Jones v. Panhandle Distributors, Inc.

• Decision Date: 28 February 1990
• Docket Number: 17317,Nos. 16953,s. 16953
• Parties: Bill JONES and Bill Jones Distributors, Inc., an Idaho corporation, Plaintiffs-Respondents, v. PANHANDLE DISTRIBUTORS, INC., an Idaho corporation, Defendant-Appellant. Bill JONES and Bill Jones Distributors, Inc., an Idaho corporation, Plaintiffs-Appellants, v. PANHANDLE DISTRIBUTORS, INC., an Idaho corporation, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 315

792 P.2d 315

117 Idaho 750

Bill JONES and Bill Jones Distributors, Inc., an Idaho corporation, Plaintiffs-Respondents, v. PANHANDLE DISTRIBUTORS, INC., an Idaho corporation, Defendant-Appellant.

Bill JONES and Bill Jones Distributors, Inc., an Idaho corporation, Plaintiffs-Appellants, v. PANHANDLE DISTRIBUTORS, INC., an Idaho corporation, Defendant-Respondent.

Nos. 16953, 17317.

Supreme Court of Idaho.

Feb. 28, 1990.

On Denial of Rehearing June 20, 1990.

Eismann & Kosonen, Coeur d'Alene, for appellant Panhandle Distributors, Inc. D. Samuel Eismann argued, Coeur d'Alene.

Verby, Elsaesser & Jarzabek, Sandpoint, for respondent Jones. Steven C. Verby argued, Sandpoint.

BAKES, Chief Justice.

Both plaintiff and defendant appeal a trial court's granting of a partial j.n.o.v. and new trial on the issue of damages for breach of a beer distribution franchise sale agreement. The franchise buyer, plaintiff Bill Jones Distributors, Inc. (Jones), alleged that the franchise seller, defendant Panhandle Distributors, Inc. (Panhandle), breached the written sales contract in several respects. After a seven-day trial, the jury found that Panhandle breached the contract with Jones. In its special verdict the jury awarded compensatory damages of $162,289.24 and punitive damages of $10,700.00. Panhandle moved for judgment notwithstanding the verdict (j.n.o.v.) or, in the alternative, new trial on all issues. The trial court granted j.n.o.v. with respect to the punitive damage award and granted a new trial on the issue of compensatory damages, but not on the issue of liability. Both Panhandle and Jones appealed, raising issues which we have consolidated on appeal for review. Panhandle contends that the trial court erred in denying its motion for new trial on liability, and its j.n.o.v. motion on the compensatory damage issue. Jones argues that the trial court erred by (1) granting Panhandle's motion for new trial on compensatory damages, and (2) granting Panhandle's motion for j.n.o.v. on the punitive damages issue.

I

Panhandle and Jones are both beer distributors in northern Idaho. Panhandle is run by Jim Crowley, its chief executive officer; Jones is run by Bill Jones. On November 9, 1978, these two companies entered a written contact for the sale to Jones of Panhandle's right to distribute Schlitz and Miller Brewing products in Bonner and Boundary Counties. The sale price was $10,000. Prior to entering this agreement, Jones had acted as Panhandle's sub-distributor of Schlitz and Miller products in Bonner and Boundary Counties, the area covered by the sales contract. At trial the evidence was presented which showed that before taking on Jones as a sub-distributor, Coeur d'Alene-based Panhandle had difficulty distributing Schlitz and Miller products in the two counties. Sandpoint-based Jones, however, successfully sub-distributed these breweries' products for Panhandle.

The contract contained a "condition precedent" which stated that both Miller and Schlitz brewing companies had to approve in writing the sale of franchise right for their respective products. If either brewery did not approve in writing then the contract would terminate. ¹ Thus, the "condition The conditions precedent to the conclusion of the contract never occurred. Schlitz rejected the transfer of the franchise distribution rights from Panhandle to Jones. Miller did not reject the transfer, but did not give its consent to it either. Panhandle then resumed the distribution of Schlitz and Miller products in Bonner and Boundary Counties and returned the $10,000 sale price to Jones.

precedent" in fact amounted to two conditions precedent, i.e., the consent of two different companies. The contract also stated, "The obligation and responsibility for obtaining the respective consents [are with Panhandle], who agrees to diligently pursue the receipt of the written consents as soon as possible...."

Jones sued Panhandle for breach of the sale contract and urged two bases for the alleged breach. First, Jones argued that Panhandle breached the contract by failing to diligently pursue approval of the transfer as required by the contract. Second, Jones argued that Panhandle, through Crowley, actually prevented the fulfillment of the contract's performance by directly influencing Schlitz's disapproval and Miller's nonconsent in order to prevent either of the conditions precedent from occurring. Jones presented some evidence to show that Crowley influenced the breweries to either disapprove the transfer or take no action. For example, regarding the Schlitz consent, a former Schlitz representative, Ray Carolin, testified that Crowley had asked him and his boss, Dale Lippert, to disapprove Jones's application to become a distributor. With regard to the Miller Brewing consent, there was no testimony offered by Jones to show that Crowley had done anything to dissuade Miller from consenting to the transfer. However, Miller representative Swede Wick did testify that he had heard of Crowley's intention not to go through with the sale of Panhandle's distribution rights to Jones and of Crowley's request to Schlitz representatives to disapprove Jones's application to Schlitz. However, Wick did not testify that Crowley had made any such request of Miller Brewing to disapprove the transfer and sale, or that Miller's failure to give its written consent resulted from Crowley's influence on Miller.

Jones argues on appeal that the evidence demonstrates both that Crowley acted covertly in order to block the giving of the consents, and that Crowley failed to "diligently pursue the receipt of the written consents as soon as reasonably possible," as required by the contract. For example, Jones points out that during the several months after entering into the contract Crowley sent only one letter to Miller on behalf of Jones. Additionally, Jones produced an expert witness, Paul Pohle, who testified that because of Jones's proven success as a sub-distributor of Schlitz, Miller and other brewery products in Bonner and Boundary Counties, it was his opinion that both Schlitz and Miller would have approved the transfer but for Crowley's breach of contract.

For his part, Crowley denied having done anything to influence Schlitz's disapproval or Miller's nonconsent and asserted that he did all that he could have done to secure approval for the transfer of distribution rights. Crowley theorized that Schlitz rejected Jones as a distributor due to Jones's unacceptable performance as a sub-distributor.

The jury returned a verdict in favor of Jones for both compensatory and punitive damages.

II

The first issue we address is Panhandle's claim that the trial court committed error by improperly refusing to grant Panhandle j.n.o.v. on the issue of liability. In making a motion for j.n.o.v., a defendant admits the truth of all of plaintiff's evidence and every legitimate inference that could be drawn therefrom in a light most We are faced with a unique factual circumstance in this case because the contract essentially creates two conditions precedent to its performance. For Jones to recover from Panhandle on a breach of contract theory, regardless of whether the theory is based on Panhandle's alleged failure to use due diligence to procure consents or its alleged active prevention of approval, or some combination of the two, Jones must prove that Panhandle's contractual breach materially contributed to the actual non-occurrence of each of the two conditions precedent. It is not enough for Jones to prove that Panhandle breached its duty with respect to only one condition precedent, even though that condition then would be excused, because final performance of the contract would not occur until both conditions precedent were met. See RESTATEMENT (SECOND) OF CONTRACTS §§ 225, 245 (1979); 5 Williston on Contracts § 677A (1961). Because it is alleged that Panhandle breached each condition precedent in two respects, we must determine whether there is sufficient evidence to support the jury's finding that Panhandle's breach caused the non-performance of each condition precedent.

[117 Idaho 753] favorable to plaintiff. Quick v. Crane, 111 Idaho 759, 727 P.2d 1187 (1986). A trial court may not make its own findings of fact but must construe the evidence in a light most favorable to the non-moving party and determine whether there is sufficient evidence to create an issue of fact. Id. Whether j.n.o.v. should be granted is a question of law, and on such questions, parties are entitled to full review by an appellate court without special deference to the views of the trial court. Id.

Panhandle argues, citing approving language in the trial court's memorandum decision in ruling on the j.n.o.v. motion, that it is "undisputed that neither Crowley nor anyone else acting on the behalf of Panhandle ever did anything to dissuade, discourage, or prevent the consent from the Miller Brewing Company." As such, Panhandle contends, it did not breach the contract in any manner because the contract itself ceased to exist because one of the two conditions precedent, i.e., Miller's approval, never occurred. However, the trial court found that there was sufficient evidence, e.g., the mailing of only one letter to Miller on behalf of Jones, to create an issue of fact for the jury as to whether Panhandle breached its express contractual duty to use diligence in order to "procure consents." The trial court wrote, "Though Mr. Crowley testified that he did all he was aware of to comply with this 'obligation,' the evidence was substantial that he did not."

We agree with the trial court's assessment of the evidence on the issue of Panhandle's lack of due diligence. The trial court properly denied Panhandle's j.n.o.v. motion on the issue of whether Panhandle breached its express contractual duty to act with due diligence to procure the consents of both Miller and Schlitz.

III

Panhandle further asserts that the liability...