First National Bank v. Quinta Land & Cattle Co. , 238 Mont. 335 ( 1989 )

No. 8 8 - 5 9 9
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
FIRST NATIONAL BANK OF ALBUQUERQUE,
a National banking corporation,
Plaintiff and Respondent,
QUINTA LAND AND CATTLE COMPANY,
a New Mexico corporation; RICHARD
D. BOKUM, 11, and MARGARET B. BOKUM,
Defendants and Appellants.
APPEAL FROM: ~istrictCourt of the Eighteenth ~udicialDistrict,
In and for the County of Gallatin,
The Honorable Thomas Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard C. Conover, Bozeman, Montana
For Respondent:
William D. amd din, 111; Crowley Law Firm, Billings,
Montana
Submitted on Briefs: June 16, 1 9 8 9
Filed:
Mr. Chief Justice J. A. Turnage delivered the opinion of the
Court.
This is a foreclosure action brought by ~ i r s t National
Bank in Albuquerque, New Mexico (Bank), against Quinta Land
and Cattle Company a New ~ e x i c ocorporation (Quints), ~ichard
Bokum and his wife, Margaret Bokum. Bank sought foreclosure
of a mortgage on certain real property located in alla at in
County, Montana. The mortgage secured certain notes (numbers
753, 109, and 5052 which are herein referred to as the 1982
notes) held by and made payable to Bank. Those notes were
the subject of an underlying suit litigated in New Mexico and
were found to be in default. A judgment was entered and
upheld on appeal by the New Mexico Supreme court. Rank then
sought foreclosure in Montana. The Montana ~istrictCourt,
Eighteenth ~udicial District, granted Bank summary judgment
on the foreclosure issue, dismissed the counterclaims raised
by defendants, and awarded certain attorney fees and costs to
Bank. Requested relief from summary judgment was denied
September 6, 1988. Defendants appeal.
Thus, the issues on appeal are whether any genuine
issue of material fact exists to preclude summary judgment
for Bank regarding either the foreclosure or the counter-
claims, and, whether it was error to award attorney fees.
We affirm.
Quinta is a New Nexico corporation of which Mr. Bokum
is the president and sole shareholder. In 1971, Quinta
bought a large ranch consisting of several sections of land
on the Madison River in Gallatin County (the Montana
property).
In 1972 and 1973, Mr. and Mrs. Bokum constructed a
large residence on the ~ u i n t aMontana property. Mrs. Bokum,
although not a part of Quinta, contributed many hundreds of
thousands of dollars of her own wealth to this endeavor. The
final structure included 30,000 square feet of living space.
Prior to this time, Bank and Bokum had an established
banking relationship under which Bokum borrowed considerable
amounts of money from Bank over many years. In 1974, Quinta,
as well as Bokum, began signing on Bokum's notes with Bank.
The mortgages and indebtedness at issue in this action
are founded on a comprehensive settlement and refinancing
agreement executed by Bank, Quinta, and both Bokums on Febru-
ary 6, 1981. This agreement is fully evidenced by an Agree-
ment of Accord and Satisfaction and Release; a commitment
letter; and a Novation Agreement (referred to collectively
herein as the "1981 Release") .
As part of the 1981 Release, Mr. Bokum and Quinta
executed two promissory notes in the amounts of $830,000 and
$394,360.70. Both notes were dated February 6, 1981, and
were due and payable on February 6, 1982.
These two notes were secured by a mortgage on the
Montana property which was recorded in the alla at in County
Clerk and Recorder's office. That mortgage was dated Febru-
ary 6, 1981, and was signed only by ~uinta. As additional
security for those two notes, Bokum pledged 317,000 shares of
stock in Bokum Resources Corporation and all outstanding
stock in Quinta. The mortgage on the Montana property and
pledged stock for ~ u i n t a corporation represented the
collateral agreed upon in the 1981 Release.
The note for $394,360.70 was renewed on February 6,
1982. To evidence this renewal, Quinta and Bokum executed a
new promissory noted for $394,36C.70 bearing a 16 percent per
annum interest rate, which was due on or before August 5,
1982. This note is referred to as #753.
Also on February 6, 1982, the $830,000 note was reduced
and renewed. Quinta and Bokum executed a new promissory note
in the amount of $330,230 also to be repaid with interest at
the rate of 16 percent per annum on or before August 5, 1982.
This note is referred to as #109.
Lastly, Bank made a loan of $82,000 to Quinta and Bokum
on June 9, 1982. Quinta and Bokum executed a promissory
note, also dated June 9, 1982, evidencing this debt. The
note was due on or before December 9, 1982, together with
interest thereon calculated at Bank's prime rate. This note
was also secured by the two mortgages on the Montana property
as well as by a pledge of stock in Quinta. It is referred to
as #5052. These three notes comprise the 1982 notes, none of
which were signed by Mrs. Bokum.
Quinta and Bokum never paid on these notes. Bank
initiated this suit in Albuquerque, New Mexico, against Mr.
Bokum and Quinta in December 1983. The suit sought joint and
several judgment against the defendants as co-makers on the
1982 notes, and foreclosure on the two mortgages executed by
Quinta on the Montana property.
In July 1984, Bank started these foreclosure proceed-
ings in Montana, naming both Bokums and Quinta as defendants.
(Mrs. Bokum was added because she claimed an "interest" in
the residence.) At that time, defendants moved to stay the
Montana proceedings until completion of the New Mexico
litigation. Defendants argued to the Montana court that the
validity of the 1982 notes needed to be established before
foreclosure of Bank's mortgages would be proper. The
District Court granted a stay in November 1984, at which time
it pledged itself to give full faith and credit to any New
Mexico judgment.
The New Mexico litigation was complex and lengthy.
However, on March 31, 1986, the New Mexico trial court en-
tered its findings of fact and conclusions of law, finding in
favor of Bank. The court then entered judgment against Mr.
Bokum on the defaulted notes and ordered Bank to proceed with
its foreclosure on the collateral.
Bokum appealed to the New Mexico Supreme Court. while
that appeal was pending, Bank moved the Montana court to lift
the stay in this proceeding. That motion was granted in
March of 1987. Bank's case was later upheld by the New
Kexico Supreme Ccurt.
Bank filed motions for summary judgment in Montana on
the foreclosure issue and on the late counterclaims raised by
Quinta and Mr. Bokum. The District Court, following written
and oral argument, issued its consolidated order dated March
2, 1988, granting both motions for summary judgment and
awarding attorney fees and costs. Quinta and Mrs. Bokum ap-
peal. Mr. Bokum does not appeal the entry of foreclosure
judgment against his interest.
I. Foreclosure Action
Bank needs to prove the following elements to make out
a prima facie case for foreclosure:
(1) The debt of defendants;
(2) Nonpayment of the debt; and
(3) Present ownership of the debt by the
complaining party.
Furray v. Creese (1927), 86 Mont. 453, 260 P.2d 1051.
The record reveals that Bank made its prima facie case
of foreclosure at the summary judgment hearing and that no
material dispute in the facts could be discerned. At that
point, the burden shifted to defendants to present some
evidence of a genuine issue of material fact which would
defeat summary judgment. P l y r Brothers v. ~ a n i e l~ichard
Jae
Jewelers, Inc. (1986), 223 Mont. 397, 726 P.2d 815.
Quinta wholly failed to do so. Rather, Quinta relied
on the affirmative defenses raised in its pleadings. Under
Rule 56(e), M.R.Civ.P., a party opposing summary judgment has
an affirmative duty to respond by affidavits or sworn testi-
mony with specific facts that show the need for trial, and is
not allowed to merely rest on its laurels as set forth in the
pleadings.
Quinta asserts that the Montana District Court improp-
erly relied on the judgment of the New Kexico court in deter-
mining its liability on the 1 9 8 2 notes. That argument is
without merit. The ~istrictCourt ruled that "any attempt to
question the debt between plaintiff [Bank] and [Mr.I
Bokum/Quinta is barred by the doctrine of collateral estop-
pel." We agree.
Assuming that Quinta raised its usury defense and its
accommodation defense timely in the Montana action, those
matters were fully litigated in New ~ e x i c oand liability was
established on the defaulted notes. Specifically noteworthy
in the findings of the New Mexico court are the following:
19. The 1 9 8 2 notes are valid, binding
obligations on Bokum and Quinta. The
1 9 8 2 Notes were executed and given for
valid consideration.
21. The 1982 notes are not usurious.
22. The 1982 notes are in default.
27. The 1 9 8 2 notes are secured by a
mortgage on Quintals Montana ranch, all
of the outstanding stock of Quinta and
317,000 shares of BRC stock. [Bank] is
entitled to foreclose on that security.
Quinta was not a party to the New Mexico proceeding.
However, the defenses raised in Montana by Quinta were iden-
tical to those raised by Bokum in New ~exico. The New ~ e x i c o
court also found:
23. Bokum did not prove any defenses to
the 1982 notes. Under these facts, we
affirm the district court finding that
Quinta had the opportunity to litigate
these matters during the first trial and
they are now barred by collateral
estoppel.
We stated in Thoring v. LaCounte (1987), 219 Mont. 462,
733 P.2d 340, that the law of the state where a judgment is
rendered controls the interpretation of the effect of the
foreign judgment in any subsequent actions between the
parties or those with whom there is privity.
Collateral estoppel under New Mexico law requires the
following four elements:
(1) The parties must be the same or in privity with
the parties in the original action;
(2) The subject matter in the two actions must be
different;
(3) The facts or issues were actually litigated; and
(4) The issues were necessarily determined.
Reeves v. Wimberly (N.M. 1 9 8 8 ) , 755 P.2d 75. Reeves
interpreted these elements saying: "Collateral estoppel
applies to identical issues in the suits where the same
parties or parties in privity are involved in both actions
even though the subject matter in the second action differs
from the first." Reeves, 755 P.2d at 77.
Quinta disputes that it was in privity with its sole
shareholder, Mr. Bokum, and argues that lack of privity
should defeat application of the collateral estoppel doc-
trine. We conclude that argument is also without merit. The
record fully supports the trial court's ruling that collater-
al estoppel applied to bar Quinta from denying liability on
the 1982 notes as was determined conclusively in the previous
action.
At this juncture, we would also like to quote from
Quintals brief in support of its motion to stay the Montana
proceeding:
.
. . the issues of the validity of the
notes in the suit will be determined
under New Mexico law and the Montana
court should not have difficulty in
applying the findings of the New Mexico
court to the Montana litigation as to
Quinta since ~ u i n t aallegedly signed the
notes in suit and Quinta is a company
wholly owned by Mr. Bokum.
Bank also argued that Quintals assertion that it was
not liable on the 1982 notes would likewise be barred by the
1981 Release, res judicata and judicial estoppel. Since we
have decided this issue under a collateral estoppel analysis,
it is unnecessary for us to discuss Bank's further conten-
tions, although they are equally persuasive.
Summary judgment as to ~ u i n t aon the foreclosure issue
is affirmed.
Next, Mrs. Bokum asserts that she has an "interest" in
the residence on the Montana property which should be pro-
tected from foreclosure and thus summary judgment as to her
foreclosure defense was improper. We disagree.
Quinta, as legal successor to Kyd Cattle Co., is the
owner of the mortgaged Montana property. It is undisputed
that Mrs. Bokum contributed generously to the residence
constructed thereon; however, that building is now affixed to
the mortgaged property and legally subject to foreclosure.
It was incumbent upon Mrs. Bokum to take further steps
if she intended to sever her interest from Quinta and protect
it separately. specifically, she should have obtained a
partial satisfaction of Bank's mortgage, and a deed froni
Quinta to the residence and recorded these with the alla at in
County Clerk and Recorder's office. Absent those steps,
Quinta is the owner of the property and house on which Bank
has the recorded mortgage which is superior to all other
claims of Mrs. Bokum.
Mrs. Bokum's claimed "interest1' fails as a matter of
law and summary judgment against her on the foreclosure issue
is affirmed.
11. Counterclaims
After the stay was lifted on the Montana proceeding in
March 1987, Bank filed an amended complaint against defen-
dants. Defendants filed two amended answers and then assert-
ed the following counterclaims:
1. Breach of fiduciary duty to Mr. Bokum;
2. ~ailureto release mortgages under 5 71-1-212, MCA;
and
3. Bad faith failure to release mortgages.
The District Court granted summary judgment on these
counterclaims. Quinta and Mr. Bokum appeal summary judgment
as to Count 11, regarding the violation of S 71-1-212, MCA.
Additionally, Mrs. Bokum appeals the District Court's "disre-
gard for her harassment claim." We affirm summary judgment
on both issues.
Section 71-1-212, MCA, provides for damages when a
mortgagee refuses or neglects to issue a certificate of
release after the mortgagor's full performance of the condi-
tions of the mortgage. Bokum and ~ u i n t aasserted that Bank
wrongfully failed to release its 1976 and 1979 mortgages in
the New Nexico action.
The District Court dismissed this claim, ruling that
Eokum's claim was barred in Montana because he was obligated
to assert it in the New Mexico action but did not. The
District Court likewise dismissed Quintals claim (as standing
in privity with Bokum) as barred by res judicata. We agree.
The res judicata elements are determined under New
Mexico law for our purposes here. Thoring, supra. Under New
Mexico law, the following are the requisite elements to apply
res judicata:
(1) identity of parties or privies;
(2) same subject matter;
( 3 ) identity of capacity of character of persons for
or against whom the claim is made; and
(4) the same cause of action.
Myers v. Olson (N.M. 1984), 6 7 6 P.2d 822, 824.
New Mexico has adopted the "transactional" analysis
found in the Restatement (Second) of Judgment (1980), 5 24
and S 25. Under that approach, the cause of action is viewed
in the context of the broader transaction, or series of
transactions, from which it arose. This approach disregards
the fact that a variety of legal theories may be available to
the parties under the transaction. Myers holds that the
cause of action is "essentially equated with the transaction
from which it springs." 6 7 6 P.2d at 824.
As was discussed under the collateral estoppel issue,
the record supports the lower court finding with regard to
identity of parties (or privies) in both actions. Also,
there can be no genuine dispute that the subject matter and
the capacities are the same in both actions. Lastly, we
conclude that the fourth element regarding cause of action is
likewise met under the transactional analysis.
Bokum and Quinta both have failed to bring forth any
evidence which would preclude the District Court from apply-
ing = judicata to their counterclaims, thus precluding
summary judgment. The record is replete with credible evi-
dence supporting the District Court's application of summary
judgment on these counterclaims and that judgment is hereby
affirmed.
We note only in passing that both counterclaims are
likewise barred as a matter of law as claims specifically
intended to be waived when all parties signed the 1981
Release.
We now turn to Mrs. Bokum's claim of "harassment."
Mrs. Bokum asserts that the Bank tried to recover on property
which Bank knew was in her name only. The Montana District
Court disregarded Mrs. Bokum's claim for damages against the
Bank for harassment. We agree.
The record reveals that Mrs. Bokum did not plead this
claim properly but rather raised the issue for the first time
in defendant's brief filed in opposition to Bank's motion for
summary judgment on the counterclaims. It was not a part of
the pleadings and she did not seek leave of the District
Court to amend her pleadings as she was required to do under
Rule 13, M.R.Civ.P.
Thus, this "claim" was not properly before the District
Court, and no error was committed by disregarding it. Bank
has carried its burden in showing no genuine issues of mate-
rial fact exist as to its claims. Defendants have failed to
come forward with affidavits or other sworn testimony to show
any genuine issues of material fact which would defeat
summary judgment. Therefore, summary judgment was proper on
the counterclaims and is affirmed.
111. Legal Fees
~ollowing an evidentiary hearing as to the reasonable-
ness of attorney fees, the ~istrict Court awarded Bank
$50,000 in attorney fees. We conclude that this award was
lawful and reasonable.
The 1982 notes and the two mortgages securing those
notes all provided contractually for the recovery of attorney
fees. Additionally, Montana statute provides for award of
attorney fees in foreclosure actions. Section 71-1-233, MCA.
Thus, the award of fees was lawful.
The court took in testimony as to the reasonableness of
the $62,477 amount requested by Bank. At the close of the
testimony, the court awarded $50,000. Both the Montana and
the New Mexico courts noted the complexity and the involved
nature of this litigation. Based on the record of consider-
able time and energy spent by Bank and the other evidence
presented as to attorney fees, we conclude the amount awarded
for legal fees was reasonable.
Here we note that Bank argued in its appellate brief,
"clearly the record reflects that Mr. Bokum and ~ u i n t afought
[Bank] every step of the way, on issues that could no longer
be controverted in good faith, in ar, effort to delay the
inevitable foreclosure that is now nearly seven years over-
due." We conclude that this is an accurate representation of
the record.
Bank is also entitled. to its attorney fees on appeal.
Defendants were unable to present any evidence to
preclude summary judgment when the burden shifted to them and
have been unable to raise any meritorious arguments on
appeal.
This cause is remanded to the ~istrict Court for a
determination and award of reasonable attorney fees to Bank
as a result of this appeal.