## Facts

- S & P Brake Supply, Inc. (S&P) remanufactured brakes for semitrucks, and STEMCO LP (STEMCO) manufactured replacement brake parts.
- In March 2011, S&P and STEMCO discussed S&P becoming a STEMCO “authorized remanufacturer.”
- S&P alleged the parties made an oral agreement that STEMCO would sell brake parts to S&P for use in S&P’s remanufactured brakes, that S&P could hold itself out as STEMCO-authorized, and that S&P would have the right for five years to sell remanufactured brakes to STEMCO-authorized distributors, including Kenworth.
- The parties executed a written “Program Agreement” connected to the remanufacturer program; STEMCO contended it was the final expression of the parties’ arrangement and contained no five-year sales commitment.
- Relying on STEMCO’s assurances about the five-year opportunity (including sales to Kenworth), S&P made substantial expenditures to expand, including increasing inventory and leasing a larger warehouse and related capacity.
- About 18 months later, Kenworth began purchasing remanufactured brakes from another STEMCO remanufacturer rather than S&P.
- S&P claimed it was left with excess inventory, an unneeded warehouse lease, and lost sales, and it sued STEMCO for breach of contract and related theories.
- The parties agreed that Article 2 of the Uniform Commercial Code (UCC) governed the sale-of-goods aspects of the dispute.
- At trial, STEMCO sought a jury instruction that would have directed the jury to apply the UCC statute of frauds to bar recovery if the jury found only an oral contract; S&P argued promissory estoppel could avoid the statute of frauds. The trial court refused STEMCO’s requested instruction and submitted promissory estoppel to the jury.
- The jury returned a verdict for S&P. STEMCO appealed.

## Issues

1. Did the district court err in denying STEMCO’s motion for summary judgment on the ground that the alleged oral agreement was barred by the UCC statute of frauds and/or foreclosed by the written Program Agreement?
2. Did the district court err by submitting “part performance” to the jury as a statute-of-frauds exception in this UCC case?
3. Did the district court properly submit S&P’s promissory estoppel theory to the jury as a basis for relief notwithstanding the statute of frauds?
4. Did the district court commit reversible error by excluding certain evidence offered by STEMCO regarding contract formation and damages?
5. Was STEMCO entitled to recover its costs?

## Decision

- The Montana Supreme Court affirmed the judgment for S&P.
- The court held the district court did not err in denying summary judgment; factual disputes remained regarding the parties’ arrangements and whether the Program Agreement was the final and complete expression of their deal, as well as whether an exception to the statute of frauds could apply.
- The court held it was error to instruct the jury on part performance as presented in this case, but the error was harmless because the verdict could be sustained on the promissory estoppel theory that was properly submitted.
- The court held promissory estoppel may operate as an exception to the UCC statute of frauds on an adequate evidentiary showing and that the record supported sending that question to the jury.
- The court held the challenged evidentiary rulings did not warrant reversal because STEMCO did not show prejudicial error.
- The court affirmed denial of costs to STEMCO because STEMCO was not the prevailing party.

## Legal Principles

- Under UCC § 2-201, a contract for the sale of goods above the statutory threshold is generally not enforceable without a signed writing sufficient to indicate a contract and a quantity term, unless an exception applies.
- Whether a writing is the parties’ final expression for parol-evidence purposes can present fact questions; a program document that does not clearly memorialize all terms may not bar proof of additional oral commitments.
- Promissory estoppel can provide relief despite the UCC statute of frauds when there is (1) a clear and definite promise, (2) reliance that was reasonable and foreseeable, and (3) a resulting detriment such that enforcement is necessary to prevent injustice.
- Promissory estoppel does not require proof that the promisor intended to mislead.
- The UCC part-performance exception in § 2-201(3)(c) is limited to the goods that have been received and accepted or paid for and accepted; it does not automatically validate an entire alleged long-term oral arrangement for future transactions.
- An incorrect jury instruction does not require reversal if the appellant fails to show prejudice and the verdict is supported on an independent, proper theory submitted to the jury.
- Evidentiary rulings are reviewed for abuse of discretion, and reversal requires a showing that the ruling affected a substantial right.
- Costs are generally available only to a prevailing party under Montana law and procedural rules.

## Conclusion

The Montana Supreme Court affirmed S&P’s jury verdict against STEMCO arising from an alleged oral five-year arrangement to supply STEMCO parts and allow S&P to sell remanufactured brakes to STEMCO-authorized distributors, including Kenworth, because promissory estoppel could support relief even if the UCC statute of frauds otherwise applied; although the district court should not have submitted part performance to the jury on these facts, the mistake was harmless given the properly submitted promissory estoppel theory, and the court also upheld the evidentiary rulings and denial of costs to STEMCO.


S & P Brake Supply, Inc. v. STEMCO LP, 385 P.3d 567 (2016)