Shoop

The FDIC sued on a promissory note for FSLIC as successor to a failed savings and loan association. The debtors on the note claim that the suit is barred by Montana’s “one action rule.” Montana and several other states have a statute providing for “but one action” on a mortgage and the promissory note secured by it. The district court granted summary judgment for the FDIC, but we reverse.

I. Facts.

In 1980, Bill Boyer and Jeff Shoop bought a business and associated real estate from Virginia O’Brien. They bought the real estate on a contract, with the deed to be held in escrow until they had paid the contract price in monthly installments over a number of years. In order to convert the building from a warehouse to an office and warehouse and generally remodel it, Boyer and Shoop’s partnership, BS, borrowed $450,000 from the Central Illinois Savings and Loan Association, FSLIC’s predecessor in title. The bank took a second position, instead of paying off the O’Brien note and taking a first lien. So long as BS made payments, the bank remitted the appropriate portion to O’Brien. The rents could not cover the obligations, so the partners defaulted on their obligations both to…