Bretz v. Portland General Elec. Co.

Decision Date14 August 1989
Docket NumberNo. 87-4206,87-4206
Citation882 F.2d 411
Parties9 UCC Rep.Serv.2d 213 L.R. BRETZ, Plaintiff-Appellant, v. PORTLAND GENERAL ELECTRIC CO., Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

L.R. Bretz, Billings, Mont., pro se.

Roger K. Harris, Portland, Or., for defendant-appellee.

Appeal from the United States District Court for the District of Oregon.

Before TANG, BOOCHEVER and KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge:

We consider again the validity of Sam Goldwyn's aphorism that an oral contract isn't worth the paper it's written on. L.R. Bretz, a Montana resident, brought a diversity suit against Portland General Electric (PGE), an Oregon corporation, for breach of a contract for the sale of PGE's stock in its wholly-owned subsidiary, the Beartooth Coal Company. The district court granted PGE's motion for summary judgment, holding that the exchange of letters between Bretz and PGE did not satisfy Montana's statute of frauds. 1 We review the district court's grant of summary judgment de novo. See Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986).

Facts

In the late summer of 1983, Bretz, identifying himself as special agent in Montana for Western States Energy Ventures, wrote PGE and Beartooth offering to buy the Beartooth stock for $2 million. Bretz sought a variety of representations from PGE concerning the Beartooth securities, their sole ownership by PGE, the nature and assignability of Beartooth's holdings, and so forth. The letter also detailed an elaborate procedure for PGE's acceptance of the offer and for the completion of the transaction. 2 PGE responded on August 5, 1983, by sending Bretz a revised version of his offering letter, along with a request that Bretz "resubmit[ ] the letter as an offer so that it can be considered by Portland General Electric Company's officers." Excerpt of Record (ER) 54. PGE's August 5 letter also included a disclaimer: "Although we have reworked the terms and conditions [of your offer], we have not discussed the same nor the amount of your offer with Company management. They may request other or different terms or additional compensation." Id.

On August 10, 1983, Bretz replied, noting that "[y]ou have redrafted my offer and it appears that we are coming to a meeting of the minds." ER 58. Bretz incorporated PGE's suggestions and added some "slight" revisions of his own. As in the first offer, Bretz's August 10 communication spelled out a detailed and precise means for PGE to indicate its acceptance. In its August 23, 1983, response to Bretz's August 10 letter, PGE stated:

Dear Mr. Bretz:

Thank you for your offer of August 10, 1983 to purchase the stock of Beartooth Coal Company. Two issues have caused problems.

Your offer of $2,000,000 cash is not commensurate with the outstanding commitment we have for purchase of the stock. Financing arrangements have caused two delays in closing this commitment. Consequently we would be receptive to an offer of $2,750,000 from you and your associates provided the matter could be closed in a timely manner as proposed in your letter of August 10, 1983.

The warranty of quantity and quality referenced in your letter would have to be based on the best information available to PGE....

I would appreciate you resubmitting your offer on the above basis.

ER 62 (emphasis added).

On August 29, 1983, Bretz wrote PGE an amended version of his reworked offer. The amendment, captioned "Acceptance of Offer," and signed by Bretz, stated that the "Foregoing Offer is amended to state a purchase price of $2,750,000.00. The joint venture accepts your counter-offer which includes our terms as set forth in letter, as above. We consider that a contract for sale exists." ER 66 (emphasis added). The following day, Bretz, allegedly under the impression that he had a contract to purchase PGE's interest in Beartooth, executed an agreement with a third party for the sale of coal from the Beartooth property. On September 7, 1983, Tom Owens of Beartooth telegraphed Bretz that "It is urgent that you contact me immediately re your offer for Beartooth Coal Co." ER 171. Bretz alleges that on or about that day PGE breached its contract for the sale of Beartooth.

Bretz then filed this lawsuit, claiming breach of contract and seeking over $25 million in damages. PGE filed a motion for summary judgment, arguing that the exchange of letters did not create an enforceable contract because they did not comply with Montana's statute of frauds. Magistrate Dale agreed, holding that the letters reflected only unconcluded negotiations, not a consummated contract. He further held that parol evidence could not be used to bring the writings into compliance with the statute. The magistrate also rejected Bretz's equitable estoppel argument, finding "no evidence that defendant's conduct caused Bretz to change his position to his detriment." Magistrate's Findings and Recommendation at 8, Bretz v. Portland Gen. Elec. Co., No. 86-623-DA (D.Or. July 30, 1987). ER 16. The district court adopted the magistrate's findings and recommendations and granted PGE's motion for summary judgment.

Discussion

A. Bretz first contends that PGE's August 23 letter, when considered in conjunction with prior conversations and correspondence, was a counteroffer by PGE which, when accepted by Bretz, matured into a contract. At the very least, he argues, the documents paint an ambiguous picture which he should be allowed to fill in with parol evidence.

The parties agree that PGE's sale of Beartooth stock is covered by Montana's statute of frauds. Mont.Code Ann. Sec. 30-8-319 (1987). Although the writing required by the statute of frauds need not be contained in a single document, see, e.g., Anderson v. KFBB Broadcasting Corp., 143 Mont. 423, 391 P.2d 2, 5 (1964); Johnson v. Elliott, 123 Mont. 597, 218 P.2d 703, 707 (1950), the writings together must contain all the essential elements of a contract, including evidence of the parties' assent to be bound to the terms of the agreement. Mont.Code Ann. Sec. 28-2-102 (1987); Weigand v. Montana Land & Real Estate Invs., Inc., 724 P.2d 194, 196 (Mont.1986). 3 While parol evidence may not be used to supply an essential contract term, see Dineen v. Sullivan, 123 Mont. 195, 213 P.2d 241, 243 (1949), such evidence is admissible to explain ambiguities. See, e.g., McNabb v. Norine, 204 Mont. 330, 664 P.2d 927, 929-30 (1983); Johnson v. Ogle, 120 Mont. 176, 181 P.2d 789, 791 (1947).

In Montana, as in most other jurisdictions, "[t]he mutual assent essential to the formation of a contract ... must be gathered from the outward objective manifestations of the parties and not by the subjective undisclosed intent of one of the parties." Miller v. Walter, 165 Mont. 221, 527 P.2d 240, 243 (1974); Wyoming Farm Bureau Mut. Ins. Co. v. Smith, 259 F.Supp. 870, 873 & n. 3 (D.Mont.1966), aff'd, 377 F.2d 918 (9th Cir.1967). 4 Whether a party has made a firm offer therefore turns on the facts and circumstances of each situation, as well as on what the other party might reasonably have inferred from the statements and behavior of the first. The classic statement of this objective theory of assent was offered by Williston:

The modern law rightly construes both acts and words as having the meaning which a reasonable person present would put upon them in view of the surrounding circumstances. Even where words are used, "a contract includes not only what the parties said, but also what is necessarily to be implied from what they said." And it may be said broadly that any conduct of one party, from which the other may reasonably draw the inference of a promise, is effective in law as such.

1 S. Williston, A Treatise on the Law of Contracts Sec. 22A, at 49-50 (3d ed. 1957) (footnotes omitted). In making this inquiry, courts must ask whether the document at issue, in light of prior negotiations and the expectations of both parties, reasonably led its recipient to believe it was within his power to close the deal by acceptance.

The key question here is whether PGE's August 23 letter could reasonably be construed as an offer, or whether it was merely an invitation to Bretz to renew his offer to PGE. An examination of the letter and the surrounding circumstances lead to only one reasonable conclusion: PGE's August 23 letter was merely an invitation to continue negotiations. The letter plainly states that PGE remained "receptive to an offer" from Bretz, and suggests terms that might make the offer more acceptable to PGE. 5 The letter also refers to another commitment PGE had for the sale of the stock, implying that PGE would have to free itself from that commitment before undertaking another. PGE's letter also specifies the manner in which the deal would be closed: "as proposed in [Bretz's] letter of August 10, 1983," which, in turn, provided an elaborate mechanism for closing the deal. See note 2 supra. Finally, PGE's letter concludes, not with an offer to close the deal, but with an invitation that Bretz "resubmit [his] offer on the above basis."

The August 23 letter quite clearly evidences PGE's intent not to make an offer. Under Montana law, "when the instrument itself negates the existence of a contract," it may not be relied on for purposes of satisfying the statute of frauds. Anderson, 391 P.2d at 5. 6 Neither PGE's August 23 letter alone, nor the letter considered in concert with the remaining documents and communications, establishes the existence of a written contract that would satisfy Montana's statute of frauds. The district court therefore did not err in concluding that the parties had failed to enter into an enforceable contract for the sale of the Beartooth stock and granting summary judgment on that issue.

B. Bretz also argues that PGE should be equitably estopped from raising the statute of frauds as a defense. He claims that PGE misled him into thinking that they had a contract for...

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