Land owned by four backers of Helena Christian School is heading for foreclosure in a dispute over a $1.5 million loan from Mountain West Bank, a judge and lawyers for both parties indicated Wednesday.
District Judge Dorothy McCarter told attorneys for the bank and the school to reach agreement on an order for a foreclosure and sheriff’s sale in the land that the school backers posted as collateral for the loan in 2008.
She also told attorneys Amy Randall, representing the bank, and Bruce Sewell, representing the school, to calculate and agree upon the exact amount the school owes the bank.
“You two sit down and figure it out,” McCarter said in the eight-minute hearing.
Robert M. “Mike” Dellwo, the school’s principal, said it was unclear what the sheriff’s sale would mean for the school’s future. It operates in leased space belonging to Canyon Ferry Road Baptist Church east of Helena, not on the 326 acres near the Scratchgravel Hills subject to foreclosure.
The case started with a $90,000 loan in 2005 to the school, guaranteed by Ken Erdahl, Ray Fuller and Robert Hitzeroth.
In 2008, the school borrowed another $1.5 million. That was backed by the original group plus Christopher M. Batson, Dellwo, Jack C. Hamlin and B.G. Stumberg and was secured by property near the Scratchgravel Hills that the group hoped to develop in order to help fund the school.
A few different development proposals failed to gain final approval from Lewis and Clark County. In March 2011, Commissioners approved a preliminary plat with the condition that the developers work with the Montana Department of Environmental Quality to address historic mining contamination on the site.
According to court filings by the school, it kept up to date on its payments. But the real estate market declined, and the bank reappraised the property and demanded the school pay the loan down by $1 million.
The bank filed suit in November 2010, claiming it was owed more than $1.5 million, plus late fees, court costs and interest that continues to accumulate.
McCarter granted a summary judgment for the bank in November 2011, but the school appealed and the Montana Supreme Court sent the decision back to McCarter with instructions to order a foreclosure and then enter a judgment for the difference between the proceeds of that sale and the amount owed.
Wednesday, McCarter and the lawyers agreed the foreclosure could proceed before determining the exact amount owed to the bank.
The school has about 150 students in kindergarten through 12th grade.
Reporter Sanjay Talwani: 447-4086, firstname.lastname@example.org or Twitter.com/IR_SanjayT