author: JUSTICE HUNT

text:
    RONALD W. JOHNSON, d/b/a JOHNSON REALTY, Plaintiff and Respondent, v. JERRY NYHART, CLARAJO NYHART, and NYHART RANCHES, INC., Defendants and Appellants.
    No. 94-308.
    Submitted on Briefs November 17, 1994.
    Decided February 8, 1995.
    52 St.Rep. 37.
    269 Mont. 379.
    889 P.2d 1170.

      For Appellant: J. Robert Planalp, Landoe, Brown, Planalp & Braaksma, Bozeman.
    For Respondent: W. Cecil Jones and Calvin J. Erb, Attorneys at Law, Dillon.
   JUSTICE HUNT

delivered the Opinion of the Court.

Respondent Ronald Johnson, doing business as Johnson Realty, brought suit in the Fifth Judicial District Court, Beaverhead County, to collect a real estate broker’s commission from sellers. Johnson moved for summary judgment. The District Court granted the motion and entered judgment in favor of Johnson. Appellants Jerry Nyhart and Nyhart Ranches, Inc., appeal. We affirm in part and vacate the judgment as it pertains to Clarajo Nyhart.

We frame the issues on appeal as follows:

1. Did the District Court err in granting summary judgment?

2. Did the District Court err by awarding prejudgment interest to Johnson?

3. Did the District Court err by entering judgment against Clarajo Nyhart?

Ronald Johnson is a licensed real estate broker doing business as Johnson Realty in Dillon, Montana. In 1984, Jerry and Clarajo Nyhart owned and ranched land in Beaverhead and Deer Lodge Counties. In the spring of 1984, the Nyharts wanted to sell approximately 2000 acres of their land located in the Big Hole Valley. On May 29, 1984, Jerry and an agent of Johnson Realty executed a standard listing contract for the land, listing the selling price at $800,000, and stating that the terms of the sale would “be negotiated at time of sale.” The agreement provided that the listing contract would expire on May 29,1985. The listing contract also provided:

FOR VALUE RECEIVED, you and your agents are employed to finda buyer ready and willing to purchase or exchange the property described above at the price and terms noted or at such other price and terms as I/we accept. ... In the event a written agreement is executed for the sale or exchange of said property, I/we agree to pay you in cash a commission equal to 6% of the selling price for your services in securing or procuring a purchaser.

Johnson obtained an offer to purchase the property from Keith Swenson. Johnson presented Swenson’s offer to the Nyharts, and on June 29,1984, Swenson, Jerry, and Clarajo signed an earnest money receipt and agreement to sell and purchase. The earnest money receipt and agreement provided in part:

The TOTAL PURCHASE PRICE is Seven hundred thousand dollars ($700,000) to be paid by Purchaser as follows:
Total of $70,000 at closing including $10,000 earnest money paid this date. Balance to be paid in escrow. Purchaser to have the right of unlimited prepayment on escrow and Travelers Real Estate loan. Seller will then receive $50,000 on January 1,1985. Balance to be agreed upon at closing.
The date of closing is on or before July 30, 1984 or 30 days beyond this date shall be allowed for completion of financing.

The agreement also provided:

The Seller shall at his expense, furnish Purchaser an abstract of title to the above described property, certified to date, or a title insurance policy as evidenced by a title commitment in an amount equal to the purchase price, insuring title thereto vested in Purchaser, free and clear of all liens and encumbrances except Zoning ordinances, building and use restrictions, reservations in federal patents, beneficial utility easements of record, and mortgage to Travelers Insurance in amount of $550,000.

The scheduled closing did not occur on July 30. On November 19, 1984, pursuant to the agreement for sale and purchase, Leonard Pelullo, Swenson’s assignee in interest, executed two promissory notes payable to the Nyharts on February 1, 1985, and July 1,1994, in the amounts of $80,000 and $100,000, respectively. To secure the notes, Pelullo granted the Nyharts a mortgage on the 2000 acres. The promissory notes and the mortgage were subsequently recorded in Beaverhead County.

On December 19, 1984, the Nyharts’ attorney, Max Hansen, sent a letter to the general manager of the Boise, Idaho, branch of Travelers Insurance Company. Hansen’s letter stated in pertinent part:

It was always our understanding that at the time of closing this transaction [between the Nyharts and Pelullo], the [mortgage] assumption papers would be signed by Mr. Pelullo and the only further obligation Mr. and Mrs. Nyhart would have to Travelers would be to make the payment on the remaining balance....
Since the assumption papers are not available at this time, my clients are faced with a rather unfortunate chain of circumstances. If they do not close the transaction, default interest is going to continue to accrue on past due payments owing to Travelers. However, if they do close out the transaction and make the 1/1/84 payment together with default interest, Mr. Pelullo will be placed in possession of the property while we are tying up the loose ends of getting the assumption papers signed by Mr. Pelullo. I am rather uncomfortable with that situation to say the least. We have determined that my clients don’t have any real choice in the matter and are going to close the transaction with an eye to getting the assumption papers signed by Mr. Pelullo just as soon as possible and hopefully having the whole matter resolved by February 1,1985.

The Nyharts’ attorney prepared a deed transferring title of the 2000 acres to Pelullo, and on December 21, the Nyharts signed the deed and delivered it to Pelullo. The deed was subsequently recorded in Beaverhead County. In addition to the two promissory notes, Pelullo paid the Nyharts $70,000. The remaining balance of the pinchase price consisted of a mortgage held by Travelers in the amount of $550,000. Jerry claims that he and his attorney “were under the belief that Travelers Insurance Company would allow an assumption of the real estate mortgage.” Following the transfer of title, however, difficulties arose between the Nyharts, Pelullo, and Travelers regarding Pelullo’s assumption of the $550,000 mortgage.

On December 21, the Nyharts paid Johnson a commission of $11,967.27 out of the $70,000 they received from Pelullo. The Nyharts’ attorney also prepared, and the Nyharts signed, a promissory note for the balance of the commission, payable to Johnson on or before February 1,1985, in the amount of $30,032.73. The total amount paid and promised to Johnson equalled $42,000, or exactly six percent of the $700,000 selling price. Johnson was not present at the December 21 transaction, nor was he represented by counsel at that meeting. The note was not signed by Johnson, although Jerry claims that Johnson orally agreed to the terms of the note.

Following the transfer of title, Travelers refused to allow Pelullo to assume the $550,000 mortgage and brought suit to foreclose. Additionally, Pelullo failed to make payment on the promissory note due February 1, 1985. Two separate sets of litigation followed, the first between the Nyharts and Pelullo, and the second between Travelers, the Nyharts, Pelullo, and Pintler Creek Range, Inc. Those cases were filed in the Fifth Judicial District Court, Beaverhead County, and the Third Judicial District Court, Deer Lodge County, respectively.

In April 1987, the Nyharts and Pelullo settled their litigation against one another. They entered into a written agreement mutually releasing and discharging each other from

all manner of action and actions, cause or causes of action, suits, debts, dues, sums of money, notes, mortgages, accounts, reckonings, covenants, contracts, controversies, promises, damages, judgments, claims and demands whatsoever, in law or in equity... regarding either the Beaverhead litigation, or the Deer Lodge litigation, or the subject matter of anything set forth in said lawsuits.

The agreement was also signed by David Hellhake, president of Pintler Creek Range, Inc. According to the agreement, Pintler Creek Range, Inc., was the current owner of the “property previously deeded to PELULLO by the NYHARTS.” The agreement provided that the Nyharts would receive the use of and income generated by the 2000 acres for a period of five years and that, during the five years, Pelullo would pay the property taxes. Pelullo also agreed to pay up to $1000 to improve the cabin located on the land. A third cause of action was instituted by the Nyharts and Pelullo against Travelers. The District Court in this case presided over and took judicial notice of the proceedings in that case.

On December 11,1987, the Second Judicial District Court, Silver Bow County, issued a decree dissolving Jerry and Clarajo’s marriage. Pursuant to the properly settlement agreement in the dissolution proceedings, Jerry released Clarajo from liability for all notes, obligations, and debts which were presently owed or incurred by Jerry “including, but not limited to, property taxes, mortgages, and the debt to Travelers Insurance Company.”

Our standard of review on a grant or denial of summary judgment is identical to that of the district court. Klawitter v. Dettmann (1994), [268 Mont. 275], 886 P.2d 416, 419, Summary judgment is proper only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Klawitter, 886 P.2d at 419; Spain-Morrow Ranch, Inc. v. West (1994), 264 Mont. 441, 444, 872 P.2d 330, 331-32.

ISSUE 1

Did the District Court err in granting summary judgment?

Jerry Nyhart signed a standard listing contract with Johnson Realty. The contract provides in pertinent part:

FOR VALUE RECEIVED, you and your agents are employed to finda buyer ready and willing to purchase or exchange the property described above at the price and terms noted or at such other price and terms as I/we accept. ... In the event a written agreement is executed for the sale or exchange of said property, I/we agree to pay you in cash a commission equal to 6% of the selling price for your services in securing or procuring a purchaser.

In its order granting summary judgment, the District Court, with regard to this provision, concluded that:

The language in the agreement is clear and unambiguous. There were no qualifying conditions. Johnson was entitled to a broker’s commission when he found a buyer, ready and willing to purchase.

Jerry provides three arguments in support of his assertion that the District Court improperly granted summary judgment: (1) The District Court improperly construed the standard fisting contract; (2) the buy/sell agreement was a conditional contract and binding only upon the assumption of the mortgage; and (3) material facts existed that precluded summary judgment.

The crux of Jerry’s first argument is that the District Court incorrectly concluded that Johnson was entitled to a broker’s commission when he found a buyer ready and willing to purchase the land. According to Jerry, the standard listing contract required Johnson “to sell, make or effect a sale” and not “to merely find a purchaser.” In support of his argument, Jerry points to the word “executed” as it appears in the paragraph regarding the commission. Citing Black’s Law Dictionary and the Random House Dictionary of the English Language, he argues that “[t]he word ‘executed’ clearly means completed or carried into full effect” and that the agreement provides for the payment of a commission only “when the transaction is completed or carried into full effect.”

Jerry’s first argument fails for two reasons. First, the standard fisting contract in this case did not require the transaction to be completed or carried into full effect. Secondly, even if the contract did require the execution of a sale, the District Court correctly pointed out that a sale was, in fact, executed.

In Sayegusa v. Rogers (1993), 256 Mont. 269, 271, 846 P.2d 1005, 1006, we stated:

It is well-established law in Montana that a broker’s right to recover a commission is conditioned on the broker’s ability to accomplish that which he or she undertook to do in the contract of employment.

See Diehl and Associates, Inc. v. Houtchens (1977), 173 Mont. 372, 377, 567 P.2d 930, 933; First Trust Co. of Montana v. McKenna (1980), 188 Mont. 534, 541, 614 P.2d 1027, 1031; Ehly v. Cady (1984), 212 Mont. 82, 101, 687 P.2d 687, 697.

The contract provision at issue in Sayegusa provided:

FOR VALUE RECEIVED, you and your agents are employed to find a buyer ready and willing to purchase or exchange the property described above at the price and terms noted or at such other price and terms as I/we accept.... In the event I/we sell or exchange the property, or a written agreement is executed for the sale or exchange of the property during the term of this agreement, I/we agree to pay you in cash a commission equal to 10% of the selling price.

The Sayegusa contract provision is virtually identical to the contract provision at issue in the instant case. In Sayegusa, we affirmed the district court’s conclusion that the language of the listing contract was clear and unambiguous that the broker was entitled to a commission when he found a ready and willing buyer. Likewise, we agree with the District Court in the instant case that the listing contract employed Johnson simply to find a buyer ready and willing to purchase the Nyhart property. Pursuant to the clear and unambiguous language of the listing contract, Johnson became entitled to his commission when Pelullo, through Pelullo’s agent, entered into a written contract to purchase the land.

Moreover, the record reveals that Johnson not only found a person who was ready and willing to purchase the land; the record reveals that Johnson located a person who, in fact, purchased the land. As the Nyharts’ attorney wrote on December 19,1984:

We have determined that my clients don’t have any real choice in the matter and are going to close the transaction with an eye to getting the assumption papers signed by Mr. Pelullo just as soon as possible and hopefully having the whole matter resolved by February 1,1985.

Two days later, the Nyharts delivered a deed of conveyance to Pelullo, and Pelullo delivered to the Nyharts $70,000 and two promissory notes. The District Court correctly concluded that the December 21 transaction between the Nyharts and Pelullo constituted the sale and purchase of the 2000 acres.

Jerry further contends that, because Pelullo’s assumption of the Travelers mortgage was a condition precedent to the sale, when Travelers did not permit the assumption, the sale was not completed and Johnson was not entitled to a commission. This argument fails, because a careful review of the listing contract reveals that no conditional language exists regarding the accrual of Johnson’s commission. Nowhere in the standard listing contract is there any mention of the Travelers mortgage. We, therefore, agree with the District Court that, once Johnson found a buyer ready and willing to purchase the land, there were no qualifying conditions placed upon his entitlement to a commission.

Finally Jerry contends that the buy/sell agreement was ambiguous and the question of the parties’ intentions should have been submitted to the trier of fact. However, the intent of the parties to an agreement is only looked to when the agreement is not clear on its face. Klawitter, [268 Mont. 275], 886 P.2d at 420; Bain v. Williams (1990), 245 Mont. 228, 232, 800 P.2d 693, 695; Derrenger v. City of Billings (1984), 213 Mont. 469, 475, 691 P.2d 1379, 1382.

As a general rule, construction and interpretation of written agreements, including contracts, is a question of law for the court to decide. Klawitter, [268 Mont. 275], 886 P.2d at 420; First See. Bank of Anaconda v. Vander Pas (1991), 250 Mont. 148, 152-53, 818 P.2d 384, 387. Likewise, it is a question of law whether ambiguity exists in a contract. Klawitter, [268 Mont. 275], 886 P.2d at 420; Audit Services, Inc. v. Systad (1992), 252 Mont. 62, 65, 826 P.2d 549, 551.

Where the question of intent depends upon the construction of an unambiguous contract, the question is one for the court alone. Klawitter, [268 Mont. 275] , 886 P.2d at 420; Gray v. City of Billings (1984), 213 Mont. 6, 10, 689 P.2d 268, 270. As we discussed above, the District Court correctly determined that “[t]he language in the agreement is clear and unambiguous.” Johnson was entitled to a commission when he found a ready and willing buyer. We, therefore, reject Jerry’s argument that the parties’ intentions constituted genuine issues of material fact.

We hold that the District Court properly granted summary judgment.

ISSUE 2

Did the District Court err by awarding prejudgment interest to Johnson?

The District Court entered judgment in this matter on April 14, 1994, and ordered in pertinent part as follows:

That the Plaintiff, Ronald Johnson, recover from the Defendants, Jerry Nyhart, Clarajo Nyhart and Nyhart Ranch, Inc., the following:
1. Principal in the amount of THIRTY THOUSAND THIRTY-TWO AND 73/100 DOLLARS ($30,032.73).
2. Interest at the rate of six percent (6%) from December 22, 1984, through September 30,1985 in the amount of ONE THOUSAND FOUR HUNDRED TWO AND 70/100 ($1,402.70).
3. Interest at the rate of ten percent (10%) from October 1,1985 through April 13,1994, in the amount of TWENTY-FIVE THOUSAND AND SIX HUNDRED NINETEEN AND 99/100 ($25,619.99).
4. Interest at the rate of ten percent (10%) from April 14,1994, until the judgment is paid in full in the amount of $8.23 per diem.

Jerry objected to paragraph three of the judgment because it ordered payment of interest to Johnson prior to the date of entry of the judgment. According to Jerry, the promissory note that he and Clarajo executed on December 21 “reveals that the obligation was not to accrue interest.” The promissory note provides in pertinent part as follows:

PROMISSORY NOTE
$30,032.73 December 21,1984
Dillon, Montana
FOR VALUE RECEIVED, we, JERRY NYHART AND CLARAJO NYHART, husband and wife, of Twin Bridges, Montana, promise to pay to RONALD W. JOHNSON d/b/a JOHNSON REALTY, of Dillon, Montana, the sum of THIRTY THOUSAND THIRTY-TWO & SEVENTY-THREE/100TH DOLLARS ($30,032.73) lawful money of the United States of America, with interest- thereen-at tho-ratc of twelvo-and one-half percent (-1-21/2%) per annum payable to the payee on or before February 1,1985.
IF DEFAULT shall be made in the payment due hereunder ... the entire amount of said note, both principal and interest, shall at once become immediately due and payable.
THE MAKERS hereof are hereby granted the right to pay all or any part of the unpaid principal and-interest on this note at any time after the date hereof.

I si Jerry Nyhart

Isl Clarajo Nyhart

The stricken language was crossed out in writing, and above or beside each stricken portion, the initials “J.N.” and “C.N.” appear. Jerry contends that because he and Clarajo struck out and initialed the language regarding the payment of interest from the promissory note, interest on the note was not to accrue. Jerry, however, cites no authority in support of his contention.

Johnson, on the other hand, argues that: (1) the District Court awarded interest pursuant to the standard listing contract, the earnest money receipt and agreement to sell and purchase, and § 27-1-211, MCA, and not pursuant to the promissory note; and (2) even if the District Court awarded interest based on the promissory note, the Nyharts’ unilaterally created and altered the promissory note without the written approval or consent of Johnson.

This Court’s decision in Byrne v. Terry (1987), 228 Mont. 387, 741 P.2d 1341, is dispositive of this issue. Pursuant to § 27-1-211, MCA, we set forth three criteria under which prejudgment interest may be awarded: (1) the existence of an underlying monetary obligation; (2) the amount of the obligation is certain or capable of being made certain by calculation; and (3) the right to recover the obligation vests on a particular day. Byrne, 741 P.2d at 1343. All three of these criteria are met in the instant case: (1) the monetary obligation consists of the real estate commission owed to Johnson in the amount of $42,000; (2) the Nyharts paid Johnson $11,967.27 on December 21; therefore, the outstanding balance owed on the commission is $30,032.73; and (3) Johnson’s right to recover the commission vested on December 21, 1984, the date that the deed to the 2000 acres was delivered to Pelullo.

Additionally, “[t]he fact that a claim is disputed does not make it uncertain and thus unable to support an award of prejudgment interest.” Byrne, 741 P.2d at 1343. Jerry’s various assertions, including the fact that he and Clarajo altered the promissory note, do not change our analysis under Byrne. “When the debtor knows of his debt and also knows when it is due, ‘no demand is necessary to start the running of interest from the date the payment should have been made.’ ” Byrne, 741 P.2d at 1343 (citing W.J. Lake & Co. v. Montana Horse Products Co. (1939), 109 Mont. 434, 443, 97 P.2d 590, 594). When the Nyharts transferred title to Pelullo on December 21, 1984, the provisions of § 27-1-211, MCA, were triggered. On that date, the Nyharts owed Johnson a commission equal to six percent of the selling price, or $42,000. The Nyharts paid only one-third of the total amount owed. No demand was required by Johnson to enforce the remaining obligation owed. Neither of the two exceptions provided in § 27-1-211, MCA, apply in this case, i.e., neither the force of law nor the acts of the creditor, Johnson, prevented the Nyharts from paying the full amount of the real estate commission. Furthermore, there is no evidence in the record supporting Jerry’s assertion that Johnson agreed to either the creation or subsequent alteration of the promissory note.

We hold that the District Court correctly awarded prejudgment interest to Johnson.

ISSUE 3

Did the District Court err by entering judgment against Clarajo Nyhart?

The District Court’s April 14, 1994, judgment states in pertinent part:

That the Plaintiff, Ronald Johnson, recover from the Defendants, Jerry Nyhart, Clarajo Nyhart and Nyhart Ranch, Inc., the following:

(Emphasis added.) On appeal, Jerry “admits that the Plaintiff obtained personal jurisdiction over him, but is unaware if personal jurisdiction was obtained over Clara Jo [sic] Nyhart” and “is unable to verify if the Plaintiff ever obtained service upon his former wife.” Jerry argues that the judgment against Clarajo is invalid because (1) the District Court lacked personal jurisdiction over her due to Johnson’s failure to serve her with a summons and complaint, or (2) if service was made, the District Court failed to give “any notice of entry of default” against her.

Johnson concedes that he did not serve Clarajo because she was not a necessary party to the resolution of the case. Our review of the record confirms that Clarajo was not served with a summons or complaint in this case. We conclude that the District Court lacked personal jurisdiction over her and erroneously entered judgment against her. We, therefore, vacate the District Court’s judgment as it pertains to Clarajo.

Affirmed as to Issues 1 and 2; the judgment as to Clarajo Nyhart is hereby vacated.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, NELSON and WEBER concur.


source: Caselaw Access Project

author: JUSTICE WEBER

license: Public Domain

text:
    STATE of MONTANA, Plaintiff and Respondent, -v-ROBERT STACY BRADLEY, Defendant and Appellant.
    No. 94-088.
    Submitted on Briefs January 12, 1995.
    Decided February 8, 1995.
    52 St.Rep. 43.
    269 Mont. 392.
    889 P.2d 1167.

      For Appellant: J. B. Wheatcroft, Miles City.
    For Respondent: B[on. Joseph P. Mazurek, Attorney General, Kathy Seeley, Assistant Attorney General; Garry B. Bunke, Custer County Attorney, Miles City.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from a jury verdict finding defendant guilty of Sexual Intercourse Without Consent and from the attendant sentence imposed by the Sixteenth Judicial District Court, Custer County. We reverse and remand for a new trial.

We consider one issue as dispositive of this case:

Did the District Court err in failing to instruct the jury correctly on the applicable law of the case?

In January of 1988, Robert Stacy Bradley (Bradley) lived in a rooming house in Seattle, Washington. The rooming house was owned by his then current mother-in-law. Bradley was in the process of divorcing his third wife, Angel, and had responsibility for his young daughter, Amber, from his second marriage.

While staying at the rooming house, Bradley met Sherri Hutchins (Sherri) and her brother, Floyd, in the spring of 1988. Sherri, 14, and Floyd, 15, had been abandoned by their mother when she left them in the rooming house and subsequently disappeared.

In the spring of 1988, Bradley, Sherri, Floyd, and Amber moved into an apartment where Sherri, 14, and Bradley, 29, became lovers. Sherri, Bradley, Floyd and Amber moved from Washington to Tennessee in July of 1988 because Bradley’s family resided in that state. During the stay in Tennessee, Sherri became pregnant, but miscarried. Bradley testified that he did not know until the couple went to Tennessee that Sherri was so young. By that time, he stated, he felt he should do the “right thing” and marry her. Because Sherri was underage, the couple sought and found Sherri’s mother in the hope that she would sign for them to be married.

In June of 1989, the couple and Amber moved to Miles City, Montana, where Sherry’s mother lived. Shortly after arriving in Montana, Sherry became pregnant a second time and the couple wed on February 20, 1990, five days past Sherri’s sixteenth birthday. Sherri was seven months pregnant. She gave birth on April 3,1990.

On April 3,1991, Sherri gave birth to the couple’s second child. The couple moved around from Montana to California and while living in Washington State, the couple separated in December of 1991. During this time, Bradley obtained a restraining order for Sherri and she was unable to see her children for approximately eight months.

Bradley returned to Miles City and by August of 1992, Sherri had moved back to Miles City to live with Bradley and the children. In September of 1992, Sherri initiated contact with the Department of Family Services (DFS) to have the children removed from the home. Following an investigation, the DFS removed Sherri and the children to a shelter in Billings.

Law enforcement questioned Bradley in December of 1992 and on December 31, 1992, Bradley was charged by information with the offenses of Bigamy, a misdemeanor; False Swearing, a misdemeanor; and Sexual Intercourse Without Consent, a felony. At the time the information was filed, Sherri was pregnant with the couple’s third child.

Bradley moved to have the charges dropped based upon the spousal exemption in § 45-5-511, MCA (1989). The State countered that Bradley was not divorced from his third wife until February of 1992, two years after the actual marriage to Sherri, and he could not avail himself of the spousal exemption.

The State did move to dismiss the Bigamy and False Swearing charges because they had not been initiated within the one-year statute of limitations for misdemeanors. Ajury trial was held on June 3,1993, on the charge of Sexual Intercourse Without Consent because Sherri had been 15 years old when the couple came to Miles City the first time in 1989. A jury found Bradley guilty and the court after considerable delay sentenced Bradley on January 7, 1994 to fifteen years in the Montana State Prison, with all but thirty days suspended. The sentence also contained a litany of conditions such as therapy for Bradley’s host of emotional problems and registration in a sexual offender program. The court also reserved the right to restrict defendant’s parole upon resentencing after a violation of his probation terms.

Bradley appeals the District Court’s denial of his Motion to Dismiss, Motion for Directed Verdict, the refusal of defendant’s jury instructions, the jury verdict and the sentencing order.

Did the District Court err in failing to instruct the jury correctly on the applicable law of the case?

Bradley argues that the court did not instruct the jury on the correct law of the case. Specifically, the court refused his instructions based on § 45-5-511, MCA (1989), which contained a spousal exemption for sexual intercourse without consent. Bradley contends that his instructions 7, 11,13, and 14 should have been given. The State argues that the above referenced instructions did not accurately reflect the law or the evidence presented in the case.

Instructions must be reviewed as a whole and if they fully and fairly present the law to the jury, the jury has been properly instructed. State v. Hall (1990), 244 Mont. 161, 172, 797 P.2d 183, 190. To constitute reversible error, the trial court’s actions must affect substantial rights of the party. Davis v. Church of the Latter Day Saints (1990), 244 Mont. 61, 796 P.2d 181.

First, we note that Bradley’s instruction #14 is a general instruction with little relevance to the case. It is taken from a general treatise and is not based upon Montana law. The District Court did not err in excluding it as it is not germane to the resolution of the issues.

Bradley’s instruction #7, which was refused by the District Court stated:

To convict the defendant of sexual intercourse without consent, the State must prove the following elements:
First: That the defendant knowingly has [had?] sexual intercourse with Sherri Lynn Bradley; and
Second: That Sherri Lynn Bradley was not the defendant’s spouse; and
Third: That the act of sexual intercourse was without the consent of Sherri Lynn Bradley.... (Emphasis added.)

Instead of the above instruction, the court gave the State’s instruction #6:

To convict the defendant of sexual intercourse without consent, the State must prove the following elements:
1. That the defendant had sexual intercourse with Sherry Bradley; and
2. That the act of sexual intercourse was without the consent of Sherry Bradley; and
3. That the defendant acted knowingly....

Neither instruction is 100% correct. But the State’s instruction does not reflect the complete law. The court erred in giving the instruction as it is misleading and acted to prejudice Bradley by not giving the appropriate law upon which he must be judged.

The statute at issue is § 45-5-503, MCA. That statute in 1983 read: Sexual intercourse without consent. (1) A person who knowingly has sexual intercourse without consent with a person of the opposite sex, not his spouse, commits the offense of sexual intercourse without consent. (Emphasis added.)

In 1985, the legislature removed the phrase “not his spouse” from subsection one. However, at the same time, they added a new sentence to subsection one which remained unchanged through 1989. The 1989 version of that statute reads:

Sexual intercourse without consent. (1) A person who knowingly has sexual intercourse without consent with a person of the opposite sex commits the offense of sexual intercourse without consent. Aperson may not be convicted under this section based on the age of his spouse as provided in 45-5-501(2)(c). (Emphasis added.)

Bradley argues that he was found guilty because the court did not instruct the jury properly by including the second sentence of subsection one in the instructions. We agree with that point of view.

Likewise, the jury should have been instructed that the law contained the further exemptions found in § 45-5-511, MCA (1989):

Provisions generally applicable to sexual crimes. (1) When criminality depends on the victim being less than 16 years old, it is a defense for the offender to prove that he reasonably believed the child to be above that age. Such belief shall not be deemed reasonable if the child is less than 14 years old.
(2) Whenever the definition of an offense excludes conduct with a spouse the exclusion shall be deemed to extend to persons living as husband and wife regardless of the legal status of their relationship. ... (Emphasis added.)

The court instructed the jury on subsection one only by giving the State’s instruction #9 but refused Bradley’s instruction #13 which contained subsection two. Again, neither instruction is correct as it is written. An instruction which properly presents the law to the jury would contain both subsections of this 1989 statute. The question of whether Sherri and Bradley were “living as husband and wife” in July of 1989 is a question of fact for the jury to determine.

Because the court prejudiced Bradley by instructing the jury on an incomplete version of the appropriate law, this case must be reversed and remanded for a new trial.

Reversed and remanded.

CHIEF JUSTICE TURNAGE, JUSTICES TRIEWEILER, GRAY, HUNT, NELSON and LEAPHART concur.


text:
    PETER WOLF, Plaintiff and Appellant, v. ED WILLIAMSON and THE CITY OF GLENDIVE, Defendants and Respondents.
    No. 94-393.
    Submitted on Briefs December 15, 1994.
    Decided February 14, 1995.
    52 St.Rep. 51.
    269 Mont. 397.
    889 P.2d 1177.

      For Appellant: John F. Lynch, Lynch Law Firm, Great Falls.
    For Respondents: Gary L. Day, Lucas & Monaghan, Miles City.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant Peter Wolf appeals from an order of the Seventh Judicial District Court, Dawson County, granting the motion for summary judgment of respondents Ed Williamson and the City of Glendive.

Affirmed.

Appellant raises the following issues:

1. Did the District Court err by granting respondents’ motion for summary judgment?

2. Did the District Court err by failing to grant appellant’s second motion for leave to amend the pleadings before granting summary judgment in favor of respondents?

From April 1989 to January 1991, appellant was employed by the City of Glendive as a police officer. In January 1991, appellant resigned his position in Glendive and was subsequently employed by the Ravalli County Sheriff’s office as a deputy sheriff. In July 1991, appellant resigned from his position in Ravalli County and applied for a position as a police officer with the Kalispell Police Department. As part of his application, appellant signed an authorization for former employers to release information of past employment. The Kalispell Police Department requested information about appellant’s employment history from Glendive Police Chief, Ed Williamson, who in turn, provided the requested information. After the Kalispell Police Department did not hire appellant, he obtained a copy of the information provided by Williamson to the Kalispell Police Department.

On February 11, 1993, appellant filed suit against Williamson, alleging defamation in the form of libel. The District Court granted appellant’s motion to amend his complaint to add the City of Glendive as a defendant. On March 28, 1994, respondents filed a motion for summary judgment. Appellant filed a second motion for leave to file an amended complaint on May 31, 1994. On June 10, 1994, the District Court granted respondents’ motion for summary judgment. Appellant appeals from the District Court’s order granting summary judgment and its failure to rule on his second motion to amend the pleadings.

ISSUE 1

Did the District Court err by granting respondents’ motion for summary judgment?

“Our standard of review on a grant of summary judgment is identical to that of a trial court’s.” Cooper v. Sisters of Charity (1994), 265 Mont. 205, 207, 875 P.2d 352, 353. Summary judgment is only proper when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Spain-Morrow Ranch, Inc. v. West (1994), 264 Mont. 441, 442, 872 P.2d 330, 332. The burden of proof rests with the party seeking summary judgment to provide the court with evidence which excludes any real doubt as to the existence of a genuine issue of fact. Berens v. Wilson (1990), 246 Mont. 269, 271, 806 P.2d 14, 16. The party opposing the summary judgment is entitled to have any inference drawn from the factual record resolved in his or her favor. Boylan v. Van Dyke (1991), 247 Mont. 259, 266, 806 P.2d 1024, 1028. Only after the moving party has met this burden of proof does the burden shift to the nonmoving party to show that a genuine issue of fact exists. Morton v. M-W-M, Inc. (1994), 263 Mont. 245, 249, 868 P.2d 576, 579. “When raising the allegations that disputed issues of fact exist, the non-moving party has an affirmative duty to respond by affidavit or other sworn testimony containing material facts that raise genuine issues; conclusory or speculative statements will not suffice.” Koepplin v. Zortman Mining (1994), [267 Mont. 53], 881 P.2d 1306, 1309.

In his complaint, appellant alleged defamation in the form of libel, claiming that Williamson notified the Kalispell Police Department, through false and unprivileged publication, that appellant lacked appropriate personal habits, did not have good attendance habits, did not satisfactorily follow instructions, did not handle stress well, and was not suitable for re-employment with the Glendive Police Department. This information formed the basis of appellant’s complaint.

As part of his application with the Kalispell Police Department, appellant signed an authorization to release information which provided:

I am an applicant for a position with the Kalispell Police Department. I am required to furnish information which this agency may use in determining my moral, physical, mental and financial qualifications. In this connection, I hereby expressly authorize release of any and all information which you may have concerning me, including information of a confidential or privileged nature.
I hereby release the agency with which I am seeking employment and any organization, company, institution or person furnishing information to that agency as expressly authorized above, from any liability for damage which may result from furnishing the information requested.

In addition to signing the above, appellant testified that he believed Williamson would be responding to requests for information from the Kalispell Police Department in his official capacity as Chief of Police. Williamson testified that he responded to the request for information from the Kalispell Police Department in his official capacity as Chief of Police. Two mayors of Glendive testified that one of the official duties of the Chief of Police is to respond to requests from prospective employers about past employees of the Glendive Police Department.

Libel is a false and unprivileged publication which exposes a person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided or which has a tendency to injure him in his occupation. Section 27-1-802, MCA. A privileged publication involves one made in the proper discharge of an official duty. Section 27-1-804(1), MCA. “When a public official is acting within the scope of his or her authority, communications within that scope are privileged.” Denny Driscoll Boys Home v. State (1987), 227 Mont. 177, 178, 737 P.2d 1150, 1152.

The record shows that Williamson was acting in his official capacity as Chief of Police when he responded to the request of the Kalispell Police Department for information about appellant’s employment history with the Glendive Police Department. That information was a privileged communication under § 27-1-804(1), MCA, and therefore, could not form the basis of a defamation action. Denny Driscoll Boys Home, 737 P.2d at 1150; Small v. McRae (1982), 200 Mont. 497, 521, 651 P.2d 982, 996. Respondents sustained their burden of establishing the absence of any genuine issue of material fact, thereby shifting the burden to appellant who failed to raise a genuine issue of material fact. Consequently, respondents were entitled to summary judgment as a matter of law.

We hold that the District Court did not err in granting respondents’ motion for summary judgment.

ISSUE 2

Did the District Court err by failing to grant appellant’s second motion for leave to amend the pleadings before granting summary judgment in favor of respondents?

We review discretionary trial court rulings, such as trial administration issues, post-trial motions, and similar rulings, to determine whether the district court abused its discretion. Montana Rail Link v. Byard (1993), 260 Mont. 331, 337, 860 P.2d 121, 125. Absent an abuse of discretion, we will affirm the district court. State v. Anderson (1993), 260 Mont. 354, 358, 860 P.2d 115, 118.

On October 13, 1993, the District Court issued its memorandum of pre-trial scheduling conference and order which provided that requests for amending pleadings were to be made by March 3, 1994. Under Rule 15(a), M.R.Civ.P., a party may amend a pleading once as a matter of course; thereafter, a party may amend a pleading only by leave of court or by consent of an opposing party. The District Court granted appellant’s first motion for leave to file an amended complaint on March 2,1994. On March 28,1994, respondents filed a motion for summary judgment. On May 24,1994, the District Court issued its minute entry order, stating that it intended to grant respondents’motion for summary judgment. On June 1,1994, appellant filed a second motion to amend his complaint, seeking to add a claim under Montana’s blacklisting statute, § 39-2-802, MCA. On June 8, 1994, the District Court issued its order granting summary judgment in favor of respondents. Although the District Court did not rule on appellant’s motion to amend, it found that because appellant failed to plead blacklisting in the original complaint, as well as the amended complaint of March 2, 1994, blacklisting was not an issue properly before the court at the time of summary judgment.

There is nothing in the record to show that the District Court abused its discretion under Rule 15(a), M.R.Civ.P, by not granting appellant’s second motion to amend his complaint.

We hold that the District Court did not err by failing to grant appellant’s second motion for leave to amend the pleadings before granting summary judgment in favor of respondents.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, NELSON and WEBER concur.


author: THE HONORABLE IIENBT C. SMITH,

text:
    HARRINGTON, Appellant, v. BUTTE & BOSTON MINING COMPANY, Respondent.
    (No. 1,391.)
    (Submitted January 28, 1902.
    Decided June 9, 1902.)

      Appeal — New- Trial — Opinion of Trial Court — Bill of Exceptions — Absence of Opinion — Action on Bank Check — Burden of Proof — Bona Fidte Holder.

    1. Where, on appeal from an order granting a new trial, the opinion of the trial judge, while found in the transcript, is not embraced in any bill of exceptions, it is no part of the record, and cannot be considered.

      2. In an action on a bank check, where the answer claims it was obtained from the payee by fraud, of which plaintiff had notice, the burden is on defendant to show the fraud, and then on plaintiff to show himself a lwna fide holder.
    3. When negotiable paper is shown to have been obtained from the maker or owner by fraud, a subsequent transferee must, before he is entitled to recover, show that he is a liona fide purchaser.
    4. Where, in an action on negotiable paper, it is shown to have been obtained from the maker or owner by fraud, the question whether the plaintiff has shown himself a l)ona fide holder for value is for the jury.
    5. An order for a new trial being general in terms, it must be assumed on appeal that the trial court was of opinion that the evidence was insufficient in the sense that it preponderated against the conclusion of the jury.
    6. On a motion for a new trial the verdict should be set aside if the trial judge be satisfied it is not warranted by the evidence.

      Appeal from District Court, Silver Bow County; Theo. Brantly, Judge.

    ActioN by Phil. J. Harrington against the Butte & Boston Mining Company, impleaded with John A. Leggat. There was judgment for plaintiff, and from an order granting a new trial planitiff appeals.
    Affirmed.

      Mr. J. E. Ilealy, for Appellant.
    In the statement on motion for new trial when the insufficiency of the evidence to sustain the verdict is relied upon, them the particulars in which the evidence was insufficient to justify •the verdict must be set forth; generalizations and conclusions will not bring up the matter for review, either in the trial or supreme court. The statute requires that unless the particulars shall be set forth the statement must be disregarded. We think that the alleged specifications should! have been disregarded, and if they were not, their we ask this court to correct the error in granting a new trial which was committed by the trial court. (Sea Section 1113, Code of Civil Procedure; Mason v. Ger-maine, 1 Mont. 263; Thorp v. Breed, Ibid. 651; Stafford v. Hornbuchle, 3 Mont. 485; Bass v. Balcer, 6 Mont. 442; Raymond v. Thexton, 1 Mont. 299; Carrón v. Wood, 10 Mont. 500; Gallatin Coal Co. v. Lay, 10 Mont. 528; McLeod v. Diclcerson, 11 Mont. 438; Partridge v. San Francisco, 21 Cal. 415; Hidden v. Jordan, 28 Id. 312; Leroy v. Rodgers, 30 Ibid. 233;
      Zenith Go. v. Irvine, 32 Ibid. 303; Love, etc. v. 8. N. L. W., 32 Ibid. 350; Coleman v. Gilmore, 49 340; Kelley v. Mack, 49 Ibid. 524; Sharp v. Goodwin, 51 Z&idl 219; Grane v. Gladding, 59 Ibid. 303; Benjamin v. Stewart, 61 Z&ic?. 605 ; Hill v. Beatty, 61 Ibid. 292; Baie v. Miller, 63 Nwi. 233; Patent Brick Go. v. Moore, 75 I&id. 205-; Lowrey v. PaZg, 75 Ibid. 349 ; Alpers v. Shammel, 75 Ibid. 590; Hershey v. Kness, 75 Ibid 115; Donahoe v. Mariposa, etc., 66 317; Parker y. Beay, 76 Ibid. 103; Menk y. Home Investment Go., 76 Ibid. 50; Pam y. Raynor, 76 647; Millan v. Hood, 30 Pac. 1107; Sterling y. Parsons (Utah), 33 Pac 245 ; Love v. Anchor Raisin Go. (Cal.), 45 Pac. 1044; Zickler v. Deegan, 16 Mont. 198; Batrdivell v. Auderso», 18 Mont. 528; Pirsi National Bank v. Roberts, 9 Mont. 326; Strassberger y. Beecher, 20 Mont. 143.)
    Prom an examination of the cáses before cited, and particularly the cases of Bank v. Roberts and Strassberger v. Beecher, supra, we deduce this rule: “If there be conflicting evidence upon a point, the particular evidence which is relied upon to overturn the verdict must be particularized; but if the whole evidence taken together, as was the case in Strassberger v. Beecher, fails to present sufficient facts to justify a legal conclusion sustaining the verdict, then general conclusions will be considered as sufficient It is sufficient to say ‘there is no evidence’ when there is no evidence in fact. But this is not sufficient when there is conflicting evidence.”
    In case the motion for a nonsuit-was well taken and the defendant proceeded and put in testimony, the error, if any, was waived. (Estee’s Pleadings, 4783, note.) But even if not waived, we think that the specific grounds of nonsuit were waived by setting forth only the proposition that the plaintiff failed to make out a case. A general statement without stating the grounds is not sufficient, (Estees’ Pleadings (Eourth Edition), 4781; Hayne on New Trial and Appeal, Sec. 149 and cases cited.) If a matter be not specified as error it is waived. {Ibid.) It is the settled law that fraud will not he presumed and will not be imputed unless a very strong case is made out. In tbis case the answer alleged fraud. Under such circumstances it was incumbent upon the plaintiff to prove his good faith. This we submit he did. (Kerr, Fraud and Mistake, 383; Civil Code, Sec. 2119.)
    We take it to be the law, settled beyond cavil or doubt, that mere suspicious circumstances will not avoid the payment of a bill or note; nothing will satisfy the requirements of the law save knowledge. (Goodmom v. Bimonds, 15 Law Ed. 941.)
    The right of a bona, fide' holder to recover can be defeated only by proof of such circumstances as show he took the paper with knowledge of some infirmity in it, or with such suspicion with regard to its validity that his conduct in taking it was fraudulent. {Nat. Bank of Republic v. Young (N. J.), 5 Cent. 113.) Mere notice of facts such as would put a prudent man on his inquiry, which inquiry, if pursued, would have disclosed the infirmity of the paper, is not sufficient to impeach the title of the holder of negotiable paper taken for value before maturity, so as to let in defenses which the paper wo dd be subject to in the hands of the original party. {Ibid.) Knowledge of the consideration, even when imparted by the note itself, will not prejudice the rights of a good faith purchaser, unless the consideration is such as invalidates the note or is legally insufficient. {New v. Walker (Ind.), 6 West 873.) The purchaser of a negotiable note, before maturity, and for a valuable consideration, is not bound to inquire of the maker whether there is any defect in it, or defense against it; but is entitled to protection, unless there was bad faith in the purchase, or such gross negligence as is evidence of bad faith; and his purchase for value before maturity being shown, the onus of proving notice is on the maker. {Wildsmith v. Tracy, 80 Ala. 258.) Notice of facts to impeach a bill means knowledge of those facts, and by facts is intended facts which of themselves impeach the transaction, and not merely facts which tend to prove fraud or excite suspicion. {Credit Co. v. Howe, 3 N. E. 564 (Conn.), 8 Atl. 472.) The pendency of a suit relating to the validity of negotiable paper is not constructive notice to subsequent holders thereof before maturity. {Enfield v. Jordcm, 30 U. S., L. E'd. 523.) Tbe purchaser of a note from a bona fide bolder for value may recover thereon, though he had knowledge of equities against it when he took it. (Butterfield v. Ontario O. 0. N. D., (N. Y.) 32 Fed. 891; Bodley v. Emporia. Nat. Barde, 38 Nan. 59, 16 Pae. 88.) A mere suspicious circumstance will not prevent a party from becoming a bona fide purchaser of a note for value. (Manufacturers’ Nat. Bank v. Newell, 71 Wis. 309, 37 N. W. 420; Demis v. Seeley (Mich.), 15 Western, 412, 38 N. W. 901; Tescher v. Korea, 118 Ind. 586, 21 N. E. 316.)
    The purchaser of a note is presumably a boma fide holder and can recover in an action against the maker unless not only a good defense is proved, but also that purchaser had knowledge of the defense before taking the note. (McRitchie v. Johnson, (Kan.) 30 Pac. 477.) A transferee of a note fraudulently obtained in its inception, from a bona fide purchaser for value before maturity, is entitled to recover thereon, by virtue of the right acquired from his indorser, notwithstanding any knowledge he may have had at the time of the indorsement to him of the fraudulent origin of the note. (Cover v. Myers (Md.), 23 Atl. 850; Cover v. Bowersox (Mid.), 23 Atl. 1037; Cameron v. First Nat. Bank, 46 Mo. App. 440.)
    The assignee of a promissory note having nothing, on its face or in the written indorsement or assignment to indicate its invalidity may, in Colorado, recover thereon against the maker, although he was in possession of facts or circumstances sufficient to arouse suspicion in the mind of a person of ordinary prudence, and is guilty of negligence in not first following up such information. (Tourlettotte v. Brown, 29 Pac. 130, 1 Colo. App. 408; Merchants’ Bank v. McClellcmd, 13 Pac. 725.)
    The ordinary rules of constructive notice applicable to purchasers of personalty do not apply to negotiable instruments, the decisive test of the holder’s.right to which is the bona fides of the transaction, withoxrt regard to the vendor’s fraud or title. The omission from Tex. Bev. Statutes, Art. 265, relating to transfers of negotiable paper, of the words “in the usual course of trade,” is immaterial. (Wilson v. Denton, 82 Tex. 531, 18 S. W. 620.) Neglect to inquire as to the inception of a note is not sufficient to charge one taking it before maturity with notice óf defects so as to prevent its collection by him or Ms assignee after maturity. (Matson v. Alley, 141 Ill. 284, 31 N. E-. 419, Affg. 41 Ill. App. 72.) A bank receiving negotiable instruments from' a broker in pledge for a loan, under circumstances not tending to create suspicion, though without knowledge or inquiry, as to the ownership or the authority of the broker, takes as a tona fide holder, and may realize upon them for the repayment of the advance, as against the owner in fraud or whom the pledge was made. (London Joint Stock Bank v. Simmons (H. L. E.), 1892, A. C. 201.)
    The letters C. I. P. preceding the signature on the face of a note are not alone sufficient notice that it was given for a patent named Chapin Iron Process, so as to bring it within Mill & V. Tenn. Code, Sec. 2481, providing that a note given for an interest in a patent shall be subject in the holder’s hands1 to all defenses against the original payee yken the fact that it was so given appears on its face. (Chattanoogai First Nat. Bamlc v. Stockell (Tenn.), 20 L. B. A. 605, 21 S. W. 523.) Mere suspicion of a defense is not enough to impeach the title of the holder of negotiable paper' transferred to him before maturity for value. There must be actual notice to him of a defense to the paper consisting of knowledge of facts which would impeach the validity of the note between the antecedent parties. (De-Long v. Schroeder, 45 Ill. App. 236.) The recital in a promissory note that it is given in payment for land on that day purchased does not constitute notice that the sale of the land was oral, so as to affect the rights of an indorsee in case the sale of the lands was rescinded. (F err ess v. Trnell (Tenn.), 3 L. B. A. 414, 87 Tenn. 386, 11 S. W. 93.) Circumstances which ought to have excited suspicion in the mind of a prudent and reasonable man are not sufficient to defeat a claim to hold a. negotiable note as a tona fide purchaser, unless they show that the purchaser acted in bad faith or with a want of honesty. (.Kitchen v. Loudenback, 48 Ohio St. —, 24 Ohio L. J. 142, 26 N. E. 979.) A very large discount obtained by the purchaser’ of a note having but a short time to run, and whose maker is perfectiy solvent, is a circumstance for tlie jury to consider upon tbe question of bad faith. (Franc v. Dickinson, 34 N. T. S B. 864, 26 N. E. 250, 12o N. Y. 110, Bev’g 52 Hun 313, 24 N. Y. S. B. 446, 5 N. Y. Supp. 303.)
    Knowledge of a warranty on a sale in which a note was given will not affect the rights of a bona fide purchaser of the note for value before maturity, if he had no> knowledge of the breach of the warranty. (Miller v. 'Ottaway (Mich), 8 L. B. A. 421, 45 N. W. 665.) Indorsees of a note are not put upon inquiry as to a, subsequent failure of consideration, by a statement or recital in the note that it is given for the hanging of advertising signs in street cars, after a subsequent date. (Siegel v. Chicago Trust Co., 131 Ill. 569, 1 L. B. A. 531, 23 N. E. 411.) A banking company is a bona fide holder for value of negotiable instruments which, having’ been stolen from it by its manager, have been restored by him to its possession, or replaced by simB lar ones, without any knowledge on the part of the bank of any wrong or fraud on his part, and can hold them against a third person who was a bona fide purchaser, and from whom they were procured by fraud for the purpose of restoration. (London Bkg. Co. v. London, 1 B. Plate Bank (Eng. Ct. App.), 40 Alb; L. J. 468, 1 B., 21 Q. B. Div. 535.) The rule that when the maker of a negotiable paper showte it has been obtained from him by fraud or duress, a subsequent transferee must, before he is entitled to recover on it, show that he is a bona fide purchaser, is not satisfied by showing that the transferee paid value for the note, but it is necessary that he show that hei had no knowledge of the fraud. ( Vosburg v. Diefendorf, 119 N. Y. 351, 29 N. Y. Supp. 448, 23 N. E. 801.) A purchaser of a note, knowing, that the payee was dealing in Bohemian oats, but having no knowledge of the Bohemian oats scheme, or that this note was given in such a transaction, while the scheme had not at the time become public, is entitled to enforce payment of the note1, if he purchased it before maturity, for value and in good faith. (Helms v. Douglass (Mich.), 45 N. W. 1009.) An innocent holder of a not© fraudulently obtained in its inception is one who takes it for value without actual knowledge of the fraud. (Brechenridge v. Lewis, 84 Me. 849, 24 Atl. 164.) Knowledge of facts which, would put a prudent man on inquiry mil not affect the right of a purchaser of a promissory note to recover, if otherwise a bona, fide- holder for value. (Clark v. Evans, C. C. App. (8th C.), 66 Fed. 263, 23 Wash. Law Kep. 502, 73 C. O. A. 43.) Circumstances suggesting fraud in the execution and issuance of a negotiable instrument are not sufficient to affect the character of the holder of the same as a bona fide holder for value, but actual knowledge of the infirmity is required to effect such result. (Lincoln Nat. Banh v. Schoen, 56 Mo. App. 160.) A purchaser of a negotiable promissory note, for a valuable consideration before maturity, is not affected by notice of facts calculated to arouse the suspicions of a prudent man as to- the transactions in which the note was given, unless it is of such a character as to render his act in purchasing the note without investigation an act of bad faith. (Boiuman v. Metzger, 39 Pac. 3 (Ore.) A holder of a negotiable note bona, fide for value without notice may recover theret-on, although he took it under circumstances which should excite the suspicion of a prudent man. (Clarion Nat. Banh v. Morgan (Pa.), 165 Pa. 199, 25 Pitts. L. J. N. S. 231, 30 Atl. 95.)
    One about to purchase negotiable paper is not required by good faith to make any inquiry as to possible defenses of which he had no notice either from the face of the paper or facts communicated at the time. (First Nat. Bank v. Weston, 88 Hun. 29, 34 N. Y. Supp. 558.) That a negotiable note recites on its face that it is given for rent of a designated farm for a specified year, thus disclosing a possibility of the existence of a defense, which would defeat the payee’s right to recover, does not cast upon a purchaser any duty of investigation. (Buchanan v. Wren, Tex. Civ. App., 30 S. W. 1077; Ilynes v. Winston, Tex. Civ. App., 40 S. W. 1025.) To deprive a purchaser before maturity of a promissory note of the character of a bona fide purchaser, it is not enough that he had knowledge of existing facts and circumstances which would put an ordinaiily prudent man upon inquiry. (Atlas Nat. Banh v. Holm (C. C. App. 7th G.), 34 IJ. S. App. 472, 71 Fed Rep. 489.) The mere fact that a bank had a suspicion that all might not be right when .an application was made for an exchange of its draft for that of a customer, brought by the latter’s clerk, is not sufficient to •defeat its character of bona fide purchaser of the customer’s draft. (Lampoon v. Illinois Trust Go. & S. Banlc, 62 Ill. App. 311, 1 Chic. L. J. Wkly. 31.) A bank is not chargeable with negligence in not comparing the signature of an indorser on a renewal note with that on the original. (Lynndale Nat. Banlc v. Fletcher, 68 Yt. 81, 34 Atl. 38.) One who, before maturity, in good faith and without notice takes a negotiable instrument to secure a valid pre-existing' debt, is a holder for value in the usual course of business. (Hotchkiss v. Fitzgerald Patent P. P. Go. (W. Va.), 23 S. E. 576, 41 West Va. 357.)
    A knowledge by the holder of a promissory note of suspicious facts tending to show defects therein, or knowledge of fraudulent and similar transactions of the same payee, are facts to be •considered by the jury in determining whether the holder purchased the note in good faith. (Graig v. Shearer (C. P.), 13 Ban. Law Rev. 325.) That a note was acquired under suspicious circumstances, but not so as to create a reasonable inference of bad faith on the part of the holder, will not render "it open to defenses in his hands. (Lancaster County Nat. Banlc v. Garber, 178 Pa. 91, 13 Lane. Law Review, 277.) The pledge of a negotiable note as collateral security for an antecedent debt is entitled to the protection accorded bona fide purchasers only to the extent of the pre-existing debt, and cannot recover more than that amount from the maker who has a good ■defense as against the indorser. (Yelloivstone Nat. Banlc v. Gagnon, 19 Mont. 402, 48 Pac. 762.)
    Notice by the pledgee of notes that the holder, who represented himself as a bona fide holder, was the president of a. hank whose indorsement in blank is borne by the notes, and that the notes were originally offered to another bank having the same president as the pledgee bank, for the purpose of increasing the balance of the indorsing bank, does mot charge the pledgee with knowledge that the notes did not belong to the holder individually, but to the indorsing bank. (Kaiser v. The

      First Nat. Bank (C. C. App. 5tb C.), 78 Fed. Rep-. 281.) It is not sufficient to defeat recovery by an indorsee of a promissory note that he took it under circumstances that should excite suspicion in the mind of a prudent man. (Wing v. Ford, 89 Me. 140, 35 Atl. 1023.)
    In the federal courts it is a well settled doctrine that the purchaser of a promissory note is not deprived of his character of purchaser in good faith by proof that he took the note with knowledge of such circumstances as ought to put an ordinarily prudent man upon inquiry to ascertain the facts, (Doe v. Northiuestem Goal & T. Go. (C. C. D. Ore.), 18 Fed. Rep. 62.) The rights of the holder of negotiable paper who receives it for value in the usual course of trade, and before maturity, can only be defeated by evidence of actual notice by him of facts impeaching tire validity of the transaction and the validity of the instrument, and notice sufficient to put a prudent man upon his inquiry, which, if prosecuted, would develop such facts, is not sufficient. (Schroder v. Seitz, 68 Mo. App. 233.)
    In this state under the Codes- (Section, 4055, Civil Code, and preceding sections), the rule is declared more broadly than in the cases just cited, and this case being tried under the Code, should be substantially guided by the laws now existing, or at least by the common law. It. is true that in some of the states presumptions in favor of a holder are stronger than in other jurisdictions; but in no case in the books have we found the general proposition adduced in the foregoing decisions in anywise departed from. And we submit that in Thamling v. Duffey. 14 Mont. 567, nor in any other case which can be found, has- a party who has shown his bona fides been turned away, because of some suspicion which might be attached by one who had no evidence to back up his suspicions. In all the cases cited, supra, the question of bona fides or mala fides was left to- the jury, and in this case the jury found the facts in favor of the plaintiff. There are no specifications to review the facts of this case. A note given for a gambling debt is only non-negotiable when expressly prohibited by statute, and even then the courts are reluctant to enforce the statute. (Merchants’ Bank v. McGlel-

      land. 13 Pac. 725.) In the light, then, of all the law wbicb can be found upon this branch of the law, and wie take it that such decisions apply to this case, we are confronted with the general, proposition that the plaintiff’s g*ood faith being a question of fact, was found by the jury in his favor, as were all the other facts found by the jury in the favor of the appellant.

      Messrs. Campbell & Parr, for Beespondent.
   THE HONORABLE IIENBT C. SMITH,

one of the District Judges of the Eirst Judicial District, sitting in the place of the Chief Justice, delivered the opinion of the court.

This action is brought to recover judgment upon a bank check. There was a verdict and judgment for the plaintiff. A motion for a new! trial was granted, and the plaintiff appeals therefrom. This is the second appeal of the casei (See Harrington v. Butte & Boston Mining Co., 19 Mont. 411, 48 Pac. 758.)

The order granting a new, trial is general in terms, simply sustaining the defendant’s motion; and, while the opinion of the trial judge is found in the transcript, it is not embraced in any bill of exceptions, is not part of the record, and cannot be considered. (Menard v. Montana Central Railway Co., 22 Mont. 340, 56 Pac. 592.) One of the grounds of the motion was the insufficiency of the evidence to' justify the verdict.

The first contention of the appellant is that the specifications of particulars in which the evidence was insufficient are not explicit enough to justify the trial court in hasing thereon an order for a new1 trial. Adopting the language employed by this court in Patten v. Hyde, 23 Mont. 23, 57 Pac. 407, we think the specifications are sufficient to’ point out the particulars in which the evidence is alleged to be insuffieienei to justify the verdict. They gave the plaintiff notice and advised the court in plain language of the matters that would be urged on the hearing of the motion.

This brings us to a consideration of the question whether the trial court erred in granting the motion. The plaintiff alleges in bis complaint the giving of the check in question by the defendant to Leggat; that Leggat' indorsed the same to "Wearth, and Wearth indorsed to plaintiff for value; and that plaintiff is the present owiner and holder thereof. Defendant, "by its answer, sets forth that Wearth obtained said check from Leggat by false, fraudulent and deceitful practices, and without consideration; that the check was delivered by Wearth to- plaintiff without consideration, for the purpose of cutting off any defense thereto by the defendant; and that plaintiff had knowledge that Wearth had acquired the check from Leggat fraudulently, and without consideration. The replication, in substance, denies these affirmative allegations of the answer. Upon the trial the plaintiff at once assumed the burden of showing the circumstances under which he acquired the check. The defendant then offered evidence in support of the allegations of its answer. In rebuttal, the plaintiff offered additional testimony as to how he came into possession of the check.

The burden was upon the defendant to prove that Wearth obtained the check from Leggat through fraud. If this were shown, -the burden was then upon the plaintiff to show by the. preponderance of evidence that he was a bona, fide holder for value. It must be regarded as the settled law of this state that when negotiable paper is shown to have been obtained from the maker or (as is alleged in this case) from the payee by fraud, a subsequent transferee must, before he is entitled to recover, show that he is a bona fide purchaser. (Thamling v. Duffey, 14 Mont. 567, 37 Pac. 363, 43 Am. St. Rep. 658; Rossiter w. Loeber, 18, Mont. 372, 45 Pac. 560.)

Whether or not the plaintiff satisfied this rule was a question, in the first instance, for the jury, under the instructions of the court. The jury determined that he had, and it then became the duty of the court, upon defendant’s motion for a new trial, to say whether the evidence, in weight, justified the verdict. The order for a new trial being general in terms, we must assume that the court was of opinion that the evidence was insufficient in the sense that it preponderated against the conclusion of the jury.

Rehearing denied July 21, 1902.

We have carefully read the testimony. It is conflicting, and would justify a verdict for either party. It was. the- duty,of the trial judge, if satisfied that the verdict was not warranted by the evidence, to set it aside upon proper motion. (Paiten v-Hyde, supra.)

The order granting a new trial is affirmed.

Affirmed.

Me. -Justice Pigott : I concur.

Me. Justice MilbueN : I concur.

The Chibe Justice, having, -when a district judge, tried the cause in the court below, does not participate in the foregoing opinion.


author: MR. CHIEF JUSTICE ERANÍTLY

text:
    ARMINGTON et al., Respondents, v. STELLE et al., Appellants.
    (No. 1,765.)
    (Submitted May 8, 1902.
    Decided June 13, 1902.)

      Written Lease — -Extension of Time — Understanding of Lessees —Contemporaneous Oral Agreement — Evidence — Admissibility — Subsequent Agreement — Consideration.
    1. Testimony by lessees that they would not have signed the lease but for an understanding that the time would be extended was not admissible to show a contemporaneous oral agreement to extend, because showing mere mental reservations not disclosed to the lessor, and not in any wise affecting him.
    2. Under Civil Code, Sec. 2186, providing that the execution of a contract in writing, whether required to be written or not, supersedes all oral negotiations or stipulations which preceded or accompanied its execution, and Code of Civil Procedure, Sec. 3132, providing that, between the parties to a written agreement, there can be no evidence of its terms, other than the writing itself, except where a mistake is put in issue, its validity disputed, or evidence tending to explain an intrinsic ambiguity <}r establish illegality or fraud offered, evidence of a contemporaneous agreement between the parties to a written sublease of a mining claim, that in case the sublessors should buy the property the lease would be extended, was inadmissible.
    3. Under Civil Code, Sec. 2281, providing that a contract in writing may be altered by a contract in writing or by an executed oral agreement, and not otherwise, a subsequent oral agreement between the parties to a written sublease of a mining claim that in case the sublessors should buy the property, the lease would be extended was void, being a mere executory agreement, without consideration.

      Appeal from District Court, Cascade County; J. B. Leslie, Judge.

    ActioN by J. T. Armingfon, P. M. Collins, Lavina A. Collins and Leonie E. Barker against H. L. Steile and Dan Mc-Kinnon. From an order granting a temporary injunction, defendants appeal.
    Affirmed.

      Mr. A. G. Qormley, and Messrs. Word & Word, for Appellants.
    1. Parol evidence is admissible to> establish a contemporaneous oral agreement which induced the execution of a written contract, although it may change, vary or reform the instrument. (Thomas et al. v. Loose et al., 114 Pa. St. 35, 6 Atl. 326; Cullmans v. Lindsay, 114 Pa. St. 166, 6 Atl. 332; Wallcer v. France, 112 Pa. St. 203, 5 Atl. 208; Qodkm v. Monahcm, 83 Fed. 116; Ayers v. B. W. Bell Mfg. Co., 147 Mass. 46; Hazard v. Long, 10 Cush. 267; Erslcme v. Adeane, L. R. Chanc. App. 756; Morgan v. Griffith, L. R. 6 Exch. 70; Eighmie v. Taylor, 98 N. T. 288; Welz v. Rhodens, 87 Pnd1. 1, s. c. 44 Am. Pep. 747; School District Warsaw Twp'. v. Sidney School Furniture Co. (Pa.), 18 Atl. 606; Thudium v. Yost (Pa.), 11 Atl. 436; Boivn v. Morange, 108 Pa. St. 69; Michels v. Olmstead, 14 Fed. 219; Oregomcm Railway Co. v. Wright, 10 Ore. 162; Durkin v. Cobleigh (Mass.), 17 L. R. A. 270-275 and notes; Clenighan v. McFarland, 11 N. V. S. 719; Ferguson v. Rafferty (Pa.), 6 L. R. A. 33-48 and notes; McCormack, etc. Co-, v. Nicholson, 17 Pa. Super. Ct. 188; King v. Dahl, 84 N. W. 737.)
    2. A parol agreement made subsequent to the execution of a written lease, and for the extension of such written lease, is valid. The provision of the Code that influenced the lower could in its decision, as well as all other provisions of the Code bearing on this question, are simply declaratory of the common law rule, and this rule has been considered! and applied in a number of decisions. As particularly in point in the case at bar, we refer the court.to the following: Street B. B. Co.<y. Morrison, 160 Ill. 288, 294; Hugh Martin v. Topliff, 88 Ill. Appi 362; Schiueihert v. Seavey', 62 Pac. 600.
    We cite the following additional authorities in support of the validity of this subsequent parol agreement: 1 Greenleaf on Evidence, Sec. 304; 2 Pomeroy’s Eq. Jur. Sec. 863; Smith v. Lilley, 20 Atl. 227 (R. I.) ; Warren v. Mayer Mfg. Co. (Mo.), 61 S. W. 646; Wilson v. McClenavy, 13 So. 873; Grace v. Lynch et al., 49 N. W. 751; Fvers v. Shumaher, 57 Mo. App. 454; Thomas v. Barnes, 31 N. E. 683 (Mass.) ; Emerson v. Slater, 63 IT. S. 28, 16 L. Ed. 360; Crandin v. United States, 89 II. S. 496, 22 L. Ed. 858.

      Mr. Fletcher Maddox, for Respondents.
   MR. CHIEF JUSTICE ERANÍTLY

delivered the opinion of the court.

This action -was brought hy plaintiffs to' recover from defendants possession of a portion of the Ripple quartz lode mining claim, situate in Cascade county. The portion of the claim in controversy is described as the “south or southerly 300 feet of the Ripple quartz lode mining claim;” and it is alleged that the defendants, on or about October 10, 1901, the plaintiffs being then the owners and entitled to the possession thereof, wrongfully and unlawfully entered upon the premises, and engaged in mining and-removing valuable ores therefrom, to the irreparable damage of the plaintiffs. Equitable relief is also sought by way of injunction to perpetually restrain further trespasses by the defendants. Upon the filing of the complaint the district court made an order requiring the defendants to show cause why they should not also be restrained from mining and removing ores pending the final determination of the cause. The defendants answered, admitting plaintiffs’ title to tbe premises as alleged, but alleging that they1 themselves were-lawfully and rightfully in possession under a lease from the plaintiffs, the term of which had1 not expired at the time the-action was commenced. After a hearing the court ordered a. temporary injunction to issue. The defendants have appealed.

The action was commenced .on November 16, 1901. It appears from the evidence submitted that on February 20, 1901,. the plaintiffs, being the owners of an undivided one-half inter-v est in the claim, also held a lease of the other undivided one-half interest from one Briggs, the owner of it, with an option to purchase it on or before October 10, 1901, the date at which the term of their lease expired. The plaintiffs leased to the defendants and two others the portion of the claim in controversy under a written contract for a term beginning on February '20, 1901, and ending on October 10, thus making the two leases expire on the same date. The defendants! and their co-lessees desired a lease for a year, but the plaintiffs refused to-extend the term beyond October 10 for the reason that it was-then uncertain whether the Briggs interest would be paid for, and they did not care to bind themselves for that interest. It being admitted that the Briggs interest had been purchased by plaintiffs under their option, the defendants undertook to show that their lease was good to the end of the year by virtue of an oral understanding with the plaintiffs had on and subsequent to February 20. John Joki, one of the defendants’ co-lessees, testified that plaintiff J. C. E. Barker, who represented himself and the other plaintiffs, told him at the time the lease was signed that if plaintiffs took up the Briggs interest under their option, and the lessees made no- money out of their lease, they could have an extension, in order that they might make some money. B, O. Kempfer, who was present at the time, stated that, after reading over .the lease, Barker said to Jokir “You understand this lease calls- for October 10. Well, you are to have a written agreement holding the lease for one year. October 10 is the day our bond expires on Briggs’ half interest in this claim, and your lease is to run for one year in ease we take up. that bond.” Defendant Stelle stated: “About February 20, 1901, Joki came to me and asked me if I wanted to take a lease. I asked bim bow long the lease would be, and be said the written lease was only made out for.six months, but Barker bad told bim, if be raised the bond on Briggs’ interest, our lease would rim for one year from February 20, 1901. Tie bad Barken* put my name and McKinnon’s; in the. lease, and after that I signed the lease.” He stated' further that in April bo talked with Barker, and was told by him that the lease was good for a year if the Briggs; intei*est was purchased. He testified that a short, time subsequently be also' bad a talk with Annington, who told bim that McKinnon and Joki had been after bim for a written extension, and then said: “I can’t give it to them. If wa take up the bond, which We expect to, your time will be good up to' February 20, 1902.” McKinnon testified that be talked with Barker and Annington about the end of March, 1901, when Barker said: “We couldn’t give papers on Briggs’ interest, for we haven’t got it after October 10 if we don’t take up the bond. We could only give what we have ourselves. There is no doubt but what we will take up this bond,, and, after iva do*, ive will give you a written extension of the; lease.” Other witnesses testified to the same effect as the foregoing. Both defendants stated that they would not have entered into the lease but for the understanding that it would be good for1 a year if the bond should be taken up1. The other lessees abandoned the lease during the time, and hence are not parties to this action.

Objection w*as made to the introduction of the testimony of Joki and other witnesses on the ground that it was an attempt, to show by oral evidence an extension of the written lease, and it ivas therefore incompetent, as in violation of the provisions, of Section 2281 of the Civil Code. The court admitted the evidence, reserving a ruling upon the objection until the close of the hearing. When the hearing was concluded the evidence was excluded from the record upon the ground assigned in the objection. The defendants excepted. They now contend that the evidence was; admissible either (1) as. tending to establish a contemporaneous agreement which, induced, the execution of the written contract, or (2) as tending to establish an oral agreement made subsequent to the execution of the written lease, whereby the term stipulated for therein was extended to the end of the year;

1. Upon the first branch of this contention the plaintiffs insist that the casé falls clearly within the rule declared by Section 2186 of the Civil Code, which is as follows: “The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.” They also cite and rely upon Section 3132 of the Code of Civil Procedure, which provides that: “When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: (1) Where a mistake or imperfection of the writing is put in issue by the pleadings. (2) Where the validity of the agreement is the fact in dispute.' * * *” This section also provides that evidence shall not he excluded which tends to explain an extrinsic ambiguity in the writing, or to establish illegality or fraud.

The statement made by Stelle in the conversation between himself and Joki was clearly incompetent as hearsay. Equally as objectionable, it would seem, was the statement by both the defendants that they would not have signed the lease but for the understanding that it would' he good for a, y’ear in case the Briggs interest should he purchased. Even if everything that was said and done at the time the lease was executed by the defendants were admissible, as defendants contend, for the purpose of showing what the contract actually was, the unexpressed motive or mental reservation entertained by the defendants could not -aid the court in arriving at a correct conclusion, nor could the defendants'be permitted to testify h> it in order to modify or add 'to-the express words of their contract. Whatever may bave been tbe motive wbicb prompted tbem to sign tbe lease, so long as snob motive was not disclosed to Barker, wbo represented tbe plaintiffs, as tbe inducing cause of tbeir signing tbe contract, the plaintiffs could not be bound by it. It is only tbe acts done and! words spoken during tbe progress of tbe negotiations to wbicb tbe court may look, and upon wbicb it may base an inference as to wbat w!as in fact tbe agreement of tbe parties.

But passing these features of the evidence, and taking it all together, does tbe case fall within tbe rule declared by these statutory provisions ? We think it does. Tbe averment of tbe answer is that tbe defendants were in possession under a lease authorizing tbem to mine upon tbe premises until February 20, 1902. There is no allegation that there was any mistake in the terms of tbe contract. Tbe writing itself in evidence limits tbe term unequivocally to October 10, 1901. To admit the evidence and give it tbe force contended for by tbe defendants would be to permit tbem to insert in tbe written instrument by oral evidence an additional agreement based upon a condition upon the happening of wbicb the term would be extended for a period of four months. The statutory provisions cited are but declaratory of tbe common-law rule (1 Green!. JEv. Sec. 275), and recognize all tbe exceptions for wbicb it provides. Among these is tbe case in wbicb evidence may be received of tbe existence of an independent oral agreement not inconsistent with tbe stipulations of tbe written contract, and in respect of wbicb tbe writing does not speak, but not to contradict, vary, add to, or qualify tbe absolute terms of tbe written contract. In such a case tbe independent oral agreement must bave been upon some collateral matter, and must bave operated as an inducement to tbe complaining party to enter into tbe agreement, whereas in tbe absence of it be would not bave done so. To deny tbe admission'of evidence in such a case, if relevant to tbe issues' made by tbe pleadings, would be to allow, one of tbe parties to induce another to enter into tbe engagement under false representations, and to' aid him to enforce it against bis adversary notwithstanding tbe fraud prae-ticed upon him, by holding out to him the fraudulent inducement. We recognize this principle, and believe it to be in full accord not only with the spirit of the. statute, but also with adjudged cases. (Thomas v. Scutt, 127 N. Y. 133, 27 N. E. 961; Naumberg v. Young, 44 N. J. Law, 331, 43 Am. Rep. 380; Hei v. Heller, 53 Wis. 415, 10 N. W. 620;Specht v. Howard, 83 U. S. 564, 21 L. Ed. 348; Forsythe v. Kimball, 91 U. S. 291, 23 L. Ed. 352; Seitz v. Bremers' Refrigerating Machine Co., 141 U. S. 510, 12 Sup. Ct. 46, 35 L. Ed. 837; Van Winkle v. Crowell, 146 U. S. 42, 13 Sup. Ct. 18, 36 L. Ed. 880; Cliver v. Heil, 95 Wis. 364, 70 N.W. 346; Flynn v. Bourneuf, 143 Mass. 277, 9 N. E. 650, 58 Am. Rep. 135; Eighmie v. Taylor, 98 N. Y. 288; Beall v. Fisher, 95 Cal. 568, 30 Pac. 773; Bradford Investment Oo. v. Joost, 117 Cal. 204, 48 Pac. 1083.) This principle, however, does not apply to a case in which the oral promise relates directly to the subject of the contract, even though the claim be that the complaining party signed the instrument in reliance upon such promise. (Fisher v. Briscoe, 10 Mont. 124, 25 Pao. 30; Gillett v. Clark, 6 Mont. 190, 9 Pac. 823; Nelson v. Spears, 16 Mont. 351, 40 Pac. 786.) “Where there is no fraud or mistake in the prepamtion of the instrument, and it appears that the party signing understood its language and purport, it cannot be reformed on the ground that he signed upon the faith of a contemporaneous oral promise which was not kept, nor may such promise be received in evidence to control the written contract.” (Sanford v. Gates, Townsend & Co., 21 Mont. 277, 53 Pac. 749.) It is well said in Naumberg v. Young, supra, “that, where the written contract purports on its face to be a memorial of the transaction, it supersedes all prior negotiations and agreements, and that oral testimony will not be admitted of prior or contemporaneous promises on a subject which is SO' closely connected with the principal transaction, with respect to' which the parties’ are contracting, as to be part and parcel of the transaction itself, without the adjustment of which the parties cannot be considered as having finished their negotiations and finally concluded a contract.” Under the evidence in question, giving it all the force which is claimed for it, the alleged oral agreement had reference not to an independent collateral matter, but to the very subject-matter of the written lease, namely, the length of the term specified therein. It therefore hadi to do -with the very essence of the contract itself; and it is impossible to' admit it, and give it the import contended for by the plaintiffs, without allowing it to substitute an entirely new contract for the old one, and to adjudge the rights of the respective parties thereon. It presents a case, therefore, which not only does not fall under any one of the exceptions to the rule, but is in direct violation of it. Furthermore, w¡e do not think the evidence tends to establish any agreement whatever which operated as an inducement to the defendants to sign the lease. Giving it its utmost force, it does not establish any agreement whatever. The plaintiffs did no more than malee a promise of what they would do under certain circumstances which might arise in the future. The condition involved no new or different consideration. Nor did the defendants sign the lease upon the express, or even implied, condition that the alleged promise wjas to be made good to them.

2. The action of the court in excluding the evidence upon the objection as made was also correct Section 2281 of the Civil Code provides, “A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.” The principle embodied in this provision applies to all kinds of contracts in writing, whether they are required by law to be in writing or not. The purpose of the section is the same as1 that of the rule contained in the other provisions which we have been considering. It is, however, a distinct departure from the common-law rule, which permitted parties, at their pleasure, to alter by oral agreement, whether executed or executory, any contract which was not required to be evidenced by a writing. The only exception- recognized is the case in which the subsequent oral agreement has been executed by one or both of the parties. In such case the agreement, as altered or modified, is deemed to have been substituted for tbe written one, wbicb then ceases to be tbe only evidence of tbe engagement of tbe parties.

Rehearing denied July 9, 1902.

Tbe excluded evidence does, not, at most, tend; to establish more than a mere executory agreement to so change, tbe terms of tbe written agreement as to substitute another date for tbe one written therein, and to extend tbe life of it for four months. No consideration passed from the defendants to tbe plaintiffs, by virtue of wbicb tbe promise became a binding obligation. The alleged subsesquent agreement Was. therefore within tbe prohibition of the statute, and consequently void. The evidence offered to show it ivas incompetent, and was properly excluded.

Let tbe order be affirmed.

Affirmed.

Mr. Justice Pigott : I concur in tbe order of affirmance.

Mr. Justice Milburn: I concur.


author: MR. JUSTICE PIGOTT

text:
    JORDAN et al., Appellants, v. ANDRUS et al., RESPONDENTS.
    (No. 1,705.)
    (Submitted June 2, 1902.
    Decided June 13, 1902.)

      Municipal Indebtedness — Oonstitutional Limitation — Construction.

    Constitution, Art. XIII, Sec. 6, forbids tbe contracting of municipal debts “to an amount, including existing indebtedness, in tbe aggregate exceeding three per centum of tbe value of the taxable property.” Meld, that “indebtedness,” as used therein, meant wbat a city owed, irrespective of demands which it might hold against others.

      Appeal from District Court, Custer County; C. II. Loud, Judge.

      Injunction bjr W. A. Jordan and others against W. W. Andrus and others. From an order dissolving an interlocutory injunction, plaintiffs appeal.
    Reversed.

      Messrs. Btrevell cG Porier, and Mr. Geo. IF. Furr, for Appellants.

      Mr. George IV. Myers, and Mr. Sydney Banner, for Respondents.
    It. is claimed by appellants that the indebtedness of the city on July 1, 1901, was $22,500. It certainly cannot be successfully maintained in a court of review that cash on hand and other available assets of the city in the nature of uncollected and collected taxes representing so much money cannot be deducted from such indebtedness or at least from that part of such indebtedness as is represented by outstanding warrants given for current expenses and known as the floating debt or indebtedness of the city, for the purpose of arriving at or determining such indebtedness within the meaning of the constitutional provision limiting the indebtedness of cities. We cite the following authorities which we think conclusive of the question: German Ins. Go. v. Manning, 95 F. 597; State v. Hopkins, 44 Pac. 550; Graham v. Gity of Spokane et al., 53 Pac. 714; Kelley r. Pierce Go., 46 Pac. 253 ; Mullen \r. Sackett, 44 Pac. 136; State ex rel. Barton v. Ilopkins, 44 Pac. 134; State v. McGauley, 15 Cal. 430; Hopkins v. Commissioners, 16 Cal. 249; People v. Pacheco, 27 Cal. 207; Finely v. Gity of Cedar Falls, 27 Iowa, 227; Grant v. Gity of Davenport, 36 Iowa, 396.
    In the case of French v. Gity of Burlington, 42 Iowa, 614, the court held that not. only taxes assessed for the current year can be treated as a part of the cash assets of a municipality, but taxes unpaid assessed for prior years should! be treated as a part of such cash assets, and should be so considered in determining the indebtedness. In the case of State ex rel. Barton v. Hopkins, 44 Pac. 134, it was. held by the court that the cash assets of the county should be deducted from the outstanding indebtedness for the purpose of determining tbe amount of sucli indebtedness, within the meaning of the constitutional provision limiting the indebtedness to be incurred by counties. It vras alsoi held in the same case that taxes assessed for county purposes upon the tax roll for1 the current year should be de^ ducted from the floating debt of the county to determine the amount- of its indebtedness, within the meaning of a provision of the constitution limiting the indebtedness- of the county, and it Avas further held by the court in the same case that a deduction should be made for the amount of unpaid taxes upon the tax rolls assessed for prior years. So Ave think reason and the authorities alike declare that cash on hand as Avail as all other available assets of the city, either in money or the Avay of collected or uncollected- taxes, should be deducted from the outstanding Avarrants or floating indebtedness of tire city, to ascertain the amount of such indebtedness Avdthin the meaning of a provision limiting the indebtedness to be incurred by cities.
    Section 6 of Article XIII of the Constitution, after prescribing the. limit of indebtedness, says: “and all bonds or obligations in excess of such amount * * * shall be void.” Can these plain words be construed to enjoin an entire issue if only a very small fraction thereof should exceed the limit? We think not. We believe avo have demonstrated to the court that the entire issue Avould create no excess; but if the court should hold that the proposed issue Avould exceed the limit, then Ave contend that under the constitution only that portion AAhich exceeds the limit should be enjoined and the balance sustained, if otherwise valid. It is AAlell settled that where bonds- are issued or proposed for a greater amount than alloAvable by laAV, they Avill be sustained up< to the amount so alloAved. (Su-tro v. Pettit, 14 Cal. 833; Sutra y. Rhodes, 92 Cal. Ill; Finlay-son y. Yaughn, 54 Minn. 331.)
   MR. JUSTICE PIGOTT

delivered the opinion of the court.

This is an appeal from an order dissolving an interlocutory injunction.

On July 15, 1901, the plaintiffs, as taxpaying inhabitants of Miles City, Montana, commenced an action, the object of which is perpetually to enjoin the defendants, as mayor, aider-men, and clerk of the city, from signing, sealing, issuing or delivering certain “City Hall Bonds” for $8,000, voted at an election held on April 1, 1901.

One of the grounds upen which the injunction is prayed is that the proposed issue of bonds would create an indebtedness in excess cf three per centum of the total assessed value of the taxable property in the city, according to the last preceding-assessment. This is, the only question we need consider.

The material allegations of the complaint with reference to this matter are made positively, as of the knowledge of the plaintiffs, and the verification is sufficient. Upon the complaint the court granted a temporary injunction, which, after a hearing, was dissolved- on motion of the defendants-, and the plaintiffs appeal.

The constitution ordains and the statute provides that no city can become indebted to an amount exceeding three per centum of the valuation of the taxable property therein, as shown by the last assessment previous to the incurring of such indebtedness; oection, 6 cf Article XIII: “No city, town, township or school district shall be allowed to- become indebted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate exceeding three per centum of the value of the taxable property therein, to be 'ascertained by the last assessment for the state and county taxes previous to the incurring of such indebtedness, and all bonds or obligations in excess of such amount given by or on behalf of such city, town, township- or school district shall be void: -provided, however, that the legislative assembly may extend the limit mentioned in this section, by authorizing municipal corporations to submit the question to a vote of the taxpayers affected thereby, when such increase is necessary to construct a sewerage system or to procure a supply of water for such municipality which shall own and control said water supply and devote the revenues derived therefrom to the payment of the debt;” section 4800 of the Political Code: “The city or town council has power: * * (64) * * * To contract an indebtedness on behalf of the city or town upon the credit thereof, by borrowing money or issuing bonds for the following purposes, to-wit: Erecting public buildings. * * * The total amount of indebtedness authorized to be contracted, in any form must not at any time exceed three per centum of the total assessed valuation of the taxable property of the city or town, as ascertained by the last assessment for state and county taxes. * X X»

According to the last assessment (1900), the total1 value of taxable property in Miles City was $968,829. Three per centum of that value is $29,064.87. On the first day of July, 1901, the city was indebted on outstanding bonds and warrants in the sum of $22,500, — perhaps more. If the amount of the proposed indebtedness be added, the total indebtedness will be $30,500,- — an excess over the constitutional limit of $1,435.13. But the defendants assert that the following enumerated assets of the city should be deducted from the indebtedness: Cash on hand, $815.02; claim against Custer county for road taxes collected for the city, $1,065; amount due from abutting landowners for sidewalks, $475, — a total of $2,355.02. If this be deducted from the $30,500, the indebtedness-, including the proposed $8,000, would be $28,144.98, or $919.89 less than the prescribed limit. It is not now necessary to determine whether the $815.02 cash on hand may be deducted, and w-’e reserve the question. Suffice it to say that the other two items, amounting to $1,540, are not to be used in reduction of the city’s indebtedness. Deducting the cash, but not the claims for road taxes and sidewalies, the limit of indebtedness is exceeded by $620.11. The constitutional prohibition is plain, and not easily misunderstood. Notwithstanding the many decisions rendered by courts of great learning and high respectability to- the contrary, we hold that within the purview of Section 6 of Article XIII, supra, “indebtedness” means what the city owes, irrespective of the demands it may hold against others. Similar salutary provisions of organic law have often been frittered away, disregarded or perverted by means of strained and unnatural interpretations. We refuse to. follow them. A private person who owes $10,000 and at the same time has assets of the value of $100,000, is indebted to the former amount. His net financial worth is $90,000; but the fact that his bills receivable are greater than his liabilities does not and cannot cancel the debt. So with the city.

Not all the $8,000 indebtedness proposed to be incurred would be without the three per centum limit. Rut the object for which the bonds were voted is single. The debt would be indivisible, and the part within the limit is not separable from that without.

..The order appealed from is reversed, and the cause is remanded for further proceedings.

Reversed and remanded.