First National Bank in Miles City V

No. 80-467

I N THE SUPREME COURT O T E STATE O MONTANA F H F

FIRST NATIONAL BANK I N MILES CITY,

P l a i n t i f f and Respondent,

VS.

G A Y NUNN L D S

Defendant and A p p e l l a n t .

Appeal from: D i s t r i c t Court of t h e S i x t e e n 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 County o f C u s t e r . Honorable A. B. M a r t i n , J u d g e p r e s i d i n g .

Counsel o f Record:

For A p p e l l a n t :

Nye Law Firm, B i l l i n g s , Montana J e r r o l d L. Nye a r g u e d , B i l l i n g s , Montana

F o r Respondent:

Lucas and Monaghan, M i l e s C i t y , Montana Thomas Monaghan a r g u e d , M i l e s C i t y , Montana

Submitted: A p r i l 2 3 , 1981

Filed: \JUI$ '3 IC6. a bl* d

- Clerk

Mr. 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. The F i r s t N a t i o n a l Bank i n Miles C i t y i n i t i a t e d t h i s

a c t i o n i n t h e S i x t e e n t h J u d i c i a l D i s t r i c t Court, C u s t e r County,

t o r e c o v e r t h e amount o f a c h e c k d e p o s i t e d by i t s c u s t o m e r , G l a d y s Nunn. The c h e c k had b e e n r e t u r n e d t o F i r s t N a t i o n a l

t h r o u g h t h e c o l l e c t i o n c h a i n because of a n improper endorsement.

F i r s t N a t i o n a l a l l e g e d i n i t s c o m p l a i n t t h a t G l a d y s Nunn had b r e a c h e d h e r w a r r a n t y u n d e r t h e U n i f o r m Commercial C o d e , s e c t i o n 30-4-207, MCA, and was t h e r e f o r e r e q u i r e d t o r e i m b u r s e t h e bank

f o r t h e amount o f t h e c h e c k . G l a d y s Nunn f i l e d a c o u n t e r c l a i m f o r damages f o r l i b e l and s l a n d e r , m e n t a l a n g u i s h , costs and

attorney fees. A f t e r d i s c o v e r y , b o t h p a r t i e s moved f o r summary judgment. G l a d y s Nunn a p p e a l s from t h e o r d e r g r a n t i n g summary j u d g m e n t i n f a v o r o f F i r s t N a t i o n a l o n b o t h t h e c o m p l a i n t and t h e

counterclaim. W e a f f i r m t h e judgment o n t h e c o u n t e r c l a i m ,

r e v e r s e t h e judgment o n t h e c o m p l a i n t and remand f o r e n t r y o f j u d g m e n t i n f a v o r o f G l a d y s Nunn o n t h e c o m p l a i n t .

I n O c t o b e r o f 1 9 7 9 , G l a d y s Nunn moved t o Miles C i t y t o

l i v e w i t h h e r f o r m e r h u s b a n d , P a u l Nunn, who w a s employed by Continental-Keil, Inc. On O c t o b e r 1 8 , 1 9 7 9 , G l a d y s Nunn opened a

c h e c k i n g a c c o u n t a t t h e F i r s t N a t i o n a l Bank i n Miles C i t y . Two

o f P a u l N u n n ' s p a y c h e c k s , p r o p e r l y e n d o r s e d b y him, were used t o open Gladys Nunn's a c c o u n t . O n l y G l a d y s Nunn was a u t h o r i z e d t o

draw on t h i s account. On a m o n t h l y b a s i s t h e r e a f t e r , G l a d y s Nunn d e p o s i t e d P a u l

Nunn's paychecks from C o n t i n e n t a l - K e i l i n t o h e r checking account. S h e would t h e n u s e t h e f u n d s t o p a y t h e l i v i n g e x p e n s e s and b i l l s o f t h e h o u s e h o l d w h i c h c o n s i s t e d o f h e r s e l f , P a u l Nunn, and a m i n o r c h i l d o f P a u l Nunn f r o m a p r e v i o u s m a r r i a g e . On A p r i l 2, 1 9 8 0 , G l a d y s Nunn d e p o s i t e d i n t o h e r c h e c k i n g account Continental-Keil I s c h e c k No. 33326 d a t e d March 29, 1 9 8 0 , i n t h e amount o f $ 1 , 3 6 4 . 3 3 . The c h e c k was made p a y a b l e to P a u l

Nunn. On t h e b a c k o f t h e c h e c k , G l a d y s Nunn wrote " f o r d e p o s i t only." P a u l Nunn had n o t e n d o r s e d t h e c h e c k , n o r had G l a d y s Nunn

s i g n e d h i s name o r h e r name. The b a n k ' s e m p l o y e e a c c e p t e d t h e c h e c k and t h e d e p o s i t t i c k e t . A f t e r G l a d y s Nunn l e f t t h e b a n k ,

t h e employee stamped t h e f o l l o w i n g words on t h e back of t h e

check: DEPOSITED TO THE CREDIT OF

FIRST NATIONAL BANK MILES CITY, MONTANA

The e m p l o y e e w r o t e t h e name o f P a u l Nunn o n t h e l i n e . Addition-

a l l y t h e bank stamped i t s g u a r a n t e e of p r i o r endorsements. The c h e c k was c r e d i t e d t o G l a d y s N u n n ' s a c c o u n t and f o r w a r d e d t h r o u g h t h e usual banking channels f o r c o l l e c t i o n . G l a d y s Nunn t e s t i f i e d i n h e r d e p o s i t i o n t h a t s h e had

p i c k e d up t h e c h e c k a t t h e p o s t o f f i c e box which s h e and P a u l Nunn owned. She s t a t e d t h a t s h e t a l k e d t o P a u l Nunn o n t h e

t e l e p h o n e on Monday e v e n i n g , March 31, 1 9 8 0 , and t h a t he t o l d h e r

t o s i g n t h e c h e c k , d e p o s i t it and p a y t h e b i l l s . When P a u l Nunn r e t u r n e d home on Wednesday, A p r i l 2, he a s k e d G l a d y s f o r $ 2 5 0 , w h i c h s h e g a v e t o him i n t h e form o f a c h e c k drawn o n h e r a c c o u n t

o u t of t h e paycheck funds. A s a r e s u l t of domestic d i f f i c u l t i e s

G l a d y s Nunn moved o u t o f t h e home i n Miles C i t y and r e t u r n e d to Livingston. When s h e l e f t Miles C i t y o n A p r i l 8 , s h e had w i t h d r a w n a l l of t h e p r o c e e d s from t h e C o n t i n e n t a l - K e i l c h e c k by w r i t i n g c h e c k s f o r h o u s e h o l d e x p e n s e s and p u r c h a s i n g a money o r d e r p a y a b l e to h e r s e l f i n t h e amount o f $600. Continental-Keil c h e c k No. 33326 w a s drawn o n t h e c o r p o r a t i o n ' s a c c o u n t a t S e c u r i t y Bank i n B i l l i n g s . Security Bank r e c e i v e d t h e c h e c k from F i r s t Bank o f B i l l i n g s , t h e i n t e r - m e d i a t e o r c l e a r i n g h o u s e bank i n t h e c o l l e c t i o n c h a i n , o n o r

a b o u t A p r i l 3 and d e b i t e d t h e a c c o u n t o f C o n t i n e n t a l - K e i l . On A p r i l 11, S e c u r i t y Bank s e n t a s t a t e m e n t t o C o n t i n e n t a l - K e i l ,

which i n c l u d e d check N o . 33326. J e r r y Wagner, t h e c o m p t r o l l e r o f C o n t i n e n t a l - K e i l was con-

t a c t e d by P a u l Nunn o n o r a b o u t A p r i l 1 2 , 1980. P a u l t o l d Wagner t h a t h i s ex-wife had r e c e i v e d h i s p a y c h e c k and d e p o s i t e d it i n t o h e r a c c o u n t and t h a t h i s name had b e e n f o r g e d to t h e c h e c k . Wagner went t o S e c u r i t y Bank o n A p r i l 1 7 and c o m p l e t e d a " f o r g e d e n d o r s e m e n t d o c u m e n t " and o t h e r n e c e s s a r y p a p e r s t o h a v e t h e c h e c k r e t u r n e d t o t h e F i r s t N a t i o n a l Bank. Subsequently J e r r y Wagner i s s u e d a new c h e c k t o P a u l Nunn i n r e p l a c e m e n t of c h e c k No. 33326. P a u l Nunn h a s n e v e r b e e n a v a i l a b l e f o r t e s t i m o n y b e c a u s e i n e a r l y May, 1 9 8 0 , he a 1 l e g e d l y e m b e z z l e d c o n s i d e r a b l e f u n d s f r o m h i s e m p l o y e r and d i s a p p e a r e d .

S e c u r i t y Bank r e t u r n e d c h e c k No. 33326 t o F i r s t Bank o f B i l l i n g s , which i n t u r n r e t u r n e d t h e check t o F i r s t N a t i o n a l Bank. S e c u r i t y Bank c r e d i t e d t h e a c c o u n t o f C o n t i n e n t a l - K e i l and r e c e i v e d c r e d i t f r o m F i r s t Bank. F i r s t Bank w a s r e i m b u r s e d by F i r s t N a t i o n a l Bank f o r t h e $ 1 , 3 6 4 . 3 3 . F i r s t N a t i o n a l Bank r e s e a r c h e d G l a d y s N u n n ' s c h e c k i n g a c c o u n t and found it to h a v e i n s u f f i c i e n t funds t o cover t h e r e t u r n e d check. On A p r i l 24, 1 9 8 0 , P a u l M o t t r a m o f F i r s t N a t i o n a l Bank c o n t a c t e d G l a d y s Nunn and n o t i f i e d h e r o f t h e f a c t t h a t t h e c h e c k had b e e n r e t u r n e d d u e t o an improper endorsement. The F i r s t N a t i o n a l Bank demanded t h a t G l a d y s Nunn r e f u n d t h e amount o f t h e c h e c k , which s h e r e f u s e d to do.

The F i r s t N a t i o n a l Bank f i l e d i t s c o m p l a i n t a g a i n s t G l a d y s Nunn on J u n e 1 0 , 1 9 8 0 , a l l e g i n g t h a t G l a d y s Nunn b r e a c h e d h e r w a r r a n t y u n d e r s e c t i o n 30-4-207, MCA, and t h a t s h e was t h e r e f o r e l i a b l e f o r t h e $1,364.33. G l a d y s Nunn f i l e d a c o u n t e r c l a i m f o r d a m a g e s f o r l i b e l and s l a n d e r i n t h e amount o f $ 1 5 , 0 0 0 ; f o r ment a l a n g u i s h , s u f f e r i n g and damage i n t h e amount of $ 5 , 0 0 0 ; and f o r h e r s p e c i f i c e x p e n s e s , c o s t s and a t t o r n e y f e e s f o r d e f e n d i n g F i r s t National Bank's a c t i o n .

The i s s u e p r e s e n t e d f o r d e t e r m i n a t i o n is w h e t h e r t h e D i s t r i c t C o u r t e r r e d i n g r a n t i n g summary j u d g m e n t t o F i r s t N a t i o n a l Bank on t h e c o m p l a i n t and c o u n t e r c l a i m . In its conclus i o n s o f law, t h e D i s t r i c t C o u r t found t h a t G l a d y s Nunn b r e a c h e d

h e r w a r r a n t y as a c u s t o m e r u n d e r s e c t i o n 30-4-207, MCA, and t h a t u n d e r s e c t i o n 30-4-212, MCA, F i r s t N a t i o n a l Bank was e n t i t l e d t o

a r e f u n d f r o m h e r i n t h e amount o f $ 1 , 3 6 4 . 3 3 , plus interest. The c o u r t f u r t h e r f o u n d t h a t C o n t i n e n t a l - K e i l r e t u r n e d t h e check

w i t h i n t h e t i m e s p e c i f i e d i n s e c t i o n 30-4-406, MCA, after l e a r n i n g o f t h e i m p r o p e r e n d o r s e m e n t , t h a t F i r s t N a t i o n a l Bank

g a v e t i m e l y n o t i c e t o G l a d y s Nunn o f t h e r e t u r n of t h e c h e c k and

made t i m e l y demand upon h e r f o r a r e f u n d , t h a t F i r s t N a t i o n a l Bank made a p r o v i s i o n a l s e t t l e m e n t w i t h G l a d y s Nunn o n t h e d a t e

o f t h e d e p o s i t , and t h a t t h e s e t t l e m e n t n e v e r became f i n a l . For t h e f o l l o w i n g r e a s o n s we f i n d t h a t t h e District Court e r r e d i n

i t s i n t e r p r e t a t i o n o f t h e U n i f o r m Commercial Code as it a p p l i e s

t o t h i s case. The F i r s t N a t i o n a l Bank is b o t h a d e p o s i t a r y and a

c o l l e c t i n g bank under t h e d e f i n i t i o n s of s e c t i o n 30-4-105(a) and (d) . G l a d y s Nunn w a s a c u s t o m e r o f F i r s t N a t i o n a l Bank a s d e f i n e d i n s e c t i o n 30-4-104 ( e ) . S e c t i o n 30-4-212, MCA, provides

f o r t h e r i g h t o f c h a r g e - b a c k o r r e f u n d from t h e c u s t o m e r a s follows:

" ( 1 )-f -a c o l l e c t i n g ---- r o v i s i o n a l I b a n k h a s made p s e t t l e m e n t -- c u s t o m e r f o r a n i t e m - i t s e l f with its and f a i l s by r e a s o n o f d i s h o n o r , s u s p e n s i o n of p a y m e n t s b y a bank or o t h e r w i s e t o r e c e i v e a s e t t l e m e n t f o r -----h is o r becomes f i n a l , --- t h e item w h i c t h e b a n k may r e v o k e t h e s e t t l e m e n t g i v e n - -, c h a r g e -- by i t back t h e amount - -y c r e d i t g i v e n -r-h e - - t o i t s of an fo t -item c u s t o m e r ' s a c c o u n t or o b t a i n r e f u n d from its customer w h e t h e r o r n o t it i s a b l e to r e t u r n t h e items -- i f by its midnight d e a d l i n e or w i t h i n a l o n g e r reasonable t i m e a f t e r i t l e a r n s the f a c t s it r e t u r n s -e-t- o r th i e m s e n d s n o t i f i c a t i o n o f t h e facts. These r i g h t s t o revoke, charge b a c k a n o b t a i n refund t e r m i n a t e i f -n- -when a s e t t l e m e n t f o r t h e i t e m r e c e i v e d by tG a d b a n k i s o r becomes f i n a l ( s u b s e c t i o n ( 3 ) o f 30-4-211 a n d s u b s e c t i o n s ( 2 ) and ( 3 ) o f 30-4-213)." (Emphasis added. )

By c r e d i t i n g G l a d y s Nunn's a c c o u n t w i t h t h e amount o f t h e Continental-Keil c h e c k , F i r s t N a t i o n a l Bank made a " p r o v i s i o n a l settlement" with her. The bank had t h e r i g h t t o a u t o m a t i c a l l y

r e v o k e t h a t s e t t l e m e n t up t o s u c h t i m e as t h e s e t t l e m e n t became final . The q u e s t i o n becomes w h e t h e r t h e s e t t l e m e n t e v e r became final. The D i s t r i c t C o u r t f o u n d t h a t t h e s e t t l e m e n t d i d n o t

become f i n a l . W e c o n c l u d e t h a t t h e s e t t l e m e n t became f i n a l .

S e c t i o n 30-4-213(2), MCA, provides t h a t a provisional

s e t t l e m e n t becomes f i n a l upon t h e o c c u r r e n c e o f Iff i n a l p a y m e n t " o f t h e i t e m by t h e p a y o r b a n k . F i n a l payment is d e f i n e d by sec- t i o n 30-4-213 ( I ) , MCA, as f o l l o w s :

" (1) An i t e m is f i n a l l y p a i d by a p a y o r bank when t h e b a n k h a s d o n e a n y o f t h e f o l l o w i n g , whichever happens f i r s t : "(a) paid t h e i t e m i n cash; or

" ( b ) s e t t l e d f o r t h e item without r e s e r v i n g a r i g h t t o r e v o k e t h e s e t t l e m e n t and w i t h o u t having such r i g h t under s t a t u t e , c l e a r i n g h o u s e r u l e o r agreement; or

" ( c ) c o m p l e t e d t h e p r o c e s s o f p o s t i n g -- the i t e m - th o f the t o -e i n d i c a t e d a c c o u n t - - d r a w e r , -- o r maker o t h e r p e r s o n - - charged t h e r e w i t h ; or t o be - ( d ) made a p r o v i s i o n a l s e t t l e m e n t f o r t h e item and f a i l e d to revoke t h e s e t t l e m e n t i n t h e t i m e a n d manner p e r m i t t e d by s t a t u t e , c l e a r i n g h o u s e r u l e o r a g r e e m e n t . Upon a f i n a l payment u n d e r s u b p a r a g r a p h s ( b ) , ( c ) , o r ( d ) t h e p a y o r bank s h a l l be a c c o u n t a b l e f o r t h e amount o f t h e i t e m . " (Emphasis added. )

I f S e c u r i t y Bank ( t h e p a y o r b a n k ) c o m p l e t e d t h e p r o c e s s o f p o s t i n g t h e check t o Continental-Keil's ( t h e drawer's) account,

t h e n t h e p r o v i s i o n a l s e t t l e m e n t s i n t h e c o l l e c t i o n c h a i n became f i n a l , i n c l u d i n g t h e s e t t l e m e n t made by F i r s t N a t i o n a l Bank w i t h G l a d y s Nunn. The p r o c e s s o f p o s t i n g i n c l u d e s t h e f o l l o w i n g s t e p s

t a k e n by t h e b a n k , a c c o r d i n g to s e c t i o n 30-4-109, MCA:

"(a) v e r i f i c a t i o n of any s i g n a t u r e ; "(b) a s c e r t a i n i n g t h a t s u f f i c i e n t funds a r e available; " ( c ) a f f i x i n g a ' p a i d ' o r o t h e r stamp; "(d) e n t e r i n g a c h a r g e o r e n t r y to a c u s t o m e r ' s account;

"(e) c o r r e c t i n g or r e v e r s i n g a n e n t r y o r e r r o n e o u s a c t i o n w i t h r e s p e c t to t h e i t e m . "

G a r y M. J o h n s o n o f S e c u r i t y Bank t e s t i f i e d i n h i s d e p o s i -t i o n t h a t check No. 33326 was r e c e i v e d by h i s bank f r o m t h e F i r s t

Bank o f B i l l i n g s ( a n i n t e r m e d i a r y bank i n t h e c o l l e c t i o n c h a i n ) o n o r a b o u t A p r i l 3 , 1 9 8 0 , and p o s t e d t o C o n t i n e n t a l - K e i l ' s a c c o u n t o n t h a t same d a t e . C o n t i n e n t a l - K e i l ' s a c c o u n t was

d e b i t e d i n t h e amount o f $ 1 , 3 6 4 . 3 3 . Continental-Keil r e t u r n e d t h e c h e c k to S e c u r i t y Bank o n A p r i l 17, 1980, c l a i m i n g a forged or improper endorsement of t h e payee's signature. T h i s r e t u r n o f t h e c h e c k t o S e c u r i t y and t h e subsequent r e c r e d i t i n g of Continental-Keil 's account occurred a f t e r t h e p r o c e s s o f p o s t i n g had b e e n c o m p l e t e d and t h e r e f o r e

a f t e r t h e s e t t l e m e n t s e x t e n d e d on t h e i t e m became f i n a l .

Respondent argues t h a t the p r o v i s i o n a l s e t t l e m e n t s do n o t become f i n a l u n t i l t h e d r a w e r h a s had time to e x a m i n e h i s bank

s t a t e m e n t , r e l y i n g o n s e c t i o n 30-4-406, MCA. T h a t s t a t u t e con- c e r n s t h e c u s t o m e r l s d u t y t o d i s c o v e r and r e p o r t u n a u t h o r i z e d signatures within a reasonable t i m e after receiving h i s

statement. I f t h e customer f a i l s to t i m e l y r e p o r t a f o r g e r y he

i s p r e c l u d e d from r e c o v e r i n g from h i s b a n k . Although s e c t i o n 30-4-109(e), MCA, states t h a t p o s t i n g is n o t completed u n t i l t h e bank h a s " c o r r e c t [ed] or r e v e r s [edl a n e n t r y o r erroneous a c t i o n with respect t o the item," t h a t s u b s e c t i o n c a n n o t be c o n s t r u e d to

allow u n l i m i t e d t i m e f o r t h e customer to examine h i s s t a t e m e n t and r e p o r t a f o r g e r y . The p u r p o s e o f s u b s e c t i o n ( e ) was t o allow

t i m e f o r a bank e m p l o y e e t o e x a m i n e items a f t e r t h e c o m p u t e r a u t o m a t i c a l l y d e b i t e d t h e c u s t o m e r ' s a c c o u n t and to make a f i n a l

d e c i s i o n w i t h r e s p e c t t o t h e item. S e e F i n a l Payment and t h e P r o c e s s o f P o s t i n g u n d e r t h e U n i f o r m Commercial Code, 6 8 Colum. L. Rev. 349 ( 1 9 6 8 ) . S i n c e Continental-Keil d i d n o t r e t u r n t h e check u n t i l a f t e r f i n a l s e t t l e m e n t , S e c u r i t y Bank no l o n g e r had t h e r i g h t t o

r e v o k e t h e s e t t l e m e n t g i v e n t o F i r s t N a t i o n a l Bank, t h r o u g h t h e c o l l e c t i o n chain, under t h e p r o v i s i o n a l s e t t l e m e n t d o c t r i n e . Also, F i r s t N a t i o n a l Bank no l o n g e r had t h e r i g h t o f c h a r g e -

b a c k t o i t s c u s t o m e r ' s a c c o u n t o r t h e r i g h t to o b t a i n r e f u n d from i t s c u s t o m e r , G l a d y s Nunn, u n d e r s e c t i o n 30-4-212, MCA. The

D i s t r i c t C o u r t ' s c o n c l u s i o n t h a t F i r s t N a t i o n a l was e n t i t l e d to a

r e f u n d u n d e r s e c t i o n 30-4-212, MCA, was e r r o n e o u s . The c o n c l u s i o n t h a t t h e s e t t l e m e n t s i n t h e c o l l e c t i o n

c h a i n became f i n a l d o e s n o t r e s o l v e t h i s case, h o w e v e r . The l o s s

o f t h e r i g h t t o c h a r g e - b a c k o r r e f u n d u n d e r s e c t i o n 30-4-212, MCA, d o e s n o t p r e c l u d e F i r s t N a t i o n a l Bank f r o m s e e k i n g t o h o l d

i t s c u s t o m e r l i a b l e f o r b r e a c h o f h e r w a r r a n t y p u r s u a n t t o sec- t i o n 30-4-207. S e c t i o n 30-4-212(5), MCA; S u n s h i n e v. Bankers

T r u s t Co. ( 1 9 7 4 ) , 34 N.Y.2d 404, 3 5 8 N.Y.S.2d 1 1 3 , 3 1 4 N.E.2d 860.

A c c o r d i n g t o s e c t i o n 30-4-207 ( 2 ) , MCA, e a c h c u s t o m e r who

t r a n s f e r s a n item t o a c o l l e c t i n g bank w a r r a n t s to t h e c o l l e c t i n g bank t h a t :

" ( a ) h e h a s a good t i t l e t o t h e i t e m o r is a u t h o r i z e d t o o b t a i n payment o r a c c e p t a n c e o n b e h a l f o f o n e who h a s a good t i t l e and t h e t r a n s f e r is o t h e r w i s e r i g h t f u l ; and

"(b) a l l s i g n a t u r e s a r e g e n u i n e or a u t h o r i z e d ; and

"(c) t h e item h a s n o t b e e n m a t e r i a l l y a l t e r e d ; and

"(d) no d e f e n s e o f a n y p a r t y is good a g a i n s t him; and

" ( e ) h e h a s no k n o w l e d g e o f a n y i n s o l v e n c y p r o - c e e d i n g i n s t i t u t e d w i t h r e s p e c t t o t h e maker o r a c c e p t o r or t h e d r a w e r o f a n u n a c c e p t e d item. In a d d i t i o n e a c h c u s t o m e r and c o l l e c t i n g bank so t r a n s - f e r r i n g a n item and r e c e i v i n g a s e t t l e m e n t o r o t h e r c o n s i d e r a t i o n e n g a g e s t h a t upon d i s h o n o r and a n y n e c e s s a r y n o t i c e o f d i s h o n o r and p r o t e s t h e w i l l t a k e up t h e i t e m . "

The D i s t r i c t C o u r t f o u n d t h a t as a c u s t o m e r o f F i r s t N a t i o n a l Bank, G l a d y s Nunn g a v e t h e w a r r a n t i e s of s u b s e c t i o n ( a ) a b o v e , and t h a t s h e b r e a c h e d t h e s e w a r r a n t i e s . Appellant argues t h a t s h e d i d n o t b r e a c h t h e w a r r a n t y o f good t i t l e o r a u t h o r i t y

b e c a u s e s h e was g i v e n t h e a u t h o r i t y to o b t a i n payment o f t h e c h e c k b y P a u l Nunn. None o f t h e o t h e r w a r r a n t i e s or p r o v i s i o n s

i n s u b s e c t i o n s ( b ) t h r o u g h ( e ) a p p l y to t h i s case.

The f i r s t w a r r a n t y i s t h a t t h e c u s t o m e r h a s good t i t l e t o the item. It is c e r t a i n t h a t i f t h e p a y e e ' s e n d o r s e m e n t were f o r g e d , t h e f o r g e r would n o t h a v e good t i t l e . T h a t is n o t t h e situation here. A c c o r d i n g to A n d e r s o n , U n i f o r m Commercial Code, V o l . 3 S 3-417: 8 (2nd E d i t i o n ) , good t i t l e r e q u i r e s t h a t a l l n e c e s s a r y e n d o r s e m e n t s be g e n u i n e and a u t h o r i z e d . I t c a n be i n £ e r r e d f r o m t h i s comment t h a t t h e n e c e s s a r y e n d o r s e m e n t s m u s t e x i s t , and i n t h i s case w h e r e t h e p a y e e ' s e n d o r s e m e n t is m i s s i n g , G l a d y s Nunn d i d n o t h a v e good t i t l e . G l a d y s Nunn d i d n o t breach her warranty, however, i f s h e had a u t h o r i t y t o o b t a i n p a y m e n t o n b e h a l f o f o n e who d i d h a v e good t i t l e , i . e . o n b e h a l f o f P a u l Nunn. A c c o r d i n g t o A n d e r s o n , s u p r a , S 3-417: 1.8, the s e c o n d w a r r a n t y o f s u b s e c t i o n ( a ) i s m e a n t t o c o v e r t h e case o f a n a g e n t who t r a n s f e r s f o r a n o t h e r . The f a c t s o f t h i s case show t h e e x i s t e n c e o f a n a g e n c y r e l a t i o n s h i p b e t w e e n P a u l and G l a d y s Nunn. G l a d y s opened h e r a c c o u n t w i t h P a u l ' s p a y c h e c k s , p r o p e r l y e n d o r s e d by him. S u b s e q u e n t l y t h e r e were a t l e a s t f o u r d e p o s i t s b y G l a d y s o f P a u l ' s p a y c h e c k s , p r o p e r l y e n d o r s e d by him. A l l of t h e s e f u n d s w e r e used t o p a y t h e h o u s e h o l d e x p e n s e s o f P a u l and Gladys. T h i s p r i o r conduct is s t r o n g evidence t h a t Gladys w a s an a g e n t o f P a u l ' s f o r t h e p u r p o s e of d e p o s i t i n g h i s c h e c k s .

I n a d d i t i o n , Gladys t e s t i f i e d i n h e r d e p o s i t i o n t h a t she t a l k e d t o P a u l on t h e t e l e p h o n e w i t h r e g a r d t o c h e c k No. 33326, t h a t h e t o l d h e r t o s i g n t h e c h e c k , d e p o s i t it and pay t h e b i l l s . She t h o u g h t s h e had s i g n e d t h e c h e c k . I f s h e had s i g n e d P a u l ' s name, t h i s would h a v e b e e n p e r m i s s i b l e u n d e r s e c t i o n 30-3-403, MCA. F u r t h e r , when P a u l came home o n t h e e v e n i n g o f A p r i l 2, 1 9 8 0 , he a s k e d G l a d y s i f s h e had d e p o s i t e d t h e c h e c k and p a i d t h e bills. H e a s k e d how much money was l e f t , and t h e n a s k e d h e r f o r $250. P a u l r e c e i v e d a c h e c k from G l a d y s f o r $ 2 5 0 o u t o f t h e p r o c e e d s of h i s paycheck. H e a l s o r e c e i v e d b e n e f i t i n t h e form o f payment o f t h e h o u s e h o l d b i l l s . Gladys also t e s t i f i e d t h a t he r e c e i v e d a n o t h e r $200 i n c a s h from t h e p r o c e e d s of h i s p a y c h e c k . About a week l a t e r , P a u l w e n t to h i s e m p l o y e r and a l l e g e d t h a t h i s p a y c h e c k had b e e n s t o l e n and h i s s i g n a t u r e f o r g e d .

The UCC p r o v i d e s t h a t a g e n c y l a w a p p l i e s u n l e s s d i s p l a c e d b y Code p r o v i s i o n s . S e c t i o n 30-1-103, MCA. Agency p r i n c i p l e s a r e used i n s e c t i o n 30-3-403, MCA, r e g a r d i n g s i g n a t u r e s made by agents. Where t h e r e is no s i g n a t u r e o f t h e p r i n c i p a l o r o f t h e

a g e n t , a g e n c y law may n o n e t h e l e s s be a p p l i d to e s t a b l i s h t h e (23 a u t h o r i t y r e f e r r e d to i n s e c t i o n 30-4-207qa), MCA. It is w e l l -

s e t t l e d t h a t a p r i n c i p a l who a c c e p t s t h e b e n e f i t s o f a n a g e n c y t r a n s a c t i o n cannot l a t e r deny t h e r e w a s an agency. P u r c e l l v. G i b b s ( 1 9 5 8 ) , 1 3 3 Mont. 481, 326 P.2d 6 7 9 ; A r n o l d v. G e n z b e r g e r ( 1 9 3 4 ) , 96 Mont. 358, 3 1 P.2d 2 9 6 ; N e w Home Sewing M a c h i n e Co. v . S o n g e r ( 1 9 3 1 ) , 9 1 Mont. 1 2 7 , 7 P.2d 238. Even i f t h e a g e n t ' s a c t i o n s were u n a u t h o r i z e d , t h e p r i n c i p a l r a t i f i e s them b y rec e i v i n g t h e b e n e f i t s and i s e s t o p p e d t o d e n y t h e a g e n c y . A r n o l d v. Genzberger, supra.

W e f i n d t h a t G l a d y s Nunn had t h e r e q u i s i t e a u t h o r i t y t o o b t a i n payment o f t h e c h e c k o n b e h a l f o f P a u l Nunn and t h a t s h e was n o t i n b r e a c h o f h e r w a r r a n t y u n d e r s e c t i o n 3 0 - 4 - 2 0 7 ( 2 ) ( a ) , MCA. C o n s e q u e n t l y F i r s t N a t i o n a l Bank c a n n o t r e c o v e r from G l a d y s Nunn. The b a n k ' s remedy, i f any, is a g a i n s t Continental-Keil o r P a u l Nunn.

W i t h r e s p e c t t o t h e c o u n t e r c l a i m made by G l a d y s Nunn, w e f i n d t h a t t h e D i s t r i c t C o u r t was c o r r e c t i n g r a n t i n g summary j u d g m e n t f o r F i r s t N a t i o n a l Bank. Where t h e r e c o r d shows n o g e n u i n e i s s u e of m a t e r i a l f a c t , t h e p a r t y opposing t h e motion f o r summary j u d g m e n t h a s t h e b u r d e n of coming f o r w a r d w i t h s u b s t a n -t i a l evidence r a i s i n g the issue. R u l e 5 6 ( c ) and ( e ) , M.R.Civ.P.; Van Uden v . H e n d r i c k s e n ( 1 9 8 0 ) , Mont. , 615 P.2d 220, 37 St.Rep. 1 4 3 1 ; R i i s v. Day ( 1 9 8 0 ) , Mont . , 6 1 3 P.2d 6 9 6 , 37 St.Rep. 1 0 9 3 ; Downs v. Smyk ( 1 9 7 9 ) , Mont . , 6 0 4 P.2d 307, 36 S t . R e p . 2300.

Here, t h e r e c o r d shows no g e n u i n e i s s u e of m a t e r i a l f a c t , G l a d y s Nunn d i d n o t p r o d u c e e v i d e n c e r a i s i n g s u c h i s s u e , and t h e r e c o r d d o e s n o t s u p p o r t h e r claim f o r d a m a g e s . F i r s t National

Bank was e n t i t l e d t o judgment o n t h e c o u n t e r c l a i m as a matter o f law. A t t o r n e y f e e s a r e r e c o v e r a b l e by t h e p r e v a i l i n g p a r t y o n l y

w h e r e e x p r e s s l y a u t h o r i z e d by s t a t u t e o r by a g r e e m e n t by t h e parties. S t a l c u p v. Montana T r a i l e r S a l e s ( 1 9 6 5 ) , 1 4 6 Mont. 494, 409 P.2d 5 4 2 , and cases c i t e d t h e r e i n . S i n c e t h e r e is no s t a t u t e

o r a g r e e m e n t p r o v i d i n g f o r a n award of a t t o r n e y f e e s i n t h i s c a s e , t h e r e is no b a s i s f o r s u c h a n a w a r d . The j u d g m e n t o f t h e D i s t r i c t C o u r t o n t h e c o u n t e r c l a i m i s

a f f i r m e d , t h e j u d g m e n t o n t h e c o m p l a i n t is r e v e r s e d , and t h e case i s remanded f o r e n t r y o f summary j u d g m e n t i n f a v o r of G l a d y s Nunn

on the complaint.

Chief J u s t i c e