Estate of Pruyn v. Axmen Propane, Inc.

December 29 2009

DA 08-0352

IN THE SUPREME COURT OF THE STATE OF MONTANA

2009 MT 448

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.

APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV 2004-589
Honorable Robert L. Deschamps, III, Presiding Judge

COUNSEL OF RECORD:

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

Submitted on Briefs: August 5, 2009

Decided: December 29, 2009

Filed:

__________________________________________
Clerk
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

2
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

3
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

4
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

statue 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

1
Criminal charges were brought against Kimbrell and he was eventually found guilty of
forgery in violation of § 45-6-325, MCA, and sentenced to twenty years at Montana State
Prison with all twenty years suspended.
2
Judge Henson resigned on March 31, 2006; however, his successor, Judge Deschamps,
was not appointed and sworn in until July 10, 2006.

5
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

6
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

3
Even though Pruyn’s estate was substituted as plaintiff in this matter, for purposes of
clarity, we will continue to refer to the plaintiff and appellant simply as “Pruyn.”

7
dismiss Pruyn’s appeal as premature. We denied Axmen’s motion to dismiss Pruyn’s

appeal, but remanded the case to the District Court for a ruling on Axmen’s motion for

attorney’s fees. Est. of Pruyn ex rel. Meyer v. Axmen Prop., 2008 MT 329, ¶¶ 15-16, 346

Mont. 162, 194 P.3d 650.

¶22 On remand, the District Court awarded Axmen its attorney’s fees stating that

“Pruyn’s actions in this matter were in the very least frivolous and perhaps even

malicious.” Pruyn now appeals the various orders of the District Court on summary

judgment as well as the court’s award of attorney’s fees to Axmen.

Standard of Review

¶23 Summary judgment is proper only when no genuine issues of material fact exist

and the moving party is entitled to judgment as a matter of law. Eastgate Village Water

and Sewer v. Davis, 2008 MT 141, ¶ 18, 343 Mont. 108, 183 P.3d 873 (citing Watkins

Trust v. Lacosta, 2004 MT 144, ¶ 16, 321 Mont. 432, 92 P.3d 620). Our standard in

reviewing a district court's summary judgment ruling is de novo; we use the same

M. R. Civ. P. 56 criteria applied by the district court. Eastgate, ¶ 18. Moreover, all

reasonable inferences which may be drawn from the offered proof must be drawn in favor

of the party opposing summary judgment. Eastgate, ¶ 18. If there is any doubt regarding

the propriety of the summary judgment motion, it should be denied. Eastgate, ¶ 18

(citing 360 Ranch Corp. v. R & D Holding, 278 Mont. 487, 491, 926 P.2d 260, 262

(1996); Whitehawk v. Clark, 238 Mont. 14, 18, 776 P.2d 484, 486-87 (1989)).

¶24 In addition, we review a district court's conclusions of law to determine whether

they are correct. Montana Pet. Tank Comp. Bd. v. Crumleys, 2008 MT 2, ¶ 32, 341

8
Mont. 33, 174 P.3d 948 (citing State Farm Mut. Auto. Ins. Co. v. Gibson, 2007 MT 153,

¶ 9, 337 Mont. 509, 163 P.3d 387).

¶25 We review a district court’s order awarding attorney’s fees for an abuse of

discretion. Harding v. Savoy, 2004 MT 280, ¶ 68, 323 Mont. 261, 100 P.3d 976 (citing

Trustees of Indiana University v. Buxbaum, 2003 MT 97, ¶ 15, 315 Mont. 210, 69 P.3d

663). A district court abuses its discretion if it acts arbitrarily without employment of

conscientious judgment or exceeds the bounds of reason resulting in substantial injustice.

Essex Ins. Co. v. Moose’s Saloon, Inc., 2007 MT 202, ¶ 19, 338 Mont. 423, 166 P.3d 451

(citing Jarvenpaa v. Glacier Elec. Co-op., Inc., 1998 MT 306, ¶ 13, 292 Mont. 118, 970

P.2d 84; C. Haydon Ltd. v. MT Min. Properties, Inc., 286 Mont. 138, 146, 951 P.2d 46,

51 (1997)).

Issue 1.

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

¶27 Pruyn contends that Axmen’s Motion for Relief from Opinion and Order was a

poorly disguised motion for reconsideration that is not authorized by the Montana Rules

of Civil Procedure. Pruyn also contends that even if Axmen’s motion were considered a

motion to alter or amend judgment under M. R. Civ. P. 59(g), it was error for Judge

McLean to rule on that motion after the expiration of the 60-day time period set forth in

M. R. Civ. P. 59(g), and error for Judge Deschamps to affirm Judge McLean’s mistake.

Pruyn further contends that Judge Henson’s Opinion and Order was the law of the case

and that it could only be altered under certain limited circumstances, or after appeal to

9
this Court. To that end, Pruyn argues that in vacating Judge Henson’s order, Judge

McLean improperly exercised appellate jurisdiction.

¶28 Axmen argues on the other hand that because no notice of entry of judgment or

order pursuant to M. R. Civ. P. 77(d) was ever filed or served in this case, Judge

Henson’s summary judgment order did not constitute a final judgment, thus it could be

changed at any time by Judge Henson or a successor judge in that court. Axmen further

argues that contrary to Pruyn’s contentions, Judge McLean’s decision to vacate Judge

Henson’s order was not untimely. Axmen also argues that Pruyn’s “law of the case”

doctrine is misplaced.

¶29 First, concerning the procedural problems surrounding Axmen’s motion and the

various rulings of the successor district court judges, we note that “[a] judgment is the

final determination of the rights of the parties in an action or proceeding . . . .”

M. R. Civ. P. 54(a) (emphasis added). When there are multiple claims for relief or

multiple parties, a judgment is not final unless it is certified as such by the court, and if it

is not so certified, it “is subject to revision at any time before the entry of judgment

adjudicating all the claims and the rights and liabilities of all the parties.” M. R. Civ. P.

54(b) (emphasis added).

¶30 Although Axmen claimed in its Motion for Relief from Opinion and Order that it

was filing the motion pursuant to M. R. Civ. P. 60, that rule applies to final judgments,

orders, or proceedings. M. R. Civ. P. 60(b). As Judge Deschamps pointed out in his

January 25, 2007 Opinion and Order, Judge Henson’s order was “interlocutory in nature

10
and is subject to a motion under Rule 54(b) where the only time limit is that it be ruled

upon prior to final judgment being entered.”

¶31 In Smith v. Foss, 177 Mont. 443, 447, 582 P.2d 329, 332 (1978), this Court held

that

[s]o long as a court has jurisdiction over an action, it should have plenary
power over its interlocutory orders and should be able to revise them when
it is consonant with justice so to do. Court control over an interlocutory
order should not be subject to the restrictions of Rule 60(b).

¶32 We made a similar ruling in Teamsters Union v. C.N.H. Acquisitions, 2009 MT

92, 350 Mont. 18, 204 P.3d 733, regarding M. R. Civ. P. 59 motions to alter or amend. In

Teamsters, the defendant argued that a renewed motion for summary judgment was

improperly granted because it constituted an M. R. Civ. P. 59 motion to alter or amend a

judgment. We held in that case that M. R. Civ. P. 59 was not applicable because that rule

concerns judgments and when the plaintiffs filed their renewed motion, there was no

judgment. Teamsters, ¶ 18.

¶33 Here, final judgment as applied to all parties was never entered following Judge

Henson’s Opinion and Order—no monetary judgment and no notice of entry of judgment

against Axmen or Kimbrell was ever filed. In addition, Kimbrell did not appear in this

case until long after Judge Henson had issued his decision and, although there were

multiple defendants, Judge Henson directed entry of judgment only against Axmen.

¶34 Because Judge Henson’s Opinion and Order did not adjudicate all of the claims,

rights and liabilities of all of the parties, there was no final disposition of the case prior to

Judge McLean’s and Judge Deschamps’ rulings. Consequently, Judge Henson’s Opinion

11
and Order was “subject to revision at any time before the entry of judgment adjudicating

all the claims and the rights and liabilities of all the parties.” M. R. Civ. P. 54(b). Hence,

the 60-day time restrictions for ruling on motions filed under Rules 59(g) and 60(b) did

not apply. Thus, we hold that Judge McLean’s ruling vacating Judge Henson’s Opinion

and Order was timely. Under that same rationale, we hold that Pruyn’s law-of-the-case

argument is misplaced.

¶35 As to the merits of Axmen’s claim in its Motion for Relief from Opinion and

Order, we hold that Judge McLean and Judge Deschamps were correct in vacating Judge

Henson’s order. Axmen presented newly discovered or previously unavailable evidence

regarding a statement to police made by Pruyn’s attorney, Dennis Starkel, in connection

with Kimbrell’s criminal trial. Even though this statement was taken more than a year

prior, the statement was not available to the parties at the time of Judge Henson’s

decision because it was part of the confidential criminal justice information in the

criminal proceedings against Kimbrell. The County Attorney had not disclosed this

information as of the date of the initial summary judgment proceedings in this case. In

addition, Axmen was unable to obtain this information through discovery in the civil

matter because Pruyn asserted attorney-client privilege.

¶36 This previously unavailable statement of Starkel’s concerning the facts

surrounding the creation of the promissory note created an issue of material fact

regarding whether the note obligated Axmen precluding summary judgment. Given this,

we conclude that Judge McLean’s decision to vacate Judge Henson’s order was

appropriate and, indeed, mandated.

12
¶37 “[T]he purpose of summary judgment is to eliminate unnecessary trials, but . . .

summary adjudication ‘should never be substituted for a trial if a material factual

controversy exists.’ ” Bradley v. Crow Tribe of Indians, 2005 MT 309, ¶ 15, 329 Mont.

448, 124 P.3d 1143 (quoting Boyes v. Eddie, 1998 MT 311, ¶ 16, 292 Mont. 152, 970

P.2d 91).

¶38 Accordingly, we hold that the District Court did not err in overturning Judge

Henson’s prior order granting summary judgment to Pruyn.

Issue 2.

¶39 Did the District Court err in granting summary judgment to Axmen on Pruyn’s
contract claim?

¶40 Concluding that the promissory note was not a corporate obligation for Axmen,

the District Court granted summary judgment to Axmen on this claim. Pruyn now argues

on appeal that in making this determination, the District Court disregarded undisputed

facts demonstrating Kimbrell’s ostensible authority to bind Axmen to the agreement.

Pruyn also argues that the District Court misapplied the parole evidence rule as well as

provisions of the Uniform Commercial Code (UCC).

¶41 In Montana, one entrusted with the management of a business can have either

actual, implied or ostensible authority to make contracts on behalf of a business. Audit

Serv., Inc. v. Elmo Road Corp., 175 Mont. 533, 536-37, 575 P.2d 77, 79 (1978).

“Ostensible authority is such as a principal, intentionally or by want of ordinary care,

causes or allows a third person to believe the agent to possess.” Section 28-10-403,

MCA. Ostensible authority may be established “by omissions as well as by

13
commissions.” Northwest Polymeric v. Farmers State Bk., 236 Mont. 175, 178, 768 P.2d

873, 875 (1989). But, ostensible authority cannot be proven by the declarations of an

agent whose statements are sought to be charged to the principal. See Northwest

Polymeric, 236 Mont. at 177-78, 768 P.2d at 875; Phelps v. Union Central Life Ins. Co.,

105 Mont. 195, 199, 71 P.2d 887, 889 (1937).

[I]t is elementary that the acts, declarations, admissions, statements, or
representations of an agent are not admissible against the principal to prove
the power or authority of the agent or the scope or extent thereof, unless
such acts or declarations were done or made in the presence of the
principal, or were within his knowledge, or were authorized or ratified by
him, or there is other evidence of authority. The rule refers to declarations
made by the agent out of court, off the witness stand, or otherwise than in
his sworn testimony, and it means that such declarations cannot be testified
to by a third person for the purpose of proving the scope or extent of the
authority of the agent.

Phelps, 105 Mont. at 199, 71 P.2d at 889; see also Exchange State Bank v. Occident

Elevator Co., 95 Mont. 78, 89, 24 P.2d 126, 130 (1933).

¶42 “Part of the test to determine whether an ostensible authority exists is to determine

what a prudent person, acting in good faith, under the circumstances, would reasonably

believe the authority to be.” Youderian Const., Inc. v. Hall, 285 Mont. 1, 10, 945 P.2d

909, 914 (1997). Furthermore,

[a] person dealing with a known agent is not authorized under any
circumstances blindly to trust the agent’s statements as to the extent of his
powers; such person must not act negligently, but must use reasonable
diligence and prudence to ascertain whether the agent acts within the scope
of his powers. In other words, a person dealing with an agent assumes the
risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agent’s assumption of authority which proves to be
unfounded. The principal, on the other hand, may act on the presumption
that third persons dealing with his agent will not be negligent in failing to
ascertain the extent of his authority as well as the existence of his agency.

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Phelps, 105 Mont. at 200, 71 P.2d at 889.

¶43 In this case, Kimbrell had never entered into any transactions similar to the

promissory note with any party on Axmen’s behalf, and neither the promissory note itself

nor any other evidence supports Pruyn’s assertions that Kimbrell was authorized to bind

Axmen to the promissory note or to enter the transaction with Pruyn as Axmen’s

representative. The promissory note clearly contemplates only individual liability with

no reference to Axmen or any indication that the individuals were signing in a

representative capacity. The promissory note specifically provides that Kimbrell and the

Hansons are the “Makers.” The note also provides that “each Maker is jointly and

severally bound hereon as a principal and not as a surety.”

¶44 We agree with the District Court’s conclusion that a reasonable lender in Pruyn’s

shoes, had he intended to bind Axmen to the Note, would have made sure Kimbrell had

the authority to do so.

¶45 In addition, Pruyn’s attorney, Dennis Starkel, testified in his deposition that he

drafted the promissory note at Pruyn’s request with Kimbrell and the Hansons as

obligors. Starkel further testified that, in preparing the note, it was not his intention that

the specific entity, Axmen, be an obligor on the note. Instead, Starkel testified that it was

his goal in drafting the note to create individual liability to the three individuals who were

to sign the note, Kimbrell, Guy and Grant Hanson, and not to create liability on behalf of

Axmen or any other entity. Because of attorney-client privilege, Starkel did not testify

15
whether he followed Pruyn’s instructions in drafting the note, but he did testify that in

preparing the note he did not breach any professional duty owed to Pruyn.

¶46 Pruyn testified that he instructed Starkel to put the names of Kimbrell, Guy and

Grant Hanson on the promissory note and that Starkel drafted the note as he, Pruyn, had

instructed. Pruyn also testified as follows:

A. [Pruyn] . . . I wasn’t loaning to the propane company only.
Q. [Pruyn’s Counsel] You weren’t.
A. No.
Q. Who were you loaning to?
A. To those two gentlemen that were on the note. My requirement was
that they had to sign the note.
Q. And you’re speaking of Grant Hanson and Guy Hanson.
A. Correct.

¶47 This Court has previously stated that “[e]xtrinsic evidence of contemporaneous or

prior oral agreements which contradicts the express terms of a written agreement is

admissible where the written agreement is ambiguous.” Carelli v. Hall, 279 Mont. 202,

209, 926 P.2d 756, 761 (1996) (citing Haggerty v. Gallatin County, 221 Mont. 109,

117-18, 717 P.2d 550, 555 (1986)). “Where the language of an agreement is clear and

unambiguous and, as a result, susceptible to only one interpretation, the duty of the court

is to apply the language as written.” Carelli, 279 Mont. at 209, 926 P.2d at 761 (citing

Audit Services, Inc. v. Systad, 252 Mont. 62, 65, 826 P.2d 549, 551 (1992)). An

ambiguity exists when a contract is subject to two different interpretations, and under

such circumstances, parol evidence can be used to determine the parties’ intent. Carelli,

279 Mont. at 209, 926 P.2d at 761.

¶48 Section 28-2-905, MCA, Montana’s parole evidence rule, provides:

16
 When extrinsic evidence concerning a written agreement may be
considered. (1) Whenever the terms of an agreement have been reduced
to writing by the parties, it is to be considered as containing all those terms.
Therefore, there can be between the parties and their representatives or
successors in interest no evidence of the terms of the agreement other than
the contents of the writing except in the following cases:
(a) when a mistake or imperfection of the writing is put in issue by
the pleadings;
(b) when the validity of the agreement is the fact in dispute.
(2) This section does not exclude other evidence of the
circumstances under which the agreement was made or to which it relates,
as described in 1-4-102, or other evidence to explain an extrinsic ambiguity
or to establish illegality or fraud.

¶49 We find no ambiguity in the promissory note at issue here. It is clear on the face

of the note that Kimbrell and the Hansons were to sign as individuals and not in any

representative capacity. Thus, we agree with the District Court’s conclusion that Pruyn

intended that the Note was to be a personal responsibility of Kimbrell and the Hansons

and specifically not an obligation of Axmen.

¶50 Among his other arguments, Pruyn contended on appeal that the District Court

misapplied various provisions of the UCC to the facts of this case. As the parties suggest,

the promissory note in this case is an “instrument” as defined by the UCC, Title 30,

chapter 3, MCA, referring to negotiable instruments. Section 30-3-104, MCA. Under the

UCC, a person or entity “is not liable on an instrument unless: (a) the person signed the

instrument; or (b) the person is represented by an agent or representative who signed the

instrument and the signature is binding on the represented person under 30-3-403.”

Section 30-3-401, MCA. The UCC further provides:

(2) If a representative signs the name of the representative to an
instrument and that signature is an authorized signature of the represented
person, the following rules apply:

17
 (a) If the form of the signature shows unambiguously that the
signature is made on behalf of the represented person who is identified in
the instrument, the representative is not liable on the instrument.
(b) . . . if the form of the signature does not show unambiguously
that the signature is made in a representative capacity, or the represented
person is not identified in the instrument, the representative is liable on the
instrument to a holder in due course that took the instrument without notice
that the representative was not intended to be liable on the instrument. With
respect to any other person, the representative is liable on the instrument
unless the representative proves that the original parties to the instrument
did not intend the representative to be liable on the instrument.

Section 30-3-403, MCA (emphasis added).4

¶51 In the instant case, Kimbrell’s signature of his own name and his forgery of the

Hansons’ signatures only binds Kimbrell individually. The promissory note does not

show unambiguously that Kimbrell was signing as a representative of Axmen. In

addition, Axmen, as the represented person, is not identified in the promissory note.

While Pruyn was the holder of the note and not a “holder in due course,” the last sentence

of § 30-3-403(2)(b), refers to “any other person.” Thus, “[w]ith respect to any other

person,” such as Pruyn, Kimbrell alone is liable on the promissory note unless he can

prove that Pruyn did not intend Kimbrell to be liable on the note. Section 30-3-403(2)(b),

MCA. No such showing has been made here. On the contrary, as indicated in ¶¶ 45 and

46 of this Opinion, the evidence shows that Pruyn wanted the individuals—Kimbrell,

Guy Hanson and Grant Hanson—liable on the note, not Axmen. The evidence further

4
The Dissent maintains in ¶ 100 that only subsection (1) of § 30-3-403, MCA, applies to
the facts of this case. On the contrary, subsection (2) qualifies subsection (1), thus
subsection (2) properly applies to the facts in this case. If the Dissent’s reasoning were
correct, then any time Kimbrell signed a contract, even for his personal home mortgage,
Axmen would be bound simply because Kimbrell signed the contract.

18
shows that Kimbrell made two payments to Pruyn on the note from Kimbrell’s personal

accounts and not from any account of Axmen’s.

¶52 The evidence indicates that although Kimbrell was given authority by Axmen to

purchase propane for Axmen’s customers, Kimbrell was not given authority to speculate

in such large amounts. The 1.7 million gallons of propane purchased from Powderhorn

in this speculative transaction was a quantity that Axmen could not take possession of nor

sell in its business operations. Such a large, short term, speculative transaction had never

been entered into between Axmen and any supplier before this. While Axmen

occasionally purchased propane for future use to minimize risk due to price fluctuations,

the amounts purchased were closer to 80,000 gallons based on Axmen’s available storage

capacity. We cannot conclude from these facts that Kimbrell’s signature alone would

bind Axmen to a contract.

¶53 The Dissent contends that Kimbrell had ostensible authority to act as Axmen’s

agent. Assuming, for the sake of argument, that is true, Pruyn nonetheless made a

conscious decision to make the loan personally to Kimbrell and the Hansons; to have

Kimbrell personally sign the note; and to not name Axmen as the payor. If Pruyn

believed that Kimbrell—exercising his ostensible authority—was acting on behalf of

Axmen and, accordingly made Axmen the payor, and if Kimbrell had signed the note on

behalf of Axmen, then we would have a different case. Those are not the facts, however.

Pruyn was uniquely in the position to determine in whom he was creating a debt. Pruyn

chose to create a debt personally in Kimbrell and the Hansons, and not in the entity he

now, belatedly, contends owes him repayment on the loan. Once Kimbrell obtained the

19
loan funds, they were his to do with as he pleased. The debt on which Pruyn is suing was

never Axmen’s because Pruyn never made it Axmen’s obligation. Pruyn is the author of

his own misfortune.

¶54 As pointed out in ¶¶ 88 and 89 of the Dissent, there are two parts to the test for

determining ostensible authority. However, because the test is worded in the conjunctive

rather than the disjunctive, both parts of the test must be met for ostensible authority to

exist. Even if we were to assume that the first part of the test had been met here, Pruyn

has failed to establish that the facts in this case meet the second part of the test, i.e., that

“a prudent person, acting in good faith, under the circumstances, would reasonably

believe the authority to be.” Youderian, 285 Mont. at 10, 945 P.2d at 914. Pruyn’s own

actions demonstrate that Pruyn himself was not convinced that Kimbrell had ostensible

authority to bind Axmen to the note. If Pruyn believed so, he would not have instructed

his attorney to require the Hansons’ signatures on the note. Under the theory of

ostensible authority suggested by Pruyn, Kimbrell’s signature alone would have been

enough to bind Axmen.

¶55 Because Pruyn instructed his attorney to draft the promissory note with the

signatures of Kimbrell and the Hansons individually, any uncertainty in the note must be

construed against Pruyn. “In cases of uncertainty . . . the language of a contract should

be interpreted most strongly against the party who caused the uncertainty to exist.”

Section 28-3-206, MCA.

¶56 The Dissent states in ¶ 98 that if Kimbrell and Pruyn had intended to draft a loan

agreement based solely on individual liability, Kimbrell would not have provided or

20
needed to provide Pruyn with information about the company’s assets, cash flow and

accounts receivable. Kimbrell would have simply shown Pruyn his own personal

financial documents. First, the Dissent wrongly focuses on Kimbrell’s actions to support

its ostensible authority theory. Second, as already indicated, this raises the following

questions: If Pruyn believed that Kimbrell had ostensible authority to bind Axmen to the

agreement, why did Pruyn insist on having the Hansons’ names on the note as well?

And, assuming ostensible authority existed here, wouldn’t Kimbrell’s signature have

been sufficient to bind Axmen?

¶57 The Dissent claims in ¶ 93 that “[i]t was only when the company suffered a

financial loss that the Hanson brothers suddenly claimed that Kimbrell acted outside the

scope of his authority.” That supposition is not supported in the facts. Pruyn himself

testified that when he approached Guy Hanson on Christmas Eve 2003 contending that

Axmen owed Pruyn money, Guy Hanson disclaimed any knowledge of the promissory

note or that Kimbrell had authority to enter into the note on behalf of Axmen. And, it

was only after this encounter that Axmen learned that the promissory note was used to

cover Kimbrell’s speculative transaction.

¶58 Moreover, in analyzing the second prong of the ostensible authority test, rather

than focusing on “what the principal did” as the Dissent says we must, the Dissent claims

in ¶ 97 that Axmen is at fault because Kimbrell “met with Pruyn several times to discuss

the loan” and that Kimbrell “gave Pruyn information relating to Axmen’s assets,

Axmen’s cash flow and Axmen’s accounts receivable.” The Dissent also states in ¶ 97

21
that “[a] prudent person in Pruyn’s position would believe that Kimbrell had authority to

act on behalf of Axmen. . . .”

¶59 As already noted in this Opinion, “it is elementary that the acts, declarations,

admissions, statements, or representations of an agent are not admissible against the

principal to prove the power or authority of the agent or extent thereof . . . .” Phelps, 105

Mont. at 199, 71 P.2d at 889. In other words, Kimbrell’s actions in producing certain

information regarding Axmen are not relevant to a determination of ostensible authority.

¶60 Accordingly, we hold that the District Court did not err in granting summary

judgment to Axmen on Pruyn’s contract claim.

Issue 3.

¶61 Did the District Court err in granting summary judgment to Axmen on Pruyn’s
unjust enrichment claim?

¶62 Pruyn argues that regardless of any finding relative to Kimbrell’s authority, the

fact remains that Pruyn’s money was used to pay off Axmen’s account at Powderhorn,

thus Pruyn contends he is entitled to quantum meruit as a matter of law. Axmen argues,

on the other hand, that Pruyn’s unjust enrichment claim fails because the obligation is

governed by an express contract; Pruyn waived any unjust enrichment claim against

Axmen when he accepted payments from Kimbrell; Pruyn cannot establish the required

elements of unjust enrichment; and such a claim is inconsistent with the UCC.

¶63 Unjust enrichment is an obligation created by law in the absence of an agreement

between the parties. Maxted v. Barrett, 198 Mont 81, 87, 643 P.2d 1161, 1164 (1982).

In other words, courts have applied the theory of unjust enrichment when no contract

22
exists between the parties, but a contract in law is implied. Maxted, 198 Mont. at 87, 643

P.2d at 1164.

¶64 The doctrine of unjust enrichment is an equitable means of preventing one party

from benefiting from his or her wrongful acts. Albinger v. Harris, 2002 MT 118, ¶ 21,

310 Mont. 27, 48 P.3d 711 (citing Sebena v. State, 267 Mont. 359, 367, 883 P.2d 1263,

1268 (1994); Randolph V. Peterson, Inc. v. J.R. Simplot Co., 239 Mont. 1, 8, 778 P.2d

879, 883 (1989)). Among other things, a claim of unjust enrichment requires a plaintiff

to show the element of misconduct or fault on the part of the defendant or that the

defendant somehow took advantage of the plaintiff. Ragland v. Sheehan, 256 Mont. 322,

327, 846 P.2d 1000, 1004 (1993).

¶65 The undisputed facts show that Pruyn fails to meet this latter requirement to show

misconduct or fault on Axmen’s part. Axmen had no knowledge of the speculative

transaction between Kimbrell and Powderhorn or the transaction between Kimbrell and

Pruyn until Guy Hanson was confronted by Pruyn in December 2003. Since Guy and

Grant Hanson were not aware of either transaction until shortly before suit was filed,

Pruyn could not show any misconduct or fault on Axmen’s part.

¶66 The Dissent maintains that Axmen was unjustly enriched because Kimbrell

engaged in misconduct by using Pruyn’s loan to pay off Axmen’s debt to Powderhorn.

First, the Dissent fails to recognize the significance of the fact that it was Kimbrell who

engaged in misconduct, not Axmen. Second, it has never been established that this was

Axmen’s debt. We pointed out in ¶¶ 10 and 52 of this Opinion that although Kimbrell

was given authority by Axmen to purchase propane for Axmen’s customers, Kimbrell

23
was not given authority to speculate in this fashion. The 1.7 million gallons of propane

purchased from Powderhorn in this transaction was a quantity that Axmen could not take

possession of nor sell in its business operations. This amount was almost 20 times the

volume of any previous order. Such a large, short term, speculative transaction had never

been entered into between Axmen and any supplier before this. While Axmen

occasionally purchased propane for future use to minimize risk due to price fluctuations,

the amounts purchased were closer to 80,000 gallons based on Axmen’s available storage

capacity.

¶67 The Dissent also claims in ¶ 93 that “[t]here is no indication that if the prices had

risen instead of dropped, that Axmen would have rejected the propane and large profits

resulting from Kimbrell’s dealings . . . .” However, there is also no indication that if

there had been profits from this speculative deal of Kimbrell’s that Axmen would have

received any of said profits or that Axmen would even have known of the transaction to

be able to reject or accept any such profits.

¶68 And, finally, the Dissent claims in ¶ 102 that “[t]he record shows that the money

was wired to the Axmen Propane account at Powder Horn.” The record shows no such

thing. The “Wire/Funds Transfer Payment Order” shows the originator of the wire

transfer as “Pruyn Ranch” and the beneficiary of the wire transfer as “Powder Horn

Petroleum” referencing “Ed Kimbrell,” not Axmen. Axmen is not mentioned anywhere

in the wire transfer document. While the document the Dissent refers to in ¶ 102 was

attached as an exhibit to Pruyn’s deposition, that document makes no sense. As the

24
Dissent points out, that document is signed by Kimbrell, which begs the question: How

could Kimbrell authorize a wire transfer from Pruyn’s account?

¶69 Accordingly, we hold that the District Court did not err in granting summary

judgment to Axmen on Pruyn’s unjust enrichment claim

Issue 4.

¶70 Did the District Court abuse its discretion in awarding Axmen its attorney’s fees?

¶71 In awarding Axmen its attorney’s fees, the District Court determined that Axmen

was drawn into this lawsuit by Pruyn and forced to defend itself, and that “Pruyn

doggedly persisted in seeking compensation from Axmen” even though Pruyn knew

“fairly early on” that Kimbrell forged Guy and Grant Hansons’ signatures. The court

concluded that “Pruyn’s actions in this matter were in the very least frivolous and perhaps

even malicious,” thus the court granted Axmen’s motion for attorney’s fees “[i]n order to

make Axmen whole.”

¶72 “The longstanding rule in Montana, also known as the American Rule, is that,

absent a contractual or statutory provision to the contrary, attorney fees will not be

awarded to the prevailing party in a lawsuit.” Pankratz Farms, Inc. v. Pankratz, 2004

MT 180, ¶ 93, 322 Mont. 133, 95 P.3d 671 (citing Erker v. Kester, 1999 MT 231, ¶ 43,

296 Mont. 123, 988 P.2d 1221). In rare instances, a district court may award attorney’s

fees to an injured party under that court’s equity powers. Pankratz, ¶ 93 (citing Foy v.

Anderson, 176 Mont. 507, 511-12, 580 P.2d 114, 116-17 (1978)). However, such awards

are to be determined on a case-by-case basis, and “only when a party has been forced to

defend against a wholly frivolous or malicious action.” Pankratz, ¶ 93; see also El

25
Dorado Heights Homeown. Ass’n v. Dewitt, 2008 MT 199, ¶ 27, 344 Mont. 77, 186 P.3d

1249.

¶73 Pruyn argues on appeal that his actions to recover his money were not frivolous

and malicious, and that the equitable exception to the American rule does not apply to the

facts in this case. The promissory note specifically stated:

If legal action is commenced to collect this Note, each Maker agrees
that the venue of such action shall be in Missoula County, Montana, that
such action may be maintained without regard to the residence of any of the
defendants, and that in any such action, both at trial and on appeal, each
Maker will pay all costs and expenses and such sum as the court may
adjudge reasonable as attorney’s fees.

¶74 The District Court pointed out that this is an unusual case in that, had Pruyn

prevailed, he would have been entitled to his attorney’s fees under Montana contract law,

yet when Axmen prevailed, it was not entitled to attorney’s fees because it was not a

party to the promissory note. The court concluded that such a result is inequitable and

that, under its equity powers, the court may award attorney’s fees to make an injured

party whole. See Braach v. Graybeal, 1999 MT 234, ¶ 9, 296 Mont. 138, 988 P.2d 761.

¶75 However, as Pruyn noted, the equitable exception has been invoked infrequently,

and only in cases with particularly limited facts. The exception does not apply where the

losing party had a reasonable basis to believe his cause might prevail. See Goodover v.

Lindey’s Inc., 255 Mont. 430, 446-47, 843 P.2d 765, 775-76 (1993).

¶76 In this case, we conclude that whether or not Judge Deschamps agreed with

Pruyn’s position, there is no merit to the idea that Pruyn lacked a reasonable basis to

26
believe he could recover his money from Axmen. And, we disagree with Judge

Deschamps’ conclusion that Pruyn’s action was “frivolous and perhaps even malicious.”

¶77 Accordingly, we hold that the District Court abused its discretion in awarding

Axmen its attorney’s fees and we reverse on this issue. We remand this issue to the

District Court for entry of an order vacating its award of attorney’s fees to Axmen.

Issue 5.

¶78 Were Pruyn’s due process rights violated as a result of Axmen’s ex parte
communications with the District Court?

¶79 Pruyn contends on appeal that when the billing records compiled by Axmen’s

attorneys were provided to Pruyn for review of the attorney’s fees awarded, many of the

entries redacted on the basis of attorney-client privilege demonstrated that Axmen’s

attorneys had engaged in multiple ex parte communications with the District Court, at

least one of which involved substantive argument on the merits of this case. 5 Because

Pruyn was not given notice or an opportunity to respond, he contends that these ex parte

contacts violated his rights to due process.

¶80 The District Court had no time to respond to these allegations, however, because

Pruyn did not file his “Notice of Filing Regarding Court Communications” detailing his

complaints regarding the alleged ex parte communications until the day he filed his

Amended Notice of Appeal. This Court generally will not address an issue which the

district court had no opportunity to decide. In re Marriage of Gerhart, 2003 MT 292,

5
Although a black marker was used to cross out certain entries, the reviewer was still
able to read the entries through the black ink.

27
¶ 31, 318 Mont. 94, 78 P.3d 1219 (citing Siefke v. Siefke, 2000 MT 281, ¶ 25, 302 Mont.

167, 13 P.3d 937).

¶81 If Pruyn’s counsel believed ethical violations occurred here, the proper action for

counsel to take is to report any alleged violations by a judge of the Canons of Judicial

Ethics to the Executive Secretary of the Judicial Standards Commission of the State of

Montana, and to report any alleged violations by an attorney of the Montana Rules of

Professional Conduct to the Office of Disciplinary Counsel.

¶82 Affirmed in part, reversed in part, and remanded for further proceedings consistent

with this Opinion.

/S/ JAMES C. NELSON

We concur:

/S/ PATRICIA O. COTTER
/S/ JOHN WARNER
/S/ BRIAN MORRIS
/S/ JIM RICE

Justice John Warner concurs.

¶83 I concur.

¶84 As far as Pruyn is concerned, it is irrelevant whether Axmen had conferred

ostensible authority on Kimbrell. No matter what Kimbrell may have told him or showed

him, Pruyn chose not to deal with Axmen and instead dealt only with Kimbrell as an

individual. The Court is entirely correct that § 30-3-401, MCA, does not apply. It was

28
solely Pruyn’s mistake to trust Kimbrell and not check with the Hansons to make sure

they signed the note. Axmen simply was not involved in Kimbrell’s deal with Pruyn.

¶85 I am willing to accept that Axmen, Inc., could have made a mistake and granted

Kimbrell ostensible authority to deal with Powderhorn. This does not change the fact

that the deal between Powderhorn and Kimbrell had nothing to do with Pruyn.

¶86 The long and the short of this case is that Pruyn made a serious mistake when he

rejected Axmen as a debtor and loaned money to Kimbrell without taking security and

without checking with the Hansons. It is not established in the record, but maybe Axmen

also made a mistake and granted Kimbrell ostensible authority to deal with Powderhorn.

However, Axmen’s mistake does not translate into a conclusion that it has been unjustly

enriched by Pruyn’s carelessness. In my opinion, Pruyn’s carelessness was far more

egregious than any mistake Axmen might have made. However, at most, Pruyn and

Axmen are equally at fault—and between those who are equally in the wrong, the law

does not interpose. Section 1-3-215, MCA.

¶87 The District Court and this Court are correct in leaving these parties where it

found them. I concur in the Court’s opinion.

/S/ JOHN WARNER

Justice W. William Leaphart, dissenting.

¶88 I dissent on issues two and three. The Court has failed to apply both parts of the

test for determining ostensible authority. The Court has analyzed only the second step:

29
“Part of the test to determine whether ostensible authority exists is to determine what a

prudent person, acting in good faith, under the circumstances, would reasonably believe

the authority to be.” Opinion, ¶ 42. While it is true that part of the test is, indeed, a

“prudent person” perspective, the Court fails to analyze the first part of this Court’s long-

established test for determining ostensible authority.

¶89 As we have held in Butler, Audit Services, and Yanzick: “The test is found in a

determination of the exact extent to which the principal held the agent out or permitted

him to hold himself out as authorized, and what a prudent person, acting in good faith,

under the circumstances would reasonably believe the authority to be.” Butler Mfg. Co.

v. J & L Imp. Co., 167 Mont. 519, 527, 540 P.2d 962, 969 (1975) (emphasis added);

Yanzick v. Bd. of Trustees, 177 Mont. 459, 462-63, 582 P.2d 338, 340 (1978); Audit

Servs. v. Elmo Rd. Corp., 175 Mont. 533, 540, 575 P.2d 77, 81 (1978). Ostensible

authority is “such as a principal, intentionally or by want of ordinary care, causes or

allows a third person to believe the agent to possess.” Butler Mfg. Co., 167 Mont. at 524,

540 P.2d at 965. Ostensible authority “can be implied from the words and conduct of the

parties and the circumstances of the particular case notwithstanding a denial by the

alleged principal.” Youderian Constr. v. Hall, 285 Mont. 1, 7, 945 P.2d 909, 913 (1997)

(citing Audit Serv., Inc., 175 Mont. at 541, 575 P.2d at 81). Further, the agency

relationship “may be implied from the conduct and from all the facts and circumstances

in the case and it may be shown by circumstantial evidence.” Youderian, 285 Mont. at 7,

945 P.2d at 912-13. As outlined below, both requirements for ostensible authority are

met in this case. Axmen is liable.

30
¶90 The words, conduct, circumstances and facts of this case all indicate that Kimbrell

was acting with ostensible authority on behalf of Axmen. Axmen’s sole officers,

directors and shareholders were Edward Kimbrell, Grant Hanson, and Guy Hanson.

Axmen, by “want of ordinary care,” had failed to monitor or set limits on Kimbrell’s

authority to act on behalf of the company. Kimbrell was Axmen’s president and was

vested with authority from the Hanson brothers to conduct day-to-day operations.

Indeed, he was the only person in charge of daily operations at Axmen. Kimbrell was

held out by the company to enter propane procurement contracts, which included both

large and small amounts. No meetings, resolutions or authorization were ever required

prerequisites of Kimbrell entering contracts on behalf of the company. It is difficult to

understand how the Court can assert that Kimbrell was “not given authority to speculate

in this fashion” when there is no indication that the corporation had ever established that

there were limits to the scope of Kimbrell’s authority in the first place. Opinion, ¶ 66.

¶91 The Court makes a strained distinction between what it describes as this

“speculative” transaction and the other transactions Pruyn has engaged in on behalf of

Axmen. Opinion, ¶ 66. The record shows that Axmen allowed Kimbrell to engage in

both, and he did so without limitation or question from the corporation. In the course of

his employment at Axmen, Kimbrell engaged in “hedging transactions,” in which he

would purchase large amounts of propane at a fixed price, then sell it to customers at a

future date. The company never objected. In fact, Guy Hanson’s testimony indicates that

Axmen had no written policy, oversight, or internal controls establishing the scope of

Kimbrell’s purchasing and/or hedging authority. And it is not this Court’s prerogative to

31
decide how much authority is too much authority. That is a decision Axmen should have

made and enforced prior to what amounted to a financially deleterious outcome for the

company.

¶92 Further, the majority of Kimbrell’s actions as day-to-day business manager at

Axmen were done on credit. Axmen admitted that Kimbrell was authorized to incur debt

on behalf of Axmen. The corporation had no written policy articulating the scope of

Kimbrell’s borrowing authority. Therefore, the ex post facto claim that Kimbrell acted

outside of his authority is untenable given that the company never articulated the scope of

the authority it now claims has been overstepped.

¶93 There is no indication that if the prices had risen instead of dropped, that Axmen

would have rejected the propane and large profits resulting from Kimbrell’s dealings on

behalf of Axmen. It was only when the company suffered a financial loss that the

Hanson brothers suddenly claimed that Kimbrell acted outside the scope of his authority.

This is the exact type of “want of ordinary care” on the part of Axmen that satisfies the

first prong of the ostensible authority test. The existence of ostensible authority is simply

not dependent on the success or failure of the agent’s dealings on behalf of the company.

¶94 In determining whether Kimbrell was authorized to enter the transaction with

Pruyn as a representative of Axmen, the Court focuses solely on the promissory note and

the alleged individual liability it created. We have, however, made clear that the

ostensible authority analysis is not a “four corners” inquiry. It is measured by the

conduct, all the facts and circumstances in the case, and may be shown by circumstantial

evidence. Youderian, 285 Mont. at 7, 945 P.2d at 912-13. Likewise, the Court

32
improperly focuses on the inability of Axmen to store the propane resulting from the

transaction. Opinion, ¶ 52. Kimbrell had done this type of transaction in the past without

objection from the corporation. Regardless, Axmen’s ability to store the propane plays no

part in the legal determination required under the two-part ostensible agency analysis.

The germane fact here is that Axmen has a long track record of allowing Kimbrell to buy

propane with no limits on his scope of authority.

¶95 The weight of responsibility under the first prong of the ostensible authority test

lies not on Kimbrell’s or Pruyn’s shoulders, but on the shoulders of the corporation to

exercise “ordinary care” in establishing the boundaries of its president’s authority. Under

the legal standard for ostensible authority, the corporation—not Pruyn—authored this

misfortune by failing to establish the scope of their president’s authority.

¶96 The Court next concludes that the second prong of the ostensible authority test is

not satisfied. Opinion, ¶ 54. The assertion is not supported by any analysis under the

“prudent person” standard. Instead, the Court states: “Pruyn himself was not convinced

that Kimbrell had ostensible authority to bind Axmen to the note.” Opinion, ¶ 54. This

speculation about a party’s thought process plays no role in the two-step analysis required

by this Court’s precedent on ostensible authority. The ostensible authority test does not

ask the Court to divine whether Pruyn was convinced. It requires this Court to embark on

a careful inquiry regarding “what a prudent person, acting in good faith, under the

circumstances would reasonably believe the authority to be.” Butler Mfg. Co. v. J & L

Imp. Co., 167 Mont. at 527, 540 P.2d at 969; Yanzick v. Bd. of Trustees, 177 Mont. at

462-63, 582 P.2d at 340.

33
¶97 This second prong of the ostensible authority test is satisfied. Kimbrell met with

Pruyn several times to discuss the loan and details about the company. During the

meetings, Kimbrell gave Pruyn information relating to Axmen’s assets, Axmen’s cash

flow and Axmen’s accounts receivable. Pruyn himself testified that based on the

documentation from Axmen and his own investigation into the company’s reputation and

overall business prospects, he decided to lend Axmen $544,500. A prudent person in

Pruyn’s position would believe that Kimbrell had authority to act on behalf of Axmen:

he was the company’s president, ran day-to-day business operations, and appeared to

have the authority to possess and share the company’s private financial documents.

¶98 If the two men intended to draft a loan agreement based solely on individual

liability, as the Court concludes, Kimbrell would not have provided or needed to provide

Pruyn with information about the company’s assets, cash flow and accounts receivable.

He would have simply shown Pruyn his own personal financial documents. The same

applies to the Hanson brothers. Only their personal documents would have been

necessary, not the corporation’s financial documents. It was Pruyn’s understanding that

the money was to be used by Axmen to buy a tract of land on which a large number of

propane tanks were to be stored. The financial disclosures and stated purpose do not

suggest a personal, individual propane storage project.

¶99 A prudent person under these circumstances would reasonably believe that

Kimbrell, after providing and discussing the company’s private financial documents, was

acting on behalf of the company, not himself. Kimbrell had engaged in business

transactions—whether they be hedging transactions or otherwise—for years on behalf of

34
the company without a word from the Hanson brothers. The facts, conduct, and

circumstances clearly indicate that Axmen’s “want of ordinary care” allowed Kimbrell to

act, unbridled, on behalf of the corporation, and that a prudent person would have

believed that Kimbrell was authorized to act on the company’s behalf. Therefore, both of

the required elements of the ostensible authority test are satisfied.

¶100 The Court analyzes this case under § 30-3-403(2), MCA. Opinion, ¶ 50.

However, it is subsection one that directly applies. The statute reads as follows:

If a person acting, or purporting to act, as a representative signs an
instrument by signing either the name of the represented person or the name
of the signer, the represented person is bound by the signature to the same
extent the represented person would be if the signature were on a simple
contract. If the represented person is bound, the signature of the
representative is the “authorized signature of the represented person” and
the represented person is liable on the instrument, whether or not identified
in the instrument.

Section 30-3-403(1), MCA (emphasis added). The presence of the Axmen name on the

contract is simply not necessary for the company to be held liable. Kimbrell, acting as a

representative of Axmen, signed his name (“the signer”). Under the statute, Axmen (the

“represented”) is bound by the signature, regardless of whether Axmen was identified in

the instrument. Section 30-3-403(1), MCA. Kimbrell, via ostensible authority, signed as

an authorized representative of the corporation, thus making Axmen liable.

¶101 Issue three addresses the unjust enrichment claim. The doctrine of unjust

enrichment is an equitable means of preventing one party from benefitting from his or her

wrongful acts and requires a showing of misconduct, fault or that one party took

advantage of the other. LeFeber v. Johnson, 2009 MT 188, ¶ 26, 351 Mont. 75, 81, 209

35
P.3d 254, 260; Albinger v. Harris, 2002 MT 118, ¶ 21, 310 Mont. 27, 33, 48 P.3d 711,

716; Randolf v. Peterson, Inc. v. J.R. Simplot Co., 239 Mont. 1, 8, 778 P.2d 879, 883

(1989).

¶102 Kimbrell, with ostensible authority from the corporation, borrowed money from

Pruyn. The record shows that the money was wired to the Axmen Propane account at

Powder Horn. Kimbrell is the only person who signed the wire transfer form. 1 The

“Originator’s Name” space reads: “Axmen Propane, Inc.—Reference.” The

“Originator’s Address” is filled in with the business address of Axmen Propane. While

“Pruyn Ranch” is written in a blank space at the top of the page, the wire is signed by

Edward Kimbrell, Axmen’s president. The critical fact here, however, is that the money

was received by Powder Horn, credited to Axmen Propane’s account, and paid off the

propane futures loss for Axmen Propane. The company unjustly benefited from the acts

of its president. This scenario goes to the heart of unjust enrichment, in which the goal is

to identify and ameliorate a breed of misconduct in which one party unjustly benefits

from its own actions.

¶103 The Court bases its conclusion on the observation that the Hanson brothers were

unaware of Kimbrell’s purchase and the loan. However, under this Court’s test for

ostensible authority, it is clear that the brothers granted Kimbrell the authority to engage

in business on the corporation’s behalf. Therefore, the focus of the analysis should not be

1
The Court refers to another document, titled “Wire/Fund Transfer Payment Order.” The form
we reference and the payment order reflect the same transaction. There is no indication in the
record regarding the precise interaction or relative weight the two forms should be granted.
Regardless, both documents reflect the reality that the money was used to pay off the Power
Horn Petroleum debt.

36
on the brothers’ alleged ignorance, but rather on the misconduct of the company through

Kimbrell’s ostensible authority. Axmen directly benefited from the misconduct of the

corporation through its president, who illegitimately borrowed from Pruyn and applied

the proceeds of the loan to pay off Axmen’s debt to Powderhorn. Unjust enrichment

therefore applies.

¶104 For the above reasons, I would reverse the District Court’s summary judgment

ruling on Pruyn’s contract and unjust enrichment claims.

/S/ W. WILLIAM LEAPHART

Chief Justice Mike McGrath joins in the dissenting Opinion of Justice W. William
Leaphart.

/S/ MIKE McGRATH

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