Ruby Valley National Bank v. Wells Fargo Delaware Trust Co.
2014 MT 16
| Mont. | 2014Background
- Beckie Lewis received title to Madison County property in Feb. 2005 and executed Indenture 1 (DOT) in favor of Elliot Ames Nevada, Inc.; MERS was named beneficiary and Indenture 1 was recorded Feb. 3, 2005.
- Beckie later executed a second DOT in favor of Ruby Valley National Bank (RVNB), recorded Dec. 29, 2005 (RVNB Indenture).
- MERS assigned Indenture 1 to Flagstar (recorded 2010); Flagstar assigned to U.S. Bank (as trustee) (recorded 2011); U.S. Bank assigned to Wells Fargo (as trustee) (recorded 2011).
- RVNB sued for judicial foreclosure and asked the court to identify the beneficiary of Indenture 1; Wells Fargo was the only assignee to appear and answer.
- The District Court struck Wells Fargo’s trial witness/exhibit list as untimely, denied Wells Fargo’s summary-judgment motion, granted RVNB summary judgment on priority grounds (holding Wells Fargo failed to make a compulsory counterclaim/establish foreclosure elements), and awarded priority to RVNB.
- The Montana Supreme Court reverses: it holds Wells Fargo’s earlier-recorded indenture has priority; a senior lienholder need not counterclaim in a junior lienor’s foreclosure to preserve priority; recorded assignment documents established Wells Fargo as the current beneficiary of Indenture 1.
Issues
| Issue | Plaintiff's Argument (RVNB) | Defendant's Argument (Wells Fargo) | Held | |
|---|---|---|---|---|
| Priority between competing DOTs | RVNB urged its recorded DOT should have priority because Wells Fargo failed to assert a compulsory counterclaim for judicial foreclosure and failed to prove foreclosure elements after its exhibits/witness list was stricken | Wells Fargo argued its earlier-recorded Indenture 1 (via chain of recorded assignments) is senior and thus retains priority regardless of RVNB’s later foreclosure action | Court held Wells Fargo’s earlier-recorded indenture has priority; senior lien unaffected by junior foreclosure and need not be counterclaimant to preserve priority | |
| Whether failure to file compulsory counterclaim forfeits senior lien | RVNB relied on compulsory-counterclaim principles to argue forfeiture of Wells Fargo’s rights | Wells Fargo relied on Deschamps and the STFA: nonjudicial foreclosure is permitted and a senior lienholder may elect not to join; compulsory counterclaim rule inapplicable | Court held counterclaim was not required; nonjudicial foreclosure under STFA preserves senior liens and the one-action statute does not bar later exercise of power of sale | |
| Sufficiency of record evidence after district court struck exhibits/witness list | RVNB argued Wells Fargo could not prove beneficiary status or note assignment without witnesses/exhibits | Wells Fargo pointed to recorded documents and assignments already in the record (attached to RVNB’s complaint and its own filings) establishing assignment chain and note endorsement language | Court held recorded, notarized, and certified documents in the pleadings sufficed to identify Wells Fargo as beneficiary and demonstrate assignment of both DOT and note; burden then shifted to RVNB to raise a genuine factual dispute | |
| Standing / validity of MERS assignments (dissent) | RVNB relied on the record and did not challenge MERS beneficiary status in district court | Wells Fargo relied on chain of assignments from MERS | Dissent argued Pilgeram means MERS was not a valid beneficiary and thus assignments from MERS gave Wells Fargo no interest | Majority declined to reach MERS-beneficiary question and held Pilgeram did not automatically strip Wells Fargo’s asserted interest; majority did not decide MERS’s ultimate authority to assign |
Key Cases Cited
- Deschamps v. Treasure State Trailer Court, Ltd., 360 Mont. 437, 254 P.3d 566 (Mont. 2011) (nonjudicial foreclosure under the STFA is not waived by failing to counterclaim for judicial foreclosure)
- Earl v. Pavex Corp., 372 Mont. 476, 313 P.3d 154 (Mont. 2013) (Montana applies a race-notice recording statute: priority depends on notice and recording)
- Zimmerman v. Kevin Connor Constr., 289 Mont. 148, 958 P.2d 1195 (Mont. 1998) (compulsory-counterclaim principles applied where claims arose from same transaction — distinguished by court)
- Pilgeram v. GreenPoint Mortg. Funding, Inc., 373 Mont. 1, 313 P.3d 839 (Mont. 2013) (interprets STFA beneficiary definition; court here declined to resolve whether MERS can assign in this context)