The opinion
No. 13051
I N THE SUPREME C TR O THE STATE O MONTANA
OJT F F
1975
FIRST SECURITY BANK O BOZEMAN,
F
formerly known a s S e c u r i t y Bank and
T r u s t Company of Bozeman, a Montana
Corporation,
P l a i n t i f f and Respondent,
A N L J. THOLKES,
R OD
Defendant and Appellant.
Appeal from: D i s t r i c t Court of t h e Eighteenth J u d i c i a l D i s t r i c t ,
Honorable Jack Shans trom, Judge p r e s i d i n g .
Counsel of Record:
For Appellant :
Bolinger and Wellcome, Bozeman, Montana
H. A, Bolinger argued, Bozeman, Montana
For Respondent :
Morrow, Nash and Sedivy, Bozeman, Montana
Edmund P. Sedivy argued, Bozeman, Montana
Submitted: ~ e c e m b e r9 , 1975
3 8 1976
Decided :
MP,$ 3 G 1.;TS
Filed :
M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court.
This i s an a p p e a l from a summary judgment e n t e r e d
i n an a c t i o n on a promissory n o t e i n t h e d i s t r i c t c o u r t ,
G a l l a t i n County. The d i s t r i c t c o u r t , Hon. Jack D. Shanstrom,
p r e s i d i n g , r u l e d t h e defendant Arnold J. Tholkes was indebted
t o p l a i n t i f f S e c u r i t y Bank and T r u s t Company of Bozeman i n
t h e amount of $4,372.00, a t t o r n e y f e e s i n t h e amount o f $1,000,00,
and c o s t s o f t h e a c t i o n . From t h e summary judgment, defendant:
appeals.
I n J u l y 1971, Arnold J. Tholkes (defendant) obtained
from t h e S e c u r i t y Bank and T r u s t Company of Bozeman, (Bank),
a loan t o b e used f o r t h e purchas,e of a used automobile, home
improvements and t o pay some miscellaneous b i l l s . The Bank made
t h e loan t o defendant on J u l y 22, 1971. Defendant executed an
i n s t a l l m e n t n o t e i n t h e amount of $6,533.40, t o be r e p a i d monthly
i n payments of $108.89 f o r 60 mbnths (5 y e a r s ) and was signed
by defendant and h i s w i f e , Lovena M. Tholkes. The n o t e f u r t h e r
provided t h a t any balance remaining upon m a t u r i t y o r upon d e f a u l t
would draw i n t e r e s t a t t h e r a t e of 9% per annum. A l i f e insurance
p o l i c y on t h e l i f e of defendant was a l s o obtained a t t h i s time and
t h e premium added i n t o t h e amount o f t h e i n s t a l l m e n t n o t e .
A s s e c u r i t y f o r repayment defendant and h i s w i f e signed
a UCC S e c u r i t y Agreement d a t e d J u l y 25, 1971. It d e s c r i b e d t h e
used c a r (a 1967 P o n t i a c ) and a r e n t a l home i n Belgrade, Montana,
owned by defendant, presumably where t h e home improvements were
t o be made. A l i e n was f i l e d a g a i n s t t h e automobile w i t h t h e
r e g i s t r a r of motor v e h i c l e s , Deer Lodge, and a UCC Financing
Statement was f i l e d w i t h t h e c l e r k and r e c o r d e r , G a l l a t i n County,
describing t h e r e n t a l property.
The r e c o r d o f payments t o t h e Bank by defendant, a s s e t
f o r t h i n t h e ~ a n k ' sl e d g e r , r e v e a l s t h a t defendant was g r a n t e d
e x t e n s i o n s o f payments on two o c c a s i o n s . A t the date t h i s action
w a s f i l e d , o n l y 18 of 32 r e q u i r e d payments had been made.
On March 1 3 , 1974, a complaint was f i l e d by t h e Bank
a l l e g i n g t h a t d e f e n d a n t owed t h e Bank $3,591.33, as t h e u n p a i d
b a l a n c e o f t h e promissory n o t e , p l u s a c c r u e d i n t e r e s t a t t h e
r a t e o f 9% p e r annum from t h e d a t e o f March 1 2 , 1974. The com-
p l a i n t a l s o asked f o r $1,000.00 i n a t t o r n e y f e e s . A t t h e same
t i m e t h e Bank f i l e d a w r i t o f a t t a c h m e n t on d e f e n d a n t ' s r e n t a l
p r o p e r t y i n Belgrade.
Defendant by answer a d m i t t e d t h e e x i s t e n c e o f t h e n o t e
b u t d e n i e d any b a l a n c e due and owing. Defendant c o u n t e r c l a i m e d
(1) t h a t t h e r a t e of i n t e r e s t on t h e l o a n was u s u r i o u s and
d e f e n d a n t w a s e n t i t l e d t o t w i c e t h e amount o f i n t e r e s t he had
p a i d t o t h e Bank; (2) t h a t t h e f i n a n c i n g statement c o n s t i t u t e d
s l a n d e r o f t i t l e upon t h e d e f e n d a n t ' s r e a l p r o p e r t y , c l a i m i n g
$5,000.00 a c t u a l damages and $10,000 p u n i t i v e damages; (3) t h a t
t h e ~ a n k ' sf a i l u r e t o s e c u r e l i f e i n s u r a n c e on t h e w i f e f o r t h e
n o t e was wrongful and d e f e n d a n t i s e n t i t l e d t o $5,000.00 damages.
I n t e r r o g a t o r i e s were t a k e n from b o t h p a r t i e s ; d e f e n d a n t ' s
d e p o s i t i o n was t a k e n ; a h e a r i n g w a s h e l d and e x h i b i t s were o f f e r e d
and a d m i t t e d . The Bank f i l e d a motion f o r summary judgment and
memorandum i n s u p p o r t , wherein t h e Bank claimed t h a t i n t h e com-
p l a i n t i t made a m i s t a k e a s t o t h e amount now owed by d e f e n d a n t .
The Bank claimed i t was, i n f a c t , owed $3,957.70.
On March 24, 1975, t h e d i s t r i c t c o u r t e n t e r e d summary
judgment d e c r e e i n g t h a t t h e documents b e f o r e t h e c o u r t "show t h a t
t h e r e i s no genuine i s s u e a s t o any m a t e r i a l f a c t and t h a t t h e
p l a i n t i f f i s e n t i t l e d t o Judgment as a m a t t e r o f law 9: 9: *."
The c o u r t t h e n awarded t h e Bank $3,957.70, p l u s a c c r u e d i n t e r e s t of
$414.30, p l u s a t t o r n e y f e e s o f $1,000.00.
Defendant a p p e a l s and p r e s e n t s f o r t h i s C o u r t ' s r e v i e w
four issues:
1. Whether t h e i n t e r e s t charged on t h i s l o a n w a s
u s u r i o u s and whether t h e Bank claimed t h e c o r r e c t amount a s
due and owing?
2. Whether t h e f i l i n g o f t h e f i n a n c i n g s t a t e m e n t con-
s t i t u t e d a s l a n d e r o f t i t l e upon d e f e n d a n t ' s r e a l p r o p e r t y ?
3. Whether t h e Bank w r o n g f u l l y f a i l e d t o o b t a i n l i f e
i n s u r a n c e on d e f e n d a n t ' s w i f e , s i n c e d e c e a s e d ?
4. Whether t h e a t t o r n e y f e e s were r e a s o n a b l e and
properly allowed?
W should keep i n mind t h a t t h e l o a n h e r e was a n i n s t a l l m e n t
e
l o a n provided f o r under t h e terms o f s e c t i o n 5-527, R.C.M. 1947.
T h i s s t a t u t e p e r m i t s c h a r g i n g a r a t e of i n t e r e s t i n e x c e s s o f 10%
p e r annum on i n s t a l l m e n t l o a n s and r e c e i v i n g t h e i n t e r e s t i n advance.
The i n t e r e s t i s added t o t h e p r i n c i p a l amount o f t h e n o t e and t h e
t o t a l amount d i v i d e d i n t o t h e a g r e e d number o f e q u a l i n s t a l l m e n t s .
The n o t e i n i s s u e h e r e was i n t h e amount o f $6,533.40 and b r e a k s
down a s :
a) P r i n c i p a l , t h e sum of ...........$4,500.00
b) L i f e i n s u r a n c e premium on t h e
l i f e o f Arnold J. Tholkes ....... 244.64
c) Filing fee ....................... 10.00
d) Precalculated i n t e r e s t charges ... 1,778.76
Total.. ......... $6,533.40.
Defendant would have t h e u s e o f $4,500, b u t would make monthly
i n s t a l l m e n t payments o f $108.89 f o r 60 months (5 y e a r s ) . The
amount o f i n t e r e s t he would pay i n 5 y e a r s was $1,778.76, which
c o n v e r t s t o a n a n n u a l r a t e o f s i m p l e i n t e r e s t of 13.31% p e r annum.
Under s e c t i o n 5-527, R.C.M. 1947, t h e maximum i n t e r e s t i n
terms o f add-on o r d i s c o u n t i n t e r e s t t h a t can b e l e g a l l y t a k e n under
Montana law on $4,500 i s $1,794.10, computed:
$11.00 p e r $100 per year on t h e f i r s t $300 f o r
5 y e a r s (33.00 x 5) = .........................$165.00
$9.00 p e r $100 p e r y e a r on t h e n e x t $700 f o r
5 y e a r s ($63.00 x 5 ) = ........................ 315.00
$7.00 p e r $100 p e r year on t h e n e x t $3,754.64
f o r 5 y e a r s [$3,500 + 244.64 + 10.00 =
$3,754.641 ($262.82 x 5) = ................... 1,314.10
T o t a l a l l o w a b l e i n t e r e s t ...$1,794.10.
See Montana National Bank o f Bozeman v. Kolokotrones, Mont .
, 535 P.2d 1017, 32 St.Rep. 526,529.
Defendant was charged i n t e r e s t a t a r a t e l e s s than t h e
maximum allowed by s e c t i o n 5-527, R.C.M. 1947. The i n t e r e s t r a t e
i s not usurious. Defendant o f f e r e d no evidence t h a t he had made
any payments o t h e r than t h o s e presented by t h e Bank; nor d i d he
c o n t e s t t h e mathematic c a l c u l a t i o n s of t h e Bank.
Although never c l e a r l y s t a t e d by defendant, he seems
t o argue t h e r e i s some s i g n i f i c a n c e i n t h e f a c t t h a t t h e Bank
f i l e d a UCC f i n a n c i n g statement which only d e s c r i b e d t h e d e f e n d a n t ' s
r e a l p r o p e r t y (on which t h e home improvements were t o be made
from some o f t h e loan proceeds) and n o t t h e improvements t o be
made, a s i t p e r t a i n s t o t h e c h a r a c t e r of t h e l o a n , i . e . , a charge
a g a i n s t t h e r e a l e s t a t e and a t r a n s f o r m a t i o n from i n s t a l l m e n t n o t e
t o a conventional loan governed by s e c t i o n 47-125, R.C.M. 1947,
which l i m i t s i n t e r e s t t o 10% p e r annum.
Although t h e f i n a n c i n g statement was i n t h i s c a s e i n c o r -
r e c t l y completed i n t h a t i t named o n l y t h e r e a l p r o p e r t y and UCC
r e q u i r e s t h a t t h e f i x t u r e s and t h e r e a l p r o p e r t y be l i s t e d i n
s e c u r i t y agreements and f i n a n c i n g s t a t e m e n t s , n e v e r t h e l e s s t h e r e
i s no a u t h o r i t y o f f e r e d t h a t would support t h e argument t h a t t h i s
f i n a n c i n g statement could p u r p o r t t o c l a i m an i n t e r e s t i n r e a l
property. See Section 867A-9-102(1), s e c t i o n 87A-9-104(j),R.C.M.
1947.
A f i n a n c i n g statement does n o t meet t h e s t a t u t o r y
d e f i n i t i o n a l requirements of a mortgage ( s e c t i o n 52-202,R.C.M.
1947) and could n o t be f i l e d a s a mortgage ( s e c t i o n 52-212, R.C.M.
1947). Defendant c i t e s no c a s e law and we can f i n d none, t h a t a
f i n a n c i n g statement of t h i s type can c l a i m an i n t e r e s t i n r e a l
p r o p e r t y t o accomplish t h e t r a n s f o r m a t i o n argued h e r e .
Defendant a l s o contends t h e f i l i n g of a UCC f i n a n c i n g
statement was a s l a n d e r of t i t l e a g a i n s t h i s r e a l p r o p e r t y d e s c r i b e d
i n t h a t statement. He c i t e s no a u t h o r i t y i n support of t h i s
contention. I n 50 Am J u r 2d, L i b e l and S l a n d e r , 5541, p. 1060,
appears t h i s d e f i n i t i o n of s l a n d e r of t i t l e :
"One who m a l i c i o u s l y p u b l i s h e s f a l s e m a t t e r
which b r i n g s i n q u e s t i o n o r d i s p a r a g e s t h e
t i t l e t o p r o p e r t y , thereby c a u s i n g s p e c i a l
damage t o t h e owner, may be h e l d l i a b l e i n a
c i v i l a c t i o n f o r damages. The e s s e n t i a l
elements of t h e cause of a c t i o n , which a r e
subsequently d i s c u s s e d , a r e t h e u t t e r i n g and
p u b l i c a t i o n of t h e slanderous words by t h e
defendant, t h e f a l s i t y o f t h e words, malice,
and s p e c i a l damages. The a c t i o n i s n o t f o r
t h e words spoken, b u t f o r s p e c i a l damages f o r t h e
l o s s s u s t a i n e d by reason of t h e speaking and
p u b l i c a t i o n of t h e s l a n d e r . " (Emphasis s u p p l i e d . )
S e e - C o n t i n e n t a l Supply Co. v. P r i c e , 126 Mont. 363, 374, 251
The s o - c a l l e d "slander" n o t being a c t i o n a b l e b u t t h e
r e s u l t i n g s p e c i a l damages being t h e b a s i s f o r t h e a c t i o n , an
averment o f s p e c i a l damages i s necessary. C o n t i n e n t a l Supply
Co. v. P r i c e , surpa. Rule 9 ( g ) , M.R.Civ.P., s p e c i f i c a l l y pro-
vides :
"When items of s p e c i a l damage a r e claimed,
they s h a l l be s p e c i f i c a l l y s t a t e d . "
The complaint, o r i n t h i s i n s t a n c e t h e c o u n t e r c l a i m ,
must show t h a t t h e s p e c i a l damages a r e t h e n a t u r a l and probable
consequence of t h e s l a n d e r . I n h i s counterclaim, defendant c l a i m s
he was damaged t o t h e e x t e n t of $5,000 by t h e s l a n d e r . I n response
t o t h e ~ a n k ' sI n t e r r o g a t o r y No. 25, defendant answered:
"INTERROGATORY No. 25: I n paragraph I V of Counterclaim,
you a l l e g e s l a n d e r of t i t l e and damages t h e r e f o r , i n
t h e sum o f $5,000.00. P l e a s e s t a t e how you have i n -
c u r r e d such damages and e x p l a i n i n d e t a i l how you have
computed t h i s a l l e g e d amount of damages.
"ANSWER: The $5,000.00 damage c l a i m i s f o r g e n e r a l
dama e s s u s t a i n e d by t a k i n g a s e c u r i t y i n t e r e s t i n
& p r o p e r t y which i s n o t permitted by t h e s t a t u t e s
of t h e S t a t e of Montana and t h e c o s t s and expenses
of m defending t h i s a c t i o n . I f (Emphasis s u p p l i e d . )
y
F a i l u r e t o support t h e a l l e g a t i o n t h a t t h e f i l i n g of t h e UCC
f i n a n c i n g statement c o n s t i t u t e s s l a n d e r , and more important t h e
defendant ' s own admission concerning s p e c i a l damages, h i s c l a i m
of s l a n d e r of t i t l e f a i l s .
The t h i r d i s s u e on appeal i s t h e c l a i m of defendant t h a t
t h e Bank should have procured l i f e insurance on t h e l i f e o f
d e f e n d a n t ' s w i f e , a c o s i g n e r on t h e promissory n o t e and s i n c e
deceased. It i s elementary t h a t b e f o r e defendant can p r e v a i l on
such a c l a i m a g a i n s t t h e Bank, he must p r e s e n t competent evidence
t h e Bank had a l e g a l duty t o procure such insurance. Defendant
presented no such evidence. He admitted i n h i s d e p o s i t i o n t h a t
he never p a i d t h e premium f o r any i n s u r a n c e , o t h e r than t h a t on
h i s own l i f e . The Bank was never given money by him t o purchase
such i n s u r a n c e , n o r could i t have purchased i t , even i f money had
been given. The i n s u r a n c e a p p l i c a t i o n form of Transwestern L i f e
Insurance Company, t h e i n s u r a n c e c a r r i e r involved h e r e , s p e c i f i -
cally stated:
" *** i n t h e c a s e of more than one d e b t o r on
t h e same d e b t , t h e f i r s t named d e b t o r only s h a l l
be e l i g i b l e f o r insurance. 1 1
Defendant next r a i s e s t h e i s s u e of t h e p r o p r i e t y o f t h e
c o u r t ' s award of $1,000.00 a t t o r n e y f e e s . The r u l e was very r e c e n t l y
enunciated by t h i s Court i n Crncevich v. Georgetown Recreation
Corp. , Mont . , 541 P.2d 56, 59, 32 St.Rep. 963, 968:
11
To be s u r e t h e r e i s a s p l i t among t h e s t a t e s a s
t o t h e need f o r proof of a r e a s o n a b l e a t t o r n e y ' s f e e
when one i s c o n t r a c t e d f o r o r appears on t h e f a c e of
a note. See 18 A.L.R.3d 733, 736, 740. But i n c o n t e s t e d
c a s e s w e a r e i n c l i n e d to f o l l o w t h o s e s t a t e s
r e q u i r i n g t h e i n t r o d u c t i o n o f proof from which
a r e a s o n a b l e f e e may be determined. To award
a f e e i n such a c a s e w i t h o u t proof would b e
L O d i s r e g a r d t h e fundamental r u l e s o f e v i d e n c e .
An award o f f e e s , l i k e any o t h e r award, must b e
based on competent evidence. See L y l e v. L y l e ,
( F l a . 1964) 167 So.2d 256, 257. Furthermore
t h e proper determination of a l e g a l f e e i s c e n t r a l
t o t h e e f f i c i e n t a d m i n i s t r a t i o n of j u s t i c e and
t h e maintenance of p u b l i c c o n f i d e n c e i n t h e bench
and b a r . See Baruch v. G i b l i n , 122 F l a . 5 9 , 164
So. 831,833. Because nf r e s p o n d e n t s 1 f a i l u r e o f
proof t h e award o f f e e s was p r o p e r l y d e n i e d . 11
Evidence should have been i n t r o d u c e d i n t h e d i s t r i c t c o u r t
t o d e m o n s t r a t e t h e p r o p e r amount of a t t o r n e y f e e s due t h e Bank.
I n F o r r e s t e r and MacGinniss v. B . & M.Co., 29 Mont. 397, 409,
74 P. 1088 ( a l s o c i t e d i n C r n c e v i c h ) , t h i s Court e s t a b l i s h e d
these guidelines:
11 1 -1-
A
-L
fi The c i r c u m s t a n c e s t o b e c o n s i d e r e d i n
9
,
-
rb
d e t e r m i n i n g t h e compensation t o b e r e c o v e r e d a r e
t h e amount and c h a r a c t e r o f t h e s e r v i c e s r e n d e r e d ,
t h e l a b o r , t i m e and t r o u b l e i n v o l v e d , t h e c h a r a c t e r
and importance o f t h e l i t i g a t i o n i n which t h e s e r -
v i c e s w e r e r e n d e r e d , t h e amount o f money o r t h e v a l u e
of p r o p e r t y t o b e a f f e c t e d , t h e p r o f e s s i o n a l s k i l l
and e x p e r i e n c e c a l l e d f o r , t h e c h a r a c t e r and s t a n d i n g
i n t h e i r profession of t h e a t t o r n e y s . 9:* The
r e s u l t s e c u r e d by t h e s e r v i c e s o f t h e a t t o r n e y s may
be c o n s i d e r e d a s a n i m p o r t a n t element i n d e t e r m i n i n g
r h e i r value. 111
Without evidence of any o f t h e above f a c t o r s b e i n g i n t r o d u c e d i n
che d i s t r i c t c o u r t , t h e award o f $1,000.00 i n a t t o r n e y fees was
improper.
Rule 56 ( c ) , M.R. Civ. P . , p r o v i d e s i n p e r t i n e n t p a r t :
h he judgment sought s h a l l b e r e n d e r e d f o r t h w i t h i f
t h e p l e a d i n g s , d e p o s i t i o n s , answers t o i n t e r r o g a t o r i e s ,
and admissions on f i l e show t h a t t h e r e i s no genuine
i s s u e a s t o any m a t e r i a l f a c t and t h a t t h e moving p a r t y
is e n t i t l e d t o a judgment a s a m a t t e r of law. 11
- 4 f t e r a thorough review o f t h e f a c t s and i s s u e s o f t h i s
)case, w e Eind t h e r e was no genuine i s s u e a s t o any m a t e r i a l f a c t
2nd t h e noving p a r t y , t h e Bank, was e n t i t l e d t o a judgment a s a
n a c t e r of law. The judgment of t h e d i s t r i c t c o u r t i s a f f i r m e d on
this issue.
('he juugriierlt J J ~ c n e d i s ' i r i c c court *JII tile i s s u e of
a'icozney fees i s v a c a t e d and t h e c a u s e remanded f o r an e v i d e n t i a r y
h e a r i n g t o d e t e r m i n e p r o p e r a t t o r n e y f e e s t o b e awarded.
..---- -
Justices.