FIRST NATL BANK v SANT

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No. 12262 I N THE SUPREME C U T O THE STATE O MONTANA OR F F 1972 FIRST NATIONAL BANK O TWIN BRIDGES, F P l a i n t i f f and Respondent, A T U H. §ANT and EDNA SANT, RH R Defendants and Appellants. Appeal from: D i s t r i c t Court of t h e F i f t h J u d i c i a l D i s t r i c t , Honorable Frank E. B l a i r , Judge p r e s i d i n g . Counsel o f Record: For A p p e l l a n t s : Landoe and Gary, Bozeman, Montana, Ronald Olson argued, Bozeman, Montana, For Respondent : Chester L. Jones argued, V i r g i n i a C i t y , Montana, December 1, 1972 Submitted: PB?IR~~ Decided : PER CURIAM: T h i s i s an a p p e a l from a judgment e n t e r e d i n t h e d i s t r i c t c o u r t of t h e f i f t h j u d i c i a l d i s t r i c t , county of Madison, following t r i a l t o the court s i t t i n g without a jury. Judgment w a s rendered i n f a v o r of p l a i n t i f f F i r s t National Bank of Twin B r i d g e s , g r a n t i n g i t f o r e c l o s u r e i n c l u d i n g c o s t s and r e a s o n a b l e a t t o r n e y f e e s , a g a i n s t defendants Arthur H. Sant and Edna S a n t , who had mortgaged v a r i o u s r e a l and p e r s o n a l p r o p e r t y a s c o l l a t e r a l f o r a l o a n from t h e bank. H e r e i n a f t e r , p l a i n t i f f w i l l b e r e f e r r e d t o a s t h e Bank; defendants w i l l b e r e f e r r e d t o a s Sant. I t appears from t h e r e c o r d t h a t on J u l y 9, 1970, Sant owed t h e Bank a b a l a n c e due on e x i s t i n g n o t e s and a l s o owed c r e d i t o r s a c o n s i d e r a b l e amount o f money. O t h a t day, Sant signed and e n t e r e d n i n t o a mortgage w i t h t h e Bank whereby Sant gave t o t h e Bank a mortgage on land i n Madison County t o s e c u r e payment of t h r e e promissory notes. The f a c e v a l u e of t h e r e s p e c t i v e n o t e s was $17,690.62, $12,968.74, and $2,788.05, w i t h each b e a r i n g i n t e r e s t a t t h e r a t e of t e n p e r c e n t p e r annum. A t t h e time t h e mortgage was executed and t h e n o t e s signed, t h e p r e s i d e n t of t h e Bank, P a r i s Robert, p r e s e n t e d t o Sant z w r i t t e n plan e n t i t l e d '"Plan of P a r i s Robert", f o r t h e disbursement of t h e funds made a v a i l a b l e t o Sant by v i r t u e of t h e n o t e s t h a t had been signed, Sant signed t h e disbursement p l a n and i t was mutually agreed t h e Bank would make t h e payments t o t h e v a r i o u s c r e d i t o r s as p e r t h e disbursement schedule. schedule, p l a i n t i f f ' s e x h i b i t 5 , i s h e r e i n set f o r t h : The "(Plan of P a r i s Robert) " ~ r t h u rH. Sant Edna Sant "July 9 , 1970 , -la * > k * $ c * * $ < * * * * * * * * * * , o Work-out Statement I "PAYING: WITH C S ADVANCES ON NOTES AT TWIN BRIDGES BANK AH F i r s t National Bank of Twin Bridges Renewal of b a l a n c e s : d t 6/17/70 $1000.00 d t 6/16/70 1500.00 4808.09 d t 8/20/69 I n t e r e s t on above n o t e s : 26.48 $7334.57 50.00 Expense t o t h i s time: $7,384.57 R u s s e l l Lepp and/or C o n t i n e n t a l O i l Co. P a r t i a l payment Williams Feed Co. D i l l o n : OLD '70 buys, $1821.59 1160.00 2,981.59 Peavy co, $ 495.74 495,74 Manhattan Bal Robert Insurance Agency, Whitehall 1st ~ a t ' Rank l 717,OO 717 Great F a l l s - S p r i n k l e r 401.29 Idaho 1 s t Nat ' 1, ( S h e l l y ) (Bob Gibbons) Crawler t r a c t o r 357,40 Idaho 1st ~ a t ' l ,Idaho F a l l s 353.03 Harvestor p o t a t o e 11,690.62 Main Note Due 2/5/71 "PAYING, w i t h Notes, owned by: b u t a s subdinated p a r t n e r s in collateral: C o n t i n e n t a l Qil Co. v i a R u s s e l l Lepp (due 2/5/71) A.R.Smith: Old n o t e I n t . above 1970 l e a s e $8240.00 728.74 4000,OO 2,788.05 $12,968.74 I n t . on Renewal from m a t u r i t y : New n o t e matures 4/1/71 - - - ------- 12,968.7b. $33,441.41 "APPROVED F R DISBURSEMENT O 'IS/ Arthur H. Sant 7/9/70 C o l l a t e r a l : 2nd Mortgage on RE. Crop & Machinery ~ o r t g a g e dv i a s e c u r i t y Agreement , 3 Vehicles," Following t h e s i g n i n g of t h e t h r e e n o t e s , t h e mortgage, and t h e disbursement schedule, a l l on J u l y 9 , 1970, seven checks were w r i t t e n by P a r i s Robert on t h e " O f f i c e r ' s S p e c i a l Account" of t h e F i r s t National Bank of Twin Bridges, i n t h e s e amounts: PAYEE AMOUNT R u s s e l l Lepp ........,........e..e$ 5,000.00 ...... 2,981.59 Peavy Co........... ........,.,..,. 495.74 Robert I n s . Agency ................ 647.00 Williams Feed Co....,...... 1st M a t ' l Bank-Great F a l l s . . . . . , . . Idaho 1st M a t ' l B a n k - S h e l l e y Idaho 1st at ' 1 Rank ..... 401.29 357.40 - Idaho F a l l s . .-353.03 One a d d i t i o n a l check was w r i t t e n by P a r i s Robert on t h i s account payable t o t h e o r d e r of "Dcposj-t A r t Sant Acct" f o r $70.00. This was explained a s t h e d i f f e r e n c e between t h e d e b t t o Robert I n s u r a n c e Agency of W h i t e h a l l i n t h e amount of $717.00 l i s t e d i n t h e "Plan of P a r i s Robert" and t h e check a c t u a l l y w r i t t e n t o Robert Insurance Agency of $647.00. The t r i a l c o u r t ' s Eindings of f a c t i n d i c a t e t h a t P a r i s Robert i n making t h e seven disbursements t o c r e d i t o r s had c e r t a i n n e g o t i a t i o n s w i t h t h r e e of t h e c r e d i t o r s without t h e knowledge o r consent of Sant. A s a r e s u l t of t h e s e n e g o t i a t i o n s Robert caused t h e following r e b a t e s t o b e made t o t h e Bank: CREDITOR R u s s e l l Lepp Williams Feed Co, Peavy Company % O PY ET F A MN AMOUNT $750.00 15% 364.32 20% 100.00 $19214.32 20% A t t r i a l P a r i s Robert t e s t i f i e d t h a t t h e n e g o t i a t i o n s w i t h t h e s e t h r e e c r e d i t o r s concerning t h e r e b a t e s were simultaneous w i t h t h o s e w i t h Sant r e g a r d i n g t h e loan. He d i d admit, however, t h a t t h e y were n o t r e v e a l e d t o Sant. The t r i a l c o u r t ' s Eindings of f a c t d i d n o t c o n s i d e r t h e q u e s t i o n of whether t h e t h r e e c r e d i t o r s involved i n r e b a t e s knew t h e Bank had o r w a s i n t h e p r o c e s s of o b t a i n i n g , secured n o t e s from Sant c o v e r i n g t h e e n t i r e amount o f t h e indebtedness n o r whether they knew P a r i s Robert was a c t i n g w i t h o u t consent i n seeking t h e r e b a t e s . ant's knowledge o r One of t h e t h r e e c r e d i t o r s , R u s s e l l Lepp, t e s t i f i e d t h a t a t t h e time he agreed t o make t h e r e b a t e , h e f e l t he was under p r e s s u r e t o t a k e what h e could g e t , From t h e r e c o r d , i t appears t h e n o t e s f o r $2,788.05 and $12,968.74 were h e l d by t h e Bank and no a c t u a l disbursement was made t o C o n t i n e n t a l O i l Co, v i a R u s s e l l 1,epp o r t o A , R . Smith, both of whom were l i s t e d a s corresponding c r e d i t o r s t o t h e s e n o t e s on t h e "plan of P a r i s R,obertl'. These p e n c i l n o t a t i o n s appear on t h e r i g h t hand margins of t h e n o t e s : NOTATION NOTE AMOUNT $2,788.05 R u s s e l l Lepp-Whitehall $12,968.74 A.R. Smith T r u s t P a r i s Robert t e s t i f i e d t h e s e p e n c i l n o t a t i o n s were made by him f o r t h e purpose of i n d i c a t i n g , although t h e Bank was payee on t h e n o t e s , t h a t they were h e l d i n t r u s t f o r t h e two persons i n d i c a t e d , The f i n d i n g s of f a c t d i s c l o s e t h a t none of t h e t h r e e n o t e s was p a i d on t h e due d a t e . A t t h e time t h i s f o r e c l o s u r e a c t i o n was brought t h e only payments which had been made were $1,542.86 f o r i n t e r e s t and $27.64 on t h e p r i n c i p a l . commencement of t h e t r i a l . A.R. Smith d i e d p r i o r t o A f t e r t h e a c t i o n was commenced, an a d d i t i o n a l $2,600 was c r e d i t e d t o t h e p r i n c i p a l of t h e $2,788.05 n o t e . Two assignments of e r r o r a r e p r e s e n t e d on appeal. F i r s t , r e g a r d i n g t h e disbursements made t o c r e d i t o r s under t h e l a r g e s t n o t e , Sant contends t h e Bank a s agent breached i t s f i c u c i a r y duty t o Sant a s p r i n c i p a l , i n seeking and o b t a i n i n g r e b a t e s from t h r e e c r e d i t o r s , and consequently t h e Bank i s e n t i t l e d t o no r e l i e f from a c o u r t of e q u i t y . Second, w i t h r e g a r d t o t h e two s m a l l e r n o t e s , Sant contends t h e s e n o t e s were n o t supported by l e g a l c o n s i d e r a t i o n and t h e Bank was n o t a p a r t y i n i n t e r e s t , consequently t h e Bank was n o t e n t i t l e d t o judgment o r d e r i n g f o r e c l o s u r e , The f i r s t i s s u e p e r t a i n s only t o t h e l a r g e s t of t h e t h r e e n o t e s and t h e disbursements made thereunder. The Bank on appeal contends i t became S a n t ' s s p e c i a l agent only f o r t h e l i m i t e d purpose o f d i s b u r s i n g funds t o c r e d i t o r s i n accordance w i t h t h e w r i t t e n a u t h o r i t y Sant gave when he signed t h e "Plan of P a r i s Robert". I n t h i s contention it i s correct. The Bank then contends t h e d u t i e s of t h i s l i m i t e d o r s p e c i a l agency were c a r r i e d o u t and discharged when t h e Bank's p r e s i d e n t wrote t h e checks t o t h e seven c r e d i t o r s f o r t h e f u l l amounts of t h e i r r e s p e c t i v e d e b t s and t h a t any p r i o r , contemporaneous, o r subsequent a c t i o n of s e e k i n g r e b a t e s from t h e s e c r e d i t o r s was a s e p a r a t e f u n c t i o n i n t h e i n t e r e s t of t h e Bank and n o t r e l a t e d t o o r i n breach of i t s s p e c i a l agency d u t i e s t o Sant. I n t h i s contention, i t i s i n error. The g r a n t i n g of t h e l o a n , t h e payment of t h e c r e d i t o r s under t h e "Plan of P a r i s Robert", and t h e t a k i n g of " r e b a t e s " or 11 expenses" from t h e c r e d i t o r s were n o t s e p a r a t e and d i s t i n c t t r a n s a c t i o n s ; r a t h e r , they were i n e x t r i c a b l y r e l a t e d p a r t s of t h e same t r a n s a c t i o n , I n l i g h t of t h e t o t a l . economic r e a l i t i e s of t h e s i t u a t i o n then e x i s t i n g between S a n t , h i s c r e d i t o r s , and t h e Bank, t h e s e p a r a t e and d i s t i n c t t r a n s a c t i o n s t h e o r y propounded by t h e Bank i s n o t supported by t h e r e c o r d . The f a c t t h e ~ a n k ' sagency s t a t u s was of a s p e c i a l o r l i m i t e d c h a r a c t e r h a s been r e l i e d upon by t h e Bank t o support i t s c o n t e n t i o n t h a t i t b o r e no f i d u c i a r y r e s p o n s i b i l i t i e s t o Sant. This c o n t e n t i o n i s a l s o erroneous. The f a c t t h a t an agency r e - l a t i o n s h i p i s of a l i m i t e d o r s p e c i a l n a t u r e does n o t e x t i n g u i s h t h e f i d u c i a r y d u t y , b u t r a t h e r t h a t f i d u c i a r y duty i s l i m i t e d i n scope and o p e r a t i o n t o t h e same degree a s t h e agency t o which i t applies. V i r t u a l l y any r e l a t i o n s h i p between a p r i n c i p a l and agent w i l l have some l i m i t a t i o n i n t h e degree of a u t h o r i t y and scope of purpose, 3 C.J.S. Agency § 138, s t a t e s t h e g e n e r a l r u l e : "As has been p o i n t e d o u t i n !j 1 of t h i s T i t l e , t h e r e l a t i o n s h i p e x i s t e n t between p r i n c i p a l and agent i s a f i d u c i a r y one, demanding c o n d i t i o n s of t r u s t and confidence, Accordingly, i n a l l t r a n s a c t i o n s concerning o r a f f e c t i n g t h e s u b j e c t m a t t e r of h i s a g e n c y , i t i s t h e d u t y of t h e agent t o a c t w i t h t h e utmost good f a i t h and l o y a l t y f o r t h e f u r t h e r a n c e and advancement o f t h e i n t e r e s t s of t h e p r i n c i p a l . " (Emphasis added), Tn t h e i n s t a n t case, the s u b j e c t m a t t e r of t h e agency was of a s p e c i a l l i m i t e d n a t u r e , i . e , making disbursements t o c r e d i t o r s d e s i g n a t e d under and i n accordance w i t h t h e "Plan of P a r i s Robert". W f i n d t h e Bank d i d n o t " a c t w i t h t h e utmost good e f a i t h and l o y a l t y f o r t h e f u r t h e r a n c e and advancement of t h e i n t e r e s t s o f t h e p r i n c i p a l " Sant. It would appear from t h e t r i a l c o u r t ' s asis is of Decision1', p.2, para. VT, t h a t i t reached a s i m i l a r c o n c l u s i o n b u t f a i l e d t o pursue i t on t h e ground of l a c k of a " c l e a r - c u t remedy". The t r i a l court said: "It must b e admitted t h a t t h e t r a n s a c t i o n s amount t o unorthodox banking. I n f a c t , t h e bank i n e n t e r i n g i-nto such t r a n s a c t i o n s w i t h o u t t h e knowledge o r cons e n t of t h e defendants s k a t e d on v e r y t h i n i c e and t h e m a t t e r h a s t r o u b l e d t h e Court v e r y g r e a t l y , But d e s p i t e i t s misgivings and i n t h e absence of a c l e a r c u t remedy t h e Court has h e l d t h e t r a n s a c t i o n s v a l i d a s between a l l p a r t i e s t o t h i s a c t i o n . I I 3 C.J.S. Agency 5 139, e l a b o r a t e s f u r t h e r on t h e n a t u r e of d u t i e s imposed by t h i s r e l a t i o n s h i p : "An agent should n o t , without t h e knowledge of h i s p r i n c i p a l , engage i n t r a n s a c t i o n s which tend t o bring h i s personal i n t e r e s t i n t o c o n f l i c t with h i s obl.igations t o h i s p r i n c i p a l , n o r should he p l a c e himself i n a p o s i t i o n where h i s i n t e r e s t s may become a n t a g o n i s t i c t o t h o s e of h i s p r i n c i p a l , o r s p e c u l a t e i n t h e s u b j e c t m a t t e r of t h e agency. Also an agent should n o t , without a f u l l d i s c l o s u r e o f t h e f a c t t o h i s p r i n c i p a l , seek compensation from both p a r t i e s * * *, " ~ l t h o u g h t h i s r u l e i s g e n e r a l l y h e l d adopted on t h e ground of p u b l i c p o l i c y , c o u r t s have v a r i o u s l y h e l d t h e t h e o r y t o b e based on 'moral o b l i g a t i o n ' , 1 p o s i t i v e l a w ' , 1 p l a i n r e a s o n ' and a d e s i r e t o remove from t h e agent a l l temptation t o n e g l e c t h i s p r i n c i p a l ' s i n t e r e s t . " The p a r t i c u l a r circumstances and e x i g e n c i e s o f t h i s c a s e are such t h a t t h e p r i n c i p l e of j u d i c i a l d i s c r e t i o n t o g r a n t e q u i t a b l e r e l i e f g i v e s way t o j u d i c i a l duty t o g r a n t i t . follows t h e law i n a p p l i c a t i o n of f i d u c i a r y d u t i e s . Equity 3 ~orneroy's Equity J u r i s p r u d e n c e , 5 t h Ed,, 3 959, p. 819, s t a t e s : 11P r i n c i p a l and Agent--Generally. Equity r e g a r d s and t r e a t s t h i s r e l a t i o n i n t h e same g e n e r a l manner, and with n e a r l y t h e same s t r i c t n e s s , a s t h a t of t r u s t e e and b e n e f i c i a r y . The underlying thought i.s t h a t an agent should n o t u n i t e h i s p e r s o n a l and h i s r e p r e s e n t a t i v e c h a r a c t e r s i n t h e same t r a n s a c t i o n ; and e a u i t v w i l l n o t ~ e r m i t him t o be exposed t o temptatioA o r brought i n t o a s i t u a t i o n &here h i s p e r s o n a l i n t e r e s t s c o n f l i c t w i t h t h e i n t e r e s t s of h i s p r i n c i a 1 and w i t h t h e d u t i e s h e owes t o h i s principal (Emphasis added). .' Tn Middlefork C a t t l e Co, v. Todd, 49 Mont. 259, 262, 141 P. 641, t h i s Court s t a t e d : I1 Common honesty d e n i e s t o an a g e n t t h e r i g h t t o p r o f i t a t t h e expense of h i s p r i n c i p a l by chicane and m i s r e p r e s e n t a t i o n . I f t h e r e a r e any i n s t a n c e s wherein t h e law and j u s t i c e a r e o u t of harmony, t h i s i s n o t one of them, f o r t h e c o u r t s a r e of one opinion i n d e c l a r i n g t h a t t h e u n f a i t h f u l agent under such circums t a n c e s should be made t o d i s g o r g e t h e amount of t h e p r o f i t so wrongfully r e a l i z e d . " Here, t h e Bank, i n f a c t , made an a c t u a l cash o u t l a y of $9,091.73 under t h e l a r g e s t n o t e . The t o t a l of t h e e i g h t checks w r i t t e n by t h e Bank w a s $10,306.05, s u b t r a c t i n g t h e $1,214.32 i n r e b a t e s l e a v e s $9,091.73. The remainder of $7,384.57 of t h e n o t e i s a renewal of a p r e e x i s t i n g d e b t . W a r e n o t h e r e h o l d i n g t h a t an a g e n t cannot d e a l s e p a r a t e l y e i f the f a c t s a r e disclosed. W a r e h o l d i n g t h a t h e r e , where t h e e p r i n c i p a l was charged $50 f o r expenses of s e t t i n g t h e m a t t e r up, and where t h e agent was charging i n t e r e s t a t t e n p e r c e n t on t h e money loaned, and t h e a g e n t was s e c r e t l y n e g o t i a t i n g a t t h e same time w i t h c r e d i t o r s f o r o t h e r c o l l e c t i o n f e e s i n t h e form of d i s c o u n t s o r r e b a t e s , t h e f a i l u r e t o d i s c l o s e i s a breach of duty owing between t h e agent and h i s p r i n c i p a l , Therefore we hold a s t o t h e n o t e f o r $17,690.62, Sant was e n t i t l e d t o a c r e d i t f o r t h e amount of $1,214.32, t h e r e b a t e s mentioned h e r e t o f o r e . Sant a t t h i s p o i n t urges t h a t under what h e c a l l s t h e "clean hands" d o c t r i n e , t h e a c t s of t h e Bank w e r e f r a u d u l e n t and t h e r e f o r e t h e e n t i r e t r a n s a c t i o n i s v o i d ; thus Sant would be excused from t h e d e b t . W keep i n mind h e r e t h a t t h e defense e was based upon claims of u s u r i o u s i n t e r e s t r a t e s which were abandoned, and t h e p l e a d i n g s were deemed amended t o conform t o t h e proof. The proof i n o u r view i s more i n t h e way of accounting, I t was n o t t r i e d a s a c a s e on f r a u d , However, s i n c e t h e mortgage was based upon t h e n o t e and s i n c e , a s w i l l h e r e i n a f t e r a p p e a r , t h e o t h e r two n o t e s were f o r moneys n o t due t h e Bank a t a l l , t h e s e c u r i t y of t h e mortgage f a i l s . The underlying d e b t s , however, do n o t . The second i s s u e p e r t a i n s t o t h e n o t e s f o r $2,788.05 and $12,968,74 given by Sant t o t h e Bank under t h e "plan of P a r i s Robert", The s u b - i s s u e s a r e : ( a ) Was t h e r e l e g a l c o n s i d e r a t i o n t o support t h e s e i n d e n t u r e c o n t r a c t s ? (b) Was t h e Bank a r e a l p a r t y i n i n t e r e s t so a s t o have s t a n d i n g t o sue f o r f o r e c l o s u r e on them? From t h e r e c o r d i t appears no disbursement was made by t h e Bank t o Sant, A. R. Smith o r R u s s e l l Lepp under e i t h e r n o t e , Since t h e Bank paid no money under t h e s e two i n d e n t u r e c o n t r a c t s , Sant contends t h e y a r e n o t based on any l e g a l c o n s i d e r a t i o n , The Bank contends t h a t under t h e s t a t u t e s and precedent of Montana law a p r i o r e x i s t i n g d e b t can be c o n s i d e r a t i o n f o r a subsequent new i n d e n t u r e instrument. The ~ank!s c o n t e n t i o n i s c o r r e c t and t h e r e does appear t o have been a p r i o r indebtedness o f Sant i n f a v o r o f A. R. Smith and R u s s e l l Lepp. However f o r t h i s t y p e of p r i o r e x i s t i n g d e b t t o be v a l i d a s c o n s i d e r a t i o n , i t must be between the parties to the contract. The Bank cannot r e l y on p r i o r e x i s t i n g d e b t t o t h i r d p a r t i e s a s c o n s i d e r a t i o n f o r an i n d e n t u r e c o n t r a c t between i t and S a n t , u n l e s s i n making t h e c o n t r a c t and s u i n g on i t , i t i s a c t i n g i n some c a p a c i t y of t r u s t e e s h i p , agency, o r p a r t n e r s h i p f o r t h e two p a r t i e s whose p r i o r c r e d i t a g a i n s t Sant formed t h e consideration f o r the contract. Sant contends t h e Bank was never a c t i n g i n any c a p a c i t y of j o i n t v e n t u r e , t r u s t e e s h i p , agency, o r p a r t n e r s h i p f o r A.R. Smith o r R u s s e l l Lepp i n making t h e s e two i n d e n t u r e c o n t r a c t s o r i n s u i n g f o r f o r e c l o s u r e on them. Robert", Looking back t o t h e "plan of P a r i s t h e c a p t i o n thereon preceding t h e l i s t i n g of t h e n o t e f o r $2,788.05 and t h e n o t e f o r $12,868.74 r e a d s : "PAYING, w i t h Notes, owned by: b u t a s subdinated partners i n collateral:" The words it owned by" e v i d e n t l y r e f e r s t o t h e Bank, s i n c e i t i s t h e s o l e payee and had continuous possession of t h e n o t e s , The word I'subdinated" i s n o t t o b e found i n t h e d i c t i o n a r y , p o s s i b l e t h e intended word was subordinated. "Subdinatedtl a p p e a r s t o be used a s an a d j e c t i v e which modifies t h e noun II p a r t n e r s t 1 , This then would i n d i c a t e t h a t A. R. Smith, R u s s e l l Lepp and t h e Bank were i n some kind of a p a r t n e r s h i p concerning t h e s e two n o t e s . N such r e l a t i o n s h i p i s evidenced on t h e f a c e of t h e n o t e s , which o show t h e Banlc a s s o l e payee. Nor does i t appear from t h e t e s t i - mony of P a r i s Robert o r R u s s e l l Lepp t h a t t h e r e was any e x p r e s s w r i t t e n o r o r a l agreement between A , R, Smith and t h e Bank nor between R u s s e l l Lepp and t h e Bank c r e a t i n g a p a r t n e r s h i p , agency or trust. There a r e only t h e p e n c i l n o t a t i o n s i n t h e margins of t h e n o t e s and t h e e x p l a n a t i o n given of them by Robert, e f f e c t of t h e s e n o t a t i o n s i s q u e s t i o n a b l e a t b e s t , The b i n d i n g The burden of proof t o e s t a b l i s h t h e e x i s t e n c e of a t r u s t , p a r t n e r s h i p , j o i n t v e n t u r e , agency o r any o t h e r such r e l a t i o n s h i p i s upon t h e p a r t y who c l a i m s i t , T r u s t s must be founded on evidence which i s un- mistakable, c l e a r , s a t i s f a c t o r y and convincing. Bender v. Bender, 144 Mont. 470, 397 P.2d 957; P l a t t s v. P l a t t s , 134 Mont. 474, 334 P.2d 722. I n F i r s t S t a t e Bank v , Mussigbrod, 83 Mont. 68, 271 P, 695, c i t e d by t h e Bank, t h i s Court a f f i r m e d a f o r e c l o s u r e d e c r e e i n a s u i t by one of t h r e e n o t e owners, where a l l t h r e e n o t e s were secured by one mortgage. There, however, t h e Court d i d f i n d t h e e x i s t e n c e of an e x p r e s s t r u s t between t h e t h r e e n o t e owners. I n t h e i n s t a n t c a s e t h e Bank i s t h e owner of a l l t h e n o t e s ; A.R, Smith and R u s s e l l Lepp own no i n t e r e s t b~hatsoever. Presumably, t h e Bank would t u r n over t h e money r e a l i z e d i n a f o r e c l o s u r e on t h e s e n o t e s t o t h e A . R. Smith E s t a t e and t o R u s s e l l Lepp. However, if t h e Bank chose t o keep t h e money, Smith and Lepp n o t b e i n g p a r t i e s t o t h e n o t e s and n o t having any e x p r e s s t r u s t , p a r t n e r s h i p , agency, j o i n t v e n t u r e o r o t h e r such r e l a t i o n s h i p w i t h t h e Bank, would have no r e c o u r s e a g a i n s t t h e Bank. Since t h e r e was never a n y r e l e a s e of t h e indebtedness siven t o Sant b y e i t h e r Smith o r Lepp, t h e i r only r e c o u r s e would be a g a i n s t Sant on t h e o r i g i n a l debt, W f i n d t h a t i t would be c o n t r a r y t o law and would ill e s e r v e t h e ends of j u s t i c e and e q u i t y t o all-ow f o r e c l o s u r e under t h e s e circumstances, W hold t h e r e f o r e , r e g a r d i n g t h e n o t e f o r $2,788.05 and e t h e n o t e f o r $12,968,74, t h a t they were n o t supported by l e g a l c o n s i d e r a t i o n between p a r t i e s t o them and t h a t p o r t i o n of t h e l i e n of t h e mortgage which s e c u r e s them should be r e l e a s e d . This h o l d i n g does n o t a f f e c t any p r e e x i s t i n g o r p r e s e n t d e b t between $ a n t and Smith, o r Sant and Lepp. Summarizing t h e h o l d i n g o f t h e Court a s i t concerns a l l t h r e e n o t e s between Sant and t h e Bank: Sant i s e n t i t l e d t o c r e d i t i n t h e amount of $1,214.32 on t h e n o t e f o r $17,690.62. The Bank i s n o t e n t i t l e d t o f o r e c l o s e on t h e n o t e s f o r $2,788.05 and $12,968.74. The judgment of t h e d i s t r i c t c o u r t i s v a c a t e d and t h e cause i s remanded t o t h e d i s t r i c t c o u r t f o r f u r t h e r proceedings c o n s i s t e n t herewith.

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