United States v. Carol Dubay Pastos and John W. Pastos, D/B/A Carol's Country Corner, and Security State Bank of Polson and Lake County

INTRODUCTION

Appellants, Carol Dubay Pastos and John W. Pastos (the “Pastos”) seek to redeem property purchased by appellees, the Small Business Administration (the “SBA”), at a mortgage foreclosure sale. The Pastos appeal the dismissals of their petition for redemption and motion to amend the foreclosure order. We reverse and remand.

BACKGROUND

The Pastos owned commercial property in Montana subject to a first mortgage held by the Security State Bank of Poison (the “Bank”) and to a second mortgage held by the SBA. The SBA note provides: “The undersigned waives all right of redemption or appraisement whether before or after sale.”

The Pastos fell behind in their mortgage payments for the first time in 1980. In July of 1983, they settled with both of the mortgagees, bringing both mortgages current to avoid foreclosure. Later that same year, the Pastos again fell behind in their mortgage payments. The SBA sued for foreclosure. On April 4,1984, after a hearing, the District Court entered a Decree of Foreclosure and Order for the SBA and the Bank. The decree does not expressly mention redemption rights. Montana statutes, however, provide that all rights of redemption are…