## Facts

- On October 20, 1980, Thomas J. and Cicily Chunkapura executed a promissory note to First State Bank of Forsyth for $17,000 at 14% annual interest, payable in monthly installments.
- The note was secured by a deed of trust covering two town lots in Forsyth, Montana (Lots 17 and 18, Block 54), naming First Montana Title Insurance Company as trustee and the Bank as beneficiary.
- The Chunkapuras made payments totaling $2,042.98, then defaulted on the note.
- The Bank filed a judicial action seeking the unpaid principal and interest, foreclosure and sale of the property, and a deficiency judgment for any remaining balance after applying sale proceeds.
- The district court concluded that, under Montana’s Small Tract Financing Act (STFA), the Bank could not obtain a deficiency judgment on an STFA trust deed, even though the Bank elected to proceed by judicial foreclosure rather than a trustee’s sale.
- The district court’s order was certified as final for appeal under Mont. R. Civ. P. 54(b).
- At the sheriff’s sale, the Bank was the only bidder and purchased the property for $10,000.
- The Bank appealed, arguing that choosing judicial foreclosure should allow a deficiency judgment (and, correspondingly, the borrower should receive a statutory right of redemption like in mortgage foreclosure).

## Issues

1. Whether a beneficiary under an STFA deed of trust who elects judicial foreclosure (instead of a trustee’s sale) may obtain a deficiency judgment.
2. Whether judicial foreclosure of an STFA deed of trust gives the borrower a statutory right of redemption comparable to redemption in a conventional mortgage foreclosure.

## Decision

- The Montana Supreme Court held that a lender foreclosing an STFA trust deed by judicial procedure is not entitled to remedies inconsistent with the STFA.
- The Bank could not recover a deficiency judgment after judicial foreclosure of the STFA trust deed.
- The borrowers had no statutory right of redemption following judicial foreclosure of an STFA trust deed.
- The court affirmed the district court’s ruling barring a deficiency judgment and remanded for further proceedings consistent with its opinion.

## Legal Principles

- The STFA’s remedial limits attach to the use of an STFA trust deed as the security instrument; selecting judicial foreclosure does not change the statutory remedial package governing that instrument.
- Under Mont. Code Ann. § 71-1-317, a beneficiary’s remedies on an STFA trust deed do not include a post-sale deficiency judgment, even when the beneficiary proceeds in court rather than by trustee’s sale.
- The STFA reflects a legislative exchange: the trust-deed framework provides a faster, more certain foreclosure mechanism than conventional mortgage foreclosure, while restricting certain creditor remedies (such as deficiency recovery) and omitting borrower remedies (such as statutory redemption) associated with mortgage foreclosures.
- A party cannot obtain the advantages of mortgage foreclosure while enforcing an STFA trust deed; remedies must remain consistent with the STFA’s structure.
- An interlocutory ruling that finally resolves a separable remedial question (such as availability of a deficiency judgment) may be certified for appeal under Mont. R. Civ. P. 54(b).

## Conclusion

First State Bank of Forsyth v. Chunkapura holds that when a loan is secured by a deed of trust governed by Montana’s STFA, the Act’s limits govern even if the beneficiary chooses judicial foreclosure: the lender may not obtain a deficiency judgment, and the borrower does not receive a statutory right of redemption like that available in conventional mortgage foreclosure.


First State Bank of Forsyth v. Chunkapura, 734 P.2d 1203 (1987)