                                      No. 12965

          I N T E SUPREME COURT O THE STATE O M N A A
               H                 F           F OTN

                                         1975



WILLIAM C. MAGELSSEN and CHARLOTTE T. MAGELSEEN,

                              P l a i n t i f f s and Respondents,
          -VS   -
WILLIAM G. MOUAT, T r u s t e e , and WESTERN B N S O
                                                AK    F
BILLINGS, B i l l i n g s , Montana, a Montana Corporation,

                              Defendants and Appellant.

WESTERN BANK O BILLINGS,
              F
                   Third-Party P l a i n t i f f ,
          -VS   -
HARRISON FAGG,
                              Third-Party Defendant.



Appeal from:        D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a l D i s t r i c t ,
                    Honorable E. G3rdner Brownlee, Judge p r e s i d i n g .

Counsel of Record:

     For Appellant :

                Davidson, Veeder, Roberts & Baugh, B i l l i n g s ,
                 Montana
                John R. Davidson argued, B i l l i n g s , Montana
                William G, Mouat appeared, B i l l i n g s , Montana

     For Respondents :

                Moses, Kampfe, T o l l i v e r and Wright, B i l l i n g s ,
                 Montana
                D, Frank Kampfe argued, B i l l i n g s , Montana
                Crowley, Kilbourne, Haughey, Hanson and Gallagher,
                 B i l l i n g s , Montana

                                                      -




                                                 Submitted:          June 16, 1975


Filed :
Mr.J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e
Court.



                                                                                             1
            T h i s i s a n a p p e a l from a judgment o f t h e d i s t r i c                    court,
Yellowstone County, o r d e r i n g d e f e n d a n t s William G . Mouat                          Trustee,

and Western Banksof B i l l i n g s , t o d e l i v e r t o p l a i n t i f f s a deed
conveying them any r i g h t , t i t l e and i n t e r e s t o f t h e bank

c e r t a i n r e a l property.
                                                                                             I     in



            William C . Magelssen and C h a r l o t t e T . Magelssen
                                                                                             b
t h i s a c t i o n t o r e c o v e r t h e sum of $55,000 p a i d t o d e f e n d a n t banks
                                                                                                 rought



by t h e f i d e l i t y i n s u r e r of t h e b a n k s ' employees, and t o

t h e banks t o reconvey r e a l p r o p e r t y conveyed t o t h e bankb under
                                                                                             T   equire



a t r u s t indenture foreclosure s a l e .

a s k i n g t h e d i s t r i c t c o u r t to:                                              I
                                                             The banks c o u n t e r c l imed,



             (1) r a t i f y and a f f i r m t h e f o r e c l o s u r e p r o d e e d i n g s ;

             ( 2 ) o r d e r t h e payment by Magelssens of t h e banks l o s s e s

($14,500) t o g e t h e r w i t h i n t e r e s t , r e p r e s e n t i n g t h e d i f f e r e n c e be-

tween t h e i n s u r a n c e payment t o t h e banks ( $ 5 5 , 0 0 0 ) , and t h e a c t u a l

l o s s t o t h e banks ( $ 6 9 , 5 0 0 ) , o c c a s i o n e d by Loans made by W i l l i a m
Magelssen t o one George Manuel.

            Two i s s u e s a r e r a i s e d on a p p e a l .

            1.     Whether t h e e v i d e n c e s u p p o r t s t h e d i s t r i c t c o u r t ' s

d e c i s i o n o r d e r i n g t h e banks t o d e l i v e r t o Magelssens a deed convey-
i n g t o them a l l t h e r i g h t , t i t l e and i n t e r e s t of t h e banks e v i -

denced by t h e t r u s t i n d e n t u r e d a t e d September 9, 1971, and a l l r i g h t ,

t i t l e o r i n t e r e s t o b t a i n e d by t h e banksupon t h e t r u s t i n d e n t u r e

f o r e c l o s u r e proceedings.
            2.     Whether t h e c o u r t e r r e d i n f a i l i n g t o award t h e banks
t h e sum of $14,500 t o g e t h e r w i t h i n t e r e s t and a t t o r n e y f e e s and
c o s t s i n foreclosing t h e t r u s t indenture.
            I t i s n e c e s s a r y t o s e t o u t i n some d e t a i l t h e f a c t u a l s i t -

uation i n order t o d i s t i l l the rather limited legal questions in-

volved i n t h e case.
             The f i s c a l maneuvering of William C . Magelssen s e r v e s

a s t h e background t o a s s e s s who owes whom--the                         problem p r e s e n t e d

by t h e i s s u e s .       For some t w e n t y y e a r s a f t e r g r a d u a t i n g from

c o l l e g e p l a i n t i f f Magelssen worked i n v a r i o u s banks i n t h i s s t a t e

h o l d i n g v a r i o u s p o s i t i o n s from t e l l e r and bookkeeper, t o t h e head

of t h e mortgage and r e a l e s t a t e d e p a r t m e n t of h i s l a s t employer.

H e became a n a s s i s t a n t t o t h e v i c e - p r e s i d e n t      and l a t e r v i c e - p r e s -

i d e n t of t h e S e c u r i t y Bank o f B i l l i n g s , Montana.               These twenty

y e a r s of banking e x p e r i e n c e r e s u l t e d i n h i s d e c i s i o n , i n 1970,

t o o r g a n i z e h i s own banking empire and d u r i n g t h a t y e a r he organ-

i z e d two banks, t h e Western S t a t e Bank and t h e Western Bank of

B i l l i n g s , e a c h c a p i t a l i z e d a t $500,000.         To have a c o n t r o l l i n g i n -

t e r e s t i n t h e banks he purchased 3,210 s h a r e s , 6 6 . 4 % of t h e s h a r e s

i s s u e d , a t $105 p e r s h a r e , f o r a t o t a l c o s t o f $674,100.                  To f i n a n c e

t h i s p u r c h a s e he e n t e r e d i n t o t h e s e f i s c a l d e a l i n g s :

             $40,000 from h i s s a v i n g s .

             $40,000 borrowed from t h e F i r s t N a t i o n a l Bank i n G l e n d i v e ,

                      Montana, and t h e Midland Bank i n B i l l i n g s , Montana.

             $300,000 borrowed from h i s f a t h e r .

             $50,000 borrowed from t h e Western Banks w i t h W.                             B. Van

                      F l e e t a s accomodation p a r t y .

             $100,000 borrowed from Western Banks, w i t h Lloyd H o s t e t l e r

                      a s accomodation p a r t y .

             $100,000 borrowed from Western Banks t o pay Voegele on

                      a loan.

             $30,000 borrowed from Western Banks w i t h Mardaus a s

                      accomodation p a r t y .

             $25,000 borrowed from Western Banks w i t h H a r r i s o n Fagg

                      a s accomodation p a r t y .

             Total       -   $685,000.

             To s e c u r e t h e accomodation p a r t i e s t o h i s borrowing from
h i s own banks Magelssen gave t h e p a r t i e s h i s own p e r s o n a l n o t e s .

To s e c u r e t h e $300,000 l o a n from h i s f a t h e r h e gave h i s common

s h a r e s i n b o t h banks a s s e c u r i t y .        A l l of t h i s was i n J u l y , 1970.

On October 1 9 , 1970 h i s f a t h e r c a l l e d up h i s l o a n .                 A t t h i s point

t h i n g s went from bad t o worse.

             To g e t money t o c o v e r t h e f a t h e r ' s l o a n of $300,000 p l u s

i n t e r e s t , Magelssen c o n t a c t e d a money b r o k e r from Ohio named George

Manuel i n a n e f f o r t t o s e c u r e a t e r m c a p i t a l l o a n f o r t h e two

Western Banks of B i l l i n g s , and a proposed bank i n Bozeman, f o r

some $900,000.             Manuel came t o B i l l i n g s and Magelssen a g r e e d t o

pay him a f e e of from 3% t o 5% f o r o b t a i n i n g such a l o a n .                         Manuel

o b t a i n e d a 90 day l o a n from a F l o r i d a company, Fred Brown                      &    Co.,

which was used t o c o v e r t h e $300,000 p l u s i n t e r e s t l o a n of h i s

father.        He t h e n gave Manuel $7,475 a s a n i n i t i a l f e e f o r o b t a i n -

i n g t h e l o a n and o b t a i n e d promises from Manuel f o r f u r t h e r f i n -

a n c i n g from S w i t z e r l a n d s o u r c e s .

             On October 2 0 , 1970, t h e two Western Banks o f B i l l i n g s ,

t h r o u g h Magelssen, e a c h l o a n e d Manuel, $35,000.                    Manuel gave a s

s e c u r i t y t o e a c h bank h i s p e r s o n a l p r o m i s s o r y n o t e .    A t t h e same

t i m e Manuel d e p o s i t e d t h e $35,000 o b t a i n e d from t h e Western S t a t e

Bank i n M a g e l s s e n ' s p e r s o n a l a c c o u n t .   In addition, a s "collateral"

f o r t h e two n o t e s f o r $35,000 e a c h , Manuel gave Magelssen, f o r

t h e banks, c e r t a i n s t o c k i n F i r s t United T r u s t C o . ,            a real estate

investment t r u s t .          Manuel t o l d Magelssen t h a t t h e s t o c k was l i s t e d

on t h e N e w York exchange, b u t on i n v e s t i g a t i o n t h e s t o c k was worth-

less.      Manuel ended up i n p r i s o n b u t n o t f o r h i s o p e r a t i o n s i n

Montana.

             From t h e p r o c e e d s of t h e o t h e r $35,000 l o a n t o Manuel by

t h e Western S t a t e Bank, Manuel took $5,000 i n c a s h and d e p o s i t e d

$30,000 i n h i s p e r s o n a l c h e c k i n g a c c o u n t .

             From t h e above abw-viated background of f i s c a l o p e r a t i o n s
    of the two Western Banks, it was no surprise that various
    banking officials became alarmed and early in 1971 both state
    bank examiner officials and the F.D.I.C.   told plaintiff Magelssen
    and his board that either a purchaser would have to be found for
    the banks or they would be closed.
              As a result of the problems raised by the banking officials,
    Magelssen was ousted from his position as president of the two
    Western Banks and the Board of Directors hired one George E. "Bud"
    Hansen, one of its directors, to secure a purchaser.    Hansen had
    two purchasers, one deal fell through, but in August a sale was
    consumnated with one John Vucurevich to purchase the capital stock
    of the banks.    The original offer was $1,000,000, which was re-
    fused.    Subsequently, it went to $1,025,000 which resulted in the
    sale.    That amount was some $25,000 short of paying off all the
    obligations of the banksand Hansen testified that Vucurevich and
    one of his officials, a Jack Dano, offered to take a second mort-
    gage on Magelssen's home in the amount of $25,000, which was agreed
    upon and done by Magelssen and his wife.    It is this amount issue
    one on appeal is directed to.
             As part of the Vucurevich purchase, Magelssen received as
    consideration for selling his stock the complete payment of his
    father's obligation (he had reborrowed $300,000) plus the payment
    of all the accomodation loans with interest.    In addition, he
    testified he was promised the Manuel notes which by that time had

'
V   been written off by the b n ' but were still in the banks' posses-
                             ak.
    sion.    Magelssen was paid $103.97 per share for his stock while
    all other stockholders received $110.    The stock had been purchased
    for $105 per share.
              On January 8, 1971, the Insurance Company of North America
    commenced a file on the Western Banks of Billings that ultimately
    resulted in the payment to those banks, on February 11, 1972, an
    amount of $55,000.    This was a compromise amount-for the banks
c l a i m e d $70,000, which was t h e amount w r i t t e n o f f by t h e banks

o f t h e two Manuel n o t e s .

             A t t h e t i m e of t h e p u r c h a s e Magelssen a r r a n g e d t h a t t h e

accomodation n o t e s of Mardaus, Van F l e e t and Fagg were p a i d o f f .

However, Magelssen a r g u e s t h a t a s t o t h e Fagg n o t e , t h e banks

t r i e d t o g e t p a i d t w i c e on it.          Once t h r o u g h t h e f o r e c l o s u r e on

h i s t r u s t i n d e n t u r e , and t h e second t i m e t h r o u g h a law s u i t f i l e d

a g a i n s t Fagg, which w a s f i n a l l y dropped.                 Magelssen a r g u e s t h a t

t h e Manuel n o t e s were l i k e w i s e t o have been c a r e d f o r and t h e

n o t e s r e t u r n e d t o him as f u l l y s a t i s f i e d .       Further, t h a t the

b a n k s ' l a t e r a c t i o n i n o b t a i n i n g a $55,000 s e t t l e m e n t from t h e

i n s u r a n c e companies s h o u l d have e i t h e r been r e t u r n e d t o him o r a t

l e a s t a p p l i e d a g a i n s t h i s $25,000 n o t e .        The banks a r g u e t h a t

a l t h o u g h t h e y p a i d no s e p a r a t e c o n s i d e r a t i o n f o r t h e Manuel n o t e s

t h e y a r e t h e owners of t h e n o t e s by v i r t u e of t h e p u r c h a s e of t h e

c a p i t a l s t o c k and a r e a c c o r d i n g l y e n t i t l e d t o t h e s e t t l e m e n t .

             The t r i a l c o u r t a f t e r a f u l l h e a r i n g and a f t e r c o n s i d e r -

i n g a l l t h e e v i d e n c e s u b m i t t e d by t h e v a r i o u s d e p o s i t i o n s , e n t e r e d

i t s own f i n d i n g s o f f a c t , c o n c l u s i o n s of law and judgment, p r o v i d -
ing i n pertinent part:

             " ' T h a t $55,000.00 i s what i s now c a u s i n g t h e
             t r o u b l e . The banks c l a i m t h e money a l l e g i n g t h a t
             t h e Manuel n o t e s a r e t h e p r o p e r t y o f t h e banks
             and t h e r e f o r e t h e money b e l o n g s t o t h e banks.
             The P l a i n t i f f s c l a i m t h e money a l l e g i n g t h a t had
             t h e Manuel n o t e s been l i q u i d a s s e t s a t t h e t i m e
             of t h e s a l e t o Vucurevich t h e c a s h t h e P l a i n t i f f s
             would have r e c e i v e d would have been $70,000
             g r e a t e r , t h e r e f o r e t h e money b e l o n g s t o t h e P l a i n -
             tiffs.          The P l a i n t i f f s a l s o a l l e g e t h a t t h e a g r e e -
             ment w i t h M r . Vucurevich was t h a t t h e Manuel n o t e s
             were t o be t h e p r o p e r t y of t h e P l a i n t i f f s and
             t h e r e f o r e any money b r o u g h t i n based on t h o s e
             n o t e s belongs t o t h e P l a i n t i f f s . '

             "Without d o u b t a t t h e t i m e o f t h e bank s a l e
             n e i t h e r P l a i n t i f f s nor Mr. Vucurevich b e l i e v e d t h e
             Manuel n o t e s had any v a l u e .           The n e g o t i a t i o n s un-
             doubtedly r e s u l t e d i n t h e p a r t i e s understanding
             t h a t M r . Vucurevich would n o t pay one c e n t f o r
             t h o s e n o t e s , and t h e r e f o r e P l a i n t i f f s w e r e s t u c k
            w i t h t h a t l o s s . There i s some c o n f l i c t i n t h e
            t e s t i m o n y a s t o p h y s i c a l d e l i v e r y of t h e n o t e s :
            t h e P l a i n t i f f s a l l e g e t h e y were t o r e c e i v e t h e
            a c t u a l n o t e s . The c o u r t f i n d s some b a s i s f o r
            t h i s b e l i e f , e s p e c i a l l y from t h e t e s t i m o n y of
            M r . J a c k P. Dano r e g a r d i n g n o n - d e l i v e r y of t h e
            notes.

            "The c o u r t h a s l i t t l e t r o u b l e f i n d i n g t h a t M r .
            Vucurevich d i d n o t pay any c o n s i d e r a t i o n f o r t h e
            n o t e s because he and t h e P l a i n t i f f f e l t t h e y were
            w o r t h l e s s . N e i t h e r d o e s t h e c o u r t have any
            t r o u b l e f i n d i n g t h a t M r . Vucurevich would have
            p a i d a c o n s i d e r a t i o n f o r t h e n o t e s had t h e y been
            v a l i d o b l i g a t i o n s . I t was n o t proved t o t h e s a t -
            i s f a c t i o n of t h e Court t h a t M r . Vucurevich a c t u a l l y
            bought t h e two Manuel n o t e s from t h e P l a i n t i f f s ( i n
            effect).
            "The c o u r t would have l i t t l e t r o u b l e f i n d i n g t h a t
            n e i t h e r p a r t y i s e n t i t l e d t o t h e $55,000, b u t i t i s
            on hand, and t h e c o u r t c o n c l u d e s it s h o u l d be
            d i v i d e d i n some manner between t h e p a r t i e s .

             "Therefore,
             "IT I S ORDERED:

             "1. That H a r r i s o n Fagg i s n o t o b l i g a t e d t o any of
             the parties herein;

             "2.  That a l l c l a i m s , c r o s s c l a i m s o r c o u n t e r c l a i m s
            o f any p a r t y i s d i s p o s e d o f by t h i s judgment,
            whether s p e c i f i c a l l y r e f e r r e d t o o r n o t .

             " 3 . That t h e banks keep t h e $55,000.00, b u t t h e y
             a r e o r d e r e d t o d e l i v e r t o t h e P l a i n t i f f s a deed
             conveying t o t h e P l a i n t i f f s any r i g h t , t i t l e o r
             i n t e r e s t t h e banks have and t o t h e p r o p e r t y c o v e r e d
             by t h e n o t e and t r u s t I n d e n t u r e d a t e d September 9 ,
             1971, i n c l u d i n g any r i g h t , t i t l e o r i n t e r e s t o b t a i n e d
             by f o r e c l o s u r e p r o c e e d i n g s ;
             "4.     A l l p a r t i e s a r e t o pay t h e i r own c o s t s . "

             To d e t e r m i n e whether t h e r e i s s u f f i c i e n t e v i d e n c e t o

s u p p o r t t h e t r i a l c o u r t ' s f i n d i n g s and c o n c l u s i o n s , we f i r s t examine

t h e p u r p o s e of t h e p u r c h a s e of t h e bonds o f t h e I n s u r a n c e Company
of America by t h e two Western Banks of B i l l i n g s , r e f e r r e d t o a s a
b a n k e r s ' b l a n k e t bond.    The bond was p u r c h a s e d by e a c h bank, n o t

by Magelssen, and one of i t s p r o v i s i o n s was t o c o v e r " D i s h o n e s t y " :
           "A l o s s t h r o u g h any d i s h o n e s t a c t o f any of t h e
             employees committed anywhere and whether committed
             alone o r i n collusion with o t h e r s , including l o s s ,
             t h r o u g h any s u c h a c t of any of t h e employees, of
             P r o p e r t y h e l d by t h e I n s u r e d f o r any purpose o r i n
          any capacity and whether so held gratuitously or
          not, and whether or not the Insured is liable
          therefor. 'I
         From the testimony of Mr. Veeder, Claims Supervisor of
the Insurance Company of North America, who finally negotiated
the settlement of $55,000 with the two banks, and all of the
documentary evidence introduced concerning that settlement, it
is obvious that the settlement was made under the quoted "Dis-
honesty" acts clause of the policy.    TOO, from the same source
of evidence, it is clear the acts referred to were the acts of
Magelssen when he was an officer of the two banks in his dealings
with Manuel.
         To now argue Magelssen can personally benefit from those
acts through insurance he had purchased to protect the banks is
untenable.     The policies were to protect the banks and not Magelssen
and to argue that he sold his stock at a lower price than the other
stockholders, or that all the new owners had declared the Manuel
notes of no value, just begs the issue.    Magelssen cannot, and
should not, benefit from his own wrongdoing.    His note and those
of Manuel became the property of the two banks at the time of the
sale.
         Plaintiff Magelssen cites Gilmore v. Gilmore,       Mont   .
    ,   530 P.2d 480, 32 St.Rep. 23, 26; Stromberg and Brown v.
Seaton Ranch Co., 160 Mont. 293, 306, 502 P.2d 41, to support his
proposition on appeal that:
         "We must indulge the presumption that the
         judgment of the district court is correct and
         wiil not be disturbed unless there is a clear
         preponderance of evidence against it when
         viewed in the light most favorable to the pre-
         vailing party."
         We have no argument with the case authority cited but there
is like authority for this Court to set aside a trial court's find-
ings where there was no substantial evidence as a basis for its
findings.    If a clear and satisfactory showing is not made in
s u p p o r t oi t h e f i n d i n g s , t h i s C o u r t , i n p r o p e r c a s e s , w i l l s e t

them a s i d e .        Gray v . G r a n t , 62 Mont. 452, 206 P.2d 410; K a s a l a v .

K a l i s p e l l Pee Wee B a s e b a l l League, 1 5 1 Mont. 1 0 9 , 439 P.2d 6 5 ;

J u d s o n v . Anderson, 118 Mont. 1 0 6 , 165 P.2d 1 9 8 .

             W e f i n d t h e t r i a l c o u r t e r r e d i n f a i l i n g t o award t h e

banks t h e sum of $ 1 4 , 5 0 0 , t o g e t h e r w i t h i n t e r e s t , a t t o r n e y f e e s

and c o s t s i n f o r e c l o s i n g t h e t r u s t i n d e n t u r e .

             The f i n d i n g s o f f a c t , c o n c l u s i o n s o f l a w , and judgment

a r e set a s i d e .      The c a u s e i s r e t u r n e d t o t h e t r i a l c o u r t w i t h

d i r e c t i o n s t o e n t e r judgment             appellant-defendants.




W e qoncur:         .




   Chief ~ u s t i c e




   Justices
