No. 82-140 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

BRONREN'S GOOD TIPm COMPANY, 

Plaintiff and Respondent, 

-vsJ. W. BROWN & ASSOCIATES, 

Defendant and Appellant. 

Appeal from: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Xonorable VJ. W. Lessley, Judge presiding. 

Counsel of Record: 

For Appellant: 

Drysdale, McLean & Screnar, Bozeman, Montana 

For Respondent: 

Lyman B. Bennett, 111, Eozeman, Montana 

Submitted: January 27, 1983 

Decided: April 14, 1983 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court: 

This is an appeal from an order of the Eighteenth 

Judicial District Court, Judge W.W. Lessley presiding, 

awarding damages to Bronken's Good Time Company, a wine 

distribution business, based on breach of a distributorship 

contract by J. W. Brown & Associates, a wine brokerage firm. 

On May 4, 1979, Bronken's Good Time Company (Bronken) 

was appointed as exclusive distributor of wines marketed by 

J. W. Brown & Associates (Brown) for the four-county area 

consisting of Gallatin, Park, Sweet Grass and Meagher 

counties. The agreement between Bronken and Brown contained 

no provision for its termination. Bronken began distributing 

Brown wines in July, 1979. 

On February 7, 1980, Brown informed Bronken the 

agreement would be terminated as of March 1, 1980. 

Termination was later postponed until April 1, 1980. 

Bronken brought this action against Brown claiming that 

the agreement had been terminated prematurely and without 

cause. Trial was before the District Court sitting without a 

jury. The District Court concluded that the appointment of 

Bronken by Brown was an enforceable, executory contract 

binding upon both parties for a reasonable time, that Bronken 

was terminated without cause, and that a reasonable time for 

an appointment as an exclusive distributor was twenty-four 

months. Damages were assessed in the sum of twenty-four 

thousand six hundred seventy-eight and 60/100ths dollars 

($24,678.60) and included sixteen thousand seven hundred 

seventy-nine dollars ($16,779.00) in lost profit for a 

seventeen-month period, five thousand dollars ($5,000.00) in 

personnel time spent explaining termination of the 

distributorship to Bronken's customers, and two thousand 
eight hundred ninety-nine and 60/100ths dollars ($2,899.60) 

for unsold inventory of Brown wines which were either 

destroyed or consumed by Bronken. 

Brown appeals, raising four issues. 

We affirm in part and reverse in part, vacating the 

District Court's order and remanding for consideration in 

light of this opinion. 

First Brown contends that the District Court erred by 

finding that the distributorship agreement was wrongfully 

terminated because a reasonable time of twenty-four months 

had not passed. Since Bronken had made a relatively 

insubstantial investment in distributing Brown's wines and 

had not undertaken any advertising or promotion for Brown's 

wines, Brown believes the distributorship agreement should 

have been terminable at will upon reasonable notice. 

Whether distributorship agreements containing no express 

provision for duration or termination may be terminated at 

will or only after a reasonable time has expired, has not 

been decided by this Court. However, this question has been 

addressed by courts in other jurisdictions and is discussed 

at length in Annotation, 19 A.L.R.3d 196, "Termination by 

Principal of Distributorship Contract Containing No Express 

Provision for Termination." 

Our review of this annotation and the cases discussed 

therein, reveals that two rules have evolved based on 

divergent, somewhat inconsistent rationales. One provides 

that such agreements are terminable at will by either party; 

reasonable notice may or may not be required. The other, 

sometimes referred to as the "modern majority rule", provides 

such agreements are terminable at will only after a lapse of 

a reasonable time and upon reasonable notice. 
While it appears that both rules are still viable, we 

adopt the modern majority rule. The record discloses that 

the instant distributorship agreement was analogous to an 

employment or agency contract where the employee or agent 

provided consideration in addition to his or her mere 

services. 

Williston explains: 

" . . . for the purpose of determining the duration 

of the relation between the parties and the power 

to terminate it, [a true sales agency contract and 

a sales and distribution contract] are so 

substantially similar that cases of either type are 

authoritative on this point for the other . . . 

"Usually, in these situations, the agent or buyer, 

as the case may be, is doing more than merely 

offering to render services or to pay the price for 

the goods. It is at least expected and understood, 

and, in fact, frequently expressly provided in the 

contract, that he is to make a substantial 

investment and to build up or maintain a business 

establishment for the distribution of the 

manufacturer's products . . . 

"[Therefore,] where the agreement contains no 

provision whatever for its termination[:] 

"Quite properly, this has frequently been held an 

enforceable executory contract, binding upon each 

party for a reasonable time . . . 

"It is the settled law of agency that if the agent 

or employee furnishes a consideration in addition 

to his mere services, he is deemed to have 

purchased the employment for at least a reasonable 

period where the duration of employment is not 

otherwise defined." 9 Williston, Contracts (3rd 

ed.), Section 1017A, pp. 138-141, 150-151. 

The record here indicates Bronken did more than just 

distribute wines -- he purchased trucks for distribution, 

rented and constructed warehouse space, hired staff, 

maintained an inventory of Brown wines, and assumed the risk 

of destruction of the wines. Although testimony indicates 

the percentage of Bronken's sales and inventory for which 

Brown's wines accounted was relatively low and the 

advertising on Bronken's trucks promoted wines other than 

those carried by Brown, that evidence does not negate the 
District Court's finding, which is based on substantial 

credible evidence, that Bronken provided consideration in 

addition to his mere services, and that he was therefore 

entitled to distribute Brown wines for a reasonable time. 

We hold that, where a distributorship agreement contains 

no provision for its termination and the distributor has made 

substantial investment in establishing or furthering the 

distributorship, the agreement may be terminated only after a 

reasonable time has lapsed and reasonable notice of 

termination is given. 

As to what is a reasonable period of time i-n a given 

situation, we will defer to the judgment of the trier of 

fact. Absent an abuse of discretion, this Court will not 

interfere. We find no abuse of discretion in the case at 

bar. It is apparent the District Court has considered the 

testimony and the extent of Bronken's investment and arrived 

at a considered decision. 

Brown next argues that the District Court erred by 

finding that the distributorship agreement was terminated 

without cause. This claim is without merit. The record does 

not support a finding of termination for cause. It is 

evident Brown's performance standards were ambiguous and not 

related to Bronken in an acceptable or definitive manner. 

While Bronken might have been more aggressive in his sales 

approach, the evidence does not compel a finding that the 

performance was inadequate and termination justified. 

The third issue presented by Brown regards Bronken's 

failure to mitigate damages. Brown bases his contention on 

testimony that Bronken refused Brown's offer to repurchase 

his remaining inventory and instead either sold the wines for 

a loss or consumed or destroyed the remainder. 
The rule in Montana is that a nondefaulting party in a 

contractual arrangement must act reasonably under the 

circumstances so as not to unnecessarily enlarge damages 

caused by default. Town Pump, -- Inc. v. Diteman (1981), 

Mont . , 622 P.2d 212, 38 St.Rep. 54, [indemnity action 

developing mitigation of damages rule from Business Finance 

----- Co., Inc. v. Red Barn, - Inc. (1973), 163 Mont. 263, 517 P.2d 

383, and Brown - v. First Federal --- Sav. and L. Ass'n. - of Great 

Falls (1969), 154 Mont. 79, 460 P.2d 97.1 

Whether the injured party violated his duty to mitigate 

damages is a question for the trier of fact when there is 

conflicting evidence. Fairway Builders, -- Inc. v. Malouf 

Towers Rental -- Co., Inc. (1979), 124 Ariz. 242, 603 P.2d 513. 

Our function then is to review the record to determine if 

there is substantial credible evidence to support the trial 

court's finding. 

Since the trial court's order and memorandum in support 

thereof does not include any findings regarding Bronken's 

duty to mitigate damages or the reasonableness of his actions 

i.n consuming or destroying wine he did not sell, we vacate 

the damage award and remand for further consideration of this 

issue. 

As a. final matter, Brown contends the assessed damages 

were speculative and therefore are improper under section 

27-1-311, MCA. This Court cannot agree with Brown's 

contention that the damages assessed were speculative. The 

exhibits and Bronken's testimony provide a basis for 

estimating loss of profits and the damages incurred as a 

result of the breach. 

While we cannot agree the damages are speculative, the 

record indicates that Bronken presented conflicting evidence 

regarding appropriate computation his loss profits. 
Exhibit 7 purportedly computes loss profits on a gross, per 

month basis and was used by the District Court in fixing 

damages. However, Bronken testified that there were expenses 

associated with the sale of Brown wines that are not 

reflected in Exhibit 7. Bronken acknowledged that labor, 

gas, insurance, accounting, etc., expenses were not 

represented in the exhibit. 

The general rule in breach of contract actions is that 

where overhead or operating expenses are saved as a result of 

the breach, the proper measure of recovery is net, not gross, 

profit, and where such expenses are constant, and no savings 

occurs, the rule is otherwise. Compare Covington Bros. - v. 

Valley Plasterinq, Inc. (1977), 93 Nev. 355, 566 P.2d 814, 

and P & [I Vending z, Inc. - v. Half Shell - of Boston, - Inc. 

Here it was improper to grant recovery without 

considering that there were expenses associated with the sale 

of Brown wines. 

Therefore, we vacate the damage award and remand this 

issue for reconsideration by the District Court. 

We Concur: 

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