Title: FIRST SECURITY BANK v THOLKES
Citation: N/A
Docket Number: 13051
State: Montana
Issuer: Montana Supreme Court
Date: March 29, 1976

No. 13051 I N THE S U P R E M E C O T J R T O F THE STATE O F MONTANA 1975 FIRST SECURITY BANK O F BOZEMAN, formerly known a s Security Bank and Trust Company of Bozeman, a Montana Corporation, P l a i n t i f f and Respondent, A R N O L D J. THOLKES, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e Eighteenth J u d i c i a l D i s t r i c t , Honorable Jack Shans trom, Judge presiding . Counsel of Record: For Appellant : Bolinger and Wellcome, Bozeman, Montana H. A, Bolinger argued, Bozeman, Montana For Respondent : Morrow, Nash and Sedivy, Bozeman, Montana Edmund P. Sedivy argued, Bozeman, Montana Submitted: ~ecember 9, 1975 Decided : 3 8 1 9 7 6 MP,$ 3 G 1.;TS Filed : M r . J u s t i c e Gene B. Daly delivered the Opinion of the Court. This is an appeal from a summary judgment entered i n an action on a promissory note i n the d i s t r i c t court, Gallatin County. The d i s t r i c t court, Hon. Jack D. Shanstrom, presiding, ruled the defendant Arnold J. Tholkes was indebted t o p l a i n t i f f Security Bank and Trust Company of Bozeman i n the amount of $4,372.00, attorney fees i n t h e amount of $1,000,00, and costs of the action. From the summary judgment, defendant: appeals. In July 1971, Arnold J. Tholkes (defendant) obtained from the Security Bank and Trust Company of Bozeman, (Bank), a loan t o be used f o r the purchas,e of a used automobile, home improvements and t o pay some miscellaneous b i l l s . The Bank made t h e loan t o defendant on July 22, 1971. Defendant executed an installment note i n the amount of $6,533.40, t o be repaid monthly i n payments of $108.89 f o r 60 mbnths (5 years) and was signed by defendant and h i s wife, Lovena M. Tholkes. The note f u r t h e r provided t h a t any balance remaining upon maturity o r upon default would draw i n t e r e s t a t the r a t e of 9% per annum. A l i f e insurance policy on t h e l i f e of defendant was a l s o obtained a t t h i s time and t h e premium added i n t o t h e amount of the installment note. A s security f o r repayment defendant and h i s wife signed a UCC Security Agreement dated July 25, 1971. It described t h e used car (a 1967 Pontiac) and a r e n t a l home i n Belgrade, Montana, owned by defendant, presumably where the home improvements were t o be made. A l i e n was f i l e d against the automobile with the r e g i s t r a r of motor vehicles, Deer Lodge, and a UCC Financing Statement was f i l e d with the clerk and recorder, Gallatin County, describing the r e n t a l property. The record of payments t o the Bank by defendant, a s s e t f o r t h i n the ~ a n k ' s ledger, reveals t h a t defendant was granted extensions of payments on two occasions. A t t h e d a t e t h i s a c t i o n w a s f i l e d , only 18 of 32 required payments had been made. O n March 13, 1974, a complaint was f i l e d by t h e Bank a l l e g i n g t h a t defendant owed t h e Bank $3,591.33, as t h e unpaid balance of t h e promissory note, plus accrued i n t e r e s t a t t h e r a t e of 9% per annum from t h e d a t e of March 12, 1974. The com- p l a i n t a l s o asked f o r $1,000.00 i n a t t o r n e y fees. A t t h e same t i m e t h e Bank f i l e d a w r i t of attachment on defendant's r e n t a l property i n Belgrade. Defendant by answer admitted t h e existence of t h e n o t e but denied any balance due and owing. Defendant counterclaimed (1) t h a t the r a t e of i n t e r e s t on t h e loan was usurious and defendant w a s e n t i t l e d t o twice t h e amount of i n t e r e s t he had paid t o t h e Bank; (2) t h a t t h e financing statement c o n s t i t u t e d slander of t i t l e upon t h e defendant ' s r e a l property, claiming $5,000.00 a c t u a l damages and $10,000 punitive damages; (3) t h a t the ~ a n k ' s f a i l u r e t o secure l i f e insurance on t h e wife f o r t h e note was wrongful and defendant i s e n t i t l e d t o $5,000.00 damages. I n t e r r o g a t o r i e s were taken from both p a r t i e s ; defendant ' s deposition was taken; a hearing w a s held and e x h i b i t s were offered and admitted. The Bank f i l e d a motion f o r summary judgment and memorandum i n support, wherein t h e Bank claimed t h a t i n t h e com- p l a i n t it made a mistake a s t o t h e amount now owed by defendant. The Bank claimed it was, i n f a c t , owed $3,957.70. On March 24, 1975, t h e d i s t r i c t c o u r t entered summary judgment decreeing t h a t t h e documents before t h e court "show t h a t t h e r e i s no genuine i s s u e as t o any material f a c t and t h a t t h e p l a i n t i f f i s e n t i t l e d t o Judgment as a matter of law 9: 9: *." The court then awarded t h e Bank $3,957.70, plus accrued i n t e r e s t of $414.30, plus attorney f e e s of $1,000.00. Defendant appeals and presents f o r t h i s Court's review four i s s u e s : 1. Whether t h e i n t e r e s t charged on t h i s loan w a s usurious and whether t h e Bank claimed t h e c o r r e c t amount a s due and owing? 2. Whether t h e f i l i n g of t h e financing statement con- s t i t u t e d a slander of t i t l e upon defendant's r e a l property? 3. Whether t h e Bank wrongfully f a i l e d t o obtain l i f e insurance on defendant's wife, since deceased? 4. Whether t h e attorney f e e s were reasonable and properly allowed? W e should keep i n mind t h a t t h e loan here was an installment loan provided f o r under t h e terms of section 5-527, R.C.M. 1947. This s t a t u t e permits charging a r a t e of i n t e r e s t i n excess of 10% per annum on installment loans and receiving t h e i n t e r e s t i n advance. The i n t e r e s t i s added t o t h e p r i n c i p a l amount of t h e note and t h e t o t a l amount divided i n t o t h e agreed number of equal installments. The note i n i s s u e here was i n t h e amount of $6,533.40 and breaks down a s : a ) P r i n c i p a l , t h e sum of ...........$ 4,500.00 b) L i f e insurance premium on t h e l i f e of Arnold J. Tholkes ....... 244.64 ....................... c) F i l i n g f e e 10.00 ... d) Precalculated i n t e r e s t charges 1,778.76 Total.. ......... $6,533.40. Defendant would have t h e use of $4,500, b u t would make monthly installment payments of $108.89 f o r 60 months (5 years). The amount of i n t e r e s t he would pay i n 5 years was $1,778.76, which converts t o an annual r a t e of simple i n t e r e s t of 13.31% per annum. Under section 5-527, R.C.M. 1947, t h e maximum i n t e r e s t i n terms of add-on o r discount i n t e r e s t t h a t can be l e g a l l y taken under Montana law on $4,500 i s $1,794.10, computed: $11.00 per $100 per year on the f i r s t $300 f o r 5 years (33.00 x 5) = .........................$ 165.00 $9.00 per $100 per year on the next $700 f o r 5 years ($63.00 x 5) = ........................ 315.00 $7.00 per $100 per year on the next $3,754.64 f o r 5 years [$3,500 + 244.64 + 10.00 = $3,754.641 ($262.82 x 5) = ................... 1,314.10 Total allowable i n t e r e s t ...$ 1,794.10. See Montana National Bank of Bozeman v. Kolokotrones, Mont . , 535 P.2d 1017, 32 St.Rep. 526,529. Defendant was charged i n t e r e s t a t a r a t e l e s s than the maximum allowed by section 5-527, R.C.M. 1947. The i n t e r e s t r a t e i s not usurious. Defendant offered no evidence t h a t he had made any payments other than those presented by t h e Bank; nor did he contest the mathematic calculations of the Bank. Although never c l e a r l y s t a t e d by defendant, he seems t o argue there i s some significance i n the f a c t t h a t the Bank f i l e d a UCC financing statement which only described the defendant's r e a l property (on which the home improvements were t o be made from some of the loan proceeds) and not the improvements t o be made, a s it pertains t o the character of the loan, i . e . , a charge against the r e a l e s t a t e and a transformation from installment note t o a conventional loan governed by section 47-125, R.C.M. 1947, which l i m i t s i n t e r e s t t o 10% per annum. Although t h e financing statement was i n t h i s case incor- r e c t l y completed i n t h a t it named only the r e a l property and UCC requires t h a t the f i x t u r e s and the r e a l property be l i s t e d i n security agreements and financing statements, nevertheless there i s no authority offered t h a t would support t h e argument t h a t t h i s financing statement could purport t o claim an i n t e r e s t i n r e a l property. See Section 867A-9-102(1), section 87A-9-104(j),R.C.M. 1947. A financing statement does not meet the s t a t u t o r y d e f i n i t i o n a l requirements of a mortgage (section 52-202,R.C.M. 1947) and could not be f i l e d a s a mortgage (section 52-212, R.C.M. 1947). Defendant c i t e s no case law and we can find none, t h a t a financing statement of t h i s type can claim an i n t e r e s t i n r e a l property t o accomplish the transformation argued here. Defendant a l s o contends t h e f i l i n g of a UCC financing statement was a slander of t i t l e against h i s r e a l property described i n t h a t statement. H e c i t e s no authority i n support of t h i s contention. I n 50 Am Jur 2d, Libel and Slander, 5541, p. 1060, appears t h i s d e f i n i t i o n of slander of t i t l e : "One who maliciously publishes f a l s e matter which brings i n question o r disparages the t i t l e t o property, thereby causing special damage t o the owner, may be held l i a b l e i n a c i v i l action f o r damages. The e s s e n t i a l elements of the cause of action, which a r e subsequently discussed, a r e the u t t e r i n g and publication of the slanderous words by the defendant, the f a l s i t y of the words, malice, and special damages. The action i s not f o r t h e words spoken, but f o r special damages f o r t h e l o s s sustained by reason of the speaking and publication of the slander." (Emphasis supplied.) See- Continental Supply Co. v. Price, 126 Mont. 363, 374, 251 The so-called "slander" not being actionable but t h e r e s u l t i n g special damages being the basis f o r the action, an averment of special damages i s necessary. Continental Supply Co. v. Price, surpa. Rule 9(g), M.R.Civ.P., s p e c i f i c a l l y pro- vides : "When items of special damage a r e claimed, they s h a l l be s p e c i f i c a l l y stated." The complaint, o r i n t h i s instance the counterclaim, must show t h a t the special damages a r e t h e n a t u r a l and probable consequence of the slander. In h i s counterclaim, defendant claims he was damaged t o the extent of $5,000 by the slander. In response t o the ~ a n k ' s Interrogatory No. 25, defendant answered: "INTERROGATORY No. 25: In paragraph I V of Counterclaim, you a l l e g e slander of t i t l e and damages therefor, i n the s u m of $5,000.00. Please s t a t e how you have in- curred such damages and explain i n d e t a i l how you have computed t h i s alleged amount of damages. "ANSWER: The $5,000.00 damage claim i s f o r general dama es sustained by taking a security i n t e r e s t i n & property which i s not permitted by the s t a t u t e s of the S t a t e of Montana and the c o s t s and expenses I f of m y defending t h i s action. (Emphasis supplied.) Failure t o support the allegation t h a t the f i l i n g of the UCC financing statement c o n s t i t u t e s slander, and more important the defendant ' s own admission concerning special damages, h i s claim of slander of t i t l e f a i l s . The t h i r d issue on appeal i s the claim of defendant t h a t the Bank should have procured l i f e insurance on the l i f e of defendant's wife, a cosigner on t h e promissory note and since deceased. It i s elementary t h a t before defendant can prevail on such a claim against the Bank, he must present competent evidence the Bank had a l e g a l duty t o procure such insurance. Defendant presented no such evidence. He admitted i n h i s deposition t h a t he never paid the premium f o r any insurance, other than t h a t on h i s own l i f e . The Bank was never given money by him t o purchase such insurance, nor could it have purchased it, even i f money had been given. The insurance application form of Transwestern Life Insurance Company, t h e insurance c a r r i e r involved here, specifi- c a l l y stated: " * * * i n the case of more than one debtor on t h e same debt, the f i r s t named debtor only s h a l l be e l i g i b l e f o r insurance. 1 1 Defendant next r a i s e s the issue of t h e propriety of t h e c o u r t ' s award of $1,000.00 attorney fees. The r u l e was very recently enunciated by t h i s Court i n Crncevich v. Georgetown Recreation Corp. , Mont . , 541 P.2d 56, 59, 32 St.Rep. 963, 968: 11 To be sure there i s a s p l i t among t h e s t a t e s a s t o the need f o r proof of a reasonable attorney's f e e when one i s contracted f o r o r appears on the face of a note. See 18 A.L.R.3d 733, 736, 740. But i n contested cases w e a r e inclined to follow those s t a t e s requiring the introduction of proof from which a reasonable f e e may be determined. To award a f e e i n such a case without proof would be LO disregard the fundamental r u l e s of evidence. A n award of f e e s , l i k e any o t h e r award, must be based on competent evidence. See Lyle v. Lyle, (Fla. 1964) 167 So.2d 256, 257. Furthermore the proper determination of a l e g a l f e e i s c e n t r a l t o t h e e f f i c i e n t administration of j u s t i c e and the maintenance of public confidence i n t h e bench and bar. See Baruch v. Giblin, 122 Fla. 59, 164 So. 831,833. Because nf respondents1 f a i l u r e of proof t h e award of fees was properly denied. 11 Evidence should have been introduced i n t h e d i s t r i c t court t o demonstrate t h e proper amount of a t t o r n e y fees due t h e Bank. In F o r r e s t e r and MacGinniss v. B. & M.Co., 29 Mont. 397, 409, 74 P. 1088 (also c i t e d i n Crncevich), t h i s Court established these guidelines: 11 1 -1- -L - 9 , A fi rb The circumstances t o b e considered i n determining t h e compensation t o be recovered a r e the amount and character of the services rendered, t h e labor, time and trouble involved, the c h a r a c t e r and importance of t h e l i t i g a t i o n i n which t h e s e r - vices w e r e rendered, t h e amount of money o r t h e value of property t o be a f f e c t e d , t h e professional s k i l l and experience c a l l e d f o r , t h e character and standing i n t h e i r profession of t h e attorneys. 9 : * The r e s u l t secured by t h e services of t h e attorneys may be considered a s an important element i n determining r h e i r value. 1 1 1 Without evidence of any of t h e above f a c t o r s being introduced i n che d i s t r i c t court, the award of $1,000.00 i n attorney fees was improper. Rule 56 (c) , M.R. Civ. P., provides i n p e r t i n e n t p a r t : h he judgment sought s h a l l be rendered forthwith i f the pleadings, depositions, answers t o i n t e r r o g a t o r i e s , and admissions on f i l e show t h a t t h e r e i s no genuine issue a s t o any material f a c t and t h a t the moving p a r t y is e n t i t l e d t o a judgment a s a matter of law. 11 -4fter a thorough review of t h e f a c t s and i s s u e s of t h i s )case, w e Eind there was no genuine i s s u e a s t o any material f a c t 2nd t h e noving party, t h e Bank, was e n t i t l e d t o a judgment a s a nacter of law. The judgment of t h e d i s t r i c t court i s affirmed on t h i s issue. ('he juugriierlt J J ~ c n e d i s ' i r i c c court *JII tile i s s u e of a'icozney fees is vacated and t h e cause remanded f o r an e v i d e n t i a r y hearing t o determine proper a t t o r n e y f e e s t o b e awarded. . .- - - - - J u s t i c e s .