DA 07-0169

IN THE SUPREME COURT OF THE STATE OF MONTANA

2008 MT 300

PERRY POLZIN d/b/a MP LIVESTOCK TRUST,

 Plaintiff and Appellee,

 v.

APPLEWAY EQUIPMENT LEASING, INC.,

 Defendant and Appellant.

APPEAL FROM: District Court of the Tenth Judicial District,

In and For the County of Judith Basin, Cause No. DV 05-09

Honorable E. Wayne Phillips, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Ward E. Taleff; Taleff Law Office, Great Falls, Montana

For Appellee:

Mark E. Westveer, Heather Perry; Hubble, Ridgeway, Unmack & 

Westveer, Stanford, Montana

Submitted on Briefs: January 4, 2008

 Decided: August 20, 2008

Filed:

__________________________________________

Clerk

August 20 2008
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Justice Jim Rice delivered the Opinion of the Court. 

¶1 Appellant Appleway Equipment Leasing, Inc. (Appleway), appeals from the order 

of the Tenth Judicial District Court, Judith Basin County, denying its motion to dismiss 

on the basis of improper venue. We reverse. 

¶2 We restate the issue on appeal as follows: 

¶3 Did the District Court err by invalidating the forum selection clause of the parties’ 

agreement? 

FACTUAL AND PROCEDURAL BACKGROUND

¶4 Appellee Perry Polzin (Polzin), a Montana resident, owns and operates the 

trucking business MP Livestock Trust, located in Stanford, Judith Basin County, 

Montana. Polzin often enters into lease-purchase agreements to obtain trucks for use in 

his business. Appleway is a commercial class-eight truck and trailer financing and 

leasing company with its principal place of business in Spokane, Washington. In 

addition to class-eight truck and trailer leasing, Appleway also sells its own repossessed 

trucks and trailers. When leasing equipment, Appleway uses a standard contract that 

contains two parts: an agreement to purchase and a lease agreement. This allows the 

buyer to purchase the equipment by making monthly lease payments in accordance with a 

payment schedule contained in the lease agreement. The lease agreement contains a 

forum selection and choice of law clause numbered “Section 4.24.” This section 

provides: 

Section 4.24 Venue and Governing Law. This Lease is made in 

accordance with and shall be interpreted and governed by the laws of the 
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State of Washington. If any Legal Action or other proceeding shall be 

brought on or in connection with the Equipment or this Lease, the venue of 

such Legal Action shall, at the option of the Lessor, be in any State and 

County where any of the Equipment is then located, or in Spokane County, 

Washington. 

Over the past ten to fifteen years, Polzin has contracted with Appleway approximately 

five times to lease trucks. The same standard contract containing Section 4.24 was used 

each time.

¶5 In early 2005, Barry Kottke (Kottke), a territory salesperson for Appleway, 

contacted Polzin and informed him of an available truck for sale. After discussing the 

truck over the phone, Polzin and a friend traveled to Spokane to inspect the truck. The 

asking price was $43,000 and Kottke informed Polzin that the truck had a new engine and 

new tires. The new engine had a warranty passed on from a California company called 

Chapa Diesel Repair (Chapa). As indicated on the purchase agreement, Polzin offered 

$38,000. Because Polzin’s offer was lower than the asking price, Kottke went to the 

manager for approval. On the day of the negotiation, the normal office manager, Mike 

Klotz, was unavailable and instead the President of Appleway, Bradley T. Pring (Pring),

looked over the purchase agreement. 

¶6 The purchase agreement has two handwritten notes both initialed by Pring with 

“BTP.” The first handwritten note states: “[$]42,500, due to engine overhaul – BTP w/

warranty[.]” The second handwritten note states: “[$]41,500 BTP Best I can do[.]” The

second note is circled and the amount $41,500 is repeated at the bottom of the agreement,

which is dated February 14, 2005, and is signed by both Polzin and Kottke. In 
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conjunction with the purchase agreement, and in order to finance the $41,500 purchase 

price, Polzin signed an equipment lease. The lease contains a payment schedule and is 

also dated February 14, 2005, but is signed by both Polzin and Pring. Polzin

subsequently drove the truck back to Montana and began sending lease payments to 

Appleway in Spokane. 

¶7 On June 22, 2005, the truck broke down outside of Glendive, Montana. Polzin 

had the truck towed to North Dakota, where it was repaired. Polzin contacted Appleway 

seeking repayment of the repair costs under the warranty. Appleway refused to pay any 

costs associated with the repair, claiming that Polzin was informed at the time of sale that 

the warranty was passed on from Chapa, located in Strathmore, California, and that 

Polzin would have to contact Chapa regarding enforcement of the warranty. In October, 

2005, Polzin filed a complaint in Judith Basin County, Montana, alleging breach of 

contract because Appleway had “failed to perform under an express warranty which was 

the basis of the bargain for the Agreement to Purchase contract . . . .” Appleway filed a 

motion to dismiss for improper venue on January 20, 2006, arguing that, pursuant to 

Section 4.24 of the equipment lease, the contract is governed by the laws of the State of 

Washington and that “the venue of any legal action shall, at Appleway’s option, be in any 

State and County where the equipment is located or in Spokane County, Washington.” 

The District Court converted the motion to dismiss into a motion for summary judgment 

and conducted a hearing. 
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¶8 After the hearing, the District Court denied the motion to dismiss for improper 

venue. In reliance on our decision in Keystone v. Triad Systems Corporation, 1998 MT 

326, 292 Mont. 229, 971 P.2d 1240, the District Court concluded that forum selection 

clauses are against Montana public policy, stating: “choice of forum clauses are void as 

unconstitutional.” Pursuant to the Restatement (Second) of Conflict of Laws, § 187(2)(b)

(1971) (the Restatement), the District Court analyzed whether Montana had a “materially 

greater interest” in the dispute than Washington – the State chosen by the parties. The 

Court admitted that it was “unclear” whether it should undertake a “materially greater 

interest” analysis or evaluate the clause on the basis of public policy. Applying the 

Restatement § 188(2) factors, the District Court concluded that Montana had a materially 

greater interest in the dispute. The court also determined that the choice of law clause 

was invalid pursuant to public policy. Because the District Court determined that 

(1) forum selection clauses violate Montana public policy and (2) Montana held a 

materially greater interest in the dispute than Washington State, the District Court 

concluded that the choice of law and forum selection clauses of the lease agreement were

void. Appleway appeals.

STANDARD OF REVIEW

¶9 Where a motion to dismiss is converted by the District Court into a motion for 

summary judgment, the same standard of review applied to an appeal from a grant or 

denial of summary judgment is used. We review a district court’s denial of summary 

judgment de novo – applying the same criteria as the District Court pursuant to M. R. 
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Civ. P. 56(c). Sherner v. Nat’l Loss Control Servs. Corp., 2005 MT 284, ¶ 23, 329 Mont. 

247, ¶ 23, 124 P.3d 150, ¶ 23. Summary judgment is appropriate when there are no 

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

law. M. R. Civ. P. 56(c); Sherner, ¶ 23. 

DISCUSSION

¶10 Did the District Court err by invalidating the forum selection clause of the 

parties’ agreement? 

¶11 Appleway asserts that the District Court erred when concluding that forum 

selection clauses are broadly unconstitutional and asserts that forum selection clauses are 

indeed “enforceable in Montana.” Appleway argues that pursuant to § 28-3-102, MCA, 

the choice of law clause in Section 4.24 is valid and the District Court erred by failing to 

give Section 4.24 any effect. 

¶12 Polzin argues that Section 4.24 must be analyzed pursuant to the “most significant 

relationship” test adopted by this Court pursuant to the Restatement §§ 6, 188, and 187. 

Polzin contends that such an analysis will result in the conclusion that “Montana has the 

most significant relationship to the warranty dispute and application of Washington law . 

. . would be contrary to the fundamental policy of Montana . . . .” Polzin asserts that 

Section 4.24 “was not an effective choice by the parties” because “[n]either party to the 

negotiation was familiar with the clause or even understood it.” 

¶13 Section 4.24 contains two distinct parts: a choice of law clause and a forum 

selection clause. The choice of law clause states: “This Lease is made in accordance with 
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and shall be interpreted and governed by the laws of the State of Washington.” The 

forum selection clause states: 

If any legal Action or other proceeding shall be brought on or in connection 

with the Equipment or this Lease, the venue of such Legal Action shall, at 

the option of the Lessor, be in any State and County where any of the 

Equipment is then located, or in Spokane County, Washington. 

Where a contract contains both a choice of law clause and a forum selection clause, we

first determine whether the choice of law clause is valid. Keystone, ¶ 9. Unfortunately, 

the District Court missed this threshold question and blurred the issues.

¶14 We recently reaffirmed our reliance on the Restatement §§ 6, 187, and 188 for 

determining the validity of choice of law clauses in Modroo v. Nationwide Mutual Fire 

Insurance Company, 2008 MT 275, ¶ 50, 53 Mont. __, ¶ 53, __ P.3d __, ¶ 53. We 

explained that pursuant to the Restatement we will apply the “law of the state chosen by 

the parties to govern their contractual rights” unless

application of the law of the chosen state would be contrary to a 

fundamental policy of a state which has a materially greater interest than 

the chosen state in the determination of the particular issue and which, 

under the rule of § 188, would be the state of the applicable law in the 

absence of an effective choice of law by the parties.

Modroo, ¶ 54 (quoting Restatement § 187(2)(b)). In sum, we refuse to apply the law of 

the state chosen by the parties if three factors are met: (1) but for the choice of law 

provision, Montana law would apply under § 188 of the Restatement; (2) Montana has a 

materially greater interest in the particular issue than the parties chosen state; and (3) 

application of the chosen state’s law would contravene a Montana fundamental policy. 

Modroo, ¶ 54. 
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¶15 Here, the District Court considered only factors two and three. The court began its 

analysis with the second factor of the conflicts-of-law analysis and in reliance on the 

Restatement § 188(2), determined that Montana had a materially greater interest in the 

dispute. The court next concluded that the choice of law provision was void per public 

policy. The court explained that because public policy “upholds a Montana citizen’s 

right to seek redress in Montana courts . . . [,] choice of forum clauses are void as 

unconstitutional.” While this conclusion is, in and of itself, an incorrect conclusion of 

law, see Milanovich v. Schnibben, 2007 MT 128, ¶ 11, 337 Mont. 334, ¶ 11, 160 P.3d 

562, ¶ 11 (explaining that forum selection clauses “are prima facie valid and should be 

enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under 

the circumstances” (internal quotation omitted)), we need not explain this error in depth 

because the court first erred by failing to apply factor one of the three factor conflicts-oflaw analysis – whether Montana law would apply if Section 4.24 was not in the contract. 

¶16 When determining whether Montana law would apply absent the parties choice of 

law, we rely, see Modroo, ¶ 55, on the Restatement § 188, which provides: 

(1) The rights and duties of the parties with respect to an issue in 

contract are determined by the local law of the state which, with respect to 

that issue, has the most significant relationship to the transaction and the 

parties under the principles stated in § 6. 

In turn, Restatement § 6(1) states that “[a] court, subject to constitutional restrictions, will 

follow a statutory directive of its own state on choice of law.” Montana law provides that 

a “contract is to be interpreted according to the law and usage of the place where it is to 
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be performed or, if it does not indicate a place of performance, according to the law and 

usage of the place where it was made.” Section 28-3-102, MCA. 

¶17 Appleway contends that performance under the contract is synonymous with 

“payment” and therefore, the “place of performance” is Washington – where the lease 

payments were sent, citing McGregor v. Svare, 151 Mont. 520, 445 P.2d 571 (1968).

Polzin asserts that the place of performance is Stanford, Montana, because the underlying 

dispute is “enforcement of the warranty” and “the subject matter of the warranty, the 

Truck, is licensed and insured in Stanford, Montana.” Polzin also points to other facts

such as the Truck’s Montana registration in support of his argument. 

¶18 Despite the parties’ arguments, a review of the contract reveals that it does not 

indicate a place of performance. Accordingly, pursuant to our statutory directive, when 

the contract does not indicate a place of performance, we apply “the law and usage of the 

place where it was made.” Section 28-3-102, MCA. Here, the contract was negotiated 

and entered into in Spokane, Washington. This means that absent a choice of law 

provision in the contract, our statutory directive would require application of Washington 

law. Therefore, we answer the first question in the conflicts-of-law analysis in the 

negative. In turn, this ends our conflicts-of-law analysis as we conclude that the parties’

choice of law is effective. 

¶19 Accordingly, the District Court erred when denying the motion for summary 

judgment. Washington law recognizes forum selection clauses as valid, see Voicelink 

Data Servs. v. Datapulse, Inc., 937 P.2d 1158, 1162 (Wash. App. 1997), and the contract 
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clearly states that venue of any legal action shall be, at the option of the lessor, in any 

state and county where the equipment is located or in Spokane County, Washington. 

Appleway chose Spokane County as the venue for this legal action and therefore the 

Montana venue is improper. 

¶20 Next, Polzin reasserts the alternative argument he raised in the District Court that 

the agreement is a contract of adhesion and therefore invalid. We concluded in 

Milanovich that forum selection clauses are “prima facia valid” and will be enforced 

unless the resisting party can show that the clause is unreasonable under the 

circumstances. Milanovich, ¶ 11. A forum selection clause is “unreasonable and 

unenforceable if the agreement is not ‘deliberately and understandingly made,’ and if the 

contractual language does not ‘clearly, unequivocally and unambiguously express a 

waiver’ of personal jurisdiction.” Milanovich, ¶ 11 (citing May v. Figgins, 186 Mont. 

383, 394, 607 P.2d 1132, 1138-39 (1980)). Evidence that the clause is a contract of 

adhesion supports the conclusion that the clause is unreasonable under the circumstances. 

See Milanovich, ¶13. This is because adhesion contracts generally occur “when a party

possessing superior bargaining power presents a standardized form of agreement to a 

party whose choice remains either to accept or reject the contract without the opportunity 

to negotiate its terms.” Zigrang v. U.S. Bancorp Piper Jaffray, Inc., 2005 MT 282, ¶ 14, 

329 Mont. 239, ¶ 14, 123 P.3d 237, ¶ 14. 

¶21 In those circumstances, we will not enforce a contract clause against the weaker 

party if the clause is: “(1) not within the reasonable expectations of said party, or 
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(2) within the reasonable expectations of the party, but, when considered in its context, is 

unduly oppressive, unconscionable or against public policy.” Iwen v. U.S. West Direct, 

1999 MT 63, ¶ 27, 293 Mont. 512, ¶ 27, 977 P.2d 989, ¶ 27 (internal quotation omitted).

“When determining whether a contract is one of adhesion, we focus on the nature of the 

contracting process . . . .” Iwen, ¶ 28.

¶22 Polzin argues that he “did not reasonably expect that only Appleway could 

determine where an action could be filed.” However, in its order the District Court 

referenced several case specific considerations that convince us otherwise. First, Polzin 

has been in the trucking business for nearly twenty years and has often entered into leasepurchase agreements to obtain trucks for use in his business. Over the past fifteen years, 

Polzin has contracted with Appleway at least four other times to lease trucks. The same 

standard equipment lease containing Section 4.24 was used each time. Accordingly, it 

was reasonable for Polzin to expect that Section 4.24 would appear in the current and 

fifth lease. Failure to read and understand a clear and unambiguous agreement, absent 

mistake, is not a defense to its enforcement. See Schlemmer v. N. Central Life Ins. Co., 

2001 MT 256, ¶ 16, 307 Mont. 203, ¶ 16, 37 P.3d 63, ¶ 16; Morrison v. Higbee, 204 

Mont. 515, 520, 668 P.2d 1025, 1027 (1983). Second, as in Milanovich, ¶ 13, the 

handwritten notes on the purchase agreement indicate that this contract was negotiated. 

The price was set at $43,000 and Polzin offered $38,000. After more negotiating the 

parties settled on a sale price of $41,500. This negotiation process mitigates the 

possibility that the agreement is an adhesion contract as it demonstrates Polzin’s use of
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legitimate bargaining power. Third, this is not an instance where Polzin had no other 

option except to sign the contract. 

¶23 Polzin argues that even if he should have reasonably expected the forum selection 

clause, the clause is void because “Montana law is clear that forum selection clauses are 

void as against public policy.” As previously noted, forum selection clauses are not 

presumptively void as against public policy. See Milanovich, ¶ 11. Accordingly this 

argument also fails. Polzin offers no evidence that Section 4.24 is unreasonable under the 

circumstances here. Consequently, he has not met his burden as the “resisting party.” 

Milanovich, ¶ 11.

¶24 In sum, the forum selection clause is valid and Appleway had the option of 

changing the venue of the proceeding to either Spokane, Washington, or where the 

equipment was located. Therefore, the District Court erred by denying Appleway’s 

motion to dismiss for improper venue. 

¶25 Reversed.

/S/ JIM RICE

We concur: 

/S/ PATRICIA COTTER

/S/ JAMES C. NELSON

/S/ W. WILLIAM LEAPHART

/S/ BRIAN MORRIS