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 the Thirteenth Judicial 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, 1993 
Justice 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. 

On November 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 of Montana Bancsystem, 

Inc. (MBI) for $36 million. Kuhns was MBI'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 for approval of the stock 

purchase to the Federal Reserve Board of Governors (Board). The 

application was reviewed and approved by MBI1s general 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 

"seriously concerned" about the effect of the proposed acquisition 

2 
on FIBM1s resources, ttparticularly the substantial reduction of 

[FIBM's] capital and [FIBM's] increased reliance on debt." Finding 

that the proposed 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, the Board concluded that the acquisition would 

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, claiming breach of the stock purchase agreement and 

two contingent contracts--a consulting agreement and an employment 

agreement--between FIBM and Kuhns. The complaint alleged that 

Kuhns had 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. 

In addition to breach of contract, the plaintiffs claimed that 

Scott had "deliberately, improperly, and without justification or 

excuse caused FIBM to breach its duties under the stock purchase 

agreement" and thus interfered with Kuhns' prospective contractual 

relations with FIBM, and that FIBM had "deliberately and 

systematically operated its businesses and arranged financing of 

its MBI 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 answer 
took 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 the bankruptcy 

proceeding moved to withdraw as counsel for plaintiff Robert Grimes 

in the breach of contract action, on the grounds that Grimes had 

sued Kuhns and was therefore listed as Kuhnst creditor, 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. 

In November 1989, FIBM moved to dismiss the breach of contract 

action for failure to prosecute, pointing out that the plaintiffs 

had taken no action other than filing a set of interrogatories and 

requests for discovery in July 1987. Kuhnst bankruptcy lawyers 

filed an objection, stating that the plaintiffs were without 

representation in this case, though their firm was representing 

Kuhns in bankruptcy court: that the bankruptcy court had refused to 

authorize litigation to proceed until reorganization was more 

certain; and that until Kuhns' reorganization plan 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 conference was held on April 

3, 1990, but the District Court decided that no schedule for 
discovery 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--had not been fulfilled, and that Kuhns could not maintain 

in his individual capacity a breach of contract claim that belonged 

to MBI. 

Kuhns requested an extension of the deadline for responding to 

FIBM's motion, stating that Mr. Huntley had breached his contingent 

fee hiring agreement by refusing to respond to FIBM's motions and 

that he would have to respond pro se. An extension was granted and 

on July 1, 1991, Kuhns filed a brief and affidavit, pro se, 

contending that factual issues existed, in particular 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. Huntley withdrew as Kuhns' lawyer on July lo, 1991, citing 

Rule 1.16(b) of the Rules of Professional Conduct, which allows a 

lawyer to withdraw if the client makes representation unreasonably 
difficult. In his 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 

the purchase of MBI, and that Kuhns had promised to provide 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 contract and 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 failure of 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 appropriate when there is no genuine issue 

6 
of material fact and the moving 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 the moving party. Ravalli County Bank v. Gasvoda (1992), 253 

Mont. 399, 401, 833 P.2d 1042, 1043. Once the moving 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 statements are insufficient to raise a genuine issue of 

material fact. Simmons v. Jenkins (1988), 230 Mont. 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 that whether FIBM used "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 several ways to "improve FIBM's financial 

resources, decrease debt and increase capital.'* Because FIBM did 

not adopt any of these suggestions, Kuhns argues, FIBM did not make 

reasonable efforts to obtain Board approval. 
FIBM contends that the contract did not require FIBM 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' 

suggestions would 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 to consummate the purchase 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 through June 1985. Kuhns does not argue that this amount was 

not adequate to pay the purchase price; instead, he argues that the 

agreement called for Itadequate financing," 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 to what was required of FIBM under the "reasonable 

efforts" clause in the stock purchase agreement, rather than a 

factual issue. We agree. A mere difference of interpretation does 

not amount to a genuine issue of material fact. See Sprunk v. 

First Bank System (1992), 252 Mont. 463, 830 P.2d 103 (plaintiff, 

8 
appealing 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 of material fact). 

Kuhns failed to support his interpretation of the "reasonable 

effortsw clause with 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 FIBMts final 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, MBIts general 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 

@'inject additional capital." 

We conclude that there is no genuine issue of material fact 

with regard to FIBMts reasonable 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 Scott 
caused 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 stock purchase agreement. In his 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 increasing FIBM's equity capital would have meant 

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, Kuhns would have to show that Scott had 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), 237 Mont. 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 FIBM 
breached the implied covenant of good faith and fair dealing? 

The plaintiffs alleged in their complaint that FIBM 

"deliberately and sy~tematically'~ arranged f inancing of the MBI 

acquisition "in a manner 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 

that because FIBM knew its proposed financing would 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 fair dealing, and that 5 28-1-211, MCA, 

defines the required standard of conduct as "honesty in fact and 

the observance of reasonable commercial standards of fair dealing.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 

Reserve Board approval. No reasonable commercial standard required 

FIBM, or Scott, to increase FIBM1s cost 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. 

, 
June 10, 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Eldon E. Kuhns 

P.O. Box 602 

Billings, MT 59103-0602 

Sam E. Haddon, Esq. 

Randy J. Cox, Esq. 

BOONE, KARLBERG & HADDON 

P.O. Box 9199 

Missoula, MT 59807-9199 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA