source: Caselaw Access Project

author: MR. JUSTICE HUNT MR. JUSTICE WEBER,

license: Public Domain

text:
    MONTANA BANK OF RED LODGE, N.A., Plaintiff and Appellant, v. AILEEN LIGHTFIELD, a/k/a Mary Aileen Lightfield, Defendant and Respondent.
    No. 88-377.
    Submitted on Briefs Nov. 17, 1988.
    Decided April 6, 1989.
    771 P.2d 571.

      Bruce E. Lee, Billings, for plaintiff and appellant.
    W. Corbin Howard, Billings, for defendant and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

The Montana Bank of Red Lodge, the plaintiff, appeals the decision by the District Court of the Thirteenth Judicial District, Carbon County, denying its two motions for judgment notwithstanding the verdict, one regarding whether a partnership existed between defendant Aileen Lightfield and her son, Lee J. Lightfield, and the other regarding whether defendant Aileen Lightfield is liable for up to $40,000 of Lee J. Lightfield’s debt because of her signature on a written guaranty form. The Bank also appeals the District Court’s decision to order a new trial.

The defendant cross-appeals the decision by the District Court, denying her motion for judgment notwithstanding the verdict regarding whether she is liable for up to $40,000 of Lee J. Lightfield’s debt as a result of her signature on a written guaranty form. We affirm the District Court.

The issues raised by the plaintiff on appeal are:

(1) whether the District Court erred in denying plaintiff’s motion for judgment notwithstanding the verdict upon plaintiff’s assertion that as a matter of law a partnership existed between defendant Aileen Lightfield and her son, Lee J. Lightfield, and therefore defendant is liable for debts incurred by Lee J. Lightfield, totaling $86,126.91 plus interest;

(2) whether the District Court erred in denying plaintiff’s motion for judgment notwithstanding the verdict upon plaintiff’s assertion that as a matter of law the defendant is liable for up to $40,000 as a result of her signature on a written guaranty form;

(3) whether the District Court erred in granting a new trial upon the motion of the defendant.

The issue raised on cross-appeal by the defendant is:

(1) whether the District Court erred in denying defendant’s motion for judgment notwithstanding the verdict upon defendant’s assertion that she is not liable for up to $40,000 as a result of her signature on a written guaranty form.

On March 25, 1982, Lee J. Lightfield established a line of credit for $40,000 with the Montana Bank of Red Lodge (Bank) to finance used automobiles for the purpose of reselling the automobiles at a car lot in Billings. Before allowing Lee to establish this line of credit, the Bank required that Lee’s parents, Aileen and Gilbert Lightfield, pledge a $10,000 certificate of deposit by assignment and sign a guaranty form for up to $40,000 plus interest. Both Aileen and Gilbert Lightfield pledged the $10,000 certificate of deposit and signed the guaranty form.

On April 23, 1982, after Lee pledged a $20,000 certificate of deposit, the Bank increased Lee’s line of credit to $80,000. On September 28, 1982 the Bank increased Lee’s line of credit to $130,000. In neither case did the Bank inform Aileen Lightfield of the increase in Lee’s line of credit.

Gilbert Lightfield was seriously ill throughout this time and subsequently died on May 9, 1983. Shortly after Gilbert Lightfield’s death, Lee persuaded his mother, Aileen Lightfield, to enter the used car business. Aileen testified that she did not necessarily want to get into the car business, but she also did not want to be alone on the ranch. She testified that her son promised that he would get her an apartment near him in Billings, teach her to how to buy cars, and have her keep the books. Aileen consented to enter the car business and went with Lee to the Bank on May 16, 1983, to see whether the Bank would give her a line of credit for the purpose of buying used automobiles. The Bank subsequently allowed Aileen to establish a line of credit in the amount of $150,000 for the purpose of buying used automobiles. Aileen mortgaged her ranch land, located in the Lambert area, as collateral.

In July, 1983, Aileen Lightfield realized that her son was not fulfilling his promise of teaching her about the car business and informed her son to sell all of her cars because she was getting out of the business. She informed the Bank of her decision on August 26, 1983. She arranged a November 10, 1983 meeting with the Bank. Aileen testified that at this meeting, as well as on the phone approximately a week earlier, she demanded from the Bank all of the documents that she had ever signed. After this demand, the Bank simply gave her a satisfaction of her mortgage on her ranch land at the November 10 meeting.

In November, 1983, the Bank became concerned when an inventory of the car lot in Billings showed a few cars of Lee Lightfield’s missing. The Bank met with Lee on January 7, 1984 and eventually discovered that Lee was defrauding the Bank. Lee subsequently pled guilty to eighteen counts of theft.

In January, 1984, the Bank called Aileen Lightfield and asked her to come to the Bank to see if she could help Lee with his financial problems. When Aileen arrived at the Bank on January 16, 1984, the Bank asked her to sign a note promising to pay Lee’s debt of $150,000. Aileen refused to sign the note.

The Bank filed a complaint on April 25, 1984, naming Lee J. Lightfield, Lee’s wife (Sandy Lightfield), and Aileen Lightfield as defendants. Lee and Sandy Lightfield were subsequently dismissed as defendants in this action when they filed for bankruptcy by way of a joint petition in the United States Bankruptcy Court, leaving Aileen Lightfield as the sole defendant. The case was brought to trial on September 21, 1987. Both the plaintiff Bank and defendant Aileen Lightfield filed motions for directed verdicts asking the court to determine if a partnership existed between defendant Lightfield and her son. The court granted Lightfield’s motion, finding that as a matter of law no partnership existed between her and her son.

Both the Bank and Lightfield also brought motions for directed verdict regarding defendant Lightfield’s liability as a result of the written guaranty form. The District Court denied both of these motions and allowed the question to go to the jury. On September 24, 1987, the jury, by special verdict, found defendant Lightfield liable to the Bank by reason of the guaranty, but only awarded the Bank $1.00 in compensatory damages. The jury also found that the Bank breached a duty of good faith and fair dealing toward Aileen Lightfield, but found that the breach did not cause her injury or damage. The jury then found that the Bank did not commit actual or constructive fraud by reason of its conduct toward defendant Lightfield. The jury awarded Lightfield $1,500 in compensatory damages. The jury found that the Bank had not acted with fraud, malice or oppression in its relationship with Lightfield and therefore did not reach the question of whether to assess the Bank with punitive damages.

The District Court denied the Bank’s motion for judgment notwithstanding the verdict regarding the existence of a partnership and denied both the Bank’s and Lightfield’s motions for judgment notwithstanding the verdict regarding Lightfield’s liability as a result of the written guaranty form. On March 25, 1988, the District Court granted Lightfield’s motion for a new trial, finding that under § 25-11-102, MCA, the jury’s findings were inconsistent.

The first issue raised on appeal is whether the District Court erred in denying the Bank’s motion for judgment notwithstanding the verdict upon the Bank’s assertion that as a matter of law a partnership existed between Aileen Lightfield and her son, Lee J. Lightfield, and therefore Aileen Lightfield is liable for debts incurred by Lee J. Lightfield, totaling $86,126.91 plus interest.

Section 35-10-201, MCA, defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.” This Court has consistently held that in determining whether a partnership exists, it is necessary that the parties clearly manifest their intent to associate themselves in a partnership relationship; that each partner contributes something that promotes the enterprise; that each partner has a right of mutual control over the subject matter of the enterprise; and that the partners have agreed to share profits. Bender v. Bender (1965), 144 Mont. 470, 480, 397 P.2d 957, 962. When ascertaining the intent of the parties absent a written agreement, all the surrounding facts, circumstances, and conduct of the parties must be considered. Bender, 144 Mont. at 480, 397 P.2d at 962. Section 35-10-202, MCA, also lists rules that are important in determining whether a partnership exists.

The Bank argues that the agreement between Lee and Aileen was to share profits and that under § 35-10-202(4), MCA, the sharing of business profits is prima facie evidence that a person is a partner in the business. However, § 35-10-202(4), MCA, also states that no such inference shall be drawn if such profits were received in payment as wages for an employee or as a debt by installments. Section 35-10-202(4) (a) and (b), MCA. The facts in this case are uncontroverted. The understanding between Aileen and Lee provided for an unequal splitting of the profits between Lee and Aileen from Aileen’s line of automobiles only. Neither profits nor losses were shared between Lee and Aileen from Lee’s line of automobiles. The understanding also provided that Lee would absorb all the losses. The understanding, however, also included that Lee would teach Aileen the art of buying used automobiles, get her an apartment in Billings, and have her keep the books. Lee never fulfilled this part of the agreement and therefore after less than two months, Aileen made her intentions known to Lee that she was getting out of the used car business. In light of all the surrounding facts and circumstances, this understanding between Lee and Aileen is more consistent with Aileen paying Lee to instruct her in the business of buying used automobiles rather than an agreement among partners to share profits.

The evidence also clearly establishes that Aileen had no control over the subject matter of the supposed partnership. Lee took total control of the buying and selling of the automobiles financed on Aileen’s line of credit. Aileen had no control over her automobiles nor over automobiles financed from Lee’s line of credit. Lee also never allowed Aileen to keep the books. No written partnership agreement existed between Lee and Aileen Lightfield and neither Lee nor Aileen intended to be partners nor did the Bank consider them or treat them as partners until the deficiency arose. All parties, including the Bank, understood Lee’s and Aileen’s lines of credit to be separate and the lines in fact were kept separate.

The record also establishes that the insurance policy for both Lee’s and Aileen’s automobiles was in the sole name of Lee J. Lightfield; that Lee and Aileen, as well as other third parties, operated under the name of a car lot, Central Auto, which was owned by a third party; that both Lee and Aileen operated under the same business license and bond; and, that the two shared one bank account for all their business transactions. As stated previously, however, the entire surrounding facts, circumstances, and conduct of the parties must be considered when determining whether the requisite intent exists to create a partnership in the absence of an express agreement. This Court has never held — contrary to what the Bank argues — that intent is not required in the formation of a partnership. To the contrary, intent is a major factor. Truck Ins. Exchange v. Industrial Indemnity Co. (1984), 212 Mont. 297, 300, 688 P.2d 1243, 1244; Bender, 144 Mont. at 480, 397 P.2d at 962.

The burden of proving the existence of a partnership is on the party seeking to establish its existence. Bender, 144 Mont. at 480, 397 P.2d at 962. In light of all of the evidence, we hold that the Bank failed to establish the requisite factors necessary to prove the existence of a partnership and therefore hold that the District Court properly found that no partnership existed between Aileen and Lee as a matter of law.

The second issue raised on appeal and the issue raised on cross-appeal is whether the District Court erred in denying the Bank’s and Lightfield’s motions for judgment notwithstanding the verdict regarding whether Lightfield is liable for up to $40,000 as a result of her signature on a written guaranty form.

The Bank argues that the guaranty should be enforced on its face and that none of the affirmative defenses set forth by Lightfield should have gone to the jury. Lightfield argues that as a matter of law she should be exonerated because the Bank failed to inform her of facts substantially increasing her risk of loss and because her obligation under the guaranty was procured by either fraud or constructive fraud. We hold that the District Court did not err by allowing the issues to go to the jury and in denying the Bank’s motions for directed verdict regarding Lightfield’s affirmative defenses.

The Bank argues that Lightfield’s allegation of fraud fails because an essential element — the aggrieved party’s reliance upon the other party’s representation — is not present. Conversely, Lightfield argues that the evidence indicates that all the elements constituting fraud were satisfied and therefore the District Court erred in not granting her motion for judgment notwithstanding the verdict. We disagree with both the Bank’s and Lightfield’s assertions.

Typically, a person who fails to take the opportunity to examine a written form before executing it cannot claim fraud. Jenkins v. Hillard (1982), 199 Mont. 1, 6, 647 P.2d 354, 357; Hjermstad v. Barkuloo (1954), 128 Mont. 88, 98, 270 P.2d 1112, 1117. As noted by the Bank, however, a person may claim fraud to a document he signs “where he is prevented from reading it or having it read to him by some fraud, trick, artifice, or devise by the other party.” 17 Am.Jur.2d Contracts § 152 (1964).

Actual fraud is always a question of fact. Jenkins, 199 Mont. at 5, 647 P.2d at 357. This Court is not in a position to weigh the facts. This Court’s function is to determine whether the District Court erred when denying the Bank’s motion for directed verdict. Motions for directed verdict or for judgments notwithstanding the verdict are proper only when no evidence exists to warrant submission to the jury. McGregor v. Mommer (Mont. 1986), 220 Mont. 98, [at 104], 714 P.2d 536, 540, 43 St.Rep. 206, 210; Wilkerson v. School Dist. No. 15 (Mont. 1985), 216 Mont. 203, 210-11, 700 P.2d 617, 622, 42 St.Rep. 745, 750-51. We therefore hold that the District Court properly denied the Bank’s motion for directed verdict on the basis of either fraud or constructive fraud. Likewise, we uphold the court’s order denying Lightfield’s motion for judgment notwithstanding the verdict on these issues.

The Bank also argues that under the written guaranty form they were not required to give Lightfield advance notice that they were increasing Lee J. Lightfield’s line of credit. In Bails v. Gar (1976), 171 Mont. 342, 558 P.2d 458, we held that “[f]raud vitiates every transaction and all contracts.” Bails, 171 Mont. at 347, 558 P.2d at 461 (quoting 37 Am.Jur.2d Fraud and Deceit §8 (1968)). A person who perpetuates fraud by inducing another to enter a contract may not then immunize himself by relying upon the provisions within the contract. Jenkins, 199 Mont. at 6, 647 P.2d at 357. In light of the above discussion addressing fraud, we cannot determine as a matter of law whether Lightfield had notice of the specifications under the written guaranty form and whether the Bank needed to inform her of facts which substantially increased her risk of loss. These are questions for the jury to decide. As previously noted, motions for directed verdict or for judgment notwithstanding the verdict are proper only when no evidence exists to warrant submission to the jury. McGregor, 220 Mont. [at 104], 714 P.2d at 540, 43 St.Rep. at 210; Wilkerson, 216 Mont. at 210-211. 700 P.2d at 622, 42 St.Rep. at 750-51. We therefore hold that the District Court properly denied the Bank’s motion for directed verdict and Lightfield’s motion for judgment notwithstanding the verdict on this issue.

The third issue raised on appeal is whether the District Court erred in granting a new trial upon the motion of the Bank.

The District Court granted Lightfield’s motion for a new trial on March 25, 1988. The court found that the verdict form was straightforward and understandable, but after reviewing the jury’s responses, the court was left with the inescapable impression that the jury was “either hopelessly confused or disregarded the court’s instructions.” We agree that the jury was confused but further determine that the form itself was terribly confusing and should not be used again.

The requirements for requesting and ordering a new trial are set forth in Rule 59, M.R.Civ.P. A verdict may be vacated and a new trial granted on the application of an aggrieved party if the District Court finds that insufficient evidence exists to justify the verdict or that it is against the law. Section 25-11-102(6), MCA. In ordering the new trial, the District Court found that the jury had determined that Lightfield was liable to the Bank on the guaranty she had signed. The court noted that the guaranty was for up to $40,000, yet the jury awarded the Bank compensatory damages of only $1.00. The court also found that the jury had determined that the Bank had breached its duty of good faith and fair dealing in its actions toward Lightfield, but then found that Lightfield had not been injured or damaged as a result. The court noted, however, that the jury nonetheless awarded Lightfield $1,500 in compensatory damages. The court also noted that despite its instructions, the jury failed to account for Lightfield’s $10,000 certificate of deposit which the Bank retained. The court concluded that the jury findings were inconsistent and that it was too difficult to speculate as to how the jury arrived at its conclusions. The court therefore ordered a new trial pursuant to § 25-11-102(6), MCA.

The District Court possesses the discretion to either grant or deny a motion for a new trial. This Court will not overturn a decision by the District Court absent a showing of manifest abuse of that discretion. Walter v. Evans Products Co. (1983), 207 Mont. 26, 30-31, 672 P.2d 613, 616. In light of the above, we hold that the District Court did not abuse its discretion by granting Lightfield’s motion for a new trial. We therefore affirm the District Court on this issue.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and SHEEHY concur.

MR. JUSTICE WEBER,

specially concurring:

I concur in the granting of a new trial. However, I dissent to the portion of the majority opinion which affirms the District Court’s granting of a directed verdict on the partnership issue.

Both parties in this action moved for a directed verdict, asking the court to determine as a matter of law whether a partnership existed. The lower court granted Ms. Lightfield’s motion, determining as a matter of law, that no partnership existed. This Court has examined the facts and affirmed this holding.

The standard for granting a directed verdict is well-settled and was recently reiterated in Britton v. Farmers Ins. Group (1986), [221 Mont. 67,] 721 P.2d 303, 317, 43 St.Rep. 641, 656, as follows:

“A motion for directed verdict is properly granted only in the complete absence of any evidence to warrant submission to the jury, and all inferences of fact must be considered in the light most favorable to the opposing party. Jacques v. Montana National Guard (1982), 199 Mont. 493, 649 P.2d 1319; if the evidence viewed in a light most favorable to plaintiff indicates reasonable men could differ as to the conclusions drawn from the evidence a directed verdict is not proper. Weber v. Blue Cross of Montana (1982), 196 Mont. 454, 643 P.2d 198.”

In the present case the majority opinion states facts sufficient to demonstrate that reasonable men might differ as to whether a partnership existed. This was properly a jury issue. The District Court analyzed and weighed the evidence. This is inappropriate on a motion for a directed verdict, even when both parties have requested a directed verdict. Borgmann v. Diehl (1970), 155 Mont. 458, 462-63, 473 P.2d 529, 531.

The majority opinion, in affirming the directed verdict, has also-engaged in weighing the evidence. While it is possible that a jury would conclude that no partnership existed, it is not our function to make that determination where reasonable men could reach a different conclusion. An inappropriate standard has been used both by the District Court, and by this Court on appeal. I would vacate the directed verdict and remand for a jury trial on the partnership issue also.


author: MR. JUSTICE SHEEHY

text:
    VICTOR WERLHOF AVIATION INSURANCE, Plaintiff and Respondent, v. RONALD GARLICK, d/b/a Garlick Helicopters, Defendant, v. FARMERS STATE BANK, a Montana Banking corp., Garnishee-Appellant.
    No. 88-528.
    Submitted on Briefs Jan. 12, 1989.
    Decided April 6, 1989.
    771 P.2d 962.

      Jeffrey H. Langton, Hamilton, for garnishee-appellant.
    Charles J. Tornabene, Patterson, Marsillo, Tornabene and Schuyler, Missoula, for plaintiff and respondent.
    George T. Bennett, Montana Bankers Associates, Helena, for amicus curiae.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

The principal issue in this case is whether a bank, otherwise lawfully entitled to a setoff, may exercise its right of setoff against a depositor’s account at the same moment it is presented with a writ of execution which seeks to levy on the same depositor’s account. We uphold the right of the Bank to the setoff.

A second issue is whether a bank may set off a matured debt against a depositor’s account when the debt is secured by collateral. Again, we hold that the Bank’s right of setoff in this case is not barred by the presence of collateral.

A third issue is whether § 30-4-303, MCA, modifies the Bank’s right of setoff. We hold that § 30-4-403 has no application in this case.

Farmers State Bank appeals from an order of the District Court, Fourth Judicial District, Ravalli County, which held that the Bank holds property of a depositor to which a judgment creditor of the depositor Victor Werlhof Aviation Insurance, had a right. The order forbade the Bank to transfer or otherwise dispose of the depositor’s monies until the judgment creditor, Victor Werlhof Aviation Insurance, could commence and prosecute to judgment an action against the Bank for recovery of the monies which the District Court held were wrongfully set off by the Bank. The order is in the nature of an injunction and is thus appealable under Rule 1, M.R.App.P. We reverse the District Court and vacate the prohibitive order.

There is no dispute as to the evidentiary facts. Victor Werlhof Aviation Insurance first obtained a judgment against Garlick Aviation on April 11, 1986 in Missoula County District Court for $10,391.46. The judgment was abstracted to Ravalli County District Court on May 19, 1986. That court issued a writ of execution on June 4, 1986 directed to appellant Farmers State Bank of Victor, Montana, against Garlick’s account in the Bank. Garlick owed monies on a delinquent note to the Bank at the time of the execution of the first writ. The return of service of the June 4 execution indicated that Garlick’s account held $3,276.97, but the Bank claimed a setoff against the monies for a delinquent note of $80,000.00 which Garlick had executed to the Bank in 1982.

On January 15, 1988, on behalf of Victor Werlhof Aviation Insurance, a second writ of execution was issued by the court. This writ was presented by the sheriff to the Bank in the same manner &r: the first writ. At the time the Bank received the writ, Garlick owed the Bank a monthly payment of $2,895.10 which was due as of January 1, 1988. The overdue payment was a monthly obligation in satisfaction of a debt underlying a contract for deed which had been assigned to the Bank in a separate bankruptcy by a party not involved in these proceedings. The Bank, when the judgment creditor’s writ was presented, set off Garlick’s checking account balance toward the January 1, 1988 overdue installment. Victor Werlhof Aviation Insurance then sought supplemental proceedings in aid of execution against the Bank. The District Court held against the Bank and it appealed to this Court.

1. May the Bank claim set off against a depositor’s account at the moment it is presented with a writ of execution to be levied upon the account?

The basis of a bank’s right to set off its depositor’s accounts against matured debts owed by the depositor to the bank was recently discussed by this Court in Bottrell, Reeve and Northern Line Layers, Inc. v. American Bank (f/k/a Western State Bank), Jim Beaton and Marty Derrig, [(Mont. 1988) 237 Mont. 1, 773 P.2d 694, 46 St.Rep. 561]. There we said, citing Spratt v. Security Bank of Buffalo, Wyo. (Wyo.1982), 654 P.2d 130, 135-136:

“We next reach appellant’s claim that the bank’s set-off should fail for lack of mutuality between appellee and Gail Fanning. Before going further, we need to discuss a bank’s right to setoff against the general deposits in its possession. The bank’s right of set-off to secure the payment of its depositor’s indebtedness is a part of the law merchant and well established in commercial transactions. (Citing authority.) For a bank to establish a right to set off, three conditions must be met: ‘the fund to be setoff must be the property of the debtor, the fund must be deposited without restrictions, and the existing indebtedness must be due and owing.’ (Citing authority.) The bank’s right to setoff does not arise until the time the depositor’s indebtedness to the bank has matured. (Citing authority.) Addressing appellant’s point, for set-off to be permissible, there must be mutuality of obligation between the debtor and his creditor, as well as between the debt and the fund on deposit. (Citing authority.) Debts to be used as set-offs must be due to and from the same persons in the same capacity. (Citing .authority.)”

The right of setoff is not limited exclusively to banks. Such right exists between any mutual debtors and creditors where the debts have matured and the parties mutually are debtors and creditors of and to each other. Thus, because setoff is a common law right, it exists independently of statutes, unless, of course, statutes affecting setoff have been enacted.

The banker’s right to setoff is the common law equitable right of the bank to apply the general deposits of a depositor against the matured debts of the depositor. The right grows out of the contractual debtor-creditor relationship created between the depositor and the bank at the time the account is opened, Security State Bank of Comanche, Okl. v. W. R. Johnston & Co. (1951), 204 Okla. 160, 228 P.2d 169; and it rests on the principle that it would be inequitable to permit the debtor-depositor to carry an open account that induces the bank to extend credit, and then allow the debtor to apply the funds to other purposes because he had not expressly agreed to apply them to the debt. Melson v. Bank of New Mexico (1958), 65 N.M. 70, 332 P.2d 472; Southwest Nat’l Bank v. Evans (1923), 94 Okla. 185, 221 P. 53. It is a general rule that when a depositor is indebted to a bank, and the debts are mutual — that is, between the same parties and in the same right — the bank may apply the deposit, or such portion thereof as may be necessary, to a payment of the debt due it by the depositor, provided there is no express agreement to the contrary and the deposit is not specifically applicable to some other particular purpose. Security State Bank of Melrose, Minn. v. First Nat’l Bank of Ismay (1927), 78 Mont. 389, 254 P. 417. For a bank to establish the right to setoff, the fund to be set off must be owed by the Bank to the debtor, the fund must be deposited without restrictions, and the existing indebtedness must be due and owing. Federal Deposit Ins. Corp. v. Pioneer State Bank (1977), 155 N.J. Super 381, 382, 281 A.2d 958.

As to the writ of execution levied against the Bank on June 4, 1986, the District Court held that though the Bank was not entitled to a setoff, since Victor Werlhof did nothing further about it, Victor was barred by laches from recovery as to the proceeds of the first writ of execution. Victor Werlhof has not cross-appealed on this holding, and so we do not concern ourselves with the result in the District Court as to the levy of the first execution writ.

As to the second writ of execution, it is undisputed that Garlick was delinquent under the contract for deed in not making the monthly payment of $2,895.10 due the Bank on January 1, 1988. On January 21,1988, when presented by the sheriff with the second writ of execution, the Bank claimed a setoff of $1,697.41 from Garlick’s checking account against the delinquent indebtedness. Victor Werlhof contends that since the Bank had taken no action to set off the account before the writ was presented, the checking account was subject to the writ from the moment of its issuance on January 15, 1988, and thus preceded any right of the Bank to setoff. The Bank, on the other hand, contends that its setoff occurred when the monthly payment was not made — at the moment the debt matured in other words.

Neither contention is correct. The Bank acquired a right to setoff when Garlick’s payment became delinquent, but the Bank must take positive steps to accomplish the setoff. As to a would-be executing judgment creditor, the setoff is accomplished when the Bank takes positive steps to claim its right, by entering evidence of the setoff in its own records, and then possibly giving other written notice of its action. United States v. Citizens and Southern National Bank (5th Cir. 1976), 538 F.2d 1101, 1107, cert. denied 430 U.S. 945 97 S.Ct. 1580, 51 L.Ed.2d 792 (1977); Studley v. Boylston Bank (1913), 229 U.S. 523, 33 S.Ct. 806, 57 L.Ed. 1313. Here the Bank recorded the setoff in its records on the date the writ was presented, executed a response to the sheriff claiming setoff, and later furnished an affidavit stating the facts of its claim of setoff. By those actions, the Bank accomplished its setoff.

The nature of the claim of a judgment creditor against a third party holding property of the judgment debtor provides a further reason why the writ of execution does not take precedence over the right of setoff. A judgment creditor seeking attachment or execution of a judgment debtor’s property in the possession of a third party stands in the shoes of the judgment debtor as far as the rights of the third party are concerned. Thus, it is stated in General Electric Credit Corporation v. Tarr (W.D. Pa. 1978), 457 F.Supp. 935, 938:

“The service of attachment execution has the effect of an equitable assignment of the thing attached. It puts the garnishee in the relation to the attaching creditor which he had sustained to his former creditor. He may make the same defense to the attachment by evidence of set off or of other equities that he might have made if sued by his original creditor.”

Here the Bank could have asserted its right of setoff against any claim of Garlick to his checking account at the time of the presentation of the writ of execution. The judgment creditor, Victor Werlhof Aviation Insurance, had no greater right against the Bank than did Garlick at that time. Therefore, the writ did not take precedence over the right of setoff. We hold the setoff here could be asserted by the Bank at the time it was presented with the execution writ.

2. Was the Bank’s right of setoff affected by the contract for deed for real property which secured Garlick’s debt to the Bank?

Stated another way, we are asked to decide if the Bank must first exhaust its collateral before it can exercise setoff to recover a matured debt secured by the collateral.

In Montana, the “one-action rule” applying to notes secured by mortgages on real property, § 71-1-222, MCA, does not apply to contracts for deed. Glacier Campground v. Wild Rivers, Inc. (1978), 182 Mont. 389, 184 Mont. 543, 597 P.2d 689, 698.

The Bank’s position as a creditor of Garlick appears to result from some “creative financing” prevalent in the early 1980’s. The Bank held a first security position on the real property to secure two promissory notes totaling $392,560.00. The owner of the real property entered into a contract for deed with Garlick as buyer to deliver clear title upon payment by installments of $400,000.00. Later the owner became bankrupt, and the bankruptcy court segregated the contract for deed and assigned it to the Bank, with Garlick to keep up the payments and thus retire the promissory notes. Under the assignment, Bank has first claim to Garlick’s payments, and it was the payment due January 1, 1988 that Garlick had not made. Under the contract for deed, if Garlick remained in breach of the contract for more than 30 days after notice, the Bank could accelerate the debt and “take all means to enforce and collect the same.” Nothing in the law, however, requires the Bank under these circumstances to wait until the contract for deed was canceled before it had a right of setoff on the contract debt. Garlick’s January 1, 1988 payment was overdue, the debt had matured, and the Bank was not limited to or constrained by the contract terms. It could pursue any legal means to collect its debt, or any part of the debt that had matured. J. M. Hamilton Co. v. Battson (1935), 99 Mont. 583, 44 P.9d 1064. We hold under these circumstances that the Bank could resort to setoff even though other remedies lay open under the contract for deed.

3. Does Section 30-4-303, MCA affect Bank’s right of setoff?

Prominent among the conclusions of law adopted by the District Court was its determination that § 30-4-303, MCA “in the light of the facts” gave the writ of execution priority over the setoff rights of the Bank.

Section 30-4-303, MCA, provides:

“(1) Any knowledge, notice or stop order received by, legal process served upon or set-off exercised by a payor bank, whether or not effective under other rules of law to terminate, suspend or modify the bank’s right or duty to pay an item or to charge its customer’s account for the item, comes too late to so terminate, suspend or modify such right or duty if the knowledge, notice, stop order or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the bank has done any of the following:
“(a) accepted or certified the item;
“(b) paid the item in cash;
“(c) settled for the item without reserving a right to revoke the settlement and without having such right under statute, clearinghouse rule or agreement;
“(d) completed the process of posting the item to the indicated account of the drawer, maker or other person to be charged therewith or otherwise has evidenced by examination of such indicated account and by action its decision to pay the item; or
“(e) become accountable for the amount of the item under Subsection (l)(d) of 30-4-213 and 30-4-302 dealing with the payor bank’s responsibility for late return of items.
“(2) Subject to the provisions of Subsection (1) items may be accepted, paid, certified or charged to the indicated account of its customer in any order convenient to the bank.”

It need only be said that the foregoing statute does not apply to the circumstances of this case. If we regard the writ of execution as an “item” (likely not), the Bank in no wise recognized the writ nor acted upon it so as to indicate a reversal of its action to accomplish a setoff. If the District Court felt that acceptance by the Bank of deposits from Garlick after the first attempted levy of a writ of execution gave the Bank notice of the outstanding judgment against Garlick, still, as discussed above, the Bank had not lost its right to accomplish the second setoff as against a judgment creditor. We hold that § 30-4-303, MCA, is not applicable to the circumstances of this case.

Finally, we find no merit in two other contentions raised by Victor Werlhof on this appeal. We hold, as stated above, that the Bank’s imputed knowledge of the outstanding judgment against Garlick did not affect the Bank’s right of setoff in this case. We also hold that under the circumstances here, the Bank did not act against public policy in frustrating the attempted levies of execution, since it acted legally in accomplishing setoff.

The judgment and order of the District Court is reversed, and the prohibition against the Bank transferring or disposing of the funds sought to be executed upon is vacated.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, GULBRANDSON, HUNT, McDONOUGH and WEBER concur.


author: MR. JUSTICE GULBRANDSON

text:
    In re the MATTER OF GARY HENRICHS, Petitioner and Appellant.
    No. 88-512.
    Submitted on Briefs March 9, 1989.
    Decided April 12, 1989.
    771 P.2d 967.
    Terry L, Seiffert, Billings, for petitioner and appellant.
    Marc Racicot, Atty. Gen., Clay Smith, Asst. Atty. Gen., Helena, Harold F. Hanser, Yellowstone Co. Atty., Curtis L. Beldoven, Deputy Yellowstone Co. Atty., Billings, for respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Petitioner appeals the denial of his writ of habeas corpus. The Thirteenth Judicial District Court, Yellowstone County, held that the misspelling of petitioner’s name on the complaint and arrest warrant issued in Idaho did not render the extradition proceedings in Montana defective. Consequently, the court denied Gary Henrichs’ petition for release. We affirm.

Henrichs presents the following issue upon appeal:

Did the District Court err in holding that the petitioner Gary Henrichs had the burden of proving beyond a reasonable doubt that he was not the individual named “Gary Hendricks” in the charging documents accompanying the Governor of Idaho’s request for extradition?

On February 12, 1988, the Governor of Idaho requested the Governor of Montana to extradite “Gary Clark Henrichs a/k/a Gary Henrichs.” This extradition request was accompanied by a requisition application, filed by the prosecuting attorney of Canyon County, Idaho, requesting the apprehension and rendition of Gary Henrichs for his crime of grand theft in Idaho. A copy of the criminal complaint charging “Gary Hendricks” with grand theft, together with a copy of the arrest warrant issued under the same name and describing the suspect as a 5T1” tall, 220 pound male, born June 14, 1941, also accompanied the extradition request. In response, the Governor of Montana on February 25, 1988 issued a warrant for the arrest of “Gary Clark Henrichs a/k/a Gary Henrichs.”

On March 8, 1988, Henrichs filed a petition for writ of habeas corpus. He alleged that his arrest and detention in Montana was unlawful because the charging documents accompanying the extradition request named “Gary Hendricks” rather than “Gary Henrichs.” Henrichs contended the State of Montana failed to meet its burden of proof which required the State to show that he was the same man as the “Hendricks” charged.

On August 16, 1988, the District Court denied Henrichs’ writ. The court held that the complaint and arrest warrant had inadvertently misspelled Henrichs’ name as “Hendricks.” Such a technical error did not affect the presumption, arising upon issuance of the Montana Governor’s warrant, that the accused and the wanted fugitive were the same. Because of this presumption, petitioner had the burden of establishing beyond a reasonable doubt that he was not the “Gary Hendricks” charged in the criminal complaint issued in Idaho which gave rise to the extradition request. The court held that Henrichs failed to meet this burden, and thus it denied his petition for release. Henrichs appealed this denial of his petition.

This Court has previously held that when a foreign state requests the extradition of a fugitive, the Governor of the asylum state has the duty of determining whether the person demanded has been substantially charged with a crime and whether the person is indeed a fugitive. State ex rel. Hart v. District Court (1971), 157 Mont. 287, 291, 485 P.2d 698, 701, citing from Bruzaud v. Matthews (D.C. Cir. 1953), 207 F.2d 25; see also § 46-30-211(2), MCA. A determination of whether the person demanded has been substantially charged with a crime only requires inquiry into:

“. . . (a) whether the extradition documents on their face are in order; (b) whether the petitioner has been charged with a crime in the demanding state; [and] (c) whether the petitioner is the person named in the request for extradition . . .

Michigan v. Doran (1978), 439 U.S. 282, 289, 99 S.Ct. 530, 535, 58 L.Ed.2d 521, 527; see also In re Petition of Blackburn (1985), 215 Mont. 440, 701 P.2d 715.

Petitioner does not dispute that he is the person named in the Idaho Governor’s extradition request. Henrichs does contend, however, that he was not charged with a crime in Idaho. He argues that the extradition documents, accompanied by the complaint and arrest warrant charging a “Gary Hendricks” with grand theft, were not in order on their face.

Petitioner’s contentions are without merit. This Court has previously held that a person may not be released on a writ of habeas corpus because of a technical defect if the defect does not substantially affect his rights. Petition of Eldiwitw (1969), 153 Mont. 468, 471, 457 P.2d 909, 910. The issuance of the criminal complaint and arrest warrant for “Gary Hendricks,” rather than for “Gary Henrichs,” appears to be just such a technical defect. The arrest warrant which accompanied the extradition request described Gary Hendricks as a 5’11” tall, 220 pound male, born June 14, 1941. This description matches the description on the driver’s license of Gary Henrichs. The correct description of Henrichs in the arrest warrant indicates the petitioner was substantially charged with a crime in Idaho.

The doctrine of idem sonans further supports the District Court’s determination that the petitioner was substantially charged with a crime in Idaho. According to this doctrine, two names spelled differently will be regarded as the same if they “sound alike in their pronunciation.” Dilworth v. Leach (1973), 183 Colo. 206, 515 P.2d 1130, 1131. In Dilworth, the petitioner, O’Dell Dilworth, was named as “Odell Dillworth” in documents (other than the charging documents) accompanying the demanding governor’s extradition request. The Colorado court held that omission of the apostrophe and addition of an “1” in the surname was not sufficient to mislead the petitioner. Id.

The facts in the present case differ slightly from those in Dilworth. The extradition request by Idaho correctly named “Henrichs,” while the accompanying charging documents named “Hendricks.” The applicability of the doctrine, however, does not hinge on where the misspelling occurred. Rather, it depends on the extent of the misspelling. See, e.g., Edmonds v. Andrews (Colo. 1985), 696 P.2d 325 (upholding the extradition of Wayne Edmonds, Jr. even though the extradition papers requested “Wayne Edmunds”); see generally State v. Davila (Fla.Dist.Ct.App. 1985), 481 So.2d 486 (upholding the extradition of Enrique Davila even though the extradition papers requested “Enrique Davila Torres a/k/a “Kiki,” this extradition request was accompanied by a photograph of the requested fugitive). Courts will not apply the doctrine when the extradition papers cite an entirely different name than that name charged without any proof that the two named persons are in fact the same individual. See, e.g., People v. Cheek (1982), 93 Ill.2d 82, 66 Ill.Dec. 316, 442 N.E.2d 877 (holding the extradition of Michael Asbell was invalid because no proof was offered to show that he and the charged “Frederick Leroy Cheek, Jr.” were the same individual); Lee Gim Bor v. Ferrari (1st Cir. 1932), 55 F.2d 86 (invalidating the extradition of Lee Gim Bor because no proof was offered to show that he and the indicted “John Doe” were one and the same).

We hold as did the Colorado court in Dilworth, that the extent of the discrepancy between the named Idaho fugitive and the accused petitioner are minimal. The charging documents simply added a “d” and substituted a “k” for an “h”. The District Court thus did not abuse its discretion when it applied the doctrine of idem sonans, determined under this doctrine that petitioner had been substantially charged with a crime in Idaho, and upheld the validity of the Montana Governor’s warrant.

Once the Governor of Montana has issued a warrant for the arrest and extradition of an accused, a presumption arises that the accused is the demanded fugitive. This presumption is “sufficient to justify his arrest, detention and delivery to the demanding state.” State ex rel. Hart, 485 P.2d at 702, citing Soloman v. Warden (1969), 256 Md. 297, 260 A. 2d 68. The burden of proof then shifts to the accused to prove beyond a reasonable doubt that he is not the fugitive charged in the demanding state. Henrichs failed to introduce any evidence showing he was not the “Hendricks” charged in Idaho with grand theft. We therefore hold that the District Court was correct in denying Henrichs’ writ of habeas corpus.

Affirmed.

MR. JUSTICES HARRISON, HUNT, McDONOUGH and WEBER concur.


author: MR. JUSTICE HARRISON

text:
    In re the MARRIAGE OF GWYN ANN ALLEN, Petitioner and Appellant, and DONALD GARY ALLEN, Respondent and Respondent.
    No. 88-556.
    Submitted on Briefs Feb. 16, 1989.
    Decided April 12, 1989.
    771 P.2d 578.

      David Allen Dick, Wolf Point, Denise Peterson, Jackson, Murdo, Grant & Larsen, P.C., Helena, for petitioner and appellant.
    Robert Hurly, Glasgow, for respondent and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

Petitioner Gwyn Allen (hereinafter referred to as the Wife) appeals from an award of joint custody of the parties’ three minor children. In April, 1988, the District Court granted physical custody of the two older children to respondent Donald (hereinafter referred to as the Husband) until August, 1988, at which time the court would reexamine physical custody. At the later hearing, the District Court made another temporary determination of physical custody until August, 1989, at which time a hearing is set to re-examine and determine physical custody for the following year. We affirm the award of joint custody and find under these circumstances it was not an abuse of discretion to maintain jurisdiction to determine physical custody.

This appeal arises from a particularly acrimonious custody battle. The parties were unfriendly and uncooperative throughout the proceeding, especially regarding custody and visitation. Much of the testimony involved the Wife’s allegations that the Husband had an indiscreet relationship with his live-in girl friend. At the conclusion of the original hearing on January 26, 1988, Judge Langen concluded the parties would have joint custody.

“I find that . . . the presumption prevails and that I must award joint custody. I base that on the fact that when I consider the factors set forth in 40-4-212,1 find that in my finding, after listening to the testimony here for these many hours, that there is no testimony which would come within the provisions of 1 through 6, which would allow me to find other than that the presumption prevails.”

Judge Langen found ample evidence the Wife had obstructed the Husband’s attempts to visit the children, however, he requested the parties to work out a visitation schedule whereby the Wife would be the primary custodian during the ten school months and the Husband would have the two older children for two months in the summer, plus other liberal visitation on weekends and holidays. Judge Langen concluded:

“However, if she [Wife] continues to hamper visitation on the part of the father, or tends to interfere with his right to have prolonged visitation or custody, I’ll change the decree, and I’ll give him the custody, and you can be the noncustodial parent trying to get visitation rights.”

On February 1, 1988, the Husband moved the District Court for a new trial, to amend findings of fact, or to reopen the case for presentation of further evidence. The motion alleged that the Wife was continuing to hamper the Husband’s visitation with the children and was not making a cooperative effort to set a visitation schedule. The motion requested an immediate order granting physical custody of the two older children to the Husband.

On February 5, 1988, Judge Langen heard testimony from both parties regarding what transpired following the initial hearing. He then ordered the parties to remove to a conference room and attempt to reach an agreement. The parties evidently reached some agreement but the Wife refused at the last moment to commit to its terms. Judge Langen then stated that he would settle the dispute since the parties could not. Before the close of the hearing, the Wife’s attorney advised the Judge that under Montana law, joint custody does not require equal physical custody.

On April 1, 1988, Judge Langen entered his findings of fact, conclusions of law, and decree and judgment. The marriage was ordered dissolved, the marital property was divided, child support was determined, and the parties were awarded joint custody of the children. The court determined that the Husband should have the two older children for the months of April, May, July and August, 1988. An August 19, 1988, hearing was scheduled in the findings, at which time the Judge was to determine custody for the ensuing months. The Judge strongly recommended the parties prepare a written plan of physical custody and visitation which would obviate the need for the August hearing.

Prior to the August hearing, the Wife moved for the recusal of Judge Langen on the allegation that he participated in the negotiations between the parties during the February 5, 1988, hearing. Judge Langen complied with the motion, but noted that his recollection of the facts differed considerably from those alleged in the motion. Judge Sorte then accepted jurisdiction of the case. The August hearing was vacated and rescheduled for September 9, 1988.

During the September hearing, the Wife realleged facts of the Husband’s unfitness as a parent which were made during the first hearing. The Wife also made numerous additional allegations, not mentioned during the first hearing, which ranged from marital rape to bad driving habits. Judge Sorte was not sure how this testimony related to a determination of future physical custody, but he allowed the Wife to so testify. After hearing the testimony and considering post-hearing briefs from both parties, Judge Sorte entered his findings of fact, conclusions of law and supplemental judgment and decree regarding custody on September 26, 1988. The court concluded that custody of the two older children should remain with the Husband through the 1988-89 school year. The Judge scheduled an August 15, 1989, hearing to determine custody of the children for the ensuing school year, but gave the parties an opportunity to make their own custody arrangements. This appeal followed.

The Wife raises the following issues for our review:

1. Was it an abuse of discretion to order a custody arrangement different from that which was established in the temporary custody order without making a specific finding of changed circumstances?

2. Did the District Court ignore all “best interest” factors except visitation?

3. Did the District Court order equal physical custody because it erroneously concluded the law required such an award?

4. Is this appeal limited to the issues of the supplemental order of September 23, 1988, or may we consider issues determined by the order of April 1, 1988?

5. Was it error for either District Court Judge to make custody arrangements without establishing a final physical custody plan?

Issue No. 1.

Was it an abuse of discretion to order a custody arrangement different from that which was established in the temporary custody order without making a specific finding of changed circumstances?

The Wife filed her petition for dissolution in September, 1985. She was granted temporary custody upon her ex parte motion on the same day. At a subsequent hearing, the parties stipulated that the Wife would have temporary custody but the Husband would be allowed certain visitation rights. Since this case was not heard until February, 1988, the Wife had temporary custody for nearly two and one-half years from the date she filed her petition for dissolution.

The Wife argues the grant of physical custody of the two older children to the Husband was error because there was no finding of changed circumstances to support the “modification” from the temporary custody order. The Wife reads the recent case of In re the Custody of Andre (Mont. 1988), [234 Mont. 80,] 761 P.2d 809, 45 St.Rep. 1745, as requiring a court to make a finding of changed circumstances before any final custody order can be made which alters the temporary custody order. We disagree with that interpretation.

The facts in Andre were substantially different from those of this case. The parties there were not acting under a temporary custody order, but had agreed to a custody arrangement between themselves, without judicial supervision. The de facto custody arrangement had continued for nine years. Here, the children were initially awarded to the Wife upon her ex parte motion. At a later hearing, through stipulation by both parties, the Wife was temporarily awarded custody pending resolution of the action. While the temporary order did not specifically state that the rights of the non-custodial parent would not be prejudiced, as in In re Marriage of Beitz (1984), 211 Mont. 111, 683 P.2d 485, we conclude that, under these facts, the temporary order did not require a showing of changed circumstances before the final custody order could alter the terms of the temporary custody order.

As expressed in § 40-4-213, MCA, the best interest test is the standard used by the court to award temporary custody. However, the court, upon motion for temporary custody, is only determining the best interest of the child with regard to temporary custody pending resolution of the action.

“Temporary child custody is merely an initial determination made to ascertain which of [the] parents will keep children until such time as full hearing on custody can be made.”

27C C.J.S. Divorce, § 642, footnote 30. While district courts must consider the stability of the child’s home when it determines custody, it would nevertheless be inherently unfair to require the temporary non-custodial parent to make a higher threshold showing of changed circumstances before a custody order may deviate from the temporary order.

According to the Wife’s reasoning, temporary custody would require a non-custodial parent who seeks final custody to bear a heavier burden to show changed circumstances under § 40-4-219, MCA. This interpretation goes against the policy of this temporary custody statute. The commissioner’s note to § 40-4-213, MCA, states:

“[This action] encourages trial courts to issue temporary custody orders without formal hearing whenever possible. Since the hearing itself may be a traumatic event for both parents (and therefore for their children, indirectly), the trial court is authorized to make temporary orders on the basis of affidavits alone unless one of the parties files formal objection to that procedure. In most cases, it is expected that trial judges will award temporary custody to the existing custodian so as to minimize disruption for the child.”

If the Wife’s interpretation were correct, parents would be forced to vigorously litigate temporary custody in an attempt to avoid the changed circumstances burden. Such a result would be contrary to the purpose of the temporary custody statute. We conclude that under the facts of this case, the District Court was not required to make a finding of changed circumstances before granting physical custody of the two older children to the Husband.

Issue No. 2.

Did the District Court ignore all “best interest” factors except visitation?

The Wife argues that both Judge Langen and Judge Sorte abused their discretion by not looking to the best interest of the children in awarding the parties joint custody. We disagree. There is no evidence that either Judge ignored the best interest factors. In fact, the transcript illustrates Judge Langen examined the facts under the statutory standards, and he specifically examined §§ 40-4-212, -222, and -223, MCA. Judge Langen spoke directly to the allegation of physical abuse of the Wife, the wishes of the parents, the wishes of the children, and the interaction and interrelationship of the parents with the children.

Judge Sorte also heard all of this evidence, and much more. He too agreed that the statutory presumption prevailed. There is no evidence that the best interest factors were ignored. The Wife has shown no clear abuse of discretion by either District Judge.

Issue No. 3.

Did the District Court order equal physical custody because it erroneously concluded the law required such an award?

This issue has no merit. There is no evidence that Judge Langen concluded that joint custody requires equal physical custody. In fact, Judge Langen’s first choice was to award an unequal division of physical custody. During the February 26, 1988 hearing, Judge Langen originally requested the parties to work out an arrangement whereby the Wife would have the children for ten months during the school year and the Husband would have the two older children for two months in the summer. Additionally, counsel for the Wife specifically advised Judge Langen at the close of the February 5, 1988 hearing, prior to the entry of the judgment and decree, that joint custody does not require equal physical custody. We find no abuse of discretion.

Issue No. 4.

Is this appeal limited to the issues of the supplemental order of September 23, 1988, or may we.consider issues determined by the order of April 1, 1988?

The Wife argues that since the original order called for an August hearing to re-examine the custody arrangements, she could not timely appeal the original judgment and decree before Judge Sorte could hear the issues, and therefore, she should be able to challenge the discretion of Judge Langen with respect to the original order. Because we have decided to address the Wife’s issues with respect to the original order above, we need not discuss this issue further.

Issue No. 5.

Was it error for either District Court Judge to make custody arrangements without establishing a final physical custody plan?

Section 40-4-104(1), MCA, provides in part:

“(1) The district court shall enter a decree of dissolution of marriage if:
“(d) to the extent it has jurisdiction to do so, the court has considered, approved, or made provision for child custody, the support of any child entitled to support, the maintenance of either spouse, and the disposition of property.”

Prior to amendment of this section in 1985, the word “property” was followed by the phrase “or provide for a separate, later hearing to complete these matters.” Recently, in In re Marriage of Ensign (Mont. 1987), [227 Mont. 357,] 739 P.2d 479, 44 St.Rep. 1146, we held that the deletion of this language was an attempt by the legislature to prevent prolonged custody, support and maintenance battles. On this reasoning, the Wife argues it was error for the District Court to set later hearing dates to re-examine and determine physical custody for the future periods of time. We disagree.

Judge Langen determined in his April 1,1988 judgment and decree that the parties would have joint custody. He also established support and divided the marital property. It was his decision to determine future physical custody after examining how the custody arrangement developed through the summer months. Judge Langen also wanted the parties to “take advantage of the experiences of the physical custody arrangements imposed by the Court in this Decree” and reach their own agreement regarding physical custody.

We find the court did not err when it retained jurisdiction to reexamine the physical custody arrangements when it was faced with such a bitter and hostile custody battle. But even if the Wife’s assertions on this issue were correct, we do not understand how this position could further her case. She now has an opportunity to reach a custody agreement with her former husband which would better serve the best interest of the children. As we stated in Andre, 761 P.2d at 812:

“Although the end of a relationship is a time of great trauma, parents generally love their children and have the greatest interest in determining which of them can best care and provide for the child ... In addition, parents are in a much better position to determine custody arrangements ... It would be unrealistic to assume that the welfare of a child can better be determined by a court after a short period of self-interested testimony.”

Wife has shown no clear abuse of discretion by either District Court Judge. The judgment and decree and the supplemental judgment and decree are affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES WEBER, McDONOUGH and HUNT concur.


author: MR. CHIEF JUSTICE TURNAGE

text:
    UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland corporation, Plaintiff and Appellant, v. RICHARD CROMWELL, Defendant and Respondent.
    No. 88-566.
    Submitted on Briefs March 23, 1989.
    Decided April 13, 1989.
    Rehearing Denied May 4, 1989.
    771 P.2d 970.
    William P. Driscoll, Gough, Shanahan, Johnson and Waterman, Helena, for plaintiff and appellant.
    Jerrold L. Nye, Nye and Meyer, Billings, for defendant and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Plaintiff, United States Fidelity and Guaranty Company (USF&G), is a bond surety appealing a judgment by the District Court, Fifteenth Judicial District, Daniels County, which denied recovery from defendant Cromwell for monies paid out by USF&G on a performance bond. The District Court sitting without a jury found that the plaintiff had not carried its burden of proof in proving that a signed and duly executed contract existed between the parties which could be enforced against Cromwell. USF&G appeals.

The sole issue on appeal is whether the District Court’s findings and conclusions are clearly erroneous because USF&G argues that the record contains substantial credible evidence requiring recovery on the bond for the plaintiff. We affirm the District Court.

The standard of review for a judge sitting without a jury pursuant to Rule 52(a), M.R.Civ.P., is that the court’s findings shall not be set side unless clearly erroneous. Thus, when the District Court’s findings are based on substantial credible evidence, they are not clearly erroneous. Parker v. Elder (Mont. 1988), [233 Mont. 75,] 758 P.2d 292, 45 St.Rep. 1305.

Defendant Richard Cromwell and Terry Forchak were farmers in Scobey, Montana. In 1983 they leased farm land owned by Howard Smith, Randy G. Smith and Debra K. Hersel (lessors). Cromwell and Forchak both signed the farm lease dated February 3, 1983; however, each maintained separate farming operations and were not business partners. The existence and the terms of the farm lease are not disputed.

The annual rent payment under the lease was $10,543 per lessee, for a yearly total of $21,086. On June 13, 1984, Cromwell and Forchak entered into an addendum to the farm lease which required both Cromwell and Forchak to furnish the lessors “a performance bond in the amount of the annual lease payment . . .”

On May 1, 1984, Cromwell and Forchak executed an “Application for License and Miscellaneous Bonds” with USF&G. The application was signed by both parties and offered into evidence at trial. The purpose of the application was to obtain the issuance of a bond from USF&G as surety with Cromwell/Forchak as principals to the lessors as obligees, in the amount of $10,543 which would assure the annual payments under the farm lease.

The terms of the application stated that Cromwell and Forchak would:

“indemnify [USF&G] against all losses, damages, claims, suits, costs, and expenses whatever, including court costs and counsel fees at law or in equity or liability therefor which [USF&G] may sustain or incur by reason of: executing or procuring said bond, or making an investigation on account of same, or evidence thereof from same, or procuring its release or evidence thereof from same, or defending, prosecuting or settling any claim, suit or other proceedings which may be brought or threatened by or against any of the undersigned or [USF&G] in connection with the same or any other agreements herein contained.”

On June 25, 1984, USF&G claimed it issued bond number 28-0130-10341-84-6 with USF&G as surety and allegedly with Cromwell/ Forchak as principals; lessors were named as obligees for the amount of $10,543. On August 29, 1984, Cromwell individually executed an “Application for License and Miscellaneous Bonds” (rider) from USF&G to increase the previous bond from $10,543 to $21,086 so that the entire annual amount due under the farm lease would be protected. Cromwell identified his signature on the second application offered into evidence at trial.

On September 10, 1984, USF&G issued the rider to the previous bond increasing the total amount to $21,086. The remaining terms and parties were identical to the original bond.

Cromwell paid his one-half of the rent in 1985 in the amount of $10,543. Forchak did not pay the remaining rent. He subsequently declared bankruptcy and was discharged from this obligation leaving an unpaid balance of $10,543 due the lessors.

The lessors notified USF&G of the default and made a claim against the bond in the fall of 1985 in the amount of $10,543. Williams testified on behalf of USF&G that he notified Cromwell and Forchak of the claim. After receiving no satisfaction from either of them, Williams paid the claim in January 1986 in the amount of $10,543 plus interest as demanded by the lessors/bond obligees.

USF&G filed suit against Cromwell and Forchak to recover on the bond for USF&G’s monies paid out and the cost of their lawsuit. Forchak was dismissed later from the suit because his debt was discharged under the bankruptcy proceeding. USF&G proceeded against Cromwell individually as a principal on the bond. The case went to trial on June 10, 1988. The trial court made several findings leading to the ultimate conclusion that USF&G did not prove that an indemnification contract existed between USF&G and Cromwell because the best evidence of the contract (the contract/bond itself) had not been admitted into evidence and all of the oral testimony offered to prove the contents of the contract was disputed. It is that conclusion and the findings leading up to it which USF&G cites as error by the District Court.

We note here at the outset that this is not a question of suretyship law nor contract interpretation. The dispositive issue is whether the plaintiff followed the rules of evidence to prove that an indemnification contract existed such that the contract could be enforced against the defendant and the plaintiff would prevail. The District Court found that the plaintiff did not.

Section 28-2-903, MCA, provides that a promise to answer for the debt, default or miscarriage of another must be in writing. The district judge concluded in Conclusion of Law #1 that no such written document was introduced in evidence in this case. We agree.

Best Evidence

At trial USF&G failed to introduce the original bond or the original rider. Instead, Williams, as custodian of the records for USF&G, introduced a sample form of the bond and the rider with the appropriate information typed in to show the court what obligations the bond purported to impose. Williams testified that the originals were likely in the hands of the lessors. However, USF&G offered no certainty as to where the originals were and no reason as to why they were not produced. That is not acceptable under the Rules of Evidence.

Rule 1004, M.R.Evid., states that the original writing is not required if it is

(1) lost or destroyed;

(2) not obtainable by judicial process;

(3) in the hands of the opponent; or

(4) if it relates only to a collateral matter.

The District Court was not allowed to make a finding under this rule as to whether the original was necessary because the plaintiff offered no reason for its absence.

Rule 1007, M.R.Evid., states that no accounting for the nonproduction of the original will be required if the contents of the writing (1) may be proved by testimony or (2) by written admissions of the party against whom it is offered. However, this rule is inapplicable to these facts because USF&G tried both approaches and failed.

During discovery USF&G requested Cromwell to admit the authenticity of a copy of the bond. Cromwell declined, stating that he had no actual knowledge that a bond had been issued and did not recall ever signing a bond. During trial Cromwell testified that while he believed a bond may have been issued, he did not know if he was the named principal and had no recall of signing a bond charging him with its obligations. Cromwell stated that he only signed an application filled out by an insurance agent in order to fulfill his obligations under the farm lease.

When Cromwell declined to admit to the authenticity of a copy of the bond during discovery, it became incumbent upon USF&G at trial to come forth and produce the bond, or put in evidence the reason why the original bond was not produced and why secondary evidence should be allowed to prove that the contract existed, Rule 1004, M.R.Evid. Those failures by USF&G were fatal to its case.

The District Court had no evidence from which it could make a finding that Cromwell signed the bond, thus duly executing the contract, or that he was named as a co-principal on the bond in order to enforce it against him. Moreover, Williams testified that he did not know for certain to whom bond number 28-0130-10341-84-6 was paid. He brought no documentation or business records with him to trial to refresh his memory of the transaction, his recollection was only that $10,543 plus “a couple hundred dollars” interest was paid out on the bond to someone.

USF&G argues that a conclusion that the contract existed is supported by the record because Cromwell signed an application to procure a bond and because on cross-examination Cromwell stated he believed a bond had been issued. Likewise, during discovery, Cromwell admitted that he believed a bond had been issued, although he had not signed one and had no record of one. From there, USF&G wishes us to fill in the blank spaces in its case because it, in fact, issued a bond and paid a claim against it to someone. But this Court cannot do that. The findings made by the court were not clearly erroneous in light of the evidence.

Because the entire case turns on existence of the contract, we decline discussion on plaintiff’s other citations of error by the District Court. The District Court was correct in ruling that the best evidence of a contract had not been received into evidence and that the existence of a contract enforceable against Cromwell had not been proved.

Judgment affirmed.

MR. JUSTICES HARRISON, SHEEHY, HUNT, McDONOUGH, GULBRANDSON and WEBER concur.