S & P Brake Supply, Inc. v. STEMCO LP

• Decision Date: 13 December 2016
• Docket Number: DA 16-0014
• Citation: 385 P.3d 567,385 Mont. 488,2016 MT 324
• Parties: S & P BRAKE SUPPLY, INC., Plaintiff and Appellee, v. STEMCO LP, Defendant and Appellant.
• Court: Montana Supreme Court

385 Mont. 488

385 P.3d 567

2016 MT 324

S & P BRAKE SUPPLY, INC., Plaintiff and Appellee,

v.STEMCO LP, Defendant and Appellant.

DA 16-0014

Supreme Court of Montana.

Submitted on Briefs: October 26, 2016

Decided: December 13, 2016

For Appellant: Robert C. Griffin, Crowley Fleck PLLP, Billings, Montana

For Appellee: Michael F. McGuinness, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 S & P Brake Supply, Inc. (S & P) sued STEMCO LP (STEMCO) for breach of an alleged oral contract for a five-year arrangement to produce and sell remanufactured brakes. STEMCO claimed that the statute of frauds barred the oral contract and that the parol evidence rule precluded evidence of its formation. The District Court denied STEMCO's motions for summary judgment and judgment as a matter of law. A Yellowstone County jury found in favor of S & P and awarded damages on the oral agreement. STEMCO appeals. We restate the issues on appeal as follows:

1. Whether the District Court erred in denying STEMCO's motion for summary judgment because the alleged oral contract was barred by the statute of frauds;

2. Whether the District Court erred in submitting the questions of part performance and promissory estoppel to the jury;

3. Whether the District Court abused its discretion in excluding evidence proffered by STEMCO to rebut S & P's breach of contract and damages claims;4. Whether the District Court erred in denying costs to STEMCO for prevailing on its counterclaim.

¶2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 S & P is a Montana corporation that remanufactures brakes for semi-truck vehicles. STEMCO is a Texas company with a division that manufactures replacement brake parts, including brake linings. On March 2, 2011, STEMCO and S & P representatives met to discuss entering into a business relationship. The two parties agreed that S & P would become a "STEMCO authorized remanufacturer." This meant that STEMCO would sell its brake linings to S & P, S & P would remanufacture brakes using the STEMCO brake linings, S & P would label the remanufactured brakes as STEMCO products, and then S & P would sell the remanufactured brakes to certain "STEMCO authorized distributors"—companies to which STEMCO permitted its "authorized remanufacturers" like S & P to sell the remanufactured brakes. At the meeting, S & P's president signed a STEMCO "Authorized Brake Remanufacturer Program Agreement" (Program Agreement), which STEMCO required in order for S & P to become an "authorized remanufacturer."

¶4 The parties dispute whether the Program Agreement served as a final expression of their agreement and therefore constituted a contract. S & P alleged that, at the March 2011 meeting, STEMCO guaranteed S & P the right to sell remanufactured brakes to STEMCO authorized distributors in a five-state region for a period of five years. Among those authorized distributors was Kenworth Sales Company (Kenworth), with locations in Utah and Idaho. Following the meeting, S & P made substantial expenditures on new inventory and equipment, a new trailer, a commercial lease for additional warehouse space in Salt Lake City, and additional employees. S & P asserted that it made these expenditures in reliance on STEMCO's promise that S & P could sell remanufactured brakes to Kenworth for five years.

¶5 For roughly the next year and a half, S & P remanufactured brakes using STEMCO brake linings and sold those brakes to Kenworth. In about August 2012, Kenworth broke ties with S & P and instead began purchasing its remanufactured brakes from a company called Gorilla Brake, another STEMCO authorized remanufacturer. S & P sued STEMCO for breach of contract, among other claims. S & P argued that STEMCO violated the terms of the parties' alleged oral five-year contract by allowing Gorilla Brake to replace S & P as Kenworth's supplier of remanufactured brakes.

¶6 STEMCO moved for summary judgment. It argued that the statute of frauds rendered the alleged oral contract unenforceable. STEMCO contended further that the terms of the oral contract contradicted the terms of the Program Agreement, and thus that the parol evidence rule barred S & P from introducing evidence of the oral contract. The District Court denied STEMCO's motion in part, concluding that genuine issues of fact existed as to whether S & P could satisfy an exception to the statute of frauds and whether the Program Agreement constituted a final expression of the parties' agreement such that the parol evidence rule would apply.

¶7 At trial, the District Court instructed the jury, over STEMCO's objections, on the doctrines of part performance and promissory estoppel as possible exceptions to the statute of frauds. The court rejected STEMCO's proposed instruction on promissory estoppel that would have included a requirement that S & P prove that STEMCO intentionally misled S & P. The District Court also excluded certain evidence that STEMCO offered to rebut S & P's claim for damages and to show that S & P lost Kenworth's business as a result of its own inadequate service rather than anything STEMCO did.

¶8 At the close of S & P's case in chief, STEMCO moved for judgment as a matter of law, contending that insufficient evidence existed to allow a reasonable jury to find that any exception to the statute of frauds applied to the alleged oral contract.¹ The District Court denied the motion, concluding that sufficient evidence existed to support a jury finding that either the part performance or promissory estoppel exception applied. The jury found for S & P and awarded it $344,532 in damages.

¶9 The jury also found in favor of STEMCO on its counterclaim against S & P for $63,990.48 worth of inventory it delivered to S & P but for which S & P had not paid. Each party submitted a bill of costs. The court awarded costs to S & P, but denied costs to STEMCO, reasoning that although STEMCO prevailed on its counterclaim, it was not entitled to costs because it did not prevail on the "main issue in controversy."

STANDARDS OF REVIEW

¶10 We review de novo a district court's ruling on summary judgment, applying the criteria of M. R. Civ. P. 56(c)(3). Citizens for a Better Flathead v. Bd. of Cnty. Comm'rs , 2016 MT 256, ¶ 10, 385 Mont. 156, 381 P.3d 555. We review a district court's conclusions of law to determine whether they are correct. Citizens for a Better Flathead , ¶ 10.

¶11 Whether judgment as a matter of law should be granted or denied is a question of law, and therefore the appropriate standard of review is de novo. Johnson v. Costco Wholesale , 2007 MT 43, ¶ 18, 336 Mont. 105, 152 P.3d 727. Judgment as a matter of law is proper only when there is a complete absence of any evidence that would justify submitting an issue to a jury; all such evidence and any legitimate inferences that might be drawn from the evidence must be considered in the light most favorable to the party opposing the motion. Johnson , ¶ 13.

¶12 A district court has discretion when it decides how to instruct the jury, and this Court will not reverse a district court on the basis of its instructions absent an abuse of discretion. Cechovic v. Hardin & Assocs. , 273 Mont. 104, 116, 902 P.2d 520, 527 (1995). Although a district court has broad discretion, the principle that jury instructions must fully and fairly instruct the jury regarding the applicable law limits its discretion.

Goles v. Neumann , 2011 MT 11, ¶ 9, 359 Mont. 132, 247 P.3d 1089.

¶13 A district court has broad discretion in determining whether evidence is relevant and admissible. Stokes v. Ford Motor Co. , 2013 MT 29, ¶ 11, 368 Mont. 365, 300 P.3d 648. We thus review evidentiary rulings for an abuse of discretion. Stokes , ¶ 11.

¶14 We review for correctness a district court's determination whether a party is statutorily entitled to costs. Total Indus. Plant Servs. v. Turner Indus. Grp., LLC , 2013 MT 5, ¶ 61, 368 Mont. 189, 294 P.3d 363.

DISCUSSION

¶15 1. Whether the District Court erred in denying STEMCO's motion for summary judgment because the alleged oral contract was barred by the statute of frauds.

¶16 The District Court denied STEMCO's motion for summary judgment on the grounds that genuine issues of fact existed as to whether the Program Agreement constituted the final expression of the parties' agreement and what the terms of the parties' agreement were.

The court reasoned also that genuine issues of fact existed as to whether S & P could demonstrate that statutory and equitable exceptions shielded the alleged oral contract from the statute of frauds.

¶17 STEMCO argues that it was entitled to summary judgment because the Program Agreement constituted a final expression of the parties' agreement and the parol evidence rule barred evidence of the alleged oral contract. STEMCO contends that the doctrines of part performance and promissory estoppel do not exempt the alleged oral contract from the statute of frauds. Even if promissory estoppel could be invoked, STEMCO claims that Montana law permits the doctrine to defeat the statute of frauds only when the party asserting promissory estoppel shows that the promisor engaged in fraud or intentional deception, which S & P did not allege.

¶18 The parties agree that the Uniform Commercial Code (UCC) applies to their contractual relationship, but they also cite to general contract law to support their arguments. The UCC applies to "transactions in goods." Section 30-2-102, MCA. "Goods" include "all things ... which are movable at the time of identification to the contract for sale." Section 30-2-105, MCA. The agreement between the parties involves the sale of brake linings from STEMCO to S & P and the sale of remanufactured brakes from S & P to Kenworth. The brake linings and remanufactured brakes constitute moveable goods under § 30-2-105, MCA. The alleged oral contract thus pertains to "transactions in goods" and falls within the ambit of the UCC. Section 30-2-102, MCA.

¶19 Montana's...