Wells Fargo v. Pallett , 2002 MT 274N ( 2002 )

No. 01-877
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 274N
WELLS FARGO BANK, N.A.,
Plaintiff and Respondent,
v.
WAYNE PALLETT and ALTA PALLETT,
Defendants and Appellants.
APPEAL FROM: District Court of the Tenth Judicial District,
In and for the County of Fergus,
The Honorable John Warner, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Robert L. Johnson, Attorney at Law, Lewistown, Montana
For Respondent:
Charles Frederick Unmack, Attorney at Law, Stanford, Montana
Submitted on Briefs: September 5, 2002
Decided: December 3, 2002
Filed:
__________________________________________
Clerk
Justice Jim Regnier delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal
Operating Rules, the following decision shall not be cited as precedent but shall be filed as a
public document with the Clerk of the Supreme Court and shall be reported by case title,
Supreme Court cause number, and result to the State Reporter Publishing Company and to
West Group in the quarterly table of noncitable cases issued by this Court.
¶2 Respondent Wells Fargo Bank filed a complaint in the Tenth Judicial District Court,
Fergus County, which sought to recover the balance owing on a loan guarantied by the
Appellants, Wayne and Alta Pallett. Wells Fargo subsequently filed a motion for summary
judgment, which the District Court granted. Wayne and Alta appeal from the District Court’s
order of summary judgment. We affirm.
¶3 We address the following issues on appeal:
¶4 1. Did the District Court err when it concluded that Wells Fargo was entitled to
recover from Wayne and Alta as a matter of law pursuant to the guaranties?
¶5 2. Did the District Court err when it dismissed Wayne and
Alta’s counterclaim for conversion?
BACKGROUND
¶6 On November 14, 1994, Ernest and Debbie Pallett obtained a $31,000 loan from
Norwest Bank, now Wells Fargo Bank, to finance a startup business, Ernie’s Auto, located in
Lewistown, Montana. Ernest and Debbie granted Wells Fargo a security interest in their
presently owned and after-acquired inventory and equipment. Further, Ernest’s parents,
Wayne and Alta Pallett, cosigned the loan, guarantying Wells Fargo “the payment and
2
performance of each and every debt, liability and obligation of every type and description
which [Ernest and Debbie] may now or at any time hereafter owe to [Wells Fargo] . . . .” The
guaranties specifically provided that Wells Fargo maintained no obligation to inform Wayne
and Alta of debt subsequently incurred by Ernest and Debbie.
¶7 On October 15, 1997, Ernest and Debbie obtained an additional
$10,000 loan from Wells Fargo. Ernest and Debbie signed another
Security Agreement granting Wells Fargo a security interest in
their presently owned and after-acquired inventory and equipment.
Wells Fargo did not inform Wayne and Alta about this loan at its
inception.
¶8 In January of 1998, Wells Fargo notified Wayne and Alta that
it had not received payment on either of the loans for an
undisclosed period of time. In the ensuing months, Wells Fargo
contacted Wayne and Alta on several occasions regarding the
delinquency. By July of 1998, Ernie’s Auto went out of business.
The Palletts leased the building formerly occupied by Ernie’s Auto
to Paul Granot, doing business as PJG Motorsports.
¶9 In August of 1998, Wells Fargo informed Wayne, Alta, Ernest,
and Debbie that the outstanding balance on both loans was
$26,824.54. On June 18, 1999, Wayne and Alta remitted $18,723.12
to Wells Fargo. This amount satisfied the initial $31,000 loan.
However, the parties remained indebted to Wells Fargo in the
approximate amount of $8,000.
¶10 In September of 1999, Wells Fargo informed the Pallets and
Granot of its intention to seize certain equipment from the
3
business premises, namely a high-lift hoist and an air compressor.
On January 24, 2000, Wells Fargo sold the hoist and compressor to
Granot for $2,250 and applied the proceeds to the outstanding
balance on the second loan. Granot later vacated the premises and
took the hoist and compressor with him.
¶11 On June 13, 2000, Wells Fargo filed a complaint against Wayne
and Alta in an effort to collect the unpaid debt. The complaint
sought to recover $6,788.23, plus interest, as well as attorney
fees and costs incurred in filing suit. On September 7, 2000,
Wayne and Alta filed an answer which asserted a counterclaim for
conversion. Wayne and Alta argued that they owned an undivided,
two-thirds interest in the service station, including the fixtures
contained therein. Wayne and Alta contended that the hoist and
compressor were fixtures. As Wells Fargo had no security interest
in the fixtures on the property, Wayne and Alta insisted that Wells
Fargo’s “removal of the hoist and compressor was a deliberate or
grossly negligent act and it has constituted a conversion of
Defendants’ interest in those fixtures sufficient to support an
award of punitive damages.”
¶12 On May 15, 2001, Wells Fargo filed a motion for summary
judgment. Wayne and Alta filed a motion for summary judgment on
August 8, 2001. On September 5, 2001, the District Court granted
Wells Fargo’s motion for summary judgment. The District Court
dismissed the counterclaim, entered judgment against Wayne and Alta
in the amount of $7,378.29, plus interest, and awarded Wells Fargo
its reasonable attorney fees and costs incurred in the action.
4
Wayne and Alta subsequently moved the District Court to amend its
judgment. The District Court denied the motion to amend and Wayne
and Alta filed a notice of appeal from the order of summary
judgment on December 14, 2001.
5
STANDARD OF REVIEW
¶13 We review a district court’s grant of summary judgment de novo, applying the same
evaluation under Rule 56, M.R.Civ.P., as the district court. Vivier v. State Dept. of Transp.,
2001 MT 221, ¶ 5, 306 Mont. 454, ¶ 5, 35 P.3d 958, ¶ 5. This Court has stated that:
The movant must demonstrate that no genuine issues of material fact exist.
Once this has been accomplished, the burden then shifts to the non-moving
party to prove, by more than mere denial and speculation, that a genuine issue
does exist. Having determined that genuine issues of fact do not exist, the
court must then determine whether the moving party is entitled to judgment as
a matter of law. We review the legal determinations made by a district court as
to whether the court erred. [Citations omitted.]
Bruner v. Yellowstone County (1995), 272 Mont. 261, 264-65, 900 P.2d 901, 903.
DISCUSSION
ISSUE ONE
¶14 Did the District Court err when it concluded that Wells Fargo
was entitled to recover from Wayne and Alta as a matter of law
pursuant to the guaranties?
¶15 Wayne and Alta contend that “the pivotal issue is whether the
payment they made to the bank in June of 1999 did, or did not, fund
or settle the bank’s claim against them concerning the 1997 note.”
Wayne and Alta suggest that genuine issues of fact existed as to
what the 1999 payment actually covered. Therefore, they maintain
that the District Court erroneously entered summary judgment in
favor of Wells Fargo.
¶16 The construction and interpretation of a contract is a
question of law for the court to decide. Stutzman v. Safeco Ins.
Co. of America (1997), 284 Mont. 372, 376, 945 P.2d 32, 34. If a
6
contract is clear and unambiguous, a court need not resort to the
rules of construction, but shall enforce the contract as made by
the parties. Schwend v. Schwend, 1999 MT 194, ¶ 38, 295 Mont. 384,
¶ 38, 983 P.2d 988, ¶ 38.
¶17 The guaranty that Wayne and Alta executed in 1994 provides:
[T]he undersigned guarantee(s) to [Wells Fargo] the
payment and performance of each and every debt, liability
and obligation of every type and description which
[Ernest and Debbie] may now or at any time hereafter owe
to [Wells Fargo] (whether such debt, liability or
obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect,
due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or joint, several
or joint and several; all such debts, liabilities and
obligations being hereinafter collectively referred to as
the “Indebtedness”).
. . . .
[T]his is an absolute, unconditional and continuing
guaranty of payment of the Indebtedness and shall
continue to be in force and be binding upon the
undersigned, whether or not all Indebtedness is paid in
full, until this guaranty is revoked prospectively as to
future transactions, by written notice actually received
by [Wells Fargo] . . . .
. . . .
[Wells Fargo] may, but shall not be obligated to, enter
into transactions resulting in the creation or
continuance of Indebtedness, without any consent or
approval by the undersigned and without any notice to the
undersigned.
The guaranty provided Wayne and Alta the opportunity to limit their
future liability. However, Wayne and Alta did not avail themselves
of the protection afforded therein.
¶18 Wayne and Alta do not contend that they revoked the guaranty
as to future transactions. Therefore, pursuant to the clear
language of the guaranty, Wayne and Alta remained liable to Wells
7
Fargo for both loans. As such, contrary to Wayne and Alta’s
assertion, the issue of which loan the 1999 payment was applied to
does not create a genuine issue of fact. For, as Wayne and Alta
guarantied both loans, it does not matter which debt their
advancement covered. Accordingly, we hold that the District Court
did not err when it concluded that Wells Fargo was entitled to
recover from Wayne and Alta as a matter of law.
ISSUE TWO
¶19 Did the District Court err when it dismissed Wayne and Alta’s counterclaim for
conversion?
¶20 On appeal, it is somewhat difficult to ascertain Wayne and
Alta’s position on this issue. In their answer to Wells Fargo’s
complaint, Wayne and Alta asserted that they owned an undivided
two-thirds interest in the automotive service station, which
included the fixtures contained therein. They claimed that the
hoist and compressor located in the service station constituted
fixtures. As Wells Fargo did not maintain an interest in the real
property, Wayne and Alta argued that Wells Fargo unlawfully
converted the property when it seized and sold the items to Granot.
¶21 Section 70-15-103, MCA, provides:
Fixture defined. A thing is deemed to be affixed to
land when it is:
(1) attached to it by roots, as in the case of
trees, vines, or shrubs;
(2) imbedded in it, as in the case of walls;
(3) permanently resting upon it, as in the case of
buildings; or
8
(4) permanently attached to what is thus permanent
as by means of cement, plaster, nails, bolts, or screws.
To consider whether an object has become a fixture or not, courts
should examine the following factors: (1) annexation to the realty;
(2) an adaptation to the use to which the realty is devoted; and
(3) intent that the object become a permanent accession to the
land. Schwend, ¶ 15.
¶22 With regard to whether the items constituted fixtures, the
District Court entered the following findings and conclusions:
The bank loaned money to buy the compressor and hoist.
The hoist and compressor were purchased, placed in the
business and used therein. Both items were heavy, were
taken into the building and attached to the floor by
bolts imbedded in the concrete, which bolts were passed
through holes in the bases of the machinery and then
secured by nuts screwed onto the bolts.
. . . .
Here, it is clear that the hoist and compressor were
not permanently attached. There is no evidence in the
record that it [sic] or the building were damaged when
removed.
¶23 The information presented to the District Court, i.e.,
affidavits and exhibits, supports the above findings and
conclusions. Although the items were secured to the real property
with bolts, they were not done so in the permanent fashion
contemplated by § 70-15-103, MCA, and our fixture case law. As
indicated by the District Court, the hoist and compressor could be
removed without causing material injury to the real property or the
items. See Montana Electric Co. v. Northern Valley Mining Co.
(1915), 51 Mont. 266, 274, 153 P. 1017, 1019.
9
¶24 The record supports the District Court’s conclusion that no
genuine issues of fact existed regarding the permanency of the
items. Therefore, the items qualified as equipment subject to the
Security Agreement. Accordingly, we hold that the District Court
did not err when it dismissed Wayne and Alta’s counterclaim for conversion.
¶25 Wayne and Alta purport to present a third issue for review on
appeal. Wayne and Alta assert that the District Court committed
error when it failed to address their motion for partial summary
judgment. It appears that Wayne and Alta filed their summary
judgment motion on the theory that “if the Bank intended to hold
them to their continuing guaranty on the later loan to their son
and his wife, the Bank had a duty to tell them so in time to let
the senior Palletts have an opportunity to protect their position
before this suit.” We have already indicated that the guaranty
clearly and unambiguously relieved Wells Fargo from any obligation
to inform Wayne and Alta of future indebtedness. While the
District Court did not expressly grant or deny Wayne and Alta’s
motion for summary judgment, it certainly examined and discredited
the arguments proffered therein. Therefore, the District Court did
not fail to address Wayne and Alta’s motion as they suggest.
¶26 Finally, Wells Fargo requests that we award costs and attorney
fees incurred on appeal. Courts automatically award costs on
appeal in civil actions to the prevailing party. See Rule 33(a),
M.R.App.P. Further, where an award of attorney fees is based on a
contract, the prevailing party is entitled to his reasonable
attorney fees on appeal. Eschenbacher v. Anderson, 2001 MT 206, ¶
10
51, 306 Mont. 321, ¶ 51, 34 P.3d 87, ¶ 51. Thus, we hold that
Wells Fargo is entitled to an award of attorney fees and costs on
appeal.
¶27 In summary, we hold that the District Court did not err when
it entered summary judgment in favor of Wells Fargo. Therefore, we
affirm the judgment of the District Court and remand this matter
for a determination of attorney fees and costs.
/S/ JIM REGNIER
We Concur:
/S/ TERRY N. TRIEWEILER
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE
11