Estate of Pruyn v. Axmen Propane, Inc.

• Decision Date: 29 December 2009
• Docket Number: No. DA 08-0352.,DA 08-0352.
• Citation: 2009 MT 448,354 Mont. 208,223 P.3d 845
• Parties: ESTATE OF Earl M. PRUYN, acting through the Personal Representative Jack Meyer, Plaintiff and Appellant, v. AXMEN PROPANE, INC., a Montana corporation, and Edward Kimbrell, individually, Defendants and Appellees.
• Court: Montana Supreme Court

223 P.3d 845

2009 MT 448

354 Mont. 208

ESTATE OF Earl M. PRUYN, acting through the Personal Representative Jack Meyer, Plaintiff and Appellant, v. AXMEN PROPANE, INC., a Montana corporation, and Edward Kimbrell, individually, Defendants and Appellees.

No. DA 08-0352.

Supreme Court of Montana.

Submitted on Briefs August 5, 2009.

Decided December 29, 2009.

For Appellant: Randy J. Cox, Scott M. Stearns, Thomas J. Leonard, Boone Karlberg P.C. Missoula, Montana.

For Appellee Axmen Propane, Inc.: David B. Cotner, Trent N. Baker, Erika Peterman, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana.

For Appellee Edward Kimbrell: Edward Kimbrell, (Self-Represented), San Antonio, Texas.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Earl Pruyn filed suit against Edward Kimbrell and Axmen Propane, Inc. (Axmen) claiming they had defaulted under the terms of a promissory note. After Pruyn's death in June 2008, his estate was substituted as plaintiff in this case. Eventually, the District Court for the Fourth Judicial District, Missoula County, denied Pruyn's motions for summary judgment and granted Axmen's cross-motions for summary judgment and awarded Axmen its attorney's fees. We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.

¶ 2 Pruyn raises the following issues on appeal:

¶ 3 1. Did the District Court err in overturning a prior order granting summary judgment to Pruyn?

¶ 4 2. Did the District Court err in granting summary judgment to Axmen on Pruyn's contract claim?

¶ 5 3. Did the District Court err in granting summary judgment to Axmen on Pruyn's unjust enrichment claim?

¶ 6 4. Did the District Court abuse its discretion in awarding Axmen its attorney's fees?

¶ 7 5. Were Pruyn's due process rights violated as a result of Axmen's ex parte communications with the District Court?

Factual and Procedural Background

¶ 8 Edward Kimbrell, Guy Hanson and Grant Hanson co-owned Axmen, a full-service propane retailer in Missoula, Montana. Because Kimbrell had expertise in the propane business, he became managing partner when the partnership was formed in 1999, and then President when Axmen was incorporated in 2000. Kimbrell and the Hansons were Axmen's only shareholders, its only officers, and its only directors. The three provided the company's initial capitalization from their own pockets and they held equal shares in the company.

¶ 9 Kimbrell ran the day-to-day operations at Axmen while the Hansons worked at another location running their other business ventures. A large part of Kimbrell's duties involved purchasing propane. He often bought thousands of gallons of propane by simply picking up the phone and calling a supplier. Besides purchasing propane to maintain Axmen's normal stock levels, Kimbrell also purchased large quantities of propane to "hedge" against price fluctuations. In these transactions, Kimbrell would purchase large amounts of propane for delivery over several months rather than a few days to "lock in" a fixed price for Axmen and its customers.

¶ 10 Powderhorn Petroleum (Powderhorn) was one of Axmen's main propane suppliers, and Kimbrell entered into numerous propane procurement and futures transactions with Powderhorn. In March 2003, Kimbrell and two others, John Giuliani and Shawn Diehl, entered into a propane transaction with Powderhorn for the purchase of 1.7 million gallons of propane, almost 20 times the volume of any previous order by Axmen. Shortly after entering into this transaction with Powderhorn, propane prices dropped and Kimbrell incurred a substantial loss. To finance this loss, Kimbrell approached Pruyn for a loan. Pruyn was a local businessman who often lent money on business ventures. Pruyn later testified that he understood from Kimbrell that Axmen needed to borrow money to acquire property in the Bitterroot for a larger supply of tanks.

¶ 11 Kimbrell had several meetings with Pruyn wherein he gave Pruyn information relating to Axmen's assets, cash flow and accounts receivable. Pruyn testified that based upon the documentation from Axmen as well as his own investigation into the company's reputation and overall business prospects, he decided to lend Axmen $544,500. Pruyn also testified that although he told his attorney to draft the promissory note "to Axmen Propane guaranteed by Guy and Grant Hansen [sic], personally," Axmen was not specifically mentioned in the note. The promissory note included signature blocks for Kimbrell and both of the Hansons, but it did not indicate that they would be signing in any representative capacity.

¶ 12 On April 4, 2003, Kimbrell executed the note forging the Hansons' signatures. After Kimbrell returned the signed note to Pruyn, the money was wired to Powderhorn's bank to pay off the debt to Powderhorn. Although the promissory note was not paid as agreed, Pruyn did receive two cashier's checks from Kimbrell, one dated August 11, 2003, for $20,000, and one dated October 1, 2003, for $40,000.

¶ 13 On Christmas Eve 2003, Pruyn discussed the promissory note with Guy Hanson. Pruyn learned at that time that neither of the Hansons knew anything about the loan, the promissory note, or the Powderhorn debt. Kimbrell subsequently admitted that he had forged the Hansons' signatures on the note.¹

¶ 14 Pruyn filed this action against Axmen and Kimbrell on July 8, 2004, seeking the unpaid principal balance on the promissory note, accrued interest, all costs and expenses of suit, and attorney's fees. Axmen filed its Answer, Cross Claim and Demand for Jury Trial on September 2, 2004, wherein Axmen contended that the note was barred by the statute of frauds because Axmen is not mentioned in the note. Axmen also filed a cross claim against Kimbrell for, among other things, fraud, constructive fraud, breach of fiduciary duty, and unjust enrichment.

¶ 15 On July 25, 2005, Pruyn moved for summary judgment asserting that the undisputed material facts showed that because Kimbrell had authority to speak on behalf of Axmen and to enter into the subject loan transaction, Axmen was liable on the promissory note. After reviewing the parties' briefing and hearing oral argument, then District Court Judge Henson² granted summary judgment in favor of Pruyn. In his March 20, 2006 Opinion and Order, Judge Henson determined that Kimbrell had ostensible authority to bind Axmen in the loan transaction, and that Axmen had retained the benefit of the loan by applying it toward its debt with Powderhorn. Judge Henson also determined that Pruyn should not be made to suffer for Kimbrell's actions even if the loan transaction was accomplished fraudulently and without actual authority.

¶ 16 On April 28, 2006, Axmen filed a Motion for Relief from Opinion and Order. When the District Court failed to make a decision on the motion within 60 days of its filing, Pruyn filed a "Notice of 60 Day Pendency of Axmen Propane's Motion for Relief from Opinion and Order" on June 28, 2006, arguing that the motion had been deemed denied. The following day, Axmen filed its Renewed Motion for Relief from Opinion and Order. Since Judge Henson had retired and his successor had not yet been appointed or sworn in, the matter was called to the attention of Judge McLean, who, on July 6, 2006, granted Axmen's request and vacated Judge Henson's order. Pruyn moved to set aside Judge McLean's order claiming the 60-day time period for considering Axmen's motion had expired prior to Judge McLean's ruling. Thereafter, the case was assigned to newly-appointed Judge Deschamps for further proceedings.

¶ 17 On January 24, 2007, Judge Deschamps, confronted with what he considered to be mistakes by both of his predecessors, declined to set aside Judge McLean's order. In his Opinion and Order, Judge Deschamps stated that the "simple solution" would be to set aside Judge McLean's order as untimely thereby reinstating Judge Henson's original order, and allow Axmen to appeal. However, Judge Deschamps, "convinced that Axmen would prevail on appeal," decided to forego the appeal process altogether and opted for "the more just, albeit risky, approach of upholding Judge McLean's order." In doing so, Judge Deschamps stated that "for reasons of equity and avoiding enforcing an order that was issued in error, Judge McLean's order must stand and the parties must have their day in court." Judge Deschamps further stated that "Judge McLean's weeklong delay in ruling on Axmen's motion due to administrative upheaval in the District Court is unfortunate, but excusable."

¶ 18 Both Axmen and Pruyn again moved for summary judgment. On July 23, 2007, Judge Deschamps granted partial summary judgment to Axmen finding that the promissory note was not a corporate obligation of Axmen. In dismissing Pruyn's contract claim, Judge Deschamps determined that Pruyn might still be entitled to restitution from Axmen under one of the unjust enrichment claims pled in this matter.

¶ 19 Axmen urged a stay of the civil proceedings while the criminal matter against Kimbrell was pending. Pruyn, who was 83 years old at the time, objected to further delaying the lawsuit, but Judge Deschamps ruled in Axmen's favor and stayed the proceedings. Kimbrell was found guilty of forgery on January 3, 2008. After Kimbrell was sentenced, the court lifted the stay in the instant case, and the parties briefed the unjust enrichment issue.

¶ 20 Pruyn passed away on June 11, 2008, and his estate was substituted as plaintiff in this case.³ In an Opinion and Order dated June 27, 2008, Judge Deschamps determined that Axmen was not unjustly enriched at the expense of Pruyn, thus Axmen was entitled to judgment as a matter of law on Pruyn's unjust enrichment claim.

¶ 21 Pruyn filed a Notice of Appeal on July 25, 2008. On August 7, 2008, Axmen moved the District Court for an award of attorney's fees, and also moved this Court to dismiss Pruyn's appeal as premature. We denied Axmen's motion to dismiss...