No. 90-287 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

BEAVERHEAD BAR SUPPLY, INC., 

a Montana corporation, 

Plaintiff and Appellant, 

-vDONALD P . HARRINGTON , d/b/a . , 

HARRINGTON BOTTLING COMPANY, 

Defendant and Respondent. +F 1 

4.9. 

APPEAL FROM: District Court of the Fifth Judicial District, 

In and for the County of Beaverhead, 

The Honorable Frank Davis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Frank B. Morrison, Jr.,. & John M. Morrison; Morrison 

Law Offices, Helena, Montana 

For Respondent: 

Donald C. Robinson; Poore, Roth & ~obinson; Butte, 

Montana 

Submitted on Briefs: November 8, 1990 

Filed: 

~ecided: February 1, 1991 w 
Justice R. McDonough delivered the Opinion of the Court. 

The plaintiff Beaverhead Bar Supply (Beaverhead) appeals the 

order of the Montana Fifth Judicial District Court, Beaverhead 

County, granting the defendant Donald P. Harrington, d/b/a/ 

Harrington Bottling Company (Harrington), summary judgment on 

Beaverheadts claims of breach of contract and breach of the 

implied covenant of good faith and fair dealing. We reverse. 

The plaintiff raises several issues on appeal, which we 

restate as follows: 

1) Did the District Court err in concluding as a matter of 

law that no contract existed between the parties? 

2) Does the statute of frauds bar the plaintiff from seeking 

enforcement of an alleged oral agreement on the grounds that the 

agreement could not be performed within one year? 

3) Does the implied covenant of good faith and fair dealing 

apply to the relationship alleged in this case? 

In 1978, Dan Carpita, Jr. (Carpita) began negotiating an 

agreement with his father (Carpita, Sr.) to purchase his father's 

interest in Beaverhead Bar Supply for $294,705.00. Carpita was 

also contemplating a $300,000.00 expansion over five years. The 

terms of the agreement called for a down payment of $85,000.00 and 

monthly payments of $1,754.08 over 20 years. At the time, PepsiCola products allegedly represented approximately 30% of 

Beaverheadts inventory and approximately $7000.00 to $8000.00 per 

month gross profit. Beaverhead obtained all of its Pepsi products 
from Harrington on an order basis. 

As part of negotiations, carpita sought assurances from 

Beaverhead's major suppliers for their continued business. Both 

Carpita and carpita, Sr. allegedly met with Don Harrington in 

Harrington's office and explained the proposed financial 

transaction and expansion. They allegedly advised Harrington of 

the terms of their agreement and told him that Carpita was also 

planning on incurring additional debt of approximately $300,000.00 

for expansion of Beaverhead. carpita alleges that they explained 

to Harrington that in order to effectively carry out this plan for 

sale and expansion that it was necessary for Beaverhead to maintain 

the Pepsi-Cola distributorship in order to service the proposed 

debt. 

Harrington alleges that while the Carpitas did inform him of 

the transfer of ownership of Beaverhead, no such in-depth 

discussion took place. 

In 1979, Harrington began directly distributing Pepsi-Cola 

products in adjacent Madison County, thus removing that market from 

what had been part of Beaverhead's distribution area. In 1982, an 

agent of Harrington allegedly came to Carpita and asked if 

Beaverhead was for sale. Carpita informed him that it was not. 

Due to these two incidents, Carpita claims that he began to be 

concerned about the intentions of Harrington sometime in 1983. 

About this time Harrington suggested that Carpita invest more 

heavily in an aggressive promotion of Pepsi-Cola products and 
Carpita stated that as a prerequisite to additional investment, he 

would need the alleged oral assurance of Harrington for a continued 

relationship, put into a written contract. Don Harrington 

allegedly agreed to "work upvt a written contract. 

In June of 1984, Carpita, Sr. died leaving Harrington and 

Carpita as the only witnesses to the alleged 1978 agreement. In 

August, Harringtonts agent presented Carpita a proposed written 

contract providing for a termination of the bottler-distributor 

relationship Itat will.It Carpita counterproposed certain terms 

reflecting the continuation of the alleged 1978 agreement. 

On December 18, 1984 Don Harrington notified Carpita that 

effective January 7, 1985, Harrington Bottling would begin 

distributing Pepsi-Cola products directly and would no longer make 

those products available to Beaverhead. Beaverhead filed suit in 

June of 1985, alleging that as a result of the termination it lost 

over $90,000.00 a year, approximately one-third of its income, and 

entirely lost 65 accounts as a result of the termination, of which 

approximately 39 were allegedly developed since 1978 through the 

efforts of Carpita. Beaverhead alleges that the loss of this 

income has brought it to the brink of insolvency. 

Harrington moved for summary judgment, which the District 

Court granted on April 26, 1990, and subsequently amended its order 

on May 4, 1990. Beaverhead now appeals. 

In its order granting summary judgment, the District Court 

concluded that there existed a I1vague, indefinite, and uncertain," 
type of relationship between the parties, but that no contract 

existed between them. Consequently, the court found no implied 

covenant of good faith and fair dealing attendant to a contract. 

Moreover, the court concluded that the statute of frauds, 5 28-2- 

903, MCA, bars enforcement of whatever oral relationship or 

agreement may have existed between the parties. 

We disagree. Summary judgment under Rule 56 (c) , M.R. Civ. P. 

is proper only if the record discloses no genuine issue of material 

fact and the moving party is entitled to judgment as a matter of 

law. Reaves v. Reinbold (1980), 189 Mont. 284, 287, 615 P.2d 896, 

898. While it is true that the purpose of summary judgment is to 

encourage judicial economy, it is also true that the procedure is 

never to be a substitute for trial if a material factual 

controversy exists. Reaves, 615 P.2d at 898. In Reaves we held 

that there was a genuine issue of material fact as to the existence 

of an oral contract for $900.00 a month salary that precluded 

summary judgment. Reeves, 615 P.2d 898-99. Similarly, in this 

case there are genuine issues of material fact regarding whether 

Beaverhead and Harrington had a contract based on the 1978 meeting. 

This factual dispute is more evident in the deposition testimony 

of the parties. In his deposition, Harrington testified as 

follows: 

Q. At the time that Dan purchased the business from his 

father, do you recall a meeting in Butte with Carpita, 

Sr. and Dan and yourself present? 

A. Yes. 

Q. Where was that meeting held? 

A. It was in our old offices at the plant here, and 
Dan, Sr. put his head in the door and he said, llI'm 

turning this business over to young Dan," and he says, 

"But I'm going to be around to look after it for awhile." 

Q. Was that the extent of the meeting? 

A. It was very brief. 

Q. Did anybody come in and sit down in your office? 

A. No, never did. Dan was standing there and his dad 

was standing there, right in the door of the office. 

Q. And what was said by you? 

A. As I recall, I said something to the effect that, 

"If he does as good a job as you did, well, things will 

be okay,It or words to that effect. 

Q. If other people testify that something like that 

was said, you wouldn't disagree with it? In fact, you 

do remember saying something like that? 

A. Correct. Dan's dad was a good businessman. 

Carpita's account of the meeting given in his deposition differs 

substantially: 

Q. Mr. Harrington was asked this morning about a 

conversation that took place between he and your father 

back at about the time you were taking over the business 

from your father here in Butte. Did you witness that 

conversation? 

A. Idid. 

Q. What is your recollection of where that conversation 

took place? 

A. It took place in Don's office on Holmes Avenue. 

Q. And Mr. Harrington testified that while he was in 

his off ice, your father stuck his head in the door and 

indicated, said something to the effect that you had 

taken over the business, and he was being advised of 

that, so to speak, and Mr. Harrington indicated that that 

was fine and wished you all well, and said something to 

the effect that if you did as good a job as your, as Dan, 

Sr. did, everything will be okay, or words to that 

effect. 

Is that your recollection of the conversation? 

A. No. 

Q. What is your recollection of the conversation? 

A. We called and made an appointment to see Don and 

made a specific trip for that reason. We spent some 

three hours in Dongs office and explained the financial 

transaction between my father and I and also the 

transaction with the expansion ofthe business, building, 

et cetera. 

Q. Who participated in that conversation? 

A. My dad, Don and myself. 
A. [I] [elxplained the financial situation and pointed 

out to him the importance of having it, because nothing 

could take--I couldn't service the debt to him. I 

couldn't service the debt for the expansion without it. 

Q. Without what? 

A. Without Pepsi-Cola. ... A. . . . [A]t the time the first discussion took place, 

I asked Don if we needed something in writing. And he 

says, "A handshake should always be good enough. It 

always has been." 

Q. When did he say that? 

A. In 1978. 

Q. He said, "You have a handshake." Did you shake 

hands? 

A. Yes. 

Q. What did you shake hands over? 

A. Over the discussion, over the relationship, over the 

friendship that we assumed after 30 years that we have. 

Q. Did he say anything to the effect about, or 

compliment your father and say If [sic] things went like 

your father ran the business, that he thought everything 

would be okay, or words to those [sic] effect? 

A. What the words were to the effect was that we had 

always enjoyed a good relationship. We didn't see any 

reason to change anything if it kept going. 

Q. That isn't my question, Mr. Carpita. My question 

is, did he ever say anything to the effect that your 

father had done an excellent job and that if you 

continued along the same lines, that everything would be 

okay? 

A. No. 

Q. He didn't say that? 

A. That was not the specific words that he said. 

Q. Did he say words to that effect? 

A. The words to the effect that I just said, that we 

had always enjoyed a good relationship. 

Q. By llwegt , he meant he and your father, right? 

A. Beaverhead Bar Supply. 

In light of the deposition testimony and the continued relationship 

of the parties for some 30 years there is a genuine issue of 

material fact regarding whether an agreement was made at the 1978 

meeting, and what was that agreement. Furthermore, if an agreement 

was made, the deposition testimony indicates that factual issues 
exist regarding the length of the contract's term. According to 

Harrington's testimony, such a contract could be construed as being 

Iffor so long as Beaverhead continued to perform satisfactorily1', 

measured comparatively to the performance of Beaverhead under 

Carpita, Sr. See, e.g., Burgermeister Brewing Corp. v. Bowman 

(1964), 227 Cal.App.2d 274, 38 Cal.Rptr. 597. Or, as Beaverhead 

argues in its brief, the term of the contract could be construed 

as an exclusive distributorship of Pepsi-Cola products for an 

implied term of twenty years, i.e. the time necessary for 

Beaverhead to service its debt. Finally, according to Carpita's 

testimony that Itwe had always enjoyed a good relationship [and] 

[w]e didn't see any reason to change anything if it kept going" 

the contract could be construed as providing for termination at 

will. See e.g., Bronken's Good Time Co. v. J. W. Brown & 

Associates (1983), 203 Mont. 427, 661 P.2d 861. 

The District Court also ruled that the statute of frauds 

barred enforcement of any agreement that may have existed between 

the parties. Again, we disagree. The statute provides that an 

agreement that by its terms is not to be performed within a year 

from the making thereof must be in writing. Section 28-2- 

903 (1) (a) , MCA. Evidence of such an agreement is not admissible 

without the writing or secondary evidence of its contents. Section 

28-2-903 (2), MCA. 

However, courts have uniformly construed this provision 

narrowly. If there is any possibility that a contract may be 
performed within one year, it is not within the statute. 2 Corbin 

on Contracts, 1 444 at 535; Farnsworth, Contracts, 5 6.4 at 392. 

Thus, the issues of fact regarding the terms of the alleged oral 

agreement discussed hereinabove are also material toward 

determining whether the statute bars enforcement of the alleged 

agreement. Assuming arguendo that there is an oral contract, if 

its term is for "so long as Beaverhead continued to perform 

satisfactorilyu Harrington could not terminate the contract at 

will. Rather, the contract would be one of indefinite duration 

that, depending upon Beaverhead's performance, might possibly be 

performed within one year, and therefore enforcement would not be 

barred by the statute. Bursermeister, 38 Cal.Rptr. at 601-602. 

On the other hand, if the jury finds that the oral contract was for 

a twenty-year term--thus enabling Beaverhead to service the debt 

incurred in expansion--enforcement is clearly barred by the statute 

because by its terms such a contract cannot possibly be performed 

within a year. Section 28-2-903 (1) (a), MCA. Finally, if the 

alleged oral contract was terminable at will, the rule of Bronken's 

Good Time Co. v. J. W. Brown & Associates, supra, as to reasonable 

notice of termination applies. If so, Beaverhead is entitled to 

reasonable notice of termination. As to what is a reasonable 

amount of time is a question of fact. Bronken's, 661 P. 2d at 864. 

If the jury finds that a reasonable amount of time to be given by 

a notice to terminate exceeds one year, then such contract, being 

wholly oral, is unenforceable. Section 28-2-903 (1) (a) , MCA; San 
Francisco Brewing Corp. v. Bowman (Ca1.1959), 343 P.2d 1, 7, also 

discussed in appeal after remand, Burgermeister Brewing Cor~., 

suwa, 38 Cal.Rptr. at 602. 

Beaverheadts final issue on appeal asks us to rule on whether 

the implied covenant of good faith and fair dealing applies to the 

relationship alleged in this case. In order for Beaverhead to 

recover from Harrington on a theory of breach of the implied 

covenant, there must be an enforceable contract to which the 

covenant attends. See Story v. City of Bozeman (1990), 242 Mont. 

436, 450, 791 P.2d 767, 775. In Story we held that "every 

contract, regardless of type, contains an implied covenant of good 

faith and fair dealing." In essence, the covenant is a mutual 

promise implied in every contract that the parties will deal with 

each other in good faith, and not attempt to deprive the other 

party of the benefits of the contract through dishonesty or abuse 

of discretion in performance. Story, 791 P.2d at 775. 

First, we note that this case is before us on appeal from an 

order granting summary judgment. We decline to rule on application 

of the covenant in this case where only a sparse record has been 

developed at this point and where there are still genuine factual 

issues to be resolved regarding the existence and enforceability 

of the alleged contract. However, we do note that Beaverhead 

correctly concedes in its brief that even if it can prove a breach 

of the implied covenant, it cannot prove that it entered into the 

contract for a non-profit motivation and thus any damages it might 
recover will be limited to contractual remedies. Story, 791 P.2d 

We conclude that there are genuine issues of material fact 

regarding the existence of a contract and its enforceability that 

preclude summary judgment under Rule 56 (c) , M.R. Civ. P. We 

therefore reverse the order of the District Court granting summary 

judgment . 

REVERSED and REMANDED for further proceedings consistent with 

this opinion. 

We Concur: I 

Chief Justice 

/ 

Justice # 

1 District Judge, &ttihg in 

place of Justice John C. Sheehy