FIRST BANK OF LINCOLN, a Montana bank corporation, Plaintiff-Appellant,
LAND TITLE OF NEZ PERCE COUNTY, INC., an Idaho corporation, Defendant-Respondent.
from the District Court of the Second Judicial District,
State of Idaho, Nez Perce County. Jeff M. Brudie, District
court grant of summary judgment, affirmed.
Hamblen, LLP, Spokane, WA, for appellant. Gregory S. Johnson
Pursley, LLP, Boise, for respondent. Thomas E. Dvorak argued.
BURDICK, CHIEF JUSTICE.
appeal arising out of Nez Perce County, First Bank of Lincoln
(First Bank) challenges the district court's grant of
summary judgment in favor of Land Title of Nez Perce County
Incorporated (Land Title). In 2011, First Bank loaned Donald
Tuschoff (Tuschoff) $440, 000 to purchase the Hotel Lincoln
in Lincoln, Montana. The loan was secured by a deed of trust
against the hotel. As additional collateral, Tuschoff
assigned First Bank his interest in a note and deed of trust
on a bowling alley in Washington. Later, following a sale of
the bowling alley, Land Title distributed the proceeds to
Tuschoff and other interested parties rather than First Bank.
Bank did not learn of the bowling alley sale until it
completed its annual loan review of Tuschoff's hotel
loan. Subsequently, Tuschoff defaulted on the hotel loan.
First Bank held a non-judicial foreclosure sale of the hotel
and placed a full-credit bid of the approximately $425, 000
owed to it by Tuschoff. First Bank was able to later sell the
hotel for approximately $190, 000. First Bank then initiated
several lawsuits against various parties in Washington,
Montana, and Idaho, seeking to recover the
"deficiency" between what it was owed and for what
it sold the hotel. Relevant here is First Bank's suit
against Land Title in Idaho. The district court, applying
Montana law, granted summary judgment in favor of Land Title.
The court determined that First Bank's full credit bid
extinguished Tuschoff's debt, and once that debt was
extinguished, the assignment of Tuschoff's interest in
the bowling alley as collateral for that debt was also
extinguished. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1994, Tuschoff purchased a bowling alley located in Asotin
County, Washington from Rex and Helen Humphrey (the
Humphreys). Tuschoff's purchase of the bowling alley was
financed with a note secured by a deed of trust
(Tuschoff/Humphrey deed of trust). In October 1998, Tuschoff
sold the bowling alley to an investor group, Schwab, and
financed this sale with another note secured by a deed of
trust (Schwab/Tuschoff deed of trust). The second note was
delivered to a company which was later purchased by Land
January 2011, Tuschoff obtained a $440, 000 loan from First
Bank to purchase the Hotel Lincoln, located in Lincoln,
Montana. This loan was secured by a deed of trust against the
hotel as well as an assignment of Tuschoff's interest in
the bowling alley note and deed of trust.
2013, Schwab sold the bowling alley to Banana Belt Gaming,
LLC (Banana Belt), and executed a $1, 100, 000 note payable
to Tuschoff in monthly installments. As part of the sale,
Schwab also executed a deed of trust listing Tuschoff as the
beneficiary. Tuschoff subsequently placed the note and deed
of trust in escrow with Land Title.
American Title Company (First American) handled the closing
of the Schwab/Banana Belt sale. An employee of First American
obtained a title commitment from Land Title which listed the
Tuschoff/Humphrey deed of trust, the Schwab/Tuschoff deed of
trust, and the assignment to First Bank. Prior to closing,
the employee at First American contacted Land Title
requesting a payoff quote and confirmation that the quoted
amount would pay off both deeds of trust. Land Title
confirmed that both deeds of trust would be paid, and First
American sent Land Title a check for the quoted payoff
amount. Subsequently, Land Title distributed the money to the
Humphreys and Tuschoff, but not First Bank.
time later, First Bank discovered the bowling alley had been
sold and the proceeds had been distributed to the Humphreys
and Tuschoff. In April 2014, First Bank brought suit in
Washington against Tuschoff and Banana Belt seeking a
declaratory judgment as to its interest in the bowling alley
(the Washington litigation). Subsequently, Tuschoff defaulted
on the Hotel Lincoln loan.
2014, First Bank had the Hotel Lincoln appraised at a value
of $210, 000. On August 24, 2014, First Bank held a
non-judicial foreclosure sale of the Hotel Lincoln. First
Bank was the only bidder and bid the entire amount due on
Tuschoff's underlying note, $425, 748.50. First Bank
later sold the Hotel Lincoln for approximately $193, 000.
in the Washington litigation, the trial court granted summary
judgment in favor of Banana Belt, holding that Banana
Belt's payment of the Schwab/Tuschoff deed of trust
extinguished First Bank's interest. In April 2016, the
Washington Court of Appeals reversed the trial court's
ruling. First Bank of Lincoln v. Tuschoff, 375 P.3d
687, 693 (Wash.Ct.App. 2016). It held that Banana Belt
purchased the bowling alley subject to First Bank's
assignment and that the Hotel Lincoln note created a separate
obligation against the bowling alley. Id. However,
the Washington Court of Appeals remanded the case and
directed Banana Belt to file suit in Montana so that a
Montana court could determine if First Bank was owed a
deficiency judgment. Id. Banana Belt did not re-file
in Montana following the Washington Court of Appeals'
decision. Instead, Banana Belt entered into a stipulated
resolution with First Bank wherein both parties dismissed
their claims against each other and First Bank gave up the
right to restore its interest in the bowling alley.
November 2016, First Bank filed the current lawsuit against
Land Title alleging negligence and breach of contract. It
sought recovery of the $170, 000 balance on the loan to
Tuschoff, plus interest. Ruling on cross motions for summary
judgment, the district court determined that Montana law
applied. The district court concluded that, under Montana
law, a successful credit bid on a property in foreclosure is
credited to the overall outstanding debt of a debtor. Thus,
the district court held that when First Bank bid the full
amount owed by Tuschoff on the Hotel Lincoln ($425, 748.50),
it extinguished all of Tuschoff's debt. Accordingly, the
district court held that there was no longer any outstanding
debt between Tuschoff and First Bank, and therefore no
damages to recover for any alleged negligence or breach of
contract on the part of Land Title for its failure to direct
the quoted payoff amount to First Bank. The court stated:
First Bank's claims against Land Title relate solely to
its interest in the bowling alley property. At the acceptance
of the First Bank's full credit bid, First Bank no longer
held an interest in the bowling alley property. There remains
no genuine issue of material fact regarding First Bank's
claims against Land Title. Therefore, Land Title's motion
for summary judgment is granted.
Bank timely appeals.
ISSUES ON APPEAL
Montana's anti-deficiency statute apply in this case?
if section 71-1-317 is inapplicable, does First Bank's
negligence claim against Land Title have merit?
either party entitled to attorney's fees on appeal?