Consolidated Dairies v. American Ab

• Court: Montana Supreme Court
• Decided: June 10, 1981
• Docket: 80-462
• Status: Published

Opinion

No. 80-462 IN THE SUPREME COURT OF THE STATE OF MONTANA

CONSOLIDATED DAIRIES OF LAKE COUNTY, INC., Petitioner and Respondent,

AMERICAN ABSTRACT AND TITLE CO., FIRST CITIZENS BANK OF POLSON, DOUGLAS K. STAM, et al., Respondents and Appellants.

Appeal from: District Court of the Fourth Judicial District, In and for the County of Lake. Honorable Jack L. Green, Judge presiding. Counsel of Record: For Appellants: Hash, Jellison, O'Brien and Bartlett, Kalispell, Montana James C. Bartlett argued, Kalispell, Montana Mike Greely, Attorney General, Helena, Montana For Respondent: John R. Frederick argued, Polson, Montana Williams Law Firm, Missoula, Montana Richard Ranney argued, Missoula, Montana

Submitted: ~ p r i l22, 1981 Decided :JUN 10 1981

Clerk Mr. J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e Opinion of the Court. This is an a p p e a l from a judgment setting aside a t r u s t e e ' s s a l e and d i r e c t i n g t h a t t h e s a l e be r e c o n d u c t e d . Once in a great while the wrath of mother nature t e m p e r s e v e n t h e power and a u t h o r i t y o f l a w . On t h e q u i e t Sunday e v e n i n g o f May 1 8 , 1 9 8 0 , i n t h e n o r t h w e s t c o r n e r o f

t h e United States, an explosion occurred with a magnitude and e n e r g y o f 500 H i r o s h i m a a t o m i c bombs. A dust cloud of unknown toxicity spread over the e n t i r e Northwest. News

r e p o r t s i n d i c a t e d t h a t t h e e x a c t n a t u r e and p o s s i b l e e f f e c t s

of t h e d u s t were undetermined. P e o p l e were s t r o n g l y a d v i s e d

to remain at home, but if they had to go out, t o wear p r o t e c t i v e masks. A psychological s h o c k wave o f unbelief q u i c k l y r o l l e d a c r o s s t h e P a c i f i c Northwest.

When t h e d u s t had s e t t l e d and t h e p a n i c s u b s i d e d , it was discovered that a relatively dormant volcano in the

State of Washington, Mount St. Helens, had erupted and continued eruptive a c t i v i t y . During a p e r i o d of f o u r d a y s

t h i s p a r t of t h e l i v i n g world stood s t i l l . Towns and c i t i e s seemed deserted and abandoned. The o n c e g r e e n landscape b u d d i n g w i t h s p r i n g c o l o r s a g a i n s t a b l u e s k y was g r a y and

bleak. Prior t o t h i s marvel of n a t u r e ' s power, a group of people in the Polson, Montana, area were conducting

b u s i n e s s , u n s u s p e c t i n g t h a t i n a few d a y s t h e y would h a v e a rendevous w i t h n a t u r e . . . That group c o n s i s t e d of p e t i t i o n e r - r e s p o n d e n t herein, Consolidated D a i r i e s o f Lake C o u n t y , I n c . , and a p p e l l a n t s h e r e i n , t h e t i t l e company ( A m e r i c a n A b s t r a c t and T i t l e C o . ) ,

t h e bank ( F i r s t C i t i z e n s Bank o f P o l s o n ) , t h e S t a m s ( D o u g l a s K. and L e n o r e Kay S t a m ) and t h e B l a n k e n h o r n s ( C h a r l e s E . and

Karen K . B l a n k e n h o r n ) . The Blankenhorns own a house and lot in Polson,

Montana. This real property is subject to (1) a trust

indenture in favor of the bank securing a $46,000 note,

f i l e d of r e c o r d September 1 5 , 1977, and ( 2 ) a mortgage i n

favor of Consolidated, securing a promissory note for

$55,000 f i l e d of record August 17, 1979. At t h e end of

1979, Blankenhorns d e f a u l t e d i n p a y m e n t s on t h e bank n o t e .

Consequently, t h e bank i n s t r u c t e d t h e t r u s t e e of the t r u s t

i n d e n t u r e , which was t h e t i t l e company, t o h o l d a t r u s t e e ' s

s a l e o f t h e p r o p e r t y p u r s u a n t t o t h e t r u s t i n d e n t u r e and t h e

Small T r a c t Financing A c t . ( S e c t i o n 71-1-301 e t s e q . , MCA).

The title company, acting through its president,

R u s s e l l Harshberger, proceeded t o n o t i c e such a s a l e . After

s u b s t i t u t i n g a t t o r n e y J a m e s B a r t l e t t a s t r u s t e e , a n amended

n o t i c e of t r u s t e e ' s s a l e was f i l e d o f r e c o r d on J a n u a r y 1 6 ,

1980. T h i s amended n o t i c e r e c i t e d t h a t t h e p r o p e r t y would

be s o l d " a t p u b l i c a u c t i o n t o t h e h i g h e s t b i d d e r i n c a s h " on

May 21, 1980, at ll:00 a.m. at the entrance to the

c o u r t h o u s e o f Lake C o u n t y i n P o l s o n . C o p i e s o f t h i s amended

n o t i c e w e r e m a i l e d t o t h e B l a n k e n h o r n s and t o C o n s o l i d a t e d .

As it t u r n e d o u t , May 2 1 , 1 9 8 0 , was a n u n f o r t u n a t e

choice. On May 18, 1980, the Mount St. Helens volcano

erupted. On May 1 9 , 1980 ( M o n d a y ) , Lake C o u n t y and m o s t o f

w e s t e r n Montana was c o v e r e d w i t h a l a y e r o f f i n e volcanic ash.

On t h a t same d a y , i n response t o t h i s ash f a l l o u t ,

t h e Montana D e p a r t m e n t o f H e a l t h and E n v i r o n m e n t a l S c i e n c e s

issued a "Declaration of Emergency, Findings of Fact and Emergency Order to All Persons in the State of Montana." This order, among other things, ordered closure of "all off ices of local, county and state government, including authorities, joint meetings, and other public bodies . . . all retail trade establishments with certain exceptions . . . banks, credit agencies other than banks . . . real estate off ices . . . all schools and universities, and in general all business establishments with certain necessary exceptions." In addition, "all unnecessary use of motor vehicles [was] prohibited." The District Court took judicial notice of the conditions prevailing during this period of ash fallout and the reactions and attitudes of the general population. People were essentially confined to their homes both by fear for their health if they ventured outdoors and by the widely publicized order described above. On May 21, 1980, the day for which the trustee's sale was noticed, Lake County and most of western Montana were still subject to the above order and to the ash fallout. The title company was not open for business. The Lake County Courthouse was closed. Lake County was released to an "alert" level on May 22, 1980, and all restrictions were lifted on May 23, 1980. On May 21, 1980, at 11:OO a.m. Russell Harshberger proceeded to the courthouse steps. He "proclaimed to the public" that the sale noticed for that time and place was postponed to May 27, 1980, at the same place at 11:OO a.m. No one was there to listen to the proclamation. Later that day, Doug Stam came to Harshberger's office and was informed of the time and place of the postponed sale. The n e x t working day after restrictions

were lifted, the bank inquired of Harshberger what had

happened. The bank was i n f o r m e d o f t h e t i m e and p l a c e o f

the postponed sale. No other persons or organizations

( o t h e r t h a n a t t o r n e y B a r t l e t t ) w e r e n o t i f i e d by H a r s h b e r g e r

or t h e t i t l e company o f t h e d a y and t i m e o f t h e postponed

sale or that it had been postponed. In particular,

C o n s o l i d a t e d was n o t n o t i f i e d . No n o t i c e s were p o s t e d n o r

advertising conducted concerning the postponement of the

sale.

On May 2 7 , 1 9 8 0 , a t a r o u n d 10:OO a . m . , a f f i d a v i t s of

p u b l i c a t i o n and p o s t i n g w e r e f i r s t r e c o r d e d . A t 11:OO a.m.

Harshberger proceeded t o t h e courthouse s t e p s . Present a t

t h i s t i m e were a d i r e c t o r o f t h e bank, C h a r l e s Blankenhorn,

an employee of the title company, and the Stams. The

b i d d i n g was s t a r t e d a t $ 5 1 , 3 5 6 . 6 6 . The s o l e b i d was t h a t o f

t h e Stams f o r $51,357.66.

The Stams' bid of $51,357.66 was accepted, and in

f i v e minutes they presented Harshberger with a cashier's

c h e c k i n t h a t amount. F o l l o w i n g t h e s a l e , t h e t i t l e company

d i d n o t i n f o r m o r n o t i f y C o n s o l i d a t e d t h a t t h e s a l e had b e e n

accomplished. There is evidence that the property in

q u e s t i o n was w o r t h b e t w e e n $ 7 5 , 0 0 0 and $ 8 5 , 0 0 0 .

Consolidated f i l e d a p e t i t i o n i n t h e D i s t r i c t Court

of t h e Fourth J u d i c a l D i s t r i c t of t h e S t a t e o f Montana t o

set aside the t r u s t e e ' s s a l e . A l l p a r t i e s f i l e d answers to

the petition. The parties filed an agreed statement of

facts and stipulated to have the cause submitted to the

D i s t r i c t C o u r t b a s e d on t h a t s t a t e m e n t .

The District Court entered findings of fact, conclusions of law, and order setting the trustee's sale

aside. American A b s t r a c t , the trustee, and t h e b a n k , as

b e n e f i c i a r y , have a p p e a l e d . The D i s t r i c t C o u r t f o u n d , i n t h e u n i q u e c i r c u m s t a n c e s p r e s e n t e d by t h e f a c t s o f t h i s case, two s e p a r a t e r e a s o n s

for setting aside the trustee's sale. First, the p o s t p o n e m e n t o f t h e s a l e m e r e l y by o r a l p r o c l a m a t i o n a t t h e

time and p l a c e f i x e d i n t h e n o t i c e o f s a l e was n o t l e g a l l y sufficient notice under the Small Tract Financing Act,

section 71-1-301 et seq., MCA, as applied t o t h e unique circumstances of t h i s c a s e . Second, if the Small Tract F i n a n c i n g A c t were i n t e r p r e t e d t o p e r m i t t h e t y p e o f n o t i c e

o f p o s t p o n e d s a l e employed by t h e t r u s t e e i n t h i s c a s e , t h e n

the A c t , a s applied t o Consolidated i n t h i s case, would be u n c o n s t i t u t i o n a l a s v i o l a t i n g t h e due process c l a u s e of t h e U n i t e d S t a t e s and Montana C o n s t i t u t i o n s . The relevant statute is section 71-1-315(3), MCA,

which p r o v i d e s :

". . . The p e r s o n making t h e s a l e may, f o r any c a u s e h e deems e x p e d i e n t , p o s t p o n e t h e s a l e f o r a p e r i o d n o t e x c e e d i n g 1 5 d a y s by p u b l i c p r o c l a m a t i o n a t t h e t i m e and p l a c e f i x e d i n t h e n o t i c e o f s a l e . No o t h e r n o t i c e o f t h e p o s t p o n e d s a l e need be g i v e n . " The relevant contractual provision of the trust i n d e n t u r e is:

"14. . . . The p e r s o n c o n d u c t i n g t h e s a l e may, f o r a n y c a u s e h e d e e m s e x p e d i e n t , postpone t h e s a l e f o r a period n o t exceeding f i f t e e n ( 1 5 ) d a y s by p u b l i c p r o c l a m a t i o n by s u c h p e r s o n a t t h e t i m e and p l a c e f i x e d i n t h e N o t i c e o f S a l e , and no o t h e r n o t i c e o f t h e p o s t p o n e d s a l e need be g i v e n .. ." Appellants contend that the title company c o m p l i e d with t h e c o n t r a c t u a l p r o v i s i o n s of t h e t r u s t i n d e n t u r e and

f u l l y complied w i t h t h e Small T r a c t Financing A c t . Thus, appellants argue, the District Court was without authority to set aside the trustee sale. We disagree. While the notice by public proclamation at the time and place fixed in the notice of sale was sufficient to meet the technical requirements of both the law and the trust indenture instrument, it was not sufficient in the present case. As a practical matter, because of the volcanic eruption and the declared emergency, potential purchasers, subsequent lienholders and the public in general were not able to attend at the time and place fixed in the notice of sale. Where potential purchasers, subsequent lienholders, and the public in general are E ---- t i c a x- legally rac - and prevented from traveling to and attending at the time and place noticed for the sale, the giving of notice of a postponed sale only by "public proclamation at the time and place fixed in the notice of sale" is a futile act, of no practical or legal significance. The provisions of section 71-1-315(3), MCA, apply to normal situations where there is no state of general emergency preventing potential purchasers, subsequent lienholders and the public in general from attending at the time and place fixed in the notice of sale. Under the circumstances of this case, notice of a postponed sale only by "public proclamation at the time fixed in the notice of sale" is not reasonably calculated to apprise all interested parties of the details of the postponed sale, and so is in violation of the due process clause of the United States and Montana Constitutions. Great Falls National Bank v. McCormick (1968), 152 Mont. 3 1 9 , 4 4 8 P.2d 9 9 1 .

It was practically and legally difficult for the

general public, potential purchasers and lienholders to

attend the time and place of the notice of the sale.

Because of these facts, the "public proclamation" of the

postponed sale a t the time and p l a c e of the trustee sale

would n o t h a v e t h e e f f e c t o f n o t i f y i n g a l l t h o s e i n t e r e s t e d

p e r s o n s o f t h e t i m e and p l a c e o f t h e p o s t p o n e d s a l e and a l l

i n t e r e s t e d p a r t i e s were n o t a p p r i s e d o f t h e n o t i f i c a t i o n .

The D i s t r i c t C o u r t d i d n o t l o o k a t t h e l i t e r a l w o r d s

of t h e s t a t u t e , b u t i n s t e a d l o o k e d t o a l l o f t h e f a c t s and

the i n t e n t of the legislation. Postponing a noticed s a l e o n l y b y way o f a p u b l i c p r o c l a m a t i o n a t t h e time and p l a c e

where no one was present and no interested person could

l e g a l l y o r p r a c t i c a l l y be p r e s e n t a t and g i v i n g no f u r t h e r

n o t i c e of t h e postponed s a l e is n o t c a l c u l a t e d t o o b t a i n a

fair price for the property, nor was it reasonably

c a l c u l a t e d t o a p p r i s e a l l i n t e r e s t e d p a r t i e s of t h e pendency

of the action.

We affirm the District Court in setting aside the

trustee sale and find proper the remedy t o reconduct the

t r u s t e e s a l e a s p r o v i d e d i n t h e judgment. W e concur :

PA& ,, - g.$Git? Chief J u s t i c e