No. 92-375 IN THE SUPREME COURT OF THE STATE OF MONTANA 1993

LUMBER ENTERPRISES, INC., a Montana corporation, Plaintiff,Respondent and Cross-Appellant,

DUANE F. HANSEN and PEGGY HANSEN, d/b/a MODEL LOG HOMES, Defendants,Appellants and Cross-Respondents,

APPEAL FROM: District Court of theEighteenthJudicialDistrict, In and for the County of Gallatin, The Honorable Thomas 

### A. Olson, Judge presiding.

COUNSEL OF RECORD: For Appellant: Marcelle C. Quist, Quist Law Office, Bozeman, Montana For Respondent: John H. Tarlow, Landoe, Brown, Planalp & Braaksma, P.C., Bozeman, Montana

. Submitted on Briefs: January 8, 1993 

### FEI~

### 11993 Decided: February 11, 1993Chief Justice J. A. Turnage delivered the Opinion of the Court. This isan action for breach of contract. The District Court for the Eighteenth Judicial District, Gallatin County, granted judgment to Lumber Enterprises, Inc., in the amount of $45,460.50 plus interest and costs. Duane F. Hansen and Peggy Hansen appeal. Lumber Enterprises, Inc., cross-appeals. We affirm. The issues are: 1. 

### id the ~istrict Courtabuse its discretion inapplication of § 30-2-309, MCA? 2. Should the court have awarded prejudgment interest to Lumber Enterprises, Inc.? Lumber Enterprises, Inc., is a Montana corporation with its principalplace ofbusiness at GallatinGateway,Montana. Itsells specially prepared logs for loghomes through a network of dealers. Duane F. Hansen and hiswife Peggy Hansen do business as Heartbilt Homes (formerly Model Log Homes) in Stockton, Illinois,asa dealer of Lumber Enterprises' products. The parties have had a working relationship since 1972. On October 29, 1985,at the request of theHansens, theparties agreed to a special pricing arrangement for approximately thirty loads of logs to be delivered in January, February and March of 1986. Lumber Enterprises agreed to the reduced price to keep its crews busy during the winter months.The thirty loads were delivered but, at the request of the Hansens, over a much longerperiod of time than originally agreed. The last load was shipped on October 31, 1988. The price of the last twelve of the thirty loads is the subject of this lawsuit. OnApril 27, 1987, Lumber Enterprises issued a new price list to the Hansens and told them to "take it or leave it." Thepractical effectwas to raise prices to the Hansens by about 50percent. After theApril 1987price change,theHansens ordered twelve loads of logs to complete the thirty-load agreement of October 1985. They paid for the first nine of those twelve loads at the new 1987 prices, but underprotest. Mr. Hansen testifiedhe told the office manager for Lumber Enterprises that eventually therewould have to be a reconciliation of the 1987 prices. The Hansens did not make payment for the last three loads, contendingthat thiswas the only way to force Lumber Enterprises to deal with their concerns. Lumber Enterprises brought suit claiming $45,460.50 was due from the Hansens for logs, catalogs, trussesand insulation, using the 1987 prices. The Hansens contended the twelve disputed loads should have been billed at 1985 prices. They further contended that Lumber Enterprises owed them $859 as part of a professional photography bill: a credit of $9,827.55 for half logs billed as full logs; and a $500 credit for help in photographing and assembling new company catalogues. By the Hansens' calculations, Lumber Enterprises owed them money.After trial, the District Court concluded that because of the long history of amicable dealings between the parties, neither party saw the need tohave a formalwritten contract. Itconcluded that the Hansens would expect to deal with Lumber Enterprises in the future, because of the specialized nature of theproduct. The court concluded that the parties, by their conduct, allowed the shipments agreed to in theOctober 1985 negotiations to extend past the express terms of the contract and that thepractical effect of the contract between the parties and their modifications of that contractwas to transform the relationship into a contract calling for successive performances but indefinite in duration. The court concluded that 6 30-2-309, MCA, applied: 

### Absence of specifictimeprovisions

# --notice of termination. (1)The time for shipment ordelivery or any other action under a contract if not provided in this chapter 

### or agreed upon shall be a reasonable time. (2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.

(3)Termination of a contractby oneparty except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. The court further concluded that the unilateral announcement of new prices by Lumber Enterprises on April 27, 1987, did not satisfy the requirement under § 30-2-309(3),MCA, of reasonable notice. Taking into account the long history of dealings betweenthe parties, the court deemed that thirty days' notice would be reasonable before Lumber Enterprises changed its prices. For purposes of calculating damages, the court allowed the parties to supplement the evidence to show how many loads of logs

were orderedby the Hansens during the thirty-dayperiod beginning April 27, 1987. Theparties stipulated that no loadswere ordered during that period. The court then ruled that the Hansens owe Lumber Enterprises $45,460.50, plus costs of suit. The court denied the credits sought by the Hansens for photography and half logs, the damages sought by the Hansens for breach of good faith and consequential damages, and the request of Lumber Enterprises for attorney fees. The Hansens appeal and Lumber Enterprises cross-appeals. I Did the District Court abuse its discretion in application of $3 30-2-309, MCA? The Hansens claim 

### theApril 27, 1987 price increaseby Lumber Enterprises was a unilateral modification of a term of the contract, not a termination of the contract. They assert that the attempted modification of the contract was not made in good faith and that the original contract should be enforced. They claim the remedy shouldhave been the one for modification of contract in the absence of good faith.The test of good faith as tomerchants includes observance of reasonable commercial standards of fairdealing in the trade. This may in some situationsrequirean objectively demonstrable reason for seeking a modification. But suchmatters asa market shiftwhichmakesperformance come to involve a lossmay provide such a reason even though there is no such unforeseen difficulty as would make out a legal excuse fromperformance under Sections 30-2-615 and 30-2- 616. Official Comment to 

### 5 30-2-209,MCA. A Lumber Enterprises manager testified that theApril 27, 1987 price increasewas necessary "[b]ecause we were losingmoney at the 1985 price agreement." He testified that when the original agreement was entered, Lumber Enterprises had never before sold truckloads of logs without the usual trim work done on them, and they believed theprice was proper. However,after a year of supplying the Hansens with such logs, they realized they were selling the logs at a price below the cost ofproduction. We conclude that the test of good faith has been met. More importantly, the Hansens ignore that the contract had already been extended indefinitely, with the acquiescence of both parties, at the time of the April 27, 1987 price increase. The indefinite extensionplaced thecontract within § 30-2-309(2), MCA, in that "the contract provides for successive performances but is indefinite in duration." Under that statute, termination is allowed "at any time by either partyu in such a contract.The Hansens contend that the contract between thepartieswas never terminated, so that 30-2-309(3), MCA, does not apply. Termination isdefined at 3 30-2-106(3), MCA, as "wheneitherparty pursuant to a power created by agreement or law puts an end to the contract otherwise than for itsbreach." As stated above, 3 30-2- 309(2)

## ,MCA, provides that eitherpartyhas thepower, at any time, to terminate a contract for successive performances but indefinite in duration. We concludethatwhen Lumber Enterprises unilaterally raised its prices, it had the power to, and did, put an end to the previous contract between the parties. Section 30-2-309(3), MCA, provides thataparty isentitledto "reasonable notification" before a contract is terminated. The statute leaves to the finder of fact the determination of what is "reasonablenotification." Here, the contract between theparties originally called forthepurchase of approximatelythirty loads of logs during a three-month period. The time was extended for over

a year, at theHansens' request, before Lumber Enterprises changed its prices. We conclude that, in this case, the court did not abuse its discretion in adopting thirty days' notice as reasonable and in determining that the Hansens were entitled to the original contract price only on additional loads of logs purchased during that amount of time. In buying loads of logs more than thirty days after the unilateral price increase,the Hansens effectively entered into anew contract with Lumber Enterprises. Lumber Enterprises brought this suit to collect on the unpaid debt under that contract. We hold that the District Court did not abuse its discretion in application of 5 30-2-309, MCA. I1 Should the court have awarded prejudgment interest to Lumber Enterprises, Inc.? One of the reasons the District Court denied the request of Lumber Enterprises forprejudgment interestwas that Lumber Enterprises did not file a brief in support of its motion to amend the findingsto allow the award ofprejudgment interest. The filing of a supporting brief is required by Uniform District CourtRule 2(b) : [Flailureto file

### a Briefwithin five days [ofthe filing of a motion] by the moving party shall be deemed an admission that the motion is without merit. By failing to abide by this rule, Lumber Enterprises admitted at the trial court level that itsmotion for the award of prejudgment interest was without merit. As a result, it waived its right to bring a request to this Court to award such interest. We therefore will not consider this issue. Affirmed.

/ /' 

# cw

Chief Justice L,.

8We concur: