Trial court did not abuse its discretion in conducting hearing to determine fair market value of foreclosed property.
Five people (collectively, Defendants) completed a series of transactions to acquire over 600 acres of property in Flathead County, Montana. Defendants borrowed $2,237,000 from Whitefish Credit Union (Whitefish). Defendants signed a promissory note for $1,949,466 secured by mortgages on the property. Defendants defaulted on the promissory note and offered Whitefish a deed in lieu of foreclosure; Whitefish did not accept the deed and filed an action to foreclose and collect the debt.
The property was sold at a foreclosure sale on June 12, 2012 to Whitefish for $1,100,000. Whitefish then requested a deficiency judgment against Defendants for $745,365. Defendants opposed the deficiency, arguing that the fair market value of the property exceeded the loan balance. The trial court ordered a hearing to determine the fair market value of the property and the amount of deficiency, if any.
At the hearing three different appraisals were entered into evidence. The appraisals were completed at various times before and during the foreclosure process. The court found the property was worth $2,366,667 as of the date of the foreclosure sale and thus no deficiency was owed.
On appeal, Whitefish argued that a hearing to determine the fair market value of foreclosed property is not required by statute. The Supreme Court of Montana noted that when a trial court acts in equity it must find an equitable result. It held that although a hearing to determine fair market value is not required by statute or case precedent, a trial court can conduct such a hearing if that is necessary to fashion an equitable result.
The Supreme Court of Montana noted that foreclosure law in Montana seeks to balance the protection the law affords a debtor and the restrictions imposed on the foreclosing creditor. The supreme court defines "fair market value" as the intrinsic value of the real property with its improvements at the time of sale under judicial foreclosure, without consideration of the impact of the foreclosure proceedings on the fair market value.
The Supreme Court of Montana remanded the case to the trial court because of evidentiary errors that affected the outcome of the proceeding.
Whitefish Credit Union v. Prindiville
Supreme Court of Montana
November 24, 2015
2015 WL 7459119
Alan M. Weinberger, JD, has been a professor at Saint Louis University School of Law since 1987. Previously, he practiced for twelve years with law firms in Detroit and Washington, DC, where he specialized in real estate transfer, finance, and development. Weinberger graduated magna cum laude from the University of Michigan Law School. He has published articles and chapters in the fields of real estate finance, partnership, and property law. He is coauthor of Property Law Cases, Materials and Problems, 3rd ed., published by West Group. His most recent article, "Tools of Ignorance: An Appraisal of Deficiency Judgments," was published in the Spring 201 5 issue of the Washington and Lee Law Review. Contact: firstname.lastname@example.org
Megan Murphy, JD, is an attorney in the Centennial, Colorado, law firm of White Bear Ankele Tanaka & Waldron. She graduated magna cum laude from Saint Louis University School of Law where she was the Mel Friedman Fellow in Real Estate Law.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Recent Court Decisions on Real Estate and Valuation|
|Date:||Mar 22, 2016|
|Previous Article:||Evidence showing what hypothetical buyer-developer would pay may be considered in determining value of remainder.|
|Next Article:||Property owner may be entitled to compensation for both the fair market value of the property and business losses in a taking.|