Davidson v. D.H. Hansen Ranch, Inc.

NO. 88-412
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
T.M. DAVIDSON, CONSERVATOR OF THE
ESTATE OF GEORGE NELSON, a/k/a
GEORGE E. NELSON,
Plaintiff and Respondent,
-vs-
D.H. HANSEN RANCH, INC.,
a Montana Corporation,
Defendant and Appellant.
APPEAL FROM: District Court of the Fifteenth Judicial District,
In and for the County of Sheridan,
The Honorable M. James Sorte, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
O'Toole & O'Toole; Loren J. O'Toole, Plentywood,
Montana
For Respondent:
F-
L--
3-
nr McIntee & Whisenand; Terry R. Lorenz, Williston,
North Dakota
Submitted on Briefs: Nov. 17, 1988
Decided: December 16, 1988
Mr. Justice L. C. Gulbrandson del-ivered the Opinion of the
Court.
Defendant, as the defaulting purchaser of property
under a contract for deed, appeals an order of the District
Court of the Fifteenth Judicial District, Sheridan County,
awarding the surplus proceeds from a foreclosure sale to the
foreclosing plaintiff. We reverse and remand.
The sole issue raised upon appeal is whether the
District Court erred in giving the foreclosing party, whose
debt had been paid in full, the surplus proceeds from the
foreclosure sale?
On February 12, 1981, D. H. Hansen Ranch, Inc. (Hansen)
executed a contract for deed, thereby agreeing to purchase a
tract of land for $92,000 from George and Edna Nelson.
Hansen contracted to pay this purchase price in twenty annual
installments of $9,200. These annual payments, which
included interest at the rate of 10% per annum, became due on
December 1, 1981, and on the first of December of each
succeeding year until paid in full. Hansen failed to make
any payment on the contract for the years 1981 through 1986.
The contract stated that in the event both George and
Edna died before full pavment on the contract, the remaining
balance due would be excused and the contract considered paid
in full. Although Edna died in 1985, George survived.
George was adjudged incapacitated, however, and a conservator
appointed in that same year. Following his appointment, the
conservator served a notice of default on the contract upon
the defendant. The defendant failed to cure the default
within thirty days as required in the notice. Consequently,
the conservator elected to rescind the contract and to bring
an action to recover possession of the premises through
foreclosure.
On October 1, 1987, the District Court Judge granted
plaintiff's motion for partial summary judgment, and a
judgment was subsequently entered rescinding the contract for
deed and authorizing a foreclosure upon the contracted
property. The amount of debt owing by the defendant remained
in issue with defendant contending that plaintiff had waived
any right to payments for 1981 through 1984.
On February 3, 1988, plaintiff moved for summary
judgment on this remaining issue. The court held that the
parties had not effected a modification of the contract and
all payments designated in the contract remained due and
owing. Consequently, the court granted summary judgment and
ordered a public auction of the foreclosed property.
On May 12, 1988, the sheriff auctioned off the property
for $175,000. The sheriff deposited a surplus of $6,106.41
with the court after subtracting auction costs and the amount
owed to plaintiff for principal, interest, costs and attorney
fees. No other lienors have a claim to this surplus.
Plaintiff filed a motion requesting that all surplus
proceeds from the sale be awarded to him. The court granted
this motion on July 22, 1988. Defendant appeals from this
grant of the surplus to the conservator of the estate of
George Nelson.
In defense of the distribution of the surplus to him,
the conservator contends that § 71-1-225, MCA, governing the
distribution of surplus proceeds from a sale, is clear and
unambiguous. The statute, which mandates that the court give
surplus proceeds to the one entitled to them, simply raises a
factual issue of entitlement to be determined by the District
Court. Respondent contends the facts, that Hansen failed to
make any payments on the property while inhabiting it and
that George Nelson is an incapacitated elderly man in need of
the funds from the sale of the property, support the court's
determination that Nelson's estate was entitled to the
surplus.
At the outset, we note that this is an action at law
and not an action in equity because the parties are seeking
only a monetary judgment. See, e.g., Reagan v. Aiken
(1891), 138 U.S. 109, 11 S.Ct. 283, 34 L.Ed. 892. We
therefore need determine who is entitled by statute to the
surplus proceeds as a matter of law. Section ?1-1-225, MCA,
states only that:
If there be surplus money remaining after
the payment of the amount due on the
mortgage, lien, or encumbrance, with
costs, the court may cause the same to be
paid to the person entitled to it . . .
(Emphasis added.)
This statutory language fails to clearly dictate who is
entitled to surplus sale proceeds. We thus must look to
other means to determine the legislative intent of the
statute. Missoula Co. v. American Asphalt, Inc. ( ~ o n t .
1905), 701 P.2d 990, 992, 42 St.Rep. 920, 922.
Previous Montana case law has interpreted statutes
relating to surplus proceeds as requiring any surplus to he
paid to the mortgager if no other liens remain on the
property. State v. District Court (1926), 76 Mont. 143, 150,
245 P. 529, 532. Other state and federal courts have
similarly held that the purchaser of property under a
mortgage or deed is entitled to any surplus proceeds
resulting upon foreclosure. E .g. , Wartell v. Novograd (R.I.
1927), 137 A. 776; Soderberg v. King County (Wash. 18961, 45
P. 785. One legal encyclopedia has similarly stated that:
Subject to the rights of other
lienors or claimants, surplus proceeds of
a mortgage foreclosure sale generally go
to the owner of the equity of redemption.
59 C.J.S.2d Mortgages S 799 (1949); see also 5 5 Arn.Jur.2d
M o r t g a g e s S 930 ( 1 9 7 1 ) .
The weight of existing law indicates that the
defendant, a s t h e d e f a u l t i n g purchaser under t h e c o n t r a c t f o r
deed, was entitled t o the s u r p l u s proceeds. Moreover, we
t a k e n o t i c e o f t h e f a c t t h a t d e f e n d a n t redeemed t h e p r o p e r t y
at the full sale price plus interest, although n o t until.
after the District Judge had already rendered his final
judgment i n the case. Given t h e w e i g h t o f e x i s t i n g l a w , we
h o l d t h a t t h e D i s t r i c t C o u r t a b u s e d i t s d i s c r e t i o n when i t
awarded t h e s u r p l u s p r o c e e d s from t h e s a l e o f t h e f o r e c l o s e d
property to the foreclosing plaintiff rather than to the
defendant.
W e r e v e r s e and remand f o r judgment i n accordance with
/
t h i s o p i n i on.
Justi e
W e concur: / f
Justices