Turner v. Mountain Engineering & Construction, Inc. , 53 State Rptr. 23 ( 1996 )

NO. 95-329
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
JOHN P. TURNER,
Plaintiff, Respondent and
Cross-Appellant,
v.
MOUNTAIN ENGINEERING AND
CONSTRUCTION, INC., et al.,
Defendants, Appellants and
Cross-Respondents.
KERIN AND ASSOCIATES,
Plaintiff,
v.
AMERITRUST FINANCIAL .CORP., et al.,
Defendants
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Larry W. Moran, Judge presiding.
COUNSEL OF RECORD:
For Appellant Johnston Excavating:
Gregory 0. Morgan, Attorney at Law, Bozeman, Montana
For Respondent and Cross-Appellant John P. Turner:
James A. McLean; Drysdale, McLean & Nellen, Bozeman,
Montana
George A. Guynes, Attorney at Law, Santa Fe,
New Mexico
For Plaintiff Kerin & Associates:
Jon M. Hesse, Attorney at Law, Livingston, Montana
For Defendant Figgins Sand & Gravel, Inc.:
Richard A. Ramler, Attorney at Law, Belgrade,
Montana
itted on'~:Briefs : November 16, 1995
Decided: January 11, 1996
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
This case arises out of a protracted dispute between the
mortgagee (Turner) and construction lien creditors who performed
work on the subject property. Turner executed on a foreign
judgment, foreclosed on mortgages owned by the judgment debtor, and
purchased the property at a sheriff's sale. The subject property
is located in Gallatin County, Montana, and is commonly known as
the t'Royal Village" subdivision.
On March 14, 1995, the Eighteenth Judicial District Court,
Gallatin County, entered its Memorandum and Order for Summary
Judgment, granting Turner's Motion for Summary Judgment and finding
his mortgages valid and superior to the construction liens. The
original mortgages were executed in 1982 and 1983. In 1987,
approximately eight years before the foreclosure sale, the
construction liens were filed pursuant to 5 71-3-535, MCA.
The District Court ordered Turner to prepare an appropriate
decree and order for foreclosure of the property. In addition, the
District Court awarded Turner his costs and attorney's fees against
defendants Kerin and Associates, Figgins Sand and Gravel, Inc., and
Johnston Excavating, Inc. (the lien creditors). On April 27, 1995,
the District Court amended its order, deleting its award of costs
and attorney's fees.
On May 5, 1995, the District Court entered its Judgment,
Decree of Foreclosure, and Order of Sale. On May 25, 1995, in the
interim between the judgment and the sheriff's sale, the lien
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creditors filed their notice of appeal to this Court; however, they
did not stay the proceedings or post a supersedeas bond. On June
22, 1995, a sheriff's sale was held to satisfy the four outstanding
mortgages and Turner purchased the subject property.
The lien creditors appeal from the District Court's Memorandum
and Order for Summary Judgment and Turner cross-appeals from the
court's amended order which deleted his award of costs and
attorney's fees.
We summarize the issues raised on the lien creditor's appeal
and Turner's cross-appeal as follows:
1. Did the District Court err in finding that Turner's
mortgages had priority over the construction liens?
2. Did the District Court err in finding that the statute of
limitations had not run on the "Valley Bank" and "Greiner"
mortgages?
3. Did the District Court err in granting priority to the
"Greiner" mortgage even though the mortgage does not describe the
debt it secures and does not adequately identify the mortgagee?
4. Did the District Court err in granting Turner's motion
for summary judgment?
5. Did the District Court err in amending its Memorandum and
Order for Summary Judgment when it deleted Turner's award of costs
and attorney's fees?
In light of the fact that the subject property has been sold
at a court-ordered foreclosure sale, Turner filed a motion to
dismiss the appeal as moot. The lien creditors assert that because
the judgment was satisfied by an involuntary payment or
performance, their appeal from the judgment is not thereby rendered
moot. We hold the issue of mootness to be determinative of issues
one through four.
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L.--.-- -
In so holding, we take this opportunity to clarify the
question of mootness as it relates to foreclosure actions. We have
long recognized that a question is moot when this Court cannot
grant effective relief. Martin Dev. Co. v. Keeney Co. (1985), 216
Mont. 212, 220, 703 P.2d 143, 147-48; State ex rel. Hagerty v. Rafn
(1956), 130 Mont. 554, 557-58, 304 P.2d 918, 919-20; State ex rel.
Begeman v. Napton (1891), 10 Mont. 369, 369-70, 25 P. 1045, 1045-
46. In Martin Dev. Co., this Court stated that:
It is equally well recognized that payment of a money
judgment by the judgment debtor does not, by itself,
render the cause moot for purposes of appeal. A defeated
party's compliance with the judgment renders his appeal
moot only where the compliance makes the granting of
effective relief by the appellate court impossible.
Martin Dev. Co., 703 P.2d at 147. Confusion, however, has arisen
due to the Court's attempt to distinguish between voluntary and
involuntary performance or compliance with a judgment. In a number
of our prior decisions dealing with foreclosure actions and
mootness, we have reasoned that, since foreclosure is involuntary
rather than voluntary, it will not give rise to a waiver of the
right to appeal from the judgment. See, e.g., Traders State Bank
of Poplar v. Mann (1993), 258 Mont. 226, 234, 852 P.2d 604, 609;
Moore v. Hardy (19881, 230 Mont. 158, 162, 748 P.2d 477, 480;
LeClair v. Reiter (1988), 233 Mont. 332, 335, 760 P.2d 740, 742;
First Nat'1 Bank in Eureka v. Giles (1986), 225 Mont. 467, 468, 733
P.2d 357, 358 (citing First Nat'1 Bank in Eureka v. Giles (Mont.
1986), 43 St.Rep. 1326, 1327-28). However, that voluntary versus
involuntary analysis, in the context of mootness, was in error.
Although the question of whether the appellant's compliance with a
4
judgment was voluntary or not has bearing on whether an appellant
has waived his or her right of appeal, it has no bearing on the
question of mootness.
The Rafn opinion is apparently the source of this voluntary
versus involuntary distinction; however, in later cases, Rafn's
characterization of the issue has been misstated. See, e.s.,
LeClair, 760 P.2d at 742. In -I the district court prohibited
Rafn
the Montana Liquor Control Board from issuing beer and liquor
licenses to persons other than those who had permits from the
Blackfeet Tribe. Rafn
-, 304 P.2d at 919. The district court
entered a writ compelling the Board to issue licenses to those
parties who had tribal permits. Rafn, 304 P.2d at 919. The Board
attempted to stay the issuance of the writ at the district court
and at this Court. This Court, however, was not in session. Thus,
the writs "were delivered to the [tribal permit holders] under
protest and involuntarily " and tribal permit holders began to sell
Rafn
liquor and beer. -, 304 P.2d at 919. Nonetheless, the Board
members pursued their appeal and we held that:
[Blecause their compliance with the mandate of the lower
court was coerced by the threat of punishment for
contempt had they disobeyed, they have by obeying lost
none of their rights to appeal and that they are entitled
to a review here.
Rafn
-I 304 P.2d at 919. This Court went on to state that if the
involuntary or coerced compliance with the district court's order
were the only issue, this Court may have been able to hear the
merits of the appeal. ~, 304 P.2d at 919.
Rafn The Court went on to
hold, however, that "we may not be called upon to review here, and
5
perhaps reverse, if our review is to no purpose and our reversal
without effect." Rafn 304 P.2d at 920.
-I The Rafn Court recognized
that the question was moot regardless of whether the Board,
voluntarily or involuntarily, had obeyed the writs issued. Rafn,
304 P.2d at 920.
The Court analyzed what effect reversing the district court
might have and recognized that since the licenses had already been
issued, the parties could not be returned to their respective
positions at the time of the applications. Thus, the Court held
that the appeal was moot. -, 304 P.2d at 920.
Rafn
A party may not claim an exception to the mootness doctrine
where the case has become moot through that party's own failure to
seek a stay of the judgment. Gates v. Deukmejian (9th Cir. 1993),
987 F.2d 1392, 1408. In Gates
-I the Ninth Circuit held that by
refusing to seek a stay of execution of the award, and by paying
the amounts awarded, the defendants mooted any error in the interim
award. Gates, 987 F.2d at 1408.
The question of mootness is different from the waiver of
appeal rights, which is a concept that has worked itself into our
prior mootness analysis. a, e.q., Traders State Bank, 852 P.2d
at 609; LeClair, 760 P.2d at 742; Moore, 748 P.2d at 480; First
Nat'1 Bank in Eureka, 733 P.2d at 358; Montana Nat'1 Bank of
Roundup v. State Dep't of Revenue (1975), 167 Mont. 429, 432-33,
539 P.2d 722, 724. In each of these opinions, we have mixed the
doctrine of waiver with our discussion of mootness. For example,
in Traders State Bank, we stated that:
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As in LeClair, Mann Farms and John Mann did not
voluntarily relinquish their real estate and personal
property to the Bank; the Bank foreclosed. We conclude
that the failure to post a supersedeas bond or otherwise
stay the proceedings below does not render Mann Farms or
John Mann's appeal moot.
Traders State Bank, 852 P.2d at 609. As this quote illustrates,
the issue of mootness was confused with the involuntary nature of
the foreclosure. This is in error. The issue of mootness is
separate and distinct from the question of waiver of appeal rights.
Complying with the judgment does not necessarily render the appeal
moot. However, if compliance is voluntary, the party may be said
to have waived any objection to the judgment. This is a different
question than the issue of mootness.
In deciding whether a case is moot, we determine whether this
Court can fashion effective relief. Martin Dev. Co., 703 P.2d at
147-48; Rafn 304 P.2d at 920.
-I In a situation where a judgment has
been satisfied by an involuntary payment or performance, the party
cannot be deemed to have waived or acquiesced in the judgment such
that the appeal would be precluded by prior conduct which is
inconsistent with the appeal. However, that does not mean that the
Rafn
appeal is not moot. -, 304 P.2d at 920-21. The fact that a
party has not voluntarily waived its right to appeal does not
necessarily mean that this Court can still provide effective
relief.
In Traders State Bank, relying on a passage in LeClair which
mischaracterized the holding in Rafn, we held that "where payment
or performance of a judgment by an appellant is involuntary, the
appellant does not acquiesce to the judgment and the right to
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appeal is not affected." Traders State Bank, 852 P.2d at 609
(citing LeClair, 760 P.2d at 742). We went on to state that "[w]e
expressly overruled Henke [Gallatin Trust and Sav. Bank v. Henke
(1969), 154 Mont. 170, 461 P.2d 4481 and, in effect First Sec. Bank
[First Sec. Bank of Kalispell v. Income Properties, Inc. (1984),
208 Mont. 121, 675 P.2d 9821 and held that the appeal was not moot
because the defendant had not voluntarily surrendered the
property." Traders State Bank, 852 P.2d at 609.
We now determine that this line of authority is unnecessarily
confusing and in error. Moreover, these decisions all resulted in
affirmances in favor of the foreclosing creditor and failed to
analyze the question of what, if any, relief could be fashioned in
the event of a reversal. & Rafn
-I 304 P.2d at 920-21.
Accordingly, we overrule Traders State Bank, 852 P.2d at 609;
LeClair, 760 P.2d at 742; -r 748 P.2d at 480; First Nat'1 Bank
Moore
in Eureka, 733 P.2d at 358; and Montana Nat'1 Bank of Roundup, 539
P.2d at 724, to the extent that they hold that the voluntary versus
involuntary payment or performance distinction is dispositive on
the question of mootness.
In addition, we note that Rule 7(b), M.R.App.P., sets forth
the procedure to stay a foreclosure sale. Rule 7(b), M.R.App.P.,
provides:
Upon service of notice of appeal, if the appellant
desires a stay of execution, the appellant must, unless
the requirement is waived by the opposing party, present
to the district court and secure its approval of a
supersedeas bond which shall have two sureties or a
corporate surety as may be authorized by law. . . When
the judgment or order determines the disposition of
property in controversy as in real actions, replevin, and
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actions to foreclose mortgages, or when such property is
in the custody of the sheriff or when the proceeds of
such property or a bond for its value is in the custody
or control of the court, the amount of the supersedeas
bond shall be fixed at such sum only as will secure the
amount recovered for the use and detention of the
property, the costs of the action, costs on appeal,
interest, and damages for delay. On application, the
supreme court in the interest of justice may suspend,
modify, restore, or grant any order made under this
subdivision.
In the present case, the lien creditors failed to avail themselves
of the protection of a stay of the proceedings under Rule 7(b),
M.R.App.P. As Rule 7(b), M.R.App.P., makes clear, the lien holders
should have sought a stay of the foreclosure sale.
After considering the issue of mootness in the foreclosure
context, as well as Rule 7, M.R.App.P., we conclude that our
holdings in First Sec. Bank of KalisDell v. Income Prooerties,
Inc.
-, Gallatin Trust and Sav. Bank v. Henke and State ex rel.
Haqertv v. Rafn, correctly set forth the doctrine of mootness
without interjecting the concept of waiver and the distinction
between voluntary and involuntary compliance.
Generally speaking, loss of property through foreclosure is
involuntary and will not give rise to a waiver of the right to
appeal from the judgment. For example, if the property has been
foreclosed upon but not yet sold, it may still be possible for this
Court to fashion a remedy. However, the underlying question we
must confront in determining whether an appeal is moot is not
whether the sale was involuntary, but, rather, whether or not this
Court is in a position to grant effective relief.
In Martin Dev. Co., this Court determined that the appeal was
9
not moot because, although a money judgment had been satisfied, no
property had changed hands, and no third party interests were
involved. The Court held that despite voluntary payment of the
judgment, effective relief could still be granted. Martin Dev.
co., 703 P.2d at 147-48. However, our holding in Martin Dev. Co.
contemplated a situation like the one raised in the instant case.
In Martin Dev. Co., we noted that certain factors were not present;
namely, that no property had changed hands and no third party
interests were involved. Both of those elements are present in the
case sub judice.
Here, the subject property has been sold at a sheriff's sale
and third party interests, albeit Turner's, are involved. Further,
there is no surplus from the sheriff's sale for the lien creditors
to attach. The appellants' status as lien creditors who did not
post a supersedeas bond or stay the proceedings at the District
Court pending appeal, along with the fact that no surplus was
recovered at the foreclosure sale, make it impossible for this
Court to grant effective relief. The parties cannot be returned to
the status guo. See Martin Dev. Co., 703 P.2d at 148; -
see also 9
-
James W. Moore et al., Moore's Federal Practice 1 208.03 (2d ed.
1994) (stating that there is a particular danger of dismissal for
mootness and, thus, a special need for seeking a stay when the
district court refuses to enjoin or, as in this case, orders a sale
of the property).
As this Court recognized in Martin Dev. Co., when there is no
effective relief this Court can fashion, the appeal is moot.
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Martin Dev. co., 703 P.2d at 147-48. Appellants allowed
foreclosure sale to proceed, did not stay the proceedings, and did
not post a supersedeas bond. As has been recognized, there is a
danger of dismissal for mootness and, thus, a special need for
seeking a stay when the sale of property is ordered and is not
enjoined. A party who is confronted with a judgment ordering a
foreclosure sale and who allows the foreclosure sale to proceed
runs the risk that his appeal will thereby be rendered moot. Moore
et al., suura at 1 208.03.
In summary, the voluntary versus involuntary distinction still
has meaning in ascertaining whether an appeal is barred due to
waiver. Thus, if an appellant has voluntarily complied with, or
performed a judgment, that voluntary compliance may result in a
waiver of that party's right to appeal and, thus, it would be
unnecessary for this Court to address the question of mootness. In
a like manner, when compliance is involuntary, as in most
foreclosure actions, the appeal is not barred or waived, but may,
nevertheless, be moot to the extent that this Court cannot grant
any effective relief. That peril has come to pass in the instant
case. At this time, this Court cannot grant effective relief.
We therefore dismiss issues one through four of the appeal as
moot and proceed to a discussion of issue five, which was raised by
Turner on cross-appeal.
5. Did the District Court err in amending its Memorandum and
Order for Summary Judgment when it deleted Turner's award of costs
and attorney's fees?
In 1987, Kerin filed suit to foreclose its construction lien.
11
Figgins Sand & Gravel and Johnston Excavating were named as
defendants in the suit, and Figgins counterclaimed and cross-
claimed seeking a determination of the priority of the liens and
foreclosure of its lien. In that action, the mortgagees who were
Turner's predecessors in interest were also named as defendants,
however, the action was stayed because of the bankruptcy petition
filed by Ameritrust, a mortgagee. Turner obtained an order from
the United States Bankruptcy Court for the Eastern District of
California abandoning the trustee's interest in the Royal Village
subdivision.
After obtaining this order, Turner filed suit to foreclose on
the Royal Village subdivision on December 30, 1992. In February of
1993, Turner's suit was consolidated with the lien creditors' suit.
In an attempt to invalidate Turner's mortgage and to obtain
priority and validity of their liens, the lien creditors filed
counterclaims and cross-claims. After a protracted dispute between
the lien creditors and Turner, both Figgins and Turner filed
motions for summary judgment. Turner's brief in support of his
motion for summary judgment included a request for attorney's fees
and referenced 5 71-3-124, MCA.
In its March 14, 1995, Memorandum and Order for Summary
Judgment, the District Court awarded Turner his costs and
attorney's fees pursuant to §§ 71-1-233 and 71-3-124, MCA. Lien
creditors moved the District Court to reconsider its award of costs
and attorney's fees and, on April 27, 1995, the District Court
entered its Order Amending Summary Judgment striking the award. On
12
cross-appeal, Turner argues that the lien creditors waived their
right to object to: the award of costs and attorney's fees and,
further, that the District Court was without the power to amend the
original award. Lien creditors rely on Rules 52(b) and 60(b),
M.R.Civ.P., as authorizing the District Court to amend its order.
Even assuming that the court had authority to amend the award, an
amendment as to § 7X-3-124, MCA, was not appropriate. Section ?I-
3-124, MCA, provides:
In an action to foreclose any of the liens provided for
by parts 3, 4, i5, 6, 8, or 10 of this chapter, the court
must allow as; costs the money paid for filing and
recording the &en and a reasonable attorney's fee in the
district and : supreme courts, and such costs and
attorneys' fees must be allowed to each claimant whose
lien is establ{shed, and such reasonable attorneys' fees
must be allowe@ to the defendant against whose property
a lien is clabmed, if such lien be not established.
[Emphasis added. 1
Section 71-3-124, MCA, required an award of attorney's fees to
the party successfu?ly defending the lien foreclosure. Carkeek v.
Ayer (1980), 188 Mont. 345, 348, 613 P.2d 1013, 1015. Thus, the
District Court was correct in its original order which granted
costs and attorney's fees to Turner pursuant to § 71-3-124, MCA
The proceedings evolved into a contest to determine the
priorities and validity of various construction liens and mortgages
as well as an actioniby Turner to foreclose on the mortgages. Lien
creditors and Turner were the principal parties to the litigation
and the priority of; the construction liens and their foreclosure
was central to the litigation. Here, Turner was not only
attempting to determine the priority of his mortgages and foreclose
on them, he was also defending against the construction lien
13
holders' foreclosure suits. Thus, the award was required by § 71-
3-124, MCA, and was proper.
We reverse and remand for a determination of Turner's costs
and attorney's fees pursuant to 5 71-3-124, MCA.
We concur.
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