FARM CREDIT BANK OF SPOKANE, a corporation, Successor by merger to The Federal Land Bank of Spokane, Plaintiff and Respondent, v. WILLERT MARK FAUTH and PATRICIA ANN FAUTH, husband and wife; and THOMAS FAUTH AND THERESA FAUTH, husband and wife, Defendants and Appellants.
No. 91-298
Supreme Court of Montana
Decided Dec. 10, 1991
Submitted on briefs Oct. 24, 1991.
251 Mont. 101 | 822 P.2d 650 | 48 St.Rep. 1080
For Respondent: Gregory G. Murphy, Moulton, Bellingham, Longo & Mather, Billings.
JUSTICE WEBER delivered the Opinion of the Court.
This is a foreclosure action brought by Farm Credit Bank of Spokane (Farm Credit) against Willert Mark and Patricia Ann Fauth (Fauths) in the Seventeenth Judicial District Court, Valley County, Montana. The District Court granted summary judgment in favor of Farm Credit. Fauths appeals. We affirm.
We find the following issue determinative:
Title 12 U.S.C. 2202(a)(2) ?
November 17, 1982, the Fauths executed a promissory note to the Federal Land Bank of Spokane, a Farm Credit System lender governed by the Agricultural Credit Act of 1987,
Pursuant to
The Act requires that Farm Credit System lenders consider borrower‘s restructure proposals. If the proposal is declined, the debtor may appeal this decision to a credit review committee.
“Membership. In no case shall a loan officer involved in the initial decision on a loan serve on the credit review committee when the committee reviews such loan.”
The Fauths contended that Robinson was “involved” in the initial denial of their application; thus, Farm Credit violated 2202(a)(2) when Robinson sat on the credit review committee.
“Limitation on foreclosure. No qualified lender may foreclose or continue any foreclosure proceeding with respect to any distressed loan before the lender has completed any pending consideration of the loan for restructuring under this section.”
After Farm Credit commenced foreclosure on November 29, 1988, it voluntarily selected a new committee and held a second review of the Fauths’ restructure proposal. On November 30, 1989, the Fauths’ April 5, 1988, restructuring application was again reviewed and denied.
Did Farm Credit‘s credit review committee properly review Fauths’ restructure application in compliance with the standards of Title 12 U.S.C. 2202(a)(2) ?
The Fauths contend that Robinson was involved in the initial denial of the Fauths’ application, and therefore Farm Credit violated the restructure procedures mandated by
We note that 2202(a)(2) prohibits “loan officers” who are involved in the initial decision from serving on a credit review committee. Because we conclude that any deficiency in the credit review procedure was corrected by the subsequent committee review, we do not find it necessary to decide whether regional credit manager Robinson could be classed as a “loan officer” for this purpose.
In reaching that decision the committee was required to consider
“In general. When a qualified lender receives an application for restructuring from a borrower, the qualified lender shall determine whether or not to restructure the loan, taking into consideration (A) whether the cost to the lender of restructuring the loan is equal to or less than the cost of foreclosure; (B) whether the borrower is applying all income over and above necessary and reasonable living and operating expenses to the payment of primary obligations; ...”
The initial credit review committee denied the Fauths’ application on the ground that (1) the Fauths’ historical cash flow indicated a higher level of income available for debt service; (2) the Fauths were unwilling to pledge available real property as additional security; and (3) the application did not represent the least cost alternative to Farm Credit. The second committee denied the application of April 5, 1988, for the same reasons.
Farm Credit contends that 2202a(b)(3), is a limitation on the enforcement of foreclosure rather than a condition precedent to filing a foreclosure action. Thus dismissal is not required when the court did not order foreclosure until after procedural requirements were met.
Section 2202a(b)(3), in substance provides that no lender “may foreclose or continue any foreclosure proceeding” before the lender has completed any pending consideration of a restructure plan. On April 5, 1988, the Fauths filed their initial restructure application. Loan officer Schmitt denied the restructure proposal and the Fauths’ appeal to the credit review committee was denied on September 8, 1988. Farm Credit then commenced foreclosure proceedings on November 29, 1988. As a result of contentions that Robinson‘s membership in the committee was inappropriate, Farm Credit selected a new committee which completed the second review on November 30, 1989. On December 4, 1990, the District Court concluded that the section provided a limitation on enforcement, that the action of the second review committee cured any violation, and granted Farm Credit‘s motion for summary judgment. On May 13, 1991, the court ordered foreclosure of the mortgage.
We conclude that the District Court is correct in concluding that this code section did not require dismissal of the foreclosure. The initial committee credit review and the second committee credit review took place prior to the judgment of foreclosure. We therefore conclude there was no violation of
Finally the Fauths contend that Farm Credit should have considered the facts regarding restructuring as in existence on November 30, 1989, the date of review, rather than limiting review to the April 5, 1988, restructuring application.
In Federal Land Bank of St. Paul v. Asbridge (N.D. 1991), 474 N.W.2d 490, the borrower, in a foreclosure action, requested that the case be remanded in order for Asbridge to file an additional
Likewise in this case, Farm Credit refused the Fauths’ restructure plan in accordance with the Agricultural Credit Act procedures. Section 2202a(b)(3), as applicable here, prohibited Farm Credit from continuing foreclosure until it had completed “any pending consideration of the loan for restructuring.” We conclude that the only pending application for consideration was the restructure application of April 5, 1988. Thus Farm Credit was not required to command interminable efforts at restructuring, consider any revised structure applications, or consider negotiations subsequent to April 5, 1988.
We hold Farm Credit‘s review committee properly reviewed Fauth‘s restructure application in compliance with the standards of
We affirm.
CHIEF JUSTICE TURNAGE and JUSTICES HUNT, MCDONOUGH, and GRAY concur.