No. 12965 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

WILLIAM C. MAGELSSEN and CHARLOTTE T. MAGELSEEN, 

Plaintiffs and 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: 

For Appellant : 

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, 1975 
Mr. Justice John Conway Harrison delivered the Opinion of the 

Court. 

This is an appeal from a judgment of the distric court, 

Yellowstone County, ordering defendants William G. Mouat 1 Trustee, 

and Western Banksof Billings, to deliver to plaintiffs a deed 

conveying them any right, title and interest of the bank in 

certain real property. 

I 

William C. Magelssen and Charlotte T. Magelssen rought b 

this action to recover the sum of $55,000 paid to defendant banks 

by the fidelity insurer of the banks' employees, and to T equire 

the banks to reconvey real property conveyed to the bankb under 

a trust indenture foreclosure sale. The banks countercl imed, 

asking the district court to: I 

(1) ratify and affirm the foreclosure prodeedings; 

(2) order the payment by Magelssens of the banks losses 

($14,500) together with interest, representing the difference between the insurance payment to the banks ($55,000), and the actual 

loss to the banks ($69,500), occasioned by Loans made by William 

Magelssen to one George Manuel. 

Two issues are raised on appeal. 

1. Whether the evidence supports the district court's 

decision ordering the banks to deliver to Magelssens a deed conveying to them all the right, title and interest of the banks evidenced by the trust indenture dated September 9, 1971, and all right, 

title or interest obtained by the banksupon the trust indenture 

foreclosure proceedings. 

2. Whether the court erred in failing to award the banks 

the sum of $14,500 together with interest and attorney fees and 

costs in foreclosing the trust indenture. 

It is necessary to set out in some detail the factual situation in order to distill the rather limited legal questions involved in the case. 
The fiscal maneuvering of William C. Magelssen serves 

as the background to assess who owes whom--the problem presented 

by the issues. For some twenty years after graduating from 

college plaintiff Magelssen worked in various banks in this state 

holding various positions from teller and bookkeeper, to the head 

of the mortgage and real estate department of his last employer. 

He became an assistant to the vice-president and later vice-president of the Security Bank of Billings, Montana. These twenty 

years of banking experience resulted in his decision, in 1970, 

to organize his own banking empire and during that year he organized two banks, the Western State Bank and the Western 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 

this purchase he entered into these fiscal dealings: 

$40,000 from his savings. 

$40,000 borrowed from the First National 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 as accomodation party. 

$100,000 borrowed from Western Banks, with Lloyd Hostetler 

as accomodation party. 

$100,000 borrowed from Western Banks to pay Voegele on 

a loan. 

$30,000 borrowed from Western Banks with Mardaus as 

accomodation party. 

$25,000 borrowed from Western Banks with Harrison Fagg 

as accomodation party. 

Total - $685,000. 

To secure the accomodation parties to his borrowing from 
his own banks Magelssen gave the parties his own personal notes. 

To secure the $300,000 loan from his father he gave his common 

shares in both banks as security. All of this was in July, 1970. 

On October 19, 1970 his father called up his loan. At this point 

things went from bad to worse. 

To get money to cover 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 term capital loan for the two 

Western Banks of Billings, and a proposed bank in Bozeman, for 

some $900,000. Manuel came to Billings 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 to cover the $300,000 plus interest loan of his 

father. He then gave Manuel $7,475 as an initial fee for obtaining the loan and obtained promises from Manuel 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 to each bank his personal promissory note. At the same 

time Manuel deposited the $35,000 obtained from the Western State 

Bank in Magelssen's personal account. In addition, as "collateral" 

for the two notes for $35,000 each, Manuel gave Magelssen, for 

the banks, certain stock in First 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 in prison but not for his operations in 

Montana. 

From the proceeds of the other $35,000 loan to Manuel by 

the Western State Bank, Manuel took $5,000 in cash and deposited 

$30,000 in his personal checking account. 

From the above abw-viated background of fiscal operations 
of the two Western Banks, it was no surprise that various 

banking officials became alarmed and early in 1971 both 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 in August a sale was 

consumnated with one John Vucurevich 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 that Vucurevich 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 the Vucurevich purchase, Magelssen received as 

consideration for selling his stock the complete payment of his 

father's obligation (he had 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 banks 
claimed $70,000, which was the amount written off by the banks 

of the two Manuel notes. 

At the time of the purchase Magelssen arranged that the 

accomodation notes of Mardaus, Van Fleet and Fagg were paid off. 

However, Magelssen argues that as to the Fagg note, the banks 

tried to get paid twice on it. Once through the foreclosure on 

his trust indenture, and the second time through a law suit filed 

against Fagg, which was finally dropped. Magelssen argues that 

the Manuel notes were likewise to have been cared for and the 

notes returned to him as fully satisfied. Further, that the 

banks' later action in obtaining a $55,000 settlement from the 

insurance companies should have either been returned to him or at 

least applied against his $25,000 note. The banks argue that 

although they paid no separate consideration for the Manuel notes 

they are the owners of the notes by virtue of the purchase of the 

capital stock and are accordingly entitled to the settlement. 

The trial court after a full hearing and after considering all the evidence submitted by the various depositions, entered 

its own findings of fact, conclusions of law and judgment, 

ing in pertinent part: 

"'That $55,000.00 is what is now causing the 

trouble. The banks claim the money alleging that 

the Manuel notes are the property of the banks 

and therefore the money belongs to the banks. 

The Plaintiffs claim the money alleging that had 

the Manuel notes been liquid assets at the time 

of the sale to Vucurevich the cash the Plaintiffs 

would have received would have been $70,000 

greater, therefore the money belongs to the Plaintiffs. The Plaintiffs also allege that the agreement with Mr. Vucurevich was that the Manuel notes 

were to be the property of the Plaintiffs and 

therefore any money brought in based on those 

notes belongs to the Plaintiffs.' 

provid- 

"Without doubt at the 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 

that Mr. Vucurevich would not pay one cent for 

those notes, and therefore Plaintiffs were stuck 
with that loss. There is some conflict in the 

testimony as to physical delivery of the notes: 

the Plaintiffs allege they were to receive 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 little trouble finding that Mr. 

Vucurevich did not pay any consideration for the 

notes because he and the Plaintiff felt they were 

worthless. Neither does the court have any 

trouble finding that Mr. Vucurevich would have 

paid a consideration for the notes had they been 

valid obligations. It was not proved to the satisfaction of 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 to the $55,000, but it is 

on hand, and the court concludes it should be 

divided in some manner between the parties. 

"Therefore, 

"IT IS ORDERED: 

"1. That Harrison Fagg is not obligated to any of 

the parties herein; 

"2. That all claims, cross claims or counter claims 

of any party is disposed of by this judgment, 

whether specifically referred to or not. 

"3. That the banks keep the $55,000.00, but they 

are ordered to deliver to the Plaintiffs a deed 

conveying to the 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 interest obtained 

by foreclosure proceedings; 

"4. All parties are to pay their own costs." 

To determine whether there is sufficient evidence to 

support the trial court's findings and conclusions, we first examine 

the purpose of the purchase of the bonds of the Insurance Company 

of America by the two Western Banks of Billings, referred to as a 

bankers' blanket bond. The bond was purchased by each bank, not 

by Magelssen, and one of its provisions was to cover "Dishonesty": 

"A loss through any dishonest act of any of the 

employees committed anywhere and whether committed 

alone or in collusion with others, including loss, 

through any such act of any of the employees, of 

Property held by the Insured for any purpose or in 
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 settlement was 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. The policies 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 . 

, 530 P.2d 480, 32 St.Rep. 23, 26; Stromberg and Brown v. 

Seaton Ranch Co., 160 Mont. 293, 306, 502 P.2d 41, to support his 

proposition on appeal that: 

"We must 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 light most favorable to the prevailing party." 

We have no argument with 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 in 
support oi the findings, this Court, in proper cases, will set 

them aside. Gray v. Grant, 62 Mont. 452, 206 P.2d 410; Kasala v. 

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

Judson v. Anderson, 118 Mont. 106, 165 P.2d 198. 

We find the trial court erred in failing to award the 

banks the sum of $14,500, together with interest, attorney fees 

and costs in foreclosing the trust indenture. 

The findings of fact, conclusions of law, and judgment 

are set aside. The cause is returned to the trial court with 

directions to enter judgment appellant-defendants. 

We qoncur: . 

Chief ~ustice 

Justices