                                 No. 88-72
                IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1988



LITTLE HORN STATE BANK,
                 Plaintiff and Appellant,
         -vs-
THOMAS J. MILL and SHARON MILL,
                 Defendants and Respondents.




APPEAL FROM:     District Court of the Thirteenth Judicial District,
                 In and for the County of Big Horn,
                 The Honorable William J. Speare, Judge presiding.

COUNSEL OF RECORD:
         For Appellant:
                 Bert W. Kronmiller and James E. Torske, Hardin,
                 Montana
         For Respondent :
                 Moulton, Bellingham, Longo    &   Mather; Ward Swanser,
                 Billings, Montana



                                    Submitted on Briefs:     June 22, 1988
                                     Decided:       August 23, 1988
Filed:
         m~2 3 1988
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
      Plaintiff Little Horn State Bank appeals the September
8, 1987, bench judgment of the Thirteenth Judicial District
Court, Big Horn County. After trial, the court dismissed the
Bank's action on its merits. The court concluded that defen-
dants Thomas and Sharon Mill had a superior claim to the
heating system and exhaust fan which the Mills removed from a
building mortgaged by a third party to the Bank. We affirm.
      The players in the proceedings that gave rise to this
case are appellant, Little Horn State Bank (~ank),respon-
dents, Thomas J. Mill and Sharon Mill (Mills), Gary C. Davis
and Patricia C. Davis (Davises) and Ruf Cut, Inc., a corpora-
tion (Ruf Cut) , in which Mills were the sole shareholders.
      Facts relevant to this case reveal that on April 28,
1980, Mills gave to Bank a real estate mortgage on property
in Big Horn County, described in Certificate of Survey 293,
to secure a loan of $81,516 for the purpose of enabling Mills
to construct a building thereon to be used as a roller skat-
ing facility.
      On July 7, 1980, Thomas J. Mill gave the Bank a securi-
ty agreement, evidenced by a financing statement, to secure a
loan of $30,000 for the purpose of enabling Mills to acquire
personal property to be used in the roller skating facility.
The security agreement covered personal property, including
the Co-Ray Vac heating system and exhaust fan installed in
the building located on the real property described in Cer-
tificate of Survey 293. The heating system was installed by
hanging it to the ceiling of the building by a series of "J1'
hooks and suspended by wires.    The exhaust fan was put in
place by four lag screws. On December 31, 1981, Mills paid
off the $30,000 loan.
      Sometime prior to April 13, 1984, the Mills were
experiencing financial difficulty in meeting their obliga-
tions under the April 28, 1980, mortgage and were seeking a
buyer for the roller skating facility. The Bank agreed to
finance the Davises as buyers.
       On April 13, 1984, the following events occurred and
were concluded in the office of a Hardin attorney, who draft-
ed the relevant documents as attorney for the Bank and the
Mills.    The record does not disclose if the Davises were
represented by an attorney. These documents were all filed
or recorded in Big Horn County in the following sequence:
       1. A financing statement, Davises as debtors and Mills
as secured parties, listing personal property, including the
heating system and exhaust fan.
      2. Deed to the real property described in Certificate
of Survey 293 (the roller skating building), Mills as gran-
tors and Davises as grantees.
      3. Satisfaction of Mills/Bank mortgage of April 28,
1980.
      4. Termination of financing statement dated July 7,
1980, Thomas J. Mill to the Bank, which had been paid off
December 31, 1981.
      5. Real estate mortgage dated April 13, 1984, mortgag-
ing the property described in Certificate of Survey 293 (the
roller skating building) in the amount of $101,911.05, Davis-
es as mortgagors and the Bank as mortgagee.
      On the same date, April 13, 1984, the Davises and Mills
entered into two agreements:
      1. Document entitled "contract for deed," Ruf Cut as
seller (the corporation in which Mills are sole stockholders)
and Davises as buyers. In this document Mills agreed to sell
and buyers agreed to buy for $25,000, with $8,000 as a down
payment and the balance of $17,000 plus interest to be paid
no later than April 13, 1986, real property adjacent to the
real property described in Certificate of Survey 293 (the
roller skating building but separate therefrom) and personal
property used by Mills in the roller skating rink enterprise.
The "contract for deed" referenced personal property de-
scribed in a schedule attached thereto; no schedule was
attached to the copy introduced in evidence at the trial.
However, in the financing statement dated April 13, 1984, a
detailed specific list of personal property was contained,
and we construe this document and the "contract for deed"
together.
      2. Financing statement filed April 13, 1984, in Big
Horn County, Mills the secured parties and Davises debtors.
This document contains a detailed list of personal property
sold by Mills to Davises relating to the roller skating
business and specifically includes the said heating system
and exhaust fan. The place of filing is not an issue in this
case.
      The "contract for deed" of April 13, 1984, provided
that sale documents, including a deed to the real property
and a bill of sale for the personal property, were to be held
in escrow at the office of the Hardin attorney who had draft-
ed them and that in the event Davises failed to pay the
purchase price, the deed and bill of sale were to be redeliv-
ered to Mills as sellers.
      The "contract for deed" further provided that in the
event of Davises' default, after notice, Mills had the right
to terminate the contract and Davises were to return posses-
sion of the real and personal property to Mills and Davises
as buyers would have no further interest therein.
      Davises defaulted, notice was given, and on May 14,
1986, Davises delivered possession of the real and personal
property under the "contract for deed." to Mills.
      On July 7, 1986, Davises and the Bank entered into an
agreement and release whereby Davises agreed to deed and did
deed the real property described in Certificate of Survey 293
 (the roller skating building and land where it is situate) in
consideration of the Bank satisfying the mortgage debt, then
amounting to $103,256.81.
       In May 1986 Mills offered to sell the heating system
and exhaust fan to the Bank. The Bank declined the offer and
advised Mills that the Bank claims the property as fixtures
pursuant to its mortgage of April 13, 1984, given to them by
Davises.    Mills took possession of the heating system and
exhaust fan, removing them from the roller skating facility,
and the Bank sued.
       We state the determinative issue in this case to be:
Did the District Court err in concluding that the claim of
the Bank under its mortgage of April 13, 1984, to the heating
system and fan as fixtures in the mortgaged premises was
inferior and subject to the right of Mills in this property?
      The answer to this issue is dependent upon who owned
the personal property in dispute at the time Davises gave
their mortgage of April 13, 1984, to the Bank.
      The District Court findings of fact and conclusions of
law, in their essential part, concluded that Mills were at
all times the owners of the personal property and never
transferred ownership to Davises.    The District Court con-
cluded that the Bank obtained no more interest in the person-
al property than the interest held by Davises. We agree and
affirm the District Court's judgment for the respondents.
      The record discloses that the Bank, at the time it
loaned Mills the money to acquire the disputed personal
property, secured the loan by a security agreement further
evidenced by a financing statement.  When Mills paid this
loan, they were the owners of the personal property,
unencumbered.
       The undisputed testimony of Thomas J. Mill is that the
Mills and the Davises intended the disputed personal property
to remain as such and that it was not intended to be a fix-
ture in the building purchased by the Davises from Mills.
This testimony is further supported by the "contract for
deed" and financing statement executed by Mills and Davises
wherein the personal property is bargained for and sold
separate from the roller skating building and real property
deeded to Davises and upon which the Bank's mortgage was
taken.
      The interest that Davises may have had to the disputed
personal property on April 13, 1984, and which may have been
mortgaged to the Bank was that derived from a contract for
deed. Before such interest could ripen into an interest the
Bank may claim under its mortgage to be superior to the
interest of Mills, an essential condition precedent had to
occur--Davises would have had to complete payment to Mills
under the terms of their purchase contract. They failed to
do so, and with this failure, any claim of the Bank as supe-
rior to Mills also fails.
      Our holding on this issue resolves this case, and it is
unnecessary to discuss any other issues raised by appellant.
      Affirmed.




                                  Chief Justice
We concur:




      Justices
