No. 90-607 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

CITIZENS FIRST NATIONAL BANK OF WOLF POINT, A national banking 

corporation, 

Plaintiff and Respondent, 

MOE MOTOR COMPANY, a partnership and A.R. MOE, a/k/a ARVID MOE, AND 

CURTIS MOE, a/k/a CURTIS W. MOE, partners, associated and in 

business under the common name and style of said company, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Fifteenth Judicial District, 

In and for the County of Roosevelt, 

The Honorable M. James Sorte, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Don M. Hayes and Rodney T. Hartman; Herndon, 

Hartman, Sweeney & Halverson, Billings, Montana. 

For Respondent: 

Charles W. Hingle and Stephen D. Bell; Dorsey and 

Whitney, Billings, Montana. 

Submitted on briefs: April 18, 1991 

Decided: June'4, 1991 
Chief Justice J. A. Turnage delivered the Opinion of the Court. 

This is an action to foreclose a loan. Defendants appeal a 

summary judgment granted to plaintiff bank by the District Court 

of the Fifteenth Judicial District, Roosevelt County. We affirm 

in all respects except that we remand as to the Kelly Moe contract. 

The issue is whether the District Court erred in granting 

summary judgment in favor of the bank on its claims and on 

defendants' counterclaims. 

Defendant Moe Motor Company (Moe Motor) is a Wolf Point, 

Montana, partnership owned by defendants Arvid Moe and Curtis Moe. 

The business sells and services farm implements and equipment. Moe 

Motor and Citizens First National Bank of Wolf Point (CFNB) had a 

thirty year debtor-creditor relationship. 

From 1978 to 1985, Moe Motor's indebtedness to CFNB increased 

from $85,435 to $308,863, while its net worth declined from 

$435,233 to $192,729. On September 11, 1985, Arvid Moe on behalf 

of Moe Motor executed a promissory note and security agreement with 

CFNB in which $210,670.88 of promissory notes were refinanced into 

one note. The note was payable "on demand, but if no demand is 

made, then on February 11, 1986." The security agreement granted 

CFNB a secured interest in Moe Motor's inventory, machinery, 

accounts or other rights to payment, general intangibles, and all 

vehicles, machinery, equipment, and fixtures identified. 
Moe Motor did not make payment on the note by February 11, 

1986, but, instead, sought further financing from CFNB. CFNB asked 

for certain financial information in support of the request. Moe 

Motor eventually supplied some, but not all, of the financial 

information. In the meantime, in April 1986, Moe Motor obtained 

a $230,000 federal disaster loan from the Small Business Administration (SBA) . Moe Motor paid $150,000 to CFNB, which voluntarily released $20,000 back to Moe Motor for operating expenses. 

In August 1986, with written notice to Arvid Moe, CFNB placed 

a hold on Moe Motor's checking account. CFNB then made two setoffs against the account, in the amounts of $14,786.88 and 

$13,728.08, applying these amounts to Moe Motor's obligations to 

the bank. In October 1986, CFNB determined that Moe Motor had sold 

several pieces of secured equipment "out of trustIml without 

reporting the sales or remitting proceeds to CFNB. In November 

1986, CFNB wrote to Moe Motor debtors and instructed them to make 

payments directly to CFNB. 

CFNB filed this action in December 1986, seeking to recover 

on the September 11, 1985, promissory note. The action was stayed 

while Moe Motor went through a Chapter 11 bankruptcy. After the 

bankruptcy was concluded, Moe Motor filed counterclaims against 

CFNB for breach of contract, tortious interference with third party 

contracts, tortious violation of the covenant of good faith and 

fair dealing, defamation, and actual or constructive fraud. Moe 
Motor claims that CFNB "breached agreements and understandings 

which had existed for years between the parties;" unreasonably 

refused to make further loans to Moe Motor; and, in contacting Moe 

Motor customers, intentionally interfered with Moe Motor's 

contracts with those customers. 

CFNB moved for summary judgment on its affirmative claims and 

on the claims of Moe Motor. The District Court granted summary 

judgment in favor of CFNB in the amount of $216,937.81 in prejudgment principal and interest, plus post- judgment interest and CFNB' s 

costs and attorney fees. 

Our standard of review is the same standard employed by the 

district court; that is, summary judgment is proper only if no 

genuine issues of material fact exist and the moving party is 

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

McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 

892, 894. All reasonable inferences that may be drawn from the 

offered proof are to be drawn in favor of the party opposing the 

motion for summary judgment. Cereck v. Albertsonls, Inc. (1981), 

195 Mont. 409, 411, 637 P.2d 509, 511. 

CFNB's action to recover on the note signed by Amid Moe on 

behalf of Moe Motor on September 11, 1985, is straightforward. It 

is undisputed that Moe Motor did not pay off the note by the due 

date of February 11, 1986. CFNB's claim would fail only if one of 

Moe Motor's counterclaims succeeds. Moe Motor's first counterclaim 
is that CFNB breached the contract before it did by taking a setoff when the Moe Motor debt was not due and owing; by wrongfully 

setting off $14,786.88 due on a contract with Arvid Moe's son, 

Kelly; and by refusing to extend further credit to Moe Motor 

without solid business reasons. 

According to the unambiguous terms of the written contract 

between the parties, the September 11 note was due and owing when 

CFNB set off Moe Motor's checking account. Prior notice of setoff is not required if the depositor's indebtedness is due and 

owing. FDIC v. First Mortgage Investors (E.D.Wis. 1980), 485 

F.Supp. 445, 455; Northwestern Bank v. Estate of Coppedge (1986), 

219 Mont. 473, 476, 713 P.2d 523, 526. Moe Motor's claim of an 

unwritten agreement for an extension of the due date is too vague 

and indefinite to be an enforceable contract. 

Kelly Moe, son of Arvid Moe, purchased a used Kenworth truck 

from Moe Motor in 1983. Moe Motor assigned the Kelly Moe contract 

to CFNB and agreed to act as guarantor of Kelly Moels obligations 

under the note. Kelly Moe defaulted on the note by failing to make 

payments and CFNB discovered that he had sold the truck without 

remitting the proceeds to CFNB. With notice to Moe Motor, CFNB 

set off Moe Motor's checking account in the amount of $14,786.88 

to cover the Kelly Moe contract. 

The guarantee signed by Amid Moe on behalf of Moe Motor for 

the Kelly Moe contract stated that "I hereby guarantee the 
collection of the above described amount upon failure of the seller 

named herein to collect said amount from the buyer named herein." 

Section 30-3-416(2), MCA, provides that 

wCollection guaranteedv1 or equivalent words 

added to a signature mean that the signer 

engages that if the instrument is not paid 

when due he will pay it according to its 

tenor, but only after the holder has reduced 

his claim against the maker or acceptor to 

judgment and execution has been returned 

unsatisfied, or after the maker or acceptor 

has become insolvent or it is otherwise apparent that it is useless to proceed against 

him. 

The guarantee signed by Amid Moe was of the llcollection guaranteedv1 type. 

The record before us does not indicate that CFNB obtained a 

judgment against Kelly Moe before setting off funds from the 

checking account of guarantor Moe Motor. The District Court made 

no findings that Kelly Moe had become insolvent or that it was 

otherwise apparent that it was useless to proceed against him. We 

remand this case to the District Court for entry of the appropriate 

finding as to this issue. If no such finding is appropriate from 

the record before the court, the District Court shall reduce the 

amount of CFNB1s judgment by the amount set off for the Kelly Moe 

contract. However, because at the time of the set-off, Moe Motor 

had defaulted on the September 11 note, no cause of action for 

wrongful set-off will lie. 
Moe Motor contends that CFNB led it to believe that further 

financing would be provided. That contention is contradicted by 

Arvid Moels own statements in the May 18, 1984, SBA disaster loan 

application: 

I feel we need this Loan to stay in business 

and survive this Ag crisis due to No moisture 

and low Farm and Ranch prices the last few 

years. The high interest rate and the buyers 

market to lower profit even less has truly 

hurt cash flow and Farm Business in general. 

We have received loans from Citizens 1st 

National Bank to keep going. However they 

cannot loan more and in order to keep the 9 

families working and lower our payments and 

interest I feel we must have SBA loan. 

Moreover, Moe Motor failed to provide all of the additional 

financial information CFNB had requested before granting another 

loan. ina ally, CFNB had no obligation to extend further credit to 

Moe Motor. Montana Bank of Circle v. Meyers & Son (1989) , 236 

Mont. 236, 244, 769 P.2d 1208, 1213. We hold that CFNB did not 

breach the contract before Moe Motor did. 

Another counterclaim was for tortious interference with third 

party contracts. Moe Motor claims that CFNB interfered with its 

third party contracts by writing to Moe Motor customers and instructing them to pay their Moe Motor debts directly to CFNB. 

Under 5 30-9-502, MCA, a secured party is entitled to notify 

an account debtor to make payment to the secured party, in the 

event of default. It is not disputed that CFNB was a secured party 
under its contract with Moe Motor. We hold that CFNB was within 

its rights in writing to Moe Motor's debtors. 

Moe Motor's counterclaim for breach of the covenant of good 

faith and fair dealing depends on the claim that it had a special 

relationship with CFNB, under the standards set forth in Story v. 

City of Bozeman (1990), 242 Mont. 436, 791 P.2d 767. Here, like 

in Lachenmaier v. First Bank Systems, Inc. (Mont. 1990), 803 P.2d 

614, 47 St.Rep. 2244, and Mann Farms, Inc. v. Traders State Bank 

of Poplar (Mont. 1990), 801 P.2d 73, 47 St.Rep. 2094, the parties 

had a business relationship and every indication is that the 

contract was for a profit motivation. We hold that there was no 

special relationship between the parties. 

Moe Motor also alleges that CFNB defamed it in the letters 

CFNB wrote to Moe Motor customers. Copies of these letters are 

attached to the deposition of Amid Moe. The first letter provides 

notice that debts to Moe Motor are to be paid directly to CFNB, 

citing statutory authority. The letter states that on February 11, 

1986, Moe Motor defaulted under its security agreement with CFNB 

by failing to pay the amounts due. It then allows the addressee 

an opportunity to correct CFNB's record of the balance due. 

After that letter was written, CFNB learned that Amid Moe 

had instructed customers to pay Moe Motor directly. A second 

letter from CFNB notified debtors that if payments were made to Moe 
Motor, the debtor would be liable to CFNB for wrongful payment. 

It again offered to correct payment records. 

The record indicates that the statements in CFNB1s letters 

were true. Truth is a complete defense to a claim of defamation. 

Griffin v. Opinion Publishing Co. (1943), 114 Mont. 502, 507, 138 

P.2d 580, 584. We hold that the District Court was correct in 

granting summary judgment to CFNB on the defamation counterclaim. 

Moe Motor claimed actual or constructive fraud on the part of 

CFNB. This claim evidently arises from alleged representations by 

the president of CFNB to Arvid Moe that the February 11 due date 

on the note would not be enforced and that the note would only 

become due if the bank deemed itself insecure or if Moe Motor 

violated the agreement. 

The claimed representations by CFNB's president conflict with 

Amid Moels statement to the SBA that CFNB could no longer extend 

credit to Moe Motor. Even if such representations were made, Arvid 

Moe admitted violating the agreement with CFNB by selling equipment 

out of trust. He also admitted failing to give the bank information requested before another loan would be extended. We hold that 

the claim for actual or constructive fraud fails due to Amid Moe s 

own admissions. 

In review, we conclude that summary judgment was proper on the 

claim of CFNB and on Moe Motor's counterclaims. The judgment of 

the District Court is affirmed except as to the amount set off from 
Moe Motor's account for the Kelly Moe contract. The District Court 

shall make findings and, if necessary, amend the judgment as to 

that aspect. Each party shall bear its own costs and attorney fees 

on appeal. 

We concur: 1 
Justice William E. Hunt, Sr., dissenting. 

I dissent. Once again, this Court takes it upon itself to 

determine material questions of fact, further eroding a litigant's 

right to a trial by jury. 

Summary judgment should be granted only if no issues of 

material fact exist. Rule 56(c), M.R.Civ.P. All reasonable 

inferences must be drawn in favor of the party opposing the motion. 

Cereck v. Albertson's Inc., 195 Mont. 409, 411, 637 P.2d 509, 511 

(1981). Although the majority gives lip service to these 

time-honored rules, it refuses to apply them in this case. 

Instead, it selects evidence that tends to demonstrate CFNBfs view 

of the suit while ignoring those proffered by Moe Motors. In so 

doing, it places itself in the position of fact finder, a position 

that should be left to the jury. 

The majority concludes that Moe Motorsf claim of an unwritten 

agreement for an extension of the promissory note's due date is too 

vague and indefinite to be an enforceable contract. However, when 

the proof is viewed in the light most favorable to Moe Motors, it 

becomes apparent that material questions of fact exist regarding 

whether the parties engaged in an implied agreement to extend the 

due date of the note or whether CFNB, by its actions, waived the 

condition of payment by February 11, 1986. 
If one looks at CFNBts actions after the February 11, 1986, 

due date passed, one cannot help but conclude that CFNB led Moe 

Motors to believe that it would not enforce the time provision of 

the promissory note. Rather than taking action to collect on the 

note after February 11, CFNB attempted, in the words of its 

president Michael Miller, Itto work out a plan on it.'' CFNB had 

substantial contact with Moe Motors throughout May, June, July, and 

August 1986, during which CFNB sought financial information from 

the car dealer in its attempt to refinance. In April 1986, CFNB 

accepted a partial payment of $130,000, which reflected money from 

the SBA loan received by Moe Motors. It also accepted other 

payments of principal and interest in August and September 1986. 

The payment of interest for a definite period of time may be 

sufficient consideration for a creditor's promise to extend the 

time for payment of a note. Hackin v. First Nat '1 Bank of Arizona, 

419 P.2d 529, 531 (Ariz. 1966). The debtor's promise to pay 

interest during the extension period may be implied from the 

circumstances. Hackin, 419 P.2d at 531. Here, we have a debtor 

who has alleged that an agreement for extension existed and who 

made periodic payments of principal and interest during the 

extension period. Certainly, these facts raise an issue regarding 

whether an agreement to extend actually existed. 

Alternatively, the evidence raises a genuine issue of fact 

concerning whether CFNB waived the due date of the note. The 

receipt of a delayed partial payment of money due and owing may 

12 
operate as a waiver of any existing default. 3A A. Corbin, Corbin 

on Contracts, 5 754, at 491-92 (1960). Because the facts here 

demonstrate that CFNB accepted payments after the due date without 

demanding remittance of the entire amount borrowed and because CFNB 

attempted to formulate a financing plan with Moe Motors, CFNB may 

very well have waived the default that occurred on February 11. 

If CFNB waived or extended the due date, it was required to 

notify Moe Motors of its intent to collect the remaining sums due 

before it setoff funds from the car dealer's checking account. 

The right of setoff exists only if the borrower is in default. 

See Bottrell v. American Bank, 237 Mont. 1, 14, 773 P.2d 694, 702 

(1989). There are genuine issues of material fact regarding 

whether Moe Motors was indeed in default. 

If Moe Motors was not in default when the setoff occurred, 

the Bank may be liable for wrongful setoff for the amounts applied 

to both the Moe Motors1 promissory note and the Kelly Moe debt. 

It may also be liable for bad faith, defamation, and tortious 

interference with the right to contract for notifying customers of 

Moe Motors of a purported default when a default either had not yet 

occurred or had been waived by CFNB. 

We will never know, however, which party actually committed 

the first breach. Thanks to this Opinion, the parties will never 

have the opportunity to reveal the entire story and plead their 
positions to what should be the only real finder of fact in this 

state, a jury. 

I would reverse the District Court. 

Justice 

I concur with the foregoing dissent of Justice Hunt.