No. 13494 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1977 

RAMON ARCHER, 

Plaintiff and Respondent, 

LarJIARCH CREEK RANCH OF MONTANA., 

d/b/a Sundance Lodge, 

Defendant and Appellant, 

DAVID CHRISTENSEN, 

Intervenor and Appellant. 

Appeal from: District Court of the Eleventh Judicial 

District, 

Honorable Robert Keller, Judge presiding. 

Counsel of Record: 

For Appellant: 

Greg J. Skakles argued, Anaconda, Montana 

For Respondent : 

Hash, Jellison and O'Brien, Kalispell, Montana 

Kenneth E. O'Brien argued, Kalispell, Montana 

Submitted: September 21, 1977 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

David Christensen appeals from the denial of his motion 

to intervene and the entry of default judgment against defendant 

LaMarch Creek Ranch. We affirm the judgment. 

Plaintiff, Ramon Archer, commenced this action for foreclosure of a promissory note on March 14, 1973. The complaint 

alleged that defendant executed and delivered a promissory note 

to plaintiff in the amount of $13,876.98. The complaint further 

alleged that the note was past due and no payment had been received. 

Personal service was had on Robert Cope, president of LaMarch 

Creek Ranch, a Montana corporation. 

On July 25, 1973, a motion to dismiss was submitted on 

behalf of defendant. The motion was denied and defendant was given 

twenty days in which to further plead. An answer in the form of 

a general denial was submitted on March 7, 1974. Four affirmative 

defenses were contained therein. 

Trial was set for June 23, 1975. At the beginning of the 

trial without jury, counsel for defendant made a motion to intervene on behalf of Christensen. At that time counsel stated that 

he was no longer representing defendant and that the intervener's 

case would basically consist of the four affirmative defenses 

found in the answer previously filed on behalf of defendant. 

Counsel further stated he was without authority to appeal in behalf of defendant. The motion to intervene was taken under advisement and trial was had. Christensen was allowed to introduce both 

oral and documentary evidence concerning the four affirmative 

defenses. 

On May 7, 1976, the District Court entered findings of 

fact, conclusions of law and judgment which denied Christensen's 

motion to intervene and entered default against defendant in the 

amount of $13,876.98 plus costs and attorney fees. 
The cogent facts leading up to the filing of this action 

are as follows: On June 30, 1971, a stock purchase agreement 

was executed wherein plaintiff acquired 100 shares of stock in 

defendant corporation. The total purchase price was $10,000. 

Robert Cope, the president of defendant corporation, was listed 

as the seller. Christensen was also listed as a purchaser of 

stock and was a signatory to the stock purchase agreement. The 

purchase agreement provided that if Christensen or plaintiff 

wished to sell any or all of their stock, the defendant must 

purchase it. The stock certificates were endorsed to that end. 

In November, 1972, plaintiff met with Cope in order to 

discuss the repurchase of his stock by the corporation. Thereafter, on November 22, Cope, as president of defendant corporation, executed a promissory note to plaintiff in the amount of 

$13,876.98. This sum was full compensation for the repurchase 

of plaintiff's stock, back salary and earned interest. The note 

was payable on or before January 1, 1973; no payments have been 

made on the note. 

Christensen apparently learned of the promissory note in 

January, 1973. At that time he was a stockholder, director and 

secretary of defendant corporation. Christensen took no action 

to rescind the note or intervene on behalf of defendant until 

the day of the district court hearing. 

Four issues are before this Court on appeal; 

1. Whether the District Court erred in denying Christensen's motion to intervene. 

2. Whether the District Court erred in entering default 

judgment against defendant. 

3. Whether the affirmative defenses raised by Christensen 

were effective. 

4. Whether the District Court erred in refusing to admit 
defendant's exhibits A and D and in refusing to allow Christensen to testify concerning the solvency of defendant. 

Christensen alleges error in the District Court's refusal 

to allow him to intervene in this matter. We disagree. Christensen's motion to intervene was made for the first time at the 

beginning of trial. The District Court judge took the motion 

under advisement and did not rule until all evidence had been 

presented. Christensen was allowed to fully present his defense. 

He was given the opportunity to present evidence on each of the 

four defenses upon which he relied. After hearing all the evidence, the judge correctly denied Christensen's motion to intervene on the basis of untimeliness. This party cannot claim he 

was denied the opportunity to be heard. 

There is no doubt that Christensen was dilatory in his 

attempt to intervene. He first learned of the note involved 

herein in January, 1973. The record is barren of any attempt by 

Christensen to assert his claimed rights until June, 1975. In 

effect, Christensen sat on his claimed right for some two and 

one-half years. Under these circumstances it is clear that 

Christensen, by his failure to act, waived his right to contest 

the validity of the note and is now estopped from doing so. 

The notion that one may waive a right by inaction is far 

from novel in this jurisdiction. In Northwestern Fire and Marine 

Insurance Co. v. Pollard, 74 Mont. 142, 149, 238 P. 594, it is 

stated : 

" * * * waiver is a voluntary relinquishment or 

renunciation of some right, a foregoing or giving 

UP of some benefit or advantage, which, but for 

such waiver, a party would have enjoyed. It may 

be proved by express declarations * * * or by a 

course of acts and conduct, or by so neqlectinq 

and failinq to act, as to induce the belief that 

it was his intention and purpose to waive." 

(Emphasis added.) 

See also Farmers Elevator Company of Reserve v. Anderson, 
Mont. , 552 P.2d 63, 33 St.Rep. 614. 

Christensen's second alleged error requires little 

discussion. Rule 55(a), M.R.Civ.P., governs default judgments 

and provides in pertinent part: 

"When a party against whom a judgment for affirmative relief is sought has failed to plead or 

otherwise defend as provided by these rules and 

that fact is made to appear by affidavit or otherwise, the clerk shall enter his default." (Emphasis 

supplied.) 

The record clearly reflects that defendant failed to 

appear at trial. Counsel for Christensen, who had previously 

represented defendant, specifically stated that he was not 

authorized to appear on behalf of defendant. No one having 

appeared on behalf of defendant at the trial, the District Court 

had no alternative but to grant plaintiff's motion for default 

j udgment . 

The answer originally filed on behalf of defendant contained four affirmative defenses. The affirmative defenses alleged that: (1) the promissory note was given without sufficient 

consideration; (2) the repurchase of the stock by means of a 

promissory note was a violation of the statutory requirement 

that such purchases be made with "surplus" funds; (3) the repurchase of stock rendered the corporation insolvent; and (4) the 

president lacked the authority to execute the promissory note on 

behalf of the corporation. These defenses substantially comprised 

Christensen's case and he alleged that these defenses were effective and the court erred in entering judgment against defendant. 

An analysis of each of the above affirmative defenses 

convinces us that the District Court ruled correctly. As to the 

first defense of lack of consideration, we find an abundance of 

substantial evidence supporting the District Court decision. The 

rule in this jurisdiction is that a written instrument is presumptive evidence of a good and sufficient consideration and the 
burden of attacking the sufficiency of such consideration is on 

the party seeking to invalidate the instrument. Section 13- 

510, R.C.M. 1947; Bielenberg v. Higgins, 85 Mont. 69, 227 P. 

636. The record herein does not reflect even a scintilla of 

evidence tending to prove a lack of good and sufficient consideration for the note. 

Christensen, in his second affirmative defense, alleges 

that the purchase of the stock by use of the promissory note 

was void as a violation of section 15-2205, R.C.M. 1947. In 

essence this statute prohibits the use of funds other than "surplus" 

funds for the repurchase of stock. Christensen concludes that no 

"surplus" funds were available at the time of the purchase and 

the transaction is therefore void. 

The burden of proving an affirmative defense rests on 

the defendant. Baker National Bank v. Lestar, 153 Mont. 45, 453 

P.2d 774. We find absolutely no proof that surplus funds were 

not available at the time the note was executed. In the absence 

of such proof in the record, we have no alternative but to deny 

the defense. 

For a third affirmative defense, Christensen alleges that 

the repurchase of the stock occurred at a time when the corporation was insolvent, a violation of section 15-2260, R.C.M. 1947. 

Insolvency is defined as the " * * * inability of a corporation 

to pay its debts as they become due in the usual course of its 

business." Section 15-2202(n), R.C.M. 1947. The district court 

found that the defendant corporation was not insolvent on the 

date of the execution of the note. We agree. Again Christensen 

has not met his burden of proving the affirmative defense and 

we have no alternative but to deny the defense. 

Christensen's final affirmative defense concerns his claim 

that the president lacked the authority to execute the note on 
behalf of the corporation. Absolutely no evidence is found 

in the record to support this contention. The note was admitted without objection as to foundation by Christensen's 

attorney. Hence the final affirmative defense must fail for 

lack of proof. 

The final issue concerns the admissibility of certain 

items of evidence sought to be introduced by Christensen. The 

first item, Exhibit A, was a copy of the stock purchase agreement involved herein. Objection was made on the basis of relevancy 

and foundation. We have stated that generally " * * * whatever 

naturally and logically tends to establish a fact in issue is 

relevant, and that which fails to qualify in this respect is not 

relevant." 1 Jones on Evidence, 5th Ed., section 151, page 270; 

Brion v. Brown, 135 Mont. 356, 340 P.2d 539. 

The record reflects that the repurchase of plaintiff's 

stock was not made pursuant to the stock purchase agreement. The 

District Court concluded, and we agree, that the stock purchase 

agreement was not relevant to establish any fact in issue. 

The second item of evidence in question was Exhibit D which 

was an income statement for the period 12/1/72 to 1/31/73. Objection was made on the basis of relevancy by plaintiff. This statement showed the defendant corporation operated at a loss during 

this period. This exhibit was offered by christensen in an attempt 

to prove that the corporation was insolvent. The District Court 

correctly ruled that this statement was irrelevant. An income 

statement, standing alone, does not prove insolvency of a corporation. 

The final item of evidence was the refusal of the court 

to allow Christensen to answer the question, "And could you please 

describe briefly what the financial situation of the corporation 

was at that time?" A best evidence objection was made and 
sustained. The corporate records would be the best evidence 

of the financial condition of the corporation. No attempt 

was made to explain the absence of these records. The ruling 

of the District Court is therefore correct. 

We affirm the District Court judgment in its entirety. 

Justice 

Chief ~ustice /"\