Norwest Bank Billings v. Murnion

• Decision Date: 15 August 1984
• Docket Number: No. 83-541,83-541
• Citation: 684 P.2d 1067,41 St.Rep. 1132,210 Mont. 417
• Parties: , 38 UCC Rep.Serv. 1509 NORWEST BANK BILLINGS, f/d/b/a First Northwestern Bank, Plaintiff and Respondent, v. James W. MURNION, Defendant and Appellant.
• Court: Montana Supreme Court

Page 1067

684 P.2d 1067

210 Mont. 417, 38 UCC Rep.Serv. 1509

NORWEST BANK BILLINGS, f/d/b/a First Northwestern Bank Plaintiff and Respondent, v. James W. MURNION, Defendant and Appellant.

No. 83-541.

Supreme Court of Montana.

Submitted on Briefs March 15, 1984.

Decided June 14, 1984.

Rehearing Denied Aug. 15, 1984.

Sandall, Cavan & Smith, Billings, for defendant and appellant.

John K. Addy, Billings, for plaintiff and respondent.

GULBRANDSON, Justice.

Defendant James Murnion appeals from a judgment rendered against him in the District Court of the Thirteenth Judicial District, Yellowstone County. We affirm.

On August 14, 1979, James Murnion purchased a Trojan front-end loader from Montana Machine Inc., in Billings, Montana. The purchase is evidenced by a retail installment contract and security agreement prepared and dated August 15, 1979. The contract shows a cash price of $17,500 for the loader and a $5,500 allowance for a trade in by Murnion of a diesel tractor, to be applied against the cash price of the loader, thus leaving an unpaid balance of $12,000. Murnion agreed to pay this amount plus about $1,870 in interest in four installments between December 1, 1979 and July 1, 1981. The contract was signed by Murnion and Howard Hanson, president of Montana Machine. The contract lists plaintiff First Northwestern National Bank (now Norwest Bank) as Montana Machine's assignee with full recourse.

Murnion did not make the first installment due under the contract, and in January, 1980, was deemed to have defaulted. The bank exercised its right to require Montana Machine to repurchase the contract. Instead of repurchase, Montana Machine entered into a second contract with Murnion. This new agreement converted the original installment payment scheme into a single payment due December 1, 1980. The agreement was signed by Montana Machine and Murnion, and Montana Murnion did not make the December 1 payment, and on December 31, the Bank notified Murnion of the deficiency and requested that he make some arrangements for payment. On January 6, 1981, a meeting was held at the office of Montana Machine between Murnion and Howard Hanson. Paul Borisevich, dealer program supervisor for the Bank, was also in attendance during portions of this meeting.

Machine assigned this contract to the bank with right of full recourse.

Murnion claims to have confronted Hanson during the meeting about a material misrepresentation involving the loader. According to Murnion, the serial number on the loader indicated that the machine was approximately ten years older than had been represented to him by Hanson. Murnion maintains that he discovered this discrepancy while attempting to obtain parts for the loader from a parts dealer in Billings. Murnion asserts that he wanted to rescind his contract with Montana Machine because of this alleged misrepresentation.

Hanson supposedly conceded that a misrepresentation had been made, but allegedly reached an oral agreement with Murnion to rectify the problem and renegotiate the sales contract. Under the terms of this alleged oral agreement, Murnion agreed to pay an additional sum of money on the loader contract and use the machine until Hanson picked it up in April for resale. If sale of the loader brought more than the balance due on the contract, Murnion would be paid the excess. If the sale brought less than the balance due, Murnion would not be held liable for the deficiency.

A third written contract was prepared on January 6, the day of the meeting, calling for Murnion to pay in cash approximately $2,467 of the $13,471.40 owed under the last agreement, with the remaining $11,004 to be paid at fifteen percent interest on September 1, 1981. The total sum due amounted to $12,241.50. The contract, a form document supplied by the Bank, was prepared by Paul Borisevich and signed by Murnion and Hanson, with the latter's interest being assigned to the bank. A brief description of the loader and the payment terms were filled in by Borisevich. There is no mention of the terms of Murnion's and Hanson's alleged oral agreement.

Murnion insists that Borisevich was present during those portions of the meeting when the alleged misrepresentation was discussed and when the negotiation of the terms of the oral agreement took place. During trial, Borisevich testified that he recalled a conversation about the "age" of the loader, but he never characterized the conversation as one about misrepresentation about age. Borisevich also testified that he was aware of no terms or conditions in the agreement between Murnion and Hanson other than those that appear in the January 6 written contract.

During the spring of 1981, Borisevich did contact some implement dealers and bank customers about the possibility of purchasing Murnion's loader to help Murnion raise revenue to pay off the contract. Some of the dealers and customers contacted Murnion, but none desired to purchase the loader. The bank did not act as an intermediary between Murnion and the prospective buyers, and did not discuss with Murnion any absorption by the bank of any deficiency arising from resale.

Sometime prior to the September 1 payment date, Montana Machine Inc. went out of business, and Howard Hanson moved to Australia. Murnion did not make the September 1 payment. The bank notified Murnion of his default, and urged him to speak to bank officials concerning the outstanding debt. On September 28, 1981, Murnion signed a deferral agreement with the bank, agreeing to pay the outstanding balance February 1, 1982, for an additional $918 consideration.

Murnion did not remit the unpaid balance, so the bank brought this action in May 1982. Murnion did not answer the complaint, and the bank filed a praecipe for entry of default. Default was entered in July of 1982, but the District Court, upon motion of defendant, eventually set aside the default in November, 1982. Murnion The case came to trial in August 1983. The only witnesses were Paul Borisevich, appearing on behalf of the Bank, and Murnion, appearing on his own behalf. Murnion was permitted to testify, over the bank's continuing objection, to the terms of the oral agreement. The bank also objected to admission of evidence of the contracts signed prior to January 6, 1981, but the real dispute involves the terms of the oral agreement. Both objections were based on the parol evidence rule. In addition, Murnion was permitted to testify, over the bank's objection, to the allegations of misrepresentation. This objection was based on the rule against hearsay. The court heard all of Murnion's testimony, reserving the right to strike it when deciding the case.

then filed an answer, wherein he admitted signing the January 6 contract but denied owing the unpaid balance specified therein. Murnion asserted an affirmative defense of misrepresentation and failure of the bank to resell the loader as allegedly agreed.

The trial court rendered judgment for the bank. In its findings and conclusions, the court concluded that the bank's objections to the prior and contemporaneous agreements were valid, and disallowed the evidence. The court ordered Murnion to pay the $12,241.50 unpaid balance plus interest of fifteen percent and reasonable attorney's fees. Murnion appeals from the District Court judgment.

Murnion raises the following three issues:

(1) Whether the trial court erred by disallowing the evidence of contemporaneous and prior agreements offered by Murnion?

(2) Whether the trial court erred by failing to consider evidence of the contemporaneous oral agreement in order to permit Murnion to prove unconscionability?

(3) Whether the trial court erred by failing to apply Section 31-1-231, MCA, dealing with the requirements for a retail installment contract, to the facts of this case?

THE PAROL EVIDENCE ISSUE

In resolving this dispute, the trial court applied the traditional parol evidence rule, codified at Section 28-2-904, MCA, which provides that "[t]he execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument." With the adoption of the Uniform Commercial Code, however, litigation arising out of a transaction like that involved here should be controlled by the principles of the Code, with the law of contract being used only to supplement Code provisions. Section 30-1-103, MCA. The loader in this case comes within the Code definition of "goods." See Section 30-2-105(1), MCA. Thus, the sale of the loader is governed by the Code and any Code provisions addressing the parol evidence question must be given primary consideration.

The relevant statute for this case is Section 30-2-202, MCA:

"Final written expression--parol or extrinsic evidence. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:

"(a) by course of dealing or usage of trade (30-1-205) or by course of performance (30-2-208); and

"(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement."

This statute, based on U.C.C. sec. 2-202 (1962), continues the operation of the traditional parol evidence rule, although with some modifications. See 2 R. Anderson, Uniform Commercial Code Section 2-202:3 (1982). Although the trial court According to the provisions of Section 30-2-202, an initial determination must be made that the parties intended the final writing or contract to be the final expression of their agreement with respect to the...