### No. 12965 IN

### THE SUPREME COURT 

### OF THE 

### STATE OF MONTANA 1975

WILLIAM C. 

### MAGELSSEN and CHARLOTTE T. MAGELSEEN, Plaintiffsand Respondents, -VS

# - WILLIAM G. 

### MOUAT, Trustee, and WESTERN BANKS OF BILLINGS, Billings, Montana, a Montana Corporation, Defendants and Appellant. WESTERN BANK 

### OF BILLINGS, Third-Party Plaintiff

# , -VS

# - HARRISON FAGG, Third-Party Defendant.

Appeal from: District Court of the Thirteenth Judicial District, Honorable 

### E. G3rdner Brownlee, Judge presiding. Counsel of Record: ForAppellant: 

### Davidson, Veeder, Roberts & 

### Baugh, Billings,

Montana John R. 

### Davidson argued, Billings, Montana William G, 

### Mouat appeared, Billings, Montana For Respondents: 

### Moses, Kampfe, Tolliver and Wright, Billings,

Montana 

### D, Frank Kampfe argued, Billings, Montana Crowley, Kilbourne, Haughey, Hanson and Gallagher,

Billings, Montana

Filed: - 

### Submitted: June 16, 1975Mr. JusticeJohn Conway Harrison delivered the Opinion of the Court. This 

### isan appeal from a judgment of the distric court, Yellowstone County, orderingdefendants William G. Mouat Trustee, 

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and Western Banksof Billings, todeliver toplaintiffs a deed conveying them any right, title and interestof the bank in certainrealproperty. 

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William C. Magelssen and Charlotte T. Magelssen rought 

# b thisaction torecover the sum of $55,000 paid todefendant banks by the fidelityinsurer of the banks' employees, and to equire 

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the banks toreconvey realproperty conveyed tothe bankb under

a trust indenture foreclosure sale. The banks countercl imed, asking the district court to: 

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(1)ratify and affirmthe foreclosureprodeedings; (2) order the payment by Magelssens of the banks losses ($14,500) together with interest, representing the difference between the insurance payment tothe banks ($55,000), and the actual loss tothe banks ($69,500), occasioned by Loans made by William Magelssen toone George Manuel. Two issues areraised on appeal. 1. Whether the evidence supports the districtcourt's decision ordering the banks todeliver toMagelssens a deed conveying tothem alltheright, titleand interest of the banks evidenced by the trust indenture dated September 9, 1971, and allright, titleor interest obtained by the banksupon the trust indenture foreclosureproceedings. 2. Whether the court erred infailingtoaward the banks the sum of $14,500 together with interest and attorney fees and costs inforeclosing the trust indenture. It isnecessary tosetout in some detailthe factual situation inorder todistillthe rather limited legal questions involved inthe case.The fiscal maneuvering of William C. Magelssen serves

asthe background toassess who owes whom--the problem presented by the issues. For some twenty years after graduating from college plaintiff Magelssen worked invarious banks inthis state holding various positions from teller and bookkeeper, to the head of themortgage and real estatedepartment of his lastemployer. Hebecame an assistant tothe vice-president and later vice-president of the Security Bank of Billings, Montana. These twenty years of banking experience resulted inhis decision, in 1970, toorganize his own banking empire and during that year he organized two banks, the Western StateBank and theWestern Bank of Billings, each capitalized at$500,000. To have a controlling interest in the banks he purchased 3,210 shares, 66.4% of the shares issued, at$105 per share, for a total cost of $674,100. To finance thispurchase he entered into these fiscal dealings: $40,000 from his savings. $40,000 borrowed from the FirstNational Bank in Glendive, Montana, and the Midland Bank in Billings, Montana. $300,000 borrowed from his father. $50,000 borrowed from the Western Banks with W. B. Van Fleet asaccomodation party. $100,000 borrowed from Western Banks, withLloyd Hostetler

asaccomodation party. $100,000 borrowed from Western Banks topay Voegele on

a loan. $30,000 borrowed from Western Banks withMardaus as accomodation party. $25,000 borrowed from Western Banks with Harrison Fagg

asaccomodation party. Total

# - $685,000. To secure the accomodation parties tohisborrowing fromhis own banks Magelssen gave the parties his own personal notes. To secure the $300,000 loan from his father he gave his common shares inboth banks as security. Allof this was inJuly, 1970. On October 19, 1970 his father called up his loan. Atthis point things went from bad toworse. To getmoney tocover the father's loan of $300,000 plus interest, Magelssen contacted a money broker from Ohio named George Manuel in an effort to secure a 

### termcapital loan for the two Western Banks of Billings, and a proposed bank in Bozeman, for

some $900,000. Manuel came toBillings and Magelssen agreed to pay him a fee of from 3%to 5%for obtaining such a loan. Manuel obtained a 90 day loan from a Florida company, Fred Brown & Co., which was used tocover the $300,000 plus interest loan of his father. He then gave Manuel $7,475 as an initial fee for obtainingthe loan and obtained promises fromManuel for further financing from Switzerland sources. On October 20, 1970, the two Western Banks of Billings, through Magelssen, each loaned Manuel, $35,000. Manuel gave as security toeach bank hispersonal promissory note. Atthe 

### same time Manuel deposited the $35,000 obtained from theWestern State Bank inMagelssen's personal account. In addition, as "collateral" for the two notes for $35,000 each, Manuel gave Magelssen, for the banks, certain stock inFirst United Trust Co., a real estate investment trust. Manuel told Magelssen that the stock was listed

on the New York exchange, but on investigation the stock was worthless. Manuel ended up inprison but not for his operations in Montana.From the proceeds of the other $35,000 loan toManuel by the Western State Bank, Manuel took $5,000 incash and deposited $30,000 inhis personal checking account. From the above abw-viated background of fiscaloperations

### of the two Western Banks, itwas no surprise that various banking officials became alarmed and early in 1971both state bank examiner officials and the F.D.I.C. told plaintiff Magelssen and his board that either a purchaser would have to be found for the banks or they would be closed. As a result of the problems raised by the banking officials, Magelssen was ousted from his position as president of the two Western Banks and the Board of Directors hired one George E. 

### "Bud" Hansen, one of its directors, to secure a purchaser. Hansen had two purchasers, one deal fell through, but inAugust a sale was consumnated with one JohnVucurevich to purchase the capital stock of the banks. The original offer was $1,000,000,which was refused. Subsequently,it went to $1,025,000 which resulted in the sale. That amount was some $25,000 short of paying off all the obligations of the banksand Hansen testified thatVucurevich and

one of his officials, a Jack Dano, offered to take a second mortgage on Magelssen's home in the amount of $25,000,which was agreed upon and done by Magelssen and his wife. It is this amount issue

one on appeal is directed to. As part of theVucurevich purchase,Magelssen received as consideration for selling his stock the complete payment of his father's obligation (hehad reborrowed $300,000) plus the payment of all the accomodation loans with interest. In addition, he testified he was promised the Manuel notes which by that time had

V' 

### been written off by the bank'. but were still in the banks' possession. Magelssen was paid $103.97 per share for his stock while all other stockholders received $110. The stock had been purchased for $105 per share. On January 8, 

### 1971, the Insurance Company of North America commenced a file on the Western Banks of Billings that ultimately resulted in the payment to those banks, on February 11, 1972,an amount of $55,000. This was a compromise amount-for the banksclaimed $70,000, which was the amount written off by the banks of the two Manuel notes. Atthe time of the purchase Magelssen arranged that the accomodation notes of Mardaus, Van Fleet and Fagg were paid off. However, Magelssen argues that as tothe Fagg note, the banks tried togetpaid twice on 

### it. Once through the foreclosure on his trust indenture, and the second time through a law suit filed against Fagg, which 

### was finallydropped. Magelssen argues that the Manuel notes 

### were likewise tohave been cared for and the notes returned to him as fully satisfied. Further, that the banks' later action inobtaining a $55,000 settlement from the insurance companies should have either been returned tohim or at least applied against his $25,000 note. The banks argue that although they paid no separate consideration for the Manuel notes they arethe owners of the notes by virtue of the purchase of the capital stock and areaccordingly entitled tothe settlement. The trial court after a full hearing and after considering allthe evidence submitted by the various depositions, entered its own findings of fact, conclusions of law and judgment, ing inpertinent part: "'That $55,000.00 

### iswhat is now causing the trouble. The banks claim the money alleging that the Manuel notes are the property of the banks and therefore themoney belongs tothe banks. The Plaintiffs claim themoney alleging that had the Manuel notes been liquid assets atthe time of the sale toVucurevich the cash the Plaintiffs would have received would have been $70,000 greater, therefore the money belongs tothe Plaintiffs. The Plaintiffs also allege that the agreement with Mr. Vucurevich was that the Manuel notes were tobe the property of the Plaintiffs and therefore any money brought inbased on those notes belongs tothe Plaintiffs.' provid-

"Without doubt atthe time of the bank sale neither Plaintiffs nor 

### Mr. Vucurevich believed the Manuel notes had any value. The negotiations undoubtedly resulted in the parties understanding thatMr. Vucurevich would not pay one cent for those notes, and therefore Plaintiffs

### were stuckwith that loss. There 

### is some conflictinthe testimony astophysical delivery of the notes: the Plaintiffsallege they were toreceive the actual notes. The court finds some basis for this belief, especially from the testimony of Mr. Jack P. Dano regarding non-delivery of the notes. "The court has littletrouble finding thatMr. Vucurevich did not pay any consideration for the notes because he and the Plaintiff feltthey were worthless. Neither does the court have any trouble finding thatMr. Vucurevich would have paid a consideration for the notes had they been valid obligations. It was not proved tothe satisfactionof the Court that Mr. Vucurevich actually bought the two Manuel notes from the Plaintiffs 

### (in effect). "The court would have little trouble finding that neither party is entitled tothe $55,000, but it is on hand, and the court concludes it should be divided insome manner between the parties. "Therefore, "IT IS ORDERED: "1. That Harrison Fagg 

### isnot obligated toany of the parties herein; "2. That allclaims, cross claims or counter claims of any party is disposed of by thisjudgment, whether specifically referred toor not. "3. That the banks keep the $55,000.00, but they areordered todeliver tothe Plaintiffs a deed conveying tothe Plaintiffs any right, 

### title or interest the banks have and to the property covered by the note and trust Indenture dated September 9, 1971, including any right, title

### or interestobtained by foreclosure proceedings; "4. Allparties are topay their own costs." To determine whether there is sufficientevidence to support the trial court's findings and conclusions, we firstexamine the purpose of the purchase of the bonds of the Insurance Company of America by the two Western Banks of Billings, referred to asa bankers' blanket bond. The bond was purchased by each bank, not by Magelssen, and one of itsprovisions was tocover "Dishonesty": "A loss through any dishonest actof any of the

employees committed anywhere and whether committed alone or incollusion with others, including loss, through any such act of any of the employees, of Property held by the Insured for any purpose orin

### any capacity and whether so held gratuitously or not, and whether or not the Insured is liable therefor.'I 

### From the testimony of Mr. Veeder, Claims Supervisor of the Insurance Company of North America, who finally negotiated the settlement of $55,000 with the two banks, and all of the documentary evidence introduced concerning that settlement, it is obvious that the settlementwas made under the quoted "Dishonesty" acts clause of the policy. TOO, from the same source of evidence, it is clear the acts referred to were the acts of Magelssen when he was an officer of the two banks in his dealings with Manuel. To now argue Magelssen can personally benefit from those acts through insurance he had purchased to protect the banks is untenable. Thepolicies were to protect the banks and not Magelssen and to argue that he sold his stock at a lower price than the other stockholders,or that all the new owners had declared the Manuel notes of no value, just begs the issue. Magelssen cannot,and should not, benefit from his own wrongdoing. His note and those of Manuel became the property of the two banks at the time of the sale. Plaintiff Magelssen cites Gilmore v. Gilmore, Mont

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, 530 P.2d 480, 32 St.Rep. 23, 26; Stromberg and Brown v. Seaton Ranch Co., 160Mont. 293, 306, 502 P.2d 41, to support his proposition on appeal that: "Wemust indulge the presumption that the judgment of the district court is correct and wiil not be disturbed unless there is a clear preponderance of evidence against it when viewed in the lightmost favorable to the prevailing party." We have no argumentwith the case authority cited but there is like authority for this Court to set aside a trial court's findings where there was no substantial evidence as a basis for its findings. If a clear and satisfactory showing is not made insupport oi the findings, this Court, 

### inproper cases, will set them aside. Gray v. Grant, 62 Mont. 452, 206 P.2d 410; Kasala 

### v. Kalispell Pee Wee Baseball League, 151Mont. 109, 439 P.2d 65; Judson 

### v. Anderson, 118Mont. 106, 165 P.2d 198. We find the trial court erred infailing toaward the banks the sum of $14,500, together with interest, attorney fees and costs inforeclosing the trust indenture. The findings of fact, conclusions of law, and judgment

are set aside. The cause is returned tothe trialcourt with directions toenter judgment appellant-defendants.

We qoncur:

.

Chief ~ustice

Justices