POMEROY v SALLAZ
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No. 12173 IN THE 3UPREE.IE COURT O THE STATE OF M N A A F OTN 1972 MARLYS J , POMEROY, AS ADMINISTRATRIX OF THE ESTATE O C , M. POMEROY, DECEASED, F P l a i n t i f f and Respondent, -vs - ARTHUR C. SALLAZ, Defendant and A p p e l l a n t . Appeal from: D i s t r i c t Court o f t h e Seventh J u d i c i a l D i s t r i c t , Honorable L. C. Gulbrandson, Judge p r e s i d i n g . Counsel o f Record: For Appellant : Robert W. OIDonovan, Glendive, Montana 59330. Loble, P i c o t t e and Loble, Helena, Montana 59601. Gene A. P i c o t t e a r g u e d , Helena, Montana 59601. F o r Respondent: R u s s e l l C: McDonough, Glendive, Montana 59330. M. J. Hughes a r g u e d , Helena, Montana 59601. Hughes and B e n n e t t , Helena, Montana, Submitted: J u n e 20, 1972 M r . J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion of t h e Court. This i s an appeal from a judgment f o r p l a i n t i f f i n t h e d i s t r i c t c o u r t of t h e seventh j u d i c i a l d i s t r i c t , county of Dawson. Defendant contends t h e d i s t r i c t judge e r r e d i n r e f u s i n g t o g r a n t an order a l t e r i n g and amending t h e judgment and i n t h e a l t e r n a t i v e , r e f u s i n g t o g r a n t an order f o r a new t r i a l . P l a i n t i f f Marlys J. Pomeroy brought t h e a c t i o n t o recover t h e amount of a promissory n o t e i s s u e d t o h e r husband, s i n c e deceased, by defendant Arthur C. S a l l a z and t o f o r e c l o s e on t h e property covered by a c h a t t e l mortgage securing t h e promissory note. The c o u r t , s i t t i n g without a j u r y , entered judgment f o r plaintiff. On November 10, 1968, C. M, Pomeroy, husband of p l a i n t i f f , died. A t t h e time of h i s death he owned a promissory n o t e i n t h e amount of $25,000, secured by a c h a t t e l mortgage dated February 1, 1964, covering r e t a i l l i q u o r l i c e n s e No. 1777 and r e t a i l beer l i c e n s e No. 1777. The n o t e and mortgage were executed by Arthur C. S a l l a z , defendant. Marlys Pomeroy a s a d m i n i s t r a t r i x of t h e e s t a t e of C. M. Pomeroy, had made demand f o r payment of t h e n o t e , b u t S a l l a z has refused t o pay any p a r t of i t . The property t o which t h e beer and l i q u o r l i c e n s e s a r e a t t a c h e d i s t h e Longhorn Bar, 116 South M e r r i l l , Glendive, Montana. The r e a l property was owned by Mrs. Lulu R, Pomeroy u n t i l i t was s o l d i n 1968 t o S a l l a z . The l i c e n s e s were owned by Lulu R. Pomeroy u n t i l 1954, when they were t r a n s f e r r e d t o h e r son, C.M. On March 9, 1956, C. M. t o one John Wrigg. Pomeroy. Pomeroy t r a n s f e r r e d t h e l i c e n s e s However, C , M. Pomeroy was named on t h e l i c e n s e s a s mortgagee because concurrently with t h e t r a n s f e r of t h e l i c e n s e s t o Wrigg, Pomeroy r e q u i r e d Wrigg t o execute a promissory n o t e t o him i n t h e amount of $25,000. mortgage executed by Wrigg, This note was secured by t h e c h a t t e l I n May 1963, Wrigg t r a n s f e r r e d h i s i n t e r e s t i n t h e l i c e n s e s t o William Reinhardt and S a l l a z , a t which time they executed a promissory note i n t h e amount of $25,000 payable t o C. M. Pomeroy, and secured by a c h a t t e l mortgage on t h e l i c e n s e s . This l a t t e r n o t e and mortgage were s i m i l a r t o t h e n o t e and mortgage executed by Wrigg when he acquired t h e l i c e n s e s i n 1956. Reinhardt and S a l l a z continued t o operate t h e Longhorn Bar a s p a r t n e r s u n t i l 1964, when Reinhardt t r a n s f e r r e d h i s i n t e r e s t i n t h e b a r and licenses t o Sallaz. When S a l l a z , i n d i v i d u a l l y , took over operation of t h e b a r and l i c e n s e s i n 1964, he a l s o executed t o C , M. Pomeroy a n o t e i n t h e amount of $25,000 and signed a mortgage pledging t h e l i c e n s e s a s s e c u r i t y f o r t h e note. the s u b j e c t of t h i s lawsuit. This n o t e and mortgage a r e The l i c e n s e s i n question a r e p r e s e n t l y i n t h e name of Arthur C. S a l l a z , and s t a t e t h a t C. M. Pomeroy i s t h e mortgagee. The i s s u e presented t o t h i s Court i s whether o r n o t t h e d i s t r i c t c o u r t e r r e d by e n t e r i n g judgment a g a i n s t defendant S a l l a z because t h e n o t e and c h a t t e l mortgage together merely c o n s t i t u t e a s e c u r i t y agreement. I n o t h e r words, i s t h e t i t l e t o t h e r e t a i l beer l i c e n s e and the r e t a i l l i q u o r l i c e n s e encumbered by a $25,000 mortgage o r i s t h e defendant c o r r e c t i n h i s contention t h a t he owns t h e l i c e n s e s f r e e of a l l encumbrances. Appellant S a l l a z argues t h a t t h e i n t e n t i o n of Pomeroy was t o prevent t h e removal of t h e l i c e n s e s from t h e premises during t h e r e n t a l term. H e urges t h i s Court t o look beneath t h e s u r f a c e of t h i s t r a n s a c t i o n , i n order t o determine t h e t r u e i n t e n t of t h e p a r t i e s when t h e n o t e and mortgage were executed, W agree e with a p p e l l a n t t h a t e q u i t y demands c l o s e s c r u t i n y of t h e t r a n s action and a r e i n accord with h i s c i t e d a u t h o r i t y t h a t i n e q u i t y , substance, not form, c o n t r o l s . However, we can not accept h i s contention that the note secured by the mortgage is merely a security agreement to insure the rental of the bar; and, in order to accomplish this security arrangement, the documents were given to insure the licenses would remain attached to the premises. The district court found, and we agree, that a valid note was signed by appellant. Appellant's argument is that other notes were executed by previous tenants of the premises and Pomeroy never attempted to collect on those notes, which indicates that Pomeroy never intended to collect on appellant's note. Upon careful scrutiny, this argument quickly evaporates. A genuine note was held by Pomeroy and he was free to exercise his option to collect or to refrain from collecting as he deemed necessary. Upon his death the note passed to his estate, and the estate is correct in callingthe note due. Appellant argues that $25,000 is far above the top dollar price of $1,800, which was the amount recently paid for similar licenses in the Glendive area. He contends this discrepancy indicates that payment of the note was never anticipated by the parties. We cannot accept this argument, The licenses which recently sold for $1,800 in the Glendive area were disposed of at a sheriff's sale. This sale was a forced auction sale and the value of the licenses may have been considerably more than the price received. This Court has no way of knowing what the going price for liquor and beer licenses might be between a willing buyer and a willing seller, The value of such licenses might well be $25,000. The licenses were valuable and appellant may have made a bad business decision to agree to pay $25,000 for them, but appellant's business sense is not a question for this Court. Both parties advance arguments as to whether or not the documents in question were negotiable. At the time the note and mortgage were executed by appellant to Pomeroy, the Negotiable Instrument Law was in effect in Montana. Under the then existing law, we find that the note was negotiable and under section 55-301, R.C.M. 1947, a presumption exists that consideration was given for the promissory note. This presumption is coupled with the fact that a common practice existed for a new owner of the Longhorn Bar, in consideration of his receiving the liquor and beer licenses, to endorse on the licenses the name of C M. . Pomeroy as mortgagee and at the same time for the new owner to execute a promissory note in the amount of $25,000 and a mortgage, The note and mortgage given to Pomeroy by appellant supplanted a note and mortgage given to Pomeroy previously by Reinhardt and appellant in the same amount. This indicates appellant's contention that the documents were merely given as security to prevent removal of the licenses from the premises during the rental term, must fail. Valuable consideration did exist for the issuance of the note and mortgage and we find it was not merely a security agreement. Appellant further contends he executed the documents to provide Pomeroy security for rent due on the premises under the terms of the February 1964 lease; therefore, appellant did not buy the licenses from Pomeroy, nor did he owe any monetary or other obligation to Pomeroy, other than the rent for the premises containing the Longhorn Bar. contention. We cannot accept this Sallaz and Pomeroy executed a negotiable note, secured by a $25,000 mortgage, on the liquor and beer licenses of the Longhorn Bar. Sallaz now owns the liquor and beer licenses, subject to a mortgage; and for him to receive the licenses free and clear he would have to pay the administratrix of the Pomeroy estate $25,000. If appellant, as he would have us believe, acquired ownership of the licenses from his predecessor Reinhardt, then appellant would have had no reason to execute the note and mortgage, Appellant paid Reinhardt $1,600 for the one-half interest in the Longhorn Bar. That amount, appellant claims, included the inventory, fixtures and licenses which constituted the bar business. As discussed heretofore, a retail liquor and beer license is worth at least $1,800 in the Glendive area. We cannot accept his contention that the $1,600 paid by appellant to Reinhardt for his one-half interest included inventory, fixtures and licenses. If this were true, why did appellant execute the note secured by a mortgage to Pomeroy; and why did Pomeroy's name appear on the licenses as mortgagee? Further, appellant argues that Lulu Pomeroy did not transfer the ownership of the licenses to her son in 1956; consequently, in 1968 when she sold the premises containing the bar to appellant, he became the owner. Lulu Pomeroy was unable to testify at trial due to a heart attack. If appellant be- lieved that he would be prejudiced by Mrs. Pomeroy's absence from the trial, he had the right to ask for a continuance until such date as she would be available to testify. done. This was not The district court did not err in denying appellant's motion for a new trial. The trial court's order denying a new trial, when reviewed by this Court, is presumed correct and the burden of overcoming this presumption is upon the appellant, See State ex rel. Elakovich v. Zbitnoff, 142 Mont. 576, 386 P.2d 343, and cases therein cited, We find that no error is shown in the trial court; and, therefore, the judgment of that court is affirmed. We concur: / A Chief ~ u s t i c e /- 1 Associate Justices, I
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