Poulsen v. Treasure State Industries, Inc.

600 P.2d 206 | Mont. | 1979

No. 14934

IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 HAROLD POULSEN, KARL INGEBRIGTSON, DICK OLSON and EMERY MATSKO, JR.,

Plaintiffs, TREASURE STATE INDUSTRIES, INC., A Montana Corporation; and KENNETH K. KNIGHT,

Respondents. ORIGINAL PROCEEDING: Counsel of Record:

For Plaintiffs: Graybill, Ostrem, Warner & Crotty, Great Falls, Montana Donald Ostrem argued, Great Falls, Montana

For Respondents: Smith, Emmons, Baillie and Walsh, Great Falls, Montana Cure and Borer, Great Falls, Montana Edward Borer argued, Great Falls, Montana

Submitted: September 17, 1979 Decided : ! ? 7 <-. - 1979 , - Filed: ,: <-+ ;! .-\t-; ; - * a < s-

/ !- IQ !51 J' +< \ JW J , - Clerk M r . Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of t h e Court.

P e t i t i o n e r Kenneth K. Knight h a s f i l e d an o r i g i n a l motion i n t h i s C o u r t s e e k i n g an o r d e r p e r m i t t i n g him t o p o s t s e c u r i t y o t h e r t h a n a s u p e r s e d e a s bond t o s t a y e n f o r c e m e n t of a money judgment a g a i n s t him pending a p p e a l .

The u n d e r l y i n g a c t i o n i n t h e D i s t r i c t Court o f Cascade County r e s u l t e d i n e n t r y o f judgment a g a i n s t d e f e n d a n t Knight and d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s , I n c . , a Montana c o r p o r - a t i o n , j o i n t l y and s e v e r a l l y i n t h e sum of $302,129.65 and an a d d i t i o n a l award s o l e l y a g a i n s t d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s i n t h e sum o f $1,742.52. his judgment was e n t e r e d on J u n e 1, 1979. T h e r e a f t e r an amended judgment was e n t e r e d a g a i n s t t h e same d e f e n - d a n t s i n t h e same amounts w i t h an a d d i t i o n a l judgment of indemnity i n f a v o r o f d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s a g a i n s t d e f e n d a n t Knight f o r such amounts as T r e a s u r e S t a t e might u l t i m a t e l y pay t o p l a i n t i f f i n s a t i s f a c t i o n of t h e j o i n t and s e v e r a l judgment a g a i n s t it and Knight.

Following e n t r y of t h e amended judgment, t h e D i s t r i c t Court g r a n t e d t h r e e temporary s t a y s o f judgment and e x e c u t i o n pending a h e a r i n g i n t h a t c o u r t on d e f e n d a n t K n i g h t ' s a p p l i c a t i o n t o f i l e s e c u r i t y o t h e r t h a n a s u p e r s e d e a s bond. On August 1 7 , 1979, f o l l o w - i n g h e a r i n g , t h e D i s t r i c t C o u r t d e n i e d t h e a p p l i c a t i o n .

On t h e same d a t e d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s p o s t e d a s u p e r s e d e a s bond a s r e p r e s e n t e d by a c e r t i f i c a t e of d e p o s i t i n t h e sum o f $319,224.52, which w a s approved by t h e D i s t r i c t C o u r t . T h i s c o v e r e d t h e l i a b i l i t y of T r e a s u r e State I n d u s t r i e s on t h e judgment b u t d i d n o t c o v e r t h e l i a b i l i t y of d e f e n d a n t Knight.

T h e r e a f t e r d e f e n d a n t Knight f i l e d an o r i g i n a l motion i n t h i s C o u r t t o p e r m i t him t o p o s t s e c u r i t y o t h e r t h a n a s u p e r s e d e a s bond o r i n an amount d i f f e r e n t from t h e amount of t h e judgment, p u r s u a n t t o Rule 7 ( a ) , M.R.App.Civ.P. T h i s C o u r t s e t t h e motion for hearing on September 13, stayed enforcement and execution on the judgment pending hearing, and enjoined defendant Knight from transferring, encumbering or concealing property for the purpose of avoiding satisfaction of judgment.

Plaintiffs in whose favor the underlying amended judgment was entered filed their written objection to defendant Knight's motion. The motion and objections thereto came on for hearing be- fore this Court on September 13.

An affidavit of Knight's counsel and the financial state- ment of Knight were submitted for filing. Oral argument by coun- sel for Knight and by counsel for objectors was heard. This Court granted Knight the right to take and submit two depositions, his own and that of Eleanor K. Johnson, by September 17 in support of his motion. These have been taken and filed. The order staying enforcement and execution on the judgment and enjoining Knight from transferring, encumbering or concealing property for the pur- pose of avoiding satisfaction of the judgment have been continued pending our decision on Knight's motion. The matter has now been submitted to us for decision.

The essential facts in this case are clear. Knight cannot secure a supersedeas bond from a commercial bonding company with- out posting a cash security or its equivalent (in the form of a certificate of deposit, an irrevocable letter of credit from a bank, or an assigned savings account) in the amount of his liabil- ity on the judgment. Knight claims he cannot post cash security without liquidating a substantial portion of his assets, incurring substantial tax liabilities, and suffering severe business and econ- omic hardship which he seeks to avoid. He has applied to one bank for a letter of credit but has been advised this would exceed that bank's lending authority. He seeks authorization from us to post common stocks and pledges of personal assets including equity positions, real estate and business ventures in lieu of a supersedeas bond. He has submitted an unverified "personal statement" dated April 1, 1979, indicating a net worth far in excess of his liability on the judgment together with a customer's copy of his account with a stock brokerage firm.

The pertinent rule under which Knight's motion is made provides : "Upon entry of a judgment or order a party may apply to the district court on notice or ex parte for a stay of the execution of the judgment or order. The court in its discretion may grant said stay . . . Upon service of notice of appeal, if the court has made no such order or the appellant de- sires a stay for a longer period than ordered, he may present to the district court and secure its approval of a supersedeas bond . . . On application, the supreme court in the interest of justice may suspend, modify, restore, or grant any order made under this subdivision." Rule 7(a), M.R.App.Civ.P.

The purpose of a supersedeas bond as a condition for staying enforcement and execution on a judgment is to guarantee and secure the rights of the judgment creditor during the appeal process. At the same time it preserves and implements the judgment debtor's statutory right of appeal. It is well established that a super- sedeas bond may be required to preserve the rights of the unsuccess- ful party. Gallatin Trust and Savings Bank v. Henke (1969), 154 Mont. 170, 461 P.2d 448, and cases therein cited.

Here Knight seeks to post security other than a supersedeas bond to guarantee and secure the rights of judgment creditors pend- ing determination of his appeal "in the interest of justice" as provided in Rule 7(a), M.R.App.Civ.P. Alternatively, he seeks re- duction of the amount of any supersedeas bond to a lesser sum than the amount of his liability on the judgment.

We deny Knight's motion in the exercise of our discretion for several reasons. Denial of his motion will not deny him access to this Court to appeal from the judgment. He is apparently a wealthy man who can post a supersedeas bond albeit with some financial hardship consisting of monetary losses in liquidation of assets, tax consequences, and loss of business income. We do not consider the rights of his judgment creditors guaranteed and secured by the reduction in amount of a supersedeas bond on the posting of substitute security in the form of stocks and pledges of equities in business ventures, real estate and personal assets. A reduction in amount of a supersedeas bond below the amount of his liability on the judgment cannot secure the rights of his judgment creditors. Additionally such substitute security fluc- tuates in value due to changes in market conditions and requires constant attention to preserve the security of the judgment creditors. his Court has neither the expertise nor the capacity to monitor such collateral. If commercial bonding companies de- cline to issue a supersedeas bond based on such security, what justification exists for this Court to accept such security in lieu of a supersedeas bond? None has been advanced that moves our discretion.

Additionally, Knight's attempts to secure a supersedeas bond have been neither prompt nor thorough. The record does not disclose any attempt to secure a loan from a bank or lending institution. The record discloses but one inquiry of a bank con- cerning the acquisition of an unrevocable letter of credit. He has not furnished this Court with a recent net worth statement verified by a certified public accountant. These indications do not support his claims that the "interests of justice" require us to grant his motion.

For the foregoing reasons, the motion of Kenneth K. Knight is denied in its entirety. Our orders staying enforcement and execution of the judgment and restraining and enjoining Kenneth K. Knight from transferring, disposing, encumbering or concealing property heretofore issued by this Court are vacated effective October 15 in the absence of his posting a supersedeas bond or o r i t s e q u i v a l e n t approved by t h e C o u r t .

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Chief J u s t i c e

J u s t i c e s J

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