CULBERTSON STATE BANK v DAHL
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No. 80-151 I N THE SUPREME COURT OF THE STATE O M N A A F OTN 1980 CULBERTSON STATE BANK OF CULBERTSON, MONTANA, a Montana S t a t e C o r p o r a t i o n , P l a i n t i f f and Respondent, HAROLD D H a n d GENEVA DAHL, husband AL and w i f e a n d MAURICE SYTHE, Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court of t h e Seventh J u d i c i a l D i s t r i c t , I n and f o r t h e County o f R i c h l a n d . H o n o r a b l e L. C . G u l b r a n d s o n , J u d g e p r e s i d i n g . C o u n s e l o f Record: For Appellants: B j e l l a , N e f f , R a t h e r t & Wahl, W i l l i s t o n , N o r t h Dakota W. Gene T h e r o u x , Wolf P o i n t , Montana For Respondent: Garden, McCann, and S c h u s t e r , Wolf P o i n t , Montana S u b m i t t e d o n b r i e f s : J u l y 2 2 , 1980 Decided : ~ i l e d : OCT 2 2 1980 -V B. Clerk OCT 2 2 1980 Mr. Chief Justice Court. Frank I. H a s w e l l P laintiff-respondent this action t o County foreclose District jury, entered and C u l b e r t s o n S t a t e Bank ( B a n k ) b r o u g h t e s t a t e mortgage i n t h e Richland a real Court. The D i s t r i c t judgment foreclosure, , delivered the Opinion of the in favor Harold of Court, the and H a r o l d and G e n e v a D a h l , sitting Bank and Geneva as m a k e r s , decree The D a h l s a l s o e x e c u t e d e s t a t e mortgage a of appeal. e x e c u t e d a $20,000 t h e payee, w h i c h was r e c o r d e d on t h e same d a t e . a Dahl missory note t o Maurice Sythe, a real without on F e b r u a r y 1 4 , pro1974. i n Sythe's favor The t e r m s o f t h e n o t e s p e - c i f y t h a t i t i s t o be p a i d i n e q u a l a n n u a l i n s t a l l m e n t s o f $ 4 , 0 0 0 p l u s 7% i n t e r e s t , note where also p a y m e n t s t o commence on F e b r u a r y 1 4 , 1 9 7 5 . designates payment is to the Culbertson be made. a c c o u n t w i t h t h e Bank. The State Bank n o t e was as the The place p l a c e d i n an e s c r o w The e s c r o w a c c o u n t was o p e n e d b y M a u r i c e S y t h e on May 1 0 , 1 9 7 4 . Maurice November 6, sisted of Sythe 1974. an obtained note from the Bank on The n o t e s t a t e d t h a t t h e B a n k ' s s e c u r i t y c o n - "Assignment t h i s provision, a $10,000 o f H a r o l d Dahl Note." Consistent with t h e " D a h l n o t e " was e n d o r s e d b y S y t h e , payable t o t h e Bank. On March 27, 14, 1975, missory note held $5,572.50 ($4,000 Bank payment February 1975, had in notified H a r o l d Dahl that not received the escrow. been Dahl Mr. made on t h e p r i n c i p a l ) on March 31, t o be a p p l i e d t o t h e n o t e h e l d i n e s c r o w . March 1975, 31, vice-president, Sythe. cerning a Sythe's $5,000 told he Alan had testified a1 r e a d y that belief that nothing on p r i n c i p a l $10,000 note paid Dahl was on March 31, n o t e f r o m B a n k on A p r i l 23, i n to w h i c h was $20,000 owing something said the Bank or Sythe a t which con- Sythe. credited obtained time to about anything i n t e r e s t was 1975. 1975, 1975, of executive said had n o t and $ 3 8 2 . 6 4 payment Bank's the had owed a pro- He t e s t i f i e d t h a t on Peterson, h i m money b u t t h a t D a h l $5,000 to that Peterson Sythe owing he on the a he t o l d Alan Peterson that took a written this date. Bank sent he d i d n o t assignment The owe H a r o l d D a h l of assignment the was Dahl real recorded a l e t t e r t o H a r o l d Dahl a n y money. e s t a t e mortgage on on A p r i l January 23, 27, 1975, 1976, on 1976. informing h i m t h a t a w r i t t e n a s s i g n m e n t o f t h e m o r t g a g e was t a k e n . l e t t e r was s e n t on J a n u a r y 2 6 , Bank Another which informed Dahl t h a t the a s s i g n m e n t h a d b e e n r e c o r d e d and t h a t a p a y m e n t was due F e b r u a r y 14, 1976. Bank his two further did not $5,000 receive notes. any payments Harold Dahl also G e n e v a D a h l and M a u r i c e S y t h e . trial of process against upon note and that payments directly 4, to make any was to regard 1975; on Geneva defense at the Maurice J a n u a r y 1, 1 9 7 5 ; from a g a i n s t H a r o l d and This Dahl trial on was introduced came December He promissory He action that liability. $20,000 Sythe. including: an $11,800 Sythe. and discharged 1977, Bank was n e v e r a b l e t o make s e r - Maurice Harold Harold Dahl's this refused on p a y m e n t s on t h e n o t e w h i c h h a d b e e n a s s i g n e d t o t h e Bank. T h e B a n k f i l e d a c o m p l a i n t on O c t o b e r 3 , vice from Maurice Sythe on 19, for 1979. he h a d p a i d t h e attempted note several a check t o S y t h e f o r $9,520 promissory note from Sythe t o show been had to made exhibits in d a t e d March h i m s e l f dated a n d an u n n e g o t i a t e d c h e c k d a t e d A p r i l 2 3 , 1975, made o u t b y h i m s e l f and a l l e g e d l y s i g n e d b y S y t h e f o r $ 5 , 5 7 2 . 5 0 , c o n t a i n i n g a n o t a t i o n t h a t i t was a r e f u n d o f t h e p a y m e n t made b y Dahl. The appellant expended considerable effort at trial i n a t t e m p t i n g t o p r o v e t h a t d i r e c t p a y m e n t s h a d b e e n made t o M a u r i c e Sythe, and t h e r e s p o n d e n t d e v o t e d a s i m i l a r e f f o r t i n attempting t o r e b u t t h e s e a1 l e g a t i o n s . The D i s t r i c t Court c u t e d on F e b r u a r y 1 4 , found 1974; a real a n d r e c o r d e d on t h e same d a t e ; n o t e w h i c h was of payment incorporated that: t h e $20,000 n o t e was e x e - e s t a t e m o r t g a g e was executed one o f t h e t e r m s o f t h e p r o m i s s o r y i n the mortgage s p e c i f i e d t h e p l a c e as t h e C u l b e r t s o n S t a t e Bank; Maurice Sythe endorsed the p r o m i s s o r y n o t e p a y a b l e t o t h e Bank and d e l i v e r e d Bank on May assignment mortgage, $5,000 10, of 1974; the the note Bank, and for the delivery of l o a n e d M a u r i c e S y t h e $10,000 on April 23, 1975; the Bank consideration the is the with interest Harold from and Geneva attorney fees March 31, to 1975 the enforcing i s Bank; the the of the 1974 and "owner and H a r o l d and G e n e v a D a h l on t h e n o t e a s s i g n e d t o t h e Bank; Dahl in lawful the of assignment on November 6, h o l d e r " o f a l l t h e n o t e s and t h e m o r t g a g e ; h a v e p a i d o n l y $4,000 it to now and due the collection and Bank of $11,000 owing has the from incurred note. The D i s t r i c t C o u r t c o n c l u d e d t h a t a l l o f t h e t e r m s and c o n d i t i o n s o f the note had entitled been to broken have the by the and that enforced mortgage makers the Bank and foreclosed was and to r e c e i ve a t t o r n e y f e e s . On a p p e a l , erred in t h e a p p e l l a n t contends t h a t t h e D i s t r i c t Court admitting correspondence which the Bank received from Maurice Sythe under t h e "business r e c o r d s " e x c e p t i o n t o t h e hearsay It i s rule. a l s o contended t h a t t h e r e is insufficient evi- dence t o s u p p o r t t h e judgment. With regard t o appellant's contention t h a t there i s insufficient evidence Commercial to support the Code c o n t r o l 1 i n g . judgment, we The D i s t r i c t find Court of the 30-1-201(20), Section n o t e w h i c h was MCA. As a result of Bank's recover unless 30-3-307 ( 2 ) , As assertion e s t a b l is h e s previously that stated, 1 i a b i 1i t y had appellant's defense. payment sole been d i s c h a r g e d MCA, defense by However, only discharges the maker's i n s t r u m e n t under s e c t i o n 30-3-603, "holder." as a Sect i o n MCA. g e d l y made d i r e c t l y t o M a u r i c e S y t h e . defense o f a status it i s entitled to and i t s p r o d u c t i o n o f t h e i n s t r u m e n t , defendant s i n c e i t was endorsed by Maurice Sythe. "holder" the Uniform p r o p e r l y found t h a t t h e B a n k was a " h o l d e r " o f t h e p r o m i s s o r y n o t e , i n possession the was payments his a1 l e - the affirmative l i a b i l i t y on t h e i f p a y m e n t i s made t o t h e The a p p e l l a n t n e v e r a t t e m p t e d t o p r o v e t h a t payment was made t o t h e " h o l d e r . He i n s t e a d a t t e m p t e d t o p r o v e t h a t p a y m e n t s w e r e made t o M a u r i c e S y t h e , the court determined appellant would instrument. defnse not that the 30-3-307 ( 2 ) , e v e n had b e e n made t o S y t h e , from liability the on the the appellant f a i l e d t o establish a v a l i d Bank was Bank the had Thus, entitled is to recover under section MCA. Since payments payee. have been d i s c h a r g e d I n short, and the original assignee o f t o a the holder of t h e mortgage which secures decree of foreclosure to the the note the note, extent of and a valid it i s e n t i t l e d the debt due and o w i n g o n t h e d a t e o f commencement. Appellant admitting also asserts correspondence that the D i s t r i c t received from Court Maurice erred Sythe in which g e n e r a l l y d e n i e d t h a t D a h l h a d made a n y p a y m e n t s d i r e c t l y t o h i m . The t w o l e t t e r s w h i c h were a d m i t t e d u n d e r t h e " b u s i n e s s r e c o r d s " exception t o t h e hearsay r u l e , the Bank in an effort to over objection, collect Sythe's were s o l i c i t e d by note and i n f o r m a t i o n c o n c e r n i n g D a h l ' s a1 l e g a t i o n s o f p a y m e n t . address this no e f f e c t letters i s s u e on t h e m e r i t s , on t h e was to person--not a valid defense error not 103(a), outcome rebut of the "holder." and Mont .R.Evid., "a litigation. were to substantial i.e. it would of stated, find right not Affirmed. ,I The defense previously i f we obtain We n e e d n o t s i n c e t h e e v i d e n c e c o u l d have appellant's As even affecting the to Chief Justice be payment this error, of effect the it was of the to a not a would party," reversible be Rule error. y e - , ----- - - - - - - - - - - - - - - - - -----Jus 'ces
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