Traders State Bank of Poplar v. Mann

• Decision Date: 13 May 1993
• Docket Number: No. 92-106,92-106
• Citation: 258 Mont. 226,50 St.Rep. 509,852 P.2d 604
• Court: Montana Supreme Court
• Parties: TRADERS STATE BANK OF POPLAR, Plaintiff and Respondent, v. John J. MANN and Mann Farms, Inc., Defendants, Third-Party Plaintiffs and Appellants, v. NORTHEAST MONTANA BANK SHARES, INC.; John Witte; Richard Loegering; Gerald Kreig; Bruce A. Fredrickson; Charles R. Cashmore; Malcolm H. Goodrich; Crowley, Haughey, Hanson, Toole & Dietrich, Third-Party Defendants and Respondents.

Page 604

852 P.2d 604

258 Mont. 226

TRADERS STATE BANK OF POPLAR, Plaintiff and Respondent, v. John J. MANN and Mann Farms, Inc., Defendants, Third-Party Plaintiffs and Appellants, v. NORTHEAST MONTANA BANK SHARES, INC.; John Witte; Richard

Loegering; Gerald Kreig; Bruce A. Fredrickson; Charles R.

Cashmore; Malcolm H. Goodrich; Crowley, Haughey, Hanson,

Toole & Dietrich, Third-Party Defendants and Respondents.

No. 92-106.

Supreme Court of Montana.

Submitted on Briefs Dec. 10, 1992.

Decided May 13, 1993.

John J. Mann, pro se.

Terry Wallace, Missoula, for defendants, third-party plaintiffs and appellants.

Bruce A. Fredrickson, Ronald R. Lodders, Crowley, Haughey, Hanson, Toole & Dietrich, Billings, for plaintiff and respondent.

GRAY, Justice.

John J. Mann and Mann Farms, Inc. appeal from orders of the Fifteenth Judicial District Court, Roosevelt County, granting summary judgment and dismissing third-party claims. They also appeal an order of the District Court denying a motion to dissolve an injunction. John Mann appeals the contempt order entered against him for refusing to comply with the injunction. We affirm in part, reverse in part and remand.

We phrase the issues on appeal as follows:

1) Does the failure of John Mann and Mann Farms, Inc. to post a supersedeas bond on appeal or otherwise stay the proceedings below render this appeal moot?

2) Did the District Court err in concluding that the claims the Mann Family asserted against the third-party defendants did not constitute sufficient grounds for relief from the Mann I judgment under Rule 60(b), M.R.Civ.P.?

3) Did the District Court err in granting summary judgment for the Bank on its foreclosure complaint?

4) Can the District Court's grant of summary judgment on foreclosure be upheld as to Mann Farms under the doctrines of judicial estoppel, equitable estoppel or quasi-estoppel?

5) Did the District Court err in refusing to dissolve an injunction and in finding John Mann in contempt for failing to abide by the injunction?

The details surrounding this appeal constitute a morass of factual and procedural intricacies. In 1976, Wilbur, Edna, John and Frances Mann formed Mann Farms, Inc. (Mann Farms). (Mann Farms and the individual Mann family members are referred to collectively herein as the Mann Defendants.) They began banking with Traders State Bank of Poplar (the Bank) and operated for several years on an unsecured basis. Mann Farms' debt load increased, however, and in 1983, the Bank required security for Mann Farms' line of credit. The parties began negotiations in late April of 1985 in attempts to reduce the loan balance.

On April 29, 1985, the Mann Defendants executed two promissory notes to the Bank. The first note renewed a previous note of $215,000, and the second renewed a previous note of $85,000. On that date, the Mann Defendants also signed a mortgage pledging real property to secure the $300,000 of existing debt (the $215,000 and the $85,000 debts evidenced by the renewal notes) and $150,000 of contemplated future advances. In addition, they executed four security agreements, which were:

. A security agreement covering crops, livestock and farm equipment and vehicles signed on April 29, 1985 by John Mann, Frances Mann, Wilbur Mann, and Edna Mann, individually and as officers of Mann Farms as security for notes totalling $300,000;

. A security agreement covering a 1962 1 1/2 ton truck signed on May 15, 1985, by Wilbur Mann as security for the $215,000 note;

. A security agreement covering various farm vehicles signed on May 15, 1985 by John Mann as president of Mann Farms as security for the $215,000 note; and

. A security agreement covering livestock signed on May 13, 1985, by Patricia Mann Mingus as security for notes totalling $300,000 (Patricia Mingus is not a party to this appeal but had ownership interest in the cattle).

On May 1, 1985, the Bank advanced the Mann Defendants $7,500, which was evidenced by a promissory note and designated by the Bank as operating money for 1985. Around this time, the Bank approved two additional conditional loans of $25,000 each. Due to disagreements over the collateral for the conditional loans, the funds were not advanced.

On May 15, 1987, Mann Farms filed for bankruptcy under Chapter 12 of the United States Bankruptcy Code. On March 28, 1988, the Mann Defendants filed a tort claim against the Bank alleging, among other things, breach of the covenant of good faith and fair dealing and breach of fiduciary duty.

As required by the Bankruptcy Act, Mann Farms then filed its plan of reorganization and characterized the debt with the Bank as disputed. The reorganization plan specified that the Bank's lien status would be determined in conjunction with the bad faith action in state court. The Bank immediately contested the plan, arguing that Mann Farms could not seek to cancel the notes in state court and simultaneously seek to restructure the notes in the bankruptcy action. Mann Farms amended its plan of reorganization, and included the following clause:

The Debtor will not contest the validity of notes, mortgages, or security interests of the Bank in state court or by adversary proceedings in this court. Debtor does intend to pursue the state court action previously commenced by the debtor, insofar as prosecution of the debtor's tort claims are concerned.

On June 22, 1988, the United States Bankruptcy Court for the District of Montana approved the amended plan of reorganization, and the Bank appealed to the United States District Court. That court also affirmed the amended plan, and the Bank appealed to the United States Court of Appeals for the Ninth Circuit, arguing that the state court tort action would restructure de facto its status in the bankruptcy plan. The Ninth Circuit concluded that the tort claims were independent of the contractual rights of the parties and, therefore, that the Mann Defendants' action for tort damages in state court could not affect the approved plan of reorganization. In re Mann Farms, Inc. (9th Cir.1990), 917 F.2d 1210, 1213.

Meanwhile, in state court, the District Court granted summary judgment in favor of the Bank on the tort claims. We affirmed in Mann Farms, Inc. v. Traders State Bank (1990), 245 Mont. 234, 801 P.2d 73 (Mann I ).

On April 19, 1991, the United States Bankruptcy Court dismissed Mann Farms' bankruptcy proceeding; final decree closing the case was filed May 28, 1991. Two months later, the Bank filed a complaint against the Mann Defendants, seeking judgment on the promissory notes signed April 29 and May 1, 1985, which totalled $307,500, and foreclosure of the security agreements and mortgage described above. The complaint alleged that on May 15, 1987, the Mann Defendants had defaulted on the notes and that, at the time of the complaint, they owed the Bank $575,709.85. The Bank also sought to foreclose on a March 23, 1984, security agreement covering crops, cattle, and farm equipment signed by John Mann as president of Mann Farms as security for notes totalling $305,100.

John, Frances, Wilbur and Edna Mann (the Mann Family), appearing pro se, answered the foreclosure complaint by generally denying its allegations. They also asserted third-party claims against Northeast Montana Bank Shares (the holding company for Traders State Bank of Poplar) and two bank employees, John Witte and Richard Loegering (the Bank Defendants), alleging that the Bank Defendants had committed fraud upon the court in the earlier bad faith action. Additionally, they asserted third-party claims against Bruce Fredrickson, Charles Cashmore, Malcolm Goodrich, and the law firm of Crowley, Haughey, Hanson, Toole & Dietrich (the Lawyer Defendants), claiming that the Lawyer Defendants had assisted in perpetrating this alleged fraud. They also asserted third-party claims against district court judge James Sorte, for abandoning his judicial function in the bad faith action, and against First Citizens Bank of Wolf Point, for conspiring with the Bank to subvert the judicial process.

On August 12, 1991, John Mann, acting in his capacity as president of Mann Farms, transferred all assets held by Mann Farms into the Mann Family Trust. The Bank then sought an injunction requiring the Mann Defendants to provide an accounting of all proceeds received from any sale of the Bank's collateral and to execute certain financing statements; the Bank also asked the court to enjoin the Mann Defendants from disposing of any of the Bank's collateral and from retaining any proceeds that may have been obtained from the collateral.

Upon motion of the Bank, on September 3, 1991, the District Court entered a default judgment on the foreclosure claim against Mann Farms for failing to respond to the foreclosure complaint.

Judge Sorte and First Citizens Bank of Wolf Point moved to dismiss the third-party claims. The Bank Defendants and the Lawyer Defendants moved for summary judgment on the third-party claims asserted against them. After a hearing on the motions on October 3, 1991, the District Court dismissed the Mann Family's third-party claims against Judge Sorte and First Citizens Bank of Wolf Point. The court also granted the Lawyer Defendants and the Bank Defendants' motions for summary judgment and issued the injunction requested by the Bank.

On November 4, 1991, counsel appeared on behalf on Mann Farms. On November 15, Mann Farms moved to set aside the default judgment entered against it. The District Court set aside the default judgment and allowed Mann Farms to file an answer. Mann Farms' answer generally denied the foreclosure allegations and asserted various affirmative defenses. John Mann and the other family members continued to represent themselves pro se.

The Bank also moved for summary judgment on its foreclosure complaint. In response, Mann Farms moved for summary judgment on that issue; the Mann Family contended that summary judgment was improper because genuine issues...