MODERN MACHINERY v FLATHEAD CO

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No. 82-265 IN THE SUPREME COURT OF T I STATE OF MONTANA fE 1982 MODERN MACHINERY, Plaintiff and Appellant, -vsFLATHEAD COUNTY, Defendant and Respondent. .1 from: District Court of the Eleventh Judicial District, In and for the County of Flathead, The Honorable Douglas G. Harkin, Judge presiding. Counsel of Record: For Appellant: James D. Moore, Kalispell, Nontana For Respondent : Gary R. Christiansen, Kalispell, Montana . Ted 0 Lympus, County Attorney, Kalispell, Montana Submitted on Briefs: Xovember 24, 1982 ~ecided: December 29, 1982 Filed: FJE C 2 ,; '1582 J u s t i c e John Court. Mr. Plaintiff Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n of b r o u g h t t h i s a c t i o n f o r breach of c o n t r a c t E l e v e n t h J u d i c i a l D i s t r i c t i n F l a t h e a d County. the in the A j u r y t r i a l com- menced i n K a l i s p e l l , M o n t a n a , o n F e b r u a r y 2 4 , 1 9 8 2 . On F e b r u a r y 26, 1982, t h e j u r y r e t u r n e d a v e r d i c t awarding p l a i n t i f f $10,000. P l a i n t i f f and d e f e n d a n t a p p e a l from t h e j u d g m e n t e n t e r e d upon t h e jury's verdict. On or a b o u t J u l y 3 0 , 1 9 7 9 , t h e F l a t h e a d C o u n t y c o m m i s s i o n e r s issued a for call bids for the purchase of a jaw-type rock c r u s h e r t o be used b y t h e F l a t h e a d C o u n t y r o a d d e p a r t m e n t . commissioners received three bids from p l a i n t i f f amount of in the K a l i s p e l l d i s t r i b u t o r , Westmont; f o r $200,870. The i n response t o t h e c a l l , one $305,725 and two from a n o t h e r o n e f o r $ 2 0 1 , 1 9 3 and t h e o t h e r On A u g u s t 2 2 , 1 9 7 9 , t h e d a y t h e b i d s were o p e n e d , t h e commissioners voted to t a k e t h e b i d s under advisement pending recommendation of the county road department. Representatives f r o m t h e r o a d d e p a r t m e n t and C o m m i s s i o n e r F r a n k Guay t h e n f l e w to Cedar Rapids, Iowa, p l a i n t i f f 's crusher. with plaintiff's agent, J i m Fox, to view C o m m i s s i o n e r Guay and t h e r e p r e s e n t a t i v e s f r o m t h e r o a d d e p a r t m e n t were i m p r e s s e d w i t h f e a t u r e s c o n t a i n e d on p l a i n t i f f ' s c r u s h e r which were not a v a i l a b l e on Westmont's models. On S e p t e m b e r 1 4 , 1 9 7 9 , t h e c o m m i s s i o n e r s m e t w i t h members of t h e r o a d d e p a r t m e n t and J i m Fox to d i s c u s s t h e c r u s h e r b i d s . road department recommended plaintiff's crusher. accept road the that the commissioners C o m m i s s i o n e r Guay t h e n made department's recommendation. seconded by Commissioner J o a n D e i s t . The The purchase a motion motion to was The m o t i o n was r e c o r d e d i n t h e m i n u t e s of t h e meeting as f o l l o w s : " M o t i o n t o Guay t o a c c e p t t h e Road D e p a r t ment's recommendation to purchase gravel c r u s h e r f r o m Modern M a c h i n e r y f o r $ 3 0 5 , 7 2 5 . The o n l y o t h e r b i d b e i n g r e c e i v e d h a v i n g b e e n f o r used power p l a n t g e n e r a t o r c o n t a i n e d i n a second u n i t n o t a t t a c h e d t o t h e c r u s h e r i t s e l f , t h e r e b y c r e a t i n g o p e r a t i o n a l problems. M o t i o n s e c o n d e d b y J o a n A. D e i s t , motion carried. Note :, Me1 W o l l a n v o t e s no o n c r u s h e r b i d as t h e lower b i d f o r a j a w c r u s h e r was v e r y a d e q u a t e and a s a v i n g s o f $ 1 0 0 , 0 0 0 . " Everyone trial felt plaintiff I s i n a t t e n d a n c e a t t h e m e e t i n g who t e s t i f i e d that the county crusher. was to going On S e p t e m b e r 1 7 eventually a t the purchase t h e f o l l o w i n g Monday, an a t t o r n e y r e p r e s e n t i n g Westmont d e l i v e r e d a l e t t e r to c o m m i s s i o n e r F r a n k Guay w h i c h r e q u e s t e d t h a t t h e award to p l a i n t i f f be v a c a t e d o r h e would s e e k t o e n f o r c e W e s t m o n t ' s r i g h t s i n t h e matter by w h a t e v e r means p e r m i t t e d by l a w . M i s s o u l a and t h e c r u s h e r had b e e n o r d e r e d t o l d him i f Guay t h e n c a l l e d J i m Fox in from t h e f a c t o r y , to have t h e o r d e r s t o p p e d . On Wednesday, Fox and a n o t h e r r e p r e s e n t a t i v e f o r p l a i n t i f f , L a r r y E x e , m e t Guay i n H e l e n a , M o n t a n a , t o d i s c u s s t h e c r u s h e r . Guay t e s t i f i e d a t t r i a l t h a t he a g a i n t o l d Fox and Exe to s t o p o r d e r on t h e c r u s h e r i f it h a d , i n f a c t , been ordered. Fox and i n H e l e n a was m a i n l y to d i s c u s s Exe t e s t i f i e d t h a t t h e m e e t i n g t h e p o l i t i c a l r a m i f i c a t i o n s to Guay s h o u l d t h e sale be c o m p l e t e d . A f t e r t h e meeting i n Helena, Exe c a l l e d t h e f a c t o r y to see how Exe t o l d t h e f a c t o r y to f a r t h e y had p r o g r e s s e d o n t h e o r d e r . l e t him know how much e x p e n s e would be i n c u r r e d i f p l a i n t i f f was T h a t was t h e l a s t t o s t o p o r d e r on t h e c r u s h e r a t t h a t t i m e . c o n t a c t p l a i n t i f f had w i t h t h e f a c t o r y c o n c e r n i n g a s t o p o r d e r o n the crusher. F O X , Guay and Exe t h e n met w i t h A s s i s t a n t County A t t o r n e y , Kuether , a t the Charles Again, Guay crusher. told F l a t h e a d County commissioner's plainti f f ' s representatives not to o f f ice. order the Guay s t a t e d t h a t t h e b i d award w a s n o t f i n a l u n t i l t h e c l e r k and r e c o r d e r ' s o f f i c e i s s u e d a l e t t e r a c c e p t i n g p l a i n t i f f ' s b i d and r e j e c t i n g a l l o t h e r b i d s . followed Again, and attended by Guay s t a t e d recorder's P l a i n t i f f 's Fox, , Guay and p l a i n t i f f l s attorney. t h e b i d award was n o t f i n a l u n t i l office counsel Exe A second meeting w i t h K u e t h e r issued requested notice of the the clerk successful bid. a letter directing p l a i n t i f f e i t h e r o r d e r or s t o p o r d e r on t h e c r u s h e r . to Guay r e f u s e d to d r a f t s u c h a l e t t e r s t a t i n g t h a t s i n c e t h e c o m m i s s i o n e r s had n o t f o r mally ordered the That was the i t was crusher order. last not meeting to necessary between rescind plaintiff and an the commissioner's o f f ice. On November 11, 1979, F l a t h e a d County p u r s u a n t plaintiff to tendered county to refused November 2 0 , to accept d a y s from d a t e of o r d e r . delivery of the t h e c o m m i s s i o n e r s m e t and 1979, crusher statement i n the call f o r bids the t h a t d e l i v e r y m u s t be w i t h i n f o r t y - f i v e The the machine. On i s s u e d a l e t t e r to p l a i n t i f f s t a t i n g t h e y had d e c i d e d t o r e j e c t a l l b i d s r e c e i v e d i n to response its call f o r b i d s on t h e rock crusher. Plaintiff s u b s e q u e n t l y t r a n s p o r t e d t h e c r u s h e r to Tempe, A r i z o n a , w h e r e it was finally complaint in District, County sold. in On District the and alleging for plaintiff Plaintiff Court of filed Eleventh Judicial the Flathead, of contract. After filed against a damages this appeal in the and amount defendant Flathead trial jury the jury returned a verdict 1982, a plaintiff County o f assessing then 11, 1 9 7 9 , the breach mencing F e b r u a r y 24, of December of com- in favor $10,000. cross-appeals . The s u b s t a n c e o f t h e a p p e a l s is as f o l l o w s : 1. Whether t h e r e w a s a v a l i d c o n t r a c t . 2. Whether t h e j u r y was p r o p e r l y i n s t r u c t e d o n t h e m e a s u r e o f damages. 3. Whether the jury verdict was supported by substantial c r e d i b l e evidence. The e s s e n t i a l e l e m e n t s o f a c o n t r a c t are: contracting, Section Mont . -- consent, 28-2-102, - , a MCA; 614 P.2d lawful Keil v. objective, p a r t i e s c a p a b l e of and Glacier P a r k 5 0 2 , 5 0 5 , 37 S t . R e p . 1151. consideration. Inc. (1980), I n t h i s case t h e i s s u e o f w h e t h e r or n o t t h e r e w a s a c o n t r a c t g o e s to t h e r e q u i r e ment of consent. There is c o n s e n t t o c o n t r a c t when t h e r e h a s b e e n a n o f f e r and a c c e p t a n c e of t h e o f f e r . Here, p l a i n t i f f I s w r i t t e n bid i s s u e d i n r e s p o n s e to F l a t h e a d County's call f o r b i d s c o n s t i t u t e s an o f f e r . However, a w r i t t e n b i d h a s c o n s i s t e n t l y b e e n c o n s t r u e d as n o t h i n g more t h a n a n o f f e r to perform labor supply materials, or and the o f f e r does r i p e n i n t o a c o n t r a c t u n t i l accepted by t h e o f f e r e e . ( 1 9 8 1 ) , - - -- Ballenger St.Rep. Mont -- . - - - - , 628 P.2d not C a r r i g e r v. 1106, 1108, 38 Thus, w e must d e t e r m i n e w h e t h e r t h e F l a t h e a d County 864. commissioners accepted plaintiff I offer s thereby creating a contract. A f t e r t h e b i d s were o p e n e d , the bids under advisement t h e c o m m i s s i o n e r s v o t e d to t a k e pending a recommendation the by On S e p t e m b e r 1 4 , 1 9 7 9 , t h e com- F l a t h e a d County road department. m i s s i o n e r s m e t w i t h members o f t h e r o a d d e p a r t m e n t and J i m Fox t o discuss the department plaintiff I bids. that A t recommended s meeting that the the of commissioners A m o t i o n was made, crusher. members the road purchase s e c o n d e d and r e c o r d e d : " M o t i o n by Guay t o a c c e p t t h e r o a d d e p a r t m e n t ' s r e c o m m e n d a t i o n t o p u r c h a s e g r a v e l c r u s h e r from Modern M a c h i n e r y f o r $ 3 0 5 , 7 2 5 . 0 0 ." (Emphasis added. ) Commissioner J o a n D e i s t t e s t i f i e d t h a t t h e commissioners norm a l l y make o n e o f t h r e e m o t i o n s upon b i d s r e c e i v e d i n r e s p o n s e t o a c a l l f o r b i d s ; m o t i o n t o a c c e p t ; m o t i o n t o d e n y ; o r m o t i o n to take under advisement. Initially, the commissioners c r u s h e r b i d s u n d e r a d v i s e m e n t p e n d i n g r e c o m m e n d a t i o n of department. On S e p t e m b e r 1 4 , that commissioners the the road department purchase took the t h e road recommended plaintiff t s crusher. C o m m i s s i o n e r Guay moved t o a c c e p t t h e r o a d d e p a r t m e n t ' s recommendation, t h e m o t i o n was s e c o n d e d and d u l y r e c o r d e d i n t h e m i n u t e s o f t h e meeting. The t h i r d c o m m i s s i o n e r l a t e r n o t e d a no v o t e on the he minutes as wasn't in attendance at the September 14 meeting. F l a t h e a d C o u n t y a r g u e s t h e r e w a s n o t a c c e p t a n c e as t h e r e w a s n o n o t i c e o f b i d award i s s u e d by t h e c l e r k and r e c o r d e r ' s o f f i c e . However, everyone in attendance a t the meeting, including the c o m m i s s i o n e r s , t e s t i f i e d t h a t t h e y t h o u g h t t h e c o m m i s s i o n e r s were g o i n g t o buy p l a i n t i f f I s crusher. W e f i n d t h e r e was a c c e p t a n c e on t h e p a r t o f F l a t h e a d C o u n t y when t h e c o m m i s s i o n e r s a c c e p t e d plaintiff was o n l y f u l f i l l i n g i t s o b l i g a t i o n on t h e c o n t r a c t b y o r d e r i n g and and made m i n u t e s reflecting the acceptance, and T h e r e is no s t a t u t o r y p r o v i s i o n f o r t h e delivering the crusher. p r o c e d u r e a r g u e d by t h e c o u n t y . Flathead satisfies County the statute s t a t e d above, ripen f u r t h e r argues of sect i o n no w r i t i n g 30-2-201 , which MCA. As t h i s Court has p r e v i o u s l y held a w r i t t e n bid can into a contract if Ballenger, frauds, t h e r e was supra. Here, accepted by t h e o f f e r e e . we have found the C a r r i g e r v. written was bid m o t i o n which was s e c o n d e d by Com- a c c e p t e d b y C o m m i s s i o n e r Guay I s m i s s i o n e r D e i s t and r e c o r d e d i n t h e m i n u t e s of t h e S e p t e m b e r 1 4 meeting. Thus, there was a valid contract, not barred by t h e s t a t u t e of frauds. The n e x t i s s u e is w h e t h e r t h e j u r y w a s p r o p e r l y i n s t r u c t e d o n t h e measure of damages. First, p l a i n t i f f a r g u e s t h e g i v i n g of 7 was i n e r r o r . court's instruction No. The i n s t r u c t i o n s t a t e s : " I f you f i n d t h a t t h e P l a i n t i f f is e n t i t l e d to d a m a g e s , you may award a n y of t h e f o l l o w i n g : 1 ) L o s t n e t p r o f i t s ; 2 ) I n c i d e n t a l damages s u c h as e x p e n s e s i n c u r r e d i n t h e t r a n s p o r t a t i o n of g o o d s a £ t e r t h e b u y e r ' s b r e a c h ." The m e a s u r e of damages when a b u y e r w r o n g f u l l y r e j e c t s or r e v o k e s a c c e p t a n c e o f g o o d s is g o v e r n e d by t h e U n i f o r m Commercial Code. S e c t i o n 30-2-703, MCA, states: "Where t h e b u y e r wrong- f u l l y r e j e c t s or r e v o k e s a c c e p t a n c e o f g o o d s ( e) ( 30-2-706 ) ; (30-2-708) the aggrieved ( d ) r e s e l l and r e c o v e r damages as h e r e i n a f t e r p r o - s e l l e r may: vided ... . . ." recover Pursuant damages for nonacceptance t o s e c t i o n 30-2-706, "the MCA: s e l l e r may r e c o v e r t h e d i f f e r e n c e b e t w e e n t h e r e s a l e p r i c e and the less contract price expenses together with saved in any consequence P u r s u a n t t o s e c t i o n 30-2-708, MCA: incidental of the damages buyer's . . . breach." " t h e m e a s u r e of damages f o r n o n a c c e p t a n c e or r e p u d i a t i o n by t h e b u y e r is t h e d i f f e r e n c e b e t ween t h e m a r k e t p r i c e a t t h e t i m e and p l a c e f o r t e n d e r and u n p a i d c o n t r a c t p r i c e t o g e t h e r w i t h a n y i n c i d e n t a l damages the ... l e s s e x p e n s e s s a v e d i n c o n s e q u e n c e of t h e b u y e r ' s b r e a c h ." or "If t h e m e a s u r e o f damages p r o v i d e d i n s u b s e c t i o n ( 2 ) i s i n a d e q u a t e t o p u t t h e s e l l e r i n as good a p o s i t i o n as p e r f o r m a n c e would h a v e d o n e t h e n t h e m e a s u r e o f damages is t h e p r o f i t seller would have together with made from any i n c i d e n t a l full performance . . ., damages . . . which by the the buyer due a l l o w a n c e for c o s t s r e a s o n a b l y i n c u r r e d and d u e c r e d i t f o r p a y m e n t s or p r o c e e d s o f resale ." W e f i n d c o u r t ' s u n s t r u c t i o n n o . 7 was n o t a c o r r e c t s t a t e m e n t of the l a w as s t a t e d b y t h e U . C . C . damages u n d e r t h e U . C . C . The p o s s i b l e m e a s u r e s of are n o t s t a t e d i n p e r m i s s i v e l a n g u a g e , are m a n d a t o r y and s p e c i f i c a l l y s t a t e t h e amount of but rather, r e c o v e r a b l e damage d e p e n d i n g upon t h e remedy s e l l e r h a s p u r s u e d The District following" Court's in use of i n s t r u c t i o n no. were n o t r e q u i r e d the words 7 implied "may award to t h e any of jury . the t h a t they b y l a w t o award s p e c i f i c damages. Thus, the g i v i n g o f t h e D i s t r i c t C o u r t ' s i n s t r u c t i o n n o . 7 was i n e r r o r as b e i n g i n c o n t r a d i c t i o n of t h e U.C.C. P l a i n t i f f a l s o claims t h e g i v i n g o f t h e f o l l o w i n g i n s t r u c t i o n was i n e r r o r : "A p a r t y who a l l e g e s t h a t it h a s b e e n damaged b y t h e b r e a c h of c o n t r a c t by a n o t h e r p a r t y is bound t o e x e r c i s e r e a s o n a b l e care and d i l i g e n c e t o a v o i d l o s s and t o m i n i m i z e i t s damage. A p a r t y may n o t r e c o v e r f o r losses which could have been prevented by r e a s o n a b l e e f f o r t s on i t s p a r t ." W e f i n d t h e g i v i n g of t h i s i n s t r u c t i o n w a s i n error. case a method of 30-2-704 ( 2 ) , MCA. mitigating damages is addressed by In t h i s section The s e c t i o n s t a t e s : "Where t h e g o o d s a r e u n f i n i s h e d a n a g g r i e v e d s e l l e r may i n t h e e x e r c i s e of r e a s o n a b l e commercial j u d g m e n t f o r t h e p u r p o s e s of a v o i d i n g l o s s and of effective realization either c o m p l e t e t h e m a n u f a c t u r e and w h o l l y i d e n t i f y t h e g o o d s t o t h e c o n t r a c t o r cease m a n u f a c t u r e and r e s e l l f o r s c r a p or s a l v a g e v a l u e o r p r o c e e d i n a n y r e a s o n a b l e manner." T h i s s e c t i o n is b e t t e r u n d e r s t o o d by l o o k i n g t o t h e O f f i c i a l Comment t o s e c t i o n 30-2-704 ( 2 ) , MCA: "Under this Chapter the seller is given e x p r e s s power t o c o m p l e t e m a n u f a c t u r e or p r o c u r e m e n t of g o o d s f o r t h e c o n t r a c t u n l e s s t h e e x e r c i s e o f r e a s o n a b l e c o m m e r c i a l j u d g m e n t as t o t h e f a c t s a s t h e y a p p e a r a t t h e time he l e a r n s o f t h e b r e a c h makes it c l e a r t h a t s u c h a c t i o n w i l l r e s u l t i n a material i n c r e a s e i n d a m a g e s . The b u r d e n is upon t h e b u y e r t o show t h e c o m m e r i c a l l y u n r e a s o n a b l e n a t u r e of t h e seller's a c t i o n i n completing manufacture." Here, C o m m i s s i o n e r Guay e x p r e s s e d c o n c e r n a b o u t t h e c o n t r a c t a t an e a r l y date, but, the contracts of commissioners i t s board are the contracts n o t of missioners, refused The c o u n t y h a s power to c o n t r a c t , repudiate the contract. its board the i n d i v i d u a l members Petroleum County e t a l . of of county thereof. ( 1 9 3 0 ) , 8 7 Mont. 4 3 6 , 447, to and com- B e n n e t t v. 288 P. 1 0 1 8 , 1020. C o m m i s s i o n e r Guay d i d n o t h a v e t h e a u t h o r i t y t o i n d i v i - dually revoke the contract and when b o a r d t a k e some a c t i o n it r e f u s e d . plaintiff asked that the T h u s , p l a i n t i f f was a c t i n g i n a c o m m e r c i a l l y r e a s o n a b l e m a n n e r to f u l f i l l i t s o b l i g a t i o n u n d e r the contract. forty-five I f p l a i n t i f f had n o t d e l i v e r e d t h e c r u s h e r w i t h i n days, it would h a v e b r e a c h e d t h e c o n t r a c t and e x p o s e d itself to legal liability. Had t h e b o a r d t a k e n some a c t i o n a t a n e a r l y d a t e , p l a i n t i f f c o u l d h a v e m i t i g a t e d i t s damages u n d e r section 30-2-704, placed the The D i s t r i c t C o u r t ' s MCA. entire burden to mitigate instruction unfairly damages w h e r e a s t h e comments t o s e c t i o n 30-2-704, upon plaintiff state: MCA, " t h e bur- d e n is upon t h e b u y e r [ F l a t h e a d C o u n t y ] t o show t h e c o m m e r i c a l l y unreasonable nature of the seller 's act i o n in completing Thus, t h e g i v i n g of t h e C o u r t t s i n s t r u c t i o n w a s i n manufacture." error. The l a s t i s s u e i s w h e t h e r t h e j u r y v e r d i c t w a s s u p p o r t e d b y s u b s t a n t i a l credible evidence. damages 30-2-708, the is contract price the buyer's by section s t a t e d a b o v e , t h e m e a s u r e of 30-2-706, Under s e c t i o n 30-2-706, MCA. resale p r i c e be governed As ($305,725) p l u s MCA, MCA, and section t h e damages would be incidental damages less t h e ( $ 1 8 6 , 4 9 9 . 8 6 ) and e x p e n s e s s a v e d i n c o n s e q u e n c e of breach. plaintiff's Under s e c t i o n 30-2-708 ( 2 ) t h e damages would anticipated profit ($78,879.56) plus incidental damages Using less either plaintiff's credit for section payments in this made o r proceeds instance the of resale. record shows damages were f a r i n e x c e s s of $ 1 0 , 0 0 0 a n d t h e r e is no s u b s t a n t i a l c r e d i b l e e v i d e n c e which c a n s u p p o r t t h e j u r y v e r dict. We affirm the case as to county's liability and judgment i s r e v e r s e d and t h e case is remanded to t h e D i s t r i c t C o u r t f o r a h e a r i n g o n damages by f o l l o w i n g t h e a p p l i c a b l e s t a t u t e s .

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