                                                  No.    82-88

                    I N THE SUPREPI COURT OF THE STATE OF MONTANA

                                                         1982




AVCO FINANCIAL S E R V I C E S
OF B I L L I N G S ONE, I N C . ,

                                    P l a i n t i f f and A p p e l l a n t ,



DANIEL L . C H R I S T I A E N S , BEVERLY A.
C H R I S T I A E N S , 1,ELVIN R. CEIRISTIAENS            ,
LINDA K. CMRISTIAENS, ROBERT M.
RODMAN AND SUSAN A. RODMAN,

                                    D e f e n d a n t s and R e s p o n d e n t s .




Appeal from:            D i s t r i c t C o u r t of t h e Second J u d i c i a l D i s t r i c t ,
                        I n and f o r t h e C o u n t y of S i l v e r Bow
                        H o n o r a b l e A r n o l d O l s e n , Judge p r e s i d i n g .

C o u n s e l of R e c o r d :

      For P l a i n t i f f :

             John L e s l i e H a n m e r , B u t t e , M o n t a n a

      For D e f e n d a n t s :

             M a u r i c e A.     Maf f e i , B u t t e , Ilontana




                                                  S u b m i t t e d on b r i e f s :   August 19, 1982

                                                                       Decided-:       October 14, 1982



F i l e d OCT&qSZ
Mr. J u s t i c e F r e d J . Weber d e l i v e r e d t h e O p i n i o n o f t h e
Court.


         F o l l o w i n g t h e d e f a u l t by D a n i e l and B e v e r l y C h r i s t i a e n s

 (~hristiaens)
             on a l o a n +e AVCO F i n a n c i a l S e r v i c e s ( A V C O ) ,
                                  0m     f i x


AVCO o b t a i n e d a judgment a g a i n s t C h r i s t i a e n s f o r $ 8 , 5 7 5 . 1 9 .

AVCO b r o u g h t a d e c l a r a t o r y judgment a c t i o n t o d e t e r m i n e i f

t h e judgment c o n s t i t u t e d a l i e n on c e r t a i n S i l v e r Bow County

property.          The D i s t r i c t C o u r t o f t h e Second J u d i c i a l D i s t r i c t

f o r S i l v e r Bow County e n t e r e d a judgment f i n d i n g t h e r e was

no e f f e c t i v e l i e n .    W e v a c a t e t h a t judgment.

        The f o l l o w i n g i s s u e s w i l l b e c o n s i d e r e d on r e v i e w :

         (1) I s a s e c u r e d p a r t y f i r s t r e q u i r e d t o d i s p o s e o f

c o l l a t e r a l given f o r s e c u r i t y of a d e b t i n order t o reduce

t h e amount o f t h e judgment b e f o r e s e e k i n g a n a l t e r n a t i v e

remedy.

         (2)     I f a j u n i o r encumbrancer p u r c h a s e s a s e n i o r encum-

b r a n c e r ' s i n t e r e s t u n d e r a t r u s t i n d e n t u r e and t h e r e a f t e r

sells t h e p r o p e r t y , does t h i s c o n s t i t u t e a f o r e c l o s u r e under

T i t l e 71, MCA,       and i s t h e s e c u r e d p a r t y t h e r e b y p r e c l u d e d

from p u r s u i n g f u r t h e r r e m e d i e s .

        AVCO l o a n e d C h r i s t i a e n s a sum of money on J u n e 8 ,

1978.      A s s e c u r i t y f o r t h e loan C h r i s t i a e n s executed a

p r o m i s s o r y n o t e and a s e c u r i t y a g r e e m e n t i n f a v o r of AVCO

which g a v e AVCO a l i e n on v a r i o u s h o u s e h o l d goods and on two

o l d e r automobiles.           AVCO a l s o r e c e i v e d a s e c o n d t r u s t i n d e n t u r e

l i e n on r e a l p r o p e r t y on E x c e l s i o r Avenue i n B u t t e owned by

Christiaens.           The f i r s t l i e n was h e l d on t h i s p r o p e r t y by

Nationwide F i n a n c e Company ( N a t i o n w i d e )          .
        On September 28, 1979, t h e l o a n w i t h AVCO was i n d e f a u l t .

AVCO f i l e d a n a c t i o n a g a i n s t C h r i s t i a e n s and judgment was

e n t e r e d on November 1, 1 9 7 9 , by d e f a u l t a g a i n s t C h r i s t i a e n s

f o r $8,575.19 p l u s c o s t s and i n t e r e s t .
        The o b l i g a t i o n due Nationwide was a l s o i n d e f a u l t and

Nationwide n o t i c e d f o r e c l o s u r e on i t s t r u s t i n d e n t u r e on t h e

E x c e l s i o r Avenue p r o p e r t y .    The s a l e was conducted on November

8 , 1979, and AVCO, t h e second t r u s t i n d e n t u r e l i e n h o l d e r ,

purchased t h e p r o p e r t y a t t h e t r u s t e e ' s s a l e .        AVCO h a s

s u b s e q u e n t l y s o l d t h e p r o p e r t y on E x c e l s i o r Avenue a t a

loss.

        O November 1, 1979, t h e d a t e of e n t r y of judgment
         n

a g a i n s t C h r i s t i a e n s , t h e y a l s o owned i n t e r e s t s of r e c o r d i n

l a n d d e s c r i b e d a s p l a t 170-B l o c a t e d i n S i l v e r Bow County.

On March 28, 1980, C h r i s t i a e n s s o l d t h e i r t r a c t 170-B l a n d

t o d e f e n d a n t s Rodman f o r $70,000--of            which $8,611.19 was

h e l d back by Summit V a l l e y T i t l e Company pending f i n a l

d e t e r m i n a t i o n o f AVCO by way of t h e i r judgment l i e n .

        The f i r s t i s s u e i s whether a s e c u r e d p a r t y i s f i r s t

required t o dispose of c o l l a t e r a l given f o r s e c u r i t y of a

d e b t i n o r d e r t o r e d u c e t h e amount o f t h e judgment b e f o r e

s e e k i n g a n a l t e r n a t i v e remedy.

        I n o r d e r t o s e c u r e t h e l o a n w i t h AVCO, C h r i s t i a e n s

gave AVCO a l i e n on a 1969 Oldsmobile, a 1972 C h e v r o l e t

p i c k u p , and household goods and f u r n i t u r e .              After default

AVCO d i d n o t a t t e m p t t o t a k e p o s s e s s i o n of any of         the security.

C h r i s t i a e n s t e s t i f i e d t h a t he d r o v e t h e Oldsmobile " u n t i l

t h e f r o n t end b a l l j o i n t s w e r e r e a l bad" and t h a t h e " p a r k e d

t h e c a r and e v e n t u a l l y it was junked o u t . "            Christiaens also

t e s t i f i e d t h a t t h e t r a n s m i s s i o n went o u t on t h e C h e v r o l e t

p i c k u p and t h a t he " f i n a l l y s o l d i t f o r p a r t s . "     Most of t h e

household goods and f u r n i s h i n g s were l e f t i n t h e house on

E x c e l s i o r Avenue, b u t t h e C h r i s t i a e n s s t i l l had t h e washer

and d r i e r .

        Mark Ayers, manager of t h e B u t t e AVCO o f f i c e , t e s t i f i e d

t h a t AVCO does n o t r e p o s s e s s a s e c u r i t y i f they f e e l t h a t

t h e r e was no way t h e y would g e t t h e i r p r i n c i p a l back by
doing so.

        C h r i s t i a e n s c o n t e n d t h a t AVCO i s f i r s t r e q u i r e d t o t a k e

p o s s e s s i o n of t h e c o l l a t e r a l and f i r s t d i s p o s e o f i t i n a

r e a s o n a b l y commercial manner b e f o r e a t t e m p t i n g t o a c q u i r e

any d e f i c i e n c y and t h a t s i n c e AVCO d i d n o t r e p o s s e s s any o f

t h e c o l l a t e r a l i t s h o u l d b e p r e c l u d e d from a t t e m p t i n g t o

e n f o r c e i t s judgment on t h e s a l e o f t h e t r a c t 170-B l a n d .

        S e c t i o n 30-9-504(1),         MCA,    provides:          "A s e c u r e d p a r t y

a f t e r d e f a u l t may s e l l , l e a s e o r o t h e r w i s e d i s p o s e o f any -
                                                                                            or

      of t h e c o l l a t e r a l i n i t s then c o n d i t i o n .      . ."      (Emphasis

added.)        I n a d d i t i o n , s e c t i o n 30-9-501(1),        MCA,     provides:

"When a d e b t o r i s i n d e f a u l t u n d e r a s e c u r i t y a g r e e m e n t , a

secured party.           .   .may r e d u c e h i s c l a i m t o judgment,            foreclosure

o r o t h e r w i s e e n f o r c e t h e s e c u r i t y i n t e r e s t by any a v a i l a b l e

j u d i c i a l procedure."         The Utah Supreme C o u r t , i n c o n s i d e r i n g

t h e same Uniform Commercial Code s e c t i o n a l l o w e d a s e c u r e d

party t o " a t i t s option, ignore t h a t security [personal

p r o p e r t y ] and s a t i s f y i t s judgment from o t h e r p r o p e r t y [ r e a l

p r o p e r t y ] i n t h e hands o f t h e judgment d e b t o r . "             Kennedy v .

Banlc o f Ephraim ( U t a h 1 9 7 9 ) , 594 P . 2d 881, 884.

        " [ T l h e c r e d i t o r c a n i g n o r e h i s s e c u r i t y i n t e r e s t and

o b t a i n a judgment on t h e u n d e r l y i n g o b l i g a t i o n and p r o c e e d

by e x e c u t i o n and l e v y . "     J . White & R .         Summers, Uniform

Commercial Code, a t 962-963                   (1972).       I t may n o t a l w a y s b e

p r a c t i c a l f o r t h e secured p a r t y t o f i r s t t a k e p o s s e s s i o n of

t h e c o l l a t e r a l and a t t e m p t t o s e l l i t i f t h e v a l u e o f t h e

c o l l a t e r a l h a s s o d i m i n i s h e d t h a t t h e p r o c e e d s from r e s a l e

would c l e a r l y b e i n s u f f i c i e n t t o s a t i s f y t h e d e b t .     I t may

t h e n b e t o t h e s e c u r e d p a r t y ' s a d v a n t a g e t o p r o c e e d by

judgment and e x e c u t i o n b e c a u s e i n t h a t way he c a n r e a c h

a s s e t s i n a d d i t i o n t o t h e c o l l a t e r a l and c a n e l i m i n a t e t h e

t w o - s t e p p r o c e s s o f f i r s t s e l l i n g t h e c o l l a t e r a l and t h e n
suing f o r a deficiency.

        W e hold t h a t a secured c r e d i t o r i s n o t required t o

f i r s t t a k e p o s s e s s i o n and d i s p o s e o f c o l l a t e r a l b e f o r e

o b t a i n i n g a judgment a n d e x e c u t i o n upon o t h e r p r o p e r t y owned

by t h e d e b t o r .

        The second i s s u e i s i f a j u n i o r encumbrancer p u r c h a s e s
a s e n i o r e n c u m b r a n c e r ' s i n t e r e s t u n d e r a t r u s t i n d e n t u r e and

t h e r e a f t e r s e l l s t h e property, does t h i s c o n s t i t u t e a f o r e c l o s u r e

under ~ i t l e
              71, MCA, and i s t h e s e c u r e d p a r t y t h e r e b y p r e c l u d e d

from p u r s u i n g f u r t h e r r e m e d i e s .

        A s p a r t o f t h e c o l l a t e r a l , AVCO r e c e i v e d a s e c o n d l i e n

i n t h e form of a t r u s t i n d e n t u r e on p r o p e r t y t h a t C h r i s t i a e n s

owned on E x c e l s i o r Avenue.             Nationwide had t h e f i r s t l i e n

a l s o i n t h e form o f a t r u s t i n d e n t u r e .        On November 8 , 1 9 7 9 ,

Nationwide f o r e c l o s e d and t h e p r o p e r t y was s o l d by b i d i n

conformance w i t h T i t l e 71, MCA, r e g a r d i n g t r u s t i n d e n t u r e s .

AVCO was t h e s o l e b i d d e r f o r $ 7 , 8 5 6 . 6 1 - - t h e     amount d u e on

Nationwide's balance.                 AVCO t h e n s o l d t h e p r o p e r t y t h r o u g h a

Butte realtor.            AVCO r e c e i v e d a g r o s s s a l e p r i c e o f $8,200

and a f t e r p a y i n g t h e t a x e s and s e l l i n g e x p e n s e s , AVCO n e t t e d

a p p r o x i m a t e l y $6,711.

        C h r i s t i a e n s contend       t h a t when AVCO b o u g h t and s o l d t h e

E x c e l s i o r Avenue p r o p e r t y , AVCO p r o c e e d e d u n d e r T i t l e 71,

MCA,    and i s p r e v e n t e d from any f u r t h e r r e c o v e r y b e c a u s e o f a

d e f i c i e n c y u n d e r s e c t i o n 71-1-317,     MCA,    which p r o v i d e s :

"When a t r u s t i n d e n t u r e e x e c u t e d i n c o n f o r m i t y w i t h t h i s

p a r t i s f o r e c l o s e d by a d v e r t i s e m e n t and s a l e , no o t h e r o r

f u r t h e r a c t i o n , s u i t , o r proceedings s h a l l be t a k e n o r

judgment e n t e r e d f o r any d e f i c i e n c y a g a i n s t t h e g r a n t o r .        .
 I'




        The c o n t e n t i o n on t h e p a r t o f C h r i s t i a e n s and t h e h o l d i n g

o f t h e ~ i s t r i c t o u r t s u g g e s t s c o n f u s i o n a s t o t h e p a r t y who
                        C
in fact foreclosed.     AVCO did not foreclose on the Excelsior
Avenue property.     Nationwide did foreclose on that property

in accordance with the procedure under Title 71, MCA, the
"Small Financing Act."     At the sale conducted by Nationwide,
AVCO bid on the property in the amount owed to Nationwide
and AVCO then received a trustee's deed covering the
Excelsior Avenue property.     The title which AVCO received by
that trustee's deed had no relationship to AVCO's junior
trust indenture lien, or to AVCO's judgment lien.     Section

71-1-318, MCA, describes the trustee's deed:
             "(3) The trustee's deed shall operate to
             convey to the purchaser, without right of
             redemption, the trustee's title and all
             right, title, interest, and claim of the
             grantor and his successors in interest and
             of all persons claiming by, through, or
             under them in and to the property sold. .    ."
     The trustee's deed in this case transferred the title

originally held by Nationwide as trustee and including all

right, title and interest of the Christiaens and all those
claiming through them in and to the Excelsior Avenue property.
Such trustee's deed has the affect of eliminating the AVCO
trust indenture lien under its junior trust indenture, and
also eliminating the AVCO judgment lien.    As a result of the
trustee's deed, AVCO became the owner of the Excelsior
Avenue property with a right to sell the same in any manner

it chose.    Under section 71-1-317, MCA, relied upon by the

Christiaens, Nationwide was prohibited from taking a deficiency
judgment.    That section in no way applied to AVCO as a
purchaser.    AVCO therefore had the right to sell the Excelsior
Avenue property without regard to section 71-1-317, MCA.

AVCO did suffer a loss of approximately $1,145 when it sold
the Excelsior Avenue property, but AVCO is not attempting to
recover from Christiaens any part of that loss.    AVCO is

only seeking to recover the amount of its judgment entered
on November 1, 1979, plus interest.
     We hold that AVCO is entitled to a declaratory judgment
establishing that its judgment of November 1, 1979, constituted
a lien upon the land described as plat 170-B, Silver Bow

County.
     We vacate the judgment of the District Court in favor
of the Christiaens, and direct the court to enter a judgment

for AVCO in accordance with this opinion.




We Concur:


       %+
  ~LdLdl.
Chief Justice
