No. 92-297
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
DEBBIE NENTWIG,
Plaintiff and Appellant,
-vs-
UNITED INDUSTRY, INC., DEC 3 0 1992
Defendant and Respondent.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Robert W. Holmstrom, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
W. Scott Green, Attorney at Law, Billings, Montana
For Respondent:
Earl J. Hanson, Attorney at Law, Billings, Montana
Submitted on Briefs: October 2 2 , 1992
Decided: December 30, 1992
Filed:
Justice John Conway Harrison delivered the opinion of the Court.
This is an appeal from the Thirteenth Judicial District,
Yellowstone County, the Honorable Robert W. Holmstrom presiding.
Appellant Debbie Nentwig (Nentwig) appeals from the entry of
summary judgment in favor of respondent United Industry, Inc.
(United) on her claims of breach of contract and fraud. We affi n n .
The following issues are raised on appeal:
1. Did the District Court abuse its discretion by raising an
issue that was not in the pretrial order?
2. Did the District Court err in granting summary judgment in
favor of United?
3. Did the District Court err in refusing to grant summary
judgment in favor of Nentwig?
Nentwig and her then partner, Jill Murphy, entered into a
lease dated October 21, 1982, to rent approximately 271 square feet
of space in the Transwestern I building (TWI) in Billings. The
term of the lease was December 15, 1982 to December 14, 1985. The
purpose of the lease w a s to provide a location for their hair
styling salon. Nentwig dealt with Jeff Shoop who was a managing
partner in TW Partnership, the owner of TWI, and with Larry Nitz
who worked for the firm that managed TWI for the partnership.
In October 1985, Nentwig and Murphy dissolved their
partnership. Also in October 1985, Nitz delivered to Nentwig a
copy of a lease for another three years because the original lease
was due to expire in December of that year. This new lease (the
1985 lease) expired on October 31, 1988. Nentwig signed this lease
2
and added a letter that read:
f am herewith delivering an executed Office Lease
Agreement pertaining to the space I am leasing for "A
Touch of Class1@barbershop. It is my understanding that
if you cancel this lease after October 31, 1987, you will
provide me with alternative space in the TW Plaza and
will pay me some amount to be agreed upon for relocation
costs and for leasehold improvements. I understand that
you do not want to have this put in writing in the lease
but I do want you to know what my understanding is in the
event you elect to terminate the lease after October 31,
1987. As you know, I have had to buy out my ex-partner,
Jill Murphy, and in doing so I had to obtain a
substantial loan which will not be paid off until after
October 31, 1987. Therefore, it is extremely important
to me that I know that I have space available to me down
the road and that I will not be required to spend
additional money for leasehold improvements, etc. If
this letter does not reflect our understanding, please
let me know as soon as possible.
She returned the lease and the letter to Nitz who then passed
it on to Jeff Shoop for execution by TW Partnership. However, no
executed copy was produced, and Shoop and Nitz allege that it never
was executed. In fact, Shoop and ~ i t z testified in their
depositions that they told Nentwig that the long term lease would
not be signed until another tenant, Mutual of New York, decided
whether it wanted to expand into her area of the building. They
c l a i m to have told her that the lease was not signed. However,
Nentwig claims that she was under the impression the lease had been
signed and that she was never given any indication that it was not,
or would not be, signed. She does admit in her deposition that
Nitz never told her or led her to believe that Shoop had physically
signed the document.
ent twig remained in the building and continued to pay rent
after the original lease expired in December 1985.
In July 1986, TW Partnership, as part of the sale of the
building, assigned its leases and rents in TWI to United, from whom
it had bought TWI originally. Appended to the assignment was a
list entitled "Transwestern 1 Leases," which included Nentwig's
salon. Nitz remained as manager of the TWI property.
In December 1986, Nitz sent a letter to all TWI tenants,
including Nentwig, which stated:
All office space leases between Transwestern 1 Tenants
and TW Partnership have been assigned to United Industry,
Inc. Here is a copy of the Assignment document for your
files. If you have a written lease, this document should
be attached to it.
In July 1988, Nentwig sent a letter to Nitz informing him that
she desired to exercise an option to renew her lease, which was
contained in the 1985 lease. United's general counsel denied
Nentwig's request on the basis that the 1985 lease had never been
signed on the lessor's behalf, therefore she had no option to
exercise. Counsel informed Nentwig that she had a month-to-month
lease after United took back the property. The letter informed
Nentwig that the building would undergo extensive remodelling and
that her tenancy was terminated effective October 31, 1988. We
note that this is the date the 1985 lease expired under its own
terms anyway.
Nentwig then sued United for breach of contract for failing to
allow her to renew the lease, provide alternative space, pay
relocation costs, and reimburse her for improvements. Later she
filed an amended complaint asserting that her claim was not barred
by the Statute of Frauds and alleging part performance, equitable
estoppel, promissory estoppel, and fraud. She was again allowed to
amend her complaint to allege breach of the implied covenant of
good faith and fair dealing.
A pretrial conference was held September 13, 1991, at which
time the attorneys-andthe judge signed a pretrial order. On the
day of trial, the court held a conference in chambers where
Nentwig's counsel informed the court that he was relying on the
option provision contained in the 1985 lease. The judge then
informed the parties that his independent research in preparing for
trial led him to two Montana cases, Riis v. Day (1980), 188 Mont.
253, 613 P.2d 696, and Drug Fair Northwest v. Hooper Enters., Inc.
(1987), 226 Mont. 31, 733 P.2d 1285, which he felt controlled the
issues in this case. He informed the parties that the option
clause in the 1985 lease might be void for vagueness or
indefiniteness under the holdings in those cases. He recognized
that the issue had not been raised in the pleadings, in the motions
for summary judgment, in the pretrial order, or in the parties
trial briefs. He gave United fifteen days to file a brief on the
issue and to make any motion it deemed appropriate. He gave
Nentwig fifteen days to respond, and he gave United five days to
reply after that.
Both parties filed briefs and moved for summary judgment. The
District Court granted unitedismotion and denied Nentwiglsmotion.
I
Did the District court abuse its discretion by raising an
issue that was not in the pretrial order?
Nentwig asserts that the issue of whether the provision was
void for vagueness or indefiniteness had not been raised in a
timely fashion, therefore it should be considered waived. The
District Court recognized that the issue had not been previously
raised, but on the basis of Rule 16, M.R. Civ.P., which provides for
modification of the pretrial order to prevent manifest injustice,
it determined that it would be best to dismiss the jury and provide
the parties an opportunity to argue the issue in briefs.
The District Court reasoned that !Ithe submission to the jury
of a case contrary to the law as announced by our Supreme Court
would be manifest injustice to one or both of the parties." After
considering the alternatives, the court determined that dismissing
the jury and allowing the parties to brief the issue was the best
procedure to follow.
Nentwig correctly points out that failure to raise an issue in
the pretrial order may result in a waiver. Har-Win, Inc, v.
Consolidated Grain & Barge Co. (5th Cir. 1986), 794 F.2d 985; Miles
v. Tennessee River Pulp 6t Paper Co. ( 1 1 t h C i r . 1989), 8 6 2 F.2d
1525. The purpose of the pretrial order is to prevent surprise,
simplify the issues, and permit the parties to prepare for trial.
Bache v. Gilden (Mont, 1992),.827 P.2d 817, 819, 49 St.Rep. 203,
204. However, this Court said in Bell v. Richards (1987), 228
Mont. 215, 217, 741 P.2d 788, 790, that the pretrial order "should
be liberally construed to permit any issues a t trial that are
'embraced within its language."' (~uoting
Miller v, Safeco Title
Ins. Co. (9th Cir. l985), 758 F.2d 364, 368.) But the theory or
issue must be at least implicitly included in the pretrial order.
United States v. First Nat'l Bank of Circle (9th Cir. 1981), 652
F.2d 882, 886; ACORN v. City of Phoenix (9th Cir. 1986), 798 F.2d
In the present case, in chambers before the trial was to
begin, Nentwig's counsel informed the District Court that Nentwig
intended to rely on a theory that United breached the option clause
contained in the 1985 lease. In her contentions listed in the
pretrial order, Nentwig raised this issue generally by claiming
that United breached the lease. In the "Issues of Laww section of
the pretrial order, Nentwig raised the issue of whether options to
renew a lease are subject to the Statute of Frauds. United
generally denied that it had breached the lease or any contract.
In resolving this matter, the judge was required to review the
contract, especially the option provision. We feel that Nentwig's
reliance on the option provision necessarily carried with it a
requirement that the provision be valid.
As the court said in Manbeck v. Ostrowski (D.C. Cir. 1967),
384 F.2d 970, 975, cert. denied, 390 U.S. 966 (1967):
[Wlhile the pre-trial order may be the beginning, it is
never the end of a matter of this sort. It normally
"controls the subsequent course of the action," but not
if it is "modified at the trial to prevent manifest
injustice." The judicial function does not terminate
upon discovery that an issue is unspecified, but extends
to a determination as to whether the ends of justice
implore that the issue nonetheless be introduced into the
litigation. This frequently involves a delicate balance
of competing considerations, variable from case to case,
in order that the decision may be soundly made. And
absent perceptible irregularity in a process so largely
discretionary, we are loath to disturb the result.
Although the district court has wide discretion, Manbeck, and
the pretrial order is to be viewed liberally, m, the district
court must be mindful not to prejudice the parties. See Glissman
v. AT&T Technologies, Inc. (8th Cir. 1987), 827 F.2d 262. We
recently held in Bache that the district court abused its
discretion by allowing a witness who had not been listed in the
pretrial order to testify at trial. We held that because the
respondent had not revealed the information in a timely fashion and
the appellant was not given the opportunity to depose the witness,
the court had abused its discretion. Bache, 827 P.2d at 819.
In a case similar to the present one, Morris v. Homco Int'l,
Inc. (5th Cir. 1988), 853 F.2d 337, the seller of a business
brought suit to collect payments under the terms of a non-
competition clause. Although the defendant buyer had not raised
the issue of substantial performance in his counterclaim or in the
pretrial conference, the court, in drafting its opinion a month
after trial, injected the doctrine into the case to the defendant's
benefit. The appellate court held this was error because the issue
had not been raised and the plaintiff had no notice that the issue
would be important in the case "until the time had passed to meet
the issue squarely." 853 F.2d at 343.
On the other hand, we held that there was no error in Ottersen
v. Rubick (1990), 246 Mont. 93, 803 P.2d 1066, where even though
certain legal issues had not been set forth specifically in the
pretrial order, they had been argued in briefs before the court.
We hold that the District Court did not abuse its discretion
by raising the issue of vagueness because it is vested with wide
discretion, the issue was implicit in those raised, and the court
overcame any prejudice to Nentwig by allowing her a full
opportunity to brief the issue. We also note that the court's
action did not require Nentwig to develop further facts or present
new evidence to make her argument. This was strictly a matter of
law.
Did the District Court err in granting summary judgment in
favor of United?
United also filed a motion for summary judgment along with its
brief on the issue of vagueness. The court granted this motion.
Summary judgment I1shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law." Rule 56(c), M.R.civ.P. On
appeal, this Court applies the same standard as that applied by the
trial court. McCracken v. City of Chinook (1990), 242 Mont. 21,
24-25, 788 P.2d 892, 894.
We first address the issue of whether the option provision in
the lease was void for vagueness or indefiniteness. The provision
states, I9Lessee shall have an option to renew this Lease for 3
years with rent to be agreed upon by the parties.I1
The District Court relied on Riis v. Day (1980), 188 Mont.
253, 613 P.2d 696, and Drug Fair Northwest v. Hooper Enters., Inc.
(19871, 226 Mont. 31, 733 P.2d 1285, in determining that this
clause was void because it was "nothing more than a n agreement to
agree in the future [and did] not establish a definite mode for the
determination of the rent. .. .Ig Riis is analogous to the present
case. In Riis, a two-year lease contained a renewal provision
which read in part:
Lessees are hereby given an exclusive option to renew
this Lease and Agreement for an additional two years,
under the same terms and provisions as this present Lease
and Agreement except that the amount of rental shall be
subject to negotiation and mutual agreement between the
parties.
We stated in Riis that generally an agreement must contain all
essential terms to be binding upon the parties. 613 P.2d at 697.
We then noted that at that time this Court had not ruled on the
validity of a renewal provision where the amount of rent was
negotiable, and that other jurisdictions were divided on the issue.
In Riis, we looked to Slayter v. Pasley (Or. 1957), 264 P.2d
444, for a discussion of the three prevailing views of the time.
requires that the renewal provision specify the term
The Ifoldrulenv
of the lease and the rate of rent with certainty, leaving nothing
for future determination. 613 P.2d at 697. The Itfirstminority
view1' permits enforcement of the provision if it expressly
contemplates a clear and definite mode for determining future rent.
613 P.2d at 697. The "liberal viewt1 permits enforcement if the
contract shows that the parties mutually agreed to meet in the
future and make provisions for reasonable rent. 613 P.2d at 698.
In Riis we said:
10
We believe the 'Ifirst minority viewn reflects the best
standard. It recognizes the business utility of renewal
provisions. Such p r o v i s i o n s often do provide the
inducement for entering the original lease. But, given
fluctuating market conditions, the parties cannot fairly
determine what would be an adequate rent in the future.
At the same time, this standard also adheres to the
wisdom of the old rule. It recognizes the danger of
courts arbitrarily interpolating provisions into an arm's
length transaction to breathe life into an otherwise
invalid agreement.
We cited Riis extensively in Drus Fair where Drug Fair argued
that a letter from the owner of a shopping center in which it was
a tenant constituted a lease. The letter provided for four five-
year options but did not provide at least a method to determine
rent during those periods. We concluded that Drug Fair only had a
month-to-month lease. 733 P.2d at 1288.
Nentwig argues that various cases cited in Slavter establish
that the first minority view only requires that the language of the
lease demand reasonableness or adherence to commercial standards.
However, Riis and Drus air require more. Although they may be
inconsistent with the cases cited in Slavter, we clearly follow
Riis and Druq Fair. They require at least a definite mode for
determining rent.
Nentwig argues that our decision in Story v. City of Bozeman
(1990), 242 Mont. 436, 791 P.2d 767, effectively overrules Riis by
providing that If[e]ach party to a contract has a justified
expectation that the other will act in a reasonable mannerw and
that every contract contains an implied covenant of good faith and
fair dealing. 791 P.2d at 775. The requirement of reasonableness
is not inconsistent with Riis and Druq Fair. These cases, however,
require more for the reasons stated in u,
which we have
reproduced above. Anytime a material term is required, one could
argue that provides a sufficient method of establishing that
term by requiring that the parties act reasonably. We refuse to
extend Story that far.
The present case illustrates the problem foreseen in u.
Under the 1982 lease, Nentwig paid $400 per month over the three-
year term. Under the 1985 lease, she paid $405 per month. This
rent was higher on a per square-foot basis than what the other
tenants were paying. They averaged about nine dollars per square-
foot during the first lease period and twelve dollars per square-
foot during the second period. Nentwig was paying about eighteen
dollars per square-foot until her rent was reduced during the
second term when United took back the building. In her letter
seeking to exercise the option provision, she proposed that the
rent be ten dollars per square-foot for a total of $225.83 per
month. This is two dollars per square-foot less than she testified
Shoop was willing to agree to in the 1985 lease. We point out that
the 1982 and 1985 leases both contained a provision that Nentwig
would pay $532 per month if she held over after the expiration of
the term. Nentwig relies on this term to argue that a price had
been fixed in the lease and therefore, the option provision is not
vague.
The range of prices evidenced in this case provides a clear
example of the problem that the Court in Riis and Druq Fair sought
to avoid. The courts must not be forced to provide the material
term of rent.
We hold that the ~istrictCourt did not err in determining
that the option clause was void for vagueness when it granted
summary judgment .
Nentwig also argues that there was a writing sufficient to
satisfy the Statute of Frauds and puts forth several other
arguments including an equitable argument that "[tlhat which ought
to have been done is to be regarded as done, . . . ." Section 1-3-
220, MCA; an argument that the lease was signed because
"Transwestern Partnershipw was typed above the signature line; an
argument that options are not subject to the Statute of Frauds;
integration; part performance; and fraud. Because the District
Court assumed for the purpose of summary judgment that TW
Partnership had signed the lease, therefore eliminating any Statute
of Frauds problems Nentwig encountered, we need not address these
issues. As we view the facts in the same light as the District
Court, we will make the same assumption. McCracken, 788 P.2d at
894.
Nentwig argues that United, as assignee of the leases in TWI,
assumed the benefits and burdens of the assignment, As we hold
that the option provision was void, there is no burden associated
with it.
Further, Nentwig argues that United breached the relocation
agreement contained in the letter she included with the 1985 lease.
That letter stated:
It is my understanding that if you cancel this lease
after October 31, 1987, you will provide me with
alternative space in the TW Plaza and will pay me some
amount to be agreed upon for relocation costs and for
leasehold improvements.
Jeff Shoop admitted in his deposition that he would provide as
stated in the letter. However, Nentwig does not assert, nor could
it be argued, that the agreement extended beyond the term of the
lease to which it was attached. That lease expired by its own
terms on October 31, 1988. Nentwig was not forced to relocate
between October 31, 1987 and October 31, 1988. Therefore, United
did not breach this agreement.
Lastly, Nentwig argues in her brief to this Court that the
District Court erred in granting summary judgment to United because
United committed fraud. The elements of fraud are: a
representation, falsity of the representation, materiality of the
representation, the speaker's knowledge of the falsity of the
representation or ignorance of the truth, the speaker's intent that
it should be relied on, the hearer's ignorance of the falsity, the
hearer's reliance upon the representation, the hearer's right to
rely on the representation, and consequent and proximate injury
caused by reliance on the representation. Lee v. Armstrong (1990),
244 Mont. 289, 293, 798 P.2d 84, 87.
In its Memorandum accompanying the Order, the court stated:
While there is a genuine issue of material fact as to
whether or not the acts of the Defendant and its assignor
amounted to fraud, it is clear that Plaintiff did not
sustain any damage resulting from the alleged fraud. She
asserts that the fraud consisted of representations that
the 1985 lease had been signed and that a signed copy
would be returned to her, that she was entitled to and
did rely upon the representations. However, she was not
damaged thereby because she received everything that she
was entitled to receive under the 1985 lease. It expired
by its own terms on October 31, 1988, and she was
permitted to occupy the premises until that date.
Further, Defendant, after it acquired the building,
reduced her rent by fifty percent (50%) and as testified
by one or more of its officials, this would not have
occurred had it been known that there was a written
lease. Not only did the Plaintiff not sustain any damage
but she actually received a benefit from what she claims
to be the fraud committed upon her.
In her brief, Nentwig does not dispute the District Court's
determination that she was not damaged and in fact received a
benefit. We find no evidence on the record otherwise. She
received everything to which she was entitled under the 1985 lease.
Because the option provision was void, she could have suffered no
damages based on it.
We hold that the District Court did not err in granting
summary judgment to United.
I11
Did the District Court err in refusing to grant summary
judgment in favor of Nentwig?
In its Memorandum, the District Court stated that "[tlhe
granting of the Defendant's Motion for Summary Judgment of
necessity required a denial of the Plaintiff's Motion for Summary
Judgment. We agree.
Af finned.
December 30, 1992
CERTIFICATE O F SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
W. Scott Green
W. SCOTT GREEN, P.C.
301 North 27th Street
Billings, MT 59101
Earl J. Hanson
Attorney at Law
Suites 214-215, Transwestern I
404 North 31st St.
Billings, MT 59101
ED SMITH
CLERK O F THE SUPREME COURT
STATE OF MONTANA
BY: