## Facts

- A developer organized a warehouse-conversion project and arranged construction financing through a newly formed Montana general partnership, Galleria Partnership.
- Approximately sixteen investors became general partners; the partnership took title to the property and borrowed funds from trustees of a carpenters-employers retirement trust.
- The partners executed a promissory note in their individual capacities, and the partnership granted a deed of trust on the property securing the loan.
- The property was appraised at about $1,950,000 when the loan closed; investors asserted they were told the financing was “non-recourse” and did not expect personal liability for any deficiency.
- Rental income failed after businesses tied to the developer collapsed; the partnership defaulted and the trustees foreclosed under the deed of trust.
- Near the foreclosure sale, the property was appraised at about $1,100,000; at the sheriff’s sale the trustees purchased it for $565,000.
- The trial court entered a deficiency judgment against the partnership and the individual partners for the remaining balance due on the note.

## Issues

1. Whether individual general partners were personally liable for a post-foreclosure deficiency despite alleged oral assurances that the loan was non-recourse.
2. Whether the foreclosure and sheriff’s sale were legally sufficient and whether the asserted inadequacy of the sale price barred or limited a deficiency judgment.
3. Whether alleged misrepresentations by the developer could defeat enforcement of clear written loan terms by the lender trustees.
4. Whether the trustees’ deed of trust was a valid first lien properly enforced through foreclosure.

## Decision

- The Montana Supreme Court affirmed the foreclosure decree and the determination that the trustees held a valid first lien on the property.
- The court affirmed entry of a deficiency judgment against Galleria Partnership and its individual general partners.
- The court rejected the partners’ reliance on alleged oral “non-recourse” assurances where the written instruments imposed personal liability.
- The court held that the sale was not subject to being set aside, and the deficiency was not barred, absent proof of fraud, collusion, or procedural irregularity in the foreclosure or sale process.

## Legal Principles

- Clear, integrated written loan documents control over inconsistent oral statements offered to change the borrower’s obligations under the note and security instruments.
- Parties who sign loan documents with an opportunity to read them are generally bound by their terms; failure to read does not excuse liability absent fraud that prevented meaningful review.
- A deficiency judgment may be entered after foreclosure when sale proceeds do not satisfy the debt, so long as statutory requirements are met and there is no fraud, collusion, or material irregularity; inadequacy of price alone is insufficient.
- General partners are personally liable for partnership debts, and signing a promissory note individually supports personal liability for any deficiency.

## Conclusion

The court enforced the written construction-loan instruments as drafted, upheld the trustees’ first-lien foreclosure, and allowed a deficiency judgment against the partnership and its general partners because alleged oral nonrecourse assurances and a low sale price did not overcome the unambiguous documents or show sale impropriety.


Trs. of Wash.-Idaho-Mont. Carpenters-Emps. Ret. Tr. Fund v. Galleria P'ship, 780 P.2d 608 (Mont. 1989)