                                                                   FILED
                                                                April 14, 2016
                                                         In the Office of the Clerk of Court
                                                       WA State Court of Appeals, Division Ill




         IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                            DIVISION THREE

FIRST BANK OF LINCOLN, A                    )         No. 33192-0-111
MONTANA BANK CORPORATION,                   )
                                            )
                    Appellant,              )
                                            )
             v.                             )         OPINION PUBLISHED IN PART
                                            )
DONALD C. TUSCHOFF AND JANE                 )
DOE TUSCHOFF, HUSBAND AND                   )
WIFE, AND THE MARITAL                       )
COMMUNITY COMPRISED THEREOF;                )
BANANA BELT GAMING LLC; JOHN                )
DOES I-IV; AND ALL PARTIES                  )
CLAIMING RIGHT, TITLE OR                    )
INTEREST IN THE SUBJECT REAL                )
PROPERTY IN ASOTIN COUNTY,                  )
WASHINGTON,                                 )
                                            )
                    Respondents.            )

      LAWRENCE-BERREY, J. - Donald Tuschoff (Tuschoft) sold a bowling alley to the

Schwab family, who financed the purchase with a note secured by a deed of trust.

Tuschoff and his daughter thereafter borrowed money from First Bank of Lincoln (First

Bank) to purchase Hotel Lincoln located in the state of Montana. As additional collateral

to secure the loan from First Bank, Tuschoff assigned the Schwab/Tuschoff deed of trust
No. 33192-0-III
First Bank of Lincoln v. Tuschoff


to First Bank. First Bank properly recorded the assignment of the deed of trust. Banana

Belt Gaming LLC (Banana Belt) purchased the bowling alley from Schwab, paid

Tuschoff the balance owing on the Schwab/Tuschoff note, but failed to secure a release

of the assigned deed of trust from First Bank.

       First Bank later learned of the sale and sued Tuschoff and Banana Belt. In

addition, First Bank conducted a nonjudicial sale of the Hotel Lincoln property in

Montana. Banana Belt successfully moved for summary judgment. The trial court

determined as a matter oflaw that Banana Belt's payment of the Schwab/Tuschoff note

extinguished First Bank's assigned Schwab/Tuschoff deed of trust. First Bank appeals.

       Most of the issues on appeal involve whether Banana Belt's purchase of the

bowling alley is subject to First Bank's recorded assigned deed of trust. In the published

portion of this opinion we answer these issues in the affirmative, in favor of First Bank.

The last issue on appeal is whether First Bank's election to foreclose nonjudicially against

the Hotel Lincoln property in Montana extinguished the underlying obligation and also

the Schwab/Tuschoff deed of trust. In the unpublished portion we direct Banana Belt to

file suit in Montana to have this issue resolved, due to the fact that resolution of this issue

requires application of Montana law and because the controlling precedent is unclear. In

general, we reverse and remand for the trial court to proceed consistent with this opinion.



                                              2
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


                                              FACTS

       This case involves a series of real estate transactions related to a bowling alley

located in Clarkston, Washington. Tuschoff originally bought the bowling alley in July

1994 from Rex and Mary Helen Humphrey for $550,000.00. Tuschoff financed the sale

by executing a note and deed of trust.

       A.      Tuschoff sells the bowling alley to Schwab

       In 1998, Tuschoff sold the bowling alley to a group of investors for $1,100,000.

The group of investors included Gene Schwab, Ladene Schwab, James Schwab, and

several others (Schwab). Schwab financed the sale by executing a $1, 100,000 note,

payable to Tuschoffin monthly installments of $9,791.65. To secure repayment, Schwab

executed a deed of trust, listing Tuschoff as the beneficiary. The Schwab/Tuschoff deed

of trust stated:

       This deed is for the purpose of securing performance of each agreement of
       Grantor herein contained, and payment of the sum of One Million One
       Hundred Thousand and No/100 Dollars ($1, 100,000.00) with interest, in
       accordance with the terms of a promissory note of even date herewith
       payable to Beneficiary or order, and made by Grantor, and all renewals,
       modifications and extensions thereof, and also such further sums as may be
       advanced or loaned by Beneficiary to Grantor, or any of their successors or
       assigns, together with interest thereon at such rate as shall be agreed upon.




                                             3
No. 33192-0-III
First Bank of Lincoln v. Tuschojf


Clerk's Papers (CP) at 82. On November 2, 1998, Tuschoffrecorded the

Schwab/Tuschoff deed of trust with the Asotin County Auditor's Office. The Humphreys

remained as senior lienholders.

       Tuschoff placed the Schwab/Tuschoff note and deed of trust in escrow with Land

Title of Nez Perce County (Land Title), which held the original loan documents, collected

Schwab's monthly payments, and disbursed those payments to Tuschoff.

       B.     Tuschojfbuys Hotel Lincoln and assigns the Schwab/Tuschojf deed of trust
              to First Bank

       On January 27, 2011, First Bank lent $440,000 to Tuschoff and his daughter

Laurie Parks so the two could buy Hotel Lincoln in Lincoln, Montana. At the time

Tuschoff and Parks applied for the loan, the then-owners of Hotel Lincoln did not have

adequate financial statements so that First Bank could analyze the business's cash flow.

To secure the $440,000 loan, Tuschoff offered to provide additional collateral to First

Bank in the form of an assignment of his beneficial interest in the Schwab/Tuschoff deed

of trust and a security interest in the Schwab/Tuschoff note. First Bank agreed to loan the

money in exchange for the additional collateral. Tuschoff and Parks thereafter signed a

promissory note for $440,000, partially secured by a deed of trust against the purchased

property. The promissory note was payable in full on February 1, 2014. It contained a

due on sale clause that allowed First Bank to "declare the entire balance of this Note to be

                                             4
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


immediately due and payable upon the ... sale of ... any part of the Property," earlier

defined as "any property ... that secures ... performance of the obligations of this Loan."

CP at 72, ,i 12, CP at 70, ,i I.E.

       That same day, Tuschoff executed further documents to provide First Bank the

additional agreed on collateral. Specifically, Tuchosff executed an "Assignment of Deed

of Trust," by which Tuschoff assigned his beneficial interest in the Schwab/ Tuschoff

deed of trust to First Bank. CP at 86. The assignment broadly assigned "all right title and

interest in said Note and all rights accrued under said Deed of Trust." Id. First Bank

recorded the assignment with the Asotin County Auditor. Despite this purported

assignment of all right title and interest in the note, Tuschoff continued receiving monthly

installment payments from Schwab.

       Tuschoff also signed a security agreement wherein he granted First Bank a security

interest in all property described therein, including:

       B.      Instruments, Documents and Chattel Paper. All instruments and
       rights I have now or in the future to payments including, but not limited to,
       rights to payment arising out of all present and future documents,
       instruments, tangible and electronic chattel paper, and loans and obligations
       receivable. This includes any rights and interests ... which I may have by
       law or agreement against any Account Debtor or obligor of mine.




                                               5
No. 33192-0-111
First Bank ofLincoln v. Tuschojf


       C.      Specific Property. DEED OF TRUST Chattel Paper Issued to
       DONALD C. TUSCHOFF by            . [sic} and executed on October 22, 1998
       in the amount of $1, 100,000, secured by [the bowling alley propertyj.[ 1l

CP at 95 (emphasis added). First Bank then filed a UCC-1 statement with the

Washington Department of Licensing providing notice of its secured interest in

       [a]ll instruments, including . .. promissory notes.. . . DEED OF
       TRUST Chattel Paper issued to DONALD C. TUSCHOFF by                 . [sic}
       and executed on October 22, 1998 in the amount of $1, 100, 000. 00 ...
       secured by [the bowling alley property].

CP at 101-02 (emphasis added).

       C.     Banana Belt buys the bowling alley from Schwab

       In June 2013, Schwab agreed to sell the Clarkston, Washington bowling alley to

Banana Belt for $1,350,000. Banana Belt hired First American Title Company (First

American) to close the sale with Schwab. First American's limited practice officer, Tonja

Hatcher, handled the closing. Ms. Hatcher obtained the title commitment on the bowling

alley property and reviewed it. She noticed in 121 of that commitment an exception that

listed the Humphreys/Tuschoff deed of trust. She also noticed in 1 23 an exception that



       1
         The parties dispute whether Tuschoff assigned the Schwab/Tuschoff note to First
Bank but retained the right to monthly payments, or whether Tuschoff only gave First
Bank a secured interest in the note. Because an owner of property does not also take a
security interest in it, the execution of the security agreement makes clear that First Bank
had only a security interest in the note.

                                             6
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


listed Tuschoff s assignment of the Schwab/Tuschoff deed of trust to First Bank. She did

not contact First Bank to inquire about First Bank's rights.

       Banana Belt borrowed $600,000 from Columbia Bank to finance the purchase.

Columbia Bank sent a letter instructing First American to assure that its lien rights were

in first position, and "request[ed] that exceptions [listed in paragraphs] 21 and 23 [in the

title commitment] be released." CP at 222.

       Accordingly, Ms. Hatcher sent Rita Johnson, the Land Title employee who

handled the Humphreys/Tuschoff and Schwab/Tuschoff note escrow accounts, an e-mail

asking for a full payoff amount for the Schwab/Tuschoff note. The e-mail attached the

pages of the title commitment listing both the Humphreys/Tuschoff deed of trust as well

as the Schwab/Tuschoff deed of trust. Ms. Hatcher drew an arrow next to Tuschoff s

assignment of the Schwab/Tuschoff deed of trust to indicate "that there [was] somebody

else involved." CP at 202. Ms. Johnson did not get the title commitment pages nor did

she notice the assignment of the Schwab/Tuschoff deed of trust.

      Ms. Hatcher sent a follow-up e-mail to Ms. Johnson requesting confirmation that

Land Title would pay off the deeds of trust so that she would be able to guarantee clear

title to Banana Belt and Columbia Bank. Ms. Johnson believed she was required to pay

off Tuschoff personally and responded, "This is a wrap and both Deeds of Trust will be


                                              7
No. 33192-0-111
First Bank ofLincoln v. Tuschojf


paid." CP at 247. Ms. Hatcher and Ms. Johnson never discussed whether Land Title

would pay First Bank, as opposed to Tuschoff. Ms. Johnson testified in her deposition

that she does not review the title commitment to determine who Land Title needs to pay,

but instead follows the instructions in Land Title's file.

       Several days later, Ms. Johnson sent Ms. Hatcher a payoff quote for the

Schwab/Tuschoffnote, which showed an outstanding balance of $359,271.82. First

American then sent Land Title a check for $359,271.82, which it said represented full

payoff for the Schwab/Tuschoff note. The letter specified that it sent the check in

exchange "for a release of the original Promissory Note and original Deed of

Trust/Mortgage recorded November 02, 1998." CP at 492. Land Title then disbursed

$355,375.75 to Tuschoff and $3,855.93 to Humphrey. This fully satisfied Schwab's

obligation to Tuschoff on the Schwab/Tuschoff note. Schwab then conveyed the bowling

alley to Banana Belt by statutory warranty deed.

       D.     First Bank sues Tuschojf and Banana Belt

       First Bank's Hotel Lincoln loan to Tuschoff matured on February 1, 2014, and a

remaining principal balance existed of $400,430.42. In reviewing whether to renew the

loan, First Bank learned that the bowling alley had been sold and funds disbursed to




                                              8
No. 33192-0-111
First Bank ofLincoln v. Tuschojf


Tuschoff, despite the recorded assignment to First Bank of the Schwab/Tuschoff deed of

trust.

         First Bank sued Tuschoff and Banana Belt in Asotin County Superior Court,

seeking a declaratory judgment that Tuschoff s assignment of his beneficial interest in the

Schwab/Tuschoff deed of trust remained a valid lien against the bowling alley property.

         First Bank held a nonjudicial foreclosure sale for the Hotel Lincoln property on

August 25, 2014. First Bank was the only bidder at the trustee's sale, and successfully

purchased the property. First Bank asserts that a $250,000 balance will remain unpaid in

connection with the Montana note after First Bank liquidates the Hotel Lincoln property.

First Bank never disclosed during discovery the amount it bid at the trustee's sale to

reacquire Hotel Lincoln.

         First Bank also sued Tuschoff in Montana District Court, Lewis and Clark County

under Case No. DDV 2014-326. The Montana trial court's decision is unclear, and will

be discussed in further detail later. Ultimately, First Bank obtained a money judgment

against Tuschoff. Tuschoff has since absconded.

         On October 24, 2014, Banana Belt moved the trial court for summary judgment

and an order to quiet title and reconvey the Schwab/Tuschoff deed of trust. Banana Belt's

principal argument was that its payment to Schwab extinguished the Schwab/Tuschoff


                                              9
No. 33192-0-111
First Bank of Lincoln v. Tuschoff


deed of trust. First Bank filed a cross motion for summary judgment. On February 10,

2015, the trial court granted Banana Belt's motion and denied First Bank's motion.

       First Bank appeals and requests that this court grant summary judgment in its favor

as a matter oflaw.

                                       ANALYSIS

       This court reviews a summary judgment order de novo. Lunsford v. Saberhagen

Holdings, Inc., 166 Wn.2d 264, 270, 208 P.3d 1092 (2009). When reviewing a summary

judgment order, the appellate court engages in the same inquiry as the trial court, viewing

the facts and all reasonable inferences in the light most favorable to the nonmoving party.

Riojas v. Grant County Pub. Util. Dist., 117 Wn. App. 694, 697, 72 P.3d 1093 (2003).

Summary judgment is appropriate only if the moving party can show that "there is no

genuine issue as to any material fact and that the moving party is entitled to a judgment as

a matter of law." CR 56(c). "A material fact is one upon which the outcome of the

litigation depends in whole or in part." Atherton Condo Apt.-Owners Ass 'n Bd. ofDirs. v.

Blume Dev. Co., 115 Wn.2d 506, 516, 799 P.2d 250 (1990). Finally, we may affirm a

trial court's summary judgment order on any basis supported by the record. Lewark v.

Davis Door Servs., Inc., 180 Wn. App. 239, 242, 321 P.3d 274, review denied, 180

Wn.2d 1026, 328 P.3d 902 (2014).


                                            10
No. 33192-0-III
First Bank ofLincoln v. Tuschoff


       A.     A seller ofproperty can only convey the seller's interest

       A seller of property can convey no greater interest in the property than the seller

has. Firth v. Hefu Lu, 146 Wn.2d 608, 615, 49 P.3d 117 (2002). Applying this rule to the

present facts, Tuschoff conveyed only his interest in the property when he reconveyed the

deed of trust to Schwab, and Schwab conveyed only his interest in the property when he

deeded the property to Banana Belt. Here, because Tuschoff could not convey the

property free and clear of the Schwab/Tuschoff deed of trust that he had earlier assigned

to First Bank, Banana Belt purchased the bowling alley property subject to First Bank's

assigned deed of trust.

       B.     The bowling alley property secured two debts

       Banana Belt argues that its payment of the underlying Schwab/Tuschoff note

satisfied the deed of trust because a security interest cannot exist without an obligation.

In support of its argument, Banana Belt cites 18 William B. Stoebuck & John W. Weaver,

Washington Practice: Real Estate: Transactions § 17 .1, at 253 (2d ed. 2004 ). The flaw in

Banana Belt's argument is that the Hotel Lincoln note created a separate obligation

against the bowling alley property. Although Banana Belt's payment to Tuschoff

extinguished Tuschoff s right to foreclose if Schwab failed to pay the Schwab/Tuschoff




                                             11
No. 33192-0-III
First Bank ofLincoln v. Tuschoff


note, it did not extinguish First Bank's right to foreclose if Tuschoff failed to pay the

Hotel Lincoln note-a separate obligation that encumbered the property.

       C.     RCW 65. 08.120 does not protect a subsequent purchaser with notice

       Banana Belt argues RCW 65.08.120 allows it to pay the note payee rather than the

payee's assignee, because the recording of a seller's assignment is not notice that its

payment was improper. RCW 65.08.120 provides:

       Assignment of mortgage-Notice. The recording of an assignment of a
       mortgage is not in itself notice to the mortgagor, his or her heirs, assigns or
       personal representatives, to invalidate a payment made by any of them to a
       prior holder of the mortgage.

(Emphasis added.) Assuming without deciding that the above rule applies beyond

mortgages to notes and deeds of trust, the rule does not advance Banana Belt's position.

First, the rule applies to obligors and certain successors in interest to the obligor, who

make payments on a debt. This rule therefore would apply to payments made by Schwab

to Tuschoff, but would not apply to payments made by Banana Belt to Tuschoff since

Banana Belt is not an "heir, assign, or personal representative" of Schwab. Second, the

rule protects obligors on a debt and certain successors in interest to the obligor, when

payments are made to an assignor of the debt when the obligor or its successor had no

notice that the payments should have been directed to the assignee. Here, a subsequent




                                              12
No. 33192-0-III
First Bank ofLincoln v. Tuschoff


purchaser such as Banana Belt who actually knows of First Bank's recorded assignment

may not ignore First Bank's interest by claiming it did not know of it.

       D.     Banana Belt is not a bona fide purchaser

       Because a bona fide purchaser can obtain rights greater than a seller has, we next

determine whether this doctrine protects Banana Belt.

       [I]f the purchaser has knowledge or information that would cause an
       ordinarily prudent person to inquire further, and if such inquiry, reasonably
       diligently pursued, would lead to discovery of title defects or of equitable
       rights of others regarding the property, then the purchaser has constructive
       knowledge of everything the inquiry would have revealed.

Albice v. Premier Mortg. Servs. of Wash., Inc., 174 Wn.2d 560, 573, 276 P.3d 1277

(2012). Here, Banana Belt had constructive knowledge--either through its agent First

American or the recording of the assignment itself-that First Bank claimed an interest in

the bowling alley property. Had First American's closing agent contacted First Bank in

June 2013, First American would have learned that Tuschoff had assigned First Bank the

Schwab/Tuschoff deed of trust to secure a $440,000 promissory note that was payable in

full in less than eight months, that over $400,000 was owing on the note, and that the note

had a due on sale clause that allowed First Bank to accelerate payment in full if the

bowling alley was sold. In addition, First American would have learned that First Bank

had a perfected security interest in the promissory note itself. All of this information is


                                             13
No. 33192-0-III
First Bank ofLincoln v. Tuschojf


imputed to Banana Belt because First American was the closing agent for Banana Belt.

Nat'! Bank of Wash. v. Equity Inv'rs, 81 Wn.2d 886, 910, 506 P.2d 20 (1973). We

therefore conclude that Banana Belt was not a bona fide purchaser and was thus incapable

of obtaining a greater interest in the bowling alley property than Schwab (through

Tuschoff) had the right to convey.

       E.     First Bank's recorded interest is entitled to protection even though Tuschojf
              had not defaulted on the Hotel Lincoln note

       Banana Belt argues that First Bank merely had a conditional assignment of the

Schwab/Tuschoff note and deed of trust, and its interests did not become absolute until or

unless Mr. Tuschoff defaulted. 2 Whether First Bank's interest was absolute or

conditional is of no consequence to our inquiry. Tuschoffwas unable to convey title free

and clear of First Bank's assigned deed of trust to Schwab, and hence Schwab was unable

to convey clear title to Banana Belt.




       2
         An assignor of a conditional security interest may foreclose on its interest. See
Uni-Com Nw., Ltd. v. Argus Publ'g Co., 47 Wn. App. 787, 794, 737 P.2d 304 (1987).
Even after Tuschoff assigned the Schwab/Tuschoff deed of trust to First Bank, Tuschoff
retained the right to foreclose if Schwab defaulted. In that event, First Bank could have
protected its interests by becoming a bidder at the foreclosure sale, and assuring that the
bid was sufficient to pay all or part of the $400,000 balance of the Hotel Lincoln note.

                                             14
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


       F.     Whether First Bank is precluded from recovering against Banana Belt
              under Montana law

       Banana Belt argues that First Bank's decision to foreclose nonjudicially against the

Hotel Lincoln property prevents First Bank from collecting further on First Bank's note

with Tuschoff, and therefore extinguishes the assigned Schwab/Tuschoff deed of trust.

First Bank responds that a Montana trial court decided this issue contrary to Banana

Belt's argument, that the obligation was not extinguished, and we should give comity to

that decision. We reject First Bank's argument, and conclude that application of comity

to this issue would be inappropriate.

       The comity doctrine allows a court, acting within its discretion, to give effect to

the law and resulting orders of another jurisdiction out of deference and respect,

considering the interests of each jurisdiction. Haberman v. Wash. Pub. Power Supply

Sys., 109 Wn.2d 107, 160-61, 744 P.2d 1032, 750 P.2d 254 (1987). The doctrine of

comity, however, does not apply beyond the "immediate parties and the underlying

claim." In re Estate of Toland, 180 Wn.2d 836, 848, 329 PJd 878 (2014). Here, Banana

Belt was not a party to the Montana action. Rather, the Montana action was brought by

First Bank against Tuschoff. For this reason, Banana Belt had no right to appear in that

controversy, could not protect its interests, and could not appeal an adverse decision.

Notice of the litigation, an opportunity to participate, and the ability to appeal an adverse

                                              15
No. 33192-0-III
First Bank ofLincoln v. Tuschojf


decision are important considerations in determining whether to apply comity. See id. at

848. We conclude that comity cannot be applied to a foreign state's decision where the

party resisting its application did not have the right to participate or appeal the foreign

state's decision.

       Reversed and remanded.

       The remainder of this opinion has no precedential value. Therefore, it will be filed

for public record in accordance with RCW 2.06.040, the rules governing unpublished

opm1ons.

       G.     Montana's anti-deficiency statute

       Having concluded that comity does not preclude us from deciding the issue

presented, we now tum to Montana's anti-deficiency statute, Mont. Code Ann. (MCA)

§71-1-317:

       Deficiency judgment not allowed. When a trust indenture executed in
       conformity with this part is foreclosed by advertisement and sale, other or
       further action, suit, or proceedings may not be taken or judgment entered
       for any deficiency against the grantor or the grantor's surety, guarantor, or
       successor in interest, if any, on the note, bond, or other obligation secured
       by the trust indenture or against any other person obligated on the note,
       bond, or other obligation.

       On its face, Montana's anti-deficiency statute seems to apply to nonjudicial

foreclosures of any type of real property, residential or commercial. The Montana trial



                                              16
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


court cited First Security Bankv. Abel, 2008 MT 161, ,i 30, 343 Mont. 313, 184 P.3d 318

for the proposition that the anti-deficiency statute does not apply to nonjudicial

foreclosures of commercial properties. Abel did not involve a nonjudicial foreclosure.

Id. at ,i 8. Therefore, Abel is not relevant to the issue presented.

       Banana Belt asserts that First State Bank of Forsyth v. Chunkapura, 226 Mont. 54,

734 P.2d 1203 (1987) stands for the proposition that a lender that forecloses nonjudicially

against any property has no right to a deficiency judgment. Chunkapura, like Abel,

involves a judicial foreclosure. Nevertheless, Chunkapura contains clear dicta:

               Under the Small Tract Financing Act, instead of mortgages, trust
       indentures (sometimes called "deeds of trust" or "trust deeds") are
       authorized. Such instruments have the effect of transferring the title of the
       borrower to a private trustee to be held by the trustee to secure the
       performance of the obligation by the borrower. A power of sale is by the
       law granted to the trustee to be exercised after a breach of the obligation for
       which the trust transfer is security. Section 71-1-304(2), MCA. The trust
       indenture is considered to be a mortgage on real property,§ 71-1-305,
       MCA, and provisions are made in the law for the method whereby a trustee
       may foreclose a trust indenture by advertisement and sale. Section 71-1-
       313, MCA. It is certain that when a trustee conducts a foreclosure sale, a
       deficiency judgment is not allowed, § 71-1-317, MCA, and the purchaser at
       the trustee sale is entitled to possession of the property on the tenth day
       following the sale. Section 71-1-319, MCA.
Id. at 58 (emphasis added). 3


       3
         The Chunkapura dissent agreed that a lender who forecloses by advertisement
and sale, i.e., nonjudicially, has no right to a deficiency judgment. Id. at 64 (Weber, J.,

                                              17
No. 33192-0-III
First Bank ofLincoln v. Tuschoff


       The Chunkapura court, noting that there was no statutory guidance on whether a

deficiency judgment was available following a judicial sale, examined other western

states' laws on the subject. Id. at 60-62. Noting that the Small Tract Financing Act of

Montana, Title 71 MCA, did not include any requirement for a court to set an upset

price-which would have protected a borrower by requiring the purchaser at foreclosure

to pay a fair purchase price-the Chunkapura court held that lenders were not entitled to

a deficiency judgment following even ajudicial foreclosure. Id. at 62-63.

       The Chunkapura court later restricted its opinion in an order on rehearing. It is

this restriction that creates the ambiguity for this court. On rehearing, the Chunkapura

court restricted the nondeficiency rule to future foreclosures of residential property. Id. at

67. The restrictive language seemingly allows a deficiency judgment following any

foreclosure of nonresidential property, i.e., commercial property. However, it can be

argued that the rehearing order was intended only to permit a deficiency judgment

following a judicial foreclosure of commercial property, and did not alter the earlier

unanimous statements from the majority and dissent which agreed that under the plain

language of MCA§ 71-1-317 there cannot be a deficiency judgment following a

nonjudicial (advertisement and sale) foreclosure. See Trs. of the Wash-Idaho-Mont.


dissenting).

                                             18
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


Carpenters-Emp'rs Ret. Trust Fundv. Galleria P'ship, 239 Mont. 250, 257-58, 780 P.2d

608 ( 1989) ("When a lender holding a trust indenture as security chooses to foreclose

under the mortgage laws, Chunkapura as modified holds that except for occupied single

family residential property, lenders can obtain a deficiency judgment even on trust

indentures.") (emphasis added). 4

       H.     Explanation for reason of disposition

       RAP 12.2 allows this court to "modify the decision being reviewed and take· any

other action as the merits of the case and the interest of justice may require." We take the

unusual step of declining to answer a dispositive issue, but instead require Banana Belt to

file suit in Montana so a Montana court can answer the dispositive issue. Only if the

Montana court determines that First Bank is entitled to a deficiency judgment, it will also

need to determine the amount of the judgment, which will require resolution of how much

First Bank bid to purchase the Hotel Lincoln at foreclosure. For at least three reasons, we

believe that it is in the interest of justice for a Montana court to resolve these issues of

Montana law. First, the controlling issue is one of Montana law. Second, this court


       4
         First Bank further argues that it is attempting to collect as owner of the
Schwab/Tuschoff note, not as a secured party of that note. First Bank's arguable right to
collect as an owner of the Schwab/Tuschoff note does not give First Bank any right to
collect against Banana Belt. This is because Banana Belt neither was the borrower on the
note nor did it assume any liability on it.

                                              19
No. 33192-0-111
First Bank ofLincoln v. Tuschoff


cannot reach a consensus on what Montana law requires. Third, although cases

sometimes are dismissed under the doctrine of forum non conveniens because they

involve questions of foreign law, the potential presence of a debt against real property in

Washington convinces us that our state must retain jurisdiction to clear title of the

assigned deed of trust, depending on the resolution of the Montana state issues. The lack

of a procedure for an intermediate appellate court such as ours to certify an issue of

Montana law to the Montana Supreme Court has resulted in this unusual remedy. See

Mont. R. App. P. 15(3) (certification of questions of law).

       I.        Instructions on remand

       We remand to the trial court for it to stay further proceedings for Banana Belt to

file suit in Montana. We deem it prudent for a Montana court to determine whether First

Bank has a right to a deficiency judgment on its promissory note with Tuschoff following

its election to foreclose against the Hotel Lincoln by advertisement and sale, and if so, the

amount of the deficiency judgment.

       If the Montana court determines First Bank has no right to a deficiency judgment

against Tuschoff, 5 the trial court is directed to enter judgment in favor of Banana Belt and


       5 First
             Bank's right (or lack of right) to a deficiency judgment against Tuschoff on
the unpaid promissory note is separate from First Bank's right against Tuschoff for
conversion of funds, for which First Bank already has received a judgment. Our opinion

                                             20
No. 33192-0-111
First Bank of Lincoln v. Tuschoff


to enter such orders as necessary to clear title of the assigned deed of trust that currently

encumbers the bowling alley property. This is because First Bank's lien against the

bowling alley property is extinguished without an existing obligation secured by the

assigned Schwab/Tuschoff deed of trust. See 18 Stoebuck & Weaver, supra,§ 17.1, at

253 (explaining that a security cannot exist without an obligation).

       If the Montana court declines to render a decision on the identified issue of

Montana law despite (in our opinion) the parties having a justiciable controversy, the trial

court is directed to determine these questions of Montana law. See RCW 5.24.020.




WE CONCUR:




does not alter First Bank's right to collect on its conversion judgment against Tuschoff.

                                              21
