First Fidelity Bank v. Slack ( 1991 )

No. 90-529
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
THE FIRST FIDELITY BANK,
a Montana Banking Corporation,
Plaintiff and Respondent,
-vs-
JAMES D. SLACK, JR., SX RANCHES, INC., JAN 1 5 1991
a Corporation; JIM SLACK & ASSOCIATES,
INC., a Corporation; SUNDANCE LAND
AND CATTLE COMPANY, a Partnership,
&A S i!
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CLERK OF S U P R C l r * - C001RT
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STATE OF ibld2NYAfdA
Defendants and Appellants.
APPEAL FROM: District Court of the Seventh Judicial District,
In and for the County of Dawson,
The Honorable B. W. Thomas, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Mark D. Parker; Parker Law Firm, Billings, Montana
For Respondent:
R.W. Heineman, P.C., Wibaux, Montana
Submitted on Briefs: December 6, 1990
Filed:
Justice Diane G. Barz delivered the Opinion of the Court.
The defendants, James D. Slack, Jr. , SX Ranches, Inc. , and Jim
Slack & Associates, Inc., appeal from a final partial summary
judgment entered by the District Court of the Seventh Judicial
District, Dawson County.
On January 24, 1983, defendant Jim Slack & Associates executed
a promissory note to plaintiff, The First Fidelity Bank in the
amount of $240,000 due May 1, 1983 guaranteed by defendant James
Slack, Jr., and SX Ranches and secured by a Security Agreement.
On January 24, 1983, defendant SX Ranches also executed a
promissory note for $200,000 to plaintiff Bank guaranteed by
defendant James Slack and secured by Security Agreements. This
note was due January 1, 1984.
In February of 1984, after both notes were in default, the
plaintiff Bank and defendants entered into a extension agreement
providing plaintiff Bank with additional collateral and a new due
date for pay-off of November 1, 1984. One of the items of
collateral provided was a junior real estate lien to a first
mortgage filed by Norwest Bank of Billings. Mortgages were
executed by defendant James Slack to plaintiff Bank covering real
estate in Richland County subject to mortgages of the Federal Land
Bank and Norwest Bank, and also real estate in Carbon County
subject to prior mortgages of Norwest Bank and others.
After payments by the defendants were never made and proceeds
from the disposition of collateral were insufficient, plaintiff
Bank filed the instant lawsuit.
Meanwhile, Norwest Bank pursued foreclosure on the first
mortgage in Carbon County and obtained a Judgment of Foreclosure
on April 27, 1988 in the amount of $2,922,768.29 plus interest,
attorney's fees and costs. Prior to that judgment, on October 30,
1987, a Stipulation between Norwest and Slack was furnished to
plaintiff Bank showing Slack's indebtedness was greater than the
value of the property and no proceeds would be available to
plaintiff Bank from the foreclosure. The plaintiff Bank signed an
agreement and mortgage release to Norwest Bank to allow Norwest to
complete its foreclosure in exchange for $13,000 which was applied
to the note.
The sole issue in this appeal is whether the "one action rule1'
set forth in 9 71-1-222, MCA which states "There is but one action
for the recovery of debt or the enforcement of any right secured
by mortgage upon real estate . . . . If precludes the Bank from
obtaining a deficiency judgment. Defendants contend that the Bank
was required to foreclose their real estate mortgage first. The
District Court found that to apply the "one action rule1'under the
circumstances of this case would be unreasonable. The District
Court found that the defendants had a burden to show that had
plaintiff Bank foreclosed there would be some value realized from
the security to apply to the debt and the $13,000 which the
plaintiff Bank received from Norwest could only be obtained from
refraining from foreclosure. In other words the $13,000 was the
price Norwest was willing to pay to facilitate its own foreclosure.
We agree. There is uncontroverted evidence that the security held
by plaintiff Bank as a second mortgage was worthless.
In Bailey v. Hansen (1937), 105 Mont. 552, 74 P.2d 438, the
plaintiff brought an action for collection of a note without
foreclosing on the mortgage. It was claimed that the mortgage had
no value. The Court stated the Itoneaction statutew was to compel
the one who has taken security for his debt to exhaust his security
before resorting to the general assets of the debtor. The Court
further held that the one action rule does not prohibit a personal
action when the mortgage security has become valueless. Bailey,
at 555, 74 P.2d at 440. We hold that there is no violation of the
"one action rule" in this case.
Affirmed. Let remittitur issue forthwith.
Pursuant to Section I, Paragraph 3(c), Montana Supreme Court
1988 Internal Operating Rules, this decision shall not be cited as
precedent and shall be published by its filing as a public document
with the Clerk of this Court and by a report of its result to the
West Publishing Company. /
We concur:
i Justices
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