No. 91

-150 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

GARY W. MANNIX, Plaintiff and Appellant,
-vsTHE BUTTEWATER COMPANY,aNew JerseyCorp., and DENNISWASHINGTON, Defendants and Respondents.

APPEAL FROM: District Court of the Second Judicial District, In and for the County of Silver Bow, The Honorable James E. Purcell,Judge presiding.

COUNSEL OF RECORD: For Appellant: FrankB. Morrison: JohnM.Morrison argued: Morrison Law Offices, Helena, Montana. For Respondent: Ronald B. MacDonald argued: Datsopoulos,MacDonald & Lind,Missoula,Montana.
Submitted:May 8, 1991 Decided:August 20, 1991 

### AUG

### 20

## I991 

# Cd3dh Filed: CLERKOFSUPKEMECOURS STATEOF MONTANA 1 ClerkJustice Fred J. Weber delivered the Opinion of the Court. This is an action for wrongful discharge. Plaintiff Gary W. Mannix appeals an order of the SecondJudicial District, SilverBow County, granting summary judgment for defendant Dennis Washington
on all claims except a "corporate veil" claim. We affirm. The issue iswhether a genuine issueofmaterial facthasbeen demonstrated as to whether Washington acted in retaliation in removing Mannix from office, so that Washington can be held personally liable forMannix'sdischarge aspresident of the Butte Water Company. PlaintiffGaryW. Mannix (Mannix)was an employee of the Butte Water Company (Water Company) from 1973 until December 1985. From 1983 until the end of his tenure, he was president of the Water Company. From the 1960's until December 1985, the Water Company was owned by the Atlantic Richfield Company (ARCO), and its various predecessors in title. In September of 1985, defendant Dennis Washington (Washington) and ARCO entered a letter agreement that Washingtonwould purchase fromARCO a Buttemine, some 35,000acres of property around Georgetown Lake, and the Water Company. At the time of the September 1985 negotiations between ARC0 andWashington, theWater Company carried,and had carried for some years,a notepayable toARCO forapproximately $4.5 million. Part of the initial agreement between Washington and ARCO was that the $4.5 million debt wouldbe erased and thatWashington would receive the Water Company free and clear. 2Dorn Parkinson was the president of Washington Corporations and also, an employee of Washington. On behalf of Washington, Parkinson met with Mannix several times in the fall of 1985 prior to the closing of the sale. Due at least in part to what he learned at 

### those meetings, Parkinson determined that itwould not be beneficial for the Water Company to be debt free. Washington arranged to use a personal line of credit at a Minnesota bank to get a $2 million loan for the Water Company and to personally guarantee the loan. ARCO and Washington agreed tomodify the sale agreement to reflect a debt of $2 million on the Water Company. Washington and ARCO agreed that the $2 million obtained from the Minnesota bank would be paid to ARCO, and Washington's purchase price for the package would be reduced by $2 million. The $4.5 million debt of the Water Company would be released as originally agreed, and Washington would own 100% of the stock in the Water Company. On December 13, 1985, the ARCO legal division asked Mannix,
as the president of the Water Company, to call a meeting of the Board of Directors to authorize the execution of a $2 million six month promissory note. Mannix consulted severalboard members and
a rate analyst at the Public Service Commission, but he did not call a board meeting. He refused to execute the note on grounds that 

### to do sowas not in the interest of theWater Company. Inhis view, thenote represented an increaseddebt for theWater Company, with no concomitant benefit, compared to the debt

-free status the company would have enjoyed under the terms of the deal tentatively

3negotiated in September. After Mannix refused to sign the promissory note, ARCO officials ordered him to do so or face personal liability if the deal fell through. Washington testified that,between December 13 and 18, 1985, while he was in the offices 

### of Gene Tidball,ARCO's corporate legal counsel,he overheard a phone conversation between Tidball and Mannix fromwhich he gathered that "[tlhey were having
some problems with him 

## . . 

# . he didn't want to sign something.It Mannix and anotherboardmember eventually signed a resolution authorizing Frank Gardner, another board member, to execute the note onbehalf of theWater Company. Gardner executed the note and the closing of the deal between ARCO and Washington was held on December 18, 1985. On December 18, 1985, after the closing, Washington, through his corporate counsel John Thiebes, asked for the resignation of all members of the Board of Directors of the Water Company, effective immediately. The next day, Washington, as the sole shareholder in theWater Company, elected a new board 

### of directors, consisting of himself, Parkinson, and Thiebes. At a directors' meeting immediately thereafter, Parkinson was instructed to meet withMannix todetermine whetherhe shouldbe retained aspresident of the Water Company. Parkinson met with Mannix on December 20, 1985, in Butte, Montana. According to Parkinson's deposition, he had been authorized by the new board of directors 

### "to take whatever action 

### I felt was necessary, including a termination." Parkinson stated
4that,by the end of their conversation,Mannix agreed that he could
no longer work for the company. In his deposition,Mannix stated that Parkinson told him that the new board of directors did not feel that they could work with him and that, therefore, he was terminated. Mannix's complaint for wrongful discharge and a violation of
an implied covenant of good faith and fair dealing was originally filed against ARCO, Anaconda Minerals Company, the Water Company, Washington Corporations, and Washington. All claims have been dismissed againstARCO, Anaconda Minerals Company, and Washington Corporations. In the order fromwhich appeal is taken, all claims against Washington were dismissed except a claim based on a "piercing the corporate veil" theory. Following the order granting summary judgment, a motion for substitution of judge was filed and the Honorable James E. Purcell assumed jurisdiction over the case. Two days later,the Honorable Leonard Langen, who had granted the summary judgment, filed a memorandum opinion in support ofhis ruling. BecauseJudge Purcell had already assumed jurisdiction when it was filed, we have not considered thememorandum opinion in reaching our decision.



### Is there a genuine issue of material fact as to whether Washington acted in retaliation in removing Mannix from office? Summary judgment isproper only if thepleadings,depositions,
answers 

### to interrogatories, and admissions on file, together with the affidavits, if any, show that there are no genuine issues of

5material fact and that themoving party 

### is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. This Court's standard of review is the same as that employed by the district court. McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 892, 894. Mannix argues that Washington can be held personally liable,
as a member of the board of directors of the Water Company, in connection with Mannix's discharge as president of the Water Company if Washington's actionswere against thebest interests of the corporation, were for his own pecuniary benefit, or were undertakenwith the intenttoharmMannix. Phillips

### v. Montana Ed. Ass'n. (1980), 187 Mont. 419, 425, 610 P.2d 154, 158. Mannix argues that it was against the best interests of the Water Company to dischargehim because of his good work record with the company. He asserts that he was following his own corporate bylaws and honoring the wishes of his board of directors in refusing to sign the $2 million note. It is clear that the disagreement about whether it was in the Water Company's best interests to sign the $2 million note was actually between Mannix and ARCO, because the Water Company was controlled by ARCO at that time. Moreover, Mannix has failed to present any facts supporting the argument that signing the note
was against the best interests of the Water Company. The record
on summary judgment demonstrates that as a result of the purchase by Washington, the Water Company debt was reduced from approximately $4.5 million to $2 million. In addition, five months
6after the purchase, Washington personally paid off the note, leaving the Water Company free of debt. Mannix stated in his deposition that he did not knowwhat he would do if facedwith another situation inwhich he did not agree with theboard of directorsas towhether a particular actionwould be in the best interests of the Water Company. 

### In contrast, Parkinson's deposition established that the corporation needed "teamplayers.

## '' We conclude that Mannix has failed to present facts which support the argument that his employment termination was against the best interests of the Water Company. Further,nothing in the summary judgment record supports an argument that Washington terminated the employment of Mannix forhis ownpecuniary benefit. The remaining question is whether Washington is personally liable for Mannix's termination because it was his personal act of retaliation for Mannix's refusal to sign the $2 million note on behalf of the Water Company. In support of the argument that Washington is personally liable on these grounds, Mannix cites Washington's apparent absolute control of the new board of directors. However, in the absence of a factual demonstration of retaliation, Mannix fails to demonstrate how that control is relevant. According to the depositions, Washington and Mannix had met only once before Mannix was terminated. 

### In his deposition, Washington stated that, when he overheard the argument between Tidball and Mannix, his reaction was "I thought he had a lot of
7balls." BothWashingtonand Parkinsontestifiedby deposition that the decision of whether Mannix should remain as president of the Water Company was left to Parkinson. Mannix points to a statement by Parkinson, in a deposition taken for another case but included in 

### this record, that the Directors of the Water Company made the decision to terminateMannix's employ. However, that statementwas explained in Parkinson's deposition for this case, in which he stated that the termination of Mannix's employwas empowered by and subsequently approved by the board of directors, but that the decision of whether to terminate Mannix was left to him. These facts do not demonstrate a retaliatory discharge on the part of Washington. Mannix argues that the new board of directors was unlawful because it only had threemembers and because the secretary of the Water Companywas not present at theboard meeting. He reliesupon Article VII, Section 2 of the By
-Laws of the Water Company: In case of a vacancy in the Board the remaining Directors shall continue to act: but if at any time their number be reduced to less than four,

### it shallbe theduty of the remaining Directors to forthwith fill the vacancies. However,Article V, Section 4 of the same By
-Laws provided that [tlhreeDirectorsassembledtogetheratanymeeting shall constitute a quorum competent to transactbusiness. 

## . . We conclude that a quorum of three directors was authorized to take action, under the By
-Laws. As to thepresence of the secretary of the Water Company, John Thiebes took notes as "acting secretary." We conclude that was sufficient in a corporation newly acquired by
one shareholder.
8As the First Circuit Court of Appeals has noted State of mind is difficult 

### to prove and great circumspection 

### is required where summary judgment 

### is sought on an issue involving state of mind. 

# . . 

# . But that does not mean that a party against whom summary judgment is sought is entitled to a trial simply because he has asserted a cause of action 

### towhich state ofmind is a material element. There 

### must be some indication that he canproduce the requisite quantum of evidence to enable him to reach the jury with his claim. Hahn 

### v. Sargent 

### (1st

### Cir. 1975), 523 F.2d 461, 468, cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754. Although he has made
an extensive argument,Mannix simplyhas not brought out any facts to support his position that Washington personally terminated Mannix's employment with the Water Company in retaliation forhis refusal to sign the $2 million note. We hold that the District Court did not err in granting summary judgment for Washington on all claims but the "corporateveil" claim. Affinned.

/ We Concur: n %/' 

# 2-

Chief Justice

Justices

9Justice R. C. McDonough respectfully dissents. In order for summary judgment to issue, the party moving for summary judgment has the burden of showing a complete absence of genuine issues as to all facts deemed material. All reasonable inferencesthatmay be drawn from the offeredproof are tobe drawn in favor of the party opposing summary judgment. Cereck 

### v. Albertson's Inc. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511. The above last sentence is especially appropriate in this
case. The question here involves more than whether there is a genuine issue of objective material facts. It involves the ultimate fact of intent and motive of Mr. Washington. When different ultimate inferences or determinations can be drawn from
an admitted set of facts (as here), such determination is a question of fact for the jury. Mr. Washington had proposed that the sale of the Butte Water Companybe accomplished notby hisputting up all of the $4 million to buy the stock, but by his putting up $2 million and the Butte Water Company borrowing $2 million. The ostensible purpose of the creationof the debtwas that a utility could obtain more favorable rates from the Public Service Commission if the utility had a significant debt. 

### It can also be deduced that Mr. Washington, even though he personally guaranteed the loan,had to come up with lessmoney to buy the Company at the time of closing. Either on theday of closing or theday before,Mr. Washington overheard the heated telephone conversation between Mr. Tidball,

10an attorney for ARCO, and Mr. Mannix. Mr. Tidball was angry and called the plaintiff insubordinate. The plaintiff's action in refusing to sign the note was an obstacle to the closing of the transaction. Mr. Washington wished to complete the sale. The attitude of theplaintiff and ARCO's problem with Mannix,
was discussed by Mr. WashingtonandMr. Parkinson while flying back toMontana. Shortly after returning toMontana, Mr. Parkinsonhad a meeting with Mr. Mannix and Mannix was discharged. As stated in Phillips

### v. Montana Education Assoc. (1980), 187 Mont. 419, 425, 610 P.2d 154, 158, one reason a director of 

### a corporation can be held personally liable forhis alleged tortious acts is if such acts are done with the intent to harm the plaintiff. The plaintiff asserts his termination was wrongful and Washington got rid of him in retaliation for his actions with ARCO 

### in refusing to sign the note. Mr. Washington asserts there was no intent toharm theplaintiff and theplaintiff's own statements led to his discharge. Forpurposes of summary judgment,the issue for consideration 

### is: whether on these facts, a reasonable inference can be made that Mr. Washington retaliated and intended to punish or harm the plaintiff forhis actions in placing an obstacle in thepath of the closing of the sale. This essentially requiresa determination ofMr. Washington's state ofmind. Whenmotivation is involved and credibility becomes of critical importance, or when essential facts are solely within

11the control of the moving party, summary judgment generally is inappropriate. Mazaleski 

### v. Treusdell (D.C.Cir. 1977), 562 F.2d 701, 717;Poller

### v. Columbia Broadcasting System, Inc. (1962), 368 U.S. 464, 473, 82 s.ct. 486, 491, 7 ~.Ed.2d458, 464; see also Egger v. Phillips (7thCir. 1982), 669 F.2d 497. Here motivation is involved. Evidence from pertinent witnesses 

### is oral and credibility is of critical importance. The essential facts are solely within the control of the defendant. All three of the criteria 

### fit. A determination involving a party's state of mind is seldom susceptible to direct proof, but must be inferred from circumstantial evidence. If improper motive can reasonably be inferred from the evidence, sworn denial does not entitle a defendant to summary judgment. Conrad 

### v. Delta Airlines (7thCir. 1974), 494 F.2d 914, 918. Eqaer v. Phillips, supra. After drawing all reasonable inferences in favor of the plaintiff from the above admitted facts, a jury can reasonably infer that Mr. Washington's motive was improper and he intended to harm the plaintiff. The motion for summary judgment should have been denied and the intent and motive of Mr. Washington should be
an ultimate fact to be resolved by a jury. I would reverse on this issue and direct the District Court to vacate its order of summary judgment.

12We concur in the foregoing dissent of Justice McDonough.


# / J stices

13

### August20, 1991 CERTIFICATE

### OFSERVICE 

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### United Statesmail,prepaid, to

### the followingnamed:
Frank

### B. Morrison,Jr. andJohnM.Morrison MorrisonLaw Offices 80

### So.Warren Helena,

### MT 59601 

### RonaldB. MacDonald Datsopoulos, MacDonald &

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### THESUPREME COURT STATEOFMONTANA 

### BY

# $* Deput