Court Opinion

ID: 3541786
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:53:21.925223+00
Date Added: 2024-06-11T13:55:11.353195
License: Public Domain

Fiduciary relationship and charges of general fraud — Statutory situation: In briefing this case in the district court, plaintiff advanced two theories as to the fiduciary relationship. In the one line of argument he claimed that the transaction in question was in violation of section 43 of Chapter 89 of the 1927 Session Laws, now found as section 6014.47 of the 1935 Code. This statute provides that no officer of any bank shall "for his own personal benefit" purchase any of the assets of the bank for "a sum less than shall appear upon the face of the obligations so purchased." It adds as a penalty that any person violating this provision shall forfeit to the state twice the face value of the assets so purchased. The plaintiff, then proceeded to assume that Himsl had violated the provisions of this statute, and cited at great length many authorities holding that an act in violation of a statute was void. We assume that counsel will again present the same argument with the same authorities. We contend that these authorities are not applicable to the present case for the reason that Himsl did not violate this statute or any other in making the transaction under consideration.
In the first place he did not make this purchase "for his own personal benefit." It was principally for the benefit of the bank and to carry out the reiterated insistence of the banking department that this item be "cleaned up." It was for the further purpose of providing the bank with the necessary cash reserve to do business. Also, the sale was not to Himsl alone, but to Mr. and Mrs. Himsl, jointly. In addition it was not sold for "a sum less than shall appear upon the face of the obligation," etc. Plaintiff contends that the value called for under this statute would mean the full amount for which the land was bid in at the sheriff's sale, regardless of the fact that *Page 264 
a large part of that amount consisted of interest money which was never paid and never could be paid, and another large part of it consisted of the sum already paid principally by Himsl and partly by the other stockholders at the time the $2,000 was charged off. This asset was not in the form of a note, but was at the time of the sale in the form of real estate owned by the bank. Real estate, so far as we can learn, has no "face value." The nearest approach which we can find toward determining what could be considered the "face value" of real estate owned by a bank, is set forth in section 25 of Chapter 89 of the 1927 Session Laws, now section 6014.29, 1935 Code. Under the provisions of this section, real estate purchased at a sale under a mortgage held by a bank is required "to be carried on the books of the bank for an amount not greater than the cost thereof to the bank, including costs of foreclosure and other expenses of acquiring title." Guided by this section it will be seen that the amount for which real estate can be so carried must be the amount of investment by the bank, including expense of foreclosure, less such payments as have been made at any given time. As to this particular land, the bank's original investment of $4,500 loan, plus $470 expense of foreclosure and quieting title, or $4,970 would represent the bank's investment. This amount, less the $2,000 paid by the stockholders, and the $545.62 paid in other manners as shown by indorsement on the note, or a total credit of $2,545.62, leaves the total "cost thereof" at the time of sale, $2,424.38. This was the maximum amount at which this paper should have been carried upon the books of the bank at the time of the sale. Therefore, the purchase price having been $2,870, there was no sale to Mr. and Mrs. Himsl for less than the face value of the asset.
Charges of general fraud: The second position taken by the plaintiff was not based upon any particular statute, but as we understand it, plaintiff simply claimed, and the court found, that the defendant Victor S. Himsl had taken an unfair advantage of his fiduciary relationship to the bank, and his knowledge gained thereunder, and that the transaction was therefore fraudulent and void. Again the evidence does not sustain such *Page 265 
claims of the plaintiff, nor such finding by the court, and in our opinion the undisputed evidence establishes affirmatively that the entire transaction was in good faith [Here follows a review of the evidence.] In support of his charges of general fraud, plaintiff, in briefing this case in district court, cited voluminous authorities upon the question of fraud in dealings between a corporation and an officer of that corporation. They will doubtless be cited again. We have little quarrel with the authorities cited, but only with their applicability. It appears that some states have held that any transaction between a corporation and an officer of that corporation is void. This is not the rule in Montana, however. This court has in several cases announced the rule which seems to us particularly applicable to the facts in this case in holding that transactions between corporations and their officers are legitimate if made in good faith. (See Tatem v. Eglanol Min. Co., 42 Mont. 475,113 P. 295; citing Wyman v. Bowman, 127 Fed. 257, 62 C.C.A. 189;O'Rourke v. Grand Opera House, 47 Mont. 459, 113 P. 965;Duffy v. Hastings, 78 Mont. 22, 252 P. 316.) The courts of most other states hold to the same effect.
There are several other principles of law which we believe require judgment in favor of the defendants in this case. Some of the authorities which we wish to present in this connection touch upon more than one of these principles. Therefore, we shall first state the principles and then the authorities in support of them. First, that since the transaction was entered into in good faith without fraud or concealment, it is entitled to stand as a matter of law. Second, that the sale, having been authorized by the board of directors for the benefit of the bank, is entitled to stand. Third, that the transaction, having been ratified and approved by that board, is entitled to stand. Fourth, that the Superintendent of Banks, occupying the same position and performing the same function as a receiver, has not the authority to question the transaction nor bring an action to cancel it, none of the directors or stockholders participating in the attack upon the transaction. Fifth, that even had there been fraud in the transaction attacked, the lapse of time between *Page 266 
the transaction and the action to cancel it bars the action. Sixth, that the transaction now in question was ratified, confirmed and approved by the Superintendent of Banks after the transfer had been made, and that plaintiff, his successor in office, is estopped to question the transaction, particularly at this late date. (See Welch v. Importers  Traders Nat. Bank,122 N.Y. 177, 25 N.E. 269; Tyler v. Hamilton, 62 Fed. 187;Fort Payne Rolling Mill v. Hill, 174 Mass. 224, 54 N.E. 532;Nye v. Storer, 168 Mass. 53, 55, 46 N.E. 402; Twin Lick OilCo. v. Marbury, 91 U.S. 587, 23 L. Ed. 328; Illinois PneumaticGas Co. v. Berry, 113 U.S. 322, 5 Sup. Ct. 525, 28 L. Ed. 1003;Stetson v. Northern Inv. Co., 104 Iowa, 393, 73 N.W. 869;Marsters v. Umpqua Valley Oil Co., 49 Or. 374, 90 P. 151, 12 L.R.A. (n.s.) 825.)
The same principles of law, with particular reference to ratification, right of anyone other than stockholders or directors to raise the question, and the time within which an action must be brought, are also laid down in 14A C.J. 120.
Laches: Some of the authorities previously cited touched upon the subject of laches. We believe that even though the defendants would not permit the statute of limitations to be pleaded in the answer, they were protected by sound principles of law in spite of themselves. We submit that the delay in commencing this case should bar the relief sought by plaintiff, even if he were entitled to it upon the other grounds. The Supreme Court of the United States, in Twin Lick Oil Co. v. Marbury, supra, held that a delay of less than four years was too long a delay for the commencement of an action of this nature, even had there been fraud. Many other cases hold that still shorter periods of delay were too long. In the instant case, five years elapsed before action was begun.
It is true that there are some authorities holding that in order for a defendant to avail himself of laches as a defense, he must have pleaded either the laches or the statute of limitations. The situation as to the holdings in this respect is well stated in 21 C.J. 257, as follows: "As to whether the defense must be pleaded, the authorities are not in accord. Some cases hold *Page 267 
that unless defendant presents the defense by an appropriate pleading, he waives it, except where the bill attempts to account for an apparently unreasonable delay." Other cases hold that defendant may take advantage of the defense on the hearing without having pleaded it, and that the court may, of its own motion, refuse relief when laches appears. So far as Montana is concerned, the question is foreclosed by the decisions in the cases of American Min. Co. v. Basin etc. Co., 39 Mont. 476,104 P. 525, 24 L.R.A. (n.s.) 305; Kavanaugh v. Flavin,35 Mont. 133, 88 P. 764; Streicher v. Murray, 36 Mont. 45,92 P. 36, in favor of defendants' contention.
The law applicable to the facts in this case is well settled and is comparatively clear. Himsl was at all times in a fiduciary relationship to the bank. This relationship arose out of his position as president, director and managing officer of the bank. The law applicable to a director of a corporation is applicable to any officers thereof. (14A C.J. 98-100; Alward v. BroadwayGold Min. Co., 94 Mont. 45, 20 P.2d 647; First State Bankof Hilger v. Lang, 55 Mont. 146, 174 P. 597, 9 A.L.R. 1139;McConnell v. Combination Min. Co., 30 Mont. 239, 76 P. 194, 104 Am. St. Rep. 703; Kleinschmidt v. American Min. Co.,49 Mont. 7, 139 P. 785; McConnell v. Combination Min. Co.,31 Mont. 563, 79 P. 248; Meagher v. Harrington, 78 Mont. 457,254 P. 432; Mayger v. St. Louis M.  M. Co., 68 Mont. 492,219 P. 1102; 3 Fletcher on Corporations, sec. 850; 2 Thompson on Corporations, 3d ed., sec. 1329; Coombs v. Barker,31 Mont. 526, 79 P. 1.)
In all jurisdictions the courts regard transactions by a director with the property of a corporation suspiciously. (Koehler v. Black River Falls Iron Co., 2 Black, 715,17 L. Ed. 339; Drury v. Cross, 7 Wall. 299, 19 L. Ed. 40;Cumberland Coal  Iron Co. v. Sherman, 30 Barb. (N.Y.) 553;Hoffman S. Coal Co. v. Cumberland etc. Co., 16 Md. 456, 77 Am. Dec. 311; Dragoon *Page 268 Marble  Min. Co. v. McNeish, 28 Ariz. 96, 235 P. 401;Wickersham v. Crittenden, 93 Cal. 17, 28 P. 788; Paw PawSav. Bank v. Free, 205 Mich. 52, 171 N.W. 464.)
Counsel for appellant insists that the question of good faith on the part of Himsl was not an issue in the case and that it was not raised in the pleadings nor the proof. We insist that both under our statute and the decisions of this court the burden of proof was on him to show not only that he was acting in good faith but that he made a full and fair disclosure of all of the facts to the directors of the bank, and that he failed to sustain that burden. (Sec. 7895, Rev. Codes; Coombs v. Barker, supra;Hanson Sheep Co. v. Farmers  Traders State Bank, 53 Mont. 324,163 P. 1151; Stephenson v. Rainbow Flying Service,Inc., 99 Mont. 241, 42 P.2d 735; Godfrey L. Cabot, Inc., v. Gas Products Co., 93 Mont. 497, 19 P.2d 878; Mayger
v. St. Louis M.  M. Co., supra.)
The sale to Himsl was prohibited by section 6014.43, Revised Codes. It is contended by Himsl that the face of the obligation, within the meaning of that statute, was $2,870, the amount at which the property was carried on the books of the bank. We insist that such a construction would defeat the object of the law and make it possible for officers of a bank to defraud the institution by a system of bookkeeping showing the value of an asset at much less than the face value of the obligation. Face value is the value which can be ascertained from the language of the instrument without aid from the extrinsic facts or evidence. (See Investors Syndicate v. Wilcutts, 45 F.2d 900, 902.) Inasmuch as this asset of the Plevna Bank is represented by a sheriff's deed, it is immediately apparent that for the purpose of the statute the face value of this asset must be ascertained not from the value as represented from an item in the books of the bank, but on the contrary, the face of the instrument conveying title to the bank or the face of the obligation itself must be referred to to determine the face value of the asset. That this face value was $8,252 can readily be ascertained by reference to the authorities. (In re Stoneman, 146 N.Y. Supp. 172.) *Page 269 
A contract made in violation of statutory provision is void. (Green v. Hutsonville Tp. High School Dist. No. 201, 356 Ill. 216,190 N.E. 267, 268; Booker T. Washington Burial Ins. Co. v.Roberts, 228 Ala. 206, 163 So. 409; Gantt v. Arkansas Power Light Co., 189 Ark. 449, 74 S.W.2d 232; Euclid HoldingCo. v. Shulte, 153 Misc. 455, 274 N.Y. Supp. 515; Board ofCounty Commrs. v. Miller, 132 Kan. 52, 294 P. 863; Sharp
v. Teese, 9 N.J.L. 352, 17 Am. Dec. 479.) "It is established by an unbroken line of authorities that where a statute provides a penalty for an act, a contract founded on such act is void, although the statute does not pronounce it void, nor expressly prohibit it." (Stockton P.  S. Co. v. Wheeler, 68 Cal. App. 592,601, 229 P. 1020, 1024; Berka v. Woodward, 125 Cal. 119,127, 57 P. 777, 73 Am. St. Rep. 31, 45 L.R.A. 420; Countyof Shasta v. Moody, 90 Cal. App. 519, 523, 265 P. 1032;Moody v. Shuffleton, 203 Cal. 100, 262 P. 1095.)
The board of directors did not authorize a sale to Himsl. From minute entries of the directors' meeting it appears that Himsl was authorized to sell the land, but there was not a suggestion or intimation that Himsl was authorized to buy. That being true, the officers of the bank were without authority to execute the deed to Kaiser, when it is admitted that Kaiser was acting not for himself but for Himsl. (See Crowley v. Rorvig,61 Mont. 245, 203 P. 496; Fidelity Deposit Co. v. OpportunityState Bank, 174 Wash. 245, 24 P.2d 399; State v.Larson, 119 Wash. 123, 204 P. 1041; State v. Lindberg,125 Wash. 51, 215 P. 41.)
Laches: The defendants insist that plaintiff should be barred the relief sought for the reason that he has been guilty of laches. Laches was not pleaded as a defense and by reason of their failure to object by answer, the defendants have waived any right to rely upon such defense. (21 C.J. 257; Oscar KrenzCopper  Brass Works v. Shamgochian, 92 Cal. App. 368,268 P. 488; Bishop v. Jordan, 104 Cal. App. 319, 285 P. 1096;Rooney v. McDermott, 121 Kan. 93, 246 P. 183; Thompson v.Colby, 127 Iowa, 234, 103 N.W. 117.) But if we concede, *Page 270 
for the sake of argument, that it is not necessary to plead laches as a defense, yet we insist that the record does not show laches. The authorities are in complete accord that mere delay in the bringing or prosecution of an action is not sufficient to defeat the right of recovery, but it must appear that by reason of such delay, the defendants will suffer injury or that it would be inequitable to grant relief. (Brundy v. Canby, 50 Mont. 454,473, 148 P. 315; Kirkpatrick v. Baker, 135 Or. 142,276 P. 193; Hiett v. Inland Finance Corp., 210 Cal. 293,291 P. 414; Hovey v. Bradbury, 112 Cal. 620, 44 P. 1077;Gray v. Reeves, 69 Wash. 374, 125 P. 162; Lindblom v.Johnston, 92 Wash. 171, 158 P. 972; State v. Plummer,130 Wash. 135, 226 P. 273.) The evidence shows conclusively that the defendants have suffered no injury or prejudice by reason of the delay in bringing the action. There has been no change of condition. The relation of the parties has not been materially altered, nor have any of the witnesses died or disappeared.
This action was brought to set aside certain conveyances of real estate. The cause was tried before the court sitting without a jury. Findings and conclusions of law were made in favor of the plaintiff, and judgment was rendered in conformity therewith. The appeal is from the judgment.
On June 3, 1930, the First State Bank of Plevna was the owner of the lands in question. On that date, acting through its president, Victor S. Himsl, and secretary, it executed a quitclaim deed conveying the lands to W.V. Kaiser for a recited consideration of $1. On the date following Kaiser and his wife conveyed them by quitclaim deed to Himsl and his wife for a recited consideration of $1. On June 26, 1931, the above-named bank closed its doors and the board of directors delivered the assets and property of the bank into the hands of the Superintendent of Banks. This action was brought by the *Page 271 
plaintiff Superintendent of Banks as liquidating officer of the bank, to cancel and set aside these deeds.
The bank had acquired the lands through a foreclosure proceeding and secured a sheriff's deed to them a few days before the conveyances in question. Many years prior to the foreclosure, Cunningham, the then owner of the lands, had mortgaged them to the bank to secure a note for $4,500. After some years, the banking department had required that a part of this note be charged off in the sum of $2,000, and this was done. At about that time an assessment was made upon the stockholders of the bank to make good the impairment of capital arising out of the charging off of this item and some others. During all of the various transactions in connection with the bank, Himsl was the principal stockholder, he owning more than a majority of the capital stock of the bank. Prior to the execution of the conveyance Himsl was authorized by a resolution of the board of directors to sell this land for $2,870, being the amount for which the land was carried on the books of the bank as an asset. Judgment was secured in the foreclosure proceeding and the property was bid in at the decretal sale for a sum in excess of $8,000. The land at the time of conveyance was located in a district in which various producing gas wells had been drilled on land in that vicinity. It is conceded that Kaiser paid no consideration for the transfer to Himsl, and none was paid by Himsl to Kaiser for the second transfer. The bank received $2,800 as a result of a transaction between Himsl and the Gas Development Company. Himsl and wife, soon after the date of these deeds, executed an oil and gas lease upon the lands in question to the gas company and received an advance payment of royalties in the form of a check for the sum of $2,800, which was indorsed by Himsl and delivered to the bank. Under the terms of this oil and gas lease, the lessee agreed to drill a well which it did, and this well had produced in gross royalties at the time of trial in excess of $5,500. Himsl and wife agreed in the event no production was encountered to repay this advance payment in the sum of $2,800, together with interest. The *Page 272 
residue of the sum of $2,870 above mentioned — namely $70 — was paid to the bank in this manner. Himsl gave to the bank his personal check, which was charged against the Westmore Elevator Company account on the books of the bank. The bank had acquired this Westmore Elevator Company property some years before and carried it as a book asset of the bank for some time; afterwards, at the insistence of the banking department it was charged off, and Himsl, the president and principal stockholder of the bank, operated the elevator property. The bank advanced money for its operation and received the profits, if any, although the business was conducted in the name of Himsl or various other names, but in any event it was operated by Himsl.
The trial court found that on June 3, 1930, Himsl, with the purpose and intent of depriving the bank and its depositors, creditors, and stockholders of these lands, and with the intent to appropriate them to the use and benefit of himself and wife, caused the Kaiser deed to be executed and delivered by the bank; that no consideration was paid by Kaiser, or anyone in his behalf, for this deed which was executed with the understanding and agreement that Kaiser would convey to Himsl and wife; that no consideration was paid by Himsl and wife to Kaiser for the execution of the deed to them, which deed was executed and delivered in consummation of the purpose and intent of the defendant Himsl to deprive the bank, its creditors and stockholders of the property; that the consideration passing to the bank in the sum of $2,870 was the money and property of the bank; that for more than a year prior to June 3, 1930, the Gas Development Company and other persons had been negotiating for and endeavoring to obtain an oil and gas lease from the bank upon these lands; and that Himsl had conducted the negotiations and knew of the facts while acting in his fiduciary capacity. As conclusions of law the court found that Himsl had gained an undue advantage in the transaction by virtue of his fiduciary relationship, and that by reason thereof the deeds were void and should be canceled. *Page 273 
Error is assigned upon the ruling of the trial court restricting the admission of testimony and upon the findings and conclusions of law of the court.
While the witness Kleve was on the stand, who had represented[1]  the banking department in various capacities over the period of time involved and who had made examinations of the bank, inquiry was made of him if a private individual had offered to pay $2,870 for the land and the offer had been submitted to the banking department, whether it would have advised the bank to accept the offer. The court declined to permit the witness to answer the question, objection having been made. We think the testimony sought to be elicited was immaterial, as the statutes do not authorize the banking department to control to that extent the management of a bank by its directors, nor, whatever the department's advice might have been, would it in anywise be controlling here.
The witness Graff, who had been connected with the banking department, was called as a witness for the plaintiff. Inquiry was made of him whether the banking department would have approved the execution of a lease by the bank for oil and gas containing a provision that the bank would have to repay advanced royalties in the event no production was encountered. Objection was sustained to this question. This was likewise immaterial. What we have said with reference to the previous specification is likewise controlling here.
The other specifications of error raise the question of the sufficiency of the evidence to support the findings, the conclusions of law and the judgment.
The fact that a part of the Cunningham note had been charged[2, 3]  off the books of the bank and a stockholder's assessment had been paid by Himsl and others to make good the resulting impairment of capital did not operate to transfer to Himsl any interest in that note or the land mortgaged to the bank as security for the note. Nor did the fact that the Westmore Elevator Company property had likewise been charged off the bank's books and turned over to Himsl to operate, transfer, or convey any interest in this property to Himsl. Items which *Page 274 
are charged off of the ledger of a bank do not thereby cease to be assets of the bank, and may not be transferred or conveyed by the bank except for a valuable consideration. The process of charging off amounts only to a reclassification of assets. (Baker v. Citizens' State Bank of St. Peter, 81 Mont. 543,264 P. 675.) Also, one who pays a stockholder's assessment to a bank, being legally bound to do so — and there is no contention here that the assessment was in anywise illegal — does not thereby pay to the bank a consideration which will support the transfer of any assets of the bank. (Id.)
Section 6014.47, Revised Codes, provides: "No directors, officer, agent or other employee of any bank, shall, directly or indirectly, for his own personal benefit, purchase or sell or be interested in the purchase or sale of any obligation of said bank, or of any of the assets of said bank, for a sum less than shall appear upon the face of the obligation or obligations so purchased or sold." Plaintiff argues that this statute condemns the transaction; the defendant contends the contrary.
In the case of McManus v. Fulton, 85 Mont. 170, 278 P.[4]  126, 130, 67 A.L.R. 690, this court said: "A contract expressly prohibited by a valid statute is void. The proposition has no exception, for the law cannot at the same time prohibit a contract and enforce it. The prohibition of the legislature cannot be disregarded by the courts." Counsel for the defendants argues that because the section uses the expression "the face of the obligation or obligations," the amount for which the land was carried upon the books of the bank in the sum of $2,870 was the amount, within the meaning of the section, necessary to be paid by a director or officer as the purchase price of this property; whereas it is contended on behalf of the plaintiff that the amount of indebtedness which was owing by Cunningham, and for which the land was purchased, in excess of $8,000, was the necessary amount under the statute in the circumstances.
The sum appearing upon the face of the obligation would be the[5-8]  sum which could be ascertained from an examination of the instrument itself without regard to extrinsic facts *Page 275 
or evidence. (Investors' Syndicate v. Willcuts, (D.C.)45 F.2d 900.) The statute under consideration prohibits the sale, not only of the obligation of the bank, but also of any of its assets. Clearly, under the section, if a note, the property of the bank, was sold to some person within the provisions of the statute, the amount determined from an examination of the note as owing would be the sum appearing on the face of the obligation. The plain intention of the statute is to prohibit a director or officer of the bank from purchasing property of the bank for less than the bank has invested in it. Although the language is somewhat awkward in expressing this intent, nevertheless interpretations must be reasonable (sec. 8771, Rev. Codes), and where the reason is the same, the rule should be the same (sec. 8740, Id.). Whether we are considering the disposition of a note by the bank or some tangible asset such as land, no reason can be suggested why a bank should not be permitted to sell a note to a director or officer for less than the amount due on the note, but might be permitted to sell to the same person occupying a like fiduciary relation a tract of land, an asset of the bank, for less than the amount of the bank's investment. Accordingly, we hold that the above statute prohibits this transaction.
It is contended that the $70 paid by the personal check of Himsl was a payment of a part of the consideration by him. As we have already demonstrated, the $70 check was charged to the account of the Westmore Elevator Company which was in fact the bank. Accordingly, nothing was received by the bank so far as that transaction was concerned. The $70 was already its property.
Next it is argued that if the transaction, supra, was not sufficient as a part of the consideration, Himsl paid certain taxes on the lands which were a lien at the time he accepted the conveyance. If the conveyance had been by warranty deed, there might be some merit to this contention, but both of the conveyances here involved were by quitclaim deed, and hence the bank did not undertake to convey the land free of tax liens, and the grantees would take the title as they found it. *Page 276 
It appears from the record that Cunningham, who was the mortgagor of the lands, had endeavored to effect a redemption of them and had perfected an arrangement or understanding with the bank whereby he might be permitted to redeem upon the payment of the sum of $5,500, but was unable to effect the redemption. Within thirty days after the expiration of the period of redemption Himsl acquired the lands for which, he asserts, he paid but $2,870. The Gas Development Company had been communicating with Himsl for some time relative to securing a gas lease on these lands. Yet Himsl, so far as it appears from the record, did not disclose to the directors of the bank anything concerning these negotiations. The resolution of the board of directors authorizing him to sell did not disclose any intention on the part of Himsl to acquire title. He was authorized to sell the lands, but his name was not mentioned as a prospective purchaser. An officer or director of a corporation who has transactions with it sustains a fiduciary relation to the corporation and must act with utmost fairness and candor in such transactions. (Alward v. Broadway Gold Min. Co., 94 Mont. 45,20 P.2d 647, and cases there cited.) And when a director has been dealing with a corporation, the burden is at once upon him to show that his dealings have been fair and honest. (Stephenson v. Rainbow Flying Service, Inc., 99 Mont. 241,42 P.2d 735, and cases cited.)
Defendants did not sustain this burden, but they argue that by reason of certain presumptions the burden was still upon plaintiff to show that the contract was unfair and that the defendants had gained an advantage over the plaintiff and those whom he represented. They refer to the following disputable presumptions declared by section 10606, Revised Codes: Subdivision 1, that a person is innocent of wrong; 4, that a person takes ordinary care of his own concerns; 19, that private transactions have been fair and legal; 20, that the ordinary course of business has been followed; and 33, that the law has been obeyed. A disputable presumption may be controverted by other evidence. It is successfully controverted when proof to the contrary satisfactorily overcomes it. When the evidence *Page 277 
preponderates against the disputable presumption, it fades away in the face of contrary facts. (In re Wray's Estate, 93 Mont. 525,19 P.2d 1051.) Although in some instances there may be conflicting presumptions (McMahon v. Cooney, 95 Mont. 138,25 P.2d 131), more often these presumptions prescribe the duty of production of testimony on a party at a given time, and when it is removed by his producing evidence, then the presumption as a rule of law is satisfied and disappears, and he may then by his evidence succeed in creating another presumption which then puts the same duty upon the other party (5 Wigmore on Evidence, 2d ed., sec. 2493.) At the outset of this case, before any admissions of the answer were considered and any proof was received, the presumptions for which defendants contend would obtain, but when it appeared from the admissions in the answer and the production of proof satisfactorily that these disputable presumptions were overcome, the burden was then upon the defendants to explain away the presumption which confronted them. This they failed to do.
Lastly it is contended that the action is barred by laches.[9]  There was no pleading of laches, but assuming this defense may be raised without a plea, it does not appear that any change in the circumstances of any of the parties to these transactions had occurred which had materially altered the situation during the delay. In the absence of a showing of a material alteration in the condition and circumstances of the parties where the lapse of time is short of the statute of limitations, the defense will not be permitted. (Riley v. Blacker, 51 Mont. 364,152 P. 758, and cases cited.)
The evidence was sufficient to support the findings and judgment of the court.
The judgment is affirmed.
MR. CHIEF JUSTICE SANDS and ASSOCIATE JUSTICES MORRIS and ANGSTMAN concur.
MR. JUSTICE STEWART, deeming himself disqualified, takes no part in the foregoing decision. *Page 278