A. T. Klemens & Son v. Reber Plumbing & Heating Co.

• Court: Montana Supreme Court
• Writing for the Court: CASTLES; HARRISON, C. J., and HARRISON; ANGSTMAN and ADAIR
• Citation: A. T. Klemens & Son v. Reber Plumbing & Heating Co., 360 P.2d 1005, 139 Mont. 115 (Mont. 1961)
• Decision Date: 15 March 1961
• Docket Number: No. 10128,10128
• Parties: A. T. KLEMENS & SON, a Corporation, Plaintiff and Respondent, v. REBER PLUMBING AND HEATING COMPANY, a Corporation, Defendant and Appellant.

Page 1005

360 P.2d 1005

139 Mont. 115

A. T. KLEMENS & SON, a Corporation, Plaintiff and Respondent, v. REBER PLUMBING AND HEATING COMPANY, a Corporation, Defendant and Appellant.

No. 10128.

Supreme Court of Montana.

March 15, 1961.

Rehearing Denied April 25, 1961.

Ralph J. Anderson, Helena, argued orally for appellant.

Joel G. Roth, Great Falls, for respondent.

Howard C. Burton, Great Falls, argued orally for respondent.

CASTLES, Justice.

This is an appeal from a judgment entered in favor of the plaintiff in the district court of the eighth judicial district. The action was for damages for breach of contract tried before the district court sitting with a jury. Judgment was entered for the plaintiff in the amount of $5,097.35 which included the jury's verdict of $5,079 plus costs of $18.35. The defendant has appealed from his judgment.

The plaintiff, A. T. Klemens & Son, and the defendant, Reber Plumbing and Heating Co., are both Montana corporations. J. R. Klemens, the president of the plaintiff corporation and J. B. Reber, the president of the defendant corporation, participated in the negotiations between the two corporations. Hereinafter A. T. Klemens & Son and J. R. Klemens will both be referred to as the plaintiff, and Reber Plumbing and Heating Co. and J. B. Reber will both be referred to as the defendant.

The main points in issue in this case can be determined by a summary of the various allegations of the complaint and the answer. On October 15, 1956, the trustees of School District Number One called for bids for the construction of the new East Junior High School in Great Falls, Montana. One on the three contracts the trustees offered for bid was the mechanical contract which involved the furnishing of all labor and materials necessary for: (1) plumbing fixtures, (2) heating, ventilation, temperature control, and refrigeration systems, and (3) outside utilities.

On or about October 19, 1956, the defendant requested that the plaintiff prepare and submit to the defendant a sub-bid for the installation of the ventilation system to be incorporated in the defendant's bid for the entire mechanical contract. The plaintiff alleges that it submitted the sub-bid on the agreed condition that if it were the low sub-bid on such work received by the defendant, and the defendant was awarded the entire mechanical contract, the defendant would give the plaintiff the ventilation work. The defendant admits it solicited the plaintiff's sub-bid, but denies that it agreed to these conditions.

On December 12, 1956, the trustees rejected all bids as being too high, but on January 22, 1957, issued a new call for bids for the construction of the school.

The plaintiff alleges that once again the defendant solicited the plaintiff for a sub-bid on the ventilation system. The plaintiff further alleges that it gave the defendant a new sub-bid acting on the belief that its giving of such sub-bid was conditioned on the same premise that if it were the low sub-bid submitted to the defendant on the ventilation work and the defendant were the low bidder on the entire mechanical contract, the defendant would give the ventilation work to the plaintiff. The defendant denies that it accepted the plaintiff's sub-bid on this condition.

On February 6, 1957, the trustees awarded the mechanical contract to the defendant. The plaintiff alleges that after such award the defendant advised the plaintiff that the defendant could purchase certain heating and ventilating units at a lower price than the plaintiff and requested that the plaintiff modify the arrangements existing between the parties by deleting from the plaintiff's sub-bid the price of these units plus the plaintiff's margin of profit and transportation costs thereon, the defendant proposing to procure and deliver these units to the plaintiff for installation. The defendant admits it advised the plaintiff of its ability to purchase these units at a lower price.

The plaintiff alleges that on March 2, 1957, the parties met in Helena, Montana, and modified their prior arrangements by deleting from the plaintiff's sub-bid the cost of the heating and ventilating units, the plaintiff's margin of profit thereon, and the estimated transportation costs of the units. The defendant admits that the parties met, but denies that they reached an accord on such arrangements. To the contrary, the defendant alleges that the parties met to discuss the possibilities of the plaintiff submitting a new proposal.

The plaintiff alleges that thereafter it reduced to a written agreement the understanding of the parties that had been reached at the meeting on March 2, 1957, and mailed the same to the defendant for its signature but that the defendant refused to sign the agreement. Instead the defendant notified the plaintiff that it (the defendant) would do the ventilation work and refused to permit the plaintiff to do such work. The plaintiff claims that it stood ready to do the work and by reason of the defendant's failures and refusals to permit it to perform the plaintiff has been damaged by loss of profit in the amount of $7,618.50.

The defendant admits that it has declined to permit the plaintiff to do the ventilation work, but denies that the plaintiff has been damaged thereby.

The defendant's eleven specifications of error raise four main questions for our consideration on this appeal. These questions will be considered separately.

The first question is whether there was sufficient evidence before the district court and the jury of a binding agreement between the plaintiff and the defendant to sustain the jury's verdict and the district court's judgment. The defendant urges that, as a matter of law, the evidence demonstrates that there was no binding agreement between the plaintiff and the defendant.

There was never a written agreement which was signed by both of the parties, and the main question at the trial was whether a binding oral agreement was reached at the meeting between the parties on March 2, 1957.

Where parties to a contract verbally agree upon all of its terms but stipulate that it will not be binding until it is reduced to writing, it is not binding upon the parties until it is reduced to writing and signed. However, where the parties intend the contract to be binding from the time that it is orally made with an agreement that it will later be reduced to writing the failure to reduce the agreement to writing does not affect its binding force. Hunt v. S. Y. Cattle Co., 75 Mont. 594, 244 P. 480. Also see 17 C.J.S.Contracts Sec. 49.

In his testimony the defendant at all times denied that there was ever a binding oral agreement reached between the parties at the meeting on March 2, 1957.

Upon direct examination the plaintiff asserted that there was a definite agreement, prior to the first bid letting, that if the plaintiff was the low sub-bidder on the ventilation portion of the contract with the defendant, and the defendant was the low bidder on the entire mechanical contract the plaintiff would get the job for the ventilation portion of the contract. The reason for this type of agreement, according to the plaintiff's testimony, was because the defendant was a competitor of the plaintiff in sheet metal work and the plaintiff did not want to quote a figure to the defendant and give away the amount that the plaintiff had figured for the ventilation portion of the contract. The plaintiff testified that he thought the same terms applied to the second sub-bid as the first sub-bid, and if the plaintiff were the low sub-bidder on the ventilation portion of the contract the plaintiff would get that portion of the job. The plaintiff made the only sub-bid on the ventilation portion of the mechanical contract and the defendant was the low bidder for the entire mechanical portion of the contract. After the defendant had the mechanical contract the plaintiff testified that he called the defendant and that the defendant asked if he could get a modification of the plaintiff's sub-bid since the defendant could buy some of the heating and ventilating units at a lower price than the plaintiff had figured in his sub-bid. In regard to this modification the parties met on March 2, 1957. The plaintiff testified that at this meeting he made a proposition to the defendant concerning these units and told the defendant that if the defendant wanted to furnish the units the plaintiff would allow the cost of the units plus the potential profit that had been figured thereon plus the cost of their transportation and deduct these amounts from the plaintiff's sub-bid. However, the plaintiff would still keep the original overhead margin since the plaintiff would have to install and adjust the units and look after them under a one year warranty. The plaintiff testified that this was agreeable to the defendant who said 'that is fine and dandy, you have a deal.'

On redirect examination the plaintiff testified that the agreement was intended to be binding on the parties at the time it was orally made on March 2, 1957.

However, upon cross-examination, the following conflicting testimony was elicited from the plaintiff:

'Q. But I say you didn't take Mr. Reber's word for it, you wanted it in writing before it became final, did you not? A. At the request of Mr. Reber that he wanted it----

'Q. Yes. Then both you and Mr. Reber contemplated that agreement was in writing before it was effective, did you not? A. We wanted a record----

'Q. That is right, and before it was effective they both had to be in writing?

'Mr. Burton: Just a moment, counsel. I wonder if you would be kind enough to let Mr. Klemens finish his answers before you commence your new question.

'Q. Did you have something you wanted to add to any part here? A. I have lost my train of thought now.

'Q. All right, let me start over part of it. Both you and Mr. Reber, acting for and on behalf of your organizations, contemplated before it was a...