Mannix v. Butte Water Company ( 1991 )

No. 91-150
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
GARY W. MANNIX,
Plaintiff and Appellant,
-vs-
THE 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
AUG 2 0 I991 Decided:August 20, 1991
Filed:
C 3dh
d
CLERK OF S U P K E M E 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 j u r y 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 f o r 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 finned.
2-
We Concur:
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, 8 2 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
CLERK OF THE SUPREME COURT
STATE O F MONTANA
BY
Deput
$*