                              NO.    94-438
            IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1995


AgAMERICA, FCB, a corporation, successor
in interest to The Bank of Spokane,
            Plaintiff and Respondent,
     -vs-
GARY G. ROBSON and DONA ROBSON,
husband and Wife,
            Defendants and Appellants.




APPEAL FROM:     District Court of the Fourteenth Judicial District,
                 In and for the County of Musselshell,
                 The Honorable Kenneth R. Wilson, Judge presiding.


COUNSEL OF RECORD:
            For Appellants:
                 A. Clifford Edwards, Roger W. Frickle; Edwards Law
                 Firm, Billings, Montana

            For Respondent:
                 A. Lance Tonn; Lucas and Monaghan, Billings, Montana



                                    Submitted on Briefs: April 6, 1995
                                                Decided:   August 17, 1995
Filed:
Justice Karla M. Gray delivered the Opinion of the Court.

      Gary G. Robson and Dona C. Robson (Robsons) appeal from an
order of the Fourteenth Judicial District Court,                     Musselshell
County,     granting summary judgment in favor of AgAmerica,                  FCB
(AgAmerica) and denying their motion to compel discovery, and from
the subsequent Judgment, Decree of Foreclosure and Order of Sale.
We reverse in part, vacate in part and remand.
      The issues presented on appeal are:
      1.   Did the District Court err in granting summary
      judgment to AgAmerica on the Robsons' affirmative defense
      and AgAmerica's foreclosure action?
      2. Did the District Court err in granting summary
      judgment to AgAmerica on the Robsons' counterclaim?
      3.  Did the District Court err in denying the Robsons'
      motion to compel discovery?
      The Robsons borrowed $131,000 from AgAmerica's             predecessor in
interest (hereafter also referred to as AgAmerica) to purchase real
property in 1976.          They executed and delivered to AgAmerica a
promissory note evidencing the loan.            As security for repayment of
the   loan, the Robsons also executed, filed and recorded a mortgage
covering    the    subject   property.       The mortgage incorporated the
provisions of the Farm Credit Act of 1971 and amendments thereto,
including    the   loan   restructuring      provisions   of   the   Agricultural
Credit Act of 1987 (collectively, the Act).
      The terms of the loan required the Robsons to make annual
installment    payments.     The Robsons made only a partial payment of
the 1985 installment and did not pay any of the installments due in
1986 through 1988.        In 1989, the Robsons and AgAmerica entered into
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a restructure       agreement   regarding the loan.             After the Robsons
failed to make         required payments on             the restructured loan,
AgAmerica advised them that their loan "may be a distressed loan"
pursuant to the Act and sent them an application for a second
restructuring.
      In August 1990, the Robsons submitted the second restructure
application to AgAmerica.             AgAmerica denied the application for a
number of reasons, including insufficient income to repay the first
restructured loan and the lack of additional collateral being
offered for the second restructuring.                The Robsons requested review
of the decision by AgAmerica's Credit Review Committee.                           The
Credit     Review Committee   upheld the denial of the Robsons' second
application to restructure their loan.
     AgAmerica filed, and later amended, a complaint to foreclose
on   the    Robsons'     mortgage.             The   Robsons   answered,     denying
AgAmerica's allegations regarding default and acceleration.                       The
Robsons    alleged,    as an affirmative defense,              that   AgAmerica   had
failed to comply with the loan restructuring provisions of the Act
and counterclaimed for damages based on AgAmerica's alleged breach
of fiduciary duty. After AgAmerica refused to respond to discovery
requests relating to their affirmative defense, the Robsons filed
a motion to compel discovery.
     AgAmerica        moved     for     summary      judgment on      the   Robsons'
affirmative defense and counterclaim and on its foreclosure
complaint; it also moved for protective orders regarding discovery
sought by the Robsons.            The    District     Court    granted   AgAmerica's

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motions for summary judgment and for protective orders, denied the
Robsons' motion to compel discovery, and subsequently entered its
Judgment, Decree of Foreclosure and Order.              The Robsons appeal.


      1.   Did the District Court err in granting summary
      judgment to AgAmerica on the Robsons' affirmative defense
      and AgAmerica's foreclosure action?
      Summary judgment is proper when there are no genuine issues of
material fact and the moving party is entitled to judgment as a
matter of law.         Rule   56(c),    M.R.Civ.P.     The party moving for
summary judgment bears the initial burden of establishing both the
absence of genuine issues of material fact and entitlement to
judgment as a matter of law.             Brinkman     & Lenon v. P & D Land
Enterprises (1994), 263 Mont. 238, 242, 867 P.2d 1112, 1115.                 The
same rules apply to a party seeking summary judgment on an opposing
party's affirmative defense.           Brinkman & Lenon, 867 P.2d at 1115.
      The District Court granted summary judgment to AgAmerica on
the   Robsons'     affirmative     defense      and    counterclaim    and    on
AgAmerica's    foreclosure     complaint.      We review an order granting
summary judgment by applying the same criteria as the district
court.     Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849
P.2d 212, 214.
      We begin by examining the court's grant of summary judgment in
AgAmerica's favor on the Robsons'               affirmative     defense.     The
Robsons'     affirmative defense is based on allegations that, in
considering    their   application      to   restructure,     the Act required
AgAmerica:       (1) to consider whether the cost to the lender of

                                         4
restructuring the loan is equal to,          or less than,     the cost of
foreclosure;       (2) to perform specified computations in determining
the cost of foreclosure;        (3) to perform certain computations in
determining the cost of restructuring; and (4) to restructure a
loan if the potential cost of restructuring is less than, or equal
to, the potential cost of foreclosing.          The Robsons alleged that
AgAmerica did not perform the computations necessary to determine
the cost of         foreclosure or the cost of restructuring and,
therefore,     that AgAmerica did not determine whether the cost of
restructuring was equal to, or less than, the cost of foreclosure,
all in violation of the requirements of the Act.
       Comparing the Robsons' affirmative defense allegations to the
Act itself reveals that the allegations are nearly verbatim quotes
of 12 U.S.C. §§ 2202a(d)      (1) (A), (a) (21, (e) (21, and (e) (1).   Thus,
the clear and unequivocal crux of the allegations is that AgAmerica
failed to comply with the Act in certain specified regards.               The

District Court determined at the outset of its analysis, however,
that the crux of the affirmative defense is a contention that,
while AgAmerica complied with the substantive provisions of the
Act,   its evaluation of the second restructure application was
flawed.      The     court's determination is a misreading of the
affirmative defense as pled by the Robsons.
       We recently resolved the issue of whether an affirmative
defense to a mortgage foreclosure action may be predicated on a
lender's failure to comply with the requirements of the Act. In
Farm Credit Bk. of Spokane v. District Court (1994), 267 Mont. 1,

                                      5
24, 881 P.2d 594, 608, we held that, where the parties'                      mortgage

incorporates the loan restructuring provisions of the Act, an
affirmative defense based on the lender's failure to comply with
the Act is available.       While Farm Credit Bk. of Spokane was decided
after the District Court's decision in this case, the general rule
is that an appellate court must apply the law in effect at the                   time

it renders its decision.         Haines Pipeline v. MPC (1992), 251 Mont.
422, 433, 830 P.Zd 1230, 1238.          Thus, we examine the case presently
before us under Farm Credit Bk. of Suokane.
      Here, it is undisputed that the mortgage at issue incorporated
the loan restructuring provisions of the Act.             As set forth above,
it is clear that the Robsons alleged AgAmerica's failure to comply
with those provisions as an affirmative defense.                 Thus,    AgAmerica
is entitled to summary judgment on the Robsons' affirmative defense
only if it established the absence of genuine fact issues regarding
its compliance with the Act's least cost analysis requirements, as
contained in 12 U.S.C.           §§ 2202a(d)   (1) (A),   (a)   (2))     (e) (2) and

(e) (1).
      In     this      regard,    the    District     Court       made      several
determinations.         It first determined that the Robsons "tacitly
admit"     that     AgAmerica    complied    with   all of       the     procedural
requirements of the Act.         This determination is incorrect; it also
impermissibly shifts the burden on summary judgment.                      The court
based this determination on an erroneous reading of a portion of
the Robsons' brief opposing summary judgment which, in turn, relied
on Gary Robson's deposition.         In fact, while the Robsons admit that

                                         6
AgAmerica        "complied with at least a portion of the Act's mandated
provision[sl ,'I their brief did not admit compliance by AgAmerica
with all of the Act's requirements.            Conspicuously absent from the
admitted compliance list are the very requirements the Robsons
allege were not met by AgAmerica and which form the basis for their
affirmative defense; namely, compliance with the requirement that
the lender consider the least cost factor when determining whether
to accept a restructure application,               perform    computations      to
determine        the   costs of      foreclosure and restructuring,            and
restructure the loan where the cost of restructuring is less than,
or equal to, the cost of foreclosure.
     Moreover, because the court had not determined that AgAmerica
established the absence             of a genuine    issue    of material fact
regarding        its   compliance    with the Act,      the District Court's
determination also impermissibly shifted the initial burden on
summary judgment from AgAmerica to the Robsons.                 The    nonmoving
party need not establish the existence of a material factual issue
unless and until the moving party has met its initial burden.                  See
Brinkman     &    Lenon,   867 P.2d at 1115.         Thus,   the Robsons were
entitled to rest on the allegations of their affirmative defense
until AgAmerica established the absence of genuine                    issues of
material      fact     regarding     its   compliance   with 12       U.S.C.    §§

2202a(d) (1) (A), (a) (2), (e) (2), and (e) (1).
     The District Court also determined that the Act's least cost
analysis     requirements     are "but one of a number of factors to be
considered        in determining whether a restructure application

                                           7
represents a sound credit decision."          This determination is not
altogether correct, given the requirement of the Act that a lender
"shall restructure" a loan if it determines that the potential cost
"Of   restructuring    the    loan in     accordance      with a   proposed
restructuring plan is less than or equal to the potential cost of
foreclosure . . . .I'        12 U.S.C.   5 2202a(e)    (1).   In any event,
however,   the court's determination should have led the court
logically and    inexorably to the very question raised by the
Robsons' affirmative defense: did AgAmerica consider the least cost
factor as required by the Act?       The District Court did not require
AyAmerica to come forward with evidence establishing that it had
considered the least cost factor as the Act requires.          Instead, the
court determined that AgAmerica denied the Robsons' restructure
application for other reasons.       That determination simply begs the
question and does not establish the absence of any genuine issue of
material fact regarding the Robsons' affirmative defense.
      The effect of the District Court's decision is to allow
AgAmerica to select the parts of the Act with which it chooses to
comply.    The Act,   by its terms, does not permit such unfettered
discretion in a lender,       and neither will this Court, where the
mortgage at issue incorporates the Act into the mortgage contract.
      We conclude that the District Court erred in determining that
AyAmerica established the absence of any genuine issue of material
fact regarding the Robsons' affirmative defense. On that basis, we
further conclude that the court erred in granting summary judgment
to AyAmerica on the Robsons' affirmative defense.               Because   the
affirmative defense remains to be adjudicated, vie hold that the
District Court also erred in granting summary judgment to AgAmerica
on its foreclosure action.


      2 . Did the District Court err in granting summary
      judgment to AgAmerica on the Robsons' counterclaim?
      After granting summary judgment to AgAmerica on the Robsons'
affirmative defense, the District Court granted summary judgment on
the Robsons'      counterclaim.     The Robsons contend that the court
erred.
      The   Robsons'     counterclaim begins by         incorporating       the
allegations    of   their   affirmative     defense.   In addition to the
affirmative defense allegations summarized above, the allegations
relate to the Robsons' first application to restructure their loan
in   1988 and AgAmerica's         failure    to comply with the Act in
permitting the first restructure.           The counterclaim then alleges a
breach of fiduciary duty by AgAmerica relating to the first
restructure.
      In ruling on AgAmerica's motion for summary judgment on the
counterclaim, the District Court first stated that the counterclaim
was largely disposed of by its ruling on the affirmative defense.
Notwithstanding the court's error in the affirmative defense
determinations,     this determination by the court does not take into
account the substantial difference between an affirmative defense
to foreclosure based on failure to comply with the Act in
considering the second restructure application and a tort           claim   for
breach of fiduciary duty relating to the first restructure
                                       9
application.      The combination of these two errors prevented the
District Court from properly addressing the Robsons' counterclaim
in the      context of   AgAmerica's      motion     for summary judgment.
Moreover,      neither   the   Robsons     nor     AgAmerica   analyzes     the
counterclaim separately from the affirmative defense on appeal.
     We recognized in Farm Credit Bk. of Spokane that, where the
parties'    mortgage incorporates the Act,         a party may enforce the
terms of the Act via a breach of contract claim in the same manner
as other contract terms are enforceable.                Farm Credit Bk. of
Spokane,    881 P.Zd at 602.     Here,    however,     the Robsons have not
alleged a breach of contract counterclaim against AgAmerica.              Thus,
Farm Credit Bk. of Spokane is not directly applicable with regard
to the Robsons' counterclaim as alleged, and the parties have not
cited to any authority bearing directly on this issue.
     Given our conclusion above that the District Court erred in
granting summary judgment on the Robsons' affirmative defense, the
consequent necessity of remanding this case for further proceedings
and the lack of adequate briefing on the counterclaim issue, we
conclude that it is appropriate to vacate the District Court's
order granting summary judgment to AgAmerica on the Robsons'
counterclaim and allow the parties and the court to consider the
matter further on remand.

     3.   Did the District Court err in denying the Robsons'
     motion to compel discovery?
     In its memorandum accompanying the order denying the Robsons'
motion to compel discovery, the District Court concluded that:

                                     10
        AgAmerica's "least cost calculations" and other data
        relating to its decision to deny Mr. and Mrs. Robsons'
        second Restructure Application is [sic] not relevant
        evidence and will not lead to the discovery of relevant
        evidence.
Our standard in reviewing a district court‘s ruling relating to
discovery is whether the court abused its discretion.                       McKamey v.
State (1994), 268 Mont. 137, 145, 885 P.2d 515, 520 (citation
omitted).
        Generally,      parties    may     obtain    discovery         regarding      any
unprivileged information relevant to the subject matter of the
action,     including     information      which    "relates to the claim or
defense of the party seeking discovery. .                      .I'     Rule 26(b) (l),
M.R.Civ.P.     Here, the Robsons' motion to compel sought information
regarding the least cost calculations performed by AgAmerica                        while
processing the Robsons'           second    application   to         restructure    their
loan.     As discussed above, this information is both the crux of the
Robsons'     affirmative defense to the foreclosure action and a
mandatory consideration in AgAmerica's              processing of their second
application to restructure.          The allegations that AgAmerica                failed
to consider the least cost factor and perform the computations
necessary for that consideration,               all as required by 12 U.S.C. 5
2202a, constitute a cognizable affirmative defense to a foreclosure
action.     & Farm Credit Bk. of Sookane, 881 P.2d at 608.                         Thus,
the Robsons' motion to compel discovery clearly sought information
relevant to the "claim or defense of the party seeking discovery."
See Rule 26(b) (l), M.R.Civ.P.             Accordingly,   we conclude that the
District Court abused its discretion in denying the Robsons' motion

                                           11
to compel discovery and in granting AgAmerica's related motions for
protective orders.
     The District Court's order granting summary judgment to
AgAmerica on the Robsons' affirmative defense and its foreclosure
action are    reversed,   the order granting summary judgment to
AgAmerica on the Robsons' counterclaim is vacated, and the orders
denying the Robsons'      motion to compel discovery and granting
AgAmerica's   motions for protective orders are reversed.   This case
is remanded for further proceedings consistent with this opinion.




We concur.


        Chief Justice




                                  12
Justice Fred J. Weber dissents as follows:


       I respectfully dissent from the majority opinion.               Once again
we are called upon to decide whether a lender has appropriately

failed to restructure a distressed farm loan.

       The majority holds that the lender must consider the least

cost   analysis     for   restructuring.         The federal statute at issue
provides a list of five considerations that a lender is required to
make when called upon to decide 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 based upon:

       1.    whether the cost to the lender of restructuring a loan is

equal to or less than the cost of foreclosure;
       2.    whether the borrower is applying all income over and
above necessary and reasonable living and operating expenses to the

payment of primary obligations;

       3.    whether the borrower has the financial capacity and the
management    skills      to protect       the    collateral   from    diversion,

dissipation    or   deterioration;

       4.    whether the borrower is capable of working out existing

financial difficulties, reestablishing a viable operation and

repaying the loan on a rescheduled basis; and

       5.    in the case of a distressed loan that is not delinquent,

whether restructuring consistent with sound lending practices may

be taken to reasonably ensure that the loan will not become a loan

that is necessary to place in nonaccrual status.                      12   U.S.C.   §



                                       13
2202a(d)     (l)A-E.

        Here,    the lender gave the following reasons for its denial of

the second restructuring application--insufficient farm income to

repay the loan, the Robsons did not provide the needed information

on past operating history,                the Robsons       did not provide accurate

projections and figures for the restructuring plan they supplied,

the figures that were supplied did not match with former figures

supplied to the agency,                Farm Home had indicated that they would

accelerate their loan because of large delinquencies and the
Robson's        plan      did    not   deal   with   this    at   all,   no   documents

supporting part of their projected income had been presented, and
no additional collateral had been offered as security despite the

fact that the Robson's plan called for an entire year lag time

before a payment would be due.

        This list shows that the lender did not arrive at this

decision     without        thought.     I note with interest that the Robsons

had not paid a single payment on the first restructured loan, yet

they expected the lender to consider a second restructure plan.

The second plan included a "zero"                   figure for yearly interest and

did not take into account the $34,765 payment owed to FCB yearly.

Thus,    the Robsons, in offering this plan, admitted that they had no

intent to repay this or any other loan, such as the Farm Home loan

that was badly delinquent.

        The Robsons'            plan did not contain accurate figures and in

certain pivotal areas, contained no figures.                      A lender cannot make

a   "least      cost 1'    analysis     if it does not have the appropriate


                                               14
information.         The Robsons were informed that they could provide
documentation for their figures to the credit review committee.

        The majority would have all lenders in all situations make the

"least cost" analysis involving foreclosure v.                        restructuring even

if the lender,        as in this case,          has not been provided with the
appropriate figures upon which it could make that decision.                          The

majority would have all lenders do this far-from-simple task even
if     common    sense and past performance have indicated that the

farmers in question are without the sufficient ability to make the

venture pay in any way.

        The record of this case shows that AgAmerica made its own

figures and set them beside            the figures of the Robsons.                   The

lender's        figures,   while not giving the "least                 cost" analysis,

showed clearly that the Robsons were not able to make this farm

pay.       The law specifically directs lenders to consider the

borrower's repayment capacity when making a "cost                        of foreclosure"

figure      1 2    U.S.C. 5 2202a(a) (2)   (A).       The lender determined that
there was no repayment capacity here.                        Why does the majority

believe that returning this case to the District Court is going to
have any affect at all on the                   outcome of    the Robsons     repayment
capacity?        The only thing accomplished by sending this case back is

that the original $131,000 amount that was borrowed and is now

close to $300,000 will be $400,000 by the                    time   the case is settled.

        There is nothing within the applicable legislation that

indicates in any way that if the cost of restructuring is less than

the cost of foreclosure the lender must restructure even if it is

                                           15
painfully obvious, as here, that the farmer cannot make the venture
pay or repay his escalating loan.             The wording of the law merely
states that the lender must consider this along with the other four

factors.   But if the lender determines that the farmers do not have
the capacity to repay the loan, all the restructuring in the world

is not going to repay the lender.            And putting a monetary figure on
restructuring      when     that   is    not     a   plausible   alternative,
accomplishes     nothing.

     If the restructuring plan itself is flawed as here, the lender

cannot make the "least cost" analysis in any meaningful way.             Such
a set of circumstances means that the lender must look to the other

four concerns of the federal law because the lack of repayment

capacity has shown that they are needed for analysis--such criteria
as whether the persons involved have the ability to handle a farm

enterprise become the determining factor behind the decision.

     I submit that the lender in this situation made the proper
determination and that the District Court correctly analyzed the

law and the lender's requirements under it.

     The courts do not belong in the middle of these restructuring
decisions because we do not have the practical sense needed to

evaluate the workings of the parties involved in the decision-

making.    That is why the federal scheme provided for a credit

review committee to review the lender's decision and not the

courts.    Such a credit review committee here affirmed denial of

restructuring.

     The majority's harangue against the "unfettered discretion" of

                                        16
the lender in this case is unwarranted.       The lender used common

sense when interpreting the rules provided it by the legislature

and did not do anything in opposition to legislative directive.

     I strongly disagree with the majority opinion and would vote

to affirm the District Court.




                                          /     Chief JM'$ice




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