NO. 93-346 IN THE SUPREME COURT OF THE STATE OF MONTANA 1994

BRINKMAN AND LENON,ARCHITECTS AND ENGINEERS, Plaintiff and Respondent, v. P & D LAND ENTERPRISES, a joint venture by NDI, Inc., and MINNESOTA TRUST COMPANY OF AUSTIN, a Minnesota Corp.

### , Defendants and Appellants.

APPEAL FROM: District Court of the Eleventh Judicial District, In and for the County of Flathead, The Honorable Michael H. Keedy, Judge presiding.

COUNSEL OF RECORD: For Appellants: A. Clifford Edwards, Kevin M. Funyak, Edwards Law Firm, Billings,Montana For Respondent: Debra D. Parker, Kendra L. Kawaguchi, Murphy, Robinson,Heckathorn& Phillips,Kalispell,Montana; PeterD. Plunkett, Warren F. Plunkett & Associates, Austin, Minnesota; David M. Ortley, Kalispell, Montana

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### 011994 Decided: February 1, 1994 Filed:

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# '=' f& 2,;>2cz'&;i:a t CldrkJustice Karla M. Gray delivered the Opinion of the Court.

In this case, we conclude that the District Court erred in granting summary judgment to plaintiff Brinkman & Lenon because plaintiff failed to meet its initial burden of establishing the absence of genuine issues ofmaterial fact. Therefore,we reverse and remand. The facts necessary to our resolution of this case are straightforward. Brinkman and Lenon, Architects and Engineers (Brinkman), entered into a standard form architectural contract with P & D Land Enterprises (P&D)onMay 21, 1990. Pursuant to the contract, Brinkman was to perform certain architectural and engineering services inconnection with improvementsto real estate owned by P&D and P&D was to pay for those services. Under § 4.10 of the contract, P&D was required to give written notice of any deficiency in performance of the services. Section 8.6 required that, in the event of termination of the contract by P&D not resulting from any fault of Brinkman, payment was to be made for servicesperformed prior to the termination date. Brinkman filed a breach of contract action against P&D in the Eleventh Judicial District Court, Flathead County. Brinkman asserted that it performed services under the contract, and that P&D terminated the contractand then failed topay theamount owing to Brinkman at that time, in violation of 5 8.6 of the contract. In its answer, 

### P&D admitted the existence of the contract and its termination, but denied any breach by it or that it owed Brinkman any money under the contract. P&D also counterclaimed, alleging 2both breach of contract and negligent failure to provide proper services which resulted in delays, &necessary expense and lost

revenue. Prior to discovery, Brinkman moved for summary judgment and presented the contract,a letter fromP&D, an affidavit and certain invoices in support of its motion. P&D responded generally that issues of fact were raisedby thepleadings and notmet by Brinkman in itsmotion and supporting materials. The District Courtgranted Brinkman's motion for summary judgmentvia Memorandum and Order and judgmentwas entered. Pursuant to Rule 59(g), M.R.Civ.P., P&D moved the court to alter or amend its judgment, on the basis that Brinkman did not meet its initial burden of establishing the absence of genuine issues of material fact. Inparticular, P&Dargued that its answer and counterclaim required Brinkman to establish entitlement to payment under the contract by, among other things, presenting evidence that P&D failed to givewritten notice of deficiencies in Brinkman's servicesas requiredby the contract. According to P&D, Brinkman offered only statements of counsel regarding the lack of written notice of deficiencies; no evidence of the lack of such requirednoticewasprovidedvia affidavitor otherwise. Thus,P&D contended, the question of whether such notice was given was a genuine issue of material fact raised by its answer and counterclaim and not met by Brinkman. P&D also presented correspondence to Brinkman, which it characterized as written notice of deficiencies in performance.Brinkman responded that P&D had the burden of establishing that it had given the required notice of deficiency in response to themotion for summary judgment. Having failed to do so,Brinkman argued, P&Dtspresentation of the correspondence purporting to establish that it had given the required notice was untimely. According to Brinkman, P&Dwas required to raise this "substantive defense" in opposition to themotion for summary judgment. Relying on Scott v. Robson (1979), 182 Mont. 528, 597 P.2d 1150, the District Court denied the motion to alter or amend on the basis that the letterwas not timely offered in opposition to themotion for summary judgment and could not be considered thereafter. P&D appeals from the summary judgment which became final upon the court's denial of its motion to alter or amend. Did the District Court apply the correct standard to Brinkman's motion for summary judgment? Our standard of review in appeals from summary judgment is & 

## m; we review a summary judgment utilizing the samecriteriaused by the District Court initially under Rule 56,M.R.Civ.P. Minnie



### v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214. We determine whether there is an absence of genuine issues of material fact and whether themoving party is entitled to judgment

as a matter of law. Minnie, 849 P.2d at 214. In this case, we conclude that summary judgmentwas improper because the record is devoid of therequired showing ofproof demonstrating an absence of genuine issues of material fact and an entitlement to judgment as

a matter of law. Specifically,we focus on the District Court's determinationthat P&Ddid not notify Brinkman of any deficiency in 4performance. It is clear that aparty moving for summary judgmentbears the initial burden of establishing the absence of any genuine issue of material fact and its entitlement to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Furthermore, [wlhen a motion for summary judgment is made supported asprovided in this rule, an adverseparty may not rest upon the mere allegations or denials of [its] pleading,buttheadverseparty's response,by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. Rule 56(e), M.R.Civ.P. (Emphasis added.) Put another way, the nonmoving party has no obligation to establish that genuine issues of fact exist until the moving party has shown an absence of such issues of fact; unless that initial burden is met by the moving party, the nonmoving party may rest on its pleading. Minnie, 849 P.2d at 214. InMathews v. Glacier General Assurance Co. (1979), 184Mont. 368, 603 P.2d 232, theplaintiff alleged entitlement to thepolicy limits under a contract for insurance as a result of fire damage. Thedefendant insurer generally denied the entitlementand asserted the affirmative defense of material alteration of the premises. The plaintiff moved for summary judgment, but did not present evidence from which it could be concluded that a material alteration had not taken place as was alleged in the defendant's affirmative defense. The district court granted the motion. We noted that the matters considered were devoid of any evidence initially presented by the plaintiff to justify a conclusion thatamaterial question of fact did not exist regardingthe affirmative defense of material alteration; absent this showing, the defendant had no duty to come forward with counterproof. Mathews, 603 P.2d at 235, 237. We reversed the district court, stating: The ordergranting summary judgmentwasbased on a determination that although plaintiff was the moving party, defendanthad the initial burden to showby affidavitsor other evidence,thatamaterial question of fact existed in relation to its affirmative defense of material alteration. Because defendant did not do so, the court granted summary judgment to plaintiff. It was error to impose this initial burden on defendant, the nonmoving party. 

## . . . Mathews, 603 P.2d at 236. As was the case inMathews, the pleadings in this case framed the issues. Brinkman alleged thathewas entitled topayment under the contract;P&D alleged that Brinkman had performed deficiently. Given that the contract required P&D to give notice of such deficiencies before terminating the contract,the issue of whether notice was given was crucial to each party's claim. Further, Brinkman does not dispute on appeal, and did not dispute at the District Court, that P&D1sanswer and counterclaim raised the material factual issue of whether notice of deficiency had been given. Thus,with its motion for summary judgment, Brinkman bore the initial burden of establishing theabsence of genuine issues of material fact, including thematerial issue of notice ofdeficiency in performance. Accordingly, we review thematerials submitted in support of Brinkman's motion. Brinkman presented the contract containing the provisions referred to in this opinion. Brinkman alsopresented a letter from

### P&D referencing the contractual "terminate and payf1provision. Nothing in that letterrelated tonotices of deficiency required by the contract. Finally, Brinkman submitted the affidavit of Tom Heinecke (Heinecke),a Brinkman stockholder,and copies of certain invoices. Heinecke stated that he was familiarwith the services performed and invoices corresponding to those services and that Brinkman had not been paid for servicesperformed in the amount of $4,751.98 as of the date of the termination of the contract. Heinecke's affidavit did not refer to the contract provision regarding deficiencynotices or assert thatno suchnoticehad been given by P&D. Brinkman's brief in support of its motion made numerous references to P&Dfscontractual obligation to provide written notice of any alleged deficiency in performance. Brinkman's counsel stated that "P&D never gave Plaintiff written notification of an alleged deficiency in Plaintiff'swork;" she further stated that "P&D failed to fulfill its obligation to notify Plaintiff of such defective performance, as required under Section 4.10 of the contract;" and again, she stated at some length: Because P&D nevergave Plaintiff written notification of defective performance it cannot claim that its nonpayment for services performed is justified. P&Dts failure to provide Plaintiff with the prompt written notification required under the terms of the contract precludes P&D from objecting to its obligation to pay Plaintiff for servicesperformed. The obvious problem with these statements is just that: they are merely statements of counsel. Such statements of counsel do not meet the evidentiary basis required to support a motion forsummary judgment under Rule 56(c), M.R.Civ.P. Traders State Bank of Poplarv. Mann Farms, Inc. (1992), 258 Mont. 226, 242, 852 P.2d 604,614. As a result, counseltsstatementscannotmeet Brinkmants duty to establish the absence of a genuine issue of material fact regarding a contractually required notice of deficiency. We concludethatBrinkmandid notmeet its initialburden with regard to the issue of notice of deficiency; as a result, the burden did not shift to P&D to come forward with evidence establishing the existence of that fact. It is clear from the DistrictCourt's memorandum that the courtplaced theburden on P&D to present affirmative evidence that, in fact, notice was given. P&D having failed to do so, the court determined that "[tlhere is

no issue of fact that P&D did not notify Plaintiff of defective performance" and thatBrinkmanwas entitled to judgmentasa matter of law. This conclusionwas in error. Absent a showing that no genuine issues of material fact existed, Brinkman was not entitled to judgment as a matter of law on its breach of contract claim. We hold that the District Court erred in applying an incorrect standard to Brinkman'smotion for summary judgment and in making a determination of the disputed and material factual issue of whether a notice of deficiencywas given without evidence of record to support that determination. It follows logically, therefore, that the District Court compounded its error by denying P&D1smotion to alter or amend. In conclusion, we observe here as we did in Mathews that, although P&D was technically correct in relying solely on itspleading because Brinkman did notmeet its initialburden, "that is not to say thatwe recommend thisprocedure." Mathews, 603 P.2d at 240. Here, as in Mathews, 

### P&D may have been able to prevent an appeal on the summary judgmentquestion if ithad placed affidavits or other evidence in the record demonstrating that a genuine issue ofmaterial fact existed as to the contractuallyrequired notice of deficiency. Reversed and remanded for further proceedings. 

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