No. 86-484 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

CITIZENS STATE BANK, a Montana 

banking corporation, 

Plaintiff, 

-vsRICHARD C. BOSSARD, FLOYD BOSSARD, 

JAMES T. MADDUX, ZANE K. SULLIVAN, 

KENNETH A. HIGH, 

Defendants, 

and 

ZANE K. SULLIVAN, 

Third-Party 

AMERICAN LAND TITLE CO. OF RAVALLI 

COUNTY, 

Third Party Defendant. 

APP EAL FROM: District Court of the Fourth Judic'al District, 

In and for the County of -&"a.L. 

The Honorable James B. Wheelis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Boone, Karlberg & Haddon; L, illiam L. Crowley, Missoula, 

Montana 

For Respondent: 

b7orden, Thane & Haines; Robert J. Phillips, Missoula, 

Montana 

Submitted on Brief: Jan. 8, 1987 

1;111;? 19e7 

Filed: 

Decided: March 10, 1987 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

This is an appeal from a judgment of the District Court, 

Fourth Judicial District, County of Ravalli, ordering 

appellant to contribute his pro rata share as a guarantor on 

a promissory note. We affirm. 

Appellant Sullivan was a shareholder in the Title 

Company, a Montana corporation in the business of issuing 

title insurance on real estate. Sullivan and four other 

shareholders, the respondents in this action, each held one 

share of stock in the company. In January, 1979, the five 

shareholders executed guaranties for promissory notes to 

Citizens State Bank on behalf of the Title Company. The 

continuing guaranties stated that the obligations incurred 

were joint and several, and that the guarantors waived any 

right to require the bank to exhaust any security before 

proceeding against the borrowers. 

Sullivan left the Title Company in December, 1979, at 

which time he signed away his share of stock and resigned his 

office as president and general counsel of the company. 

In November, 1981, the Title Company was sold to a 

California title company. Richard Bossard, one of the 

respondents, negotiated the sale. None of the sale proceeds 

were applied toward the Title Company's promissory notes to 

Citizens State Bank. The proceeds went instead to pay debts 

of the Title Company, including taxes, insurance, wages, 

underwriting fees, supplies, equipment, miscellaneous 

operational bills, and monies owed to Title Insurance of 

Montana, a management company. 

The Title Company was not a profitable venture. The 

Company missed several payments on the notes, although 
several payments had been personally funded by respondents. 

In February, 1983, the bank accelerated the notes and 

demanded immediate payment. 

Initially, the bank sued all five guarantors on the 

basis of their continuing guaranties, and respondents filed a 

cross-claim against Sullivan for contribution as a 

coguarantor. Subsequently, respondents agreed to pay off the 

notes, and the agreed payment schedule has since been 

completed. The bank was then dismissed from the action, 

leaving the cross-claim for contribution against Sullivan and 

Sullivan's third-party complaint against the Title Company 

for reimbursement of any sums he would be required to pay. 

In August, 1986, the District Court entered its judgment 

ordering Sullivan to contribute his one-fifth share of the 

monies owed the bank, and ordered the Title Company to 

reimburse Sullivan for the sums he actually paid. 

The issue raised by Sullivan on appeal is whether the 

District Court erred in concluding as a matter of law in an 

action for contribution between coguarantors, that Sullivan 

could not raise the equitable defense concerning the security 

for the underlying promissory notes. In particular, Sullivan 

specifies as error the District Court's conclusion of law No. 

5 : 

The continuing guaranties that were executed by the 

parties created a joint and several obligation. 

The said continuing guaranty also provides that the 

guarantors waived any right to require the bank to 

proceed against the principal obligor, American 

Land Title of Ravalli County or to proceed or 

exhaust any security held by borrowers. Thus, the 

claimed defense by Sullivan that the bank failed to 

execute against its security is insufficient as a 

matter of law. 

Sullivan contends this conclusion indicates the court did not 

allow or consider his equitable defense, the defense being 
that respondents personally profited from the sale of the 

Title Company. 

We find no merit in Sullivan's contention that the 

District Court failed to consider his equitable defense. 

Both parties filed briefs and supplemental briefs discussing 

the equitable nature of contribution and the equitable 

defense of unequal benefits. Sullivan argues that because 

respondents sold the Title Company, he was stripped of 

collateral which he had relied upon in giving his guaranty. 

This argument was clearly before the District Court, who 

rejected it. 

The standard of review for a case in equity is that the 

judgment of the trial court is presumed correct, and all 

legitimate inferences will be drawn to support this 

presumption. This Court's inquiry into the evidence is 

limited to whether the findings of the trial court are 

clearly erroneous. Rule 52, M.R.Civ.P. - See In re Estate of 

Rudd (1962), 140 Mont. 170, 175-176, 369 P.2d 526, 529. 

As we have previously stated, contribution among 

co-obligors is an equitable concept, and an obligor must be 

permitted to raise and present any equitable defense. 

Bossard v. Sullivan (Mont. 1983), 670 P.2d 1389, 1391, 40 

St.Rep. 1733, 1735. The general rule of contribution is that 

guarantors who pay more than their proportionate share of an 

obligation are entitled to contribution from other guarantors 

who are jointly and severally liable for the contribution. 

Stieben v. Korby (Colo. Ct. App. 1975), 533 P.2d 530, 531. 

"Contribution presumes the payment and extinguishment of the 

debt by one cosecurity for the benefit of all [Citation 

omitted]. The very foundation of the doctrine is that one 

had paid more and another less than his share, and where such 

is not the fact the right does not exist." Worthington v. 

Keely (Co1.0. 1917), 170 P. 194, 197. 
In this case all five coguarantors signed continuing 

guaranties which allowed the bank to forego its security and 

sue the coguarantors directly on the notes. This default 

remedy is authorized by $ 30-9-501, MCA. The bank pursued 

this option, and a settlement was reached whereby the 

obligation to the bank was completely paid off by four of the 

five guarantors. Under the general rule of contribution, the 

four guarantors were thus entitled to seek contribution from 

the fifth guarantor for his pro rata share of the obligation. 

In Montana, where coguarantors do not receive equal 

benefits from the guaranty, the liability for the obligation 

is allocated according to the benefits received. Bossard v. 

Sullivan, 670 P.2d at 1391, 40 St.Rep. at 1735. In other 

words, guarantors in unequal positions should not be equally 

liable for payment of a debt. - Id. Sullivan, however, does 

not appear to be asserting the equal benefits doctrine. 

Instead, he makes the general equitable argument that 

respondents have personally enriched themselves at the 

expense of his security for the guarantied obligation. 

We do not find this to be the case. The evidence in the 

record clearly indicates Sullivan signed the continuing 

guaranty knowing that the bank could sue him directly on the 

notes, foregoing its security. This is in fact what the bank 

did. Further, the debts paid off by the sale of the Title 

Company (the company being the underlying security for the 

notes) were debts of the corporation, not personal debts of 

respondents. These debts included wages, withholding taxes 

and industrial accident benefits which the corporation was 

obligated by law to pay. We agree with the District Court 

that the evidence supports a finding that all five 

shareholders shared equal liability on the promissory notes, 

and that Sullivan was required to contribute his one-fifth 

pro rata share. 
The judgment of the District Court is affirmed. 

We Concur: -1