Flathead Bank of Bigfork v. Masonry by Muller, Inc.
2016 MT 269
Mont.2016Background
- Masonry by Muller, Inc. (Masonry) and Flathead Bank entered into four commercial promissory notes (total about $170,623) between 2010 and 2013; William Muller signed as president and personally guaranteed three loans.
- Masonry and Muller defaulted on payments; Flathead Bank issued an IRS Form 1099‑C to Muller (identifiable event dated Sept. 18, 2013).
- Flathead Bank sued Masonry and Muller in Flathead County District Court seeking the outstanding balances. Muller personally answered but did not obtain counsel to answer on behalf of Masonry.
- Bank moved for summary judgment asserting existence of indebtedness, nonpayment, and ownership of the debt; Muller argued the 1099‑C discharged his debt and claimed Masonry was insolvent/nonexistent.
- The District Court granted summary judgment for Flathead Bank; Muller appealed, raising (1) whether issuance of a 1099‑C discharges debt and (2) whether Muller could represent Masonry personally.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether issuance of IRS Form 1099‑C constitutes discharge of debt | Flathead Bank: 1099‑C is an informational IRS filing and does not, by itself, extinguish debt | Muller: The bank’s issuance of Form 1099‑C cancelled/discharged his debt | Court: 1099‑C is not prima facie evidence of discharge; it satisfies IRS reporting and does not prevent collection absent other proof |
| Whether Muller could personally appear for Masonry (a corporation) | Flathead Bank: Corporation must be represented by licensed counsel; Muller cannot appear for corporation | Muller: He acted on behalf of Masonry and answered the case | Court: A corporation cannot appear through a non‑lawyer; Muller could only represent himself; district court did not err in not holding contempt |
Key Cases Cited
- FDIC v. Cashion, 720 F.3d 169 (4th Cir. 2013) (adopts view that Form 1099‑C can be a reporting mechanism and does not necessarily effect or evidence discharge)
- Amtrust Bank v. Fossett, 224 P.3d 935 (Ariz. Ct. App. 2009) (minority rule treating Form 1099‑C as prima facie evidence of discharge)
- Franklin Credit Mgmt. Corp. v. Nicholas, 812 A.2d 51 (Conn. App. Ct. 2002) (another decision recognizing 1099‑C as prima facie evidence of discharge)
- Continental Realty, Inc. v. Gerry, 822 P.2d 1083 (Mont. 1991) (corporations must be represented by licensed attorneys)
- State ex rel. O’Connor v. Dist. Court, 799 P.2d 1056 (Mont. 1990) (holding that contempt for unauthorized corporate representation lies within court’s discretion)