No
No. 97-585
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 150
AMERICAN MUSIC COMPANY
and ZOLLIE KELMAN,
Plaintiffs and Appellants,
v.
DENNIS L. HIGBEE, MAEETTA
HIGBEE, and HIGBEE, INC.,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
Honorable Marge Johnson, Judge Presiding.
COUNSEL OF RECORD:
For Appellants:
Steven T. Potts, Thompson, Jacobsen & Potts, Great Falls, Montana
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For Respondents:
Gregory J. Hatley, Davis, Hatley, Haffeman & Tighe, Great Falls,
Montana
Submitted on Briefs: April 16, 1998
Decided: June 16, 1998
Filed:
__________________________________________
Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
¶1 American Music Company and Zollie Kelman (collectively, AMC) brought this
action seeking a declaratory judgment, preliminary and permanent injunctions, and
specific performance of a gaming machine contract. The Eighth Judicial District
Court, Cascade County, determined that injunctive relief was not proper in a breach
of contract action when pecuniary compensation was contemplated and would afford
adequate relief. On that basis, the court dissolved a temporary restraining order it
had earlier issued. AMC appeals. We affirm.
¶2 AMC presents three issues for our review:
¶3 1. Did the District Court abuse its discretion by failing to grant a preliminary
injunction prohibiting the Higbees from disconnecting and removing AMC's
machines?
¶4 2. Did the court abuse its discretion by failing to grant a preliminary injunction
restraining the Higbees from purchasing their own gaming machines?
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¶5 3. Did the court abuse its discretion by dissolving its preliminary injunction
requiring the Higbees to deposit 40 percent of their machine receipts into a trust
account pending the outcome of this litigation?
¶6 In 1990, the parties entered a written agreement concerning a casino the Higbees
planned to build and operate in Great Falls, Montana. Zollie Kelman agreed to sell
the Higbees a building site and to guarantee their bank loan. In return, the Higbees
agreed to give Kelman's family gaming company, AMC, an exclusive five-year right
to place and maintain amusement and gambling machines in the new casino. Under
the agreement, AMC would receive 40 percent of the profits from the machines and
the Higbees would receive 60 percent. In 1993, the parties agreed, again in writing, to
extend AMC's exclusive agreement for an additional three years, until August 10,
1998.
¶7 During the winter of 1996-97, the Higbees remodeled the casino, which was
originally known as Thirsty's but was later rechristened the Gold Dust Casino. As
part of the remodeling, the Higbees wanted to offer their patrons the most up-to-date
gaming machines on the market. AMC did not have available the type of machines
the Higbees desired. Therefore, after some largely unfruitful discussions with
Kelman, the Higbees purchased their own machines. In April 1997, they stopped
paying AMC its 40 percent share of profits and began paying AMC 20 percent.
Additionally, they refused in June 1997 to cooperate with AMC to renew the licenses
of its machines located in the casino, and, later that month, Maeetta Higbee told
Kelman to remove eight of AMC's machines from the premises.
¶8 When AMC filed this action in June 1997, the District Court issued a temporary
restraining order prohibiting the Higbees from removing or interfering with the
operation of any of AMC's gaming or amusement machines. After a show cause
hearing to determine whether a preliminary injunction was warranted, the court
orally dissolved the temporary restraining order and denied the application for a
preliminary injunction. The court, however, allowed time for filing of additional
arguments, pending receipt of which it ordered the Higbees to deposit 40 percent of
their gaming machine profits into a trust account.
¶9 In response to additional motions filed, the court issued another temporary
restraining order prohibiting the Higbees from removing or interfering with the
operation of any of AMC's gaming or amusement machines on their business
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premises. A week later, the court held another show cause hearing. As a result of the
second hearing, the court dissolved its second temporary restraining order and its
order requiring deposit of a percentage of the profits from the gaming machines into
a trust account. AMC appeals.
ISSUE 1
¶10 Did the District Court abuse its discretion by failing to grant a preliminary
injunction prohibiting the Higbees from disconnecting and removing AMC's
machines?
¶11 A ruling on a motion for preliminary injunction is subject to the discretion of the
district court. Billings v. County Water Dist. (1997), 281 Mont. 219, 226, 935 P.2d
246, 250. This Court reviews such rulings for abuse of that discretion.
¶12 A preliminary injunction may be granted in the following circumstances:
(1) when it appears that the applicant is entitled to the relief demanded and the
relief or any part of the relief consists in restraining the commission or
continuance of the act complained of, either for a limited period or perpetually;
(2) when it appears that the commission or continuance of some act during the
litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or
threatens or is about to do or is procuring or suffering to be done some act in
violation of the applicant's rights, respecting the subject of the action, and
tending to render the judgment ineffectual;
(4) when it appears that the adverse party, during the pendency of the action,
threatens or is about to remove or to dispose of the adverse party's property
with intent to defraud the applicant, an injunction order may be granted to
restrain the removal or disposition;
(5) when it appears that the applicant has applied for an order under the
provisions of 40-4-121 or an order of protection under Title 40, chapter 15.
Section 27-19-201, MCA. AMC argues that a preliminary injunction was proper in this
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case under subsections (1), (2), and (3) above.
¶13 We disagree. As to subsection (1), it does not appear AMC is entitled to the final
injunctive relief demanded. A party to a contract may choose to breach the contract
and to pay damages for that breach. See § 27-1-311, MCA. Final injunctive relief
may only be granted if pecuniary compensation would not afford adequate relief, it
would be extremely difficult to ascertain the amount of compensation which would
afford adequate relief, the restraint is necessary to prevent multiple judicial
proceedings, or the obligation arises from a trust. Section 27-19-102, MCA. Here,
AMC entered into agreements for the purpose of making money from gambling
machines. It appears that monetary damages will provide the full relief to which
AMC is entitled.
¶14 At the hearings on the preliminary injunctions, both parties admitted that the
gambling machines are manufactured so that one can tell almost on a daily basis how
much money is being earned and so that income from the machines can be accurately
calculated "to the penny." The parties also acknowledged that the State of Montana
monitors the gambling machines to make sure all income is appropriately and
accurately accounted for. Additionally, historical data going back to 1990 shows how
much AMC has received from the gaming machines on a quarterly and yearly basis.
We conclude that it would not be difficult to ascertain the amount of compensation
which would afford adequate relief.
¶15 Subsection (2) provides that a preliminary injunction may be issued when it
appears that the commission or continuance of some act during the litigation would
produce a great or irreparable injury to the applicant. As discussed above, this case
centers around which party is entitled to income from the gaming machines at the
Gold Dust Casino, and it appears that pecuniary compensation will afford adequate
relief. Money damages are not considered irreparable harm, because money damages
may be recovered in an action at law without resort to equity. Dicken v. Shaw (1992),
255 Mont. 231, 236, 841 P.2d 1126, 1129.
¶16 As to subsection (3) of the preliminary injunction statute, we reach a similar
conclusion. The Higbees' act of ceasing to use AMC's machines will not render any
judgment for AMC ineffectual, because it appears that monetary damages will be
sufficient to compensate AMC for any damages.
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¶17 We hold that the District Court did not abuse its discretion in failing to grant a
preliminary injunction prohibiting the Higbees from disconnecting and removing
AMC's gaming machines.
ISSUE 2
¶18 Did the court abuse its discretion by failing to grant a preliminary injunction
restraining the Higbees from purchasing their own gaming machines?
¶19 The parties' contract provided:
Higbee agrees not to either directly [or] indirectly purchase or cause to be
purchased any coin-operated or non-coin-operated amusement or gambling
games and device of the type or kind listed in this agreement, for use in
Thirsty's, during the period of time covered by this agreement and they further
agree not to enter into any agreement with or authorize any third-party to
place or cause to be placed any of the items of the classes and kinds described
in this agreement in Thirsty's during the term of this agreement.
AMC argues that money damages would not be an adequate remedy for breach of this
clause and that an injunction is the proper remedy to enforce a negative restriction such as
this one.
¶20 As part of this argument, AMC claims that inasmuch as the contract was part of
a real property transaction, the rule applies that "[i]t is to be presumed that the
breach of an agreement to transfer real property cannot be adequately relieved by
pecuniary compensation." Section 27-1-419, MCA. However, the matters on which
injunction is here sought do not relate to any purported breach of the provisions
regarding transfer of real property in the agreement between the parties.
¶21 The Higbees respond to this issue by citing the provision in the agreement that
the machines supplied by AMC "shall be of the latest type." While AMC insists that
its contractual duty to supply the latest type of machines applied only to the initial
machines it supplied in 1990 and was not a continuing duty, the Higbees contend that
AMC's failure to continue to supply the latest type of gambling machines is a breach
of their agreement. The Higbees argue that this breach not only entitled them to
suspend their performance but also precludes AMC from seeking equitable relief
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from the court by means of a preliminary injunction. They point out that
[a] party is not entitled to enjoin the breach of a contract by another, unless he
himself has performed what the contract required of him so far as possible,
and if he himself is in default or has given cause for nonperformance by
defendant he has no standing in equity.
43A C.J.S. Injunctions, § 89, pp. 111-12.
¶22 In light of the Higbees' argument, we hold that the District Court did not abuse
its discretion in failing to grant a preliminary injunction restraining the Higbees
from purchasing their own gaming machines.
ISSUE 3
¶23 Did the court abuse its discretion by dissolving its preliminary injunction
requiring the Higbees to deposit 40 percent of their machine receipts into a trust
account pending the outcome of this litigation?
¶24 The Higbees claim they are financially unable to make payments to a trust
account in the amounts required by their agreement with AMC. AMC argues that
this financial situation justifies the preliminary injunction. But the Higbees contend
that their financial situation is a result of AMC's failure to comply with the terms of
their agreement and the resulting necessity that they purchase and pay operating
costs of their own up-to-date gambling machines. They maintain that it would be
inequitable to allow AMC to avoid its obligation to provide the latest gaming
machines while at the same time forcing them to set aside AMC's purported share of
the profits.
¶25 AMC cites Stark v. Borner (1987), 226 Mont. 356, 359, 735 P.2d 314, 316-17. In
that case, this Court upheld a preliminary injunction where it appeared that
"defendants may be unable to respond in damages if plaintiffs prevail . . . which
would render any substantial damage award plaintiffs may recover ineffectual and
unrecoverable, and further that . . . damages . . . would be quite difficult or
impossible to accurately determine." In that case, inability to pay was not alleged to
be a result of a breach of contract by the payee. Additionally, in Stark, inability to
pay was not combined with damages which were difficult or impossible to accurately
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determine. In contrast, it does not appear that damages, if any, will be difficult to
determine in the present case.
¶26 We hold that the District Court did not abuse its discretion in determining that
AMC was not entitled to a preliminary injunction requiring a deposit of machine
receipts into a trust account.
¶27 Affirmed.
/S/ J. A. TURNAGE
We concur:
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
Justice William E. Hunt, Sr., concurring in part and dissenting in part.
¶28 I concur with that part of the majority opinion which affirms the District
Court’s decision to deny the preliminary injunction prohibiting the Higbees from
disconnecting and removing AMC’s gaming machines and to deny the preliminary
injunction restraining the Higbees from purchasing their own gaming machines.
¶29 I dissent from that part of the majority opinion which holds that the District
Court did not abuse its discretion by dissolving its preliminary injunction requiring
the Higbees to deposit 40 percent of their machine receipts into a trust account
pending the outcome of this litigation.
¶30 I agree with the majority opinion that an injunction preventing the Higbees from
removing AMC’s gaming machines was not appropriate because monetary damages
will afford full relief; it is not difficult to ascertain the amount of monetary damages
necessary to afford AMC adequate relief; and Higbees’ act of ceasing to use AMC’s
machines will not render any judgment for AMC ineffectual, because it appears that
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monetary damages will be sufficient to compensate AMC for any damages. This
entire holding presumes that monetary damages will be available should AMC
prevail.
¶31 However, the danger in this case is that monetary damages will not be available.
As the majority opinion points out, the Higbees themselves "claim they are
financially unable to make payments to a trust account in the amounts required by
their agreement with AMC." According to the terms of the statute, a preliminary
injunction may be granted:
(2) when it appears that the commission or continuance of some act during the
litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or
threatens or is about to do or is procuring or suffering to be done some act in
violation of the applicant’s rights, respecting the subject of the action, and
tending to render the judgment ineffectual[.]
Section 27-19-201, MCA. In this case, it appears that due to the Higbees’ potential
inability to pay, a money judgment may be ineffectual and irreparably injure AMC. If a
preliminary injunction is not entered requiring the Higbees to utilize AMC’s gaming
machines, then the Higbees should be required to place 40 percent of all gaming machine
profits into a trust account pending the outcome of this litigation, in order to afford some
protection to AMC.
¶32 For this reason, I would reverse the District Court order dissolving its
preliminary injunction requiring the Higbees to deposit 40 percent of their machine
receipts into a trust account pending the outcome of this litigation.
/S/ WILLIAM E. HUNT, SR.
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