Court Opinion

ID: 876857
Source: CourtListenerOpinion
Date Created: 2013-06-04 20:57:39.067682+00
Date Added: 2024-06-11T11:08:18.965193
License: Public Domain

No. 14934
                             IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                  1979

HAROLD POULSEN, KARL INGEBRIGTSON,
DICK OLSON and EMERY MATSKO, JR.,
                                 Plaintiffs,

TREASURE STATE INDUSTRIES, INC.,
A Montana Corporation; and KENNETH
K. KNIGHT,
                                 Respondents.

ORIGINAL PROCEEDING:
Counsel of Record:
      For Plaintiffs:
                Graybill, Ostrem, Warner & Crotty, Great Falls, Montana
                Donald Ostrem argued, Great Falls, Montana
      For Respondents:
                Smith, Emmons, Baillie and Walsh, Great Falls, Montana
                Cure and Borer, Great Falls, Montana
                Edward Borer argued, Great Falls, Montana

                                                  Submitted:        September 17, 1979
                                                    Decided : ! ? 7
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M r . Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of
t h e Court.

             P e t i t i o n e r Kenneth K.         Knight h a s f i l e d an o r i g i n a l motion

i n t h i s C o u r t s e e k i n g an o r d e r p e r m i t t i n g him t o p o s t s e c u r i t y

o t h e r t h a n a s u p e r s e d e a s bond t o s t a y e n f o r c e m e n t of a money

judgment a g a i n s t him pending a p p e a l .

             The u n d e r l y i n g a c t i o n i n t h e D i s t r i c t Court o f Cascade

County r e s u l t e d i n e n t r y o f judgment a g a i n s t d e f e n d a n t Knight

and d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s , I n c . ,   a Montana c o r p o r -

a t i o n , j o i n t l y and s e v e r a l l y i n t h e sum of $302,129.65                and an

a d d i t i o n a l award s o l e l y a g a i n s t d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s

i n t h e sum o f $1,742.52.                  his judgment was e n t e r e d on J u n e 1, 1979.

T h e r e a f t e r an amended judgment was e n t e r e d a g a i n s t t h e same d e f e n -

d a n t s i n t h e same amounts w i t h an a d d i t i o n a l judgment of indemnity

i n favor of defendant Treasure S t a t e I n d u s t r i e s a g a i n s t defendant

Knight f o r such amounts as T r e a s u r e S t a t e might u l t i m a t e l y pay t o

p l a i n t i f f i n s a t i s f a c t i o n of t h e j o i n t and s e v e r a l judgment a g a i n s t

it and Knight.

             Following e n t r y of t h e amended judgment, t h e D i s t r i c t Court

g r a n t e d t h r e e temporary s t a y s o f judgment and e x e c u t i o n pending a

h e a r i n g i n t h a t c o u r t on d e f e n d a n t K n i g h t ' s a p p l i c a t i o n t o f i l e

s e c u r i t y o t h e r t h a n a s u p e r s e d e a s bond.        O August 1 7 , 1979, f o l l o w -
                                                                        n

i n g hearing, t h e D i s t r i c t Court denied t h e a p p l i c a t i o n .

             O t h e same d a t e d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s p o s t e d
              n

a s u p e r s e d e a s bond a s r e p r e s e n t e d by a c e r t i f i c a t e of d e p o s i t i n

t h e sum o f $319,224.52,               which w a s approved by t h e D i s t r i c t C o u r t .

T h i s c o v e r e d t h e l i a b i l i t y of T r e a s u r e State I n d u s t r i e s on t h e

judgment b u t d i d n o t c o v e r t h e l i a b i l i t y of d e f e n d a n t Knight.

             T h e r e a f t e r d e f e n d a n t Knight f i l e d an o r i g i n a l motion i n

t h i s C o u r t t o p e r m i t him t o p o s t s e c u r i t y o t h e r t h a n a s u p e r s e d e a s

bond o r i n an amount d i f f e r e n t from t h e amount of t h e judgment,

p u r s u a n t t o Rule 7 ( a ) , M.R.App.Civ.P.                  T h i s C o u r t s e t t h e motion
for hearing on September 13, stayed enforcement and execution
on the judgment pending hearing, and enjoined defendant Knight
from transferring, encumbering or concealing property for the
purpose of avoiding satisfaction of judgment.
          Plaintiffs in whose favor the underlying amended judgment
was entered filed their written objection to defendant Knight's
motion.    The motion and objections thereto came on for hearing be-
fore this Court on September 13.
          An affidavit of Knight's counsel and the financial state-
ment of Knight were submitted for filing.    Oral argument by coun-
sel for Knight and by counsel for objectors was heard.    This Court
granted Knight the right to take and submit two depositions, his
own and that of Eleanor K. Johnson, by September 17 in support of
his motion.    These have been taken and filed.   The order staying
enforcement and execution on the judgment and enjoining Knight
from transferring, encumbering or concealing property for the pur-
pose of avoiding satisfaction of the judgment have been continued
pending our decision on Knight's motion.    The matter has now been
submitted to us for decision.
          The essential facts in this case are clear.   Knight cannot
secure a supersedeas bond from a commercial bonding company with-
out posting a cash security or its equivalent (in the form of a
certificate of deposit, an irrevocable letter of credit from a
bank, or an assigned savings account) in the amount of his liabil-
ity on the judgment.   Knight claims he cannot post cash security
without liquidating a substantial portion of his assets, incurring
substantial tax liabilities, and suffering severe business and econ-
omic hardship which he seeks to avoid.   He has applied to one bank
for a letter of credit but has been advised this would exceed that
bank's lending authority.   He seeks authorization from us to post
common stocks and pledges of personal assets including equity
positions, real estate and business ventures in lieu of a supersedeas
bond.   He has submitted an unverified "personal statement"
dated April 1, 1979, indicating a net worth far in excess of
his liability on the judgment together with a customer's copy
of his account with a stock brokerage firm.
         The pertinent rule under which Knight's motion is made
provides :
         "Upon entry of a judgment or order a party may
         apply to the district court on notice or ex parte
         for a stay of the execution of the judgment or
         order. The court in its discretion may grant said
         stay ...   Upon service of notice of appeal, if the
         court has made no such order or the appellant de-
         sires a stay for a longer period than ordered, he
         may present to the district court and secure its
         approval of a supersedeas bond ..  . On application,
         the supreme court in the interest of justice may
         suspend, modify, restore, or grant any order made
         under this subdivision." Rule 7(a), M.R.App.Civ.P.
The purpose of a supersedeas bond as a condition for staying
enforcement and execution on a judgment is to guarantee and secure
the rights of the judgment creditor during the appeal process.     At
the same time it preserves and implements the judgment debtor's
statutory right of appeal.   It is well established that a super-
sedeas bond may be required to preserve the rights of the unsuccess-
ful party.   Gallatin Trust and Savings Bank v. Henke (1969), 154
Mont. 170, 461 P.2d 448, and cases therein cited.
        Here Knight seeks to post security other than a supersedeas
bond to guarantee and secure the rights of judgment creditors pend-
ing determination of his appeal "in the interest of justice" as
provided in Rule 7(a), M.R.App.Civ.P.   Alternatively, he seeks re-
duction of the amount of any supersedeas bond to a lesser sum than
the amount of his liability on the judgment.
        We deny Knight's motion in the exercise of our discretion
for several reasons.   Denial of his motion will not deny him access
to this Court to appeal from the judgment.    He is apparently a
wealthy man who can post a supersedeas bond albeit with some financial
hardship consisting of monetary losses in liquidation of assets,
tax consequences, and loss of business income.   We do not consider
the rights of his judgment creditors guaranteed and secured by
the reduction in amount of a supersedeas bond on the posting
of substitute security in the form of stocks and pledges of
equities in business ventures, real estate and personal assets.
A reduction in amount of a supersedeas bond below the amount of
his liability on the judgment cannot secure the rights of his
judgment creditors.    Additionally such substitute security fluc-
tuates in value due to changes in market conditions and requires
constant attention to preserve the security of the judgment
creditors.     his Court has neither the expertise nor the capacity
to monitor such collateral.    If commercial bonding companies de-
cline to issue a supersedeas bond based on such security, what
justification exists for this Court to accept such security in lieu
of a supersedeas bond?   None has been advanced that moves our
discretion.
        Additionally, Knight's attempts to secure a supersedeas
bond have been neither prompt nor thorough.    The record does not
disclose any attempt to secure a loan from a bank or lending
institution.   The record discloses but one inquiry of a bank con-
cerning the acquisition of an unrevocable letter of credit.    He
has not furnished this Court with a recent net worth statement
verified by a certified public accountant.    These indications do
not support his claims that the "interests of justice" require us
to grant his motion.
        For the foregoing reasons, the motion of Kenneth K. Knight
is denied in its entirety.    Our orders staying enforcement and
execution of the judgment and restraining and enjoining Kenneth
K. Knight from transferring, disposing, encumbering or concealing
property heretofore issued by this Court are vacated effective
October 15 in the absence of his posting a supersedeas bond or
o r i t s e q u i v a l e n t approved by t h e C o u r t .

                                                        Chief J u s t i c e
                                                                              .

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