Bell Generations Trust v. Flathead Bank

Bell Generations Trust v. Flathead Bank, 2013 MT 152 (June 5, 2013) (6-1) (Cotter, J., for the majority; Wheat, J., dissenting)

Issue: Whether the district court properly determined that Bell’s easement rights were subordinate to Flathead Bank’s interests in the property, and were properly foreclosed upon and extinguished by the bank trhough a trustee’s sale.

Short Answer: Yes.



Facts: In 2008, Bell bought two lots near Flathead Lake. The purchase agreement granted Bell an easement for access to the lake over and across lakefront property owned by the sellers, the Sunderlands. Bell’s easements were recorded.

At the time of purchase, the lots as well as Sunderland’s property were encumbered by deeds of trust issued by Flathead Bank. The bank knew that Sunderlands intended to package the lots with easements appurtenant to the lakefront property.

After Sunderlands became delinquent on their loan obligations, the bank attempted to foreclose by way of a trustee’s sale in March 2010. The bank did not provide notice to Bell of the sale. In August 2010 it provided Bell with notice of a second sale.

In December 2010, Bell sued the bank, asserting claims of estoppel negligence, and breach of contract, and seeking declaratory judgment recognizing the validity of its easement rights.  A few days later, the second sale was held, and the bank recorded a second trustee’s deed. The bank answered in January 2011, and counterclaimed to quiet title.

Procedural Posture & Holding: The parties filed cross-motions for summary judgment, and the district court granted the bank’s motion. It determined the first sale was invalid due to the bank’s failure to provide notice to Bell, but found the second sale complied with all statutory requirements. It concluded that Bell’s easement claims were subordinate to the bank’s interests in the property, and held that Bell had no right, estate, title, lien, easement, or interest in the property, Bell appeals, and the Supreme Court affirms.

Reasoning: Under Montana law, Bell’s easement was subordinate to the bank’s earlier recorded trust deeds. § 70-21-302. Bell doesn’t dispute that his easement would be extinguished by a properly noticed foreclosure.

The first trustee’s sale was void as to Bell because it did not provide notice to Bell as required by § 71-1-315, MCA. An attempted sale of property that has not been properly noticed is void. The only recourse is a second sale, which took place in December 2010. Bell was properly notified and had an opportunity to appear and bid. It did not do so.

Bell argues the bank should be equitably estopped from foreclosing on Bell’s easement in light of a letter it sent to Bell in June 2010 stating it did not intend to impinge upon Bell’s easement. Bell fails to establish the first element of an equitable estoppel claim, i.e., a representation or concealment of material facts. Summary judgment was properly granted to the bank.

Justice Wheat’s dissent: It is not clear whether Flathead Bank intentionally failed to provide notice to the Bells for the first sale. If its omission was intentional, it should not get a second bite at the apple. This disputed fact should preclude summary judgment and be resolved through trial.