No. 87-65 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

LOWELL SPRINGER, d/b/a SPRINGER 

GROUP ARCHITECTS and LAND PLANNERS, 

Plaintiffs and Respondents, 

-vsHARRY M. OPSAHL, RAY L. INGALLS, 

WALTER W. DEINES, ALAN M. HART, 

and CARROLL M. HART, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Joseph Gary, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Sullivan, Baldassin & Mitchell; Zane K Sullivan argued, 

Missoula, Montana 

For Respondent : 

J. David Penwell argued, Bozeman, Montana 

Submitted: September 14, 1987 

Decided; October 29, 1987 

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Clerk 

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Mr. Justice John Conway Harrison delivered the Opinion of the 

Court. 

Plaintiff-respondent, Lowell Springer, filed suit 

against the five named defendants to recover money alleged 

due under an oral contract. Plaintiff was never able to 

serve a summons on defendant Ray Ingalls. A bench trial was 

held before the Honorable Joseph B. Gary in Gallatin County 

and he concluded that the remaining four named defendants 

were indebted to plaintiff Springer in the amount of 

$17,392.70 together with interest thereon at the rate of 10% 

per annum from December 1979. We affirm, but remand for the 

correction of the percentage rate on the award of prejudgment 

interest. 

The plaintiff architect, Lowell Springer, entered an 

oral contract to design certain restaurants for an entity 

consisting of the five named defendants. Springer was paid 

only $1,000 for his services and he filed suit to recover the 

remainder. The major issue of this case involves the nature 

of the entity consisting of the five defendants. Springer 

contends he contracted with a partnership, thus making the 

individual defendants liable. The defendants-appellants 

contend that Springer contracted with a corporation, thus 

making the corporation liable on the contract but not each 

individual defendant. 

On June 20, 1978, the five named defendants entered a 

partnership agreement. The partnership was named "Crosswinds 

Enterprises." Article 1.4 of the agreement stated the 

business of the partnership was to own and operate "one or 

more restaurants and any other business related thereto, and 

such other husiness as the partners shall determine." The 

agreement gave defendant Harry Opsahl the general authority 

to operate and manage the initial restaurant venture. 
Additionally, Article 4.1 stated the partnership agreement 

would govern the rights, duties, and obligations of Opsahl 

until an employment contract was entered between Opsahl and 

the partnership. In July of 1978 the partnership Crosswinds 

Enterprises acquired property in Dillon, Montana, for the 

purpose of developing a restaurant. 

On March 1, 1979, the partners signed an addendum 

altering certain portions of the original partnership 

agreement. The name of the partnership was changed from 

"Crosswinds Enterprises" to "Carousel Properties." The 

addendum altered the manner in which the agreement governed 

Opsahl's duties as operator-manager by providing that such 

duties would be governed solely by a separate contract of 

employment and that the provisions of the partnership 

agreement related only to his status as a partner. An 

employment contract between Opsahl and the partnership 

Carousel Properties was never entered. The addendum also 

provided that unless written consent was obtained from the 

partnership, all partners were prohibited from: (1) borrowing 

money in the name of the partnership or lending money 

belonging to the partnership; and (2) making any purchase in 

the partnership name or for which the partnership could be 

liable. 

On March 30, 1979, the partnership registered and 

certified the trade name Carousel Properties with the 

Secretary of State. However, the registration document 

itself does not appear to indicate that the name "Carousel 

Properties" was specifically intended to replace the name 

"Crosswinds Enterprises" for that particular partnership. On 

that same date, the five named defendants formed a new 

corporation and incorporated under the name "Crosswinds 

Enterprises." The corporate name is somewhat confusing since 

it is the former name of the partnership Carousel Properties. 
According to appellants, the partnership Carousel Properties 

made an assignment of all right, title, and interest in the 

name "Crosswinds Enterprises'' to the newly formed 

corporation, Crosswinds Enterprises. The assignment was 

alleged to occur on the same day of incorporation, but the 

specific mechanics are somewhat blurry since defendants did 

not demonstrate the assignment with any written documentation 

other than the document registering and certifying the trade 

name Carousel Properties. 

After the incorporation of Crosswinds Enterprises, the 

status of the business entities under the control of the five 

named defendants consisted of: (I) a partnership, Carousel 

Properties, with the five named defendants as partners; and 

(2) a corporation, Crosswinds Enterprises, with the five 

named defendants as shareholders. Defendant Opsahl entered 

an employment contract with the corporation, Crosswinds 

Enterprises, on June 1, 1979. 

On Zuly 25, 1979, defendant Ray Ingalls contacted 

Springer and asked him to develop certain building designs 

for restaurants. A written contract was never entered. 

Springer testified that Ingalls indicated he would be paid 

according to the number of restaurants and the size of the 

restaurants. Two "prototypes" were envisioned: a 3,800 

square foot restaurant design and a smaller 3,400 square foot 

restaurant design. Springer testified he was to receive 

$4,500 for each smaller prototype and $7,500 for each larger 

prototype. Springer testified that Ingalls estimated that as 

many as 42 restaurants would eventually be built. Springer 

testified that Ingalls referred to his other business 

associates as his "partners," but did not specifically state 

he represented a partnership or a corporation. 

Springer indicated his acceptance of the offer and was 

sent a retainer check for 51,000 drawn on the account of 
"Crosswinds of Dillon." The check gives no specific 

indication that the entity is a partnership or a corporation. 

The check was signed by defendants Alan Hart and Ray Ingalls. 

Plans developed by Springer were used to construct three 

Wyoming restaurants and few changes were implemented. In 

November 1979, Opsahl discharged Springer and informed him 

his services were inadequate. On August 28, 1980, Springer 

received a letter from Alan Hart stating his work was 

unsatisfactory and no further payment was intended. Springer 

has never received further payment. 

On July 14, 1981, Springer filed suit against the 

corporation, Crosswinds Enterprises, to recover his fees. On 

February 18, 1982, Crosswinds Enterprises filed for 

bankruptcy. Due to the automatic stay required by 11 U.S.C. 

362(a), the lawsuit proceedings came to a halt. On October 

19, 1984, Springer filed this lawsuit against the five named 

defendants on the theory that he contracted with them as a 

partnership. 

The cause proceeded to a bench trial and Judge Joseph 

B. Gary found in favor of plaintiff Springer. Findings of 

fact and conclusions of law with a supporting memorandum were 

issued on September 19, 1986. The conclusions of law state 

that Springer entered an oral contract with a partnership, 

consisting of the five named defendants as partners, in which 

Springer was to design and supervise the construction of 42 

restaurants. It was also concluded that three restaurants 

were constructed utilizing Springer's plans and that 

defendants were indebted to Springer in the amount of 

$17,392.70 ($16,500 in contract damages plus $1,892.70 in 

actual expenses minus $1,000 received as a retainer fee) 

together with interest thereon at the rate of 10% per annum 

from December 1979. Ingalls was never served with a summons 
and therefore judgment was not rendered against him. 

Defendants appeal from this judgment. 

Five issues are presented for our review on appeal: 

the plaintiff recover from the individual 

defendants by alleging he contracted with a partnership and 

not a corporation? 

2. Should plaintiff Springer be estopped from alleging 

he contracted with a partnership when he has previously dealt 

with that entity as a corporation? 

3. Did the trial court commit error by making findings 

that were not supported by the evidence? 

4. Did the trial court commit error by admitting 

inadmissible evidence? 

5. Was the rate of prejudgment interest properly 

entered? 

Before reviewing each individual issue, we must note 

the applicable scope and standard of review. The District 

Court's findings of fact will not be reversed unless clearly 

erroneous. Rule 52 (a) , M. R.Civ. P. in dings are not clearly 

erroneous if supported by substantial credible evidence. 

Additionally, the following statement applies to the standard 

of review to be exercised in this case: 

In a nonjury trial, the credibility of 

witnesses and the weight of their 

testimony are matters for the District 

Court to determine. The sufficiency of 

the evidence must be reviewed from the 

perspective most favorable to the 

prevailing party. The District Court's 

findings and judgment are presumed 

correct and will not be overturned unless 

the appellant meets the burden of proving 

with a preponderance of evidence that 

they are wrong. Merely showing the 

evidence establishes reasonable grounds 

for reaching a different conclusion is 

insufficient to reverse the District 

Court findings. 
Frank L. Pirtz Const. v. Hardin Town Pump (Mont. 1984), 692 

I. May the plaintiff recover from the 

individual defendants by alleging he 

contracted with a partnership and not a 

corporation? 

Springer contends he contracted with a partnership 

entity and that the individual defendants are therefore 

liable. The defendants contend that Springer contracted with 

a corporation, thus making the corporation liable on the 

contract and not each individual defendant. The District 

Court concluded Springer contracted with a partnership by 

stating: 

That in the month of July, 1979, the 

Plaintiff and the partnership consisting 

of Harry M. Opsahl, Ray N. Ingalls, 

Walter W. Deines, Alan M. Hart and 

Carroll M. Hart, entered into an oral 

agreement whereby the services of the 

Plaintiff architect were to be obtained 

for the purpose of designing and 

supervising the construction of forty-two 

(42) restaurants. 

Defendants attack this issue in several different ways. 

First, defendants contend the corporation, Crosswinds 

Enterprises, should not be held to consist of an actual 

partnership. The contention is that no actual partnership 

named Crosswinds Enterprises existed between the defendants 

at any time during the relationship between Crosswinds 

Enterprises and Springer. Defendants state that by the time 

Springer and Ingalls entered the oral agreement the entity 

known as Crosswinds Enterprises was incorporated and properly 

assumed its name which was formerly held by the partnership 

Carousel Properties. They argue that the partnership 

Crosswinds Enterprises ceased to exist by that name when the 
addendum was entered on March 1, 1979 changing the 

partnership name and restricting each partner's authority. 

Second, defendants contend that Crosswinds Enterprises should 

not be held to consist of a partnership by estoppel because 

there is insufficient evidence demonstrating the entity was 

held out as a partnership and Springer did not rely on any 

such representations. 

Third, defendants contend that the individual 

defendants should not be held liable by virtue of their 

partnership status in Carousel Properties. Defendants point 

out that all of Springer's dealings were with the entity 

Crosswinds Enterprises, and that all of Springer's pleadings 

and allegations have been against Crosswinds Enterprises. 

Also, defendants state Opsahl had no authority to bind the 

partnership Carousel Properties. According to the 

partnership agreement and the addendum filed on March 1, 

1979, he had no actual authority to bind the partnership 

without the approval of the other partners. Finally, 

defendants allege that if any liability does result, it 

should extend to only Opsahl because he did not disclose the 

identity of his principal to Springer. 

In sum, defendants' tactic is to systematically rebut 

each possible theory resulting in the conclusion that 

Springer contracted with a partnership. However, we find 

that the substance of the transaction is that Springer 

entered an oral contract with a partnership. Defendants 

contend this conclusion is incorrect since the partnership 

Crosswinds Enterprises no longer existed and the partnership 

Carousel Properties was unknown to Springer. However, we 

refuse to follow this reasoning and place form over 

substance. 

More specifically, we believe the facts demonstrate a 

partnership by estoppel. Partnership by estoppel has two 
basic elements requiring: (1) that a person or entity 

represent to a 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. See, Gamble 

Robinson Co. v. Carousel Properties (Mont. 1984), 688 P.2d 

283, 288, 41 St.Rep. 1757, 1762 (a case involving these same 

five defendants in which this Court reversed a summary 

judgment which found partnership liability) . Partnership by 

estoppel is controlled by S 35-10-308, MCA, which states 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 an 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, and if he 

has made such representation or consente6. 

to its being made in a public manner, he 

is liable to such person, whether the 

representation has or has not been made 

or communicated to such person so giving 

credit by or with the knowledge of the 

apparent partner making the 

representation or consenting to its being 

made. When a partnership liability 

results, he is liable as though he were 

an actual member of the partnership. 

When no partnership liability results, he 

is liable jointly with the other persons, 

if any, so consenting to the contract or 

representation as to incur liability, 

otherwise separately. 

At the time the contract was negotiated and entered, 

Ray Ingalls did not specifically state he represented either 

a partnership or a corporation. However, Springer testified 

that Ingalls did refer to the other individuals involved as 

his "partners." This representation could lead a reasonable 
person to believe he was dealing with a partnership. After 

the contract was entered, Springer received a retainer check 

drawn on the account "Crosswinds of Dillon." The check fails 

to classify the business entity and it would not have been 

unreasonable for Springer to continue to believe he 

contracted with a partnership. The defendants do not contend 

that there was a corporation organized under that name and 

the retainer check failed to notify Springer he was dealing 

with a corporation. Regardless of their intentions the 

record clearly indicates that they would have benefitted 

financially by having the plaintiff perform the contracted 

work. 

A similar issue was presented to the Supreme Court of 

Wisconsin in Phillip Lithographing Co. v. Babich (Wis. 1965), 

135 N.W.2d 343. In determining whether certain partners were 

individually liable on a contract, the court stated: 

The general rule is that partners who 

continue to hold themselves out as such 

after the formation of a corporation 

cannot escape responsibility for 

contracts entered into after the change 

in business status without adequate 

notice that the partnership has been 

dissolved. This is especially true when 

the corporation operates under the same 

name and circumstances as the 

partnership. 

Id. at 344. Admittedly, the Wisconsin Court was faced with 

slightly different facts in that the complaining party had 

dealt with the business entity in question both before and 

after incorporation. Here, Springer contracted with the 

defendants only after the incorporation. However, we believe 

the situations are sufficiently analogous for the above 

general rule to have a persuasive effect. 

Defendant Harry Opsahl testified he believed Springer 

worked for the partnership entity. Ray Ingalls referred to 
the other individuals involved as his "partners." The 

retainer check drawn on the account of "Crosswinds of Dillon" 

did not notify Springer he contracted with a partnership, and 

a search for this particular corporate name with the 

Secretary of State still would not have notified Springer. 

Sufficient evidence exists to find that the entity was held 

out as a partnership. Additionally, Springer's subsequent 

efforts and work demonstrate he relied on this "holding out" 

to his detriment. Although the District Court simply found 

Springer contracted with a partnership and did not 

specifically conclude there was a partnership by estoppel, 

the effect of the District Court's conclusion is the same. 

We therefore agree with the result of the District Court's 

conclusion and will not reverse on this issue. 

11. Should plaintiff Springer be 

estopped from alleging he contracted with 

a partnership when he has previously 

dealt with that entity as a corporation? 

Defendants assert Springer has previously treated the 

entity Crosswinds Enterprises as a corporation and therefore 

he should now be estopped from claiming it is a partnership. 

On July 14, 1981, Springer attempted to recover his fees b:7 

filing a lawsuit against "Crosswinds Enterprises, A Montana 

Corporation." Springer obviously addresses Crosswinds 

Enterprises as a corporation throughout the complaint. 

Defendants contend Springer could not later elect to sue the 

individual defendants on the theory they acted as partners. 

Defendants also point out that on January 28, 1982, Springer 

signed an affidavit in support of a petition for a 

prejudgment writ of attachment and referred to Crosswinds 

Enterprises as a corporation. 
Defendants' argument is based primarily upon Sun River 

Stock and Land Co. v. Montana Trust and Savings Bank (1928) , 

81 Mont. 222, 262 P. 1039. In that case, this Court stated 

that one who recognizes an entity as a corporation by dealing 

with it as such is prohibited from later holding the members 

of the corporation as partners. Sun River Stock and 

Land Co., 262 P. at 1045. However, the facts of the present 

case are distinguishable. Sun River Stock and Land Co. 

involved individuals attempting to assert that a corporation 

was actually a partnership, after these same individuals 

clearly recognized and treated the entity as a corporation 

throughout their entire dealings. As a stockholder and 

director, one of the plaintiffs, Charles Power, was 

substantially involved in the incorporation and subsequent 

operation of the entity as a corporation. In contrast, 

Springer did not clearly address Crosswinds Enterprises as a 

corporation until he attempted to recover his fees by filing 

a complaint in July of 1981. The contract was formed 

approximately two years earlier and Springer's services were 

terminated in November of 1979. Until the time Springer 

filed suit against Crosswinds Enterprises, one could not 

characterize Springer as having treated that entity as a 

corporation. The sole exception to this was when Springer's 

office addressed an inspection report to "Crosswinds 

Enterprises, Inc." on September 17, 1979. Despite many 

contacts between Springer and Crosswinds Enterprises, 

including at least nine bill demands, defendants are only 

able to point out this one occasion where the entity is 

specifically designated with the abbreviation "Inc." 

Springer did not address Crosswinds Enterprises as a 

corporate entity until he attempted to recover his fees by 

filing suit against the corporation. This subsequent attempt 

to recover his fees will not be interpreted so as to estop 
Springer from alleging he originally contracted with a 

partnership. 

There is an additional reason why we find Springer is 

not estopped from his claim. Essentially, defendants contend 

that under these facts Crosswinds Enterprises is a 

corporation by estoppel. The theory of corporation by 

estoppel has heavy roots in equity. The basic rationale for 

the theory is that it is usually inequitable to allow a party 

to deny that an entity is a corporation after he has already 

dealt with it as a corporation. See, 8 Fletcher Cyclopedia 

Corporations § 3912 (1982). Under the facts presented 

however, the opposite is true. It is undisputed that 

Springer received only $1,000 in compensation. The District 

Court found that despite his termination, Springer's plans 

were utilized to build three restaurants. Evidence heard at 

trial indicated that a reasonable architect's fee would be 

much higher than what Springer demanded. The $1,000 retainer 

fee constituted only a small fraction of a reasonable fee. 

Equity and fairness dictate that Springer should not he 

estopped from contending he contracted with a partnership. 

111. Did the trial court commit error by 

making findings that were not supported 

by the evidence? 

Defendants contend the trial court erroneously 

determined the timing of the name change of the partnership 

from Crosswinds Enterprises to Carousel Properties. 

Defendants focus on finding of fact number 22 and contend it 

indicates the name change occurred after the contract was 

entered with Springer. We agree that the evidence 

demonstrates that the name change occurred before the 

agreement was entered. However, in light of the previous 
portion of this opinion, we find that this constitutes 

harmless error. 

Defendants also state finding of fact number 22 is 

erroneous in that it states defendants Opsahl and Ingalls 

represented that the restaurants were to be owned by the 

partnership and that the restaurant owners were substantial 

investors with capabilities of constructing 42 restaurants. 

The record demonstrates that Ingalls indicated the entity 

which he represented was comprised of other individuals which 

he referred to as his "partners." Further, at the time 

Springer was informed that as many as 42 restaurants were 

planned, it was impliedly represented that the individuals 

involved were "substantial" investors. F?e refuse to find 

that these findings are clearly erroneous. 

IV. Did the trial court commit error by 

admitting inadmissible evidence? 

Defendants assert the trial judge heard three items of 

evidence that should have been ruled inadmissible. First, 

defendant Opsahl was allowed to testify that Springer worked 

for the partnership and not the corporation. Error is 

alleged because Opsahl also testified he knew little about 

the contract with Springer as well as the addendum to the 

partnership agreement. Defendants claim Opsahl should not 

have been allowed to give his opinion as to the ultimate 

issue of the trial when he admitted he knew little about the 

contract itself. A lay witness may give testimony in the 

form of an opinion if the testimony is "rationally based on 

the perception of the witness and helpful to a clear 

understanding of his testimony or the determination of a fact 

in issue." Rule 701, M.R.Evid. Opsahl was substantially 

involved with the affairs of the business and his statements 

were rationally based on his own perceptions. Further, his 
statements were helpful to the determination of a fact in 

issue. "Testimony in the form of an opinion or inference 

otherwise admissible is not objectionable because it embraces 

an ultimate issue to be decided by the trier of fact." Rule 

704, M.R.Evid. Opsahlls testimony that he knew little about 

Springer's contract and the addendum to the partnership 

agreement goes to the weight of his testimony and not the 

admissibility. Therefore, the statements by Opsahl were 

admissible 

Second, defendants claim a deed to property located in 

Dillon, Montana, was improperly admitted into evidence since 

title to the property was irrelevant. The deed was for the 

property acquired by the former partnership, Crosswinds 

Enterprises, to develop their first restaurant. Defendants 

contend the trial court erroneously used the deed to conclude 

that the partnership owned all of the restaurant facilities 

operated as Crosswinds restaurants. Even if it is assumed 

that the deed was irrelevant and should not have been 

admitted, defendants fail to adequately demonstrate that the 

District Court would have arrived at a different decision. 

Therefore, the admission of the deed was no more than 

harmless error. 

Finally, defendants assert that certain character 

evidence was improperly admitted. Counsel for Springer 

demonstrated that prior to the bankruptcy, the former 

Crosswinds restaurant in Dillon was transferred to a 

corporation controlled by defendant Alan Hart's mother. 

Defendants claim this was irrelevant character evidence which 

tended to imply a fraudulent transfer and resulted in 

prejudice . However, defendants fail to demonstrate the 

conclusions of the court would have been different if the 

allegedly inadmissible character evidence had not been 

admitted. Defendants state that evidence of the prejudicial 
effect can be seen in the District Court memorandum where it 

is stated, 

There was a considerable number of hours 

spent by the respective architects at a 

very reasonable fee which was much less 

than the accountant [defendant] Mr. Hart 

charged at the time. 

In view of the evidence presented in the transcript, we agree 

with this statement by the District Court. Further, we find 

no indication that the statements by Springer's counsel 

necessarily tainted the trial judge's decision. 

V. Was the rate of prejudgment interest 

properly entered? 

The District Court awarded interest on the amount of 

the judgment at the rate of 10% per annum from December 1979. 

Defendants state the legal rate of interest should be 

governed by S 31-1-106, MCA (1979) , as that law appeared at 

the time of the Springer-Crosswinds Enterprise dealings. The 

rate of interest provided at that time was 6%. In 1985, the 

legislature amended the statute and provided for an interest 

rate of 10%. 1985 Mont. Laws 263. Defendants contend that 

if any portion of the trial court judgment is affirmed, the 

interest on that judgment amount should be only 6% per annum 

from November 1979 until judgment was entered. 

We find the newly provided interest rate should be 

applied as of the date the law became effective. The session 

law, 1985 Mont. Laws 263, indicates no effective date. 

Section 1-2-201, MCA, indicates an effective date of October 

1, 1985 unless the legislation provides otherwise or is an 

appropriation of public funds for a public purpose. 

Therefore, we hold the applicable interest rate is 6% until 

October 1, 1985, and 10% thereafter. See, Byrne v. Terry 

(Mont. 1987), P. 2d , 44 St.Rep. 1620, 1624. 
We remand to the District Court for the correction of 

the percentage rate on the award of prejudgment interest. 

For the foregoing reasons, the District Court's decision is 

affirmed on all of the remaining issues. 

V W&s&& 

Justices