NO. 95-114 INTHESUPREMECOURTOFTHESTATEOFMONTANA 1995

MOLERWAYFREIGHT LINES,

Plaintiff and

v. INC., Appellant,

RITE-LINE TRANSPORTATION SERVICES, INC.,

Defendant and Respondent.

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula, TheHonorable Douglas G.Harkin, Judge presiding.

COUNSELOFRECORD:

For Appellant: W.Anderson Forsythe, Moulton, Bellingham, Longo andMather, P.C., Billings, Montana For Respondent: James C.Bartlett, Hash, O'Brien andBartlett, Kalispell, Montana

Filed: Submitted onBriefs: July 6, 1995 Decided: August 24, 1

STATE OF MONTANA ,995Chief Justice J. A. Turnage delivered the Opinion of the court.

Molerway Freight Lines, Inc. (Molerway), appeals the decision of the Fourth Judicial District Court, Missoula County, enforcing

a contract in favor of Rite-Line Transportation Services, Inc. (Rite-Line). Weaffirm. Wefind the following issues, as rephrased by this Court, dispositive onappeal: 1. Did the District Court err inadmitting parol evidence to determine the intent of the parties to the Buy-Sell Agreement? 2. Did the District Court err in determining that the Montana Public Service Commission (PSC) "approved" the transfer of Montana Intrastate Certificate of Public Convenience andNecessity No. 1136 (Certificate No. 1136) pursuant to the terms of the BuySell Agreement? 3. Did the District Court err in determining that Molerway hadwaived the condition of PSCapproval of Certificate No. 1136? Molerway andRite-Line aremotor carriers operating intrastate trucking businesses in Montana. Intrastate trucking is regulated by the PSC. The PSCissues Montana Intrastate Certificates of Public Convenience and Necessity by which motor carriers are allowed to establish routes within Montana. Certificates can only besold or transferred with PSCapproval. Rite-Line owned Certificate No. 1136 which authorized it to operate certain routes within the State of Montana. Molerway, a direct competitor of Rite-Line, sought to obtain Certificate No. 1136. Following negotiations, Molerway and Rite-Line agreed upon

2apurchase price of $150,000. Molerway's attorney drafted aBuySell Agreement. OnFebruary 13, 1991, Molerway and Rite-Line officials signed the Buy-Sell Agreement setting forth the terms of the transaction. Under the agreement, Molerway wasrequired to pay $30,000 down andmonthly payments of $5,427.27 until the $150,00o

waspaid off. Theparties also executed alease of Certificate No. 1136, allowing Molerway to take immediate possession of the certificate andensuring that there wasnointerruption in carrier service. TheBuy-Sell Agreement wasexpressly conditioned onthe PSC's approval of the transfer. The Buy-Sell Agreement provided, in part: In the event the transfer is not approved and approval cannot be obtained within areasonable length of time after hearing on the application, then this Agreement shall beconsidered null andvoid, andanyfunds received by Seller for payment of the purchase price shall be refunded to the Buyer. Following execution of the Buy-Sell Agreement, the parties applied to the PSCfor approval of the transfer of the certificate. OnMarch 15, 1991, the PSCapproved the lease of the certificate. At that time, representatives of the PSC indicated that portions of Certificate No. 1136 which were duplicative of other routes already covered in Molerway's other certificates would be cancelled. Both parties feared that the PSC's cancellation of duplicate authorities would jeopardize the Buy-Sell Agreement. Rite-Line had

asecurity interest in Certificate No. 1136. Rite-Line feared that if the duplicate authorities were cancelled upon approval by the 3PSC, it would lose its security for the remaining payments due on

the Buy-Sell Agreement. OnJune 4, 1991, Molerway's attorney wrote the PSCconcerning the cancellation of duplicate authorities. The letter stated, in part: The payoff onthis Agreement is only two years from the date the Commission approves of the transfer. Perhaps the Commission would postpone the deletion of the duplicate authorities until the outstanding balance has been paid off. That way, Rite-Line is protected andthe Commission would be relieved of interfering with a contract. Molerway does not want to delay the transfer of this authority, nor does it expect to default on the Agreement. Perhaps wecould have ameeting with Rite-Line, Molerway andthe Commission to weigh the alternatives. Rite-Line madeasimilar request that the cancellation of duplicate authorities bedelayed until the Buy-Sell Agreement wasfulfilled. OnJuly 22, 1991, the PSCissued Order No. 6051 in which it approved the transfer of Certificate No. 1136. Pursuant to the requests of Molerway andRite-Line, the PSCdelayed any action on cancelling duplicate authorities until Certificate No. 1136 was paid off. Asof the time of trial, the PSChad not ruled onwhat it considered to bea"duplicate authority." Neither Molerway nor Rite-Line presented evidence at trial to establish precisely what the PSCwould consider tobea"duplicate authority." Therefore it is unclear what routes, if any, would becancelled pursuant to PSC Order No. 6051. PSCOrder No. 6051 states: It is the Commission's policy to cancel duplicating motor carrier authority upon a sale or transfer.

. . . However, the Commission has determined that the unique circumstances of this case justify the recognition of an exception. Specifically, the "Buy-Sell Agreement" 4between Rite-Line and Molerway establishes a security

interest in PSCCertificate No. 1136 and its subparts during the payment period of two (2)years. If Certificate No. 1136 were to be cancelled, the collateral identified in the Agreement would cease to exist. Therefore, the Commission will defer cancelling the duplicating authority for two (2) years solely for these reasons, approve the transfer with the conditions described below. Although the PSChaddonewhat Molerway hadspecifically requested in its June 4, 1991 letter, Molerway objected to Order No. 6051. Molerway stopped payment onits August installment onthe Buy-Sell Agreement, and on September 4, 1991, sent Rite-Line anotice of rescission of contract. Molerway requested the return of the $30,000 down payment and first two installments in exchange for returning Certificate No. 1136to Rite-Line. Rite-Line refused to rescind the contract. OnJanuary 29, 1992, Molerway filed acomplaint in the Fourth Judicial District Court, Missoula County, seeking to rescind the Buy-Sell Agreement and to have returned to it money paid pursuant tothat agreement. Rite-Line answered andcounter-claimed, seeking specific performance of the Buy-Sell Agreement. Following the June 7-8, 1994trial, the District Court held in favor of Rite-Line. The court determined that the PSC's order constituted an "approval" of the Certificate transfer and that by Molerway's course of conduct, it waived its right to rescind the contract due to the cancellation of duplicate authorities. Molerway appeals from the decision of the District Court.

5Issue 1

Did the District Court err in admitting parol evidence to determine the intent of the parties to the Buy-Sell Agreement? Molerway argues that the District Court erred byallowing the introduction of parol evidence during trial in order to determine the intent of the parties. Molerway insists that the Buy-Sell Agreement was clear and unambiguous on its face. Therefore, the contract should have been construed strictly by its terms and no parol evidence concerning the parties' intent should have been allowed. Wereview district court evidentiary rulings to determine if the court abused its discretion. State v. Passama (1993), 261 Mont. 338, 863 P.2d 378. The language contained in acontract controls its interpretation if the contract is clear andunambiguous

. Hennen v. OmegaEnterprises, Inc. (1994), 264Mont. 505, 508- 09, 872 P.2d 797, 799; §§28-3-401 and28-Z-905, MCA. In Montana Bank of Circle v. Meyers and Son (1989), 236Mont. 236, 769 P.2d 1208, westated: The rule has long been that where noambiguity exists in the written documents, noparol evidence maybetaken, (citation omitted) andthe duty of the court is simply to apply the language aswritten. Montana Bank, 769 P.2d at 1212. However, when ambiguities exist in acontract, the court may look to parol evidence to ascertain the intent of the parties. In Monte Vista Co. vAnaconda Co. (19881, 231 Mont. 522, 755 P.2d 1358, westated:An ambiguity exists when acontract is subject to two

interpretations and parol testimony can be used to determine what the parties intended. (Citations omitted.) However, intent of the parties is only looked to when the agreement in issue is not clear on its face. (Citation omitted). Monte Vista, 755 P.2d at 1362. Areview of the record reveals that the Buy-Sell Agreement was not clear and unambiguous on its face. While the agreement specifically conditioned validity of the contract on the PSC's "approval" of the transfer, the agreement does not define what will constitutes an "approval." Specifically, it is unclear whether "approval" aslimited byOrder No. 6051would constitute "approval" under the contract. Also, the agreement contains contradictory language concerning the purpose of the transfer. Theagreement reads, in the recital, "[iIn buying this permit, it is the Buyer's intention to serve the

area and customers previously served bythe Seller." This is the only clear expression of Molerway's intent. This purpose is not inconsistent with andwould not beaffected bythe PSC's cancellation of duplicate authorities. However, elsewhere in the agreement, the contract appears to contemplate the transfer of Certificate No. 1136asanasset rather than merely asameans bywhich to service Rite-Line's customers. Weconclude that these contradictory provisions render the Buy-Sell Agreement ambiguous. Assuch, parol evidence wasproperly admissible in order to determine the intent of the parties. We hold that the District Court did not abuse its discretion in

7admitting par01 evidence in order to determine the intent of the

parties. Issue 2 Did the District Court err in concluding that the PSC "approved" the transfer of Certificate No. 1136 pursuant to the terms of the Buy-Sell Agreement? Molerway argues that approval by the PSCwas a condition precedent expressly stated in the Buy-Sell Agreement. Molerway claims that by issuing Order No. 6051 which stated duplicate authorities would be cancelled in two years, the PSCdid not 11 approve" Certificate No. 1136 and all its subparts as was a condition precedent to the contract. Because the condition precedent did not occur, Molerway insists it is not bound by the Buy-Sell Agreement. Rite-Line argues that PSCOrder No. 6051wasan"approval" of the certificate transfer. Rite-Line contends that the PSC's asserted right tocancel duplicate authorities following completion of the contract does not render the PSC's decision adenial. The District Court agreed, concluding that Molerway's failure toobject andacquiescence tothe PSC's cancellation ofduplicate authorities following fulfillment ofthe contract illustrated Molerway's intent that cancellation of duplicate authorities would not result in a "denial" of the transfer application. Rite-Line also insists that Molerway received what it bargained for: authority to use the routes designated in Certificate No. 1136, elimination of Rite-Line asacompetitor along those

8routes, and the assurance that Certificate No. 1136 would not be

sold to another motor carrier. Wewill not overturn a district court's findings of fact unless they are clearly erroneous. Interstate Production Credit Assoc. v. DeSaye (1991), 250Mont. 320, 820 P.2d 1285. Wereview district court conclusions of law to determine if the court's interpretation of the law was correct. Steer, Inc. v Dep't of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603. Asdiscussed above, whenacontract is not clear andunambiguous on its face, the court must look elsewhere to discern the intent of the parties. Monte Vista, 755 P.2d at 1362. In this case, the evidence establishes that Molerway did not consider the cancellation of duplicate authorities to be a "denial" of the transfer application. During the March 1991meeting to discuss the lease of Certificate No. 1136, Molerway did not object tothe PSC's suggestion that it would cancel duplicate authorities. Molerway madetwo installment payments onthe contract after it had actual knowledge of the PSC's intention to cancel duplicate authorities. Molerway also encouraged, or at the very least acquiesced to, the PST's decision to cancel duplicate authorities in its June 4, 1991 letter. Byits actions andfailure to act, Molerway hasmanifested its intent that the PSC's cancellation of duplicate authorities would not render the decision adenial of the transfer application. Weconclude that the District Court's finding that the PSC's cancellation of the duplicate authorities did not amount to a denial of the transfer application wasnot clearly erroneous.

9Issue 3

Did the District Court err in determining that Molerway waived the condition of PSCapproval of the certificate transfer? Asanalternative reason for enforcing the contract, Rite-Line argued, and the District Court concluded, that even if the PSC's cancellation of duplicate authorities constituted adenial of the transfer, Molerway waived its right to rely on the condition precedent of PSC approval. The District Court concluded that Molerway's course of conduct from the March 1991 meeting of the parties with the PSCuntil issuance of the PSC's Order No. 6051 manifested Molerway's intent not to require PSC approval of Certificate No. 1136 in its entirety. Waiver is avoluntary and intentional relinquishment of a right. McGregor v. Cushman/Mommer (19861, 220Mont. 98, 714 P.2d 536. In McGreqor, this Court stated: Waiver is the voluntary, intentional relinquishment of a right. (Citation omitted.) A waiver of a right of action will be declared only when the party clearly manifests such anintention. (Citations omitted.) McGresor, 714 P.2d at 543. Therecord reveals that Molerwayvoluntarily andintentionally relinquished its right to rely on the PSC's approval of the certificate transfer in its entirety. Molerway madenoobjections when it first learned that the PSCwas considering cancelling duplicate authorities. Molerway madetwo installment payments on the contract while it knew or should have known that the PSCwas considering cancelling the duplicate authorities.

10

### Mostpersuasive wasthe tune 4, 1991letter from Molerway to

the PSC. Inthis letter, Molerway notonly acquiesced tothe PSc's cancellation of duplicate authorities, but encouraged such a cancellation. Inthe letter, Molerway's attorney stated: PerhapstheCommissionwouldpostpone thedeletion ofthe duplicate authorities until the outstanding balance has beenpaid off. Thatway, Rite-Line isprotected andthe Commission would be relieved of interfering with a contract. Molerwav does not want to delay the transfer of this authoritv, nor doesit expect to 

### default onthe Aqreee. 

### [Emphasis added.] Despite Molerway's claim 

### that it merely 

### intended to "buy some 

### time" bysending this letter, weconclude that the letter is susceptible toonly oneinterpretation. Molerway stated it wanted topostpone the PSC's cancellation of the duplicate authorities until after expiration oftheBuy-Sell Agreement. Molerway further stated that it didnot intend todefault onthe Buy-Sell Agreement despite the cancellation of the duplicate authorities. Weconclude that Molerway's course of conduct, particularly its letter ofJune4, 1991, manifested avoluntary andintentional relinquishment of its right to rely onthe condition precedent of the PSC'sapproval ofCertificate No.1136inits entirety inorder to void the contract. Wehold the District Court's conclusion of lawwascorrect. Affirmed.

Chief Justiceweconcur: