First Citizens Bank v. Sullivan, DA 06-0719.
| Decision Date | 16 December 2008 |
| Docket Number | No. DA 06-0719.,DA 06-0719. |
| Parties | FIRST CITIZENS BANK, Plaintiff and Appellant, v. Patrick J. SULLIVAN and Greg J. Eide, Defendants and Appellees. |
| Court | Montana Supreme Court |
For Appellant: Patrick T. Fleming, Fleming & O'Leary, PLLP, Butte, Montana.
For Appellee: Gregory C. Black, Sean E. Johnson, Corette Pohlman & Kebe, Butte, Montana.
¶ 1 First Citizens Bank (the Bank) brought this action to recover a deficiency due on a loan to Glacier Apparel Company, Ltd. (Glacier Apparel), which Patrick J. Sullivan and Greg J. Eide had guaranteed. Sullivan and Eide denied liability and filed counterclaims, including claims that Eide's guaranty had been exonerated and he had suffered damages as a result of the Bank's refusal to release a second mortgage on his home, and that Sullivan suffered damages as a result of the Bank's failure to liquidate collateral in a commercially reasonable manner. A jury in the Second Judicial District Court, Silver Bow County, found the Bank had not liquidated Glacier Apparel's collateral in a commercially reasonable manner, Eide's guaranty had been exonerated and he had been damaged by the Bank's refusal to release his guaranty, and Sullivan had established that a surplus would have been generated if the Bank would have liquidated the collateral in a commercially reasonable manner. The District Court then entered judgment awarding Sullivan and Eide their costs, expenses and attorney fees, resulting in a total judgment against the Bank of $260,111.25. The Bank appeals. We affirm.
¶ 2 The issues are:
¶ 3 1. Did the District Court abuse its discretion in prohibiting the Bank from disclosing to the jury that Sullivan had pled guilty to a felony in an unrelated matter and had invoked his Fifth Amendment rights during a deposition in a Minnesota civil case?
¶ 4 2. Did the District Court abuse its discretion in refusing to allow attorney J. Richard Orizotti to offer expert opinions?
¶ 5 3. Was sufficient evidence presented to support the jury's verdict that Eide was exonerated from his personal guaranty to the Bank?
¶ 6 4. Did the District Court abuse its discretion in awarding Sullivan and Eide $9,600 in legal fees for trial time of attorney Sean Johnson?
¶ 7 5. Did the District Court err in awarding expert witness fees and costs to Sullivan and Eide?
¶ 8 In September 1997, the Bank agreed to provide a $15,000 revolving line of credit to Glacier Apparel for operation of a retail store in Whitefish, Montana. The line of credit was secured by the business's inventory, accounts, equipment and general intangibles. In addition, Sullivan provided a personal guaranty as the business's sole shareholder.
¶ 9 In January 2000, Sullivan sold a portion of the stock in Glacier Apparel to Eide. The two men decided to expand the company by opening additional stores in both Montana and Minnesota. For purposes of the expansion, the Bank agreed to increase Glacier Apparel's revolving line of credit to $75,000, and Eide and Sullivan each signed personal guaranties for that amount. As additional collateral, the Bank took a second mortgage on Eide's Fargo, North Dakota, home.
¶ 10 In April 2001, Sullivan re-purchased Eide's stock in Glacier Apparel, and Eide's association with the business ended. Then, on June 19, 2001, Sullivan and the Bank signed a Change of Terms Agreement under which Glacier Apparel's revolving line of credit was converted to a term loan repayable at $590.08 per month for five years, at which time a balloon payment of $72,356.32 would become due. Sullivan signed the Change of Terms Agreement as both a guarantor of the loan and an officer of Glacier Apparel. The Bank did not seek Eide's signature or his consent to the Change of Terms Agreement. After June 2001, the Bank refused to provide Glacier Apparel an operating line of credit.
¶ 11 By letter dated July 6, 2001, Eide asked the Bank to cancel his guaranty and release the mortgage on his North Dakota home. The Bank refused to do so. Eide's attorney revoked his guaranty in a letter dated August 24, 2001, but the Bank refused to recognize that revocation.
¶ 12 In early 2002, Sullivan proposed to the Bank that he undertake a liquidation of some or all of the inventory collateral of the Glacier Apparel stores, for which purpose he requested an additional $20,000 loan to pay delinquent store rents. The Bank refused to complete the loan transaction without a personal guaranty of all of Glacier Apparel's obligations from Sullivan's son, which Sullivan was not willing to obtain. Sullivan then submitted a liquidation plan, to which the Bank did not agree. In April 2002, Glacier Apparel surrendered possession of the inventory collateral of its two Whitefish, Montana, stores and its two Missoula, Montana, stores to the Bank by having its attorney deliver to the Bank the keys to those stores.
¶ 13 Bank representatives took possession of the inventory and fixtures in the four Whitefish and Missoula stores, boxed that collateral and transported it to Butte, Montana, for storage at Christie's Warehouse. The Bank then solicited bids for the repossessed collateral by advertising a bulk sale in the legal sections of the Sunday classified ads in newspapers in Missoula, Great Falls, Helena, Butte, Bozeman and Billings.
¶ 14 The advertised sale of Glacier Apparel's collateral received only two bids: one from a retail clothing vendor in Butte for $7,000 and another from two Bank customers for $13,750. The Bank rejected both bids as insufficient. Sullivan again offered to liquidate the collateral, but the Bank refused his offer. Sullivan then hired RGIS Inventory Specialists to conduct an inventory of the collateral in the Bank's possession. RGIS identified over 7,000 items of collateral with a cost basis of $239,290.34. Subsequently, the Bank rejected yet another offer by Sullivan to liquidate the collateral.
¶ 15 In late January 2003, the Bank gave Eide and Sullivan notice that it intended to sell the collateral in a private sale, which it did, for $15,000. After applying the sale proceeds against Glacier Apparel's debt, and adding to that debt repossession and liquidation expenses of over $26,000, the Bank determined Sullivan and Eide owed it over $11,000 more than Glacier Apparel had owed when it surrendered the collateral.
¶ 16 The Bank then filed this action against Sullivan and Eide to recover the balance due on Glacier Apparel's indebtedness. Sullivan counterclaimed that the Bank had failed to liquidate the collateral in a commercially reasonable manner. Eide joined that counterclaim, and also alleged the Bank improperly had refused to release the second mortgage on his home and that he was exonerated from his personal guaranty because the Bank had made a material change in the terms of the guaranteed obligation without his consent or knowledge.
¶ 17 The case was tried to a jury in a week-long trial. In a three-page verdict form, the jury found the Bank had neither liquidated Glacier Apparel's collateral in a commercially reasonable manner nor established the amount of proceeds that would have been realized if it had liquidated the collateral in a commercially reasonable manner. The jury further found a surplus would have been generated had Glacier Apparel's collateral been liquidated in a commercially reasonable manner, and Sullivan had established the amount of that surplus as $154,014. The jury found Eide's guaranty to the Bank was exonerated, the Bank's refusal to release Eide's guaranty and second mortgage caused him damage and the amount of damage to be awarded Eide was $7,000.
¶ 18 Following a post-trial hearing, the District Court awarded Sullivan and Eide their statutory costs of $2,900.73. The court further ordered that Sullivan and Eide were entitled to additional costs of $9,287.30 under the terms of the guaranties. The court also awarded Sullivan $2,586.02 and Eide $263.20 for their actual expenses incurred in attending depositions and trial. Finally, the court awarded Sullivan and Eide their attorney fees of $84,060. The Bank appeals.
¶ 19 We review a district court's evidentiary rulings for abuse of discretion. McDermott v. Carie, LLC, 2005 MT 293, ¶ 10, 329 Mont. 295, ¶ 10, 124 P.3d 168, ¶ 10. We review a jury's verdict only to determine whether substantial credible evidence in the record supports the verdict. Upky v. Marshall Mountain, LLC, 2008 MT 90, ¶ 22, 342 Mont. 273, ¶ 22, 180 P.3d 651, ¶ 22. We review an award of attorney fees and costs for abuse of discretion. See e.g., Lewistown Propane Co. v. Moncur, 2002 MT 349, ¶ 19, 313 Mont. 368, ¶ 19, 61 P.3d 780, ¶ 19.
¶ 20 Did the District Court abuse its discretion in prohibiting the Bank from disclosing to the jury that Sullivan had pled guilty to a felony in an unrelated matter and had invoked his Fifth Amendment rights during a deposition in a Minnesota civil case?
¶ 21 Sullivan moved in limine to prohibit any testimony or evidence that he had exercised his Fifth Amendment right during a deposition in a separate civil lawsuit in Minnesota, or that he had pled guilty to charges of falsifying records to obtain a Small Business Administration loan in another case. The District Court granted his motion in writing, stating such testimony or evidence would be irrelevant and unduly prejudicial to Sullivan's defense and counterclaim. Just before trial began, the court orally clarified that this ruling would apply "unless the door is opened by the defendant."
¶ 22 On appeal, the Bank contends Sullivan's trial strategy was to portray himself to the jury as a feeble, grandfatherly figure who would never lie or fabricate. The Bank claims it had no way of effectively impeaching Sullivan because it was prohibited from mentioning his conviction and...
To continue reading
Request your trial
- Covey v. Brishka
- DiMarzio v. Crazy Mountain Const., Inc., DA 10-0097.
-
First Fed. Bank of the Midwest v. Greenwalt
...was discharged by the alteration of the repayment terms of the note without the surety's consent); First Citizens Bank v. Sullivan, 347 Mont. 452, 200 P.3d 39, 44–45 (2008) (finding that, even where the surety authorized the bank to “alter, compromise, renew, extend, accelerate, or otherwis......
-
State v. Schauf
... ... of the initial blood test because the trooper had not first informed Schauf of her right to obtain an independent blood ... First Citizens Bank v. Sullivan, 2008 MT 428, ¶¶ 20-25, 347 Mont. 452, ... ...