No. 92-375
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
LUMBER ENTERPRISES, INC.,
a Montana corporation,
Plaintiff, Respondent and Cross-Appellant,
DUANE F. HANSEN and PEGGY HANSEN,
d/b/a MODEL LOG HOMES,
Defendants, Appellants and Cross-Respondents,
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Marcelle C. Quist, Quist Law Office,
Bozeman, Montana
For Respondent:
John H. Tarlow, Landoe, Brown, Planalp & Braaksma,
P.C., Bozeman, Montana
.
Submitted on Briefs: January 8, 1993
F E I ~ 1 1993 Decided: February 11, 1993
Chief Justice J. A. Turnage delivered the Opinion of the Court.
This is an action for breach of contract. The District Court
for the Eighteenth Judicial District, Gallatin County, granted
judgment to Lumber Enterprises, Inc., in the amount of $45,460.50
plus interest and costs. Duane F. Hansen and Peggy Hansen appeal.
Lumber Enterprises, Inc., cross-appeals. We affirm.
The issues are:
1. id the ~istrictCourt abuse its discretion in application
of § 30-2-309, MCA?
2. Should the court have awarded prejudgment interest to
Lumber Enterprises, Inc.?
Lumber Enterprises, Inc., is a Montana corporation with its
principal place of business at Gallatin Gateway, Montana. It sells
specially prepared logs for log homes through a network of dealers.
Duane F. Hansen and his wife Peggy Hansen do business as Heartbilt
Homes (formerly Model Log Homes) in Stockton, Illinois, as a dealer
of Lumber Enterprises' products.
The parties have had a working relationship since 1972. On
October 29, 1985, at the request of the Hansens, the parties agreed
to a special pricing arrangement for approximately thirty loads of
logs to be delivered in January, February and March of 1986.
Lumber Enterprises agreed to the reduced price to keep its crews
busy during the winter months.
The thirty loads were delivered but, at the request of the
Hansens, over a much longer period of time than originally agreed.
The last load was shipped on October 31, 1988. The price of the
last twelve of the thirty loads is the subject of this lawsuit.
On April 27, 1987, Lumber Enterprises issued a new price list
to the Hansens and told them to "take it or leave it." The practi-
cal effect was to raise prices to the Hansens by about 50 percent.
After the April 1987 price change, the Hansens ordered twelve loads
of logs to complete the thirty-load agreement of October 1985.
They paid for the first nine of those twelve loads at the new 1987
prices, but under protest. Mr. Hansen testified he told the office
manager for Lumber Enterprises that eventually there would have to
be a reconciliation of the 1987 prices. The Hansens did not make
payment for the last three loads, contending that this was the only
way to force Lumber Enterprises to deal with their concerns.
Lumber Enterprises brought suit claiming $45,460.50 was due
from the Hansens for logs, catalogs, trusses and insulation, using
the 1987 prices. The Hansens contended the twelve disputed loads
should have been billed at 1985 prices. They further contended
that Lumber Enterprises owed them $859 as part of a professional
photography bill: a credit of $9,827.55 for half logs billed as
full logs; and a $500 credit for help in photographing and
assembling new company catalogues. By the Hansens' calculations,
Lumber Enterprises owed them money.
After trial, the District Court concluded that because of the
long history of amicable dealings between the parties, neither
party saw the need to have a formal written contract. It concluded
that the Hansens would expect to deal with Lumber Enterprises in
the future, because of the specialized nature of the product. The
court concluded that the parties, by their conduct, allowed the
shipments agreed to in the October 1985 negotiations to extend past
the express terms of the contract and that the practical effect of
the contract between the parties and their modifications of that
contract was to transform the relationship into a contract calling
for successive performances but indefinite in duration. The court
concluded that 6 30-2-309, MCA, applied:
Absence of specific time provisions --
notice of termina-
tion. (1) The time for shipment or delivery or any other
action under a contract if not provided in this chapter
or agreed upon shall be a reasonable time.
(2) Where the contract provides for successive perfor-
mances but is indefinite in duration it is valid for a
reasonable time but unless otherwise agreed may be
terminated at any time by either party.
(3) Termination of a contract by one party except on the
happening of an agreed event requires that reasonable
notification be received by the other party and an
agreement dispensing with notification is invalid if its
operation would be unconscionable.
The court further concluded that the unilateral announcement
of new prices by Lumber Enterprises on April 27, 1987, did not
satisfy the requirement under § 30-2-309 (3), MCA, of reasonable
notice. Taking into account the long history of dealings between
the parties, the court deemed that thirty days' notice would be
reasonable before Lumber Enterprises changed its prices.
For purposes of calculating damages, the court allowed the
parties to supplement the evidence to show how many loads of logs
were ordered by the Hansens during the thirty-day period beginning
April 27, 1987. The parties stipulated that no loads were ordered
during that period. The court then ruled that the Hansens owe
Lumber Enterprises $45,460.50, plus costs of suit. The court
denied the credits sought by the Hansens for photography and half
logs, the damages sought by the Hansens for breach of good faith
and consequential damages, and the request of Lumber Enterprises
for attorney fees.
The Hansens appeal and Lumber Enterprises cross-appeals.
I
Did the District Court abuse its discretion in application of
$3 30-2-309, MCA?
The Hansens claim the April 27, 1987 price increase by Lumber
Enterprises was a unilateral modification of a term of the con-
tract, not a termination of the contract. They assert that the
attempted modification of the contract was not made in good faith
and that the original contract should be enforced. They claim the
remedy should have been the one for modification of contract in the
absence of good faith.
The test of good faith as to merchants includes observance of
reasonable commercial standards of fair dealing in the trade. This
may in some situations require an objectively demonstra-
ble reason for seeking a modification. But such matters
as a market shift which makes performance come to involve
a loss may provide such a reason even though there is no
such unforeseen difficulty as would make out a legal
excuse from performance under Sections 30-2-615 and 30-2-
616.
Official Comment to 5 30-2-209, MCA.
A Lumber Enterprises manager testified that the April 27, 1987
price increase was necessary "[b]ecause we were losing money at the
1985 price agreement." He testified that when the original agree-
ment was entered, Lumber Enterprises had never before sold truck-
loads of logs without the usual trim work done on them, and they
believed the price was proper. However, after a year of supplying
the Hansens with such logs, they realized they were selling the
logs at a price below the cost of production. We conclude that the
test of good faith has been met.
More importantly, the Hansens ignore that the contract had
already been extended indefinitely, with the acquiescence of both
parties, at the time of the April 27, 1987 price increase. The
indefinite extension placed the contract within § 30-2-309 ( 2 ) , MCA,
in that "the contract provides for successive performances but is
indefinite in duration." Under that statute, termination is
allowed "at any time by either partyu in such a contract.
The Hansens contend that the contract between the parties was
never terminated, so that 30-2-309(3), MCA, does not apply.
Termination is defined at 3 30-2-106(3), MCA, as "when either party
pursuant to a power created by agreement or law puts an end to the
contract otherwise than for its breach." As stated above, 3 30-2-
309 (2), MCA, provides that either party has the power, at any time,
to terminate a contract for successive performances but indefinite
in duration. We conclude that when Lumber Enterprises unilateral-
ly raised its prices, it had the power to, and did, put an end to
the previous contract between the parties.
Section 30-2-309(3), MCA, provides that a party is entitled to
"reasonable notification" before a contract is terminated. The
statute leaves to the finder of fact the determination of what is
"reasonable notification." Here, the contract between the parties
originally called forthe purchase of approximatelythirty loads of
logs during a three-month period. The time was extended for over
a year, at the Hansens' request, before Lumber Enterprises changed
its prices. We conclude that, in this case, the court did not
abuse its discretion in adopting thirty days' notice as reasonable
and in determining that the Hansens were entitled to the original
contract price only on additional loads of logs purchased during
that amount of time.
In buying loads of logs more than thirty days after the
unilateral price increase, the Hansens effectively entered into a
new contract with Lumber Enterprises. Lumber Enterprises brought
this suit to collect on the unpaid debt under that contract.
We hold that the District Court did not abuse its discretion
in application of 5 30-2-309, MCA.
I1
Should the court have awarded prejudgment interest to Lumber
Enterprises, Inc.?
One of the reasons the District Court denied the request of
Lumber Enterprises for prejudgment interest was that Lumber Enter-
prises did not file a brief in support of its motion to amend the
findings to allow the award of prejudgment interest. The filing of
a supporting brief is required by Uniform District Court Rule 2(b) :
[Flailure to file a Brief within five days [of the filing
of a motion] by the moving party shall be deemed an
admission that the motion is without merit.
By failing to abide by this rule, Lumber Enterprises admitted at
the trial court level that its motion for the award of prejudgment
interest was without merit. As a result, it waived its right to
bring a request to this Court to award such interest. We therefore
will not consider this issue.
Affirmed.
/'
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Chief Justice L.
,
8
We concur: