Title: Inter-Mountain Threading, Inc. v. Baker Hughes Tubular Services, Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Inter-Mountain Threading, Inc. v. Baker Hughes Tubular Services, Inc.1991 WY 88812 P.2d 555Case Number: 90-139Decided: 06/10/1991Supreme Court of Wyoming
INTER-MOUNTAIN THREADING, 
INC., A WYOMING CORPORATION, APPELLANT (PLAINTIFF),

v.

BAKER HUGHES TUBULAR 
SERVICES, INC., A DELAWARE CORPORATION, APPELLEE (DEFENDANT).

Appeal from the 
DistrictCourtofNatronaCounty, Harry E. Leimback, 
J.

Jeffrey C. Gosman, 
Casper, for 
appellant.

W.W. Reeves of Reeves 
& Murdock, Casper, for appellee.

Before URBIGKIT, C.J., 
and THOMAS, CARDINE, MACY and GOLDEN, JJ.

GOLDEN, Justice.

[¶1.]     In this appeal we 
consider the doctrine of promissory estoppel in the context of preliminary 
negotiations in a commercial transaction. We also take the opportunity to 
caution members of the practicing bar who appear in this court that we expect 
compliance with our rules of appellate procedure. Our warning in this regard 
appears in the latter part of this opinion.

[¶2.]     A jury returned a 
verdict finding that Baker Hughes Tubular Services, Inc. (Baker Hughes), on 
December 30, 1987, made a promise to Inter-Mountain Threading, Inc. (IMT) that 
if it would set up a facility for the manufacture of premium thread flush 
connections on pipe used in the oil and gas industry, then Baker Hughes would 
conduct an exclusive business relationship with IMT in the form of either a 
manufacturing agreement or a licensing agreement; that Baker Hughes should 
reasonably have expected its promise to induce action on the part of IMT; that 
Baker Hughes' promise did induce IMT to change its position in reliance on the 
promise; that Baker Hughes did not keep its promise; and that IMT suffered 
$100,000 damages because Baker Hughes did not keep its promise.

[¶3.]     The trial judge granted 
Baker Hughes' motion for a judgment notwithstanding the verdict (JNOV). W.R.C.P. 
50(b). On appeal from that judgment, IMT raises this issue:

Whether the evidence in 
this case is such that without weighing the credibility of the witnesses or 
otherwise considering the weight of the evidence, there can be but one 
conclusion reasonable persons could have reached in setting aside the jury 
verdict and granting judgment notwithstanding the verdict.

[¶4.]     Baker Hughes identifies 
these issues:

1. Whether the Court 
correctly determined that enforcement of the promise was not required to avoid 
injustice.

2. Whether the promise 
allegedly made by Appellee was sufficiently clear and unambiguous to support a 
verdict based on promissory estoppel.

3. Whether Appellant took 
some action or forbearance of a definite and substantial character in reasonable 
reliance upon a promise made by Appellee.

4. Whether any 
significant change in position by Appellant was reasonably foreseeable by 
Appellee.

5. Whether Appellant 
sustained any compensable damage as a result of reliance upon any promise made 
by Appellee.

6. Whether the action was 
brought in the name of the real party in interest.1

[¶5.]     We affirm.

FACTS

[¶6.]     Baker Hughes, a 
Delaware corporation, with offices in 
Houston, Texas, possesses technical information 
necessary to cut threads on oil field pipe which results in a flush connection. 
The product is referred to as "premium threads." The technical information 
relating to these threads includes plans, specifications, and computer programs 
used in computer operated lathes which cut the threads into the ends of the 
pipe.

[¶7.]     Baker Hughes 
historically granted rather limited authority to anyone in the 
United 
States to cut its premium threads. At one time 
it had, under the provisions of a manufacturing agreement, conducted business 
with Grey-Mak, Inc., which operated a threading facility in Casper, Wyoming.

[¶8.]     Richard A. Bonander was 
president of his own company called Inter-Mountain Pipe, which sold pipe. This 
company acquired pipe with unthreaded ends and paid others to cut threads on it 
before resale. In 1987, Bonander began planning the formation of a company to 
cut threads. This company would thread the pipe that Inter-Mountain Pipe 
acquired.

[¶9.]     Greg Breed, a friend of 
Bonander's and a skilled machinist with special training in the operation of 
computerized lathes, was quality assurance manager at Grey-Mak where 
Inter-Mountain Pipe had most of its threads cut. He had the training and 
experience necessary to set up a thread-cutting facility.

[¶10.]  In the fall of 1987, Bonander and Breed 
discussed the formation of a thread cutting facility. Bonander was looking 
around for financing. In November, he applied to the Casper Area Economic 
Development Alliance for a loan to purchase a state of the art computerized 
lathe costing $100,000. Breed was looking around for equipment.

[¶11.]  On December 15, 1987, Breed quit his job 
at Grey-Mak and, within a day or two, went to work for Inter-Mountain Pipe. 
Bonander told him he wanted to put together the threading facility they had been 
discussing. Breed began investigating locations and continued looking for 
equipment. On December 16 or 17, Breed called Jerry Haygood, Baker Hughes' 
manager of manufacturing and engineering, to inform him he had left Grey-Mak, 
was working for a fellow interested in starting up a threading facility in 
Casper, and was interested in talking to Baker Hughes about cutting premium 
threads. When Breed worked for Grey-Mak, he had become acquainted with Haygood. 
Haygood told Breed that the person in Baker Hughes he should talk to was David 
Douglas, manager of the premium thread product line.

[¶12.]  In their search for equipment, Bonander 
and Breed located several lathes. To hold one in Denver until he could travel there to inspect 
it, Bonander sent in a deposit. He also located a Mori-seikis computerized lathe 
in Houston, 
being brokered by a fellow named Starling. Bonander told Starling he was looking 
for a particular brand, either a Mazak or a Mori-seikis. Breed located a Mazak 
in Louisiana. 
Bonander and Breed traveled to Louisiana to inspect the Mazak; they did not 
like it as it was in poor condition. They went to Houston and inspected Starling's Mori-seikis 
which they found to be in good condition. They did not make a commitment to buy 
that lathe at that time; they returned to Casper.

[¶13.]  Breed received a call from Haygood, 
telling Breed that he had spoken favorably of Breed to Baker Hughes' Douglas. He gave Breed Douglas' telephone number. Breed 
called Douglas who said he would like to meet with him. Breed checked on travel 
arrangements and called Douglas to arrange a 
meeting on December 30. Breed told Bonander about his contact with Douglas, and they agreed they should make a deposit on 
Starling's lathe. On December 21, Bonander sent Starling a $10,000 deposit on 
the lathe.

[¶14.]  On December 30, at a breakfast meeting in 
Houston attended by Breed, Haygood, and 
Douglas, a conversation occurred on which IMT's 
promissory estoppel claim hinges. Initially, they engaged in small talk. They 
talked about the threading market and Breed's experience. The conversation 
turned to the types of agreement under which Baker Hughes did business with a 
thread cutting facility. From employment with Grey-Mak, Breed was familiar with 
the toll manufacturing type of agreement; he was unfamiliar with the licensing 
type of agreement. They did not agree on the terms of either a licensing 
agreement or a manufacturing agreement. Douglas 
offered to send Breed sample copies of each for him to consider. Breed told 
Douglas and Haygood that he was looking at a computerized lathe in Houston, but was unsure if 
it would cut premium threads. Although they discussed percentages of prices or 
money that IMT would pay to Baker Hughes under either type of agreement, there 
was no agreement on these matters. They did not discuss the duration of any 
agreement. Although they discussed products, they did not agree on which 
products an agreement in either form would cover. Although they discussed the 
subject of liability, they did not agree as to which party would assume 
liability for product defects under either form of agreement. They did not agree 
on the price IMT would have to pay for the transfer of technology; in fact, the 
subject of transfer fees was never mentioned. There was no agreement on what 
percentage of the sales price of pipe sold IMT would pay to Baker Hughes. Breed 
did not discuss IMT's marketing plan with Douglas. They did not discuss when IMT expected to have 
its threading facility operational. There was no discussion about whether Baker 
Hughes would wait indefinitely for IMT to establish its facility. Breed assumed 
that any deal with Baker Hughes would be in writing.

[¶15.]  According to Breed, at the conclusion of 
the meeting, "Mr. Douglas told me that if I could go back to Casper and put a 
facility together that met Baker Hughes' requirements, that we would do a deal, 
the deal meaning either a licensing agreement or toll manufacturing agreement." 
During cross-examination, Breed testified that Douglas had told him "if we could get a plant put together 
that would meet Baker Hughes specifications, and after they inspected it, we 
would have a deal." Then, Breed reiterated that Douglas' words were "we can do a deal." Breed 
characterized Douglas' words as a "leaving 
remark."

[¶16.]  After the meeting Breed and Haygood 
toured Baker Hughes' operation, had lunch, and then went to Starling's to look 
at the lathe that Breed and Bonander wanted. After they checked out the lathe, 
the only discussion Breed and Haygood had was that Haygood said it was a good 
machine and the tolerances on it were very tight.

[¶17.]  After Breed and Haygood parted company, 
Breed called Bonander in Casper and reported on the day's events. Breed 
returned to Casper. Bonander called Starling to inform him 
he wanted to buy the lathe. By January 4 or 5, 1988, Bonander had arranged a 
lease agreement to finance the purchase of the lathe and other equipment. On 
January 22, 1988, IMT's articles of incorporation were filed with the secretary 
of state's office.

[¶18.]  By letter dated January 27, 1988, 
Douglas sent Breed, as he said he would, two 
types of agreement. In the letter, Douglas 
stated, in pertinent part, "Review these so that we may determine the most 
beneficial arrangement for both our companies. Neither document is submitted as 
a proposal to your company. The terms and conditions of any agreement between us 
must be negotiated separately."

[¶19.]  By March, IMT's threading facility was 
nearing completion. The parties arranged for Douglas to visit the facility on April 20, 1988. During 
that visit, the parties discussed establishing a business relationship under one 
or the other of the two sample agreement forms Douglas had sent Breed in January. The negotiations went 
back and forth, ultimately resulting in the understanding that Douglas would 
have Baker Hughes' lawyers in Houston prepare a licensing agreement and send 
that to IMT.

[¶20.]  As Douglas was returning to Houston from the April 20 
meeting, Bonander received word from a company that it wanted to place an order 
for premium thread. For this specific order, IMT and Baker Hughes entered into a 
one-time agreement. However, Baker Hughes never sent to IMT the licensing 
agreement instrument discussed at the April 20 meeting in order to facilitate 
establishment of an ongoing contractual relationship beyond the one-time 
agreement. According to Bonander, Douglas gave 
him the run-around for an extended period of time. Finally, in August, Baker 
Hughes informed IMT there would be no agreement.

[¶21.]  IMT filed suit alleging various theories 
of recovery including breach of contract, fraudulent misrepresentation, bad 
faith tort, negligence, prima facie tort, and promissory estoppel. By the time 
the case was submitted to the jury for deliberation, all counts, except 
promissory estoppel, had been dropped.

[¶22.]  When IMT rested its case-in-chief, Baker 
Hughes moved for a directed verdict. The trial court took the motion under 
advisement, deciding to let the case go to the jury. After Baker Hughes rested, 
closing arguments were made and the case submitted to the jury. The jury 
returned a verdict in favor of IMT. Several days later, Baker Hughes moved for 
JNOV. After due consideration, the trial court granted the motion. This appeal 
followed.

STANDARD OF 
REVIEW

[¶23.]  When this appellate court is faced with a 
JNOV question, we undertake a full review of the record without deference to the 
views of the trial court. Cody v. Atkins, 658 P.2d 59, 61-62 (Wyo. 1983). In 
determining whether a JNOV motion should be granted, we consider "whether the 
evidence is such that without weighing the credibility of the witnesses, or 
otherwise considering the weight of the evidence, there can be but one 
conclusion reasonable persons could have reached * * *." Erickson v. Magill, 713 P.2d 1182, 1186 (Wyo. 1986). In our review we consider the 
evidence favorable to the nonmoving party, giving it all reasonable inferences. 
Carey v. Jackson, 603 P.2d 868, 877 (Wyo. 1979). 

A court should cautiously 
and sparingly grant JNOV motions. Erickson, 713 P.2d  at 1186.

DISCUSSION

[¶24.]  Applying our standard of review, we reach 
the same conclusion as the trial judge. The evidence as revealed in the trial 
transcript and other record is wholly insufficient to support a verdict based on 
the doctrine of promissory estoppel.

[¶25.]  We have recognized and applied the 
closely related doctrines of equitable estoppel and promissory estoppel on other 
occasions. Provence v. Hilltop National Bank, 
780 P.2d 990 (Wyo. 1989) (promissory estoppel and equitable 
estoppel); Roth v. First Security Bank of Rock Springs, 684 P.2d 93 (Wyo. 1984); 
Cheyenne Dodge, Inc. v. Reynolds & Reynolds Co., 613 P.2d 1234 (Wyo. 1980) 
(equitable estoppel); Remilong v. Crolla, 576 P.2d 461 (Wyo. 1978) (promissory 
estoppel); Wood v. Trenchard, 550 P.2d 490 (Wyo. 1976) (equitable estoppel); 
Crosby v. Estate of Strahan, 78 Wyo. 302, 324 P.2d 492 (1958) (equitable 
estoppel); Vogel v. Shaw, 42 Wyo. 333, 294 P. 687, 75 A.L.R. 639 
(1930).

[¶26.]  In Provence the court identified the 
well-established elements of promissory estoppel:

(1) a clear and definite 
agreement; (2) proof that the party urging the doctrine acted to its detriment 
in reasonable reliance on the agreement; and (3) a finding that the equities 
support the enforcement of the agreement.

Provence, 780 P.2d  at 993. There, 
we looked to National Bank of Waterloo v. 
Moeller, 434 N.W.2d 887 (Iowa 1989). Moeller correctly informs us that, 
with respect to the first element, a clear and definite agreement, the "dual 
emphasis on clarity and inducement parallels the Restatement (Second) definition 
of an agreement for purposes of promissory estoppel as `[a] promise which the 
promisor should reasonably expect to induce action * * * on the part of the 
promisee.' Restatement (Second) of Contracts § 90 (1981)." Id., 434 N.W.2d  at 
889.

[¶27.]  Focusing on the first element, we cannot 
conclude that Douglas' oral statements at the 
December 30 breakfast meeting are promises clear and unambiguous in their terms. 
His conversational remarks are, at best, mere expressions of hope and opinion in 
an obviously preliminary negotiation context. In somewhat analogous preliminary 
negotiation contexts, we have viewed similar remarks as mere expressions of 
opinion and agreements to agree. See Czapla v. Grieves, 549 P.2d 650, 653 (Wyo. 
1976) (owner's agent made such remarks as "This was as good as sold, that the 
deal would be final"); Roth, 684 P.2d  at 95 (bank director made such remarks as 
"Things look very good at this time" and "You don't have any * * * problems as 
long as I own the bank"); and Doud v. First Interstate Bank of Gillette, 769 P.2d 927, 928 (Wyo. 1989) (bank president told loan applicant 
that proposed line of credit was "not any problem"). See also Rialto Theatre v. 
Commonwealth Theatres, Inc., 714 P.2d 328, 334 (Wyo. 1986) (portion of lease agreement "is 
merely an agreement to agree in the future"). In similar cases other courts have 
likewise found such expressions made in the course of preliminary negotiations 
not to be promises. See e.g., Jungmann v. St. Regis Paper Company, 682 F.2d 195 
(8th Cir. 1982); Blanton Enterprises, Inc. v. Burger King Corp., 680 F. Supp. 753 (D.S.C. 1988); Tull v. Mr. Donut Development Corp., 7 Mass. App. 626, 389 N.E.2d 447 (1979); Pacific Cascade Corp. v. Nimmer, 25 Wn. App. 552, 608 P.2d 266 (1980).

[¶28.]  Turning to the other elements of 
promissory estoppel, IMT could not have reasonably relied on Douglas' remarks as a promise that Baker Hughes had 
awarded IMT a thread cutting agreement at the December 30 meeting. IMT was not 
in existence at that meeting and would not be until late the next month. The 
evidence unequivocally demonstrated that the parties contemplated further 
discussions and negotiations leading to a signed document in the form of either 
a toll manufacturing agreement or a licensing agreement. Although Breed was 
familiar with the nature of a manufacturing agreement before the December 30 
meeting, he was not familiar with a licensing agreement. Douglas explained to him some of the features of both and 
drew for him their significant differences. Although they discussed in a general 
way price percentages under the differing forms of agreement, they reached no 
agreement of any kind. Specific prices were not discussed. Money was not 
discussed. The duration of an agreement was not discussed. They had no agreement 
on what products an agreement would cover. There was no agreement on the price 
to be paid for a transfer of technology.

[¶29.]  It is clear from the evidence that Baker 
Hughes' business relationships under either form of agreement would not have 
been simple arrangements free of details. Either contemplated relationship would 
have bound the parties for a substantial period of time and would have involved 
substantial sums of money. Considering what is at stake in terms of product, 
technology, trade secrets, money, and reputation, it is important that the 
relationship and commitment of the parties, each to the other, be carefully 
expressed in a formally executed written document. For the above and foregoing 
reasons, we also conclude that Baker Hughes could not have expected or foreseen 
IMT's alleged reliance on Douglas' remarks at 
the breakfast meeting.

[¶30.]  With respect to the element of whether 
the equities support enforcement of the promise, the trial court correctly 
treated that matter as a question of law for it, not the jury, to decide. U.S. 
Oil Company v. Midwest Auto Care Services Inc., 150 Wis.2d 80, 440 N.W.2d 825, 
828 (1989). "[T]he third requirement, that the remedy can only be invoked where 
necessary to avoid injustice, is one that involves a policy decision by the 
court. Such a policy decision necessarily embraces an element of discretion." 
Hoffman v. Red Owl Stores, Inc., 26 Wis.2d 683, 133 N.W.2d 267, 275 (1965). We 
agree with the trial court's decision on this question in light of all the 
evidence. As explained in its decision letter,

[t]here was no showing 
that [IMT] will not be able to utilize its equipment, and none that it will not 
be able to obtain future contracts. In fact, the evidence discloses that 
plaintiff has a threading business established, and that said business has been 
moderately successful. The present business conforms to the prospectus furnished 
to financial institutions prior to contacts with [Baker Hughes].

[¶31.]  Before closing this opinion, we find it 
necessary to comment on certain deficiencies revealed in the briefing presented 
to this court by IMT's counsel. First, counsel's statement of the facts contains 
numerous inappropriate page references to the record. See W.R.A.P. 5.01. In many 
instances, counsel's recitations of purported facts are either inaccurate, 
misleading, or not supported in the record. In addition, counsel's practice of 
showing only beginning page references to the trial transcripts falls short of 
what this court requires under our rule. We strongly advise counsel hereafter to 
be precise, specific and complete when making page references to the record in 
connection with all statements of fact relevant to the issues presented on 
appeal.

[¶32.]  Second, IMT's counsel asserts that the 
trial court's promissory estoppel instruction to the jury was one offered by 
Baker Hughes' counsel and contained, among other elements, the element that the 
promise is binding if injustice can be avoided only by enforcing the promise. 
Counsel then claims that, since Baker Hughes' counsel obviously did not object 
to the court's giving that instruction, Baker Hughes cannot on appeal be heard 
to say that the "injustice" question was really one for the trial court and to 
complain that the jury should not have been allowed to answer the question. We 
have carefully examined the record. The trial court gave Instruction No. 5, 
covering the elements of promissory estoppel, to the jury. Contrary to the 
inaccurate assertion and misleading argument of IMT's counsel, that instruction 
does not contain the "injustice" element. IMT's appellate counsel tried the case 
below. We are at a loss to understand how that counsel could be so mistaken 
about this instruction.

[¶33.]  IMT counsel's inappropriate page 
references to the record and inaccurate and misleading argument based on a 
nonexistent jury instruction have wasted this court's time most unnecessarily. 
We do not expect these practices to be repeated. Should they be, extreme summary 
measures shall be taken.

[¶34.]  Affirmed.

FOOTNOTES

1 Baker Hughes claims that 
since IMT was not in existence until January 22, 1988, after Baker Hughes' 
alleged promise was made to Breed, an employee of Inter-Mountain Pipe, a 
separate entity, IMT was not the real party in interest to whom the alleged 
promise was made upon which to base a claim of promissory estoppel. Since the 
parties' pretrial memoranda and presentation of the case at trial did not 
effectively raise this issue and in view of our disposition of this appeal in 
favor of Baker Hughes, we need not address this interesting issue.