Tractor & Equipment Co. v. Zerbe Bros.

• Decision Date: 30 December 2008
• Docket Number: No. DA 07-0425.,DA 07-0425.
• Court: Montana Supreme Court
• Parties: TRACTOR & EQUIPMENT CO., Plaintiff, Appellee and Cross-Appellant, v. ZERBE BROTHERS, a Montana corporation, Defendant, Appellant and Cross-Appellee.

199 P.3d 222

2008 MT 449

348 Mont. 30

TRACTOR & EQUIPMENT CO., Plaintiff, Appellee and Cross-Appellant, v. ZERBE BROTHERS, a Montana corporation, Defendant, Appellant and Cross-Appellee.

No. DA 07-0425.

Supreme Court of Montana.

Submitted on Briefs June 25, 2008.

Decided December 30, 2008.

For Appellant and Cross-Appellee: Robert Hurly, Attorney at Law; Glasgow, Montana, Matthew W. Knierim; Christoffersen & Knierim, P.C.; Glasgow, Montana.

For Appellee and Cross-Appellant: Robert L. Sterup, Jr.; Holland & Hart, LLP; Billings, Montana.

Justice W. WILLIAM LEAPHARTdelivered the Opinion of the Court.

¶ 1 The present case stems from an agreement between Tractor and Equipment Co. ("T & E") and Zerbe Brothers, Inc. ("Zerbe") for the sale of farm equipment in northeastern Montana. Under the terms of the agreement, known as the Consignment and Sales Agreement, T & E agreed to consign and to ultimately sell certain equipment manufactured by Caterpillar, Inc. ("CAT") to Zerbe for sale to Zerbe's customers in northeastern Montana. In 2000, T & E filed an action for a judgment declaring the Consignment and Sales Agreement void. In 2004, however, the District Court granted partial summary judgment in favor of Zerbe holding that the Consignment and Sales Agreement was subject to the protective provisions of the Montana Farm Implements Dealership Act ("MFIDA") §§ 30-11-801 through -811, MCA. The District Court denied a cross-motion for declaratory judgment as a matter of law filed by T & E. In 2007, the District Court entered Judgment in favor of Zerbe after concluding that T & E violated the MFIDA by substantially changing the competitive circumstances of the Consignment and Sales Agreement. The District Court awarded Zerbe $243,874.00 in damages, $64,575.11 in attorney fees, and $1,490.45 in costs.

¶ 2 Zerbe appeals, claiming the District Court underestimated its damages by failing to include certain profits received from trade-ins or profits made from sales outside a five-county area specified in the Consignment and Sales Agreement. Zerbe asks this Court to remand the action to the District Court with instructions to award $1.8 million in damages. T & E cross-appeals the damage award and the District Court's earlier determinations that the Consignment and Sales Agreement was subject to the MFIDA. T & E also claims the District Court erred, in a 2005 order, by concluding that Zerbe did not waive the MFIDA by agreeing to a termination provision in the Consignment and Sales Agreement, which allowed T & E to cancel the agreement for any reason with 30 days notice to Zerbe. We affirm.

¶ 3 The restated issues on appeal are as follows:

¶ 4 I. Did the District Court err in concluding that the MFIDA applied to the Consignment and Sales Agreement?

¶ 5 II. Did the District Court err in concluding that Zerbe did not waive the MFIDA by entering into the Consignment and Sales Agreement?

¶ 6 III. Did the District Court err in its calculation of Zerbe's damages?

BACKGROUND

¶ 7 In the mid-1990s, T & E and Zerbe entered into discussions about Zerbe managing the sale and rental of a high-end tractor known as the Challenger tractor, which at that time was manufactured by CAT. T & E, a Montana corporation with its principal place of business in Billings, Montana, was the exclusive dealer for CAT products and equipment in parts of eastern Montana, North Dakota, and Wyoming. After a series of events not relevant to the issues on appeal, T & E executed the Consignment and Sales Agreement on July 7, 1997. The agreement, which was drafted by counsel for T & E and reviewed by counsel for Zerbe, provided that T & E would consign and ultimately sell CAT equipment to Zerbe for sale to Zerbe's customers in northeastern Montana. According to evidence set forth in the record, T & E sought to establish a relationship with Zerbe because of Zerbe's well-established relationship with customers in northeastern Montana.

¶ 8 Under the terms of the Consignment and Sales Agreement, the parts and equipment on consignment to Zerbe ("Consigned Goods") would remain the property of T & E until purchased by Zerbe for sale to its customers. Title would also remain with T & E pending sale to Zerbe's customers, and Zerbe would keep the Consigned Goods at its facility in Glasgow. In addition to providing periodic requests for Consigned Goods to T & E, Zerbe was also required to furnish T & E with reports detailing the goods T & E had placed on consignment with Zerbe, and any losses sustained to those goods. It was also agreed that T & E would have "sole discretion as to which Consigned Goods" to place on consignment with Zerbe and that Zerbe would remain liable to T & E for any losses to the Consigned Goods. In the event any loss was sustained, Zerbe was obligated under the terms of the agreement to purchase those goods. Under paragraphs 13 and 14 of the agreement, Zerbe was precluded from selling or contracting to sell any of the Consigned Goods outside the counties of Valley, Phillips, Garfield, McCone, and Daniels. Further, Zerbe was to "use promotional literature, data, and information furnished by T & E for dissemination to customers only in furtherance of the objectives" of the agreement. And finally, but particularly important to this appeal, the agreement included a termination provision, which stated that "T & E has the right to terminate this Agreement for any reason at any time after thirty (30) days' prior written notice to Zerbe."

¶ 9 On March 31, 1999, T & E sent a letter to Zerbe stating that it was terminating the Consignment and Sales Agreement on April 30, 1999. Through Counsel, Zerbe responded by stating that T & E's letter violated Montana law for the termination of agricultural dealerships. Over a year later, on May 4, 2000, T & E filed a declaratory action in the Thirteenth Judicial District Court, Yellowstone County, claiming that it was "entitled to a declaratory judgment interpreting or construing the [Consignment Agreement] and declaring the rights, status and legal relations of the parties thereto." T & E also claimed that it was "entitled to a judgment declaring that . . . the Contract is terminated." In a letter dated May 5, 2000, T & E stated the following: "[I]n view of T & E's changed business circumstances, and in the exercise of its business judgment, T & E desires to exercise its contractual right of termination consistent with the contract, effective thirty days from today's date." Zerbe then moved for a change of venue to Valley County, Montana—the location of Zerbe's business. The court granted the motion, and T & E appealed the change of venue to this Court. We affirmed the change of venue in Tractor & Equipment Co. v. Zerbe Brothers, 2001 MT 162, 306 Mont. 111, 32 P.3d 721.

¶ 10 Zerbe counterclaimed following the change of venue to Valley County, arguing that the Consignment and Sales Agreement was a "dealership" agreement under the MFIDA and that T & E's termination of the agreement was wrongful. Zerbe then moved for partial summary judgment on the issue of whether T & E violated the MFIDA by unilaterally canceling the Consignment and Sales Agreement. On December 2, 2004, the District Court granted partial summary judgment to Zerbe that the Consignment and Sales Agreement was subject to the MFIDA. However, the District Court denied Zerbe's motion that T & E violated the MFIDA after determining that factual issues remained as to "whether T & E directly or indirectly gave notice of termination in violation of this protective provision." In the same order, the District Court determined that the "for any reason at any time" 30-day termination clause found in the subject Consignment and Sales Agreement was contrary to [the MFIDA] and thus, unenforceable. Based on this determination, the District Court voided the termination provision but enforced the remainder of the agreement, citing § 28-2-604, MCA, which provides that "[w]here a contract has several distinct objects of which one at least is lawful and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest." The District Court also denied T & E's cross-motion for declaratory judgment, which sought to void the entire agreement.

¶ 11 Thereafter, T & E filed a motion for partial reconsideration on April 4, 2005, claiming that Zerbe waived the MFIDA by agreeing to the 30-day termination provision in the Consignment and Sales Agreement. The District Court denied the motion on May 5, 2005, after determining that the MFIDA was adopted for a public reason and could not be contravened through private agreement under § 1-3-204, MCA. A bench trial was held on April 4-6, 2006. The District Court issued its Findings of Fact, Conclusions of Law and Order on November 8, 2006, and entered Judgment in favor of Zerbe on May 18, 2007. The District Court concluded that T & E violated the MFIDA by "substantially chang[ing] the competitive circumstances of the dealership agreement with Zerbe" and by failing "to give Zerbe proper notice and opportunity to rectify claimed deficiencies" under § 30-11-803, MCA, which requires a grantor of a dealership agreement to provide "at least 90 days' prior written notice . . . of termination, cancellation, nonrenewal, or substantial change in competitive circumstances" along with a description of the reasons for termination. The District Court awarded Zerbe $243,874.00 in damages, $64,575.11 in attorney fees, and $1,490.45 in costs. Zerbe appeals on the sole issue of whether the District Court correctly calculated its damages. T & E cross-appeals the damage award and the District Court's related orders with respect to the application of the MFIDA. Further facts are provided as necessary throughout the following discussion. We affirm the District Court on all issues.

STANDARD OF REVIEW

¶ 12 Our standard of review in appeals from summary judgment rulings is de novo. Mickelson v. Montana Rail...