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No.

95-465

IN THE SUPREME COURT OF THE STATE OF MONTANA 1996

STANLEY E. HALL, GREGORY L. STIRES, and DALE P. STIRES, Defendants and Appellants.

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APPEAL FROM:

District Court of the Eighteenth Judicial District, In and for the County of Gallatin, The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD: For Appellants: Michael K. Rapkoch; Felt, Martin , Frazier & Nelson, Billings, Montana For Respondent: Rienne H. McElyea; Berg, Lilly, Andriolo & Tollefsen, Bozeman, Montana

Submitted on Briefs: Decided: Filed:

June 27, 1996 November 14, 1996

IJ Clerk

Justice Karla M. Gray delivered the Opinion of the Court 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' judgment. Factual Background motion for summary

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 The

security agreement covering the elk purchased from Carelli.

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 The debt

partnership debt and divided it between Stires and Hall.

attributable to the promissory note executed by Hal -1 in Care11.i's favor was not listed. Procedural History

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 In response to

Carelli the debt evidenced by the promissory note.

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 M.R.Civ.P., as well as for entry of

pursuant to Rule 56(c),

judgment in his favor against Hall as a Rule 37 sanction for Hall's failure to appear at the depositions. 3 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. liability on the note, discovery. Stires subsequently moved for summary judgment against Stires answered, denying

and both Stires and Carelli conducted

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. 4

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. court entered judgment accordingly and Stires appeals. Did the District Court err in denying Stires' motion for
summary judgment?

The

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 applying the Johnson

or denial of a motion for summary judgment de nova,

same Rule 56(c), M.R.Civ.P., criteria used by that court.

v. Nyhart (1995), 269 Mont. 379, 384, 889 P.Zd 1170, 1173 (citation omitted). The moving party has the initial burden of establishing the absence of genuine judgment
as a matter

issues of

of material fact and entitlement to Brinkman & Lenon v. P & D Land Only

law.

Enters. (1994), 263 Mont. 238, 241, 867 P.2d 1112, 1115.

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. (1995), 270 Mont. 295, 298, Matter of Estate of Lien 532 (citing Owen v. The

892 P.Zd 530,

Ostrum (1993),

259 Mont. 249, 255-56, 855 P.2d 1015, 1019).

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, 5

750 P.2d 1067, 1069).

Moreover, only admissible evidence can be

considered in determining whether genuine issues of material fact exist. 915, See Treutel v. Jacobs (1990), 240 Mont. 405, 408, 784 P.2d

917. "Material issues of fact are identified by looking to the

substantive law governing the proceedings." P.2d at 532 (citation omitted). Here,

Estate of Lien, 892

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

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