No. 90-046 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1990 

HARLEY HOVEN, ESTATE OF DONNA HOVEN, 

and HOVEN CONSTRUCTION CO., a Montana 

Corporation, 

Plaintiffs and Appellants, 

FIRST BANK (N. A. ) -BILLINGS, a National 

Banking Association, and FBS CREDIT 

SERVICES, INC., a Minnesota Corporation, 

Defendants and Respondents. 

FIRST BANK (N. A. ) -BILLINGS, a National 

Banking Association, 

Counterclaimant, 

HARLEY HOVEN, ESTATE OF DONNA HOVEN, 

and HOVEN CONSTRUCTION CO., a Montana 

Corporation, 

Counterclaim Defendants. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Maurice R. Colberg, Jr., Judge 

presiding. 

COUNSEL OF RECORD: 

i- For Appellant: 

-3 

James P. Murphy, Billings, Montana 

<. 

L. .- For Respondent: 

3 

._ .. a Stephen D. Bell and Charles W. Hingle; Dorsey & 

c- ! 

Whitney; Billings, Montana 

-. Keith Strong; Dorsey & Whitney; Great Falls, Montana ir_. 

i i 

i i i 

i - - Submitted on Briefs: May 30, 1990 

Filed: 

' Clerk 
Justice Fred J. Weber delivered the Opinion of the Court. 

In the District Court for the Thirteenth Judicial District, 

Yellowstone County, plaintiffs Donna Hoven, for whom the estate of 

Donna Hoven has been substituted, and Harley Hoven, her husband, 

and Hoven Construction Company (Hoven Construction), all 

collectively referred to as Hovens, appeal from the Order granting 

the summary judgment motion of the defendants, First Bank (N.A.)- 

-Billings and FBS Credit Services, Inc., servicing agent for First 

Bank, together referred to as Bank. We affirm. 

The sole issue for our review is whether economic duress is 

a defense to the signing of the 1985 and 1986 Agreements? 

The final pre-trial order sets forth the following agreed 

facts: Hoven Construction is a Montana corporation with its 

principal place of business in Laurel, Montana. Its sole 

stockholders were Harley and Donna Hoven. 

Hoven Construction began doing business with Midland National 

Bank (Midland) in May, 1971. Midland later changed its name to 

First Bank (N.A.)-Billings. Over the years, Hoven Construction 

became one of the largest utility and excavation contractors in the 

Billings area. Although the company did various kinds of 

excavation, the bulk of its work was the installation or 

replacement of water and sewer lines in the city of Billings and 

other cities in Montana. Harley Hoven did all of the bidding for 

the jobs and spent most of his time working on the jobs himself. 

In the spring of 1985, the Hovens were in debt to the Bank in 

the amount of $885,798.29, plus interest. On May 17, 1985, the 

2 
Hovens executed and signed a Itworkout Agreementn (the 1985 

Agreement), three promissory notes, two Montana Trust Indentures 

and two mortgages with the Bank. The pertinent parts of the 1985 

Agreement stated: 

D. The total outstanding balance owing Bank on 

5/17/85 , 1985, is $885,798.24, plus interest. 

Borrower warrants, represents and acknowledges that it 

has no defenses to payment of, nor any right to set off 

against, all or any of the foregoing sums nor any 

counterclaims or other actions against the Bank of any 

kind whatsoever. 

E. Borrower acknowledges that said debt is in 

default and wishes to repay the principal and interest 

owing Bank according to the terms stated herein. 

22. Borrower hereby, and for its successors and 

assigns, releases, acquits and forever discharges Bank 

and its agents, servants, successors, heirs, executors, 

administrators, officers, directors, employees, and 

attorneys, and all other persons, firms, corporations, 

associations or partnerships of and from any and all 

claims, actions, causes of action, demands, rights, 

damages, costs, loss of service, expenses and 

compensation whatsoever which the Borrower now has or 

which may hereafter accrue on account of or in any way 

growing out of any and all known and unknown, foreseen 

and unforeseen damages and consequences thereof resulting 

from any action or inaction concerning the transactions 

between Borrower and Bank. 

In March of 1986, FBS Credit Services, Inc. handled the 

Hovenst account as servicing agent for the Bank. Martin Moss of 

FBS Credit was the officer primarily responsible for the Hovenst 

account. Both the Bank and FBS Credit are a part of First Bank 

System, Inc. This is the end of our summary of the agreed 

statement of facts. 

In addition to admitted default, Hoven Construction 

acknowledged in paragraph F of the 1986 Agreement that it breached 

its contract by failing to apply all receivables to its debt. 
Specifically, Hoven Construction failed to remit to the Bank the 

sum of $118,118.59 that it had collected, in violation of the 

Bank's secured interest in Hoven Construction accounts receivable. 

Hovens signed a second agreement with the Bank on May 9, 1986 

(the 1986 Agreement). Relevant portions of the 1986 Agreement are: 

B. Borrower acknowledges that the operating line 

of credit note matured April 7, 1986, and had to be 

renewed. The real estate note matured April 17, 1986, 

and is in default. Borrower acknowledges that the Bank 

desires to be paid in full for all amounts due and owing 

under said notes, and Borrower enters into this Agreement 

for the purpose of paying said notes in full according 

to the terms and conditions of this Agreement. 

D. The total outstanding principal balances owing 

Bank according to the terms of the promissory notes 

described above on May 9, 1986, is $885,448.39, plus 

interest. 

F. Borrower acknowledges that, according to the 

terms and conditions of the existing Agreement between 

the parties herein, Borrower was required to apply all 

receivables from the City of Billings contract on the 

indebtedness at the Bank, but despite this obligation of 

Borrower, Borrower failed to apply the sum of 

$118,118.59, dated March 28, 1986. 

6. Borrower agrees to retain and consult a 

qualified financial advisor, preferably a certified 

public accountant, for the purpose of consultation and 

guidance regarding the monetary affairs of the business, 

including but not limited to, matters concerning income 

and expenditures, control of overhead, and budgetary 

pro j ections . 

20. NO DEFENSE. THE BORROWER WARRANTS, 

REPRESENTS AND ACKNOWLEDGES THAT THEY HAVE NO DEFENSES 

TO PAYMENT OF, NOR ANY RIGHT TO SET OFF AGAINST, ALL OR 

ANY OF THE OBLIGATIONS TO BANK SET FORTH IN THIS 

AGREEMENT AND THE NOTE OR NOTES EXECUTED PRIOR OR 

PURSUANT HERETO, NOR ANY COUNTER CLAIMS OR OTHER ACTIONS 

AGAINST BANK OF ANY KIND WHATSOEVER, EXCEPTING THE 

TRANSACTION REGARDING THE WOODLAND HILLS SUBDIVISION. 

BORROWER ACKNOWLEDGES THAT THE DEBTS EVIDENCED BY 

EXHIBITS lfAt', "B", "C" WILL BE EXTENDED ONLY TO OCTOBER 

1, 1986, AT WHICH TIME ALL SUMS OWED ARE DUE AND PAYABLE, 

INCLUDING NEW MONEYS ADVANCED BETWEEN THE DATE OF THIS 
OR A SUBSEQUENT AGREEMENT, AND THE END OF THE BUDGET. 

As above mentioned, all debts were to be extended only to 

October 1, 1986. Hoven Construction ceased business operations at 

the end of September, 1986. On February 11, 1987, the Hovens filed 

an action in the United States District Court for the District of 

Montana which alleged breach of the covenant of good faith and fair 

dealing, breach of fiduciary duty, misrepresentation and fraud and 

tortious interference with contracts by the Bank. That action was 

dismissed without prejudice on April 28, 1987, for the reason that 

the Federal Court lacked subject matter jurisdiction. 

On April 21, 1987, the Bank filed suit in Yellowstone County 

District Court against the Hovens, seeking recovery on the 

promissory notes executed by the Hovens, and foreclosure of the 

mortgages and security instruments. On April 23, 1987, the Hovens 

filed suit against the Bank, FBS Credit and First Trust Company of 

Montana. These two cases were consolidated on July 1, 1987. The 

Hovens were designated as the plaintiffs. 

On December 14, 1988, the Bank filed its motion for summary 

judgment asserting that the Bank had been released from all 

liability under the terms of the 1985 Agreement and the 1986 

Agreement. The pertinent response on the part of the Hovens 

asserted that the releases were obtained through economic duress 

and were void as against public policy. The Bank filed a joint 

answer and counterclaim. Following a hearing on the summary 

judgment motion, on March 9, 1989, the District Court granted the 

Bank' s motion for summary judgment. The Hovens appeal that 
decision. 

The issue: Whether economic duress is a defense to the 

signing of the 1985 Agreement and the 1986 Agreement? 

Summary judgment is proper only when there are no genuine 

issues of material fact and the moving party is entitled to 

judgment as a matter of law. Rule 56(c), M.R.Civ.P. Any 

inferences to be drawn from the factual record must be resolved in 

favor of the party opposing summary judgment and summary judgment 

is never a substitute for a trial on the merits. Batten v. Watts 

Cycle and Marine, Inc. (Mont. 1989), 783 P.2d 378, 46 St.Rep. 1984. 

In this case summary judgment was founded on the legal issue 

of the release language of the the 1985 and 1986 Agreements. 

Hovens urge that they were under economic duress when they signed 

both the 1985 Agreement and the 1986 Agreement. They contend that 

such economic duress was based upon the impending threat of civil 

or criminal penalties, including overdraft charges which could 

result, and the requirement on the part of the Hovens that they pay 

wages and other obligations with a failure to pay resulting in 

potential penalties, both civil and criminal. In addition, the 

Hovens argue that the Bank refused to extend other credit except 

on the terms set forth in the two agreements, thereby forcing 

execution by the Hovens. In substance the Hovens contend they had 

no choice but to sign the agreements, because the failure to sign 

would have resulted in a refusal on the part of the Bank to make 

further loans and foreclosure by the Bank. 

The Bank contends that the releases are clear and unambiguous 
in terms. The Bank argues that the Hovens did not suffer from any 

legally recognized duress at the time they signed the two 

agreements. The Bank contends there is a factual failure to show 

economic duress. The Bank contends that this case is similar to 

Aldrich & Co. v. Donovan (1989), 238 Mont. 431, 778 P.2d 397. The 

Bank argues that Donovan was under similar pressure to the Hovens 

in this case--he was pressured by his need for further credit, not 

by any duress imposed by the lender. That was held not to be a 

basis for a claim of economic duress. 

In its Memorandum in support of summary judgment, the District 

Court considered various theories. The District Court considered 

Sprunk v. First Bank Western Montana Missoula (1987), 228 Mont. 

168, 741 P.2d 766, as the closest factual case to the present case. 

It pointed out that under S~runk a release could be set aside if 

it was obtained fraudulently or without adequate consideration. 

However, the District Court disposed of that theory by pointing out 

that the Hovens failed to raise a genuine issue of material fact 

because they failed to set forth facts establishing fraud or 

inadequacy of consideration. 

The District Court next considered the theory of economic 

duress. It referred to 79 ALR 3d, § 2(a) at 603, as setting forth 

the three elements of economic duress or compulsion; a (1) wrongful 

act that; (2) overcomes the will of a person; (3) who has no 

adequate legal remedy to protect his interests. The District Court 

pointed out that the Hovens argued that they were under economic 

duress because they had overdrawn their checking account, had 
borrowed up to their credit limit, and had payroll and other 

obligations to meet. The District Court concluded that the Hovens 

had failed to provide any facts to satisfy the elements of economic 

duress. The Hovens had failed to set forth facts establishing a 

wrongful act on the part of the Bank in requiring the plaintiffs 

to sign the agreements. It pointed out that economic duress is not 

established merely by proof that consent was secured by the 

pressure of financial circumstances. The District Court concluded 

that the defense of economic duress or undue influence could not 

be made under the facts of this case. 

We agree with the conclusions of the District Court on the 

economic duress theory. The Aldrich case cited above was decided 

by this Court subsequent to the summary judgment decision by the 

District Court. The statements by this Court in Aldrich are 

peculiarly pertinent here: 

A claim of economic duress requires a showing that the 

contract at issue was made under circumstances evincing 

a lack of free will on the part of the contracting 

parties. It is not sufficient to show that consent was 

secured by the pressure of financial circumstances, or 

that one of the parties merely insisted on its legal 

right. . . . The note at issue here evidenced an existing 

debt owed by Donovan to Aldrich. Aldrich did not force 

Donovan to incur the debt. Aldrich had a legal right to 

require security of some sort before extending further 

credit to Donovan. He was therefore ltpressuredgl only by 

his need for further credit, not by any duress imposed 

by Aldrich. Aldrich was therefore entitled to summary 

judgment on the note. (Citations omitted). 

Aldrich, 778 P.2d at 401. In his affidavit in opposition to the 

Bankls summary judgment motion, Mr. Hoven set forth the factual 

theory upon which he based his claim of economic duress. In 

substance, the facts established by the Hovens make it clear that 
the duress suffered by them was the result of their own financial 

circumstances. As stated in the above quote, it is not sufficient 

to show that consent was secured by the pressure of financial 

circumstances. 

We conclude that the District Court was correct in its 

determination that the Hovens had failed to set forth facts which 

establish economic duress as a defense to the releases contained 

in the 1985 Agreement and the 1986 Agreement. We therefore hold 

that the Hovens have failed to establish that economic duress was 

present in the signing of the 1985 and 1986 Agreements. As a 

result, we affirm the summary judgment ruling in favor of the Bank 

by the District Court. 

We will briefly discuss other issues raised by the Hovens in 

their briefs. The Hovens argue that there was a fiduciary 

relationship which should result in a different decision. The Bank 

disputed the presence of the fiduciary relationship. The District 

Court concluded that the Hovens had failed to present facts showing 

such a fiduciary relationship. After a review of the record, we 

conclude that the District Court was correct in its conclusion that 

the facts presented do not demonstrate a fiduciary relationship and 

the issue was properly disposed of by summary judgment. 

The Hovens argued that the release provisions of the two 

agreements were not enforceable because of the provisions of 5 28- 

2-702, MCA. That code section in substance provides that a 

contract which exempts anyone from responsibility from his own 

fraud, or wilful injury, or for a violation of law, is against the 
policy of law. The Hovens failed to present facts bringing that 

statute into play. By its terms the statute therefore does not 

apply to existing claims. We conclude there is no proper basis for 

the application of 5 28-2-702, MCA, to this case. 

The Hovens filed with this Court a motion to strike the 1985 

Agreement because the Bank failed to attach it to its briefs on the 

original motion for summary judgment, claiming that, as a result, 

the 1985 Agreement was not a part of the record before the District 

Court. Hoven admits he was aware of the provisions of the 

agreement. The Bank made reference to the agreement in its brief 

but did not initially attach a copy. In a similar manner Hoven 

Construction referred to the agreement in its pleadings. The Bank 

provided a copy of the agreement to the District Court prior to the 

hearing on the motion for summary judgment. Hoven did not file a 

motion to strike the 1985 Agreement or otherwise object. We 

conclude that Hoven waived any right to object to the absence of 

the agreement. 

The Hovens contend that the releases are not clear and 

unambiguous and therefore are not enforceable. In addition the 

Hovens contend that the 1986 release was a novation of the 1985 

release. Neither of those issues was presented to the District 

Court. We therefore decline to address either issue on appeal 

because of the absence of presentation to the District Court. See 

Wyman v. DuBray Land Realty Co. (1988), 231 Mont. 294, 752 P.2d 

196; Miller v. Catholic Diocese of Great Falls (1986), 224 Mont. 

113, 728 P.2d 794. 
We affirm the summary judgment. 

We Concur: A 
Justice William E. Hunt, Sr., dissenting: 

I dissent. It need hardly be said that summary judgment is 

inappropriate when a case presents disputed issues of material 

fact. In this case, the Hovens allege that they were forced to 

sign agreements in which they forewent legal rights and defenses 

under the threat of civil and criminal penalties. By granting 

summary judgment, the majority, and the District Court before it, 

concludes as a matter of law that the threat of civil and criminal 

penalties does not constitute economic duress. Under the 

circumstances alleged in this case, I cannot agree. The Hovens 

have raised material issues of fact which should be presented to 

a jury for its consideration. They should not be disposed of by 

the District Court on a motion for summary judgment. 

Once again, the majority has approved the trend among the 

district courts in this state to sit as fact finders in motions for 

summary judgment, thereby denying plaintiffs their rightful day in 

court. What is the old saying? If I had a nickel for every 

dissent I've written protesting this trend . . . . 
IN THE SUPREME COURT OF THE STATE OF MONTANA 

NO. 90-046 

HARLEY HOVEN, ESTATE OF DONNA HOVEN, 

and HOVEN CONSTRUCTION CO., 

a Montana Corporation, 

Plaintiffs and Appellants, 

-vFIRST BANK (N.A.) - BILLINGS, a National 

Banking Association, and FBS CREDIT 

SERVICES, INC., a Minnesota Corporation, 

Defendants and Respondents, 

FIRST BANK (N.A.) - BILLINGS a National 

Banking Association, 

HARLEY HOVEN, ESTATE OF DONNA HOVEN, 

and HOVEN CONSTRUCTION CO., 

a Montana Corporation, 

Counterclaim Defendants. 

1 

1 ORDER 

) 

The plaintiffs have filed a petition for rehearing and 

defendants have filed their response. After considering the same, 

we order that the following change be made in our opinion in this 

matter. 

Delete the following paragraph on page 9: 

We will briefly discuss other issues raised by the 

Hovens in their briefs. The Hovens argue that there was 

a fiduciary relationship which should result in a 

different decision. The Bank disputed the presence of 

the fiduciary relationship. The District Court concluded 

that the Hovens had failed to present facts showing such 

a fiduciary relationship. After a review of the record, 

we conclude that the District Court was correct in its 

conclusion that the facts presented do not demonstrate 

a fiduciary relationship and the issue was properly 
disposed of by summary judgment. 

In place of the above paragraph substitute the following: 

We will briefly discuss other issues raised by the 

Hovens in their briefs. The Hovens argue that there was 

a fiduciary relationship which should result in a 

different decision. The Bank disputed the presence of 

the fiduciary relationship. After a review of the 

record, we conclude that the facts presented do not 

demonstrate a fiduciary relationship and the issue was 

properly disposed of by summary judgment. 

In all other respects, our opinion shall remain unchanged. 

With the foregoing exception the petition for rehearing is denied. 

DATED this day of September, 1990. / 

6 

Chief Justice 

Justices 

Justice ~illiam E. Hunt, Sr. would grant the petition for 

rehearing.