Carelli v. Hall
| Decision Date | 14 November 1996 |
| Docket Number | No. 95-465,95-465 |
| Citation | 279 Mont. 202,926 P.2d 756 |
| Parties | , 33 UCC Rep.Serv.2d 513 Martin CARELLI, Plaintiff and Respondent, v. Stanley E. HALL, Gregory L. Stires, and Dale P. Stires, Defendants and Appellants. |
| Court | Montana Supreme Court |
Michael K. Rapkoch, Felt, Martin, Frazier & Nelson, Billings, for defendants and appellants.
Rienne H. McElyea, Berg, Lilly, Andriolo & Tollefsen, Bozeman, for plaintiff and respondent.
Gregory and Dale Stires appeal from the judgment of the Eighteenth Judicial District Court, Gallatin County, awarding Martin Carelli $77,381.08 in damages, costs and attorney's fees in his action on a promissory note and from the underlying order denying their motion for summary judgment. We reverse and remand.
The dispositive issue on appeal is whether the District Court erred in denying Gregory and Dale Stires' motion for summary judgment.
Gregory and Dale Stires (collectively, Stires) and Stanley Hall (Hall) owned and operated the Elk Valley Game Ranch (Game Ranch) as partners beginning in 1986. The partnership originally was formed pursuant to an oral agreement; however, Stires and Hall executed a written partnership agreement with regard to the Game Ranch in 1987.
In June of 1986, Hall purchased thirty-eight head of elk from Martin Carelli (Carelli). He signed a promissory note agreeing to pay Carelli $36,000 by December 20, 1986, for the elk. The promissory note refers solely to Hall as the purchaser and contains no reference to Stires or the Game Ranch. Hall also signed a security agreement covering the elk purchased from Carelli. The security agreement names, and is signed by, Hall as the debtor; it reflects that the elk will be kept at the Game Ranch and will be used for business purposes. Finally, Carelli and Hall signed, and Carelli filed, a Uniform Commercial Code (UCC) financing statement identifying Hall as the debtor and the elk as the collateral.
Stires and Hall dissolved their partnership in 1988. Pursuant to the partnership dissolution agreement, Stires would continue to operate the Game Ranch. The dissolution agreement listed the partnership debt and divided it between Stires and Hall. The debt attributable to the promissory note executed by Hall in Carelli's favor was not listed.
After Hall failed to pay Carelli pursuant to the promissory note, Carelli sued Hall for the principal and interest owing on the note, together with costs and attorney's fees. Hall answered, denying liability on the promissory note. He also filed a third-party complaint against Stires alleging that, pursuant to the partnership dissolution agreement, Stires was obligated to pay Carelli the debt evidenced by the promissory note. In response to Hall's third-party complaint, Stires denied liability for the debt, arguing that the debt evidenced by the promissory note was Hall's personal obligation and, therefore, Stires could not be held liable for it.
Stires attempted to depose Hall on three occasions. The first two dates were rescheduled and Hall failed to appear for the third. Thereafter, Carelli moved for summary judgment against Hall pursuant to Rule 56(c), M.R.Civ.P., as well as for entry of judgment in his favor against Hall as a Rule 37 sanction for Hall's failure to appear at the depositions. Stires also moved for Rule 37 sanctions against Hall, requesting the court to dismiss Hall's third-party complaint.
The District Court concluded that no genuine issues of material fact existed regarding Hall's liability on the promissory note and granted summary judgment in favor of Carelli. In addition, the court granted Rule 37 sanctions against Hall in favor of both Carelli and Stires and, accordingly, entered judgment against Hall in Carelli's favor and dismissed Hall's third-party complaint against Stires. The District Court then permitted Carelli to amend his complaint, pursuant to Rule 15, M.R.Civ.P., to assert a claim against Stires for liability on the debt evidenced by the promissory note Hall executed. Stires answered, denying liability on the note, and both Stires and Carelli conducted discovery.
Stires subsequently moved for summary judgment against Carelli, arguing that the promissory note, security agreement and financing statement clearly and unambiguously identified Hall as the sole debtor on the note. Thus, according to Stires, no genuine issues of material fact existed regarding whether Stires was a debtor liable on the note and Stires was entitled to judgment as a matter of law under UCC, contract and partnership principles.
Carelli opposed Stires' motion. After oral argument on Stires' summary judgment motion, the District Court determined that genuine issues of material fact existed and Stires was not entitled to judgment as a matter of law. It provided no further explanation or analysis of its denial of the motion.
Following a bench trial, the District Court entered findings of fact and conclusions of law determining that Hall was authorized to--and did, in fact--purchase the elk on behalf of the partnership and, therefore, that Stires was liable on the promissory note. The court entered judgment accordingly and Stires appeals.
Did the District Court err in denying Stires' motion for summary judgment?
Summary judgment is proper when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. We review a district court's grant or denial of a motion for summary judgment de novo, applying the same Rule 56(c), M.R.Civ.P., criteria used by that court. Johnson v. Nyhart (1995), 269 Mont. 379, 384, 889 P.2d 1170, 1173 (citation omitted).
The moving party has the initial burden of establishing the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Brinkman & Lenon v. P & D Land Enters. (1994), 263 Mont. 238, 241, 867 P.2d 1112, 1115. Only where the moving party satisfies its initial burden does the burden shift to the party opposing summary judgment to present evidence raising a genuine issue of material fact. Matter of Estate of Lien (1995), 270 Mont. 295, 298, 892 P.2d 530, 532 (citing Owen v. Ostrum (1993), 259 Mont. 249, 255-56, 855 P.2d 1015, 1019). The nonmoving party may not rest upon the allegations in the pleadings or on speculative or conclusory statements. Estate of Lien, 892 P.2d at 532 (citing Simmons v. Jenkins (1988), 230 Mont. 429, 432, 750 P.2d 1067, 1069). Moreover, only admissible evidence can be considered in determining whether genuine issues of material fact exist. See Treutel v. Jacobs (1990), 240 Mont. 405, 408, 784 P.2d 915, 917.
"Material issues of fact are identified by looking to the substantive law governing the proceedings." Estate of Lien, 892 P.2d at 532 (citation omitted). Here, Carelli and Stires agree that the UCC is the primary source of law applicable in this case because the sale of elk at issue here is a sale of "goods" under § 30-2-105(1), MCA (1985), and, additionally, that the promissory note is an "instrument" as defined in §§ 30-3-102 and 30-3-104, MCA (1985). They also agree that contract and partnership principles apply only secondarily.
The central issue in this case is whether Stires is liable on the debt evidenced by the promissory note and security agreement for the purchase of the elk executed by Hall in Carelli's favor. Stated differently, the issue is whether Hall bound the Game Ranch partnership and, as a result, Stires, when he executed the note and security agreement. In support of his motion for summary judgment, Stires relies on the promissory note and the related security agreement, both executed solely by Hall and identifying only Hall as the debtor. Stires contends that they clearly and unambiguously establish, via their express terms, that Hall is the sole person liable for the debt evidenced by the promissory note.
The note specifically provides that "the undersigned promises to pay ... MARTIN CARELLI ... the sum of Thirty-six Thousand and no/100 ($36,000.00) Dollars on or before the 20th day of December, 1986 ...." for the thirty-eight head of elk. Hall is the sole signatory of the note and neither the Game Ranch nor Stires is referenced in any way. Thus, the promissory note clearly establishes that Hall is the person liable for the promise to pay contained therein.
In addition, § 30-3-401(1), MCA (1985), expressly provides that "[n]o person is liable on an instrument unless his signature appears thereon." Because neither Stires nor the Game Ranch is identified in the note and Stires' signature is not contained therein, Stires is not liable on the instrument.
We conclude that, as the party moving for summary judgment, Stires met the initial burden of establishing the absence of genuine issues of material fact regarding Stires' liability on the promissory note executed by Hall and entitlement to judgment as a matter of law. The burden then shifted to Carelli to present affirmative evidence of a material and substantial nature raising genuine issues of material fact regarding Stires' liability; he could not rest on the allegations in his pleadings or on conclusory or speculative statements. See Estate of Lien, 892 P.2d at 532.
Carelli's argument that Stires is liable for the debt evidenced by the promissory note executed by Hall is based on the UCC and contract and partnership law. Conceding that the promissory note is clear and identifies Hall as the sole debtor, Carelli nonetheless argues that his deposition establishes the existence of a genuine issue of material fact regarding whether Hall signed the promissory note on behalf of the Game Ranch and that the District Court properly determined that this factual issue precluded summary judgment. Specifically, he relies on his deposition testimony that, in negotiating for the purchase of the elk, Hall represented to him that Hall was purchasing...
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