Beaverhead Bar Supply, Inc. v. Harrington

• Decision Date: 01 February 1991
• Docket Number: No. 90-287,90-287
• Citation: 805 P.2d 560,247 Mont. 117
• Parties: BEAVERHEAD BAR SUPPLY, INC., a Montana corporation, Plaintiff and Appellant, v. Donald P. HARRINGTON, d/b/a Harrington Bottling Company, Defendant and Respondent.
• Court: Montana Supreme Court

Page 560

805 P.2d 560

247 Mont. 117

BEAVERHEAD BAR SUPPLY, INC., a Montana corporation, Plaintiff and Appellant, v. Donald P. HARRINGTON, d/b/a Harrington Bottling Company,

Defendant and Respondent.

No. 90-287.

Supreme Court of Montana.

Submitted on Briefs Nov. 8, 1990.

Decided Feb. 1, 1991.

John M. Morrison, Frank B. Morrison, Jr., Morrison Law Offices, Helena, for plaintiff and appellant.

Donald C. Robinson, Poore, Roth & Robinson, Butte, for defendant and respondent.

McDONOUGH, Justice.

The plaintiff Beaverhead Bar Supply (Beaverhead) appeals the order of the Montana Fifth Judicial District Court, Beaverhead County, granting the defendant Donald P. Harrington, d/b/a Harrington Bottling Company (Harrington), summary judgment on Beaverhead's claims of breach of contract and breach of the implied covenant of good faith and fair dealing. We reverse.

The plaintiff raises several issues on appeal, which we restate as follows:

1) Did the District Court err in concluding as a matter of law that no contract existed between the parties?

2) Does the statute of frauds bar the plaintiff from seeking enforcement of an alleged oral agreement on the grounds that the agreement could not be performed within one year?

3) Does the implied covenant of good faith and fair dealing apply to the relationship alleged in this case?

In 1978, Dan Carpita, Jr. (Carpita) began negotiating an agreement with his father (Carpita, Sr.) to purchase his father's interest in Beaverhead Bar Supply for $294,705.00. Carpita was also contemplating a $300,000.00 expansion over five years. The terms of the agreement called for a down payment of $85,000.00 and monthly payments of $1,754.08 over 20 years. At the time, Pepsi-Cola products allegedly represented approximately 30% of Beaverhead's inventory and approximately $7000.00 to $8000.00 per month gross profit. Beaverhead obtained all of its Pepsi products from Harrington on an order basis.

As part of negotiations, Carpita sought assurances from Beaverhead's major suppliers for their continued business. Both Carpita and Carpita, Sr. allegedly met with Don Harrington in Harrington's office and explained the proposed financial transaction and expansion. They allegedly advised Harrington of the terms of their agreement and told him that Carpita was also planning on incurring additional debt of approximately $300,000.00 for expansion of Beaverhead. Carpita alleges that they explained to Harrington that in order to effectively carry out this plan for sale and expansion that it was necessary for Beaverhead to maintain the Pepsi-Cola distributorship in order to service the proposed debt.

Harrington alleges that while the Carpitas did inform him of the transfer of ownership of Beaverhead, no such in-depth discussion took place.

In 1979, Harrington began directly distributing Pepsi-Cola products in adjacent Madison County, thus removing that market from what had been part of Beaverhead's distribution area. In 1982, an agent of Harrington allegedly came to Carpita and asked if Beaverhead was for sale. Carpita informed him that it was not. Due to these two incidents, Carpita claims that he began to be concerned about the intentions of Harrington sometime in 1983. About this time Harrington suggested that Carpita invest more heavily in an aggressive promotion of Pepsi-Cola products and Carpita stated that as a prerequisite to additional investment, he would need the alleged oral assurance of Harrington for a continued relationship, put into a written contract. Don Harrington allegedly agreed to "work up" a written contract.

In June of 1984, Carpita, Sr. died leaving Harrington and Carpita as the only witnesses to the alleged 1978 agreement. In August, Harrington's agent presented Carpita a proposed written contract providing for a termination of the bottler-distributor relationship "at will." Carpita counterproposed certain terms reflecting the continuation of the alleged 1978 agreement.

On December 18, 1984 Don Harrington notified Carpita that effective January 7, 1985, Harrington Bottling would begin distributing Pepsi-Cola products directly and would no longer make those products available to Beaverhead. Beaverhead filed suit in June of 1985, alleging that as a result of the termination it lost over $90,000.00 a year, approximately one-third of its income, and entirely lost 65 accounts as a result of the termination, of which approximately 39 were allegedly developed since 1978 through the efforts of Carpita. Beaverhead alleges that the loss of this income has brought it to the brink of insolvency.

Harrington moved for summary judgment, which the District Court granted on April 26, 1990, and subsequently amended its order on May 4, 1990. Beaverhead now appeals.

In its order granting summary judgment, the District Court concluded that there existed a "vague, indefinite, and uncertain," type of relationship between the parties, but that no contract existed between them. Consequently, the court found no implied covenant of good faith and fair dealing attendant to a contract. Moreover, the court concluded that the statute of frauds, Sec. 28-2-903, MCA, bars enforcement of whatever oral relationship or agreement may have existed between the parties.

We disagree. Summary judgment under Rule 56(c), M.R.Civ.P. is proper only if the record discloses no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Reaves v. Reinbold (1980), 189 Mont. 284, 287, 615 P.2d 896, 898. While it is true that the purpose of summary judgment is to encourage judicial economy, it is also true that the procedure is never to be a substitute for trial if a material factual controversy exists. Reaves, 615 P.2d at 898. In Reaves we held that there was a genuine issue of material fact as to the existence of an oral contract for $900.00 a month salary that precluded summary judgment. Reaves, 615 P.2d at 898-99. Similarly, in this case there are genuine issues of material fact regarding whether Beaverhead and Harrington had a contract based on the 1978 meeting. This factual dispute is more evident in the deposition testimony of the parties. In his deposition, Harrington testified as follows:

Q. At the time that Dan purchased the business from his father, do you recall a meeting in Butte with Carpita, Sr. and Dan and yourself present?

A. Yes.

Q. Where was that meeting held?

A. It was in our old offices at the plant here, and Dan, Sr. put his head in the door and he said, "I'm turning this business over to young Dan," and he says, "But I'm going to be around to look after it for awhile."

Q. Was that the extent of the meeting?

A. It was very brief.

Q. Did anybody come in and sit down in your office?

A. No, never did. Dan was standing there and his dad was standing there, right in the door of the office.

Q. And what was said by you?

A. As I recall, I said something to the effect that, "If he does as good a job as you did, well, things will be okay," or words to that effect.

Q. If other people testify that something like that was said, you wouldn't disagree with it? In fact, you do remember saying something like that?

A. Correct. Dan's dad was a good businessman.

Carpita's account of the meeting given in his deposition differs substantially:

Q. Mr. Harrington was asked this morning about a conversation that took place between he and your father back at about the time you were taking over the business from your father here in Butte. Did you witness that conversation?

A. I did.

Q. What is your recollection of where that conversation took place?

A. It took place in Don's office on Holmes Avenue.

Q. And Mr. Harrington testified that while he was in his office, your father stuck his head in the door and indicated, said something to the effect that you had taken over the business, and he was being advised of that, so to speak, and Mr. Harrington indicated that that was fine and wished you all well, and said something to the effect that if you did as good a job as your, as Dan, Sr. did, everything will be okay, or words to that effect.

Is that your recollection of the conversation?

A. No.

Q. What is your recollection of the conversation?

A. We called and made an appointment to see Don and made a specific trip for that reason. We spent some three hours in Don's office and explained the financial transaction between my father and I and also the transaction with the expansion of the business, building, et cetera.

Q. Who participated in that conversation?

A. My dad, Don and myself.

A. [I] [e]xplained the financial situation and pointed out to him the importance of having it, because nothing could take--I couldn't service the debt to him. I couldn't service the debt for the expansion without it.

Q. Without what?

A. Without Pepsi-Cola.

. . . . .

A. ... [A]t the time the first discussion took place, I asked Don if we needed something in writing. And he says, "A handshake should always be good enough. It always has been."

Q. When did he say that?

A. In 1978.

Q. He said, "You have a handshake." Did you shake hands?

A. Yes.

Q. What did you shake hands over?

A. Over the discussion, over the relationship, over the friendship that we assumed after 30 years that we have.

Q. Did he say anything to the effect about, or compliment your father and say If [sic] things went like your father ran the business, that he thought everything would be okay, or words to those [sic] effect?

A. What the words were to the effect was that we had always enjoyed a good relationship. We didn't see any reason to change anything if it kept going.

Q. That isn't my question, Mr. Carpita. My question is, did he ever say anything to the effect that your father had done an excellent job and that if you continued along the same lines, that everything would be okay?

A. No.

Q. He didn't say that?

A. That was not the specific words that he said.

Q. Did he say words to that effect?

A. The words to the effect that I just said, that...