Title: WESTERN SIGN INC v STATE

State: montana

Issuer: Montana Supreme Court

Document:

No. 14296 IN THE SUPREME COUIiT O F THE STATE O F MONTANA lEXEF?N SIm, D r . , a Montana corporation, Plaintiff and Appllant, THE szATI3 OF m A N A , S T A T E O F M O N T A N A DEPAFsmNr O F A D M I N I ~ I C N , S T A T E OF ITXVI?ANA DEPAR!DENT O F I I I G H W A Y S and S T A T E O F m l A N A D m m m O F (2amlNITY AFFAIRS, Defendants and Respondents. Agpeal fran: D i s t r i c t Court of the First ~ u d i c i a l District, Honorable Gordon R. Bennett, Judge presiding. Counsel of Record: For -ellant: Burton, Waite and Cruikshank, Great Falls, bbntana Charles Cruikshank I 1 1 argued, Great Falls, MDntana For Respondents: Hon. Mike Greely, Attorney General, Helena, Montana Michael Young argued, Dept. of Administration, Helena, Pbntana M. G. McLatchey, Dept. of Highways, H e l e n a , Montana Daniel G. D i e m e r t , Dept. of Ccmnmity Affairs, Helena, Mntana Decided : F E B -, 5 1979 Filed - 5 5979 M r . J u s t i c e John Conway Harrison delivered t h e Opinion of t h e Court . Western Sign, Inc., h e r e i n a f t e r r e f e r r e d t o a s Western, appeals from an order of t h e District Court, F i r s t J u d i c i a l D i s t r i c t , t h e Honorable Gordon R. Bennett, granting t h e motion of t h e S t a t e f o r p a r t i a l summary judgment on t h e i s s u e of l i a b i l i t y and denying t h e motion f o r summary judg- ment made by Western. Involved herein i s t h e i n t e r p r e t a t i o n of a c o n t r a c t entered i n t o between t h e S t a t e of Montana and t h r e e of i t s agencies and t h e p l a i n t i f f Western Sign, Inc. The S t a t e , through i t s agents, s e n t o u t requests f o r quotations, in- v i t a t i o n s t o bid f o r c o n t r a c t t o be l e t by t h e S t a t e f o r materials t o b u i l d street signs. Western's bid w a s t h e lowest q u a l i f i e d one, and s o it was awarded t h e c o n t r a c t . Subsequently, a purchase agreement w a s entered i n t o by t h e S t a t e and Western, whereby t h e S t a t e agreed t o buy from Western a l l steel s i g n posts ordered by l o c a l governments which w e r e p a r t i c i p a t i n g i n t h e "signing program". Western procured a s t o r e of m a t e r i a l s which would enable it t o f i l l a l l t h e orders as they came i n ; i n f a c t , Western procured enough m a t e r i a l s t o f i l l t h e maximum number of orders which would have needed f i l l i n g had every e l i g i b l e l o c a l govern- ment ordered t h e maximum amount of m a t e r i a l s t h a t it could. Its a n t i c i p a t i o n f a r exceeded t h e a c t u a l i t y of events, f o r t h e S t a t e d i d n o t order enough t o exhaust Western's supply. Western then sued, a l l e g i n g i n t e r a l i a , breach of c o n t r a c t by t h e S t a t e f o r i t s f a i l u r e t o take a l l t h e m a t e r i a l s procured by Western. The District Court determined t h a t t h e r e w a s no breach because t h e c o n t r a c t w a s a requirements c o n t r a c t , which bound t h e S t a t e t o take from Western only what it required. Western argues t h a t t h e S t a t e was obligated t o purchase t h e e n t i r e quantity s t a t e d i n t h e estimate on which Western had bid, which estimate had been incorporated i n t o t h e c o n t r a c t proper, because t h e c o n t r a c t was one f o r a specified quantity. Disposition of t h i s case is controlled by t h e Montana Uniform Commercial Code and by T i t l e 13 of t h e 1947 Revised Codes of Montana. Before applying t h e law, however, t h e contract i t s e l f must be examined. The Request f o r Quotation, incorporated by reference i n t o t h e c o n t r a c t , reads i n per- t i n e n t p a r t : "Steel posts s h a l l be ordered when required on t h e same summary s h e e t a s t h e signs b u t counties and cities have t h e option t o request wood posts which w i l l n o t be p a r t of t h e purchase order. " Q u a n t i t i e s a s shown a r e on a more less b a s i s a s d e t a i l e d estimates a r e not possible u n t i l inven- t o r i e s a r e completed by each c i t y and county wishing t o p a r t i c i p a t e i n t h e s a f e t y demonstra- t i o n program. Orders f o r signing m a t e r i a l s , posts, etc., under t h i s purchase order w i l l be processed f o r each c i t y o r county individually by t h e Dept. of Highways throughout t h e f i s c a l year and vendor s h a l l expeditiously f i l l these orders and s h i p materials d i r e c t l y t o counties o r cities designated within a maximum of 90 days a f t e r r e c e i p t of an order. The Dept. of Highways s h a l l process t h e payment of each order a f t e r t h e material has been mutually inspected and accepted by representatives . . ." The r e l e v a n t portions of t h e purchase agreement a r e these: " S e l l e r agrees t o sell and d e l i v e r and buyer agrees t o purchase, accept and pay f o r a l l of Buyer's small quantity requirements of m a t e r i a l s h e r e i n a f t e r r e f e r r e d t o needed f o r use i n t h e agencies, departments, and o f f i c e s of t h e S t a t e of Montana. "Delivery of s a i d material s h a l l be made a s re- quired during t h e c o n t r a c t order and within a reasonable t i m e a f t e r t h e seller receives a w r i t t e n order therefore from t h e buyer. "These materials s h a l l be of the kind, quantity and quality s e t f o r t h i n t h a t c e r t a i n o f f e r made t o t h e buyer by t h e s e l l e r on Aug. 1 9 , 1975, a copy of which is attached hereto and by t h i s reference made a p a r t of t h e agreement. I t is expressly understood and agreed t h a t t h i s contract is f o r s i n g l e orders of t h e items l i s t e d i n s a i d o f f e r which a r e not i n excess of the q u a n t i t i e s f o r which prices a r e quoted i n said bid o f f e r . B y t h i s contract, Buyer has no obligation t o buy from S e l l e r t h e items l i s t e d i n s a i d o f f e r when a s i n g l e order f o r said items i s f o r a quantity i n excess of the quantity f o r which prices a r e quoted i n said bid offer." (Emphasis added.) Western f i r s t contends t h a t t h e S t a t e of Montana i s a merchant, and so is t o be held t o a standard higher than than of mere good f a i t h . Section 87A-2-104(1), R.C.M. 1947, defines "merchant" a s follows: "'Merchant' means a person who deals i n goods of t h e kind o r otherwise by h i s occupation holds himself o u t a s having knowledge o r s k i l l peculiar t o t h e practices o r goods involved i n the transaction o r t o whom such knowledge or s k i l l may be a t t r i b u t e d by h i s employment of an agent o r broker o r other intermediary who by h i s occupation holds himself out a s having such knowledge o r s k i l l . " Certainly it does not "deal i n goods" of the s o r t sub- j e c t of t h e contract; it does not "hold [it] s e l f o u t a s having knowledge o r s k i l l peculiar t o t h e practices o r goods involved i n the transaction." The most t h a t could perhaps be s a i d i s t h a t "such knowledge o r s k i l l may be a t t r i b u t e d [ t o the S t a t e ] by [its] employment of an agent . . . who by h i s occupation holds himself o u t a s having such knowledge o r s k i l l . " Counsel has not c i t e d us t o and neither did we find any decision i n which t h e court has found a s t a t e t o be a mer- chant. Although c e r t a i n governmental e n t i t i e s , i n p a r t i - c u l a r municipalities, have been found t o be merchants when acting i n a p a r t i c u l a r fashion, f o r instance, maintaining a municipal water system and s e l l i n g w a t e r t o r e s i d e n t s of t h e municipality, those cases reach t h a t determination of t h e merchant character v i a deciding whether t h e "goods", - t h e water, has a warranty of merchantability. See, e.g., Moody v. City of Galveston (Tex. Civ. App. 1975), 524 S.W.2d 583. But c f . Coast Laundry, Inc. v. Lincoln City (1972), 9 0re.App. 521, 497 P.2d 1224, 54 ALR3d 930 (impliedly finding municipality n o t a merchant because no implied w a r - r a n t i e s of merchantability and f i t n e s s f o r p a r t i c u l a r pur- pose i n connection with sale and supply of w a t e r . This decision has been c r i t i c i z e d , e.g., Dolan, The Merchant C l a s s of A r t i c l e 2: Farmers, Doctors, and Others, 1977 Wash. U.L.Q. 1, 27 (1977) .) W e have no question of merchantability here; ergo, t h a t is not a v e h i c l e by which w e may be c a r r i e d t o a considera- t i o n of t h e question of t h e merchant character of t h e S t a t e . "The Code makes no provision a s t o t h e proof of merchant character of a party. The general r u l e governing burden of proof w i l l r e q u i r e t h a t t h e party who w i l l b e n e f i t by proof of such character c a r r y t h e burden of proving t h e merchant character." 1 R. Anderson on t h e Uniform Commercial Code 52-104:7 (2nd ed. 1970). I t may w e l l be t h a t a state may be a merchant i n some circumstances; w e do n o t decide t h a t question i n t h i s case. W e take note, however, t h a t Western d i d not c a r r y its burden of proof, t h a t it d i d not demonstrate t h e S t a t e was a merchant i n t h i s transaction. Therefore, it cannot p r e v a i l on t h i s i s s u e . A s t h e D i s t r i c t Court noted, t h e r e i s no provision i n t h e c o n t r a c t which s p e c i f i e s an exact q u a n t i t y and p r i c e binding both t h e seller, Western, and t h e buyer, t h e S t a t e . The i n d e f i n i t e n e s s of t h e quantity, coupled with t h e speci- f i c reference t o t h e contingency of t h e participation of t h e l o c a l governments, led the t r i a l court t o conclude t h a t , a s a matter of law, t h e contract was a requirements contract. W e agree with t h a t conclusion, f o r , on appeal, Western has f a i l e d t o show t h a t the terms a r e s o d e f i n i t e as t o make it other than a requirements contract. Once t h a t determination i s made, inquiry must be made i n t o what constitutes allowable variations i n the estimates of quantity shown i n the Request f o r Quotation. The stan- dard t o be employed is one of "good f a i t h " , section 87A-2- 306(1), R.C.M. 1947, precluding an unreasonably dispropor- t i o n a t e variation. Absent such unreasonableness t h e s e l l e r assumes t h e r i s k of variations made i n good f a i t h by the buyer. See, e.g., HML Corp. v. General Foods Corp. (3rd C i r . 1966), 365 F.2d 77; Standard Magnesium Corp. v. United S t a t e s (10th C i r . 1957), 2 4 1 F.2d 677; Wilsonville Concrete Products v. Todd Bldg. Co. (1978), 281 Ore. 345, 574 P.2d 1 1 1 2 . The party p l a i n t i f f claiming a breach has t h e burden of showing t h a t t h e defendant acted i n bad f a i t h . HML Corp. v. General Foods Corp., 365 F.2d a t 83. A s i n HML Corp., t h a t burden has not been m e t . See a l s o Summers, "Good Faith" i n General Contract Law and t h e Sales Provisions of t h e Uniform Commercial Code, 54 Va.L.Rev. 195 (1968), and Farnsworth, Good Faith Performance and Commercial Reason- ableness Under t h e Uniform Commercial Code, 30 U.Chi.L.Rev. 666 (1963). Western's l a s t challenge i s directed t o whether summary judgment was appropriately awarded i n t h i s case. Appellant Western contends t h a t i n making a decision i n granting summary judgment t o t h e S t a t e the court erred because it f a i l e d t o r u l e on e i g h t other positions r e l i e d upon by a p p e l l a n t . Appellant makes no argument a t a l l on those p o i n t s , b u t merely baldly asserts t h a t t h e D i s t r i c t Court acted improperly. This Court has r e i t e r a t e d t h e r u l e t h a t an o r d e r grant- i n g summary judgment, pursuant t o Rule 56, M.R.Civ.P., w i l l be upheld i n those c a s e s i n which t h e complaining p a r t y f a i l s t o demonstrate t h e e x i s t e n c e of m a t e r i a l and s u b s t a n t i a l f a c t s which would a l t e r t h e d e c i s i o n made below. E.g., Harland v. Anderson (1976), 169 Mont. 447, 548 P.2d 613; Montana Deaconess Hospital v. Gratton (1976), 169 Mont. 185, 545 P.2d 670. The p l a i n t i f f , t h e complaining p a r t y , has f a i l e d t o show us such f a c t s a s t o r a i s e a genuine i s s u e of material f a c t a s would i n v a l i d a t e t h e conclusions of law of t h e D i s t r i c t Court. Having f a i l e d t o c a r r y its burden, plain- t i f f cannot p r e v a i l i n t h i s Court. Affirmed. W e concur: Z a $ chief J u s t i c e Q A . J . / J x & k J u s t i c e s