No. 91-150 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

GARY W. MANNIX, 

Plaintiff and Appellant, 

-vsTHE BUTTE WATER COMPANY, a New Jersey Corp., and DENNIS WASHINGTON, 

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: 

Frank B. 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 

Cd 3dh Filed: 

CLERK OF SUPKEME COURS 

STATE OF MONTANA 

1 

Clerk 
Justice 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 Second Judicial District, Silver Bow 

County, granting summary judgment for defendant Dennis Washington 

on all claims except a "corporate veil" claim. We affirm. 

The issue is whether a genuine issue of material fact has been 

demonstrated as to whether Washington acted in retaliation in 

removing Mannix from office, so that Washington can be held 

personally liable for Mannix's discharge as president of the Butte 

Water Company. 

Plaintiff Gary W. 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 

Washington would purchase from ARCO a Butte mine, some 35,000 acres 

of property around Georgetown Lake, and the Water Company. 

At the time of the September 1985 negotiations between ARC0 

and Washington, the Water Company carried, and had carried for some 

years, a note payable to ARCO for approximately $4.5 million. Part 

of the initial agreement between Washington and ARCO was that the 

$4.5 million debt would be erased and that Washington would receive 

the Water Company free and clear. 

2 
Dorn 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 it would 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 to modify 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 several board 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 so was not in the interest of the Water Company. In his 

view, the note represented an increased debt for the Water Company, 

with no concomitant benefit, compared to the debt-free status the 

company would have enjoyed under the terms of the deal tentatively 

3 
negotiated 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 from which he gathered that "[tlhey were having 

some problems with him . . . he didn't want to sign something.It 

Mannix and another boardmember eventually signed a resolution 

authorizing Frank Gardner, another board member, to execute the 

note on behalf of the Water 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 the Water Company, elected a new board of directors, 

consisting of himself, Parkinson, and Thiebes. At a directors' 

meeting immediately thereafter, Parkinson was instructed to meet 

with Mannix to determine whether he should be retained as president 

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 

4 
that, 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 against ARCO, Anaconda Minerals Company, and Washington 

Corporations. In the order from which 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 of his ruling. Because Judge Purcell 

had already assumed jurisdiction when it was filed, we have not 

considered the memorandum 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 is proper only if the pleadings, depositions, 

answers to interrogatories, and admissions on file, together with 

the affidavits, if any, show that there are no genuine issues of 

5 
material fact and that the moving 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 actions were against the best interests of 

the corporation, were for his own pecuniary benefit, or were 

undertaken with the intent to harm Mannix. 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 discharge him 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 

6 
after the purchase, Washington personally paid off the note, 

leaving the Water Company free of debt. 

Mannix stated in his deposition that he did not know what he 

would do if faced with another situation in which he did not agree 

with the board of directors as to whether a particular action would 

be in the best interests of the Water Company. In contrast, 

Parkinson's deposition established that the corporation needed 

"team players. '' 

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 for his own pecuniary 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 

7 
balls." Both Washington and Parkinson testified by 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 terminate Mannix's employ. However, that statement was 

explained in Parkinson's deposition for this case, in which he 

stated that the termination of Mannix's employ was 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 three members and because the secretary of the 

Water Company was not present at the board meeting. He relies upon 

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 shall be the duty of the 

remaining Directors to forthwith fill the vacancies. 

However, Article V, Section 4 of the same By-Laws provided that 

[tlhree Directors assembled together at any meeting shall 

constitute a quorum competent to transact business. . . 

We conclude that a quorum of three directors was authorized to take 

action, under the By-Laws. As to the presence 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. 

8 
As 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 to which state of mind 

is a material element. There must be some indication 

that he can produce 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 simply has not brought out any facts 

to support his position that Washington personally terminated 

Mannix's employment with the Water Company in retaliation for his 

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 "corporate veil" claim. 

Af f inned. 

We Concur: / 2- n %/' 

Chief Justice 

Justices 

9 
Justice 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 

inferences that may be drawn from the offered proof are to be 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 

Company be accomplished not by his putting 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 

creation of the debt was 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 less money to 

buy the Company at the time of closing. 

Either on the day of closing or the day before, Mr. Washington 

overheard the heated telephone conversation between Mr. Tidball, 

10 
an 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 the plaintiff and ARCO's problem with Mannix, 

was discussed by Mr. Washington and Mr. Parkinson while flying back 

to Montana. Shortly after returning to Montana, Mr. Parkinson had 

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 for his 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 to harm the plaintiff and the plaintiff's own statements led 

to his discharge. 

For purposes 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 for his actions in placing an obstacle in the path of the 

closing of the sale. 

This essentially requires a determination of Mr. Washington's 

state of mind. When motivation is involved and credibility becomes 

of critical importance, or when essential facts are solely within 

11 
the 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.2d 458, 464; see also 

Egger v. Phillips (7th Cir. 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 (7th Cir. 

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. 

12 
We concur in the foregoing dissent of Justice McDonough. 

/ J stices 

13 
August 20, 1991 

CERTIFICATE OF SERVICE 

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

following named: 

Frank B. Morrison, Jr. and John M. Morrison 

Morrison Law Offices 

80 So. Warren 

Helena, MT 59601 

Ronald B. MacDonald 

Datsopoulos, MacDonald & Lind 

201 W. Main, Central Square Bldg. 

Missoula, MT 59802 

ED SMITH 

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STATE OF MONTANA 

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