Richland Nat. Bank & Trust v. Swenson

• Decision Date: 08 August 1991
• Docket Number: No. 91-071,91-071
• Citation: 816 P.2d 1045,249 Mont. 410
• Court: Montana Supreme Court
• Parties: RICHLAND NATIONAL BANK & TRUST, a National Banking Corporation, Plaintiff and Respondent, v. Robert A. SWENSON and Judy A. Swenson, husband and wife, and B & J Drilling, Inc., a Corporation, Defendants and Appellants. RICHLAND NATIONAL BANK & TRUST, a National Banking Corporation, Plaintiff and Respondent, v. B & J DRILLING, a Corporation, also known as B & J Drilling, Inc., Defendant and Appellant.

Page 1045

816 P.2d 1045

249 Mont. 410

RICHLAND NATIONAL BANK & TRUST, a National Banking

Corporation, Plaintiff and Respondent, v. Robert A. SWENSON and Judy A. Swenson, husband and wife, and B & J Drilling, Inc., a Corporation, Defendants

and Appellants.

RICHLAND NATIONAL BANK & TRUST, a National Banking

Corporation, Plaintiff and Respondent, v. B & J DRILLING, a Corporation, also known as B & J Drilling, Inc., Defendant and Appellant.

No. 91-071.

Supreme Court of Montana.

Submitted on Briefs May 31, 1991.

Decided Aug. 8, 1991.

L. Randall Bishop, Jarussi & Bishop, Billings, for defendants and appellants.

Thomas M. Monaghan, Lucas & Monaghan, Miles City, for plaintiff and respondent.

McDONOUGH, Justice.

The defendants Robert A. Swenson, Judy A. Swenson, and B & J Drilling, Inc., (B & J) appeal the orders of the Montana Seventh Judicial District Court, Richland County, granting summary judgment to the plaintiff Richland National Bank and Trust (the Bank) on the defendants' counterclaims for breach of fiduciary duty, negligence, fraud, tortious interference with business relations and bad faith against the Bank in its action to collect on certain promissory notes executed by the Swensons to the Bank. We affirm.

The defendants raise several issues on appeal, which we restate as follows:

(1) Did the District Court err in concluding that there was insufficient evidence to raise a genuine issue of material fact regarding the defendants' counterclaims of breach of fiduciary duty, negligence, fraud, tortious interference with business relations and bad faith?

(2) Are the default and default judgment entered against B & J void for lack of personal jurisdiction?

(3) Did the District Court err in holding that the Swensons did not have standing to present claims for wrongs to themselves because such claims are the claims of B & J, a corporation of which the Swensons are the sole shareholders?

(4) Did the District Court err in concluding that the plaintiff's counterclaims were compulsory and thus barred by Rule 13(a), M.R.Civ.P.?

(5) Did the District Court err in concluding that the Swensons were not the real party in interest for prosecuting any claim against the Bank because under 11 U.S.C. Sec. 541(a)(1) the alleged counterclaims became the property of the Swensons bankruptcy estate?

In March of 1975, the Swensons went into the seismic drilling business. They incorporated their business under the name of B & J Drilling in March of 1979 and are the sole stockholders. The Swensons began doing business with the Bank in the fall of 1977 when they purchased a home in Sidney with financing arranged through On December 29, 1980, Mr. Swenson borrowed $60,000 from the Bank evidenced by a note for one year, to purchase an auger drill and truck. The drill was not transferred to B & J; it remained a personal asset of the Swensons. On December 29, 1981, the note was renewed in the amount of $54,600 for another year. On February 14, 1983, the note was renewed in the amount of $64,650.07, with a final maturity date of June 30, 1984. On August 6, 1984 the promissory note was renewed in the amount of $65,545.43, with a final maturity date of September 28, 1987. The Swensons' last renewal promissory note number 33-4946 provided for monthly payments of $2,338.65 beginning on October 28, 1984, and was signed by both the Swensons. B & J made seventeen monthly payments on this note beginning on November 6, 1984 and continuing through March 10, 1986.

the Bank. Early in 1978 the Swensons began borrowing money from the Bank for various business purposes. These were short term loans and were regularly paid in full.

In May of 1985, the Swensons borrowed $7,091.87 to purchase a 1981 Ford truck. They executed to the Bank promissory note number 70-7686 in that amount and gave the Bank a security interest in the truck as collateral. B & J Drilling made nine monthly payments on this note beginning on July 8, 1985 and continuing through March 10, 1986.

On November 15, 1982, B & J began borrowing from the Bank for operating expenses. All of the notes were short term notes.

In November of 1985, B & J borrowed $63,632.49 from the Bank and executed and delivered its promissory note number 33-9670. This note represented the renewal of two prior promissory notes which totaled $43,632.49 and an advance of $20,000. The note was due November 12, 1986, and it was secured under a security agreement of the same date by accounts receivable, equipment, machinery and tools belonging to B & J. The Bank also requested B & J to sign a guaranty for the debts of the Swensons, including note number 33-4946, and to sign a security agreement securing payment of such debts. The security agreement gave the Bank a security interest in various types of collateral, including its accounts receivable from Reliable Exploration, Inc. (Reliable). Reliable was B & J's only customer. B & J had no other source of income.

In November of 1985, B & J received $23,452.50 from Reliable in payment of its August invoice and applied the full amount to promissory note number 33-9670, the operating note. On December 5, 1985, B & J received $21,900 from Reliable for its September invoice. B & J applied only $1,900 to the operating promissory note and deposited the remaining $20,000 in its own checking account. That day the Bank wrote to B & J and informed them that

In the past we have advanced up to 100% of the current month's invoices for operating. All future borrowings against accounts receivable will be limited to a maximum of 75% of the current month's invoices.

On December 20, 1985, B & J requested and received an operating loan of $20,000. This loan raised the principal of note 33-9670 to $58,744.60.

In January of 1986, B & J received $37,145 from Reliable for its October invoice; it applied the full amount to note 33-9670. Later in January, B & J received $19,013.62 from Reliable for its November invoice. B & J applied $12,000 to the note and used the remainder of the check from Reliable for a transmission replacement.

In February of 1986, B & J requested and received an operating loan from the Bank of $25,000. This raised the principal of note 33-9670 to $35,180.71.

On March 7, 1986, B & J received $32,670 from Reliable and applied it to the operating note. It then requested and received an advance of $20,000 and deposited it into its checking account. The principal of note 33-9670 then totaled $23,006.06.

On April 23, 1986, B & J requested a loan of $8,400. The Bank refused the request. Mr. Swenson then contacted Reliable and requested a direct payment of money in On August 14, 1986, Mrs. Swenson brought a check to the Bank in the amount of $4,404. In her deposition she explained her actions:

                order to keep operating.  Reliable sent a check for $12,652.50.  B & J deposited this check directly into its checking account and never informed the Bank of this payment.  Mr. Swenson testified that he "slid this one by them without them knowing about it right away."   B & J made no further loan requests of the Bank
                

I owed the bank money, which I owed other people money, too; but in my mind I hated to run to the bank and say, "I want all of that money. You guys aren't getting any of this," like they did to me.

So I think I probably was fair enough to say, "Garth, would you please just give me half of it. You can have half of it. Because I do know I owe you money. Because I've always paid you your money, and I do probably owe you some."

The Bank followed Mrs. Swenson's request and applied approximately half of the check to the Swensons' debt and deposited the remainder in B & J's checking account. Shortly thereafter, the Swensons moved to California leaving behind the auger drill personally owned by them and all the equipment owned by B & J. Before leaving Sidney, Mr. Swenson removed the conventional drill rig belonging to his corporation from the truck upon which it was mounted and substituted it with an inoperative one. He stored the conventional rig on his brother-in-law's place near Richland, Montana. When the Bank inquired about the rig, Mr. Swenson would not answer the inquiries. From January until March of 1987 the Bank sold the collateral belonging to the Swensons and B & J.

The Bank filed suit (Civil No. 15,694) on April 3, 1987 to recover the money owed by the Swensons on notes number 33-4946 and 70-7686 and by B & J on note 33-9670. The Swensons filed a bankruptcy petition on May 7, 1987 protecting them from any judgment in that suit. In the bankruptcy, the Swensons did not list any contingent claims against the Bank. On September 18, 1987, the United States Bankruptcy Court entered its discharge of the Swensons.

B & J failed to respond to the summons and complaint and a default judgment was entered against it on June 15, 1987. The Bank purchased the account receivable owed B & J by Reliable at a subsequent sheriff's sale. On December 16, 1988, B & J moved to set aside its default and the judgment entered against it. On December 19, 1988, the Swensons filed their separate answer and counterclaim in Civil No. 15,694. On February 2, 1989, the District Court entered its order setting aside the default judgment. On February 10, 1989, B & J filed its separate answer and counterclaim.

On November 2, 1987, the Bank filed a second suit (Civil No. 15,915) against B & J seeking to collect the unpaid principal and interest on promissory note 33-4946 and to foreclose the corresponding security agreement. B & J answered and counterclaimed against the Bank.

On April 17, 1989, the parties stipulated to consolidate the suits. The parties conducted extensive discovery and submitted their respective motions for summary judgment. The court granted summary judgment to the Bank on May 1, 1990, concluding that (1) there were no facts to support the counterclaims of B & J and the Swensons against the Bank; (2) the default judgment against B & J was erroneously set...