Title: MAGELSSEN v MOUAT
Citation: N/A
Docket Number: 12965
State: Montana
Issuer: Montana Supreme Court
Date: July 31, 1975

No. 12965 I N T H E S U P R E M E COURT O F THE STATE O F M O N T A N A 1975 WILLIAM C. M A G E L S S E N and C H A R L O T T E T. MAGELSEEN, P l a i n t i f f s and Respondents, -VS - WILLIAM G. M O U A T , Trustee, and W E S T E R N B A N K S O F BILLINGS, Billings, Montana, a Montana Corporation, Defendants and Appellant. W E S T E R N BANK O F BILLINGS, Third-Party P l a i n t i f f , -VS - HARRISON FAGG, Third-Party Defendant. Appeal from: D i s t r i c t Court of the Thirteenth J u d i c i a l D i s t r i c t , Honorable E. G3rdner Brownlee, Judge presiding. Counsel of Record: For Appellant : Davidson, Veeder, Roberts & Baugh, Billings, Montana John R. Davidson argued, B i l l i n g s , 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 M r . J u s t i c e John Conway Harrison delivered t h e Opinion of t h e Court. This is an appeal from a judgment of t h e d i s t r i c c o u r t , Yellowstone County, ordering defendants William G. Mouat Trustee, 1 and Western Banksof B i l l i n g s , t o d e l i v e r t o p l a i n t i f f s a deed conveying them any r i g h t , t i t l e and i n t e r e s t of t h e bank i n c e r t a i n r e a l property. I William C. Magelssen and Charlotte T. Magelssen rought b t h i s a c t i o n t o recover t h e sum of $55,000 paid t o defendant banks by t h e f i d e l i t y i n s u r e r of t h e banks' employees, and t o equire T t h e banks t o reconvey r e a l property conveyed t o the bankb under a t r u s t indenture foreclosure s a l e . The banks countercl imed, asking t h e d i s t r i c t court to: I (1) r a t i f y and a f f i r m t h e foreclosure prodeedings; ( 2 ) order t h e payment by Magelssens of t h e banks l o s s e s ($14,500) together with i n t e r e s t , representing t h e d i f f e r e n c e be- tween t h e insurance payment t o t h e banks ($55,000), and t h e a c t u a l l o s s t o t h e banks ($69,500), occasioned by Loans made by W i l l i a m Magelssen t o one George Manuel. Two i s s u e s a r e r a i s e d on appeal. 1. Whether t h e evidence supports t h e d i s t r i c t c o u r t ' s decision ordering t h e banks t o d e l i v e r t o Magelssens a deed convey- ing t o them a l l t h e r i g h t , t i t l e and i n t e r e s t of t h e banks evi- denced by t h e t r u s t indenture dated September 9, 1971, and a l l r i g h t , t i t l e o r i n t e r e s t obtained by t h e banksupon t h e t r u s t indenture foreclosure proceedings. 2 . Whether t h e c o u r t erred i n f a i l i n g t o award t h e banks t h e sum of $14,500 together with i n t e r e s t and attorney f e e s and c o s t s i n foreclosing t h e t r u s t indenture. It is necessary t o s e t o u t i n some d e t a i l t h e f a c t u a l sit- uation i n order t o d i s t i l l t h e r a t h e r limited l e g a l questions in- volved i n t h e case. The f i s c a l maneuvering of William C. Magelssen s e r v e s a s t h e background t o a s s e s s who owes whom--the problem presented by t h e i s s u e s . For some twenty y e a r s a f t e r graduating from c o l l e g e p l a i n t i f f Magelssen worked i n various banks i n t h i s s t a t e holding various p o s i t i o n s from t e l l e r and bookkeeper, t o t h e head of t h e mortgage and r e a l e s t a t e department of h i s l a s t employer. H e became an a s s i s t a n t t o t h e vice-president and l a t e r vice-pres- i d e n t of t h e Security Bank of B i l l i n g s , Montana. These twenty y e a r s of banking experience r e s u l t e d i n h i s d e c i s i o n , i n 1970, t o organize h i s own banking empire and during t h a t year he organ- ized two banks, t h e Western S t a t e Bank and t h e Western Bank of B i l l i n g s , each c a p i t a l i z e d a t $500,000. To have a c o n t r o l l i n g i n - t e r e s t i n t h e banks he purchased 3,210 s h a r e s , 66.4% of t h e shares issued, a t $105 per share, f o r a t o t a l c o s t of $674,100. To finance t h i s purchase he entered i n t o t h e s e f i s c a l dealings: $40,000 from h i s savings. $40,000 borrowed from t h e F i r s t National Bank i n Glendive, Montana, and t h e Midland Bank i n B i l l i n g s , Montana. $300,000 borrowed from h i s f a t h e r . $50,000 borrowed from t h e Western Banks with W. B. Van F l e e t a s accomodation p a r t y . $100,000 borrowed from Western Banks, with Lloyd H o s t e t l e r a s accomodation party. $100,000 borrowed from Western Banks t o pay Voegele on a loan. $30,000 borrowed from Western Banks with Mardaus a s accomodation party. $25,000 borrowed from Western Banks with Harrison Fagg a s accomodation party. Total - $685,000. To secure t h e accomodation p a r t i e s t o h i s borrowing from h i s own banks Magelssen gave t h e p a r t i e s h i s own personal notes. To secure t h e $300,000 loan from h i s f a t h e r he gave h i s common shares i n both banks a s s e c u r i t y . A l l of t h i s was i n J u l y , 1970. O n October 19, 1970 h i s f a t h e r c a l l e d up h i s loan. A t t h i s p o i n t t h i n g s went from bad t o worse. To g e t money t o cover t h e f a t h e r ' s loan of $300,000 p l u s i n t e r e s t , Magelssen contacted a money broker from Ohio named George Manuel i n an e f f o r t t o secure a t e r m c a p i t a l loan f o r t h e two Western Banks of B i l l i n g s , and a proposed bank i n Bozeman, f o r some $900,000. Manuel came t o B i l l i n g s and Magelssen agreed t o pay him a f e e of from 3% t o 5% f o r obtaining such a loan. Manuel obtained a 90 day loan from a F l o r i d a company, Fred Brown & Co., which was used t o cover t h e $300,000 p l u s i n t e r e s t loan of h i s f a t h e r . He then gave Manuel $7,475 a s an i n i t i a l f e e f o r obtain- i n g t h e loan and obtained promises from Manuel f o r f u r t h e r f i n - ancing from Switzerland sources. O n October 2 0 , 1970, t h e two Western Banks of B i l l i n g s , through Magelssen, each loaned Manuel, $35,000. Manuel gave a s s e c u r i t y t o each bank h i s personal promissory note. A t t h e same time Manuel deposited t h e $35,000 obtained from t h e Western S t a t e Bank i n Magelssen's personal account. I n a d d i t i o n , a s " c o l l a t e r a l " f o r t h e two notes f o r $35,000 each, Manuel gave Magelssen, f o r t h e banks, c e r t a i n stock i n F i r s t United T r u s t C o . , a r e a l e s t a t e investment t r u s t . Manuel t o l d Magelssen t h a t t h e stock was l i s t e d on t h e New York exchange, but on i n v e s t i g a t i o n t h e stock was worth- l e s s . Manuel ended up i n prison but not f o r h i s operations i n Montana. From t h e proceeds of t h e o t h e r $35,000 loan t o Manuel by t h e Western S t a t e Bank, Manuel took $5,000 i n cash and deposited $30,000 i n h i s personal checking account. From t h e above abw-viated background of f i s c a l o p e r a t i o n s 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 re- fused. 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 mort- gage 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 b a n k ' . but were still in the banks' posses- sion. 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 t h e amount w r i t t e n o f f by t h e banks of t h e two Manuel notes. A t t h e time of t h e purchase Magelssen arranged t h a t t h e accomodation notes of Mardaus, Van F l e e t and Fagg were paid o f f . However, Magelssen argues t h a t a s t o t h e Fagg note, t h e banks t r i e d t o g e t paid twice on it. Once through t h e f o r e c l o s u r e on h i s t r u s t indenture, and t h e second time through a law s u i t f i l e d a g a i n s t Fagg, which w a s f i n a l l y dropped. Magelssen argues t h a t t h e Manuel notes were likewise t o have been cared f o r and t h e notes returned t o him as f u l l y s a t i s f i e d . F u r t h e r , t h a t t h e banks' l a t e r a c t i o n i n obtaining a $55,000 settlement from t h e insurance companies should have e i t h e r been returned t o him o r a t l e a s t applied a g a i n s t h i s $25,000 note. The banks argue t h a t although they paid no s e p a r a t e consideration f o r t h e Manuel notes they a r e t h e owners of t h e notes by v i r t u e of t h e purchase of t h e c a p i t a l stock and a r e accordingly e n t i t l e d t o t h e s e t t l e m e n t . The t r i a l c o u r t a f t e r a f u l l hearing and a f t e r consider- i n g a l l t h e evidence submitted by t h e various depositions, entered i t s own findings of f a c t , conclusions of law and judgment, i n g i n p e r t i n e n t p a r t : "'That $55,000.00 i s what i s now causing t h e t r o u b l e . The banks claim t h e money a l l e g i n g t h a t t h e Manuel notes a r e t h e property of t h e banks and t h e r e f o r e t h e money belongs t o t h e banks. The P l a i n t i f f s claim t h e money a l l e g i n g t h a t had t h e Manuel notes been l i q u i d a s s e t s a t t h e t i m e of t h e s a l e t o Vucurevich t h e cash t h e P l a i n t i f f s would have received would have been $70,000 g r e a t e r , t h e r e f o r e t h e money belongs t o t h e Plain- t i f f s . The P l a i n t i f f s a l s o a l l e g e t h a t t h e agree- ment with M r . Vucurevich was t h a t t h e Manuel notes were t o be t h e property of t h e P l a i n t i f f s and t h e r e f o r e any money brought i n based on those notes belongs t o t h e P l a i n t i f f s . ' provid- "Without doubt a t t h e time of t h e bank s a l e n e i t h e r P l a i n t i f f s nor Mr. Vucurevich believed t h e Manuel notes had any value. The negotiations un- doubtedly r e s u l t e d i n t h e p a r t i e s understanding t h a t M r . Vucurevich would not pay one c e n t f o r those notes, and t h e r e f o r e P l a i n t i f f s w e r e stuck with t h a t l o s s . There is some c o n f l i c t i n t h e testimony a s t o physical delivery of the notes: t h e P l a i n t i f f s a l l e g e they were t o receive t h e a c t u a l notes. The court f i n d s some b a s i s f o r t h i s b e l i e f , e s p e c i a l l y from t h e testimony of M r . Jack P. Dano regarding non-delivery of t h e notes. "The court has l i t t l e trouble finding t h a t M r . Vucurevich d i d not pay any consideration f o r t h e notes because he and the P l a i n t i f f f e l t they were worthless. Neither does t h e c o u r t have any trouble finding t h a t M r . Vucurevich would have paid a consideration f o r t h e notes had they been v a l i d obligations. I t was not proved t o t h e s a t - i s f a c t i o n of t h e Court t h a t M r . Vucurevich a c t u a l l y bought t h e two Manuel notes from t h e P l a i n t i f f s ( i n e f f e c t ) . "The court would have l i t t l e trouble finding t h a t n e i t h e r p a r t y is e n t i t l e d t o t h e $55,000, but it i s on hand, and t h e c o u r t concludes it should be divided i n some manner between t h e p a r t i e s . "Therefore, "IT IS ORDERED: "1. That Harrison Fagg is not obligated t o any of t h e p a r t i e s herein; "2. That a l l claims, cross claims o r counter claims of any party is disposed of by t h i s judgment, whether s p e c i f i c a l l y r e f e r r e d t o o r not. " 3 . That t h e banks keep t h e $55,000.00, but they a r e ordered t o d e l i v e r t o t h e P l a i n t i f f s a deed conveying t o t h e P l a i n t i f f s any r i g h t , t i t l e o r i n t e r e s t t h e banks have and t o t h e property covered by t h e note and t r u s t Indenture dated September 9 , 1971, including any r i g h t , t i t l e or i n t e r e s t obtained by foreclosure proceedings; " 4 . A l l p a r t i e s a r e t o pay t h e i r own costs." To determine whether t h e r e is s u f f i c i e n t evidence t o support t h e t r i a l c o u r t ' s findings and conclusions, we f i r s t examine t h e purpose of t h e purchase of t h e bonds of t h e Insurance Company of America by t h e two Western Banks of B i l l i n g s , r e f e r r e d t o a s a bankers' blanket bond. The bond was purchased by each bank, not by Magelssen, and one of i t s provisions was t o cover "Dishonesty": "A l o s s through any dishonest a c t of any of t h e employees committed anywhere and whether committed alone o r i n collusion with o t h e r s , including l o s s , through any such a c t of any of t h e employees, of Property held by t h e Insured f o r any purpose o r i n 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 "Dis- honesty" 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 pre- vailing 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 find- ings where there was no substantial evidence as a basis for its findings. If a clear and satisfactory showing is not made in support oi t h e f i n d i n g s , t h i s Court, i n proper c a s e s , w i l l set them a s i d e . Gray v. Grant, 62 Mont. 452, 206 P.2d 410; Kasala v. K a l i s p e l l Pee Wee Baseball League, 151 Mont. 109, 439 P.2d 65; Judson v. Anderson, 118 Mont. 106, 165 P.2d 198. W e f i n d t h e t r i a l c o u r t e r r e d i n f a i l i n g t o award t h e banks t h e sum of $14,500, t o g e t h e r w i t h i n t e r e s t , a t t o r n e y f e e s and c o s t s i n f o r e c l o s i n g t h e t r u s t i n d e n t u r e . The f i n d i n g s of f a c t , conclusions of law, and judgment a r e set a s i d e . The cause is r e t u r n e d t o t h e t r i a l c o u r t w i t h d i r e c t i o n s t o e n t e r judgment appellant-defendants. W e qoncur: . Chief ~ u s t i c e J u s t i c e s