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Rocky Mountain Bank-Kalispell v. Bart S. Culbertson

September 5, 2012


APPEAL FROM: District Court of the Nineteenth Judicial District, In and For the County of Lincoln, Cause No. DV 08-32 Honorable James B. Wheelis, Presiding Judge

The opinion of the court was delivered by: Jim Rice

Submitted on Briefs: July 11, 2012

Decided: September 5, 2012



Justice Jim Rice delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(d), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

¶2 This is an action brought by Rocky Mountain Bank-Kalispell (RMB) against Bart Culbertson (Culbertson) and Joseph, Darris, Michael, and Patrick Flanagan (Flanagans) to foreclose on RMB's mortgage held on real property located in Lincoln County. In February 2007, RMB agreed to loan $250,000 to Culbertson to develop and subdivide real property owned by Flanagans. Culbertson purchased the property from Flanagans and used $160,000 of the loan proceeds to pay the down payment on the real property to Flanagans. Flanagans retained a security interest in the property to secure payment of the balance of the $1,600,000 purchase price. However, RMB's loan to Culbertson was made contingent on Flanagans entering into a subordination agreement that would grant RMB a first-position security interest in the property. Culbertson's attorney drafted the subordination agreement and the agreement was approved by Flanagans' attorney. Culbertson, Flanagans, and RMB executed the subordination agreement, which granted priority to RMB and provided that its mortgage "be and remain superior to the mortgage lien of Flanagans." The agreement stated that the Culbertson and Flanagans "want the Bank to provide additional funds and perhaps provide additional accommodations to Culbertson for use in payment of all phases of developments expenses." The agreement referenced "the Bank loan" and stated "[t]he Bank anticipates future advances."

¶3 Thereafter, the real estate market declined and Culbertson failed to satisfy RMB's conditions for future advances. Culbertson failed to make payments in accordance with the terms of the loan and RMB initiated foreclosure proceedings by filing a complaint on January 29, 2008. Culbertson and Flanagans filed an answer on November 7, 2008. On December 23, 2008, Culbertson and Flanagans filed a motion for leave to file an amended answer, which included counterclaims, and a demand for jury trial. On December 29, 2008, the District Court granted leave to file an amended answer and counterclaims, but denied the demand for jury trial. Culbertson and Flanagans filed the amended answer and counterclaims.

¶4 RMB filed a motion for summary judgment on Culbertson's and Flanagans' counterclaims, affirmative defenses, and the priority issue. The District Court denied the motion as to the affirmative defenses because it found that there were genuine issues of material fact that precluded summary judgment. However, the District Court granted the motion as to the counterclaims and the priority issue, concluding that the intent of the subordination agreement was to give priority to RMB and that RMB's mortgage was recorded before Flanagans' mortgage.

¶5 A trial was held on August 2 and 3, 2011, before a different presiding District Court Judge who had assumed the bench. The District Court referenced the earlier summary judgment order but also entered findings of fact regarding the terms of the subordination agreement and entered conclusions of law regarding the agreement's interpretation. The District Court held in favor of RMB and ordered foreclosure of its mortgage. Culbertson and Flanagans filed a notice of appeal on September 8, 2011, each filing briefs pro se after their counsel filed a motion to withdraw in the District Court. However, although Culbertson and Flanagans filed briefs on appeal, neither party filed the trial transcript or the original trial exhibits with the Clerk of the Supreme Court.*fn1

¶6 Culbertson first challenges the denial of his demand for a jury trial by the District Court, which held:

By failing to demand a jury trial within 10 days after filing their original Answer, the Defendants waived their right to a jury trial. Inasmuch as the counterclaims arise out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the jury waiver is not revoked by the amendment of the Defendant's pleading.

ΒΆ7 Culbertson and Flanagans filed their answer on November 7, 2008. Their motion for leave to file an amended answer and the demand for jury trial was filed on December 23, 2008. The demand for jury trial was not premised on any new claim or issue that Culbertson and Flanagans sought to add by way of the amended answer. The Montana Rules of Civil Procedure provide that a demand for jury trial may be demanded "not later than 10 days after the service of the last pleading directed to such issue." M. R. Civ. P. 38(b) (2007). Under these circumstances, Culbertson and Flanagans were required to file a demand for jury trial within 10 days of their original answer. A party waives a jury trial unless its demand is properly served and filed. M. R. Civ. P. 38(d). The District ...

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