Trad Industries, Ltd. v. Brogan

• Decision Date: 22 January 1991
• Docket Number: No. 90-019,90-019
• Citation: 246 Mont. 439,805 P.2d 54
• Parties: , 14 UCC Rep.Serv.2d 718 TRAD INDUSTRIES, LTD., A Canadian Corporation, Plaintiff, Respondent and Cross-Appellant, v. Welch E. BROGAN, Defendant and Appellant.
• Court: Montana Supreme Court

Page 54

805 P.2d 54

246 Mont. 439, 14 UCC Rep.Serv.2d 718

TRAD INDUSTRIES, LTD., A Canadian Corporation, Plaintiff Respondent and Cross-Appellant, v. Welch E. BROGAN, Defendant and Appellant.

No. 90-019.

Supreme Court of Montana.

Submitted on Briefs Aug. 23, 1990.

Decided Jan. 22, 1991.

Richard L. Kalar, Emigrant, for defendant and appellant.

Kent R. Douglass, Swandal & Douglass, Livingston, for plaintiff, respondent and cross-appellant.

BARZ, Justice.

Defendant and appellant Welch E. Brogan appeals the judgment awarded plaintiff and respondent Trad Industries, Ltd. following a non-jury trial in the District Court of the Sixth Judicial District, Park County. Trad Industries cross-appeals. We affirm.

Brogan raises the following issues on appeal as framed by this Court:

1. Did the District Court allow testimony in violation of the parol evidence rule?

2. Did the District Court err in enforcing the oral agreement extending the cut-off dates of the written contracts?

3. Is there substantial credible evidence to support the District Court's findings of fact?

4. Did the District Court err by awarding Trad Industries damages for all 82 elk contracted for?

Trad Industries raises one additional issue on cross-appeal:

Did the District Court err in denying Trad Industries exemplary damages?

Defendant Welch E. Brogan operates the Cinnabar Game Farm located at Corwin Springs, Montana and has been engaged in the game farming business for over forty years. On December 14, 1986, Brogan and Trad Industries (Trad), a Canadian corporation located in Handel, Saskatchewan, entered into the first of the two contracts which form the basis of this action. This first Brogan-Trad contract was for the sale of fifty cow elk at a price of $1,750 each and ten heifer calves at $1,000 each, United States funds. The agreement included terms stating that, "Only animals that pass the required tests for export to Canada will be purchased" and that "Welch E. Brogan shall pay for all quaranteen [sic] and testing of the animals contracted for, before April 1st., 1987, the cut-off date of this agreement." Trad paid Brogan a deposit of $19,500 to be applied toward the total purchase price of $97,500.

On December 19, 1986, Brogan sold to Trad twenty-seven cow elk for $1,750 each. These animals were not part of the fifty cow elk which were the subject of the first Brogan-Trad contract. Trad paid the entire purchase price of these elk at the time of sale.

On December 21, 1986, Brogan executed a receipt to Carden Farms, another Canadian buyer, for payment of 150 elk with 149 delivered and 51 remaining of 200 elk contemplated under two Brogan-Carden Farms contracts. That same day Brogan and Carden Farms entered into a third contract. Brogan agreed that in exchange for an additional $25,000 paid by Carden Farms, Carden Farms would have a right of first refusal on all future elk for a period of one year with the exception of 50 cow elk committed to Trad and elk that Brogan would keep for his home herd.

Eight days after entering into the third agreement with Carden Farms, Brogan, on December 29, 1986, entered into another contract with Trad for an additional thirty-two cow elk at $1,750 each. This agreement was substantially the same as their first contract but included a May 1, 1987 cut-off date. Trad paid a deposit of $11,200 toward the purchase price of $56,000.

According to the testimony of Ron Loerzel, the president of Trad Industries, Trad entered into a number of contracts with third parties for the resale of the elk it was to receive under the contracts with Brogan. Ron Loerzel also testified that Brogan was made aware of the negotiations with third-parties to resell the elk.

During January through March, 1987, Trad telephoned Brogan on approximately fourteen separate occasions regarding Brogan's progress toward having the elk ready for delivery to Trad. Testimony elicited at trial shows that Brogan stated that the next 51 elk would be for Carden Farms but he expressed a clear intention to perform the contracts and assured Trad that he would have elk available to fulfill their contracts. In later telephone conversations Brogan stated some of the elk would be available for delivery to Canada after the cut-off dates set forth in the contracts.

On March 24, 1987, Ron Loerzel and his brother Terry Loerzel met with Brogan in Montana. Conflicting testimony was presented as to what occurred during this meeting. Brogan testified that he offered to refund Trad's deposits. The Loerzels testified, and the District Court found, that Brogan again stated that he would deliver the elk pursuant to the contracts, however, delivery dates would be pushed back to late April and mid to late May, 1987.

Throughout this time period, Brogan continued with the difficult testing procedure necessary to secure the USDA health certificate required by Canadian officials to allow the import of elk into that country. In order to bring elk into Canada, the elk must be free of four diseases: tuberculosis, brucellosis, anaplasmosis and blue tongue. Tests for these diseases are conducted by drawing blood samples from each animal and submitting the samples to a laboratory for analysis.

Upon undergoing the first series of tests, each elk is fitted with a permanent ear tag with a number which serves to identify that animal throughout the testing process. When a group of elk is tested, the group must be held apart from other elk pending receipt of the test results. If those elk all pass the series of tests, they then remain isolated for a period of sixty days, after which they are administered the same series of tests for a second time. If they pass the second series of tests, the USDA issues its health certificate and Canadian authorities will allow their import. The animals must cross the Canadian border within thirty days after issuance of the health certificate. If an individual elk fails one or more of the tests, it is held back from the group. Thereafter, the group may start the testing cycle over again after a waiting period of thirty days.

On March 27, 1987, Trad's attorney sent a letter to Brogan inquiring as to his intentions of performing the contracts and indicating Trad would file a lawsuit for lost profits if Brogan did not perform. On April 1, 1987, Brogan sent a letter to Trad returning the $30,700 deposited with him and stating that he considered all sales to Trad closed.

On April 6, 1987, Trad filed its complaint in the District Court seeking specific performance of the two Brogan-Trad contracts, or in the alternative, an award of damages for breach of contract. Trad also sought exemplary damages for breach of the implied covenant of good faith and fair dealing.

After a non-jury trial the District Court found that Brogan breached the contracts and awarded Trad lost profits on the resale of the 82 cow elk contracted for, such profits amounting to $102,103.10, together with costs of $279.90. The District Court denied Trad exemplary damages.

From this judgment Brogan appeals and Trad cross-appeals.

The first issue raised on appeal is whether the District Court allowed testimony in violation of the parol evidence rule. Brogan argues the District Court erred in allowing testimony regarding the representations he made to Trad at the time of contracting that he had 150 cow elk to sell, most of which would be ready for final testing for export to Canada in February, 1987 and that a proposed contract for the sale of the elk had been found unacceptable by Brogan. Brogan also argues the court erred when it allowed testimony regarding telephone conversations between Trad and Brogan from January through March of 1987 in which Brogan expressed his intention to perform the contracts, even if past the cut-off dates of the contracts.

The subject of the Brogan-Trad contracts was the sale of elk which come within the Uniform Commercial Code definition of "goods." See, § 30-2-105(1), MCA. Thus, the sale of the elk is governed by the Code and the Code provisions must be given primary consideration, with the law of contracts being used only to supplement the Code provisions. Norwest Bank Billings v. Murnion (1984), 210 Mont. 417, 422-23, 684 P.2d 1067, 1070. The relevant statute addressing parol evidence is § 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.

Section 30-2-202, MCA, provides that terms of the written contract cannot be contradicted by representations or negotiations which occurred prior to or contemporaneous with the written agreement. The telephone conversations are not barred by the parol evidence rule. These occurred after the writings and pertain to Trad's assertion that the contracts were subsequently modified. As for the proposed contract, no evidence of the terms of that proposed contract was entered into the record but was referred to merely to provide a foundation for the introduction of the two Brogan-Trad contracts. The District Court did not err in allowing this testimony.

The language of the two written contracts is clear and unambiguous. There are no terms within these contracts which state that Brogan had 150 cow elk to sell and that most of those elk would be ready for final testing for export to Canada in February, 1987. Therefore, the fact there may have been...