IN THE SUPREME COURT OF THE STATE OF MONTANA 1990 MARK MELOTZ, d/b/a MELOTZ TRUCKING, Plaintiff and Respondent,

CRAIG SCHECKLA, d/b/a SCHECKLA TRUCKING, Defendant and Appellant.

APPEAL FROM: District Court of the Sixteenth Judicial District, In and for the County of Rosebud, The Honorable Kenneth R. Wilson, Judge presiding.



## - COUNSEL OF RECORD: For Appellant: James A. Patten, Patten Law Firm, P.C., Billings, Montana For Respondent: John Houtz, Attorney at Law, Forsyth, Montana

Filed: Submitted on Briefs: August 23, 1990 ~ecided:November 27, 1990Justice Diane G. Barz delivered the Opinion of the Court.

Appellant Craig Scheckla, appeals from a judgment entered on

a jury verdict rendered intheSixteenthJudicial District,Rosebud County, awarding respondent Mark Melotz damages for breach of warranty. We affirm. Scheckla raises the following issues on appeal: 1. Did the District Court abuse its discretion by allowing admissionof an exhibit at trialwhen the courthad earlier imposed discovery sanctions whichprohibited theadmissionof suchexhibit? 2. Did the DistrictCourt abuse its discretionby failing to prohibit evidence of lost incomeasa sanction fordiscovery abuse? 3. Was the existence of a warranty supported by sufficient evidence? 4. Was respondent Melotz entitled to consequential damages for breach of warranty? Appellant, Craig Scheckla, owns a truckingbusiness and hauls wood products for a sawmill in Sheridan,Wyoming. Respondent,Mark Melotz, is likewise in the trucking business and hauls on a contract basis. In July of 1985, Melotz purchased from Scheckla a used 335 Cumminsdiesel engine for $3,000whichwas installed in Melotzls1970 Peterbilttruck. According toMelotzlstestimony at trial, when he and Scheckla discussed the sale of the engine Scheckla told him lf[a]llyou [have to] do is take it home, put it in there [inthe truck] and it will go right to work and it was in good running condition." Melotz further testified Scheckla alsotold him the engine recently had somemajor work done to it. After installing the engine in late July of 1985, Melotz immediately encountered problems with the oil pressure. When informed of the problem by Melotz, Scheckla told him this type of engine had low oil pressure and, according to Melotzlstestimony, Scheckla told him to replace the bearings and if that did not fix the problem Schecklawould I1payfor the bearings and everything.I1 Shortly thereafter, Melotz hauled a load to Logan,Utah. During this trip Melotz encountered problems of low oil pressure and engine overheating. From Utah, Melotz took a load to Oregon and en route the problems with low oil pressure and overheating continued. In Oregon Melotz had new bearings installed. Melotz then headed to South Dakota with continuing problems. while passing through Dubois, Wyoming on the way to South Dakota, Schecklalsmechanic examined the engine and replaced a cracked head.Due to continuing problems with the engine,Melotz parked the truck during themonths of September and October of 1985. Scheckla recommended new head gaskets and Melotz installed them in early November of 1985. OnNovember 4,1985,Melotz, believinghis truck

was capable of performing the job, entered into a contract to haul rip-rap for Midwest Dumpers, Inc. at Canyon Ferry Lake. Shortly before he was to commence work on the contract, Melotz had to notify Midwest Dumpers that he was unable to perform due to overheating problems which started up again. The engine subsequently locked up and upon being torn down Melotz discoveredthe engine had a cracked block and was unrepairable. On February 18, 1986, Melotz filed a complaint against Scheckla seeking damages for breach of warranty and for other claims not relevant on appeal. This case then began a long procedural history marked by constantdisputesbetween theparties. On November 28, 1986, Scheckla served interrogatoriesand a second request for production on Melotz. This discovery sought, among other items,all stateand federal incometax returnsand financial statementsprepared within the five years preceding the filing of the complaint. Following a motion to.compe1by Scheckla,Melotz responded to the discovery requests. The answers were deemed nonresponsiveby the District Court and as a result Judge Alfred B. Coate imposed sanctions uponMelotz on April 10,1987. Specifically,JudgeCoate ordered: "At trial Plaintiff [Melotz] will not be permitted to introduceany evidence other than those itemssupplied to Defendant

on December 12, 1986 [atMelotzlsdeposition] and marked as items 1 through 33.I1 The Midwest Dumpers contract was not one of the marked items but was discussed at the deposition and provided to Scheckla on February 13, 1987. On May 8, 1987, the District Court determined the amount 

### in controversy was less than $3,500 and transferred the case to the Rosebud County JusticeCourt. The casewas eventually transferred back to District Court on September 12, 1988. Once back in District Court, Judge Kenneth R. Wilson assumed jurisdictiononJanuary 20,1989 afterJudgeCoateretired. JudgeWilson gaveMelotz another chancetoproducehis incometax returns and financial statements, ordering that if Melotz did not produce those items, three of his claims for damages would be dismissed. This informationwas notprovided and onJune 26, 1989, in chambers before trial, Judge Wilson ordered those claims stricken. At trial the court refused to hear evidence on the potential profits of hauls during periods the truck experienced down time, deeming the evidence too speculative and as an additional sanction fordiscovery abuse. The courtdid allow intoevidence theMidwest Dumpers contract. The jury returned a verdict in favor of Melotz in the amount of $12,026.40. The District Court reduced the verdictby $208 andMelotzlsbill of costsby $359. The court then denied Schecklalspost-trial motions for judgment notwithstanding the verdict and to amend or alter the judgment. Scheckla now appeals raising the aforementioned issues.

I. 

## - 11. Since issues 1 and 2 both pertain to the imposition of sanctions fordiscovery abuse,wewill address them simultaneously. Scheckla contends Judge Wilson abused his discretion by ignoringJudgeCoate's earlier discoverysanction limitingMelotzls trial exhibits when he allowed the Midwest Dumpers contract into evidence. Citing Owen v. F.A. Buttrey Company (1981), 192 Mont. 274, 280, 627 P.2d 1233, 1236, he argues that Melotz must I1suffer the consequence^^^ of his discovery abuse and asserts that Melotz did not have to do so because he was allowed 

### to go forward with amajor part of his case, i.e.

## , the Midwest Dumpers contract lost profits. This Court has previously stated that the district court has the discretion to control discovery activities. State of Oregon

ex rel. Worden v. Drinkwalter (1985)

## , 216 Mont. 9, 12, 700 P.2d 150, 152. The district court also has the discretion to decide what sanctions are to be imposed on a party who fails to comply with discovery rules. Barrett 

### v. ASARCO, Inc. (1988), 234 Mont. 229, 234, 763 P.2d 27, 30 (citing Sikorski v. Olin (1977), 174 Mont. 107, 111,568 P.2d 571, 573)

# . JudgeWilson impliedly ignored

or overruled JudgeCoatels previous ruling and gaveMelotz one last chance toproducehis tax returnsand financial statements. Melotz did not produce this information and Judge Wilson dismissed three items of contended damages. Certainly by striking damages amounting to $32,760, Melotz was required to "suffer the consequences.I1 The District Court was acting well within its discretion when it allowed the contract into evidence. Scheckla further contends the District Court abused its discretionby failing toprohibit evidence of lost income from the Midwest Dumpers contract as a sanction for discovery abuse. Scheckla argues that since he was not provided the requested financial information he had no way of ascertaining whether Melotzlstestimony concerning lost profits was accurate. "The exclusion of evidence for noncompliance with discovery rules is a harsh remedy [and]

# . . .we will reverse the trial judge only when his judgment may materially affect the substantial rights of theappellant and allow a possible miscarriage of justice.11 (Citation omitted.) Barrett, 763 P.2d at 30-31. We do not find that situationhere. Melotz provided Scheckla with theMidwest Dumpers contract more than two years before trial. Scheckla himself was in a similar trucking business and could have testified as to profitability. Moreover, Scheckla examined Melotz in part of a
seven and one-half hour deposition and again at trial on this issue. We hold the District Court did not abuse its discretion in allowing the contract into evidence and in allowing evidence of lost income from the contract.

Schecklaattacksthe jury1 sverdictarguinghis statementthat the engine could go right towork andwas in good running condition

was merely an opinion or upuffingll and did not create an express warranty. Scheckla also contends that the evidence presented at trial did not show that he engaged in the business of selling engines or that Melotz relied upon his skill and judgment in selecting a particular engine and therefore the evidence was insufficient to show that an implied warranty of merchantability

or an implied warranty of fitness for aparticularpurposehad been created. We will not disturb a jury verdict when there is substantial credible evidence in the record to support it. "Sufficiency of the evidence. We will not reverse 

### a judgment based upon a juryverdict if there is substantial evidence in the record to support the jury verdict 

# . . . We review in the light most favorable to the prevailingparty, reversing onlywhen there is a lack of substantial evidence to support the judgmentbased upon the jury verdict 

# . . . "The 'substantial evidence test variously expressed allows reversal only if there isa completeabsence of probative facts to support the verdict 

# . . . or if the evidence is so overwhelming there is no room for an honest difference of opinion 

# . . . or if there is a complete absence of any credible evidence in support of the verdict."

(Citationsomitted.) Flynn v. Siren (1986), 219 Mont. 359, 365, 711 P.2d 1371, 1374. The court gave the jury instructions on express warranty, express warranty 

## -- statement of opinion, implied warranty, and implied warranty of fitness for a particular purpose. The jury, by general verdict, found that Scheckla warranted the engine he sold to Melotz and that Scheckla had breached thewarranty. After reviewing the record in a light most favorable to the prevailing party, we conclude the record contains sufficient evidence upon which the jury could find that at least an express warranty existed. Whether a statement is an express warranty is an issue of fact. Vandalia Ranch v. Farmers Union & Oil Supply (1986), 221 Mont. 253, 259, 718 P.2d 647, 651; Whitaker v. Farmhand, Inc.

(1977), 173 Mont. 345, 354, 567 P.2d 916, 921. Issues of fact are for the jury to resolve and should not be taken away from the jury because some evidence furnishes reasonable grounds for different conclusions. Kleinsasserv.. SuperiorDerrickService,Inc. (1985)

## , 218 Mont. 371, 374, 708 P.2d 568, 570. In the present caseScheckla represented toMelotz that the enginewas in good working condition and that the engine could be put in the truck and it would go right to work. Scheckla also stated that the engine recently had major repair work done to it. The record indicates that after the engine was installed, Scheckla told Melotz to replace the bearings and if that did not correct the problem, he would pay for the repairs. Additionally, on at least one other occasion Scheckla recommended the type of repairs that should be done and Schecklalsmechanic replaced the head in an effort to correct the problems with the engine. The statements made by Scheckla,together withhis conduct after the enginewas installed, provides a sufficientbasis upon which the jury could find that an expresswarranty existed. We hold that substantial evidence supports the existence of

a warranty under the circumstances of this case.

IV. The jury, upon deciding the warranty issue in Melotzlsfavor and finding that Schecklahad breached thewarranty,awardedMelotz consequential damages forhis claim of lost profits on theMidwest Dumpers contract. Scheckla contends that under the Uniform Commercial CodeMelotz had to "cover1Ibefore consequential damages could be awarded. Scheckla argues that all Melotz had to do to

cover was to purchase a substitute engine, and, having failed to do so,Melotz failed tomitigate his damages and should therefore be denied any recovery of consequential damages.Section 30-2-715, MCA, provides that consequential damages resulting from the seller'sbreach ofwarranty include Ir[a]ny loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise



# . 

# . . " In Harrington v. Holiday Rambler Corporation (1978), 176 Mont. 37, 575 P.2d 578, the plaintiffs sued the manufacturer for damages for breach of warranty because of defects in the trailer they had purchased. Thedefendant contended theplaintiffs failed to mitigate damages by not.havingthe trailer repaired by a third party, failing to cover by purchasing a substitute trailer and continuing to use the trailer after they knew of the defects. In holding that theplaintiffsdid not fail tomitigate damages,this Court stated the following regarding the doctrine of avoidable consequences: "The duty to reduce or mitigate damages is a positive one upon the injured person,but it has limits. The test is: What would an ordinary prudent person be expected to do if capable,under the 

### circumstance^?^^ (Citation omitted.) Harrinqton, 575 P.2d at 581. The record in thepresent case discloses that Melotz did what

an ordinary prudent person would be expected to do under the circumstances. It is true, as Scheckla points out, that to cover would have been to purchase a substitute engine. However, there

are no facts in the record to indicate the engine needed to be replaced until after the time the Midwest Dumpers contract was to be performed. The record discloses that Melotz made a number ofrepairs in an attempt to make the used engine run satisfactorily. Scheckla himself noted that this type of engine has low oil pressure and advised Melotz to replace the bearings. Also, Scheckla's mechanic replaced the head in an effort to determine what was wrong with the engine. Melotz entered into theMidwest Dumpers contract inNovember, 1985 when the engine had undergone recent repairs recommended by Scheckla and Melotz believed the truck was capable of fulfilling the contract. Melotz testified that itwas only three or fourdays before he was supposed to begin performing the contract when he realized he would not be able to do so due to continuing overheating problems. At that time he notified Midwest Dumpers that he would be unable to perform the contract. Itwas not until March, 1986, after Melotz had lost the Midwest Dumpers contract, when the engine lockedup and subsequentlywas completely torndown that Melotz learned the engine had a cracked block and was unrepairable. We hold that under the above set of facts the jury could reasonablyhave found thatMelotzlsconsequentialdamagescouldnot be prevented by cover or otherwise. Affirmed.We concur: