Janke v. Smyk

No. 83-294
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
HARRY H. JANIZE,
Plaintiff and Respondent,
-vs-
BERNARD L. SMYK, LOUIS A. SMYR,
Defendants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The I-Ionorable Robert H. Wilson, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Jackson Law Firm; Gregory Jackson argued, Helena,
Montana
For Respondent:
McKinley Anderson argued, Bozeman, Montana
Submitted: March 6, 1984
Decided: P a 29, 1384
ly
Clerk
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.
The defendants, Bernard and Lois Smyk as principal
debtors on a promissory note, and Harry H. Janke, as an
indorser, appealed a judgment entered i n Yellowstone County
.
District Court in favor of the First Bank of Billings
following a nonjury trial for collection of an overdue note
in the amount of $25,000. After the appeal was filed, Janke
paid the judgment to the Bank, and was substituted as
respondent, and now seeks to enforce the Bank's judgment
against the Smyks. We affirm.
The Smyks raise four issues, one relating to their
liabil-ity to the Bank on the note, and three questioning the
legality of the Bank's assignment of the judgment to Janke.
On the liability question, the Smyks contend that the Bank
fraudulently and materially altered the terms of the note by
later stating on the note that it had been verbally extended,
and that interest accrued at 21 percent. On the questions
relating to the legality of the assignment, the Smyks allege
that Janke failed to follow the procedure set forth in
section 25-13-104(2), MCA, for assignment of a judgment, that
the Bank had no right to assign the judgment to Janke because
a judgment on appeal is not final, and that equity and due
process of law should prohibit an assignment which results in
a coappellant seeking to reverse a judgment changing to a
respondent seeking to uphold the judgment.
On September 15, 1980, Bernard Smyk requested a 1-oan of
$25,000 from the First Bank of Billings to purchase a combine
for his ranch in Canada. The loan officer indicated that he
wa.s not interested in making the loan at that time, but
stated that if the Smyks arranged for an indorser on the
note, the Bank might reconsider the loan.
The next day, September 16, Bernard Smyk returned to the
bank with Harry H. Janke, who offered to indorse the note.
Facts show that Ja.nke was to be paid $4,000 for giving his
indorsement on Smyk's loan. The loan officer was satisfied
with Janke's financial status, and on that day made the loan
to the Smyks for $25,000, at 14 percent interest per annum,
and due on December 15, 1980. Bernard and. Lais Smyk signed
as makers of the note, and Harry Janke as indorser on the
back. Among other things, the note expressly provided that
all signatories consented to any extensions or renewals
without notice.
The Smyks failed to pay the note when due, and a month
later, on January 15, 1981, the loan officer extended. the
note for 30 days or until February 15, to enable the Smyks to
pay the note. The loan officer wrote on the note "verbal
extension, 1/15/81." On approximately the same date, another
loan officer wrote on the note "accrue at 21%." The Smyks
failed to make payment, a.nd a month later, on March 18, 1981,
the Bank officer sent a demand letter to the Smyks stating
that the Bank would demand payment from Janke unless the
Smyks submitted a definite plan of repayment.
On April 8, 1981, approximately 2 weeks after the demand
letter to the Smyks, the loan officer proposed a new note.
He wrote to Janke, stating that the note was past due, and
requested that Janke indorse another note, and give the Smyks
additional time and continued ba.cking. The second note was
for the amount of $27,500, which represented the original
amount of $25,000, plus capitalization of the interest
accrued at 14 percent per annum. The second note was at 19
percent interest because that was the prevailing interest
rate as of that date. Janke refused to sign the new note as
indorser and letters between the loan officer, the Smyks and
Janke were exchanged. However, the Smyks stil-1 failed to pay
the original note.
The Smyks raised the affirmative defense that they had
no duty to pay the note because the Bank had fraudulentl-y and
materially altered the note by placing notations on the note
that a verbal extension had been granted and that the
interest rate was 21 percent. The Bank, on the other hand,
took the position that the notations were only for internal-
Bank reference and that they did not alter the terms of the
note.
Janke, as a codefendant, denied primary liability on the
note and alleged that he signed the note only as an
accommodation to the Smyks. He cross-claimed against the
Smyks and alleged that he was only an accommodation party to
the note and that the Smyks had the duty to indemnify him if
he paid the note.
Only the Bank's loan officer testified at trial. He
testified that the note was unpaid at the time of trial and
that the notations on the note were only for internal
reference, and did not change and were not intended to change
the terms of the note. He testified that the Bank never
attempted to collect the note at a rate of interest higher
than 14 percent, and that the 21 percent figure on the note
was a reminder to him that if a new note were executed, the
interest rate should be 21 percent, the then prevailing
interest rate. Smyk and Janke presented no witnesses, nor
did they testify.
The record is barren of any evidence that the Bank
attempted to charge anything more than the original 14
percent interest agreed upon as part of the original note.
The trial court rul-ed in favor of the Bank, finding that the
notations on the note were for internal ba.nk reference only,
and were not material alterations of the note. Nonetheless,
the Smyks argued in trial court and argue now th.at the
evidence supports a conclusion that the Bank attempted to
charge 21 percent interest. They base this on the fact that
a verbal extension was given by the Bank without first
contacting the Smyks or Janke. They argue that the fact of
the note's extension, together with the notation on the face
of the note that the note was extended, is proof that the
Bank acted on the notations, including the notation that
interest was to be figured at 21 percent.
It is clear, however, that the writings on the face of
the note "verbal extension, 1/15/81," and "accrues at 21%,"
do not alter the terms of the note. First, the note itself
expressly provided that all signatories consented to any
extensions or renewals without notice, and the notation here
is simply an indication that on January 15, 1981., the Bank
officer did give an extension.
Although it is true that the notation "accrues at 21%"
was written on the original note, it was not intended as a
substitute for the 14 percent interest rate reflected in the
body of the origin.al note. The notation "accrues at 21%" was
simply a reminder to the Bank officer that the proposed
second note, a note that was rejected by Janke, would have a
21 percent interest figure, if agreed to in January or
February 1981. This proposed second note computed past due
interest at 21 percent for the period of time from the due
date of the original note to the date of filing the action,
but it did not change the interest rate on the original note.
Once the Smyks failed to pay the original note, the Bank had
the right to change the interest rate in the event the
parties signed another note. However, the Smyks and Janke
refused to sign the proposed second note, and therefore their
obligation was still based on the original note: repayment
of $25,000 principal, at 1.4 percent interest.
We proceed next to a discussion of the validity of the
Bank's assignment of its judgment to Janke while the case was
on appeal. After the District Court judgment against both
the Smyks and Janke, Janke adopted the Smyks' briefs on
appeal as his position also. However, shortly after this
appeal was filed, Janke paid the Bank approximately $35,120
in full satisfaction of the judgment, and the Rank assigned
its judgment to Janke. Janke was then substituted for the
Rank as the respondent in this appeal. Shortly before this
case was argued, Janke died and his estate now seeks
repayment from the Smyks, but the Smyks claim that neither
Janke nor his estate have a right to collect on the judgment.
The Smyks first contend that section 25-13-104(2), MCA,
is the exclusive method by which a paying surety may compel
repayment from the principal, and that because Janke did not
comply with the procedure he cannot compel repayment. Under
this statute, after a surety has paid a judgment entered
against the principal-, to avail himself of the judgment, the
surety must file a notice of payment with the clerk of court,
and must file a claim for repayment within ten days of
satisfaction of judgment. Although it is true that Janke did
not follow this procedure, early case law interpreting this
same statutory language holds that the statutory procedures
for compelling payment are cumulative with all other rights
of a surety. See Merchants National Bank of Great Falls v .
Opera Hou.se Company (1899), 23 Mont. 33, 57 P. 445,
interpreting section 1242, Code of Civil Procedure 1895, the
predecessor to section 25-13-104, MCA. This is still the law
in this state.
The right of a paying surety to enforce payment from the
principal is based on the implied agreement between them that
the principal will refund the surety for money paid by the
surety for the benefit of the principal. We hold that Janke
had a right to proceed by any recognized manner to obta.in
reimbursement. We note, in this regard, that other statutes
provide for reimbursement when a surety is required to pay
the principal's obligation. Sections 25-15-202, 27-1-703,
28-1-303, and 28-11-417, MCA, all relating to the right of
contribution from joint debtors. Clearly, failure to comply
with section 25-13-104 (2), MCA, does not preclude Janke or
his estate from proceeding against the Smyks to obtain
reimbursement for payment of the judgment.
The Smyks also contend, relying on Taylor 17. Taylor
(Kan. 1.956), 303 P.2d 133, that a iudgment on appeal is not
final and therefore is not assignable. In Taylor, the Kansas
Supreme Court, in affirming the trial court, relied on a
Kansas lis pendens statute that is different from our own.
The Kansas statute (Kans. Stat. Ann. 60-2601 (1949))
provides that no interest can be acquired in the subject
matter of a case on appeal. Our lis pendens statute (section
70-19-102, MCA) does not so provide. Although we have not
decided a case directly on point, we have held that a ca.use
of action, or a judgment rendered, may be tra.nsferred. State
ex rel. Coffey v. District Court (1925), 74 Mont. 355, 240 P.
667. It fol-lows, at least in most cases, that if a cause of
action or a judgment is assignable, that judgment may still
be assigned while it is on appeal. 46 Am.Jur.2d Judgments S
883. We, therefore, conclude that the Bank could validly
assign its judgment to Janke while the judgment was on
appeal.
Finally, the Smyks argue that their cause on appeal has
been irreparably damaged by substitution of Janke as the
respondent after he has already been one of the
co-appellants, and that equity and due process considerations
should not permit this result. The Smyks contend that at
trial, and initially on appeal, they relied on Janke's
contentions that the note was materially altered, and they
argue that this defense is destroyed now that Janke or
Janke's estate is seeking to enforce the judgment after
paying the same and taking an assignment of that judgment.
The Smyks, however, not only relied on Janke's position
that the note was altered, they in fact took that position
themselves both at trial and now on appeal. For the Smyks to
get relief, they must, in any event, satisfy this Court that
the note was materially altered. The Smyks can and have made
their arguments without the aid of Janke, and we have
considered these arguments. We fail to see how Smyks' rights
have been compromised where they had the burden to prove, in
any event, as the principal signatories to the note, that the
note was materially altered. That proof, one way or the
other, is in the record, and does not depend on the position
that Janke once took or that he now takes. We note,
furthermore, that Janke did not stand in a fiduciary position
to the Smyks and he owed them no duty to continue to support
t h e i r appeal. H i s duty, a s a s u r e t y , was t o pay a judgment
e n t e r e d a g a i n s t t h e Smyks.
The judgment of t h e D i s t r i c t C o
W e Concur:
#
ustices