No. 13356 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1977 

J & S HOME REALTY, INC., a 

Montana Corporation, 

Plaintiff and Appellant, 

THE ANACONDA COMPANY, A Montana 

Corporation, 

Defendant and Respondent. 

Appeal from: District Court of the Fourth Judicial District, 

Honorable Edward T. Dussault, Judge presiding. 

Counsel of Record: 

For Appellant: 

Boone, Karlberg and Haddon, Missoula, Montana 

Wm. T. Boone argued and Sam E. Haddon argued, 

Missoula, Montana 

For Respondent : 

Garlington, Lohn and Robinson, Missoula, Montana 

Robert E. Sheridan, Jr. argued, Missoula, Montana 

Submitted: March 2, 1977 

Filed: fip~ 2 7 IC-~-/ . -. 
Plr. Jus clce ohil "or~way Harrisoil Jelivered the Opinion of the 

Court. 

Plaintiff appeals from a judgment entered by the district 

court, Missoula County, sitting without a jury, in a breach of 

contract action. Liability and damages were separated for trial. 

In March 1971, J & S Home Realty, Inc. (J & S) entered into 

a contract with The Anaconda Company (Anaconda) to act as the 

distributor of prefabricated homes manufactured by Anaconda 

Forest Products, a division of the Anaconda Company. By the terms 

of this contract J & S was to be the sole distributor of these 

homes in Montana. For this privilege J & S was to pay a franchise 

fee and receive a specified percentage commission on each sale. 

In May 1972 Anaconda sent a notice which conformed to the 

procedure set out in the contract termination provision informing 

J & S that Anaconda was terminating the franchise. On June 26, 1972, 

following six months of negotiations, Anaconda sold the assets 

of its division, Anaconda Forest Products, including the prefabricated home building plant to Champion International Corporation 

for its U.S. Plywood Division. 

It is conceded the termination was an adjunct to the sale 

of these assets. All parties agree (1) Anaconda Forest Products 

was a profitable division of Anaconda and that these assets were 

sold for a sound business reason to improve Anaconda's cash position, 

(2) that at the time Anaconda entered into the franchise agreement 

with J & S the sale of those assets was not contemplated, and 

(3) that the termination provision in the franchise contract was 

a subject of bargaining. 
The original draft of the provision allowed termination -. 

"with or without cause" while the final provision reads in 

pertinent part: 

 i it her party may cancel or terminate this agreement 

with cause, including any breach of the provisions of 

this agreement Jc * *." 

Berton N. Schultz, Jr. of J & S, testified that during negotiations with Anaconda the reason for the change of language was: 

!'A. Well, it was going to be our responsibility to 

set up other distributors and to hire people. And 

at that time we felt that we were not willing to enter 

into a contract with Anaconda if such a contract could 

be canceled in 30 days by either party at their own 

will ." 

As a result of entering into the contract, J & S hired additional 

people and made changes in their company which entailed substantial 

dollar investments. 

This case is not one where the distributor of the product 

had all the bargaining power and the provisions of the contract 

favor the distributor. Here, the language of the contract on its 

face excludes termination at the subjective will of the parties. 

The phrase "cause, including any breach of the provisions of this 

agreement" indicates that "cause" was meant to be broader than 

legal cause alone. Care should be taken that there is no confusion 

on this matter -- Anaconda always had the power to terminate the 

contract but it would, of course, have to pay damages. Here, the 

question is whether there was "cause" for termination which would 

allow the ending of the relationship pursuant to the contract 

provision and thus not have to pay damages. 

The sole issue presented for this Court's review is whether 

Anaconda's going out of the building materials business, in good 

I I faith for business reasons, is cause" as the term was used in the 

contract l 
The question is difficult and arises in a number of contexts, 

but the controlling issue is what the parties meant at the time 

of entering the contract by the words "with cause". Applying 

Montana's rules of construction,the parties certainly did not 

mean the contract could be terminated at will to the advantage of 

the corporation. Anaconda sold the assets rather than the corporation and conveniently disposed of the rights of J & S. 

Anaconda's prior franchises were terminable "with or without 

cause" but in the instant case the parties bargained to a 

different agreement. To hold otherwise is to allow termination at 

will, requiring only a good faith subjective reason for termination, and termination at will was excluded by the contract language. 

Here, it is clear that termination was not for some failure 

on the part of J & S. In fact the termination notice states: 

11 We certainly have enjoyed our relationship with 

you and your organization and are very sorry that 

this relationship has to be terminated." 

The only cause alleged by Anaconda as the basis for termination 

was that the sale of the assets made performance impossible. 

However, the sale of assets took place after the termination. 

The termination was an adjunct to the sale and not because sale 

had made performance impossible. 

IJhile it is undisputed that Anaconda had a sound good faith 

reason to sell its forest products assets, there was no condition 

forcing termination, the division was still profitable and able to 

get materials. If Anaconda could no longer get the materials it 

needed from its timber lands because of government regulation, 

or if a long term downturn in the economy destroyed the profit 

of the building materials division, then there might exist conditions forcing termination emanating from outside Anaconda's control 
which would constitute "cause". In Parsil v. Emery, 272 N.Y.S. 

439, 440; an argument similar to Anaconda's was rejected: 

"* * * The claim of defendant that he is excused from 

performance under the contract 'because performance has 

been made impossible by destruction of the subject matter 

thereof' is predicated upon the allegation that the 

employer was dissolved as a corporation. The answer to 

this, in our opinion, is that this dissolution was nothing 

more than a voluntary sale of the corporate assets to 

another corporation engaged in like business. The case 

might be otherwise had the dissolution been effected by 

the Attorney General; in other words, an involuntary 

dissolution * * *." 

Several cases cited by J & S are of import here. In Buono . - ii -. - .D ID 

Sdles Inc. v. ~hrysler Motors Corporation, 363 F.2d 43,44,49, a 

distributor who had a contract to sell DeSoto and Plymouth automobiles 

was terminated by the corporation's decision to discontinue the 

DeSoto. The court noted that from the contract itself the very 

thought that Chrysler might sometime abandon the DeSoto was not 

within its contemplation at the time the contract was entered into 

with its dealers; that had the corporation contemplated such action 

it could easily have so provided in the contract. Further that in 

all such dealings of the corporation with dealer franchises the 

corporation is the dominating party. The court noted: 

"* * * Deceiving its dealers from the beginning as to 

what would have been an all important element of the 

agreement, hardly fits that situation or indeed into 

the basic picture of an outstanding American industry. 

As appears from the record this matter arises wholly from 

a radical corporate determination, for whatever the reason, 

to cut its production losses on DeSoto immediately. The 

inevitable collateral consequences of that move, the 

damage claims of its dealers, etc., if then bothered about 

Zit all, undoubtedly were regarded as the lesser evil which 

could be handled later. 

"The contract before us is clear. Its unmistakable intent 

is to protect Chrysler as to its dealers in every foreseen 

contingency. It does not by its terms or impliedly give 

Chrysler the naked right to discontinue without contract 
cduse, ,nanuiacturing aid dis tr lbutiz~g to its dealers 

!JeSoto dutomobiles. In so doing Chrysler broke the 

zontract. 11 

We find the reasoning found in Buono Sales Inc. applicable to the 

instant case. 

In two New York cases cited by J & S, Noah v. Daitch & Co., 

192 N.Y.S.2d 380 and Cycleway, Inc. v. Kawasaki Motors Corp. 354 

N.Y.S.2d 812, the courts upheld as reasonable termination clauses 

where the number of days notice of termination was stated and 

agreed upon by the parties to the contract. 

Here we have the sale of the assets which is not cause in the 

sense of an outside condition forcing termination, unless one 

accepts the subjective reason that the sale would be more profitable 

if the contract could be terminated at no cost to Anaconda. 

We find the district court erred in i-ts conclusion of law 

No. 3, which states: 

"That the sale of Defendant's forest products division, 

including the mill, timberlands, house plant and related 

assets and equipment and the resultant cessation of all 

operations relating thereto, was sufficient cause for the 

cerrnination of its franchise agreement with the Plaintiff." 

Che decision of the district court is reversed and the cause 

' .a 

remanded for a hearing on damages. 

Justice 

i 
We Concur: 

Chief Justice