Farm Credit Bank of Spokane v. Newt , 49 State Rptr. 267 ( 1992 )

NO. 91-352
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
FARM CREDIT BANK OF SPOKANE,
a corporation, successor by merger
to the Federal Land Bank of Spokane,
Plaintiff and Respondent,
V.
G. CHARLES NEWTON; GAIL NEWTON; SUSAN LEE
DAHLGREN NEWTON; G. CHARLES NEWTON 11;
HALLIE M. GIFFORD; and JEAN MRAZ NEWTON,
Defendants,
and
GAIL NEWTON,
Appellant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Leif B. Erickson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
M. Dean Jellison, Attorney at Law,
Kalispell, Montana
For Respondent:
William R. Baldassin, Attorney at Law,
Missoula, Montana
.. ..i Submitted on Briefs: December 12, 1991
Decided: March 31, 1992
4 ,5 i
Justice Terry N. Trieweiler delivered the opinion of the Court.
The Eleventh Judicial District Court issued a judgment and
decree of foreclosure that authorized Farm Credit Bank to foreclose
upon a parcel of property in Flathead County. Farm Credit Bank
purchased the property at the foreclosure sale. However, Gail
Newton initially refused to surrender possession. The District
Court awarded Farm Credit Bank its attorney fees, including fees
for services performedto recover possession after Farm Credit Bank
bought the property at the foreclosure sale. The court denied
Newton's motion for satisfaction of the judgment and subsequently
awarded Farm Credit Bank its attorney fees, costs, and interest as
a lien on the property. The court then denied Newton's motion for
a new trial or amendment of judgment. She appeals. We affirm.
The issues are:
1. Did the District Court err when it awarded attorney fees
to Farm Credit Bank for work performed after it purchased the
mortgaged property at the foreclosure sale?
2. Did the District Court err when it awarded attorney fees
to Farm Credit Bank for work performed in connection with a
post-foreclosure dispute regarding possession and attorney fees
when possession was resolved by stipulation?
3. Did the District Court err when it held that attorney
fees awarded in connection with post-foreclosure proceedings
constituted a part of the original judgment lien?
4. Did the District Court err when it awarded attorney fees
without first conducting an evidentiary hearing?
2
5. Is Farm Credit Bank entitled to recover its attorney fees
incurred in this appeal?
On August 28, 1989, Farm Credit Bank of Spokane filed a
mortgage foreclosure complaint against several defendants,
including appellant Newton, in the Eleventh Judicial District Court
in Flathead County. Newton was the mortgagor and fee simple owner
of the subject property. The mortgage provided that:
In case of any suit to foreclose this mortgage or to
collect any charge growing out of the debt hereby
secured, or any suit which the mortgagee may deem it
necessary to prosecute or defend to effect or protect the
lien hereof, the mortclacrors aclree to pay a reasonable sum
as attornev's fees and all costs and legal expenses
connection with said suit, and further agree to pay the
reasonable costs of searching records and abstracting or
insuring the title, and such sums shall be secured hereby
and included in the decree of foreclosure. [Emphasis
added. ]
The mortgage also granted Farm Credit Bank the right to immediate
possession in the event of foreclosure.
Farm Credit Bank took default judgments against all of the
defendants, including Newton. On May 16, 1990, the court awarded
Farm Credit Bank judgment in the amount of $126,332.64 and issued
a decree of foreclosure. The court's order specifically provided
that the purchaser at the foreclosure sale would be entitled to
immediate possession and that a writ of assistance would issue if
the debtor did not surrender possession. Farm Credit Bank had
specifically requestedthis relief in the complaint which it served
on Newton. The order also provided that Farm Credit Bank would be
entitled to a deficiency judgment if the successful bid at the
3
foreclosure sale was less than the amount of the judgment plus
attorney fees and costs expended in enforcing the judgment.
On June 27, 1990, Farm Credit Bank purchased the property at
the foreclosure sale for $128,948.00, which represented the amount
of the May 16 judgment, plus allowances for interest, costs, and
attorney fees incurred to that date. Newton, whose son took
possession shortly before the foreclosure sale, refused to vacate.
Farm Credit Bank then moved for a writ of assistance, together with
attorney fees and costs incurred to obtain the writ. Newton did
not reside on the property at that point and her son was not a
party to the mortgage. The parties resolved the possession portion
of the dispute by stipulation, but the stipulation did not address
attorney fees and costs. Subsequently, Newton redeemed the
property and sold it to a third party.
Farm Credit Bank then sought additional interest, attorney
fees, and costs incurred in attempting to recover possession. The
District Court awarded the relief asked for, concluded that a
deficiency judgment therefore existed, and held that the deficiency
judgment constituted a lien against the subject property. Newton
appeals from this order of the District Court.
I
Did the District Court err when it awarded attorney fees to
Farm Credit Bank for work performed after it purchased the
mortgaged property at the foreclosure sale?
4
Newton argues that judgment creditors cannot recover attorney
fees for work performed after foreclosure. She cites 9 71-1-234,
MCA, which provides:
If the mortgagee shall demand attorneys' fees in
case of the sale of real estate under and by virtue of
the power of sale contained in any mortgage ... in this
state ...he shall petition the district court of the
county in which said real estate o r any part thereof may
be situated to fix the amount of such attorney's fee, and
a copy of such petition shall be served upon all parties
having or claiming an interest of record in the property
to be sold ...at least 10 days before the day fixed
for hearing . . .. Such petition shall be acted upon by
the district court before the notice of sale by publica-
tion or posting, as hereinbefore provided for, shall be
given. [Emphasis added.]
Newton asserts that this statute precludes an award of attorney
fees for post-foreclosure legal work because such an award would
require a second determination of fees, in violation of the
"one-action" rule contained in 9 71-1-222, MCA.
We note that this statute does not expressly prohibit
post-judgment attorney fees. Nor does it expressly provide that an
award of fees earned prior to the foreclosure decree is final and
conclusive.
Farm Credit Bank has been consistent in its pursuit of
post-judgment attorney fees in this action. On May 10, 1990, Farm
Credit Bank moved for entry of judgment. It supported this motion
with an affidavit, which alleged that Farm Credit had already
incurred $3,093.28 in attorney fees and would "incur additional
fees and costs in enforcing the Judgment entered herein." The
affidavit also alleged that "the amount of [Newton's] indebtedness
should be increased by the amount of [Farm Credit Bank's1 actual
5
attorneys fees and costs incurred.I' The judgment provided for
immediate possession, a writ of assistance if necessary, and any
attorney fees incurred in enforcing the judgment. The motion for
entry of judgment and the supporting judgment were served upon
Newton's attorney. She cannot deny being on notice that Farm
Credit Bank was seeking post-judgment attorney fees. She did not
respond to either document.
The court entered judgment for Farm Credit Bank in the amount
Of $126,332.64. This sum represented the original debt of
$112,016.41, plus Farm Credit Bank's various costs totalling
$11,222.95, and attorney fees in the amount of $3,093.28.
Additionally, the judgment provided that:
[Farm Credit Bank] shall have and retain a deficiency
judgment against the Defendant GAIL NEWTON in the event
the bid at said sale is less than the sum of Plaintiff's
entire judgment, plus all sums expended as attorney's
fees and costs in enforcina this Judcrment. [Emphasis
added. 3
Thus, the court fixed Farm Credit Bank's attorney fees on the date
of judgment at $3,093.28, the amount alleged in the affidavit. It
then awarded Farm Credit Bank any future attorney fees it might
incur in enforcing the judgment. The amount of those fees was
still uncertain because it remained to be seen whether Newton would
acquiesce in the enforcement of the judgment. Therefore, the
court's award of attorney fees was as precise as the court could
make it, given what it knew on the date of the judgment.
Section 71-1-234, MCA, merely requires the District Court to
"act upon" the mortgagee's petition for attorney fees before the
6
notice of sale issues. The court did so in this case by awarding
Farm Credit Bank its attorney fees with as much precision as
possible on the date of the foreclosure decree. The judgment and
decree of foreclosure was entered on May 16, 1990, and the order of
sale was issued on May 24, 1990. The court "acted upon" Farm
Credit Bank's petition within the time frame contemplated by the
statute.
Newton argues that by this procedure the court essentially
gave Farm Credit Bank a "blank check" award of any fees its
attorney might see fit to bill during post-foreclosure proceedings.
We disagree. After Newton redeemed the property, Farm Credit Bank
submitted a detailed affidavit that set forth its attorney fees.
Newton could have challenged this affidavit but chose not to do so.
Farm Credit Bank's submission of this affidavit, and its apparent
readiness to defend it, refute Newton's argument that the District
Court somehow gave it a "blank check.
We hold that the District Court did not err when it awarded
attorney fees to Farm Credit Bank for work performed after it
purchased the subject property at the foreclosure sale.
I1
Did the District Court err when it awarded attorney fees to
Farm Credit Bank for work performed in connection with a
post-foreclosure dispute regarding possession and attorney fees
when possession was resolved by stipulation?
After Farm credit Bank purchased the property at the
foreclosure sale, it moved for a writ of assistance because Newton
7
did not immediately vacate the property. This motion included a
request for attorney fees.
The parties settled this possession dispute by a stipulation
in which Farm Credit Bank allowed Newton to retain possession until
September 30, 1 9 9 0 . Newton's attorney prepared the stipulation,
which was silent on the question of attorney fees. On October 4,
1990, Newton redeemedthe property by paying $131,046.50. This sum
did not include any allowance for attorney fees.
Newton now argues that because she retained possession until
she could redeem the property and sell it to a third party, she was
the "prevailing party," and therefore, cannot be liable for
attorney fees. We believe this argument misses the point.
The judgment and decree of foreclosure awarded Farm Credit
Bank the right to immediate possession. It also awarded Farm
Credit Bank any attorney fees it might incur in enforcing the
judgment. Farm Credit Bank had to move for a writ of assistance in
order to enforce its right to possession, which was a part of the
judgment. In that motion, it specifically asked for its costs and
fees .
In Nett v. Stockgrowers1 Finance Corporation ( 1 9 2 9 ) , 84 Mont. 116, 2 7 4
P. 497, we observed that attorney fees serve tu make the execution
creditor whole. We said:
The idea in providing for attorneys' fees and costs
is that, if the promisor fails to make good his promise,
the promisee may collect such a sum as will leave him the
actual amount due him, net. Following out this idea,
this court has held, regardless of the rules in other
jurisdictions, that the payee is entitled to an
attorney's fee if, after default by the maker of the
8
note, it is placed in the hands of an attorney for
collection, irrespective of whether action on the note is
brought or not.
N e t t , 214 P. at 500. Although Nett did not involve a real property
mortgage, we believe its analysis of attorney fees is equally
applicable to the land mortgage situation. The case stands for the
proposition that the prevailing creditor is entitled to recoup the
costs of collection, even if the matter never goes to court.
Newton does not deny that Farm Credit Bank actually incurred
attorney fees in attempting to secure possession of the property.
Furthermore, her attorney prepared the stipulation that purported
to resolve the dispute. At that point it was incumbent upon him to
resolve the question of attorney fees. He did not do so, and the
stipulation is silent on the matter. However, the award of
attorney fees is consistent with the District Court's judgment and
decree of foreclosure.
We will not look beyond the terms of the judgment and the
stipulation and attempt to determine who was the "prevailing party"
in the possession dispute. The judgment provided for an award of
future attorney fees, and in Issue I of this opinion we held that
part of the judgment valid. Farm Credit Bank ultimately incurred
those fees, and Newton must pay them.
We hold that the District Court did not err when it awarded
attorney fees to Farm Credit Bank for work performed in connection
with a post-foreclosure dispute regarding possession and attorney
fees when only the possession portion of the dispute was resolved
by stipulation.
9
I11
Did the District Court err when it held that attorney fees
awarded in connection with post-foreclosure proceedings constituted
a part of the original judgment lien?
This Court considered this question in McQueemy v. Toomey
(1907), 36 Mont. 282, 92 P. 561. In that case, we drew a
distinction between redemption by a third party and redemption by
the judgment debtor. We held a third party who redeems takes the
property free of any outstanding deficiency judgment. McQueenq,
92 P. at 564. However, a different rule applies when the judgment
debtor redeems in his own right. We said:
Of course, if the debtor redeems, the effect of section
1236 [the predecessor of present 5 25-13-809, MCA] ...
is to terminate the sale and restore the estate to him,
whereuwon any deficiencv iudament would attach as a lien.
[Emphasis added.]
McQueeney, 92 P. at 565.
In Issue I of this opinion, we concluded that Farm Credit
Bank's future attorney fees formed part of the judgment and decree
of foreclosure. Newton does not dispute that the amount she paid
to redeem the property did not include an allowance for attorney
fees. Therefore, a deficiency judgment existed. Under McQueeriey,
that deficiency judgment reattached to the property as a lien when
Newton redeemed.
We hold that the District Court did not err when it held that
attorney fees awarded in connection with post-foreclosure sale
proceedings constituted a part of the original judgment lien.
10
IV
Did the District Court err when it awarded attorney fees
without first conducting an evidentiary hearing?
Newton argues that because 5 71-1-234, MCA, contemplates a
hearing on the reasonableness of any petition for attorney fees,
the District Court erred in not holding such a hearing. However,
she did not dispute the amount claimed as attorney fees by Farm
Credit Bank, nor did she request a hearing. Therefore, she argues
essentially that the District Court should have scheduled such an
evidentiary hearing sua sponte. We disagree.
Farm Credit Bank submitted a detailed affidavit of attorney
fees. Newton did not respond to this document and never suggested
to the court that the fees claimed in it might be unreasonable.
Under these circumstances, the Court had no duty to conduct a
hearing with no issue to decide.
We hold that the District Court did not err when it awarded
attorney fees without first conducting an evidentiary hearing.
V
Is Farm Credit Bank entitled to recover its attorney fees
incurred in this appeal?
The underlying mortgage in this case obligated Newton to pay
Farm Credit Bank's attorney fees incurred in connection with any
future foreclosure action. This appeal is from a foreclosure
action, and Farm Credit Bank has prevailed on appeal. We conclude
that Farm Credit Bank is entitled to recover its attorney fees
incurred in this appeal.
11
The order of the District Court is affirmed and this case is
remanded for a determination of attorney fees incurred in this
appeal.
We concur:
'Chief Justice
12
March 31. 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
M. Dean Jellison
Attorney at Law
120 1st Ave. West
Kalispell, MT 59901
William R..Baldassin
Attorney at Law
500 North Higgins, Suite 200
Missoula, MT 59802
ED SMITH
CLERK OF THE SUPREME COURT
STATE ,OF MONTANA