No. 84-226 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

CENTFAL BANK OF MONTANA, 

Plaintiff and Respondent, 

-vsDEAN A. EYSTAD and MARCIA L. EYSTAD, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable Joel G. Roth, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Church, Harris, Johnson 6 Williams; William A. Reid, 

Great Falls, Nontana 

For Respondent : 

Alexander c Baucus; Ward E. Taleff, Great Falls, 

Montana 

Submitted on Briefs: July 25, 1985 

Decided: December 13, 1985 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

Dean and Marcia Eystad appeal a judgment of the Cascade 

County District Court permitting Central Bank of Montana 

(Central Bank) to foreclose on certain parcels of Eystads' 

real property and denying Eystads' counterclaims. The issue 

on appeal is whether there was substantial credible evidence 

to support the District Court's judgment. We hold that there 

was such evidence and, accordingly, we affirm. 

Appellants set forth three specific issues: 

(1) Did the District Court err in ruling that Central 

Bank could foreclose on Eystads' real property without 

liability for damages to their business? 

(2) Did the District Court err in denying Eystads' 

counterclaim against Central Bank for an alleged breach of 

the covenant of good faith? 

(3) Did the District Court err in denying Eystads' 

motion to stay judgment? 

Eystads have been customers of Central Bank for many 

years. They own and operate a business engaged in the manufacture and sale of building trusses. Beginning as early as 

1963, Eystads obtained loans from Cental Bank and secured the 

loans with mortgages on their home and business property. In 

1977, Central Bank made the first "operating loan" to 

Eystads. Eystads obtained this loan to provide funds for the 

operation of their business. Eystads gave Central Bank a 

mortgage on real property in Great Falls, Montana to secure a 

second operating loan obtained by Eystads in 1977. This 

mortgage contained a future advance clause to secure future 

advances from the Bank up to the amount of $60,000. In later 

years, Central Rank made frequent operating loans to Eystads. 
Most of the loans were intended to be secured by the 1977 

mortgage, under the future advance clause. These loans were 

evidenced by promissory notes generally providing for a lump 

sum payment due in six months. In some instances, Eystads 

would pay only the interest due on the due date and would 

renew the loan with a new promissory note. Often they would 

also borrow additional funds, with the new promissory note 

reflecting the new advances as well as the unpaid principal 

from the prior note. 

In February 1982, Central Bank renewed an existing 

$50,000 loan of Eystads for six additional months. On 

February 2, 1982, prior to the loan renewal, a Central Bank 

officer wrote to Eystads indicating that in connection with 

the renewal Eystads would be expected to substantially reduce 

the amount they owed. On February 4, Eystads executed a new 

note evidencing the renewal. Central Bank drew up and 

Eystads signed a new mortgage on business property to secure 

this loan. This is the mortgage at issue in the instant 

case. Central Bank required the new mortgage because the 

bank may have been unsecured as a result of loans to Eystads 

(which loans were intended to be secured by the first 

mortgage) possibly in excess of the $60,000 future advance 

clause of the first mortgage. 

The February 4 note was due on August 4, 1982. On 

August 4, 1982, Eystads met with two bank officers. Eystads 

wanted to pay the interest accrued on the note and requested 

a six month extension of the note. Central Bank agreed to a 

ninety day extension of the note, setting the new due date at 

November 2, 1982. 

Jeffrey Mortensen, an assistant vice-president of 

Central Bank, was at the August 4th meeting with Eystads. He 
testified that Eystads were informed at the meeting that 

their loan would not be renewed after November 2, 1982, 

without a significant reduction in the outstanding principal. 

Mortensen also testified that the bank officers told Eystads 

that the amount of reduction shou1.d approximate $25,000. 

Mrs. Eystad talked with a bank officer, Scott Rubie, on 

October 28, 1982. She testified that that day Rubie told her 

there was a possibility that the Bank would not again extend 

the loan. 

On November 9, 1982, Eystads again met with Central 

Rank officers. Eystads requested that the note due on November 2 be again extended for six months. Jeff Mortensen of 

the Bank was also at that meeting. He testified that the 

bank officials decided on November 9 to not take any action 

on the note, now due, for a couple of weeks. He stated that 

they made this decision so that Eystads could pursue 

refinancing from another source for the balance of the debt 

and so that Eystads could obtain funds owed to them. 

Mortensen testified that he urged Eystads to pursue this 

course of action and that he told Eystads that another 

extension of the loan would not be granted. 

Mrs. Eystad also testified as to the import of the 

November 9 meeting. She stated that James Hopkins, the 

president of Central Bank, indicated to her that Eystads 

would be required to make a substential payment on the principal of the loan, which had become due on November 2, before 

the Bank would extend the loan. She further testified that 

Hopkins stated that a substantial payment sufficient to 

extend the loan would be "around" $4,000 on the principal. 

On December 7, 1982, Mr. Eystad spoke with Jeff 

Mortensen and offered to pay approximately $6,300 on the 
operating loan due November 2. There apparently was a misunderstanding as to whether the total $6,300 would be applied 

on the principal of the debt. Mr. Eystad requested a six 

month extension of the note. The Rank, through Mortensen, 

refused to extend the note and later demanded payment in 

full. Mr. Eystad made no payment on the operating loan and 

instead applied approximately $6,000 to pay off a different 

loan secured by a mortgage on other property. 

The bank officers handling the Eystads' loans kept 

comment sheets relating to those loans. A comment sheet 

reflects generally the history and circumstances of the loan. 

The comment sheets relating to Eystads' loans were introduced 

at trial. These sheets, and the February 1982 letter to 

Eystads, support Central Bank's contentions that (1) the 

Bank informed Eystads that their operating loan would not be 

further renewed or extended without a substantial reduction 

in the outstanding balance of the loan; and (2) the Bank 

contemplated, and informed Eystads, that the reduction should 

be approximately $25,000. 

Central Bank, unwilling to grant Eystads a further 

extension on the loan, filed a complaint against Eystads in 

January 1983. Central Bank sought to foreclose the mortgage 

on real property which secured the loan due on November 2. 

Eystads filed an answer and counterclaim in response to 

Central Bank. As their principal defense to the action, 

Eystads asserted that Central Bank was estopped from foreclosing the mortgage. The estoppel defense was based on the 

contention that Central Bank hzd for years engaged in the 

"practice and course of conduct" of renewing and/or extending 

Eystads' loans without demanding from Eystads a payment on 

the principal of the loan. Eystads further asserted that 
they relied on this practice and course of conduct to their 

detriment and that Central Bank changed this business 

practice without any advance warning to Eystads. 

Consequently, Eystads counterclaimed against Central Rank for 

the premature and wrongful foreclosure of the mortgage. 

Eystads also counterclaimed against Central Bank alleging the tort of bad faith and praying for punitive damages. 

Under this theory, Eystads alleged that the Bank intentionally and maliciously acted to injure Eystads. 

The case went to trial in November 1983 and the District Court issued its findings of fact, conclusions of law 

and judgment in January 1984. Eystads make oblique objections alleging that the trial court adopted Central Bank's 

proposed findings and conclusj.ons verbatim. However, they 

have not raised this as an issue on appeal. In any case, we 

find the trial court's findings of fact and conclusions of 

law to be detailed and complete. 

The District Court held that the Bank was not estopped 

and could properly foreclose on the property. The court 

found that Eystads were bound by their promissory note and 

the Bank had no duty to renew or extend the note 

indefinitely. The counterclaims were rejected as without 

merit. Eystads appeal. 

The first issue is whether the District Court erred in 

finding that Central Bank could properly foreclose the 

mortgage, without liability for damages to Eystads' business. 

The standard for review is set forth in Rule 52(a), Montana 

Rules of Civil Procedure, which provides that this Court may 

not set aside findings of fact unless they are clearly 

erroneous. Expanding on this standard, we have stated: 
When reviewing findings of fact and 

conclusions of law of a district court, 

sitting without a jury, this Court has 

repeatedly held such findings and conclusions will not be disturbed if supported 

by substantial evidence and by the law. 

(Citation omitted. ) 

When reviewing evidence it will be viewed 

in the light most favorable to the prevailing party in the district court, and 

the credibility of witnesses and the 

weight assigned to their testimony is for 

the determination of the district court 

in a nonjury trial. 

Kartes v. Kartes (1977), 175 Mont. 210, 217, 573 P.2d 191, 

1.95; citing Luppold v. Lewis 11977), 172 Mont. 280, 284, 563 

The lower court made findings that, (1) the Bank was 

not estopped from foreclosing the mortgage; (2) the Bank's 

renewals and extensions of Eystads' loans were discretionary 

acts and did not imply an obligation to further renew or 

extend the loans; (3) the Bank gave Eystads adequa-te notice 

that a reduction in the principal of the loan was required; 

(4) the Bank gave Eystads adequate notice that further 

renewals or extensions would possibly not be granted; 

(5) the Bank was entitled to repayment of the loan which was 

past due; (6) Eystads' offer, in December 1982, to repay 

$3,000 of the loan principal was not a "substantial 

reduction" of the outstanding principal of $50,000; and 

(7) Eystads were not entitled to an extension under the 

Bank's assurance that an extension would be forthcoming if 

Eystads made a substantial reduction in the amount owed. 

Substantial credible evidence supports these findings 

of fact. The testimony of the bank officers, parts of which 

have been cited and which the trial court found credible, 

support the finding that the Bank was acting in good faith 

and with justifiable business judgment in foreclosing the 
mortgage. The bank's comment sheets, which were introduced 

into evidence, also support this view. The sheets show the 

Bank's legitimate concern with the loan and the Bank's 

efforts to communicate this concern to Eystads. The February 

1982 letter from the Bank to Eystads also shows the Bank's 

forthright communications to Eystads. We uphold the District 

Court as to the first issue. 

Similarly, we uphold the District Court' s decision as 

to the second issue; i.e., the denial of Eystads' counterclaim for an alleged breach of the covenant of good faith and 

fair dea,-inq. Counsel for Eystads have referred to their 

counterclaim as a claim for the tort of bad faith. The claim 

is more properly referred to a.s an alleged breach of the 

covenant of good faith and fair dealing. We do not concede 

that there was imposed upon Central Bank a covenant of good 

faith and fair dealing (as opposed to the obligation of good 

faith, defined as honesty in fact, imposed upon every 

contract or duty within the Uniform Commercial Code under 

fj 30-1-203, MCA). However, even assuminq arguendo such a 

covenant, there is substantial evidence, in the form of the 

testimony of three bank officers, the comment sheets, and the 

February 1982 letter, that Central Bank did not breach any 

covenant of good faith and fair dealing. This evidence, 

which the District Court was free to believe, portrays the 

bank representatives as candid and reasonable in their 

dealings with Eystads. Furthermore, a breach of the 

obligation of good faith imposed by § 30-1-203, MCA, is not, 

in and of itself, sufficient to support the award of punitive 

damages which Eystads requested. There must be some 

oppressive, malicious, or fraudulent conduct, above and 

beyond a breach of the statutory good faith obligation, to 
support an award of punitive damages. See First National 

Bank of Libby v. Twombly (Mont. 1984), 689 P.2d 1226, 41 

St.Rep. 1948. There is substantial evidence to support the 

trial court1 s denial of Eystads' counterclaim for breach of 

the covenant of good fa-ith and fair dealing. 

The third issue is whether the District Court erred in 

denying Eystadsl motion to stay judgment. Eystads cite no 

authority for the proposition that judgment should have been 

stayed. 

Rule 7 of the Montana Rules of Appellate Civil Procedure provides for a stay of judgment or order pending an 

appeal. Rule 7 states that, upon application, a District 

Court may in its discretion grant a stay of judgment. After 

reviewing the record of the hearing on the motion to stay 

judgment, we find that the District Court acted within its 

discretion in denying the motion to stay judgment. Further, 

Eystads did not post a supersedeas bond to stay Ijudqment. 

The District Court judgment is affirmed. ,4 

We concur: