Molerway Freight Lines, Inc. v. Rite-Line Transportation Services, Inc.

NO. 95-114
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
MOLERWAY FREIGHT LINES, INC.,
Plaintiff and Appellant,
v.
RITE-LINE TRANSPORTATION
SERVICES, INC.,
Defendant and Respondent.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Douglas G. Harkin, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
W. Anderson Forsythe, Moulton, Bellingham, Longo
and Mather, P.C., Billings, Montana
For Respondent:
James C. Bartlett, Hash, O'Brien and Bartlett,
Kalispell, Montana
Submitted on Briefs: July 6, 1995
Decided: August 24, 1,995
Filed:
STATE OF MONTANA
Chief Justice J. A. Turnage delivered the Opinion of the court.
Molerway Freight Lines, Inc. (Molerway), appeals the decision
of the Fourth Judicial District Court, Missoula County, enforcing
a contract in favor of Rite-Line Transportation Services, Inc.
(Rite-Line). We affirm.
We find the following issues, as rephrased by this Court,
dispositive on appeal:
1. Did the District Court err in admitting parol evidence to
determine the intent of the parties to the Buy-Sell Agreement?
2. Did the District Court err in determining that the
Montana Public Service Commission (PSC) "approved" the transfer of
Montana Intrastate Certificate of Public Convenience and Necessity
No. 1136 (Certificate No. 1136) pursuant to the terms of the Buy-
Sell Agreement?
3. Did the District Court err in determining that Molerway
had waived the condition of PSC approval of Certificate No. 1136?
Molerway and Rite-Line are motor carriers operating intrastate
trucking businesses in Montana. Intrastate trucking is regulated
by the PSC. The PSC issues Montana Intrastate Certificates of
Public Convenience and Necessity by which motor carriers are
allowed to establish routes within Montana. Certificates can only
be sold or transferred with PSC approval.
Rite-Line owned Certificate No. 1136 which authorized it to
operate certain routes within the State of Montana. Molerway, a
direct competitor of Rite-Line, sought to obtain Certificate No.
1136. Following negotiations, Molerway and Rite-Line agreed upon
2
a purchase price of $150,000. Molerway's attorney drafted a Buy-
Sell Agreement. On February 13, 1991, Molerway and Rite-Line
officials signed the Buy-Sell Agreement setting forth the terms of
the transaction. Under the agreement, Molerway was required to pay
$30,000 down and monthly payments of $5,427.27 until the $150,00o
was paid off. The parties also executed a lease of Certificate No.
1136, allowing Molerway to take immediate possession of the
certificate and ensuring that there was no interruption in carrier
service.
The Buy-Sell Agreement was expressly conditioned on the PSC's
approval of the transfer. The Buy-Sell Agreement provided, in
part:
In the event the transfer is not approved and approval
cannot be obtained within a reasonable length of time
after hearing on the application, then this Agreement
shall be considered null and void, and any funds received
by Seller for payment of the purchase price shall be
refunded to the Buyer.
Following execution of the Buy-Sell Agreement, the parties applied
to the PSC for approval of the transfer of the certificate.
On March 15, 1991, the PSC approved the lease of the certifi-
cate. At that time, representatives of the PSC indicated that
portions of Certificate No. 1136 which were duplicative of other
routes already covered in Molerway's other certificates would be
cancelled.
Both parties feared that the PSC's cancellation of duplicate
authorities would jeopardize the Buy-Sell Agreement. Rite-Line had
a security interest in Certificate No. 1136. Rite-Line feared that
if the duplicate authorities were cancelled upon approval by the
3
PSC, it would lose its security for the remaining payments due on
the Buy-Sell Agreement.
On June 4, 1991, Molerway's attorney wrote the PSC concerning
the cancellation of duplicate authorities. The letter stated, in
part:
The payoff on this Agreement is only two years from the
date the Commission approves of the transfer. Perhaps
the Commission would postpone the deletion of the
duplicate authorities until the outstanding balance has
been paid off. That way, Rite-Line is protected and the
Commission would be relieved of interfering with a
contract.
Molerway does not want to delay the transfer of this
authority, nor does it expect to default on the Agree-
ment. Perhaps we could have a meeting with Rite-Line,
Molerway and the Commission to weigh the alternatives.
Rite-Line made a similar request that the cancellation of duplicate
authorities be delayed until the Buy-Sell Agreement was fulfilled.
On July 22, 1991, the PSC issued Order No. 6051 in which it
approved the transfer of Certificate No. 1136. Pursuant to the
requests of Molerway and Rite-Line, the PSC delayed any action on
cancelling duplicate authorities until Certificate No. 1136 was
paid off. As of the time of trial, the PSC had not ruled on what
it considered to be a "duplicate authority." Neither Molerway nor
Rite-Line presented evidence at trial to establish precisely what
the PSC would consider to be a "duplicate authority." Therefore it
is unclear what routes, if any, would be cancelled pursuant to PSC
Order No. 6051. PSC Order No. 6051 states:
It is the Commission's policy to cancel duplicating motor
carrier authority upon a sale or transfer. . . .
However, the Commission has determined that the unique
circumstances of this case justify the recognition of an
exception. Specifically, the "Buy-Sell Agreement"
4
between Rite-Line and Molerway establishes a security
interest in PSC Certificate No. 1136 and its subparts
during the payment period of two (2) years. If Certifi-
cate No. 1136 were to be cancelled, the collateral
identified in the Agreement would cease to exist.
Therefore, the Commission will defer cancelling the
duplicating authority for two (2) years solely for these
reasons, approve the transfer with the conditions
described below.
Although the PSC had done what Molerway had specifically requested
in its June 4, 1991 letter, Molerway objected to Order No. 6051.
Molerway stopped payment on its August installment on the Buy-Sell
Agreement, and on September 4, 1991, sent Rite-Line a notice of
rescission of contract. Molerway requested the return of the
$30,000 down payment and first two installments in exchange for
returning Certificate No. 1136 to Rite-Line. Rite-Line refused to
rescind the contract.
On January 29, 1992, Molerway filed a complaint in the Fourth
Judicial District Court, Missoula County, seeking to rescind the
Buy-Sell Agreement and to have returned to it money paid pursuant
to that agreement. Rite-Line answered and counter-claimed, seeking
specific performance of the Buy-Sell Agreement.
Following the June 7-8, 1994 trial, the District Court held in
favor of Rite-Line. The court determined that the PSC's order
constituted an "approval" of the Certificate transfer and that by
Molerway's course of conduct, it waived its right to rescind the
contract due to the cancellation of duplicate authorities.
Molerway appeals from the decision of the District Court.
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Issue 1
Did the District Court err in admitting parol evidence to
determine the intent of the parties to the Buy-Sell Agreement?
Molerway argues that the District Court erred by allowing the
introduction of parol evidence during trial in order to determine
the intent of the parties. Molerway insists that the Buy-Sell
Agreement was clear and unambiguous on its face. Therefore, the
contract should have been construed strictly by its terms and no
parol evidence concerning the parties' intent should have been
allowed.
We review district court evidentiary rulings to determine if
the court abused its discretion. State v. Passama (1993), 261
Mont. 338, 863 P.2d 378. The language contained in a contract
controls its interpretation if the contract is clear and unambigu-
ous . Hennen v. Omega Enterprises, Inc. (1994), 264 Mont. 505, 508-
09, 872 P.2d 797, 799; §§ 28-3-401 and 28-Z-905, MCA. In Montana
Bank of Circle v. Meyers and Son (1989), 236 Mont. 236, 769 P.2d
1208, we stated:
The rule has long been that where no ambiguity exists in
the written documents, no parol evidence may be taken,
(citation omitted) and the duty of the court is simply to
apply the language as written.
Montana Bank, 769 P.2d at 1212.
However, when ambiguities exist in a contract, the court may
look to parol evidence to ascertain the intent of the parties. In
Monte Vista Co. v Anaconda Co. (19881, 231 Mont. 522, 755 P.2d
1358, we stated:
An ambiguity exists when a contract is subject to two
interpretations and parol testimony can be used to
determine what the parties intended. (Citations omit-
ted.) However, intent of the parties is only looked to
when the agreement in issue is not clear on its face.
(Citation omitted).
Monte Vista, 755 P.2d at 1362.
A review of the record reveals that the Buy-Sell Agreement was
not clear and unambiguous on its face. While the agreement
specifically conditioned validity of the contract on the PSC's
"approval" of the transfer, the agreement does not define what will
constitutes an "approval." Specifically, it is unclear whether
"approval" as limited by Order No. 6051would constitute "approval"
under the contract.
Also, the agreement contains contradictory language concerning
the purpose of the transfer. The agreement reads, in the recital,
"[iIn buying this permit, it is the Buyer's intention to serve the
area and customers previously served by the Seller." This is the
only clear expression of Molerway's intent. This purpose is not
inconsistent with and would not be affected by the PSC's cancella-
tion of duplicate authorities. However, elsewhere in the agree-
ment, the contract appears to contemplate the transfer of Certifi-
cate No. 1136 as an asset rather than merely as a means by which to
service Rite-Line's customers.
We conclude that these contradictory provisions render the
Buy-Sell Agreement ambiguous. As such, parol evidence was properly
admissible in order to determine the intent of the parties. We
hold that the District Court did not abuse its discretion in
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admitting par01 evidence in order to determine the intent of the
parties.
Issue 2
Did the District Court err in concluding that the PSC
"approved" the transfer of Certificate No. 1136 pursuant to the
terms of the Buy-Sell Agreement?
Molerway argues that approval by the PSC was a condition
precedent expressly stated in the Buy-Sell Agreement. Molerway
claims that by issuing Order No. 6051 which stated duplicate
authorities would be cancelled in two years, the PSC did not
11
approve" Certificate No. 1136 and all its subparts as was a
condition precedent to the contract. Because the condition
precedent did not occur, Molerway insists it is not bound by the
Buy-Sell Agreement.
Rite-Line argues that PSC Order No. 6051 was an "approval" of
the certificate transfer. Rite-Line contends that the PSC's
asserted right to cancel duplicate authorities following completion
of the contract does not render the PSC's decision a denial. The
District Court agreed, concluding that Molerway's failure to object
and acquiescence to the PSC's cancellation of duplicate authorities
following fulfillment of the contract illustrated Molerway's intent
that cancellation of duplicate authorities would not result in a
"denial" of the transfer application.
Rite-Line also insists that Molerway received what it
bargained for: authority to use the routes designated in Certifi-
cate No. 1136, elimination of Rite-Line as a competitor along those
8
routes, and the assurance that Certificate No. 1136 would not be
sold to another motor carrier.
We will not overturn a district court's findings of fact
unless they are clearly erroneous. Interstate Production Credit
Assoc. v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285. We review
district court conclusions of law to determine if the court's
interpretation of the law was correct. Steer, Inc. v Dep't of
Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.
As discussed above, when a contract is not clear and unambigu-
ous on its face, the court must look elsewhere to discern the
intent of the parties. Monte Vista, 755 P.2d at 1362. In this
case, the evidence establishes that Molerway did not consider the
cancellation of duplicate authorities to be a "denial" of the
transfer application. During the March 1991 meeting to discuss the
lease of Certificate No. 1136, Molerway did not object to the PSC's
suggestion that it would cancel duplicate authorities. Molerway
made two installment payments on the contract after it had actual
knowledge of the PSC's intention to cancel duplicate authorities.
Molerway also encouraged, or at the very least acquiesced to, the
PST's decision to cancel duplicate authorities in its June 4, 1991
letter. By its actions and failure to act, Molerway has manifested
its intent that the PSC's cancellation of duplicate authorities
would not render the decision a denial of the transfer application.
We conclude that the District Court's finding that the PSC's
cancellation of the duplicate authorities did not amount to a
denial of the transfer application was not clearly erroneous.
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Issue 3
Did the District Court err in determining that Molerway waived
the condition of PSC approval of the certificate transfer?
As an alternative reason for enforcing the contract, Rite-Line
argued, and the District Court concluded, that even if the PSC's
cancellation of duplicate authorities constituted a denial of the
transfer, Molerway waived its right to rely on the condition
precedent of PSC approval. The District Court concluded that
Molerway's course of conduct from the March 1991 meeting of the
parties with the PSC until issuance of the PSC's Order No. 6051
manifested Molerway's intent not to require PSC approval of
Certificate No. 1136 in its entirety.
Waiver is a voluntary and intentional relinquishment of a
right. McGregor v. Cushman/Mommer (19861, 220 Mont. 98, 714 P.2d
536. In McGreqor, this Court stated:
Waiver is the voluntary, intentional relinquishment of a
right. (Citation omitted.) A waiver of a right of
action will be declared only when the party clearly
manifests such an intention. (Citations omitted.)
McGresor, 714 P.2d at 543.
The record reveals that Molerwayvoluntarily and intentionally
relinquished its right to rely on the PSC's approval of the
certificate transfer in its entirety. Molerway made no objections
when it first learned that the PSC was considering cancelling
duplicate authorities. Molerway made two installment payments on
the contract while it knew or should have known that the PSC was
considering cancelling the duplicate authorities.
10
Most persuasive was the tune 4, 1991 letter from Molerway to
the PSC. In this letter, Molerway not only acquiesced to the PSc's
cancellation of duplicate authorities, but encouraged such a
cancellation. In the letter, Molerway's attorney stated:
Perhaps the Commission would postpone the deletion of the
duplicate authorities until the outstanding balance has
been paid off. That way, Rite-Line is protected and the
Commission would be relieved of interfering with a
contract.
Molerwav does not want to delay the transfer of this
authoritv, nor does it expect to default on the Aqree-
e. [Emphasis added.]
Despite Molerway's claim that it merely intended to "buy some time"
by sending this letter, we conclude that the letter is susceptible
to only one interpretation. Molerway stated it wanted to postpone
the PSC's cancellation of the duplicate authorities until after
expiration of the Buy-Sell Agreement. Molerway further stated that
it did not intend to default on the Buy-Sell Agreement despite the
cancellation of the duplicate authorities.
We conclude that Molerway's course of conduct, particularly
its letter of June 4, 1991, manifested a voluntary and intentional
relinquishment of its right to rely on the condition precedent of
the PSC's approval of Certificate No. 1136 in its entirety in order
to void the contract. We hold the District Court's conclusion of
law was correct. Affirmed.
Chief Justice
we concur: