by ruling that a hearing was necessary as a matter of law to determine the fair market value of the foreclosed property on a request for a deficiency judgment?
2. Did the District Court err by determining a value of the foreclosed property that was not supported by credible evidence?
3. Did the District Court err by improperly admitting evidence at the hearing?
¶ 3 We affirm the District Court's decision to conduct a hearing, but remand for further proceedings consistent with this opinion on the evidentiary issues and the applicable standard. Therefore, we do not reach the second issue.
¶ 4 Defendants Mary Kay and George W. Prindiville, Lloyd and Barbara Shinn, and Barry Rothschild (collectively "the Defendants"), completed a series of transactions to acquire over 600 acres of real property along Patrick Creek Road, in Flathead County (the "Patrick Creek property"), borrowing $2,237,000 from WCU. After a series of amendments, Defendants signed a promissory note to WCU for a total of $1,949,466.81, secured by mortgages on the Patrick Creek property. In 2011, the Defendants defaulted on that note, owing a principal balance of $1,951,670.81, and offered WCU a deed in lieu of foreclosure. WCU did not accept the deed, and filed this action in June 2011 for foreclosure and collection of the debt, including any sums owing after the sale of the property.
¶ 5 WCU moved for summary judgment in October 2011, and the Defendants opposed the motion. The parties eventually stipulated to a foreclosure sale, and the District Court entered a Judgment of Foreclosure and Order of Sale in March 2012, reserving a ruling on the motion for summary judgment and the issue of a deficiency judgment against the Defendants.1 The property was sold at a sheriff's sale on June 12, 2012 to WCU, the highest and only bidder, for $1,100,000.
¶ 6 WCU thereafter filed a request for entry of a deficiency judgment against the Defendants for the amount of $745,365.79. The Defendants opposed the request, arguing that the fair market value of the Patrick Creek property exceeded the loan balance. In opposing the entry of a deficiency judgment, Defendants argued that the parties had long disputed the value of the property, and requested a hearing to determine the fair market value of the property. After oral arguments, the District Court entered an Order in September 2013 granting WCU's motion for summary judgment in part by rejecting the Defendants' arguments that a deficiency judgment was barred, but holding that, as a matter of law, it "must hold a hearing" to determine the fair market value of the property, and the amount of the deficiency judgment, if any.
¶ 7 At the hearing, both parties presented appraisals and expert testimony as evidence of the fair market value of the property. The appraisals were completed at various times before and during the foreclosure process. The first appraisal was completed by Lloyd Barrie (the "Barrie appraisal") in 2011, prior to WCU filing the foreclosure action. Barrie was not present and did not testify at the hearing. The Patrick Creek property was again appraised a few months prior to the sheriff's sale in February 2012 by William Frazier (the "Frazier appraisal"). Finally, the Defendants hired Gene Lard to complete an appraisal in 2013 (the "Lard appraisal"), which was prepared to retroactively value the property as of June 2012, or the date of the sheriffs sale. Both Frazier and Lard testified at the hearing.
¶ 8 The District Court found the Patrick Creek property was worth $2,366,667 as of the date of the sheriff's sale, and determined that no deficiency was owed to WCU. WCU appeals.
¶ 9 The District Court's conclusion that a fair market value hearing was required was a conclusion of law. "We review a district court's legal conclusion—including its application of the law to the facts—to determine whether the interpretation of the law is correct." Bank of Baker v. Mikelson Land Co., 1999 MT 76, ¶ 26, 294 Mont. 64, 979 P.2d 180 (citation omitted) (reviewing a district court's valuation of a foreclosed property sold at sheriff's sale and subsequent award of deficiency judgment).
¶ 10 Evidentiary issues, including rulings on the admissibility of expert testimony, are reviewed for abuse of discretion. See Simmons Oil Corp. v. Wells Fargo Bank, N.A., 1998 MT 129, ¶ 17, 289 Mont. 119, 960 P.2d 291 (citations omitted); Weber v. BNSF Ry. Co., 2011 MT 223, ¶ 18, 362 Mont. 53, 261 P.3d 984 (citations omitted).
¶ 11 Finally, "[i]n reviewing the District Court's findings of fact, the standard of review to be applied is whether the findings are clearly erroneous." In re Marriage of Olsen, 257 Mont. 208, 213, 848 P.2d 1026, 1030 (1993).
¶ 12 1. Did the District Court err by ruling that a hearing was required as a matter of law to determine the fair market value of the foreclosed property on a request for a deficiency judgment?
¶ 13 WCU argues that a hearing to determine the fair market value of a foreclosed property is not required under statute, and that nothing in the law requires a judicial determination of fair market value before entry of a deficiency judgment. At best, WCU argues, Montana law permits a district court to hold such a hearing "[o]nly in cases where evidence presented shows that the amount bid was not a ‘fair price....’ " and that, here, the Defendants did not submit any evidence to show that the successful bid of $1.1 million at the sheriff's sale was not a fair price for the Patrick Creek property. WCU argues that the District Court erred by concluding that a hearing was required as a matter of law and by failing to "find that it was moved in equity" to consider the fair price of the property before entering a deficiency judgment.
¶ 14 Section 71–1–222(2), MCA, provides for entry of a deficiency judgment against the debtor after a foreclosure and sheriff's sale, stating: "If it appears from the sheriff's return that the proceeds are insufficient and a balance still remains due, judgment can then be docketed for the balance against the defendant or defendants personally liable for the debt...." Although the statute does not contemplate a hearing, our cases have addressed this issue and provided additional guidance to the process of entering a deficiency judgment in a foreclosure proceeding.
¶ 15 In Trs. of Wash.–Idaho–Mont. Carpenters–Emp'rs Ret. Trust Fund v. Galleria P'ship, 239 Mont. 250, 263, 780 P.2d 608, 616 (1989) (Galleria I ), this Court affirmed that the debtors were "liable for [a] deficiency judgment," but in an exercise of equity, remanded the case to the district court for a hearing to assess the property's fair market value that would serve as the basis for the amount of the deficiency judgment. Galleria I, 239 Mont. at 265–66, 780 P.2d at 617. Our discretion was moved in light of the fact that the subject property was sold at a sheriff's sale for 30% of its originally appraised value, leading to "a catastrophic deficiency judgment" against the debtors. Galleria I, 239 Mont. at 264, 780 P.2d at 616. Although noting that the statutes were silent on the duty of the courts in this regard, we explained that mortgage foreclosure proceedings are "in the equity jurisdiction of the courts" and that the courts are therefore "empowered to determine all the questions involved in the case and to do complete justice; this includes the power to fashion an equitable result ... and grant all relief necessary to the entire adjustment of the subject." Galleria I, 239 Mont. at 265, 780 P.2d at 617 (citations omitted).
¶ 16 A year later, in Fed. Sav. & Loan Ins. Corp. v. Hamilton, 241 Mont. 367, 786 P.2d 1190 (1990), the debtors argued on appeal that this Court should remand the case for a hearing to determine the adequacy of the sales price and the amount of the deficiency judgment, as we had in Galleria I. We declined to do so, noting first that, while "several states have statutes requiring that the amount realized at a sheriff's sale must reflect the fair market value of the property, Montana statutes have no such requirement." Hamilton, 241 Mont. at 371, 786 P.2d at 1193. We also reasoned that the debtors had "failed to submit any relevant evidence of the fair market value on the date of sale" and that there was "a total absence of facts demonstrating that [the purchase price] was not a fair price." Hamilton, 241 Mont. at 371, 786 P.2d at 1193. While acknowledging that in Galleria I "[w]e remanded ‘in the exercise of our equity jurisdiction[,]’ " we concluded that "the Hamiltons have failed to present any evidence requiring an exercise of our equity jurisdiction." Hamilton, 241 Mont. at 371, 786 P.2d at 1193.
¶ 17 WCU correctly argues that a hearing to determine the fair market value of the property is not mandated by statute, or by case precedent. A...
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