No. 83-119
I N 'l'HE SUPREME COURT O F THE S T A T E O F MONTANA
1983
RICHARD C . BOSSARD, FLOYD BOSSARD,
JAMES T . MADDUX, and DAVID P . JACOBSOFJ,
P l a i n t i t f s and R e s p o n d e n t s ,
ZAME K . SULLIVAN,
D e f e n d a n t and A p p e l l a n t .
A P P E A L FROM: D i s t r i c t C o u r t of the F o u r t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of M i s s o u l a ,
T h e H o n o r a b l e john S . H e n s o n r Judge p r e s i d i n g .
C o u n s e l of R e c o r d :
For A p p e l l a n t :
Boone, K a r l b e r g & Iladdon, M i s s o u l a , Montana
For R e s p o n d e n t :
Worden, T h a n e & Haines; R o b e r t J. P h i l l i p s ,
Missoula, Montana
S u b m i t t e d on B r i e f s : June 1 6 , 1 9 8 3
Decided: O c t o b e r 27, 1983
Filed: oci . : i iY&i
Clerk
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.
Zane Sullivan (Sullivan) appeals an order of the
Missoula County District Court granting summary judgment to
the plaintiffs, Richard C. Bossard, et al. (Rossard).
Bossard filed the action to compel Sullivan to pay an equal
amount on a $120,000 promissory note. All the parties had
signed personal guaranties, but Sullivan revoked his guaranty
before payment of the principal was due. Bossard and the
other stockholders paid part of the interest and principal
when it came due. The trial court found that Sullivan's
revocation could not affect his guaranty on the original
note. The trial court declined to listen to evidence, and
granted summary judgment to Bossard. Sullivan claims that
inequality among the parties, modification of the terms of
the note, and his revocation, excuse payment.
Sullivan claims that because the parties were in unequal
positions regarding stock ownership, he should not be
required to contribute equally. Sullivan also appeals the
award of Bossard's attorney fees. We vacate the summary
judgment and remand for further proceedings to determine if
the doctrine of equality applies. The award of attorney fees
is reversed.
On May 2, 1979, the Title Company of Billings executed a
note to the Montana Bank of Billings. The note was for
$120,000, annual interest at 13 percent. Interest was
payable monthly, and the principal due on demand or on May 1,
1980.
The same day, Sullivan and plaintiffs Bossard, et al. ,
signed guaranties of the note. The guaranty was a continuing
one, and provided that no extension of time for payment, nor
renewal would affect the quarantor's liability. Liability
was in effect until the Rank received written notice of
revocation. A guarantor's revocation did not affect
liability for any obligation or renewal created before
revocation.
The original note was renewed on May 1, 1980, and due on
demand or on May 1, 1981. The renewal was for $121,000 at a
higher rate of interest. Sullivan did not participate in the
renewal and did not sign the second renewal note. One month
before the renewed note was due, Sullivan revoked in writing
his guaranty. When the second renewal note came due on May
1, 1981, the title company was insolvent. Bossard and the
others negotiated with Montana Bank of Billings to defer
their payment, and on May 7, 1981, they paid $30,000 toward
the principal and interest. On the same day they signed a
third note for approximately $92,000, the balance on the
renewal note. Sullivan did not participate in the
negotiations, and refused to make any payment. On May 21,
1981, Bossard and the others demanded that Sullivan
contribute; when he refused, they brought suit.
Sullivan argues that receipt of unequal benefits from a
common obligation destroys the general rule of equal
contribution. All the parties except Sullivan were
stockholders in the title company. Sullivan alleges he had
been promised stock in the company in exchange for setting up
the corporation, hut Bossard and the others failed to
complete their promise. Contribution among co-obligors is an
equitable concept, and an equitable defense of one obligor
must be permitted to be raised and presented. The trial
court refused to consider the doctrine of equality, and
refused to hear evidence on the issue of the inequality of
the parties' ownership of stock in the corporation, and
granted summary judgment to Bossard.
The principle of unequal benefits affecting equal
liability is illustrated b 7 a Montana. ca.se, In Re Daily's
l
Estate (1945), 117 Mont. 194, 159 P.2d 327. In Daily, the
court held that a husband and wife, both deceased, were joint
obligors on two promissory notes. The court held that
without proof to the contrary, the presumption is that joint
obligors benefited equally from a common debt and the
obligors equally liable. The Daily's respective estates were
held to be equally liable. Following this analysis, if one
joint obligor offers proof that he did not receive equal
benefits, th.a.tobligor is not required to equally contribute.
The California courts have held that the right to
contribution is based in equity and is separate from the
contract to the creditor. Blankenhorn-Hunter-Dulin Co. v.
Thayer (CA 1926) , 247 P. 1088, involved marginal traders and
persons who had paid for their stock in full. The brokerage
became insolvent, and the trustee in bankruptcy claimed that
the Blankenhorn-Hunter-Dulin Co., which had paid in full for
its stock, should contribute rata.bly with the margin
purchasers to discharge the brokerage's debt. But the
California Supreme Court held that since the right of
contribution rested on equity and principles of natural
justice, it was not equitable for parties in unequal
positions to be equally liable for payment of a debt.
In the present case, Sullivan raises the issue of
equality of benefits, and was prepared to offer proof to the
contrary. Only a trial could resolve this issue.
If this were an action by the bank, our decision would
be different. Between the primary creditor and a co-obligor,
the guaranty binds the obligor. Had the bank acted against
Sullivan, he would be liable on the note, and could, in turn,
seek reimbursement from his co-obligors. However, in this
case, the action is among the co-obligors, one of whom
alleges he did not receive an equal benefit from the common
obligation.
We also reverse on the issue of attorney fees. The
trial court granted Bossard and the other stockholders their
attorney fees and costs. We find no authority for this award
and the trial court did not give any reasoning. Absent
statutory authority, or an agreement among the parties,
Bossard should not have been granted attorney fees.
Reversed and remanded for further proceedings in
accordance with this opinion.
We Concur: