NO. 92-619 IN THE SUPREME COURT OF THE STATE OF MONTANA 1993

E. E. KUHNS, Plaintiff and Appellant,

-vsTHOMAS W. SCOTT and FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC., a Montana coruoration,and JOHN DOES

Defendants and Respondents.

APPEAL FROM: District Court of theThirteenthJudicial District, In and for the County of Yellowstone, The Honorable G. Todd Bauqh, Judge presiding.

COUNSEL OF RECORD: For Appellant: Eldon E. Kuhns, Pro Se, Billings,Montana For Respondents: Sam E. Haddon, Esq., Randy J. Cox, Esq.; Bo Karlberg & Haddon, Missoula, Montana

Submitted 

### on Briefs: May 6, 1993Justice John Conway Harrison delivered the Opinion of the Court. Appellant Eldon E. Kuhns (Kuhns) appeals an order of the Thirteenth Judicial District Court, Yellowstone County, granting summary judgment to respondents Thomas W. Scott (Scott)and First Interstate Bancsystem of Montana, Inc. (FIBM). We affirm. OnNovember 19, 1984, respondent Scott,as president and chief executive officer of Security Banks of Montana, Inc. (now First Interstate Bancsystem of Montana, Inc.) executed an agreement to buy all of the issued and outstanding shares ofMontana Bancsystem, Inc. (MBI) for $36 million. KuhnswasMBI's principal shareholder. The transaction,described in the stock purchase agreement signed by Scott and Kuhns, was contingent on Federal Reserve Board approval. The relevant provision follows: The Federal Reserve Board shall have approved under the Bank Holding Company Act of 1956, as amended, the transactions contemplated by this Agreement. Such approval shall not contain any material conditions unacceptable to Buyer. After preliminary discussions with Federal Reserve Board staff,FIBM submitted a final application forapproval of the stock purchase to the Federal Reserve Board of Governors (Board). The application was reviewed and approved by MBI1sgeneral counsel, Mark Safty, and MBI's consultant, Samuel Chase, before it was submitted. On February 22, 1985,the Board issued an order denying FIBM1s application. Although the order described FIBM as a well-managed company, owning banks in satisfactory condition, the Board was "seriouslyconcerned" about the effect of the proposed acquisition 2on FIBM1sresources, ttparticularly the substantial reduction of [FIBM's] capital and [FIBM's] increased reliance ondebt." Finding that theproposed acquisition,which involved thirteen banks and significant amount of debt" held by MBI, would reduce FIBM's tangible primary capital below the level specified in its Capital Adeauacv Guidelines,theBoard concluded that theacquisitionwould not be in the public interest. In April 1986, Kuhns and two of MBI's other shareholders, Christine Goodnow and Robert Grimes, brought an action against Scott and FIBM,claimingbreach of the stockpurchase agreement and two contingent contracts--a consulting agreement and an employment agreement--between FIBM and Kuhns. The complaint alleged that Kuhnshad been damaged in an amount equal to the total value of the compensation and benefits he would have received under the consulting and employment agreements, or approximately $3.6 million. Inaddition tobreach of contract,theplaintiffs claimed that Scott had "deliberately, improperly, and without justification or

excuse caused FIBM to breach its duties under the stock purchase agreement" and thus interferedwith Kuhns' prospective contractual relations with FIBM, and that FIBM had "deliberately and systematically operated its businesses and arranged financing of itsMBI acquisition in a manner designed and intended to cause the Federal Reserve Board to disapprove the transactionw and thus breached its duty of good faith and fair dealing. The respondents denied all allegations and in their answertook the position that the plaintiffs were estopped by their own conduct or that of their agents from asserting any claims against Scott and FIBM. In September 1986, Kuhns filed a petition for relief in bankruptcy court,under Chapter 11. His lawyer for thebankruptcy proceedingmoved towithdraw as counsel forplaintiff Robert Grimes in the breach of contract action, on the grounds that Grimes had sued Kuhns and was therefore listed as Kuhnstcreditor,creating a conflict of interest for the lawyer. In July 1987, the plaintiffs filed a notice of substitution of counsel, but by April 1989 both the substituted firms had withdrawn. InNovember 1989,FIBMmoved todismiss thebreach of contract action for failure to prosecute, pointing out that the plaintiffs had taken no action other than filing a set of interrogatoriesand requests for discovery in July 1987. Kuhnstbankruptcy lawyers filed an objection, stating that the plaintiffs were without representation in this case, though their firm was representing Kuhns 

### inbankruptcy court: that thebankruptcy courthad refused to authorize litigation to proceed until reorganization was more certain; and that until Kuhns' reorganizationplan was confirmed, it would be unfair to dismiss the plaintiffs' breach of contract action. The bankruptcy court approved Kuhns' reorganization plan in December 1989, and the District Court denied FIBM's motion to dismiss in January 1990. A scheduling conferencewas held onApril 3, 1990, but the District Court decided that no schedule fordiscovery or trial could be set because the plaintiffs were not represented by counsel. On April 5, 1990, the court ordered the plaintiffs to obtain counsel by May 7, 1990. On May 11, 1990, the District Court dismissed plaintiffs Grimes and Goodnow on FIBM's motion. Gene Huntley of Baker had entered an appearance as counsel for Kuhns on May 7,and on May 14 he entered a general appearance for Grimes and Goodnow,too late to prevent them from being dismissed by the court. On June 12, 1991, FIBM moved for summary judgment on the grounds that no contract existed because a condition precedent--Federal Reserve Board approval--hadnot been fulfilled,and that Kuhns could notmaintain inhis individual capacity abreach of contractclaim thatbelonged to MBI. Kuhns requestedan extensionof thedeadline for respondingto FIBM's motion, stating thatMr. Huntleyhad breached his contingent fee hiring agreement by refusing to respond to FIBM's motions and that he would have to respond pro se. An extensionwas granted and

on July 1, 1991, Kuhns filed a brief and affidavit, pro se, contending that factual issues existed, inparticular the issue of whether the respondents had breached the covenant in the stock purchasing agreement that required them to use reasonable and continuous efforts to satisfy the conditions precedent, including adequate financing. Mr. Huntleywithdrew as Kuhns' lawyeronJuly lo, 1991, citing Rule 1.16(b) of the Rules of Professional Conduct, which allows a lawyer to withdraw if the clientmakes representation unreasonablydifficult. Inhis accompanying affidavit,Mr. Huntley stated that he had asked Kuhns to provide an independent banking expert who would testify that FIBM intended that the Board would disapprove thepurchase of MBI, and that Kuhns had promised toprovide such an expert but had not done so. The District Court granted summary judgment in favor of FIBM

on October 16, 1992. Kuhns appealed, pro se, raising several issues. We restate them as follows: 1. Whether the District Court erred in finding that no issues of material fact exist 

### in this case. 2. Whether the District Court erred in finding no evi4ence that Scott caused FIBM to breach its duties under the stock purchase agreement between MBI and FIBM. 3. Whether the District Court erred in finding no evidence that FIBM breached the implied covenant of good faith and fair dealing. The primary issue is whether the District Court erred in granting summary judgment, not as to the plaintiffs' original breach of contract claim but as to their claims regarding Scott's alleged interference with contractand FIBM's alleged breach of the implied covenant of good faith and fair dealing. The District Court determined correctly that the stock purchase agreement never became binding on either MBI or FIBM, due to failureof a condition precedent--Federal Reserve Board approval. See Management, Inc.v. Mastersons, Inc. (1980), 189 Mont. 435, 616 P.2d 356 (buyers' failure to obtain financing rendered a real estate contract a nullity because the "subject to financing" clause was a condition precedent). Summary judgment is appropriatewhen there isno genuine issue 6of material fact and themoving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. The initial burden of demonstrating the absence of a genuine issue of material fact lies with themoving party. Ravalli County Bank 

### v. Gasvoda (1992), 253 Mont. 399, 401, 833 P.2d 1042, 1043. Once themoving party has met that burden, the party opposing summary judgment must establish that genuine issues of material fact exist. Peschel v. Jones

(1988), 232 Hont. 516, 521, 760 P.2d 51, 54. Conclusory or speculative statementsare insufficient to raise a genuine issue of material fact. Simmonsv. Jenkins (1988), 230Mont. 429, 432, 750 P.2d 1067, 1069. I Did the District Court err in finding that no issues of material fact exist in this case? Kuhns argues thatwhether FIBMused "reasonable and continuous efforts to cause every condition precedent to the other party's obligations to be satisfied," as the stock purchase agreement required, is an issue of material fact. He claims, for example, that his briefs, affidavits, and exhibits make it "abundantly clearw that FIBM had a duty to arrange "such debt and equity financing as was necessary" to meet the Federal Reserve Board's requirements. He claims further that in a letter dated January 2, 1985,he informed FIBM of severalways to "improveFIBM's financial resources, decrease debt and increase capital.'* Because FIBM did not adopt any of these suggestions, Kuhns argues, FIBM did notmake reasonable efforts to obtain Board approval.FIBM contends that the contractdid not requireFIBM to comply with material conditions unacceptable to it, even if those conditions were imposed by the Board. William G. Wilson, FIBM's senior vice president, stated in his affidavit that all of Kuhns' suggestionswould have increased the cost of acquisition, and one would have required a $5 million to $7.5 million loan from the Scott family to FIBM. The stock purchase agreement provided for financing as follows: Buyer [FIBMI shall have arranged such financing as is reasonably necessary for it toconsummatethepurchase of Shares hereunder, on terms and conditions reasonably acceptable to it 

# . . . . The record shows that FIBM obtained a commitment from First Bank Minneapolis to loan FIBM $25 million, issued in November 1984 and valid throughJune 1985. Kuhns doesnot argue that this amount was not adequate topay thepurchase price; instead, he argues that the agreement called for Itadequatefinancing," which is "that which will be approved by the Fed Board." As the Board had expressed its

concerns about debt financing before FIBM submitted its proposal, Kuhns argues, FIBM was obligated under the contract to arrange financing other than debt financing. The District Court characterizes this dispute as a disagreement as towhat was required of FIBM under the "reasonable efforts" clause in the stock purchase agreement, rather than a factual issue. We agree. Ameredifference of interpretationdoes not amount to a genuine issue of material fact. See Sprunk v. First Bank System (1992), 252 Mont. 463, 830 P.2d 103 (plaintiff, 8appealing from summary judgment in favor of a bank holding company, recited "facts with his own interpretations and conclusions," which,we decided,did not raise a genuine issue ofmaterial fact). Kuhns failed to supporthis interpretation of the "reasonable effortsw clausewith evidence that FIBM did not make efforts that

were reasonable under the terms of the contract. FIBM, on the other hand, presented evidence that MBI's own consultant, along with MBI's general counsel, had approved FIBMtsfinal application to the Board; that FIBM had spent approximately $400,000 in attorneys' fees in attempting to obtain Board approval; and that FIBM actually had obtained adequate financing. Nothing in the stock purchase agreement required FIBM to obtain a specific type of financing or to increase its capital. In fact, Mark Safty,MBItsgeneral counsel in 1984-85, stated in his affidavit that "it was the intention and agreement of the parties that 

# . . . the bottom-line cost of the transaction to FIBM could not be increased," and that FIBM had no contractual obligation to @'injectadditional capital." We conclude that there is no genuine issue of material fact with regard to FIBMtsreasonable efforts to obtain Board approval of its proposed acquisition, or with regard to the adequacy of FIBM's proposed financing. As Kuhns has not met his burden of establishing that genuine issues of material fact exist, FIBM is entitled to judgment as a matter of law. I I Did the District Court err in finding no evidence that Scottcaused FIBM to breach its duties under the stock purchase agreement? In their original complaint, Kuhns and the other plaintiffs alleged that Scott deliberately and maliciously caused FIBM to breach its duties under the stockpurchase agreement. Inhis brief

on appeal, Kuhns merely contends that Scott, as chief executive officer of FIBM, could have increased FIBM's equity capital to "bring it in compliance with the [Board's guidelines]

## ,"but did not. He suggests that Scott "may well have had a personal conflict"because increasingFIBM's equity capitalwouldhavemeant diluting Scott's ownership interest in FIBM. The District Court found that Kuhns had presented no evidence that Scott acted in a manner that would subject him to personal liability. We agree. To establish a claim against Scott individually, Kuhnswould have to show that Scotthad acted for his

own pecuniary benefit and against the best interests of the corporation (FIBM); or that he had acted outside the scope of his employment. Bottrell v. American Bank (1989),237Mont. 1, 25, 773 P.2d 694, 708. Instead, Kuhns merely speculated about Scott's motivation. No evidence appears anywhere in the record that Scott acted for his own benefit or against FIBM's best interests. We conclude that no genuine issue of material fact exists as to Scott's personal liability and that Scott is entitled to judgment as a matter of law. 111 Did the District Court err in finding no evidence that FIBMbreached the implied covenant of good faith and fair dealing? The plaintiffs alleged in their complaint that FIBM "deliberately and sy~tematically'~ arranged financing of the MBI acquisition "inamanner designed and intended to cause the Federal Reserve Board to disapprove the transaction," contrary to the standard of good faith and fair dealing. On appeal, Kuhns argues thatbecause FIBM knew itsproposed financingwould be unacceptable to the Federal Reserve Board, and did nothing, it is "in clear violation of 5 28-1-211, MCA." In Story v. City of Bozeman (1990), 242 Mont. 436, 450, 791 P.2d 767, 775, we held that every contract contains an implied covenant of good faith and fairdealing, and that 5 28-1-211, MCA, defines the required standard of conduct as "honesty in fact and the observanceof reasonable commercialstandardsof fairdealing.If Here, the District Court properly concluded that Kuhns had presented no evidence showing that FIBM acted dishonestly or in contravention of reasonable commercial standards. Indeed, the record indicates that FIBM tried in good faith to achieve Federal ReserveBoard approval. No reasonable commercial standardrequired FIBM, or Scott, to increase FIBM1scost of acquiring MBI in order to obtain Board approval. For that reason, we need not consider whether a special relationship existed that would support tort damages. We hold that no genuine issue of material fact exists regarding a breach of the implied covenant of good faith and fair dealing, and that FIBM is entitled to judgment as a matter of law.Affirmed.

,June10,1993 CERTIFICATE OF SERVICE Iherebycertifythatthefollowingorderwas sentbyUnitedStatesmail,prepaid,tothefollowing named:

EldonE.Kuhns P.O.Box602 Billings,MT59103-0602

SamE.Haddon,Esq. RandyJ.Cox,Esq. BOONE,KARLBERG&HADDON P.O.Box9199 Missoula,MT59807-9199

EDSMITH CLERKOFTHESUPREMECOURT STATEOFMONTANA