No. 84-43 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

19 84 

GAMBLE ROBINSON COMPANY, 

a Corporation, 

Plaintiff and Respondent, 

CAROUSEL PROPERTIES, et al., 

Defendants and Appellants. 

APPEAL FROM: District Court of the Fifth Judicial District, 

In and for the County of Beaverhead, 

The Honorable Frank Davis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Zane I(. Sullivan, Ilissoula, Montana 

For Respondent : 

John Warren; Schulz, Davis & Warren, Dillon, 

Montana 

Submitted on Briefs: June 28, 1984 

Decided: September 13, 1984 

-- 

Clerk 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

'This action was brought in the District Court of the 

Fifth Judicial District, in and for the County of 

Beaverhead, Montana, on an account due. Respondent received 

summary judgment for $4,414.76 plus interest and costs. 

Appellants contest the lower court's ruling, and ask this 

Court to grant summary judgment in their favor. We reverse 

and remand. 

On June 20, 1978, Walter W. Deines, Alan M. Hart, 

Carroll M. Hart, Ray L. Ingalls and Harry M. Opsahl, all of 

Plissoula, Montana, agreed to form a partnership called 

Crosswinds Enterprises. Article 1.4 of the Partnership 

Agreement set out the purpose of the partnership, " ... 

the ownership and operation of one or more restaurants and 

any other businesses related thereto, and such other 

business as the partners shall determine." In addition, the 

partners, in Article 4.1 of the agreement, contemplated that 

". . . the partnership intends to enter into a separate 

contract of employment with Harry M. Opsahl regarding the 

full time operation and management of the partnershj.pls 

initial restaurant venture." Until then the Agreement gave 

Harry Opsahl the specific authority to manage the restaurant 

as a partner and employee, "which said authority shall 

include, but not be limited to the powers to . . . (ii) 

borrow monies for operating expenses of the partnership 

business . . . [and] (iii) expend sums for the payment of 

ordinary business expenses, purchase of inventory, supplies, 

or other consumables . . . " The Agreement otherwise 

limited all of the partners' authority, including Harry 

Opsahl's, to those specifically granted. Crosswinds 
Enterprises filed a registration of trade name on June 16, 

1978. 

In July of 1978, Crosswinds Enterprises acquired real 

property in Dillon, Montana on which it intended to begin 

restaurant operations. A Notice of Purchasers Interest in 

the name of Crosswinds Enterprises, a partnership, was filed 

with the Beaverhead County Clerk and Recorder at that time. 

Little apparently happened until March of 1979. On 

March 1, the five partners joined in amending the 

partnership agreement. The name of the partnership was 

changed to Carousel Properties, and the provision in the 

Agreement giving Harry Opsahl general managerial powers was 

deleted. The purposes clause of the partnership was not 

amended. On March 30, Carousel Properties filed notice with 

the Secretary of State that it was assigning all of its 

rights in its old name, Crosswinds Enterprises, to a 

corporation formed that same day. All five principals in 

the partnership were equal shareholders in the new 

corporation, which took as its name Crosswinds Enterprises. 

The purpose of the corporation was the "operation and 

management" of the Crosswinds Restaurant. That same day, 

the partnership also filed a notice of name change. 

On April 1, 1979, the partnership (Carousel 

Properties) leased to the corporation (Crosswinds 

Enterprises) the real property it had aquired the year 

before. On June 1, 1979, Harry Opsahl entered into a 

written agreement with the corporation to be general manager 

of the Crosswinds Restaurant. The restaurant opened for 

business on June 9, 1979. 

Sometime early that June, Ken Marsh, a sales 
representative for respondent, Gamble Robinson Company, 

visited the Crosswinds Restaurant to solicit orders for bulk 

foodstuffs. Between June 11 and June 22, the restaurant 

ordered $582.15 worth of food from Gamble Robinson Company. 

The first order was billed to "Crosswinds Restaurant; 

Dienes, Opsahl, Hart and Hart," and was paid on July 14. 

All subsequent orders were billed the same way. In late 

June or early July, Ken Marsh and Harry Opsahl met to 

discuss the credit arrangement between Crosswinds and Gamble 

Robinson. The details of this conversation are unclear. 

Marsh has not testified, and Opsahl's recollection is 

equivocal at best. Gamble Robinson alleges that during this 

conversation, Opsahl represented to Marsh that the 

restaurant was owned and operated by a partnership. 

Regardless, what apparently came out of this conversation 

was a credit application that Marsh filed sometime in July 

with Gamble Robinson Company's branch manager. The 

application listed the restaurant's owner as a partnership 

of Dienes, Opsahl, Ingalls, Hart and Hart. It was not 

signed by Opsahl or any of the purported partners. A line 

of credit was approved and operations began on that basis. 

In 1982, managerial and financial difficulties beset 

the restaurant. Harry Opsahl was fired as manager in April, 

and by October, Crosswinds was unable to pay its bills. The 

account with Gamble Robinson went unpaid from August 3 to 

October 16, when the line of credit was rescinded. 

Crosswinds then owed Gamble Robinson $4,414.96, the amount 

at issue in this action. 

In January of 1982, Crosswinds Enterprises effected a 

bulk transfer of all of its corporate assets to Snowden 
Enterprises, Ltd. Snowden was a newly formed corporation 

with only one shareholder, Iris Hart, the wife of Carrol 

Hart (one of the partners and shareholders in the other two 

entities). Gamble Robinson Co. received a notice of bulk 

transfer, and indicated in a letter dated January 27, 1982 

that it would file a claim as a corporate creditor. 

Following the bulk transfer, Carousel Properties transferred 

the lease from Crosswinds Enterprises to Snowden. On 

February 18, 1983, Crosswinds Enterprises filed a petition 

in United States Bankruptcy Court. Gamble Robinson, an 

unsecured creditor, received nothing. 

On February 24, 1983, Gamble Robinson filed this 

action for the unpaid account against "Crosswinds 

Enterprises, a partnership consisting of Walter W. Dienes, 

Alan M. Hart and Ray L. Ingalls, also known as Crosswinds 

Restaurant." Harry Opsahl was not named in the original 

complaint, apparently because he had left the partnership at 

the same time he was fired from his post as manager. 

Defendant moved to dismiss under the name "Carousel 

Properties, a partnership formerly known as Crosswinds 

Enterprises, a partnership consisting of Walter W. Dienes, 

Harry Opsahl, Allan W. Hart, Carrol M. Hart and Roy L. 

Ingalls; also known as Crosswinds Restaurant." The motion 

to dismiss was denied, and it is under that name this action 

has proceeded. Following a hearing, the Honorable Frank E. 

Blair, District Judge, authorized a writ of attachment to 

issue against Carousel Properties. 

This cause was heard on December 8, 1983, before the 

Honorable Frank M. Davis, District Judge, on cross-motions 

for summary judgment. At the hearing, Carousel Properties 
withdrew its motion and Gamble Robinson's motion was then 

granted. Judge Davis found this case to be appropriate for 

summary judgment because there were no genuine issues of 

material fact that the debt at issue belonged to the 

partnership, Carousel. This ruling was based upon: (1) the 

stated general purpose of the partnership; (2) the apparent 

authority of Opsahl to bind the partnership; (3) Opsahl's 

alleged representation to Marsh that he was dealing with a 

partnership; (4) the record title of the real estate was in 

the partnership name; and (5) the deceptive similarity of 

the various entities. The court also intimated that, 

although it was not strictly necessary for its decision, 

this case was ripe for the application of the doctrine of 

piercing the corporate veil. 

Appellant presents the following issues on appeal: 

(1) Was summary judgment properly granted? 

(2) Did the District court err in its analysis of the 

record in determining the facts before the court? 

(3) Is the doctrine of piercing the corporate veil 

applicable? 

Was Summary Judgment Proper? 

Summary judgment is not a substitute for trial, Baylor 

v. Jacobson (1976), 170 Mont. 234, 552 P.2d 55. Rule 56 (c) 

M0nt.R.Civ.P. permits summary judgment to issue only when 

there is no genuine issue of material fact, and the moving 

party is entitled to the judgment as a matter of law. 

Reaves v. Reinhold (Mont. 1980), 615 P.21 896, 37 St.Rep. 

1500. In Cereck v. Albertson's, Inc. (1981), 195 Mont. 409, 

637 P.2d 509, we stated the test for granting summary 
judgment : 

"It is well established that a party 

moving for summary judgment has the 

burden of showing a complete absence of 

any genuine issue as to all facts deemed 

material in light of the substantive 

principles that entitle that party to a 

judgment as a matter of law. [Citations 

omitted.] All reasonable inferences that 

may be drawn from the offered proof are 

to be drawn in favor of the party 

opposing summary judgment." [Citations 

omitted.] 

The moving party's initial burden is two-fold. First, 

it must show the absence of any genuine issue as to material 

fact. Second, that party must also show that this set of 

facts entitles it to the judgment as matter of law. This 

necessarily implies the articulation of cogent legal grounds 

to which the facts apply. 

In addressing the factual test, although the court has 

no duty to anticipate or speculate as to material facts to 

the contrary, it must nonetheless draw every inference in 

favor of the non-moving party. Larry C. Iverson, Inc. v. 

Bouma (1981), 195 Mont. 351, 639 P.2d 47; State ex re1 

Burlington Northern v. District Court (1972), 159 Mont. 295, 

If the movant has met this burden, it then shifts to 

the non-moving party to demonstrate a genuine issue of 

material fact. Mere denial or speculation will not suffice, 

the non-moving party must show facts sufficient to raise a 

k; ;rf.q genuine issue. Detert v. Lake County (Mont. 1984), =P.2d 

1097, 41 St.Rep. 76; Lewis v. State (Mont. 1984), 675 P.2d 

The fatal defect below was respondent's failure to 

meet its initial burden. It did not show an absence of any 

genuine issue of material fact, and assuming it had, it did 
not articulate cogent legal grounds upon which judgment 

could lie. To reach this conclusion, it is necessary to set 

forth the substantive law governing this matter. 

Gamble Robinson Co. relied primarily on section 

35-10-301(1), MCA, to the effect that: 

"Every partner is an agent of the 

partnership for the purpose of its 

business, and the act of every partner, 

including the execution in the 

partnership name of any instrument, for 

apparently carrying on in the usual way 

the business of the partnership of which 

he is a member binds the partnership ..." 

To this Carousel Properties responded that any actions 

or representations by Harry Opsahl to Ken Marsh were beyond 

the scope of his authority because of the March 1979 

amendments to the partnership agreement. Because he was 

acting beyond his authority, Opsahl did not bind the 

partnership. For this point, Carousel relies on the second 

clause of section 35-10-301(1), MCA: " . . . unless the 

partner so acting has in fact no authority to act for the 

partnership in the particular matter and the person with 

whom he is dealing has knowledge of the fact that he has no 

such authority." 

Carousel attempts to impute "knowledge" onto Gamble 

Robinson by characterizing Opsahl's representations as not 

within the scope of business as ordinarily conducted and not 

"for the carrying on of the partnership in the usual way," 

section 35-10-301(2), MCA. 

The scope of Harry Opsahl's authority under the 

partnership agreement is not the correct legal issue. 

Crosswinds Restaurant was legally being operated by the 

corporate entity, Crosswinds Enterprises. The only role 

that the partnership, Carousel, played was that of lessor of 
the restaurant property. Harry Bpsahl was acting for the 

corporation in his role as manager-employee. The five 

principals complied with all of the necessary legalities in 

assigning the partnership name, incorporating Crosswinds 

Enterprises, and leasing the property to the corporation. 

Gamble Robinson was dealing with the corporation, and not 

the partnership. In that respect it ran afoul of the 

general rule that persons must be partners to one another 

before they can be partners to third persons. St. Paul 

Machinery Mfg. Co. v. Bruce et. a1. (1918), 54 Mont. 549, 

172 P. 330; Martin v. Peyton (1927), 246, N.Y. 213, 158 N.E. 

77; 59 Am.Jur.2d Partnership section 67. This underscores 

that the issue in this case is not whether the partnership, 

Carousel, is itself liable, but rather, whether the five 

shareholders of the corporation, Crosswinds Enterprises, are 

liable as partners. 

In general, "[tlhe effect of a belief by a person 

dealing with a corporation that it is a partnership is 

governed by the principles applicable to partnerships by 

estoppel." Rowley on Partnerships 2d ed. section 57.15 

(1960), see also Mulkey v. Anglin (Okla. 1933), 25 P.2d 778. 

Section 35-10-308, MCA, is the pertinent statutory 

authority, stating in part: 

"(1) When a person by words spoken or 

written or by conduct represents himself 

or consents to another representing him 

to anyone as a partner in a existing 

partnership or with one or more persons 

not actual partners, he is liable to any 

such person to whom such representation 

has been made who has on the faith of 

such representation, given credit to the 

actual or apparent partnership, . . . " 

(Emphasis added. ) 

Partnership by estoppel is the exception to the general 
rule, stated above, that parties must be partners to each 

other before they can be liable as partners to third 

parties. The elements are: (1) that the person or entity 

represents to the third party that he is dealing with a 

partnership, even though no such partnership exists; and (2) 

that the third party rely to his detriment. Section 

35-10-308, MCA; Krone v. McCann (Mont. 1982), 638 P. 2d 397, 

39 St.Rep. 500. This reliance must be reasonable, and under 

the circumstances, the third party is "under a duty to make 

reasonable inquiry to ascertain whether he was dealing with 

an individual or a corporation." Payne v. Lucas (Tex. 

1979), 517 S.W.2d 602, 607. The same applies to putative 

partnerships. Hempstead v. Allen (1953), 126 Mont. 578, 255 

This determination is inherently factual. Gustafson 

v. Taber (1951), 125 Mont. 225, 234 P.2d 471. 8 Fletcher 

Cyclopedia Corporations, section 4019 (1982) points this 

out: 

"Liability of partners on contracts 

entered into and obligations incurred 

after the incorporation must depend upon 

a number of circumstances, among which 

are the legality and completeness of the 

incorporation, and notice thereof on the 

part of those subsequently dealing with 

the partners. Ordinarily the partners do 

not become liable on debts and 

obligations incurred after they have 

become incorporated, unless the other 

parties dealt with them as partners and 

were justified in so doing because of 

lack of actual or constructive notice or 

knowledge of their incorporation or 

attempted incorporation . . The 

liability of a partner or firm for future 

debts of the . . . corporation, . . . when such debts are incurred by reason of 

credit having been extended because of 

the belief induced by the conduct of the 

partners that they were still interested 

in or carrying on the business, rests 

upon a principle akin to that of 
equitable estoppel, differing only in 

this respect that no specific intent to 

mislead need be shown." (Citations 

omitted. ) 

The ultimate factual issue in this case is whether the 

five principals, Dienes, Opsahl, Hart, Hart and Ingalls, 

under these circumstances, represented, or allowed 

themselves to be represented, as partners in Crosswinds 

Enterprises in operating Crosswinds Restaurant, and then 

whether Gamble Robinson relied thereupon. The particular 

issue as to Harry Opsahl's representation was whether he 

acted under the apparent authority to bind the shareholders 

as partners so as to give rise to reasonable reliance. 

Although partnership by estoppel was not at issue 

below, we will look at the facts in the record and uphold 

the lower court's decision if it is ultimately correct. 

Shimsky v. Valley Credit Uni 1984), 676 P.2d 1308, 

41 St.Rep. 258; Steadman v. -Ha-HmA (1982), 197 Mont. 45, 

641 P.2d 448; Kirby Co. of Bozeman v. Employment Security 

Division (1980), 614 R.2d 1040, 37 St.Rep. 1255. We do not 

affirm because the facts in the record do not provide a 

sufficient basis for summary judgment. 

Respondent points out several facts supporting 

partnership liability. First, and most significant, are the 

alleged representations by Harry Opsahl to Tom Marsh, to 

which he testified to in deposition. In response to 

questioning, Opsahl stated: 

"Q. Do you feel that you would have, at 

that time, told them that this was a 

partnership operation? 

"A. I very well could have told them it 

was a partnership operation. 

"Q. Your statement is, then, it is 

- possible that you advised Gamble 
Robinson, when the account was opened 

that it was a partnership operation. 

"A. It's possible. 

"Q. Do you recall supplying information 

to Ken Marsh about credit for the 

restaurant business here in Dillon? 

"A. I would say yes. 

"Q. Do you recall telling Ken Marsh that 

the partners in the business were Walter 

Deines of Missoula, Harry Opsahl, 

manager, Ray Ingalls of Missoula, Alan 

Hart of Missoula and Carrol Hart of 

Missoula? 

"A. I don't recall that. 

"Q. Could you have provided him with that 

information? 

"A. Yes. 

"Q. So, basically your position is that 

you could have and probably did give the 

information to Gamble Robinson at this 

time, that it was a partnership operating 

a restaurant. 

"A. That's possible. 

"Q. Probable? 

"A. Looking at the information that they 

have, probable. 

"Q. Why? 

"A. Why would I give them this 

information? I suppose in order to do 

business with them I would have had to 

give them some information to fill this 

credit application. Again, they weren't 

the type of supplier I would go after if 

they didn't come to me. You treat them 

more as a courtesy when they come. We 

did use them, but as a minor supplier. I 

don't know just when he got this 

information. Maybe he got it at the time II it was a partnership. (Emphasis added.) 

And, in another statement at the deposition: "A. You 

know, there's five of us and we're building and opening 

restaurants. I guess I wasn't thinking in terms of 

different entities. We had the same purpose." 
Although Opsahl's responses provide some support for a 

conclusion of partnership liability, this is not the type 

and weight of evidence sufficient to support summary 

judgment . 

In any event, appellant contends that these 

representations were beyond the scope of Opsahl Is authority 

because of the 1979 amendments to the Partnership Agreement. 

To the extent that this restriction on Opsahl's authority is 

used to protect Carousel, this argument is irrelevant, 

because the issue is the partnership liability of the five 

shareholders of Crosswinds Enterprises. 

Gamble Robinson Co. also points out the fact that the 

record title to the real estate was held by Crosswinds 

Enterprises, the partnership. Although the failure to amend 

3 title when the owning entity changes names does not 

support liability by itself, see e.g. section 70-20-109, 

MCA, it is evidence that can support the element of 

reliance. Gamble Robinson Co. nowhere alleged that it knew 

about the title at the time credit was given. Nor does the 

record unequivocally show that it relied upon the alleged 

partnership in granting that credit. Finally, the failure 

of Crosswinds to correct the billing document that 

apparently indicated a partnership does not itself support 

summary judgment. 

In Facit-Addo, Inc. v. Davis Financial Corp (Ariz. 

1982), 653 P.2d 356, the Arizona Supreme Court overturned a 

ruling of summary judgment in similar circumstances. In 

Facit-Addo, the appellant, Facit-Addo Co. had been dealing 

with two principals over the course of several months, and 

ultimately entered into a franchise agreement with them. 
Things went sour, and the two alleged that they had 

previously incorporated and were not personally liable on 

the contract. Facit-Addo alleged no knowledge of the 

incorporation and asserted liability on the basis of 

partnership by estoppel. 

The Arizona Supreme Court emphasized that partnership 

by estoppel is a factual issue, and that the testimony 

presented did not establish a set of facts one way or 

another. The case was remanded. See also Kitchell Co. v. 

Hermansen (1968), 8 Ariz.App. 424, 446 P.2d 934, where the 

Arizona Supreme Court stated: 

"We agree with the appellant that A.R.S. 

section 29-216 [which is the same as 

section 38-10-308, MCA] may estop a 

person from denying that he was acting as 

a general partner of a company rather 

than as an officer of a corporation. 

When it is contended that such a thing 

has occurred, the question is whether his 

actions and conduct were sufficient to 

lead a creditor to believe that the 

debtor was acting as an ostensible 

cooartner, and whether he was assuming 

responsibility L 

as such. This is an issue 

of fact for the trial court to determine 

from all of the evidence presented. J. & 

J. Builders Supply v. Caffin, 248 

Cal.App.2d 292, 56Cal.~ptr. 365 (1967)." 

(Summary judgment reversed.) (Emphasis 

added. ) 

See also Mulkey v. Anglin (Okla. 1933), 25 P.2d 778; Flemmer 

f 0323 

v. Ming (Mont. 1981), 621 P.2d 9334, 37 St.Rep. 1916. 

We find that summary judgment was improperly granted, 

and thus do not reach the issue of whether this case is 

appropriate for the doctrine of piercing of the corporate 

veil. 

/ 

Reversed and remanded. / ' 
We concur: 

%&&pa C gJRd~* 

Chief Justice