No. 85-206
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1986
NORTHWESTERN BANK O LEWISTOWKT,
F
a Montana B a n k i n g c o r p o r a t i o n ,
P l a i n t i f f and. R e s p o n d e n t ,
ESTATE O GEORGE F.
F COPPEDGE, J R . ,
HELEN J . COPPEDGE,
Defendant and A p p e l l a n t .
and
V R J . COPPEDGE,
E A
Defendant and Respondent.
APPEAL FROM.: D i s t r i c t C o u r t of t h e T e n t h J u d i c i a l D i s t r i c t ,
Zn and f o r t h e County o f F e r g u s ,
The H o n o r a b l e P e t e r L . Rapkoch, J u d g e p r e s i d i n g .
COUNSEL O RECORD:
F
For Appellant:
R o b e r t E. La F o u n t a i n , ( H e l e n J. Copped.ge), B i l l i n g s ,
Montana
For Respondent:
Timothy J. O ' H a r e , ( N o r t h w e s t e r n B a n k ) , T,ewistown,
Montana
L e o n a r d J. McKinney, (Vera C o p p e d g e ) , Lewistown,
Montana
S u b m i t t e d on B r i e f s : Nov. 6 , 1985
Decided: J a n u a r y 2 1 , 1986
Filed:
-
.
Clerk
Mr. Justice Frank B. Morrison, Jr
the Court.
. delivered the Opinion of
Helen J. Coppedge and the estate of George F. Coppedge,
Jr., appeal the January 4, 1985, judgment of the Tenth
Judicial District Court. That judgment grants Northwestern
Bank of Lewistown (Northwestern Bank) $18,807.39 in
principal, $14,662.13 in interest up to the time of trial and
interest from the date of trial to the date of judgment,
pursuant to three promissory notes co-signed by George and
Helen Coppedge .
George Coppedge, Jr. (deceased) and Stanley Larson were
partners in a farm and. ranch operation. The Articles of Co-
partnership provide that each partner contributes equally to
the capital assets and property of the partnership and that
each partner owns an undivided half thereof. Art. I1 of the
Articles of Co-Partnership.
Deceased and his wife, Helen, borrowed money from
Northwestern Bank to be used primarily for farming expenses.
Three promissory notes and a security agreement were signed
by the deceased and his wife on June 5, 1980. The notes,
each due on February 1, 1981, were in the principal amounts
of $1,500, $12,000 and $58,817.89. The security agreement
included all farm machinery, vehicles and. tools; all crops
and livestock owned by the deceased, as well as his brand;
and all accounts, contract rights and other rights to payment
possessed by the deceased. In addition, the notes were
secured by a $20,000 guaranty, signed by the deceased's
mother, Vera Coppedge.
George Coppedge, Jr., died September 25, 1980. His wife
was appointed personal representative in January of 1981.
She provided notice to creditors of her husband's estate
pursuant to $ 72-3-801, MCA, starting January 25, 1981, and
ending February 8, 1981. Northwestern Bank never filed a
creditor's claim or commenced a court proceeding to protect
its claim against the estate during the time provided for in
S S 72-3-803 and 72-3-804(2), MCA. Instead, Northwestern Bank
representatives negotiated, to no avail, with the estate's
attorneys for payment or renewal of the note.
Whether with the permission of the deceased's personal
representative or not, Stan Larson continued to operate the
partnership after George Coppedge's death, pending its
dissolution. Any complaint the deceased's personal
representative has with respect to Larson's continued
operation of the partnership is not properly the subject of
this lawsuit or appeal.
Following George Coppedge's death, Larson completed
three sales of livestock: 1) the sale November 5, 1980, of
the partnership's calves for $33,385.79; 2) the sale November
20, 1980, of the deceased's cattle for $31,582.75; and 3) the
sale December 2, 1980, of the deceased's bull for $991.15.
The checks were each made payable to Stanley Larson, George
Coppedge and Northwestern Bank, as Northwestern held a
security interest in the cattle.
Stan Larson delivered the checks to Northwestern Bank.
Larson, acting for himself, and Gale Dorn, representing
Northwestern Bank, endorsed the checks. Thereafter, the
checks were stamped for deposit only in the deceased's
account and deposited therein. With respect to the first
check, one-half, or $16,692.89, was paid to Larson for his
one-half share in the cattle. The remaining $16,692.90 from
the first check and the full amount of the other two checks
were offset against deceased's promissory notes here at
issue. No other payments have been made on those notes.
On June 15, 1982, Northwestern Rank filed a complaint
seeking the unpaid principal balance on each of the notes,
the interest on those notes and its attorney's fees and court
costs. The complaint names the deceased's estate, Helen
Coppedge and Vera Coppedge as defendants. Helen Coppedge
answered by way of a general denial. No affirmative defense
or counterclaim was filed. Vera Coppedge answered, listing
four defenses. She also cross-claimed against the estate and
Helen Coppedge for any amount she might have to pay to
Northwestern Bank as guarantor. Neither the estate nor Helen
Coppedge responded to the cross-claim.
Trial was had June 5, 1984, following which judgment was
entered for Northwestern Bank and against the defendants. In
addition, judgment was entered for Vera Coppedge on her
cross-claim against the estate and Helen Coppedge. The
estate of the deceased and Helen Coppedge appeal, raising the
following issue:
Did the District Court err in finding that
Northwestern Bank had the authority to offset the
deposits to the checking account of George
Coppedge, Jr., and Helen Coppedge and to credit
those offsets against the promissory notes which
are the subject of this action?
We find no error. The promissory notes provide that in
the event of George Coppedge, Jr. ' s death, Northwestern Bank
may declare, without notice, the notes to be due and owing.
Northwestern Bank may then, again without notice, offset
against the notes1 balances any balance standing to the
deceased's credit. Admittedly, the proceeds from the cattle
sale were not "standing to the deceased's credit" at the time
of his death. However, since that money was derived directly
from the sale of collateral, it also became collateral for
the promissory notes. Section 30-9-306(1) and (2), MCA.
Northwestern Bank's actions are supported by its security
interest in the proceeds from the sale of the cattle and its
adherence to the terms of the promissory notes and Articles
of Co-Partnership.
We find no breach of the covenant of good faith and fair
dealing by Northwestern Bank. It's decision to offset the
notes' balances with the proceeds from the cattle sale
4
substantial-1-y reduced the amount of interest now due and
owing, to appellants' benefit. See Regional Agricultural
Credit Corporation of Spokane, Wash. v. Chapman (9th Cir.
1942) , 129 F. 2d 435.
Further, we find it unnecessary to address appellants'
claim of wrongful conversion by Northwestern Bank. Such an
allegation should have been raised as either an affirmative
defense or a counterclaim. Appellants failed to plead it as
either. Therefore, it was not considered by the trial court
and wil-1 not be considered on appeal. Rule 8, M.R.Civ.P. and
Old Fashion Baptist Church v. Montana Dept. of Revenue (Mont.
1983), 671 P.2d 625, 628, 40 St.Rep. 1774, 1778.
We turn next to appellants1 attack on the validity of
the judgment against them. Helen Coppedge claims the notes
are not enforceable against her because she acted merely as
an "accommodati.on maker" when signing them. There is nothing
to indicate she acted as an accommodation maker. Her
signature is on the notes and the security agreement,
together with her husband's. She is liable as a co-debtor.
At any rate, in Montana accommodation makers are primarily
liable on the notes they sign. In the Matter of the Estate
of Harbaugh (1982), 196 Mont. 274, 277, 639 P.2d 495, 497.
The estate claims the judgment against it is no good
because Northwestern Bank failed to file a creditor's claim
with the personal representative within the time limits set
forth in S 72-3-803, MCA. Northwestern Bank claims
S 72-3-803 (3)(a), MCA, relieves them of the obligation to
file a creditor's claim in this instance. That section
states:
(3) Nothing in this section affects or prevents:
(a) any proceeding to enforce any mortgage,
pledge, or other lien upon property of the estate
This is not a proceeding to enforce "any mortgage, pledge, or
other lien." Northwestern Bank is not seeking to foreclose
on the secured debt, but to collect on the promissory notes.
Therefore, S 72-3-803(3) (a), MCA, does not apply.
Northwestern Bank contends and the trial judge found
that the estate, by and through its attorneys, knew of the
bank's claim against the estate. Such knowledge, however,
does not dispense with Northwestern Bank's need to file a
creditor's claim. If Northwestern Bank can prove that the
attorneys for the estate represented that because they knew
of Northwestern Bank's claim, no creditor's claim need be
filed and if the Bank relied on this representation, the
estate could be estopped from raising Northwestern Bank's
failure to file a creditor's claim as a defense. Norman v.
State (1979), 182 Mont. 439, 443-444, 597 P.2d 715, 718. We
therefore remand for a hearing to determine whether the
estate, by or through its attorneys, represented to Bank that
it need not file a creditor's claim.
Finally, appellants contend they need not reimburse or
indemnify Vera Coppedge because the guaranty is only between
Vera, Northwestern Bank and the deceased. In Vera Coppedge's
trial brief dated July 5, 1984, she stated:
It is true that the Guaranty runs solely to George
F. Coppedge, Jr. , and therefore the cross claim is
addressed solely to the Estate of George F.
Coppedge, Jr., by and through the personal
representative of this Estate but we contend that
any judgment rendered against the Estate or the
personal representative thereof attaches to the
assets of the Estate and is a lien upon such
assets. Helen J. Coppedge is the personal
representative of the Estate of George F. Coppedge,
Jr., and in such capacity, judgment should be
entered against her on the cross complaint.
By these comments, Vera dismissed her cross-claim against
Helena Coppedge, individually. We therefore vacate the
judgment of the trial judge insofar as it found for Vera on
that portion of her cross-claim.
If the estate is not estopped from raising Northwestern
Bank's failure to file a creditor's claim as a defense, Vera
Coppedge is exonerated from responsibility under the
guaranty. Section 28-11-211(1), MCA, states:
When guarantor exonerated. (1) A guarantor is
exonerated, except so far as he may be indemnified
by the principal, if by any act of the creditor
without the consent of the guarantor the original
obligation of the principal is altered in any
respect or the remedies or rights of the creditor
against the principal in respect thereto are in any
way impaired or suspended.
If the Bank did indeed fail to file a required creditor's
claim, it impa.ired its remedy against the principal without
authorization of the guarantor. Therefore, guarantor would
be discharged of any responsibility under her guaranty.
That portion of the judgment which grants judgment to
Northwestern Bank against Helena Coppedge, individually, is
affirmed. We vacate the balance of the judgment and remand
for a hearing consistent with this 2pinion.
We concur: