No. 92-297 IN THE SUPREME COURT OF THE STATE OF MONTANA 1992

DEBBIE NENTWIG, Plaintiff and Appellant,

-vsUNITED INDUSTRY, INC., Defendant and Respondent. 

### DEC

### 301992

APPEAL FROM: District Court of theThirteenthJudicialDistrict, In and for the County of Yellowstone, TheHonorable RobertW. Holmstrom,Judgepresiding.

COUNSEL OF RECORD: For Appellant: 

### W. Scott Green,Attorney at Law, Billings, Montana For Respondent: Earl J. Hanson, Attorney at Law, Billings, Montana

Filed: Submitted on Briefs: October 22, 1992 Decided: December 30, 1992Justice John Conway Harrison delivered the opinion of the Court.

This is an appeal from the Thirteenth Judicial District, Yellowstone County, the Honorable Robert W. Holmstrom presiding. Appellant Debbie Nentwig (Nentwig) appeals from the entry of summary judgment in favor of respondent United Industry, Inc. (United)onher claims ofbreach of contractand fraud. We affinn. The following issues are raised on appeal: 1. Did the District Court abuse its discretion by raising an issue that was not in the pretrial order? 2. Did the District Court err ingranting summary judgment in favor of United? 3. Did the District Court err in refusing to grant summary judgment in favor of Nentwig? Nentwig and her then partner, Jill Murphy, entered into a leasedated October 21, 1982,to rentapproximately 271 square feet of space in the Transwestern I building (TWI) in Billings. The term 

### of the lease was December 15, 1982 to December 14, 1985. The purpose of the lease was to provide a 

### location for their hair styling salon. Nentwig dealt with Jeff Shoop who was a managing partner in TW Partnership, the owner of TWI, and with Larry Nitz who worked for 

### the firm that managed TWI for the partnership. 

### In October 1985, Nentwig and Murphy dissolved their partnership. Also in October 1985, Nitz delivered to Nentwig a copy of a lease for another three yearsbecause the original lease was due to expire in December of that year. This new lease (the 1985 lease) expired on October 31, 1988. Nentwig signed this lease 2and added a letter that read: f am herewith delivering an executed Office Lease Agreement pertaining to the space I am leasing for "A Touch of Class1@ barbershop. It ismy understanding that ifyou cancel this lease after October 31, 1987,youwill provide me with alternative 

### space in the TW Plaza and will pay me some amount to be agreed upon for relocation costs and for leasehold improvements. Iunderstand that you do not want tohave this put inwriting in the lease but Idowant you to knowwhat my understanding is in the event you elect to terminate the lease after October 31, 1987. As you know, Ihave had to buy outmy ex-partner, Jill Murphy, and in doing so I had to obtain a substantial loan which will not be paid 

### off until after October 31, 1987. Therefore, it is extremely important tome that Iknowthat Ihave space available to

### me down the road and that I will not be required to spend additional money for leasehold improvements, etc. If this letter does not reflect our understanding, please let me know as soon as possible. She returned the lease and the letter to Nitz who then passed it on to Jeff Shoop for executionby TW Partnership. However,no executed copywasproduced,and Shoopand

### Nitz allege that it never was executed. In fact, Shoop and ~itz testified in their depositions that they told Nentwig that the long term lease would not be signed until another tenant, Mutual of New York, decided whether 

### it 

### wanted to expand into 

### her area of the building. 

### They claim to have told her that the lease was not signed. However, Nentwig claims that shewas under the impressionthe leasehad been signed and that shewas never given any indicationthat 

### itwas not,



### or would not be, signed. She does admit 

### in her deposition that Nitz never toldher or ledher tobelieve that Shoophad physically signed the document. 

### ent twig remained in the building and continued to pay rent after the original lease expired in December 1985.In July 1986, TW Partnership, as part of the sale of the building,assigned its leases and rents inTWI toUnited, from whom it had bought TWI originally. Appended to the assignment was a list entitled "Transwestern 1 Leases," which included Nentwig's salon. Nitz remained as manager of the TWI property. In December 1986, Nitz sent a letter to all TWI tenants, includingNentwig,which stated: All office space leases between Transwestern 1 Tenants andTW Partnershiphavebeen assigned toUnited Industry, Inc. Here is a copy of theAssignment document foryour files. If youhave awritten lease, this document should be attached to it. InJuly 1988,Nentwig senta lettertoNitz informinghim that she desired to exercise an option to renew her lease, which was contained in the 1985 lease. United's general counsel denied Nentwig's request on the basis that the 1985 lease had never been signed on the lessor's behalf, therefore she had no option to exercise. Counsel informed Nentwig that she had a month-to-month lease after United took back the property. The letter informed Nentwig that the building would undergo extensive remodelling and that her tenancy was terminated effective October 31, 1988. We note that this is the date the 1985 lease expired under its own terms anyway. Nentwig then sued United forbreach of contract for failingto allow her to renew the lease, provide alternative space, pay relocation costs, and reimburse her for improvements. Later she filed an amended complaint asserting that her claimwas not barred by the Statute of Frauds and alleging part performance, equitableestoppel, promissory estoppel,and fraud. Shewas again allowed to amend her complaint to allege breach of the implied covenant of good faith and fair dealing. A pretrial conference was held September 13, 1991, at which time the attorneys-andthe judge signed a pretrial order. On the day of trial, the court held a conference in chambers where Nentwig's counsel informed the court that he was relying on the option provision contained in the 1985 

### lease. The judge then informed theparties that his independentresearch inpreparing for trial led him to two Montana cases,Riis v. Day (1980), 188 Mont. 253, 613 P.2d 696,and Drug Fair Northwestv. Hooper Enters., Inc. (1987), 226 Mont. 31, 733 P.2d 1285,which he felt controlled the issues in this case. He informed the parties that the option clause 

### in the 1985 lease might be void for vagueness or indefiniteness under the holdings in those cases. He recognized that 

### the issuehad notbeen raised in thepleadings, in themotions for summary judgment, in the pretrial order, or 

### in the parties trial briefs. He gave United fifteen

### days 

### to file a 

### brief on the issue and to make any 

### motion it deemed appropriate. He gave Nentwig fifteen days to respond, and he 

### gave United 

### five days to reply after that. Bothparties filedbriefs andmoved 

### for summary judgment. The District Courtgrantedunitedis motion anddeniedNentwigls motion. 

### I Did the District court abuse its discretion 

### by raising an issue that was not in the pretrial order?Nentwig asserts that the issue of whether the provision was void for vagueness or indefiniteness had not been raised in a timely fashion, therefore it should be considered waived. The District Court recognized that the issue had not been previously raised,but on thebasis of Rule 16,M.R. Civ.P., which provides for modification of the pretrial order to prevent manifest injustice, it determined that itwould be best to dismiss the juryandprovide the parties an opportunity to argue the issue in briefs. The District Court reasoned that !Ithe submission to the jury of a case contrary to the law 

### as announced 

### by our Supreme Court would be manifest injustice to one or both of theparties." After considering the alternatives,the courtdetermined that dismissing the jury and allowing the parties to brief the issue was the best procedure to follow. Nentwig correctly points out that failureto raisean issue in the pretrial order may result in a waiver. Har-Win, Inc, 

### v. Consolidated Grain & Barge Co. (5thCir. 1986), 794 F.2d 985;Miles



### v. Tennessee River Pulp 6t 

### Paper Co. (11th Cir. 1989), 862 F.2d 1525. The purpose 

### of the pretrial order is 

### to prevent surprise, simplify the issues, and permit the parties to prepare 

### for trial. Bache v. Gilden (Mont, 1992),.827P.2d 817, 819, 49 St.Rep. 203, 204. However, this Court said in Bell v. Richards (1987), 228 Mont. 215, 217, 741 P.2d 788, 790, that thepretrial order "should be liberally construed to permit any issues at trial that are

'embraced

### within its 

### language."' (~uoting 

### Miller v, Safeco Title 

### Ins. Co. (9th Cir. l985), 758 F.2d 364, 368.) But 

### the theory 

### orissue must be at least implicitly included in the pretrial order. United States v. First Nat'l Bank of Circle (9th Cir. 1981), 652 F.2d 882, 886;ACORN v. City of Phoenix (9th Cir. 1986), 798 F.2d

In the present case, in chambers before the trial was to begin,Nentwig's counsel informed the District Court that Nentwig intended to rely on a theory that Unitedbreached the option clause contained in the 1985 lease. In her contentions listed in the pretrial order, Nentwig raised this issue generally by claiming thatUnited breached the lease. In the "Issues of Lawwsection of the pretrial order,Nentwig raised the issue of whether options to

renew a lease are subject to the Statute of Frauds. United generally denied that it had breached the lease or any contract. In resolving this matter, the judge was required to review the contract, especially the option provision. We feel that Nentwig's reliance on the option provision necessarily carried with it a requirement that the provision be valid. As the court said in Manbeck 

### v. Ostrowski (D.C. Cir. 1967), 384 F.2d 970, 975, cert. denied, 390 U.S. 966 (1967): [Wlhile the pre-trial order may be the beginning, it is never the end of a matter of this sort. It normally "controls the subsequent course of the action,"but not if it is "modified at the trial to prevent manifest injustice." The judicial function does not terminate upon discovery that an issue isunspecified,but extends to a determination as to whether the ends of justice implorethat the issue nonetheless be introduced into the litigation. This frequently involvesa delicate balance of competing considerations, variable from case to case, in order that the decision may be soundly made. And absent perceptible irregularity in a process so largely discretionary, we are loath to disturb the result.Although thedistrict courthas wide discretion,Manbeck, and the pretrial order is to be viewed liberally,

# m,the district court must be mindful not to prejudice the parties. See Glissman



### v. AT&T Technologies, Inc. (8th Cir. 1987), 827 F.2d 262. We recently held in Bache that the district court abused its discretion by allowing a witness who had not been listed in the pretrial order to testify at trial. We held that because the respondenthad not revealed the informationin a timely fashionand the appellantwas not given the opportunity to depose the witness, the court had abused its discretion. Bache, 827 P.2d at 819. In a case similar to the present one, Morris 

### v. Homco Int'l, Inc. (5th Cir. 1988), 853 F.2d 337, the seller of a business brought suit to collect payments under the terms of a noncompetition clause. Although the defendant buyer had not raised the issue of substantial performance inhis counterclaim or in the pretrial conference, the court, in drafting its opinion a month after trial, injected thedoctrine into the case to thedefendant's benefit. The appellate courtheld thiswas error because the issue had not been raised and the plaintiff had no notice that the issue would be important in the case "until the time had passed to meet the issue squarely." 853 F.2d at 343. On the otherhand,we held that therewas no error inOttersen

v. Rubick (1990), 246 Mont. 93, 803 P.2d 1066, where even though certain legal issues had not been set forth specifically in the pretrial order, they had been argued in briefs before the court. We hold that the District Court did not abuse its discretionby raising the issue of vagueness because it is vested with wide discretion, the issue was implicit in those raised, and the court

overcame any prejudice to Nentwig by allowing her a full opportunity to brief the issue. We also note that the court's actiondid not requireNentwig to develop further facts or present

new evidence to make her argument. Thiswas strictly a matter of law.

Did the District Court err in granting summary judgment in favor of United? United also filed amotion for summary judgment alongwith its brief on the issue of vagueness. The court granted this motion. Summary judgment I1shallbe rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there isno genuine issue as to anymaterial fact and that themoving party is entitled to 

### a judgment 

### as a matter 

### of law." Rule 56(c), M.R.civ.P. On appeal,thisCourt applies the samestandardas that applied by the trial court. McCracken v. City of Chinook (1990), 242 Mont. 21, 24-25, 788 P.2d 892, 894. We first address the issue of whether the option provision in the leasewas void forvagueness or indefiniteness. Theprovision states, I9Lesseeshall have an option to renew this Lease for 3 years with rent to be agreed upon by the parties.I1 The District Court relied on Riis 

### v. Day (1980), 188 Mont. 253, 613 P.2d 696,and Drug Fair Northwest v. Hooper Enters., Inc.(19871, 226 Mont. 31, 733 P.2d 1285, 

### in determining that this clause was void because it was "nothing more than an agreement to agree inthe future [anddid] not establishadefinitemode for the determination of the rent. 

## .

# . .Ig Riis is analogous to thepresent

case. In Riis, a two-year lease contained a renewal provision which read in part: Lessees are hereby given an exclusive option to renew this Lease and Agreement for an additional two years, under the sameterms andprovisionsas thispresent Lease and Agreement except that the amount of rental shall be subject to negotiation and mutual agreement between the parties.

We stated inRiis thatgenerally an agreementmust contain all essential terms to be binding upon the parties. 613 P.2d at 697. 

### We then noted that at that 

### time this Court had 

### not ruled 

### on the validity of a renewal provision where the amount of rent was negotiable, and thatother jurisdictions were divided on the issue. In Riis,we looked to Slayter v. Pasley (Or. 1957), 264 P.2d 444, for a discussion of the three prevailing 

### views of the time. The Ifold rulenv requires that the renewalprovision specify the term of the lease and the rate of rent with certainty, leaving nothing for future determination. 613 P.2d at 697. The Itfirstminority view1' permits enforcement of the provision if it expressly contemplatesa clearanddefinitemode fordetermining futurerent. 613 P.2d at 697. The "liberal viewt1permits enforcement if the contract shows that the parties mutually agreed to meet in the future and make provisions for reasonable rent. 613 P.2d at 698. InRiis we said: 10We believe the 'Ifirst minority viewn reflects the best standard. It recognizes thebusiness utility of renewal provisions. Such provisions often do provide the inducement for entering the original lease. But, given fluctuating market conditions,theparties cannot fairly determine what would be an adequate rent in the future. At the same time, this standard also adheres to the wisdom of the old rule. It recognizes the danger of courtsarbitrarily interpolatingprovisions intoanarm's length transaction to breathe life into an otherwise invalid agreement.

We cited Riis extensively in Drus Fair where Drug Fair argued that a letter from the owner of a shopping center in which 

### it was a tenant constituted a lease. The letter provided for four fiveyear options but did not provide at least a method to determine rent during thoseperiods. We concluded that Drug Fair only had a month-to-month lease. 733 P.2d at 1288. Nentwig argues that various cases cited in Slavter establish that the firstminorityview only requires that the languageof the lease demand reasonableness 

### or adherence to commercial standards. However, Riis and Drus 

### air require more. Although they may 

### be inconsistent with the cases cited in Slavter, we clearly follow Riis and Druq Fair. They 

### require at least a definite mode for determining rent. Nentwig argues that our decision in Story v. 

### City of Bozeman (1990),242Mont. 436, 791 P.2d 767,effectively overrulesRiisby providing that If[e]ach party to a contract 

### has a justified expectation that the other will act in a reasonable mannerw and that every contract contains an implied covenant of good faith and fair dealing. 791 P.2d at 775. The requirement of reasonablenessis not inconsistentwith

### Riis and Druq Fair. These cases, however, require more for the reasons stated in 

# u, which we have reproduced above. Anytime a material term is required, one could argue that provides a sufficientmethod of establishing that term by requiring that the parties act reasonably. We refuse to extend Story that far. The present case illustrates the problem foreseen in

# u. Under the 1982 lease,Nentwig paid $400 per month over the threeyear term. Under the 1985 lease, she paid $405 per month. This rent was higher on a per square-foot basis than what the other tenants were paying. They averaged about nine dollars per squarefoot during the first lease period and twelve dollars per squarefoot during the second period. Nentwig was paying about eighteen dollars per square-foot until her rent was reduced during the second term when United took back the building. In her letter seeking to exercise the option provision, she proposed that the rent be ten dollars per square-foot for a total of $225.83 per month. This is two dollarsper square-foot less than shetestified Shoopwaswilling to agree to in the 1985 lease. We point out that the 1982 and 1985 leases both contained a provision that Nentwig would pay $532 per month if she held over after the expiration of the term. Nentwig relies on this term to argue that a price had been fixed in the lease and therefore, the option provision is not vague. The range of prices evidenced in this case provides a clear example of theproblem that the Court in

### Riis and Druq Fair soughtto avoid. The courts must 

### not be forced 

### to provide the material term of rent. We hold that the ~istrict Court did not err in determining that the option clause was void for vagueness when it granted summary judgment

# . Nentwig also argues that there was a writing sufficient to satisfy the Statute of Frauds and puts forth several other arguments including an equitable argument that "[tlhat which ought tohavebeen done is tobe regarded asdone,

# . . .." Section 1-3- 220, MCA; an argument that the lease was signed because "Transwestern Partnershipwwas typed above the signature line; an argument that options are not subject to the Statute of Frauds; integration; part performance; and fraud. Because the District Court assumed for the purpose 

### of summary judgment that TW Partnershiphad signedthe lease,therefore eliminatingany Statute of Fraudsproblems Nentwig encountered,we need not address these issues. As 

### we view the facts 

### in the same light as the District Court, 

### we will make the same assumption. McCracken, 788 P.2d at 894. Nentwig argues that United, as assignee of the leases in TWI, assumed the benefits and burdens of the assignment, As we hold that the option provision 

### was void, there is no burden associated with it. Further, Nentwig argues that United breached the relocation agreement contained 

### inthe letter she included

### with the 1985 lease. That letter stated:It is my understanding that if you cancel this lease after October 31, 1987, you will provide me with alternative space in the TW Plaza and will pay me some amount to be agreed upon for relocation costs and for leasehold improvements. Jeff Shoop admitted in his deposition that he would provide as stated in the letter. However,Nentwig does not assert,nor could it be argued, that the agreement extended beyond the term of the lease to which it was attached. That lease expired by its own terms on October 31, 1988. Nentwig was not forced to relocate between October 31, 1987 and October 31, 1988. Therefore, United did not breach this agreement. Lastly, Nentwig argues in her brief to this Court that the District Court erred ingranting summary judgment toUnited because United committed fraud. The elements of fraud are: a representation, falsity of the representation, materiality of the representation, the speaker's knowledge of the falsity of the representation or ignoranceof thetruth,the speaker's intentthat it should be relied on, the hearer's ignorance of the falsity, the hearer's reliance upon the representation, the hearer's right to rely on the representation, and consequent and proximate injury causedby reliance on the representation. Leev. Armstrong (1990), 244 Mont. 289, 293, 798 P.2d 84, 87. In its Memorandum accompanying the Order, the court stated: While there is a genuine issue of material fact as to whether or not the acts of the Defendantand its assignor amounted to fraud, it is clear that Plaintiff did not sustainanydamage resulting fromthe alleged fraud. She asserts that the fraud consisted of representations that the 1985 lease had been signed and that a signed copy would be returned to her, that she was entitled to and did rely upon the representations. However, shewas notdamaged thereby because she received everything that she was entitledto receiveunder the 1985 lease. It expired by its own terms on October 31, 1988, and she was permitted to occupy the premises until that date. Further, Defendant, after it acquired the building, reduced her rentby fifty percent (50%)and as testified by one or more of its officials, this would not have occurred had it been known that there was a written lease. Not onlydid the Plaintiff not sustainanydamage but she actually received a benefit fromwhat she claims to be the fraud committed upon her. In her brief, Nentwig does not dispute the District Court's determination that she was not damaged and in fact received a benefit. We find no evidence on the record otherwise. She received everything towhich shewas entitledunder the 1985 lease. Because the option provision was void, she could have suffered no damages based on it. We hold that the District Court did not err in granting summary judgment to United.

Did the District Court judgment in favor of Nentwig? In its Memorandum, the I11

err in refusing to grant summary

District Court stated that "[tlhe granting of the Defendant's Motion for Summary Judgment of necessity required a denial of the Plaintiff's Motion for Summary Judgment. We agree. Affinned.December30, 1992 CERTIFICATEOFSERVICE Iherebycertifythat thefollowingorderwas sentbyUnited Statesmail,prepaid, tothe followingnamed:

W.ScottGreen W.SCOTT GREEN,P.C. 301North27thStreet Billings,MT59101 EarlJ.Hanson AttorneyatLaw Suites214-215,TranswesternI 404North31stSt. Billings,MT 59101

EDSMITH CLERKOFTHESUPREME COURT STATEOFMONTANA BY: