*1 413 AgAMERICA, corporation, successor FCB, Spokane,
interest to The Bank of Respondent, Plaintiff v. ROBSON and DONA ROBSON,
GARY G.
husband
and Wife,
Appellants.
Defendants
No. 94-438.
6,
April
1995.
Submitted
Briefs
August 17,
Decided
1995.
St.Rep.
For A. Clifford Roger Ed- W. Firm, wards Law Billings. Tonn; A. Respondent: Monaghan,
For Lance Billings. Lucas Opinion JUSTICE GRAY delivered the Court. (Robsons)
Gary G. Dona appeal Robson and C. Robson from an *3 Court, order the Fourteenth County, Judicial District Musselshell granting summary judgment in of AgAmerica, favor FCB (AgAmerica) denying compel discovery, their to motion and from the subsequent Judgment, Decree of Foreclosure and Order of Sale. We in in part, part reverse vacate and remand. presented appeal
The issues on are: 1. Did the District err granting Court in to /AgAmerica on the Robsons’ affirmative defense and AgAmeriea’s foreclosure action?
2. Did the District err granting Court in to the counterclaim? AgAmerica on Robsons’ 3. Did the District Court err in the denying Robsons’ motion to discovery? compel $131,000 from AgAmerica’s predecessor
The Robsons borrowed in (hereafter AgAmerica) purchase interest also referred to as to real They property AgAmerica prom- executed and delivered to a issory evidencing security repayment loan, note the loan. As for of the executed, the mortgage covering Robsons also filed and recorded a subject the property. mortgage incorporated of the provisions thereto, Farm Credit Act of 1971 and including amendments the loan 416 (col- of the Act
restructuring provisions Agricultural Credit of 1987 Act). lectively, the to
The terms of loan Robsons make annual only partial The Robsons made payments. payment installment not pay and did the installments due installment 1989,the into through AgAmerica 1988. In Robsons entered the loan. After the failed agreement regarding a restructure Robsons loan, on required payments make the restructured to “may pursuant that their loan a distressed loan” to advised them be restructuring. for a application the Act and sent them an second 1990, the Robsons submitted the second restructure August In application for a AgAmerica. AgAmerica to denied the reasons, to the first including repay insufficient income number of being the lack of additional collateral offered restructured loan and of the restructuring. requested for the second The Robsons review Committee. The Credit Re- by AgAmerica’s decision Credit Review upheld the denial ofthe Robsons’second view Committee restructure their loan. to filed, amended, a on complaint and later foreclose answered, denying Robsons’mortgage. The Robsons alleged, default and acceleration. The Robsons
allegations regarding defense, had failed as an affirmative Act for loan and counterclaimed restructuring provisions fiduciary duty. After breach of damages alleged based on discovery to their respond requests relating refused to defense, compel discovery. the Robsons filed motion affirm- summary judgment moved Robsons’ it complaint; and on its foreclosure ative defense and counterclaim discovery by the orders protective regarding sought also moved for for sum- granted AgAmerica’s Court motions Robsons. The District orders, motion denied the Robsons’ mary judgment protective and for discovery, Judgment, entered its Decree compel subsequently appeal. and Order. The Robsons of Foreclosure err 1. Did District Court and AgAmerica’s defense
AgAmerica on Robsons’ affirmative foreclosure action? *4 are
Summary
genuine
is
when there
no
judgment
proper
judgment
entitled
moving party
of
fact and the
to
issues material
56(c),
party moving
law. Rule
M.R.Civ.R The
as a matter of
both the
summary judgment
establishing
bears the initial burden of
judg-
fact
genuine
of material
and entitlement
absence of
issues
of
&
P
ment as a matter
law. Brinkman
Lenon v. & D Land Enter
(1994),
238, 242, 867
1112, 1115.
263 Mont.
prises
P.2d
The same rules
to a
on an
apply
party seeking
opposing party’s
& Lenon,
affirmative defense. Brinkman
Comparing the Robsons’ affirmative defense allegations the Act nearly itself reveals that are allegations quotes verbatim of 12 (e)(1). 2202a(d)(l)(A), (a)(2), (e)(2), Thus, U.S.C. §§ the clear and unequivocal crux of the is that comply failed to the Act in certain specified regards. with District Court deter- analysis, however, mined at the outset its the crux of the that, affirmative defense is a contention complied Act, provisions with substantive its evaluation of the second was flawed. The court’s determination restructure is a by misreading pled of the affirmative defense as the Robsons. recently We resolved issue of an affirmative may be mortgage predicated to a foreclosure action defense of the Act. In Farm requirements failure to lender’s 1, 24, (1994), 267 Bk. v. District Court Mont. Credit that, incorporates 594, 608, parties’mortgage held where the P.2d we Act, an affirmative defense provisions the loan *5 418 the Act While comply failure to is available. on the lender’s
based the was decided after District Court’s Credit Bk. Farm of case, appellate rule that an court must general in this is decision it renders its decision. Haines in effect at the time the law apply 433, 1230, (1991), 422, Mont. 830 P.2d 1238. MPC 251 v. Pipeline us under Farm Credit presently the case before Thus, we examine Spokane. Bk. of incorporated at issue
Here, undisputed mortgage that the it is above, forth it is clear of the Act. As set restructuring provisions loan with those alleged AgAmerica’s failure the Robsons entitled to Thus, AgAmerica defense. is an affirmative as provisions only if it affirmative defense on the Robsons’ compli- its genuine regarding of fact issues the absence established analysis requirements, as contained the Act’sleast cost ance with (e)(2) (e)(1). (a)(2), 2202a(d)(l)(A), U.S.C. 12 §§ determinations. It the District Court made several regard, In this “tacitly admit” that that the Robsons determined first the Act. This requirements of procedural all of the complied with shifts the burden on incorrect; impermissibly it also determination on an erro- The court based this determination summary judgment. opposing the Robsons’ brief reading portion of a neous fact, deposition. In which, turn, Gary relied on Robson’s “complied with at least a admit that the Robsons their brief did not admit provision[s],” the Act’s mandated portion requirements. the Act’s Con- with all of by AgAmerica compliance very list are the compliance from the admitted absent spicuously by AgAmerica met allege were not the Robsons requirements defense; namely, compli- the basis for their form which least cost that the lender consider the requirement ance with accept application, a restructure determining whether factor when of foreclosure and to determine the costs computations perform of restructur- the loan where the cost and restructure restructuring, to, than, the cost of foreclosure. equal less or ing is the court had not determined Moreover, because issue ofmaterial fact genuine the absence of a established Court’s determi Act, the District compliance with its regarding burden on shifted the initial impermissibly nation also need nonmoving party to the Robsons. from unless and until material factual issue existence ofa not establish Lenon, & See Brinkman initial burden. has met its moving party entitled to rest on Thus, the Robsons were P.2d at 867 of their affirmative defense until established genuine regarding compli- issues of material fact its the absence of (e)(1). 2202a(d)(l)(A), (a)(2), (e)(2), 12 U.S.C. ance with §§ analy- Court also determined that the Act’sleast cost The District of factors are “but one of number to be considered requirements sis application represents a restructure a sound determining correct, altogether given This determination is not credit decision.” the Act that a lender “shall restructure” a requirement loan if determines potential that the cost “of the loan in it proposed restructuring plan equal with a less than or accordance 2202a(e)(l). cost offoreclosure ....” U.S.C. In potential § however, event, the court’s determination should have led the court *6 inexorably very question by to the raised the Robsons’ logically AgAmerica defense: did consider the least cost factor as affirmative require The District Court did not required by Act? that it establishing
come forward with evidence had considered the Instead, the Act the court requires. least cost factor as determined denied the Robsons’restructure for other application that simply begs question That determination and does not reasons. any genuine the absence of issue of material fact regarding establish affirmative defense. Robsons’ The effect of the District Court’s decision is to allow Act, it parts comply. select the of the Act with which chooses to The terms, permit lender, does not such unfettered discretion in a by its Court, mortgage this where the at issue incorporates and neither will mortgage the Act into the contract. erred in determining
We conclude that the District Court any genuine the absence of issue of material AgAmerica established basis, On fact the Robsons’ affirmative defense. we regarding granting summary that the court erred in judgment further conclude affirmative defense. Because the af- on the Robsons’ adjudicated, remains to be we hold that the District firmative defense granting summary judgment AgAmerica on its Court also erred action. summary judgment to granting District Court err in 2. Did the the Robsons’counterclaim? AgAmerica on on the Robsons’ summary judgment AgAmerica After defense, granted Court the District contend that the court counterclaim. Robsons on the Robsons’ erred. begins by incorporating allegations
The Robsons’counterclaim In of their affirmative defense. addition to affirmative defense above, the allegations summarized relate to the Robsons’ to restructure their loan in 1988 and AgAmerica’s first the Act in comply permitting failure to with first restructure. The fiduciary alleges duty by AgAmerica counterclaim then a breach of the first restructure. relating to motion ruling
In on the counterclaim, the District Court first stated that the counterclaim disposed by ruling of its on the affirmative defense. largely was Notwithstanding the court’s error in the affirmative defense determi- nations, by determination the court does not take into account difference between an affirmative defense to foreclo- the substantial the Act in considering based on failure to the second sure fiduciary duty and a tort claim for breach of restructure the first restructure The combination of relating application. these properly the District Court from prevented addressing two errors counterclaim in the context of motion for sum- Robsons’ Moreover, neither the Robsons nor ana- mary judgment. lyzes separately the counterclaim from affirmative defense on appeal. that, in Farm Credit Bk. where the recognized We Act, party may enforce the mortgage incorporates terms
parties’ contract claim in the same manner as other of the Act via breach of Spokane, Farm Credit Bk. 881 P.2d contract terms are enforceable. Here, however, alleged the Robsons have not a breach of at 602. Thus, Farm Credit Bk. against AgAmerica. counterclaim contract *7 directly regard to the Robsons’ coun applicable is not any authority not cited to alleged, parties as and the have terclaim directly on this issue. bearing Court erred in grant- above that the District
Given our conclusion defense, judgment on the Robsons’ ing summary for further necessity remanding proceedings this case consequent issue, briefing on the counterclaim we adequate the lack of to vacate the District Court’s order appropriate that it is conclude counter- to on the Robsons’ granting and the court to consider matter parties allow the claim and further on remand. denying in the Robsons’ motion to the District Court err
3. Did discovery? compel accompanying denying order
In its memorandum discovery, the District Comb concluded that: compel motion to Robsons’ relating and other data to its cost calculations” “least AgAmerica’s Appli Restructure deny Mr. and Mrs. Robsons’ second to decision and will not lead to the relevant evidence [sic] not cation evidence. discovery of relevant ruling relating reviewing a district court’s
Our standard
McKamey
its discretion.
v.
the court abused
discovery is whether
(citation omitted).
515, 520
(1994),
137, 145, 885 P.2d
268 Mont.
State
discovery regarding any un
Generally, parties may obtain
action,
of the
subject
to the
matter
information relevant
privileged
“relates to the claim or defense
information which
including
26(b)(1),
Here,
M.R.Civ.R
the Rob-
seeking discovery...
.” Rule
party
regarding the least cost
sought
information
compel
motion to
sons’
the Robsons’
by AgAmerica
processing
performed
calculations
above,
their loan. As discussed
to restructure
second
the crux of the Robsons’ affirmative defense to the
is both
information
mandatory
AgAmerica’s proc
and a
consideration
action
to restructure. The
their second
essing of
perform
the least cost factor and
failed to consider
consideration,
by 12
necessary
for that
all as
computations
affirmative defense to a foreclo
2202a,
cognizable
constitute a
U.S.C. §
Thus,
The holds that the lender must consider the least cost analysis for restructuring. federal statute at provides issue a list of five considerations that a lender to make when called to decide upon whether to foreclose on a party’s farm loan or to restructure the loan. The statute requires a lender to determine whether or not to restructure upon: based
1. whether the cost to the lender of a equal loan is foreclosure; or less than the cost of
2. whether the borrower is applying all income over and above necessary and living reasonable and operating expenses to pay- primary obligations; ment of
3. whether the borrower has the capacity financial and the man- agement protect skills to diversion, collateral from dissipation or deterioration; capable working borrower is out existing financial
difficulties, reestablishing a viable operation repaying the loan basis; on a rescheduled
in5. the case of a distressed loan that is not delinquent, whether restructuring consistent with sound lending practices may be taken reasonably ensure that the loan will not become a loan that is 2202a(d)(l)(A-E). necessary to in nonaccrual place status. 12 U.S.C. § Here, gave the lender the following reasons for its denial of the restructuring application second farm income to repay —insufficient loan, the Robsons did not provide the needed information past history, the operating provide Robsons did not projections accurate figures restructuring plan they for the supplied, figures supplied figures were did not match with former supplied to the agency, Farm Home had they indicated that would accelerate their large loan because of delinquencies and the Robson’splan did not deal all, with this at no documents supporting part projected of their income had presented, been and no additional collateral had been security offered as the fact that despite the Robson’splan called for year lag an entire time before a payment would be due.
This list shows the lender did not arrive at this decision thought. without I note with interest that the Robsons had not paid single payment loan, yet on the first restructured they expected the lender plan. plan to consider second restructure The second in- yearly cluded a “zero” figure interest and did not take into account $34,765 payment yearly. Thus, Robsons, owed to FCB they offering plan, admitted that had no intent to repay this or loan, other the Farm that was badly such as Home loan delin- quent. figures not plan
The Robsons’ did contain accurate and in certain areas, figures. no contained A lender cannot make a pivotal “least *9 analysis if it not have appropriate cost” does the information. The they were informed that could provide Robsons documentation for figures their to the credit review committee. majority all
The would have lenders in all situations the make analysis involving cost” restructuring “least foreclosure v. the even if lender, case, as in this not been provided has with the appropriate upon which it could make that The figures majority decision. would all far-from-simple have lenders do this task even if common sense past performance and have indicated that in question the farmers are ability the without sufficient to make the in pay any way. venture The record ofthis case shows that made its own figures set them figures and beside the The figures, Robsons. lender’s not giving analysis, the “least cost” clearly showed that the were Robsons not able to make this farm The pay. specifically law directs lenders to consider the repayment borrower’s capacity when 2202a(a)(2)(A). making figure. a “cost of foreclosure” U.S.C. § The lender determined that there was repayment capacity Why no here. the that majority does believe case to the returning this District Court going any is to have affect at all on the outcome of the Robsons capacity? only by repayment thing accomplished The sending original back $131,000 case is that the amount was borrowed $300,000 $400,000 by is now close to will be the time the is case settled. nothing
There is within the applicable legislation that indicates in way that if restructuring the cost less than is the cost obvious, the it painfully lender must restructure even if here, as that the farmer cannot make the pay repay venture or his escalating wording merely loan. The of the law states that the lender consider this with the other But along must four factors. if the lender capacity determines that the farmers do not the the repay have loan, all the in the restructuring going repay world is not the lender. a putting monetary figure restructuring And when that is not alternative, accomplishes plausible nothing. here, the restructuring
If the itself is flawed as lender cannot plan analysis any meaningful way. Such a set of make the ‘least cost” look to the other four means that the lender must circumstances of repayment capacity of the federal law because the lack concerns they analysis are needed for criteria as has shown —such ability have the to handle persons the involved a farm determining the factor behind the decision. enterprise become the proper I that the lender in this situation made deter- submit analyzed Court correctly and that District law mination under it. requirements the lender’s these belong do not middle of
The courts practical sense needed to we do not have decisions because decision-making. involved in the workings parties ofthe evaluate for credit review committee why provided That the federal scheme a credit and not the Such review the lender’s decision courts. review restructuring. denial of committee here affirmed discretion” of the majority’s harangue against “unfettered case is The lender used common sense lender in this unwarranted. byit legislature the rules did not interpreting provided when directive. anything opposition legislative do and would disagree majority opinion I vote to strongly affirm the District Court. foregoing dissent. JUSTICE TURNAGE concurs in
CHIEF