Opinion ID: 882372
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: In 1981, Harmon was the sole owner and stockholder of Big Bud Tractors, Inc., and its wholly owned subsidiary, Big Bud Sales and Services, Inc. (collectively Big Bud). Harmon and Big Bud were indebted to First Security and its correspondent, Seattle First National Bank (Sea-First). In July 1981, to avoid foreclosure, Harmon and Big Bud executed a settlement agreement with the two banks. Under the terms of this agreement, Harmon and Big Bud conveyed all of their assets to First Security and Sea-First. The banks agreed to reconvey these assets after Harmon and Big Bud paid approximately $3 million. Whether this money was paid, and whether the banks were obligated to reconvey the Harmon-Big Bud assets, were unresolved issues between the parties. Harmon contends now that the promissory note executed in August 1981 was part of the July 1981 settlement agreement and represents a rewriting of Harmon's obligation to First Security. First Security contends that the August 1981 promissory note was not part of the settlement agreement. In April 1982, Harmon and Big Bud filed suit against the two banks in United States District Court for the District of Montana, Great Falls Division (Adversary No. 482-0113). Their allegations included breach of contract, fraud, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. First Security counterclaimed on all promissory notes of Big Bud and Harmon, except for the note at issue in the case before this Court. Judgment on the federal jury verdict was entered on February 28, 1990. The jury, responding to special interrogatories, found that the banks had not committed fraud or breached their settlement agreement with Harmon and Big Bud; that the banks had breached a fiduciary duty in dealing with Harmon and Big Bud; and that this breach was not a proximate cause of damage to Big Bud or Harmon. The jury also found that First Security was not entitled to recover any money on its counterclaim. The promissory note on which First Security is now attempting to collect was secured by a trust indenture conveying 3.92 acres of land along U.S. Highway 2 in Hill County. Harmon stated in his District Court brief that this was his last piece of property not previously conveyed to the Banks. Harmon had a 52.5 percent undivided interest in this land, having conveyed a 47.5 percent interest to Gerald Ridgeway in 1979. From 1981 through 1985, Harmon failed to pay property taxes on the indentured property. Under the terms of the note, failure to pay taxes constituted a default, and on November 14, 1985, First Security declared that all sums owing on the note were due and payable. As of December 1, 1985, Harmon's debt included the original principal plus $108,211.40 in interest, with interest accruing at the rate of $93.13 per day. On May 30, 1986, First Security filed this collection action seeking, in addition to judgment for the amount of the debt, partition of Ridgeway's portion of the indentured property and a foreclosure sale of Harmon's portion. The Harmon-Big Bud federal case was still pending in April 1988, when Judge Langen held a scheduling conference on First Security's state court action. The parties agreed then to abate the action until the federal case was tried, though the First Security attorney expressed concern that Hill County would move for a tax deed as the unpaid taxes on the property continued to increase. In fact, the county did issue a tax deed in October 1989, and in May 1990 the county quitclaimed the indentured property to a third party. In June 1990 First Security moved for summary judgment based on the verdict in federal court. After a hearing by conference telephone call in February 1991, Judge Langen ordered that judgment for First Security be entered but not executed on until Harmon's appeal from the federal court verdict was concluded. The judgment, entered on March 21, 1991, was in the amount of $596,288.03 plus $9,429.89 for attorney's fees, $204.25 for costs, and interest at 12 percent from and after the date of entry of judgment. With respect to the other defendants, the court found that Ridgeway's interest was foreclosed by the Hill County tax deed and that the Northern Insurance Agency and the United States (Internal Revenue Service) had disclaimed any interest in the litigation and had been dismissed as parties in September 1986, and April 1987, respectively.