Court Opinion

ID: 883551
Source: CourtListenerOpinion
Date Created: 2013-06-05 02:28:49.623205+00
Date Added: 2024-06-11T15:11:43.270577
License: Public Domain

NO. 95-114
                  IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                     1995

MOLERWAY FREIGHT               LINES,       INC.,
                 Plaintiff             and Appellant,
         v.
RITE-LINE        TRANSPORTATION
SERVICES,        INC.,
                 Defendant             and Respondent.

APPEAL        FROM:          District  Court of the             Fourth   Judicial    District,
                             In and for the County              of Missoula,
                             The Honorable   Douglas            G. Harkin,     Judge presiding.

COUNSEL OF RECORD:
                 For    Appellant:
                             W. Anderson        Forsythe,       Moulton,    Bellingham,            Longo
                             and Mather,        P.C.,    Billings,       Montana
                 For    Respondent:
                             James C. Bartlett,             Hash,   O'Brien    and Bartlett,
                             Kalispell, Montana

                                                        Submitted    on Briefs:       July         6,   1995
                                                                        Decided:          August        24,    1,995
Filed:

               STATE   OF    MONTANA
Chief        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).                  We affirm.

          We find             the      following                  issues,               as        rephrased              by      this          Court,

dispositive                 on appeal:

          1.          Did     the     District                 Court        err        in admitting                    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                  and Necessity

No.      1136        (Certificate                  No.        1136)         pursuant                   to    the     terms        of     the         Buy-

Sell     Agreement?
          3.         Did      the      District                 Court           err        in     determining                  that      Molerway

had waived             the     condition                  of      PSC approval                         of    Certificate                No.     1136?

          Molerway            and Rite-Line                     are motor              carriers                operating              intrastate

trucking         businesses                  in        Montana.                 Intrastate                   trucking           is      regulated

by     the      PSC.          The         PSC issues                   Montana                  Intrastate              Certificates                   of

Public          Convenience                  and         Necessity                    by        which           motor          carriers               are

allowed         to establish                  routes            within            Montana.                    Certificates               can only

be sold         or     transferred                     with       PSC approval.
          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

                                                                            2
a purchase                price         of      $150,000.            Molerway's                    attorney           drafted              a Buy-
Sell          Agreement.                     On February                13,        1991,           Molerway              and     Rite-Line
officials             signed            the     Buy-Sell           Agreement               setting          forth          the       terms          of

the      transaction.                    Under       the     agreement,               Molerway             was required                    to pay

$30,000            down and monthly                       payments            of     $5,427.27              until         the        $150,00o

was paid           off.           The parties               also     executed              a lease          of Certificate                        No.

1136,          allowing                Molerway             to      take           immediate               possession                     of      the

certificate                 and ensuring                  that     there           was no interruption                          in        carrier

service.
            The Buy-Sell                 Agreement               was expressly                    conditioned             on the               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     a reasonable    length   of time
            after    hearing    on the application,        then this    Agreement
            shall   be considered    null    and void,   and any funds 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     PSC for            approval           of     the     transfer                of     the     certificate.

            On March             15,     1991,       the         PSC approved                the        lease       of    the        certifi-

cate.           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

a security                interest             in Certificate                 No.     1136.             Rite-Line              feared           that

if      the     duplicate                authorities               were        cancelled                upon        approval               by     the
                                                                         3
PSC,      it     would            lose        its     security                 for     the        remaining           payments         due on

the      Buy-Sell            Agreement.
          On June            4,     1991,           Molerway's                 attorney            wrote        the     PSC concerning

the      cancellation                    of    duplicate                authorities.                    The      letter          stated,      in

part:

          The payoff     on this     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        and the
          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 Agree-
          ment.      Perhaps  we could  have a meeting     with  Rite-Line,
          Molerway     and the Commission    to weigh the alternatives.

Rite-Line             made a similar                        request            that        the    cancellation             of duplicate

authorities                be delayed                 until           the      Buy-Sell            Agreement           was fulfilled.

          On July             22,        1991,         the           PSC issued              Order       No.      6051      in     which      it

approved             the      transfer                of        Certificate                 No.      1136.            Pursuant        to     the

requests             of     Molerway                and Rite-Line,                     the        PSC delayed             any     action      on

cancelling                 duplicate                authorities                    until          Certificate             No.      1136      was

paid      off.            As of          the        time        of    trial,           the        PSC had not             ruled      on what

it      considered            to be a "duplicate                               authority."                 Neither         Molerway          nor

Rite-Line             presented                evidence               at       trial         to    establish           precisely            what

the      PSC would            consider               to be a "duplicate                           authority."              Therefore          it

is     unclear            what      routes,                if    any,       would          be cancelled               pursuant         to    PSC

Order          No.    6051.               PSC Order                  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"

                                                                               4
           between       Rite-Line       and Molerway        establishes        a security
           interest       in PSC Certificate             No. 1136 and its             subparts
           during     the payment period            of two (2) years.          If Certifi-
           cate      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        PSC had done what                        Molerway                 had specifically                            requested

in   its      June        4,    1991         letter,              Molerway                 objected                 to    Order             No.         6051.

Molerway           stopped           payment             on its             August          installment                    on the            Buy-Sell

Agreement,               and    on September                      4,         1991,          sent         Rite-Line                       a notice           of

rescission               of     contract.                  Molerway                      requested                  the        return              of     the

$30,000           down payment                 and        first              two         installments                     in        exchange              for

returning           Certificate                No.        1136 to Rite-Line.                                  Rite-Line                    refused          to

rescind           the     contract.

           On January             29,        1992,        Molerway                 filed         a complaint                        in     the     Fourth

Judicial           District             Court,           Missoula                  County,              seeking                to        rescind          the

Buy-Sell           Agreement             and to           have          returned                 to     it     money            paid         pursuant

to that       agreement.                 Rite-Line                answered                 and counter-claimed,                                  seeking
specific           performance                of     the       Buy-Sell                  Agreement.

           Following            the     June        7-8,       1994 trial,                      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.

                                                                             5
                                                                           Issue          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             by allowing               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.

        We review                     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         a contract

controls          its       interpretation                            if     the         contract                is    clear             and unambigu-

ous .      Hennen           v.        Omega Enterprises,                              Inc.           (1994),            264 Mont. 505,     508-

09,     872 P.2d 797,         799;        §§ 28-3-401                      and 28-Z-905,                       MCA.                 In Montana

Bank     of      Circle               v.     Meyers             and Son               (1989),               236 Mont. 236,         769 P.2d
1208,      we stated:

        The rule has long been that where no ambiguity           exists   in
        the written       documents,    no parol evidence   may be taken,
         (citation     omitted)   and the duty of the court   is simply   to
        apply      the language   as written.

Montana          Bank, 769 P.2d                at      1212.

        However,                 when ambiguities                                exist         in      a contract,                       the        court     may

look    to      parol            evidence                to     ascertain                 the         intent           of      the           parties.           In

Monte         Vista         Co.            v Anaconda                      Co.      (19881,                231 Mont. 522,         755 P.2d
1358,      we stated:
          An ambiguity         exists        when a contract                                           is    subject   to two
          interpretations            and parol        testimony                                           can be used         to
          determine       what the parties           intended.                                             (Citations    omit-
          ted.)       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.

          A review           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"            as limited                by Order                  No. 6051would                          constitute                    "approval"

under      the       contract.
          Also,       the     agreement                  contains            contradictory                          language                   concerning

the     purpose        of         the     transfer.                    The agreement                    reads,                  in        the        recital,

"[iIn      buying           this        permit,            it        is    the     Buyer's              intention                         to    serve           the

area      and customers                   previously                      served         by the              Seller."                      This         is      the

only      clear       expression                    of     Molerway's                   intent.                    This             purpose             is      not

inconsistent                with        and would                not       be affected                  by the                  PSC's           cancella-

tion      of      duplicate              authorities.                        However,                elsewhere                       in        the      agree-

ment,      the      contract              appears               to     contemplate                  the           transfer                 of        Certifi-

cate      No.      1136 as an asset                        rather           than         merely             as a means by which                                      to

service           Rite-Line's               customers.

          We conclude                   that         these            contradictory                         provisions                         render           the

Buy-Sell          Agreement               ambiguous.                      As such,            parol              evidence                 was properly

admissible             in     order            to        determine                the         intent              of          the     parties.                       We

hold       that       the          District               Court             did         not         abuse               its          discretion                      in

                                                                            7
admitting                 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         PSC was             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       PSC did                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            PSC Order               No.        6051 was an "approval"                                 of

the        certificate                       transfer.                      Rite-Line                    contends              that            the      PSC's

asserted            right             to cancel             duplicate                authorities                      following              completion

of     the     contract                 does        not      render             the           PSC's         decision               a denial.                  The

District            Court             agreed,          concluding                   that           Molerway's                failure            to object

and acquiescence                            to the         PSC's        cancellation                       of duplicate                  authorities

following             fulfillment                     of the           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     Certifi-
cate       No.      1136,             elimination                 of Rite-Line                       as a competitor                      along         those

                                                                                8
routes,               and      the       assurance                 that       Certificate                  No.           1136            would         not       be
sold        to        another            motor          carrier.

            We will                not          overturn             a district                  court's                   findings               of         fact

unless           they          are       clearly             erroneous.                   Interstate                     Production                    Credit

Assoc.           v.      DeSaye               (1991),            250 Mont. 320,        820 P.2d 1285.               We review

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.

            As discussed                       above,        when a contract                     is not             clear            and unambigu-

ous        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             1991 meeting                       to discuss                   the

lease        of Certificate                          No.     1136,         Molerway             did       not       object               to the            PSC's

suggestion                  that         it       would          cancel          duplicate                authorities.                           Molerway

made two               installment                    payments             on the          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.               By its           actions             and failure                 to act,           Molerway                  has manifested

its        intent             that          the       PSC's         cancellation                    of     duplicate                      authorities

would        not         render          the         decision             a denial            of the          transfer                   application.
            We conclude                       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                 was not            clearly                  erroneous.

                                                                              9
                                                                         Issue        3
          Did     the      District                 Court          err         in determining                      that     Molerway                 waived

the      condition             of      PSC approval                        of     the       certificate                    transfer?

          As an alternative                              reason          for     enforcing                  the     contract,                 Rite-Line

argued,          and the              District                   Court          concluded,                  that      even         if         the        PSC's
cancellation               of        duplicate                   authorities                   constituted                  a denial                 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      PSC until                   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         a voluntary                     and          intentional                      relinquishment                         of     a

right.           McGregor              v.        Cushman/Mommer                          (19861,             220 Mont. 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 an intention.           (Citations        omitted.)

McGresor, 714 P.2d                at        543.

          The record                 reveals              that      Molerwayvoluntarily                                   and intentionally

relinquished                   its          right           to       rely            on        the      PSC's             approval                  of         the

certificate               transfer                in      its      entirety.                   Molerway              made no objections

when        it    first              learned              that            the        PSC was                considering                  cancelling

duplicate            authorities.                          Molerway               made two              installment                     payments                on

the      contract          while             it          knew or           should              have         known         that          the      PSC was

considering               cancelling                     the       duplicate               authorities.

                                                                                10
        Most persuasive                   was the tune           4, 1991 letter                 from Molerway             to
the PSC.          In this         letter,       Molerway not only                   acquiesced         to the PSc's
cancellation               of     duplicate           authorities,              but        encouraged             such       a
cancellation.               In the letter,                 Molerway's          attorney          stated:
        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     and the
        Commission would be relieved          of interfering      with   a
        contract.
        Molerwav        does not want                  to      delay        the transfer   of this
        authoritv,        nor does it                 expect          to    default  on the Aqree-
        e.            [Emphasis added.]
Despite         Molerway's          claim      that    it    merely         intended         to "buy       some     time"
by sending          this        letter,       we conclude          that       the letter             is susceptible
to only         one interpretation.                   Molerway             stated     it    wanted to postpone

the    PSC's cancellation                     of     the    duplicate           authorities              until      after
expiration          of the Buy-Sell                 Agreement.             Molerway        further       stated       that
it    did not intend               to default         on the Buy-Sell                 Agreement          despite         the
cancellation           of the duplicate                    authorities.
        We conclude               that      Molerway's          course         of conduct,             particularly
its    letter       of June 4, 1991, manifested                             a voluntary         and intentional
relinquishment              of its          right     to rely         on the condition                 precedent          of
the PSC's approval                  of Certificate             No. 1136 in its                entirety           in order
to void         the contract.                We hold        the District              Court's         conclusion          of
law was correct.                   Affirmed.

                                                                              Chief        Justice
we concur: