Title: MODERN MACHINERY v FLATHEAD CO

State: montana

Issuer: Montana Supreme Court

Document:

No. 82-265 IN THE SUPREME COURT OF T f I E STATE OF MONTANA 1982 MODERN MACHINERY, Plaintiff and Appellant, -vs- FLATHEAD 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 M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e C o u r t . P l a i n t i f f 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 i n t h e 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. A j u r y t r i a l com- menced i n K a l i s p e l l , Montana, on February 24, 1982. On February 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 appeal from t h e judgment e n t e r e d upon t h e j u r y ' s v e r d i c t . On or a b o u t J u l y 30, 1979, t h e F l a t h e a d County commissioners i s s u e d a c a l l f o r b i d s f o r t h e purchase of a jaw-type r o c k c r u s h e r t o be used by t h e Flathead County road department. The commissioners r e c e i v e d t h r e e b i d s i n response t o t h e c a l l , one from p l a i n t i f f i n t h e amount of $305,725 and two from a n o t h e r K a l i s p e l l d i s t r i b u t o r , Westmont; one f o r $201,193 and t h e o t h e r f o r $200,870. On August 22, 1979, t h e day t h e b i d s were opened, t h e commissioners voted to t a k e t h e b i d s under advisement pending recommendation of t h e county road d e p a r t m e n t . R e p r e s e n t a t i v e s from t h e road department and Commissioner Frank Guay t h e n f l e w to Cedar Rapids, Iowa, w i t h p l a i n t i f f ' s a g e n t , J i m Fox, t o view p l a i n t i f f 's c r u s h e r . Commissioner Guay and t h e r e p r e s e n t a t i v e s from t h e road department were impressed 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 n o t a v a i l a b l e on Westmont's models. On September 1 4 , 1979, t h e commissioners m e t w i t h members of t h e road department 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 . The road department recommended t h a t t h e commissioners purchase p l a i n t i f f ' s c r u s h e r . Commissioner Guay t h e n made a motion to a c c e p t t h e road d e p a r t m e n t ' s recommendation. The motion w a s seconded by Commissioner J o a n D e i s t . The motion was recorded 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 : "Motion t o Guay t o a c c e p t t h e Road Depart- m e n t ' s recommendation to p u r c h a s e g r a v e l c r u s h e r from Modern Machinery f o r $305,725. The o n l y o t h e r bid being r e c e i v e d having been 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. Motion seconded by Joan A. D e i s t , motion c a r r i e d . Note : , M e 1 Wollan v o t e s no on c r u s h e r bid as t h e lower bid 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 of $100,000." Everyone i n a t t e n d a n c e a t t h e meeting who t e s t i f i e d a t t h e t r i a l f e l t t h a t t h e county was going to e v e n t u a l l y purchase p l a i n t i f f I s c r u s h e r . On September 17 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 commissioner Frank Guay which 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 vacated or he would s e e k t o e n f o r c e Westmont's r i g h t s i n t h e matter by whatever means p e r m i t t e d by l a w . Guay t h e n c a l l e d J i m Fox i n Missoula and t o l d him i f t h e c r u s h e r had been ordered from t h e f a c t o r y , to have t h e o r d e r stopped. 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 Exe, m e t Guay i n Helena, Montana, to 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 had, i n f a c t , been o r d e r e d . Fox and Exe t e s t i f i e d t h a t t h e meeting i n Helena was m a i n l y to d i s c u s s 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 should t h e sale be completed. 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 f a r t h e y had p r o g r e s s e d on t h e o r d e r . Exe t o l d t h e f a c t o r y to l e t him know how much expense would be i n c u r r e d i f p l a i n t i f f was 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 . T h a t was t h e l a s t 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 concerning a s t o p o r d e r on t h e c r u s h e r . FOX, Guay and Exe t h e n met with A s s i s t a n t County A t t o r n e y , C h a r l e s Kuether , a t t h e F l a t h e a d County commissioner's o f f ice. Again, Guay t o l d p l a i n t i f f ' s r e p r e s e n t a t i v e s n o t t o o r d e r t h e c r u s h e r . Guay s t a t e d t h a t t h e bid 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 ice 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 . A second meeting w i t h K u e t h e r followed a t t e n d e d by Fox, Exe , Guay and p l a i n t i f f l s a t t o r n e y . Again, Guay s t a t e d t h e bid award was 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 n o t i c e of t h e s u c c e s s f u l b i d . P l a i n t i f f 's c o u n s e l r e q u e s t e d a letter d i r e c t i n g p l a i n t i f f to 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 . Guay r e f used to d r a f t such 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 commissioners had n o t f o r - m a l l y o r d e r e d t h e c r u s h e r it was n o t n e c e s s a r y to r e s c i n d a n o r d e r . T h a t was t h e l a s t meeting between p l a i n t i f f and t h e commissioner's o f f ice. On November 11, 1979, p l a i n t i f f tendered t h e c r u s h e r t o F l a t h e a d County p u r s u a n t t o t h e s t a t e m e n t i n t h e call f o r b i d s t h a t d e l i v e r y must be w i t h i n f o r t y - f i v e days from d a t e of o r d e r . The county r e f u s e d to a c c e p t d e l i v e r y of t h e machine. On November 20, 1979, t h e commissioners m e t and 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 decided t o reject a l l b i d s r e c e i v e d i n r e s p o n s e to its call f o r b i d s on t h e r o c k c r u s h e r . P l a i n t i f f 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, Arizona, where it was f i n a l l y s o l d . On December 11, 1979, p l a i n t i f f f i l e d a c o m p l a i n t i n t h e District Court of t h e E l e v e n t h J u d i c i a l District, i n and f o r t h e County of F l a t h e a d , a g a i n s t F l a t h e a d County a l l e g i n g breach of c o n t r a c t . A f t e r a j u r y t r i a l com- mencing F e b r u a r y 24, 1982, t h e j u r y r e t u r n e d a v e r d i c t i n f a v o r of p l a i n t i f f a s s e s s i n g damages i n t h e amount of $10,000. P l a i n t i f f t h e n f i l e d t h i s a p p e a l and d e f e n d a n t c r o s s - a p p e a l s . The s u b s t a n c e of 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 on t h e measure o f damages. 3 . Whether t h e j u r y v e r d i c t was s u p p o r t e d by 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 . The e s s e n t i a l e l e m e n t s of a c o n t r a c t are: p a r t i e s c a p a b l e of c o n t r a c t i n g , c o n s e n t , a l a w f u l o b j e c t i v e , and c o n s i d e r a t i o n . S e c t i o n 28-2-102, MCA; K e i l v. Glacier P a r k I n c . ( 1 9 8 0 ) , Mont . -- - , 614 P.2d 502, 505, 37 St.Rep. 1151. I n t h i s case t h e i s s u e of whether or n o t t h e r e w a s a c o n t r a c t goes to t h e r e q u i r e - ment of c o n s e n t . There is c o n s e n t to c o n t r a c t when t h e r e h a s been an 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 response to F l a t h e a d C o u n t y ' 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 been c o n s t r u e d as nothing more t h a n an o f f e r t o perform l a b o r or s u p p l y materials, and t h e o f f e r does n o t 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 . C a r r i g e r v. B a l l e n g e r (1981) , - - -- -- Mont . - - - - , 628 P.2d 1106, 1108, 38 St.Rep. 864. Thus, w e must d e t e r m i n e whether t h e Flathead County commissioners a c c e p t e d p l a i n t i f f I s o f f e r t h e r e b y c r e a t i n g a c o n t r a c t . A f t e r t h e b i d s were opened, t h e commissioners voted to t a k e t h e b i d s under advisement pending a recommendation by t h e F l a t h e a d County road department. On September 14, 1979, t h e com- m i s s i o n e r s m e t with members of t h e road department and J i m Fox t o d i s c u s s t h e b i d s . A t t h a t meeting t h e members of t h e road d e p a r t m e n t recommended t h a t t h e commissioners p u r c h a s e p l a i n t i f f I s c r u s h e r . A motion was made, seconded and recorded: "Motion by Guay to a c c e p t t h e road d e p a r t m e n t ' s recommendation to p u r c h a s e g r a v e l c r u s h e r from Modern Machinery f o r $305,725.00 ." (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 nor- m a l l y make one of t h r e e motions upon b i d s r e c e i v e d i n response t o a call f o r b i d s ; motion t o a c c e p t ; motion to deny; or motion to t a k e under advisement. I n i t i a l l y , t h e commissioners took t h e c r u s h e r b i d s under advisement pending recommendation of t h e road d e p a r t m e n t . On September 1 4 , t h e road department recommended t h a t t h e commissioners purchase p l a i n t i f f t s c r u s h e r . Commissioner Guay moved to a c c e p t t h e road d e p a r t m e n t ' s recommen- d a t i o n , t h e motion was seconded and d u l y recorded i n t h e minutes o f t h e meeting. The t h i r d commissioner later noted a no v o t e on t h e minutes as he w a s n ' t i n a t t e n d a n c e a t t h e September 1 4 meeting. F l a t h e a d County 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 no n o t i c e of 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 i n a t t e n d a n c e a t t h e meeting, i n c l u d i n g t h e commissioners, t e s t i f i e d t h a t they t h o u g h t t h e commissioners were g o i n g to buy p l a i n t i f f I s c r u s h e r . 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 of F l a t h e a d County when t h e commissioners accepted and made minutes r e f l e c t i n g t h e a c c e p t a n c e , and p l a i n t i f f was o n l y f u l f i l l i n g its o b l i g a t i o n on t h e c o n t r a c t by o r d e r i n g and d e l i v e r i n g t h e c r u s h e r . There 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 p r o c e d u r e argued by t h e county. F l a t h e a d County f u r t h e r a r g u e s t h e r e was no w r i t i n g which s a t i s f i e s t h e s t a t u t e of f r a u d s , sect i o n 30-2-201 , MCA. A s s t a t e d above, t h i s Court h a s p r e v i o u s l y h e l d a w r i t t e n bid c a n r i p e n i n t o a c o n t r a c t i f accepted by t h e o f f e r e e . C a r r i g e r v. B a l l e n g e r , s u p r a . Here, we have found t h e w r i t t e n bid was a c c e p t e d b y Commissioner Guay I s motion which was seconded by Com- m i s s i o n e r D e i s t and recorded i n t h e minutes of t h e September 14 m e e t i n g . Thus, t h e r e w a s a v a l i d c o n t r a c t , n o t b a r r e d by t h e s t a t u t e of f r a u d s . The n e x t i s s u e is whether 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 on t h e measure of damages. F i r s t , 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 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 . The i n s t r u c t i o n states: " 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 damages, you may award any 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 expenses 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 goods a£ t e r t h e b u y e r ' s breach ." The measure of damages when a buyer w r o n g f u l l y rejects or r e v o k e s a c c e p t a n c e of goods is governed by t h e Uniform Commercial Code. S e c t i o n 30-2-703, MCA, s t a t e s : "Where t h e buyer wrong- f u l l y rejects or revokes a c c e p t a n c e of goods . . . t h e aggrieved seller may: ( d ) resell and r e c o v e r damages as h e r e i n a f t e r pro- v i d e d ( 30-2-706 ) ; ( e ) r e c o v e r damages f o r nonacceptance (30-2-708) . . ." P u r s u a n t to s e c t i o n 30-2-706, MCA: " t h e seller may r e c o v e r t h e d i f f e r e n c e between t h e r e s a l e p r i c e and t h e 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 any i n c i d e n t a l damages . . . less expenses saved i n consequence of t h e b u y e r ' s breach." P u r s u a n t to s e c t i o n 30-2-708, MCA: " t h e measure of damages f o r nonacceptance or r e p u d i a t i o n by the buyer is t h e d i f f e r e n c e bet- ween t h e market 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 t h e unpaid c o n t r a c t p r i c e t o g e t h e r with any i n c i d e n t a l damages . . . less expenses saved i n consequence of t h e b u y e r ' s breach ." or " I f t h e measure of damages provided i n s u b s e c t i o n ( 2 ) is i n a d e q u a t e t o p u t t h e seller i n as good a p o s i t i o n as performance would have done t h e n t h e measure of damages is t h e p r o f i t . . . which t h e s e l l e r would have made from f u l l performance by t h e buyer t o g e t h e r w i t h any i n c i d e n t a l damages . . ., due allowance f o r costs r e a s o n a b l y i n c u r r e d and due c r e d i t f o r payments 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 no. 7 was n o t a c o r r e c t s t a t e m e n t o f t h e l a w as s t a t e d by t h e U.C.C. The p o s s i b l e measures of damages under t h e U.C.C. are n o t s t a t e d i n p e r m i s s i v e language, b u t r a t h e r , are mandatory and s p e c i f i c a l l y state t h e amount of r e c o v e r a b l e damage depending upon t h e remedy seller h a s pursued . The District C o u r t ' s use of t h e words "may award any of t h e f o l l o w i n g " i n i n s t r u c t i o n no. 7 i m p l i e d to t h e j u r y t h a t they were n o t r e q u i r e d by l a w t o award s p e c i f i c damages. Thus, t h e g i v i n g of t h e District C o u r t ' s i n s t r u c t i o n no. 7 was i n error 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 also claims t h e g i v i n g of 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 error: "A p a r t y who a l l e g e s t h a t it h a s been damaged b y t h e breach 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 to avoid loss and to minimize its damage. A p a r t y may not 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 its 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. I n t h i s case a method of m i t i g a t i n g damages is addressed by s e c t i o n 30-2-704 ( 2 ) , MCA. The s e c t i o n states : "Where t h e goods are u n f i n i s h e d an aggrieved seller 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 com- mercial judgment f o r t h e purposes of avoiding loss and of e f f e c t i v e r e a l i z a t i o n e i t h e r complete t h e manufacture and w h o l l y i d e n t i f y t h e goods to t h e c o n t r a c t o r cease manufacture and resell f o r s c r a p or s a l v a g e v a l u e o r proceed i n any 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 understood by looking to 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 t h i s C h a p t e r t h e seller is g i v e n e x p r e s s power t o complete manufacture or pro- curement of goods 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 of r e a s o n a b l e commercial judgment 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 of t h e breach makes it clear t h a t such 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 damages. The burden is upon t h e buyer t o show t h e commerically unreasonable n a t u r e of t h e seller's a c t i o n i n completing manufacture." Here, Commissioner Guay expressed concern about t h e c o n t r a c t a t a n e a r l y d a t e , b u t , t h e board of commissioners r e f u s e d to r e p u d i a t e t h e c o n t r a c t . The county h a s power to c o n t r a c t , and i t s c o n t r a c t s a r e t h e c o n t r a c t s of its board of county com- m i s s i o n e r s , n o t of t h e i n d i v i d u a l members t h e r e o f . B e n n e t t v. Petroleum County e t a l . ( 1 9 3 0 ) , 8 7 Mont. 436, 447, 288 P. 1018, 1020. Commissioner Guay d i d n o t have t h e a u t h o r i t y to i n d i v i - d u a l l y revoke t h e c o n t r a c t and when p l a i n t i f f asked t h a t t h e board t a k e some a c t i o n it r e f u s e d . Thus, p l a i n t i f f was a c t i n g i n a commercially r e a s o n a b l e manner to f u l f i l l its o b l i g a t i o n under t h e c o n t r a c t . 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 f o r t y - f i v e d a y s , it would have breached t h e c o n t r a c t and exposed i t s e l f t o l e g a l l i a b i l i t y . Had t h e board t a k e n some a c t i o n a t an e a r l y d a t e , p l a i n t i f f could have m i t i g a t e d its damages under sec- t i o n 30-2-704, MCA. The District C o u r t ' s i n s t r u c t i o n u n f a i r l y p l a c e d t h e e n t i r e burden to m i t i g a t e damages upon p l a i n t i f f whereas t h e comments to s e c t i o n 30-2-704, MCA, state: " t h e bur- d e n is upon t h e buyer [ F l a t h e a d County] to show t h e commerically u n r e a s o n a b l e n a t u r e of t h e seller 's act i o n i n completing manufacture." 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 error. The l a s t i s s u e is whether t h e j u r y v e r d i c t w a s supported by 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 . A s s t a t e d above , t h e measure of damages is governed by s e c t i o n 30-2-706, MCA, and s e c t i o n 30-2-708, MCA. Under s e c t i o n 30-2-706, MCA, t h e damages would be t h e c o n t r a c t p r i c e ($305,725) p l u s i n c i d e n t a l damages less t h e resale p r i c e ($186,499.86 ) and expenses saved i n consequence of t h e b u y e r ' s breach. Under s e c t i o n 30-2-708 ( 2 ) t h e damages would be p l a i n t i f f ' s a n t i c i p a t e d p r o f i t ($78,879.56) p l u s i n c i d e n t a l damages less c r e d i t f o r payments made o r p r o c e e d s of resale. Using e i t h e r s e c t i o n i n t h i s i n s t a n c e t h e r e c o r d shows p l a i n t i f f ' s damages were f a r i n e x c e s s of $10,000 and 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 ver- d i c t . W e a f f i r m t h e c a s e as to c o u n t y ' s l i a b i l i t y and judgment is 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 Court f o r a h e a r i n g on 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 .