Court Opinion

ID: 875502
Source: CourtListenerOpinion
Date Created: 2013-06-04 20:02:38.227561+00
Date Added: 2024-06-11T12:43:19.301395
License: Public Domain

No. 12173

       IN THE 3UPREE.IE COURT O THE STATE OF M N A A
                               F              OTN

                                     1972

MARLYS J , POMEROY, AS ADMINISTRATRIX OF THE ESTATE
O C , M. POMEROY, DECEASED,
 F

                        P l a i n t i f f and Respondent,

       -vs   -
ARTHUR C. SALLAZ,

                        Defendant and A p p e l l a n t .

Appeal from:     D i s t r i c t Court o f t h e Seventh J u d i c i a l D i s t r i c t ,
                 Honorable L. C. Gulbrandson, Judge p r e s i d i n g .

Counsel o f Record:

       For Appellant :

             Robert W. OIDonovan, Glendive, Montana 59330.
             Loble, P i c o t t e and Loble, Helena, Montana 59601.
             Gene A. P i c o t t e a r g u e d , Helena, Montana 59601.

       F o r Respondent:

             R u s s e l l C: McDonough, Glendive, Montana 59330.
             M. J. Hughes a r g u e d , Helena, Montana 59601.
             Hughes and B e n n e t t , Helena, Montana,

                                                          Submitted:        J u n e 20, 1972
M r . J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion of t h e Court.

          This i s an appeal from a judgment f o r p l a i n t i f f i n t h e
d i s t r i c t c o u r t of t h e seventh j u d i c i a l d i s t r i c t , county of Dawson.
Defendant contends t h e d i s t r i c t judge e r r e d i n r e f u s i n g t o g r a n t
an order a l t e r i n g and amending t h e judgment and i n t h e a l t e r n a t i v e ,
r e f u s i n g t o g r a n t an order f o r a new t r i a l .
          P l a i n t i f f Marlys J. Pomeroy brought t h e a c t i o n t o recover
t h e amount of a promissory n o t e i s s u e d t o h e r husband, s i n c e
deceased, by defendant Arthur C. S a l l a z and t o f o r e c l o s e on t h e
property covered by a c h a t t e l mortgage securing t h e promissory
note.     The c o u r t , s i t t i n g without a j u r y , entered judgment f o r
plaintiff.
          On November 10, 1968, C. M, Pomeroy, husband of p l a i n t i f f ,

died.     A t t h e time of h i s death he owned a promissory n o t e i n
t h e amount of $25,000, secured by a c h a t t e l mortgage dated
February 1, 1964, covering r e t a i l l i q u o r l i c e n s e No. 1777 and
r e t a i l beer l i c e n s e No. 1777.     The n o t e and mortgage were executed
by Arthur C. S a l l a z , defendant.
          Marlys Pomeroy a s a d m i n i s t r a t r i x of t h e e s t a t e of C. M.
Pomeroy, had made demand f o r payment of t h e n o t e , b u t S a l l a z
has refused t o pay any p a r t of i t .
          The property t o which t h e beer and l i q u o r l i c e n s e s a r e
a t t a c h e d i s t h e Longhorn Bar, 116 South M e r r i l l , Glendive, Montana.
The r e a l property was owned by Mrs. Lulu R, Pomeroy u n t i l i t was
s o l d i n 1968 t o S a l l a z .   The l i c e n s e s were owned by Lulu R. Pomeroy
u n t i l 1954, when they were t r a n s f e r r e d t o h e r son, C.M.           Pomeroy.
          On March 9, 1956, C. M.           Pomeroy t r a n s f e r r e d t h e l i c e n s e s
t o one John Wrigg.          However, C , M. Pomeroy was named on t h e l i c e n s e s
a s mortgagee because concurrently with t h e t r a n s f e r of t h e l i c e n s e s
t o Wrigg, Pomeroy r e q u i r e d Wrigg t o execute a promissory n o t e t o
him i n t h e amount of $25,000.            This note was secured by t h e c h a t t e l
mortgage executed by Wrigg,
           I n May 1963, Wrigg t r a n s f e r r e d h i s i n t e r e s t i n t h e l i c e n s e s
t o William Reinhardt and S a l l a z , a t which time they executed a
promissory note i n t h e amount of $25,000 payable t o C. M. Pomeroy,
and secured by a c h a t t e l mortgage on t h e l i c e n s e s .               This l a t t e r
n o t e and mortgage were s i m i l a r t o t h e n o t e and mortgage executed
by Wrigg when he acquired t h e l i c e n s e s i n 1956.                    Reinhardt and
S a l l a z continued t o operate t h e Longhorn Bar a s p a r t n e r s u n t i l
1964, when Reinhardt t r a n s f e r r e d h i s i n t e r e s t i n t h e b a r and
licenses t o Sallaz.
          When S a l l a z , i n d i v i d u a l l y , took over operation of t h e
b a r and l i c e n s e s i n 1964, he a l s o executed t o C , M. Pomeroy a
n o t e i n t h e amount of $25,000 and signed a mortgage pledging t h e
l i c e n s e s a s s e c u r i t y f o r t h e note.     This n o t e and mortgage a r e
the s u b j e c t of t h i s lawsuit.          The l i c e n s e s i n question a r e
p r e s e n t l y i n t h e name of Arthur C. S a l l a z , and s t a t e t h a t C. M.
Pomeroy i s t h e mortgagee.
           The i s s u e presented t o t h i s Court i s whether o r n o t
t h e d i s t r i c t c o u r t e r r e d by e n t e r i n g judgment a g a i n s t defendant
S a l l a z because t h e n o t e and c h a t t e l mortgage together merely
c o n s t i t u t e a s e c u r i t y agreement.        I n o t h e r words, i s t h e t i t l e
t o t h e r e t a i l beer l i c e n s e and the r e t a i l l i q u o r l i c e n s e en-
cumbered by a $25,000 mortgage o r i s t h e defendant c o r r e c t i n h i s
contention t h a t he owns t h e l i c e n s e s f r e e of a l l encumbrances.
          Appellant S a l l a z argues t h a t t h e i n t e n t i o n of Pomeroy was
t o prevent t h e removal of t h e l i c e n s e s from t h e premises during
t h e r e n t a l term.     H e urges t h i s Court t o look beneath t h e s u r f a c e
of t h i s t r a n s a c t i o n , i n order t o determine t h e t r u e i n t e n t of
t h e p a r t i e s when t h e n o t e and mortgage were executed,                   W agree
                                                                                      e
with a p p e l l a n t t h a t e q u i t y demands c l o s e s c r u t i n y of t h e t r a n s -
action      and a r e i n accord with h i s c i t e d a u t h o r i t y t h a t i n e q u i t y ,
substance, not form, c o n t r o l s .             However, we can not accept h i s
contention that the note secured by the mortgage is merely a
security agreement to insure the rental of the bar; and, in
order to accomplish this security arrangement, the documents
were given to insure the licenses would remain attached to the
premises.
         The district court found, and we agree, that a valid note
was signed by appellant. Appellant's argument is that other
notes were executed by previous tenants of the premises and
Pomeroy never attempted to collect on those notes, which indi-
cates that Pomeroy never intended to collect on appellant's
note.    Upon careful scrutiny, this argument quickly evaporates.
A genuine note was held by Pomeroy and he was free to exercise
his option to collect or to refrain from collecting as he deemed
necessary.     Upon his death   the note passed to his estate, and
the estate is correct in callingthe note due.
         Appellant argues that $25,000 is far above the top dollar
price of $1,800, which was the amount recently paid for similar
licenses in the Glendive area. He contends this discrepancy
indicates that payment of the note was never anticipated by
the parties.    We cannot accept this argument, The licenses which
recently sold for $1,800 in the Glendive area were disposed of
at a sheriff's sale.    This sale was a forced auction sale and
the value of the licenses may have been considerably more than
the price received. This Court has no way of knowing what the
going price for liquor and beer licenses might be between a
willing buyer and a willing seller, The value of such licenses
might well be $25,000. The licenses were valuable and appellant
may have made a bad business decision to agree to pay $25,000 for
them, but appellant's business sense is not a question for this
Court.
       Both parties advance arguments as to whether or not the
documents in question were negotiable.     At the time the note and
mortgage were executed by appellant to Pomeroy, the Negotiable
Instrument Law was in effect in Montana.     Under the then existing
law, we find that the note was negotiable and under section
55-301, R.C.M.    1947, a presumption exists that consideration
was given for the promissory note.     This presumption is coupled
with the fact that a common practice existed for a new owner of
the Longhorn Bar, in consideration of his receiving the liquor
and beer licenses, to endorse on the licenses the name of C M.
                                                           .
Pomeroy as mortgagee and at the same time for the new owner to
execute a promissory note in the amount of $25,000 and a mortgage,
       The note and mortgage given to Pomeroy by appellant
supplanted a note and mortgage given to Pomeroy previously by
Reinhardt and appellant in the same amount. This indicates
appellant's contention that the documents were merely given as
security to prevent removal of the licenses from the premises
during the rental term, must fail. Valuable consideration did
exist for the issuance of the note and mortgage and we find it
was not merely a security agreement.
       Appellant further contends he executed the documents
to provide Pomeroy security for rent due on the premises under
the terms of the February 1964 lease; therefore, appellant did
not buy the licenses from Pomeroy, nor did he owe any monetary
or other obligation to Pomeroy, other than the rent for the
premises containing the Longhorn Bar.      We cannot accept this
contention.      Sallaz and Pomeroy executed a negotiable note,
secured by a $25,000 mortgage, on the liquor and beer licenses
of the Longhorn Bar.     Sallaz now owns the liquor and beer licenses,
subject to a mortgage; and for him to receive the licenses free
and clear he would have to pay the administratrix of the Pomeroy
estate $25,000.
        If appellant, as he would have us believe, acquired
ownership of the licenses from his predecessor Reinhardt, then
appellant would have had no reason to execute the note and
mortgage, Appellant paid Reinhardt $1,600 for the one-half
interest in the Longhorn Bar.   That amount, appellant claims,
included the inventory, fixtures and licenses which constituted
the bar business. As discussed heretofore, a retail liquor
and beer license is worth at least $1,800 in the Glendive area.
We cannot accept his contention that the $1,600 paid by
appellant to Reinhardt for his one-half interest included in-
ventory, fixtures and licenses. If this were true, why did
appellant execute the note secured by a mortgage to Pomeroy;
and why did Pomeroy's name appear on the licenses as mortgagee?
        Further, appellant argues that Lulu Pomeroy did not
transfer the ownership of the licenses to her son in 1956;
consequently, in 1968 when she sold the premises containing the
bar to appellant, he became the owner. Lulu Pomeroy was unable
to testify at trial due to a heart attack.   If appellant be-
lieved that he would be prejudiced by Mrs. Pomeroy's absence
from the trial, he had the right to ask for a continuance until
such date as she would be available to testify.   This was not
done.   The district court did not err in denying appellant's
motion for a new trial.
        The trial court's order denying a new trial, when reviewed
by this Court, is presumed correct and the burden of overcoming
this presumption is upon the appellant, See State ex rel.
Elakovich v. Zbitnoff, 142 Mont. 576, 386 P.2d 343, and cases
therein cited,
        We find that no error is shown in the trial court;
and, therefore, the judgment of that court is affirmed.
    We concur:                A

/       Chief ~ u s t i c e
            /-

    1                             I
        Associate Justices,