Thompson v. Price ( 1995 )


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  •                              No.    95-315
    IN THE SUPREME COURT OF THE STATE OF MONTANA
    1995
    MIKE THOMPSON,
    Plaintiff and Respondent,
    v.
    JAMES PRICE,
    Defendant and Appellant.
    APPEAL FROM:     District Court of the Eleventh Judicial District,
    In and for the County of Flathead,
    The Honorable Katherine R. Curtis, Judge presiding.
    COUNSEL OF RECORD:
    For Appellant:
    James C. Bartlett; Hash, O'Brien & Bartlett,
    Kalispell, Montana
    For Respondent:
    Tia R. Robbin; Murray & Kaufman, Kalispell,
    Montana
    Submitted on Briefs:        November 21, 1995
    Decided:   December 21, 1995
    Filed:
    Justice W. William Leaphart delivered the Opinion of the Court.
    Pursuant to Section I, Paragraph 3(c), Montana Supreme Court
    1995 Internal Operating Rules, the following decision shall not be
    cited as precedent and shall be published by its filing as a public
    document with the Clerk of the Supreme Court and by a report of its
    result to Montana Law Week,           State   Reporter    and   West   Publishing
    Company.
    James    Price (Price) appeals from the Eleventh Judicial
    District,     Flathead   County,   jury verdict awarding Mike Thompson
    (Thompson) damages for breach of contract, and from the District
    Court's order denying Price's Motion for a New Trial.                  We affirm.
    Price presents three issues on appeal:
    1.  Did the District Court fail to properly instruct the jury on
    Price's theory of the case, specifically, the implied covenant of
    good faith and fair dealing?
    2. Did the District Court properly exclude evidence of Thompson's
    prior   experience  and knowledge of the limited       scope and
    enforceability of covenants not to compete?
    3.   Is the verdict contrary to the law or contrary to the evidence?
    In June of 1989, Thompson and Price formed a carpet cleaning
    partnership    called    Thompson's   Thoro   Kleen.      The   carpet   cleaning
    enterprise was initially owned by Thompson and was subject to a
    pre-existing business debt of approximately $25,000. Thompson sold
    one-half of the business to Price for approximately $13,000. In
    early 1990, Price and Thompson dissolved their partnership.                  They
    contracted that Price would pay Thompson approximately $25,000 in
    consideration for purchasing the business.               The contract included
    a covenant not to compete which limited Thompson's future carpet
    2
    cleaning to his personal accounts from outside the partnership,
    "personal friends, and people affiliated with his accounts."    Price
    received     the business   name,   business phone number, a van,
    equipment, and some customers. However, Price did not pay Thompson
    the $25,000.
    1 . Did the District Court fail to properly instruct the jury on
    Price's theory of the case, specifically, the implied covenant of
    good faith and fair dealing?
    Price argues that the District Court erred by not instructing
    the jury regarding the implied covenant of good faith and fair
    dealing.     Price asserts that because every contract contains an
    implied covenant of good faith and fair dealing as a matter of law,
    the court should have given the jury Price's proposed instruction,
    MPI 13.17.      Price's proposed instruction correctly stated the
    implied covenant of good faith and fair dealing based on both
    statutory and case law.     Section 28-l-211, MCA; Talley v. Flathead
    Valley Comm.   College (19931, 
    259 Mont. 479
    , 489, 
    857 P.2d 701
    , 707,
    cert. denied, 
    114 S. Ct. 691
    (1994). The proposed instruction read
    as follows:
    There is an obligation of good faith in every contract.
    The obligation is breached if a party failed to exercise
    honesty in fact and observe reasonable        commercial
    standards of fair dealing in the trade.
    The court refused to instruct on the implied covenant on the
    grounds that Price did not plead breach of the covenant of good
    faith and fair dealing as a cause of action or as an affirmative
    defense.
    The District Court has discretion in deciding how to instruct
    the jury,    taking into account the parties' theories of the case,
    3
    and we     will not     overturn   that decision absent an       abuse of
    discretion.     Foley v. Harrison Ave. Motor Co. (1994), 
    267 Mont. 200
    , 205,     
    883 P.2d 100
    ,    102-03; Arnold v.    Boise   Cascade   Corp.
    (1993), 
    259 Mont. 259
    , 267, 
    856 P.2d 217
    , 222. When reviewing jury
    instructions,    we consider all the offered jury instructions as a
    whole,    in light of the evidence presented at trial.        Nevrville v.
    State Dep't of Family Servs. (1994), 
    267 Mont. 237
    , 261, 
    883 P.2d 793
    , 807; 
    Folev, 883 P.2d at 103
    .
    The covenant of good faith and fair dealing is implied into
    every contract.     
    Tallev, 857 P.2d at 707
    ; Story v. City of Bozeman
    (1990),    
    242 Mont. 436
    , 450,      
    791 P.2d 767
    ,    775.    However,   the
    standards for breach of the implied covenant are distinct and
    different from breach of other contract provisions.            7
    Story,
    
    9 1 P.2d at 775
    ;     § 28-1-211, MCA.        In its Order and Rationale, the
    District Court determined that although every contract may contain
    an implied covenant of good faith and fair dealing, every contract
    action does not automatically contain a claim for breach of the
    implied covenant.      Price pled breach of contract. He did not plead
    breach of the covenant, amend his pleadings to include breach of
    the covenant, nor invoke breach of the covenant as an affirmative
    defense.
    The court correctly determined that by not pleading breach of
    the covenant, Price denied Thompson notice of this separate cause
    of action.     McJunkin   v. Kaufman & Broad Home Systems, Inc. (1987),
    
    229 Mont. 432
    , 437, 
    740 P.2d 910
    , 913.           As this Court has held:
    "liberal construction and amendment of pleadings does not grant
    4
    counsel carte blanche       to advance new theories on an unsuspecting
    opponent."     
    McJunkin, 748 P.2d at 913
    .     In McJunkin, we held that
    the district court correctly refused to give a breach of express
    warranty instruction when that claim had not been pled.          
    McJunkin, 748 P.2d at 914
    .          We apply that reasoning here.      Price is not
    entitled to a jury instruction on the implied covenant of good
    faith and fair dealing without having pled the covenant as a cause
    of action.        The District Court did not abuse its discretion in
    refusing Price's offered jury instruction.
    2 . Did the District Court properly exclude evidence of Thompson's
    prior   experience  and knowledge of the limited        scope and
    enforceability of covenants not to compete?
    At trial,     Price attempted to introduce testimony from Mike
    Olsen (Olsen).        Olsen and Thompson had a previous contract that
    included a covenant not to compete.        Price wanted to establish that
    Thompson knew that the language of the covenant not to compete in
    the Thompson/Price contract was unenforceable.           Price argued that
    Olsen's testimony would show that Thompson knew the limits that
    Montana law places on covenants not to compete.           See § 28-2-704,
    MCA.     The testimony, asserts Price, would have revealed Thompson's
    shrewd business tactics and dishonesty.
    However,     the District Court granted Thompson's Motion in
    Limine    restricting     Olsen's   testimony.    The court excluded the
    testimony on the grounds that the previous Olsen/Thompson covenant
    not to compete used different language than the Price/Thompson
    covenant.         Thus,   the court determined the testimony was not
    probative of the issue whether Thompson knew the Price/Thompson
    5
    covenant not to compete was unenforceable.                    The court determined
    that the evidence would be                   inadmissible     character       evidence.
    Notwithstanding the Motion in Limine, Olsen testified about his
    previous business dealings with Thompson and offered his opinion
    regarding Thompson's business practices.
    The determination of the admissibility of evidence is within
    the broad discretion of the trial court, and we will not disturb
    the court's ruling absent                a manifest   abuse of this discretion.
    King v. Zimmerman (1994), 
    266 Mont. 54
    , 65, 
    878 P.2d 895
    , 902.
    Outside of the narrow exceptions found in Rule 404, M.R.Evid.,
    character    evidence        is     specifically      proscribed.     See Rule 404,
    M.R.Evid.; Lindberg v. Leatham Bros., Inc. (19851,                    
    215 Mont. 11
    ,
    23,   
    693 P.2d 1234
    , 1242.               We agree with the District Court's
    determination that because the language of the two covenants not to
    compete was quite different,                the Olsen testimony was irrelevant.
    We find no abuse of discretion in the District Court's exclusion of
    testimony        regarding         the   covenant      not   to     compete    in   the
    Olsen/Thompson       contract.
    3.    Is the verdict contrary to the law or contrary to the evidence?
    It is not the function of this Court to agree or disagree with
    the jury's verdict.               
    Arnold, 856 P.2d at 220
    .      Our role is to
    determine whether there was substantial evidence to support the
    verdict.         
    Arnold, 856 P.2d at 220
    .          Substantial evidence is
    evidence which a reasonable mind might accept as adequate to
    support a conclusion, even if the evidence is weak or conflicting.
    
    Arnold, 856 P.2d at 220
    .
    6
    Price contends that the jury's verdict was contrary to the law
    and contrary to the evidence.                 He asserts that he was excused from
    performing the contract               because Thompson breached a previous
    contract        with      Olsen.       Price     apparently     contends    that     the
    Thompson/Price contract required him, in part, to satisfy certain
    outstanding debts that Thompson's Thoro Kleen had with Olsen and
    two other parties.           He argues that if Thompson had remained current
    on     these    obligations,       the amount of the debts would have been
    reduced        thereby    reducing    Price's     obligation    to   Thompson.      This
    argument ignores the fact that the indebtedness was merely used to
    arrive at a sum certain on the Thompson/Price contract; that Price
    agreed to pay this sum, regardless of whether the obligees agreed
    to an assignment of the obligations to Price.                           In fact,     the
    obligees did not consent to an assignment of the debts.                            Thus,
    Thompson        remained liable on the underlying debts.               In turn, Price
    remained         liable to         Thompson     for   the     full   amount of       the
    Thompson/Price           contract,    regardless of whether Thompson remained
    current on his independent debt obligations.                    Payments, or lack of
    payments,       by Thompson on the underlying debts had no effect upon
    Price's        separate obligation to pay Thompson the agreed upon
    consideration for the purchase of the business.
    Contrary to Price's contention,               the facts presented in this
    case fail to trigger the rule of law that if a contracting party
    materially breaches a contract,~                the injured party is entitled to
    suspend his performance.               Liddle v. Petty (1991), 
    249 Mont. 442
    ,
    446,    
    816 P.2d 1066
    , 1068; Sjoberg v. Kravik (1988), 
    233 Mont. 33
    ,
    38,   
    759 P.2d 966
    , 969.   We will not extend this well-established
    rule to cover the situation presented by this case,     i.e.,   that
    Thompson's breach of a contract not at issue, entitles Price to
    suspend performance on a separate and distinct contract.
    The District Court properly instructed the jury regarding the
    law concerning a party's breach of contract. The parties presented
    sufficient evidence for the jury to conclude that Thompson did not
    materially breach the contract and thus, that Price was not excused
    from performance. Therefore, based on our review of the record, we
    conclude that there was substantial evidence to support the verdict
    that Price was not excused from performing the Thompson/Price
    contract.   We affirm the jury verdict.
    Justices