No. 83-107
IN THE SUPREME COURT OF THE STATE OF MONTANA
1954
NORTHWEST POTATO SALES, INC.,
Plaintiff and Appellant,
-vs-
CHARLES BECK,
Defendant and Respondent.
APPEAL FROM: District Court of the Third Judicial District,
In and for the County of Powell,
The Honorable Robert J. Boyd, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Patrick F. Hooks, Townsend, Montana
For Respondent:
James J. Masar, Deer Lodge, Montana
Submitted on Briefs: June 30, 1983
Decided: March 2, 1984
Filed: $f&.( , . 9 4
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.
Plaintiff, Northwest Potato Sales, Tnc., a family
corporation owned by the Martin McCullough family, and
dealing primarily jn the buying and selling of potatoes,
.
appeals an order of the Powell County District Court
dismissing its claim against the defendant, Charles Reck, for
damages claimed as a result of an alleged failure by Beck to
honor a contract to sell seed potatoes to Northwest Potato
Sales. The trial court held that the alleged agreement was
barred by the statute of frauds because Beck, although he had
received the written contract containing the necessary terms,
had not signed it. Although McCullough raised estoppel as a
bar to Beck's rel-iance on the statute of frauds, and
presented evidence on this issue, the trial court, in a
memorandum opinion accompanying its findings and conclusions,
but with no analysis of the evidence, and no attempt to apply
the elements of estoppel to that evidence, held that the
plaintiff failed to establish the requisite elements of
estoppel. We reverse and hold that McCullough proved
estoppel as a matter of law.
The trial presented essentially three issues. First,
whether there was an agreement between McCullough and Beck.
On this issue, the trial court failed to make any findings
and conclusions, but in a separate memorandum opinion the
trial court did conclude that the parties had not reached
agreement. Second, whether Beck was entitled to rely on the
statute of frauds as a defense because he had not signed the
written contract. To decide this issue, the trial court
first ha.d to decide whether Reck was a "merchant" within the
meaning of an exception to the statute of frauds as a
defense. Third, whether Beck was estopped by his active and
passive conduct from reliance on the statute of frauds as a
defense. The findings and conclusions did not mention the
estoppel issue, but the court concluded in a separate
memorandum opinion that the plaintiff failed to establish the
requisite elements of estoppel. In reaching this conclusion,
however, the trial court failed to analyze this evidence bv
application of the elements of estoppel.
It is within this trial context that the issues are
raised on appeal. First, McCullough asks this Court to imply
a trial court finding that an agreement did exist, because
the trial court could not have decided the statute of frauds
issue unless it first found an agreement to exist. Second,
McCullough argues the trial court applied an improper legal
standard in concluding that Beck was not a "merchant." In
reaching its conclusion the trial court stated: "Each of the
farmer-growers and the one banker-rancher all agree that the
farmer did not have the knowledge or skill in the market
place as that of a buyer-broker." McCullough argues this is
an improper legal standard by which to judge the status of
both parties. While he concedes he is a "merchant", he
argues that the test is not one of comparing the skills and
knowledge of the parties, and that the parties need not have
substantially similar skills before a conclusion is justified
that both parties are "merchants" so that an exception to the
statute of frauds is triggered. However, because we conclude
that McCullough proved estoppel as a matter of law, we need
not decide the implied findings issue and we need not remand
the case to the trial court to make findings on the
"merchant" issue based on a proper application of the law.
The third, and dispositive issue, is whether McCullough
proved the elements of estoppel. Beck argued at trial and
now in his appeal brief that estoppel does not apply to the
UCC statute of frauds. McCullough presented evidence on the
existence of the contract and on Beck's active and passive
conduct after he received the contract. This evidence was
virtually uncontradicted and is sufficient to estop Beck from
successfully invoking the statute of frauds. The trial court
did not properly reach the estoppel issue. The separate
findings and conclusions are silent on the estoppel issue.
And although an attempt was made in the accompanying
memorandum to dispose of the estoppel issue, the tria-1 court
failed to analyze the estoppel evidence that McCullough had
presented, and failed to apply the elements of estoppel to
this evidence. We are left with the unsupported conclusion
of the trial court that "[tlhe plaintiff has failed to
establish the requisite elements of estoppel."
We set forth sufficient facts here to provide a general
background picture and we then add more fa-cts while applying
the estoppel elements to the evidence.
On July 17, 1980, Martin McCullough, pursuant to a
general custom with other Montana farmers and also pursuant
to a custom established with Beck in three previous dealings,
sent Beck a written contract confirming what McCullough
believed was an oral. telephone agreement for Beck to sell to
McCullough 10,000 pounds of certified seed potatotes at $4.50
per cwt (cwt being the price per 100 pounds of potatoes).
McCullough farms seed potatoes with his son in Broadwater
County Montana, but his primary business is that of a
licensed potato broker with some 20 years experience.
McCullough operates his business, a family corporation
consisting of himself, his wife, and a son, out of Kennewick,
Washington. Charles Beck is a farmer rancher in Powell
County, who grows other crops and raises livestock, but who
also had almost 15 years experience as a seed potato farmer.
He was familiar with the marketing of seed potatoes, although
he did not have the overall general experience of Martin
McCullough. McCullough and Reck had been neighbors in times
past, and McCullough had for several years Leased 700 acres
from Beck on which he grew seed potatoes. Their dealings had
always been above board and each characterized the other as
an honest person.
The written contract sent to Reck was in compliance with
the UCC statute of frauds, and was sufficient to bind
McCullough. By the time McCullough had sent the contract to
Beck, McCul.lough had already made commitments to Washington
"table-stock" farmers to purchase 10,000 pounds of Beck
potatoes for use in the following spring planting season.
Beck testified that he was fully aware of McCullough's
practice in obtaining commitments from Washington
"table-stock" farmers, and that he assumed McCullough had
followed that practice in this instance.
Although Beck did not sign the contract (he testified at
trial that he threw the contract away), he did nothing
between July 17 and late November to tell McCullough they did
not have an a-greement. McCullouqh was not particularly
worried about Beck not returning the siqned contract beca.use
he testified that Beck was habitually slow in getting his
paperwork done. During the period from July 17th to the end
p c e i v$
of November, McCullough acted in reliance on what h-
e
to be Beck's promise, and during this same period Beck
actively and passively led McCullough to believe the contract
would be honored.
The market price for seed potatoes rose steadily from
July to November, and at the end of November, when the market
price was approximately $9.00 per cwt (or twice that of the
terms stated in the July 17th contract), Beck informed
McCullough for the first time that they did not have a
contract. He told McCullough that he had never agreed to the
terms and that in any event he had not signed the contract.
Because McCullough had commj-tted 10,000 cwt of Beck's seed
potatoes to Washington "table-stock" farmers, McCullough was
forced to borrow an additional $45,000 at interest to obtain
the cash sufficient to buy seed potatoes at the higher market
price of approximately $9.00 per cwt. Beck also took action
with respect to his seed potato crop. Although he insisted
that he was not hound by the July 17th contract because he
had not signed it, Beck nonetheless sold his 1980 seed potato
crop on three verbal contracts -- he did not require written,
signed contracts for any of those transactions.
This Court has never held that the absence of a
signature to a contract otherwise binding is absolute]-y fatal
to a contract for the sale of personal property. We
recognized this principle most recently in Cargill Inc. v.
Wilson ( 1 9 7 5 ) , 166 Mont. 346, 532 P.2d 988, where the defense
was that the seller had not agreed to the contract because he
had not signed the contract, even though his name had been
signed to the contract by the grain dealer, with the seller's
acquiescence. Although we recognized that the requirement of
some writing is important to evidence the agreement, we held
strict adherence to the signature requirement is not
necessary where the "relationship and course of dealings
between the parties justifies one party's belief that the
other has consented to the written statement of contract,
even though he had not signed it." 532 P.2d at 990. If the
necessary relationship and course of dealings is established,
we held that:
11
. . .the contract may be enforced. The
beneficial purposes of the statute of frauds a.re
preserved - the dangers of mistake or fraud are
averted -- and the ends of justice are served."
Cargill-, supra, 532 P.2d at 990.
Although the facts of Cargill are not directly analogous
to the factual situation here, the case clearly recognizes
that lack of a signature to a contract for the sale of goods
is not indispensable to the enforcement of a contract
otherwise binding. And that is the situation here. But here
we rely on the principles of estoppel in holding that Beck
cannot be permitted to rely on the statute of frauds where
his active and passive conduct in the transaction 1-ed
McCullough to detrimentally rely on the belief that he had a
contract.
Although Beck cites authority holding that estoppel
cannot apply to a UCC statute of frauds transaction, we have
no difficulty in holding to the contrary. The UCC expressly
mentions estoppel as one of the genera1 principles of law
that supplement the UCC (section 30-1-103, MCA), unless other
parts of the UCC expressly displace that principle. Here no
provision of the UCC states that estoppel cannot be applied
to defeat a statute of frauds defense. Furthermore, another
UCC provision, section 30-1-203, MCA, requires good faith in
all UCC transactions, stating: "Every contract or duty
within the [Uniform Commercial Code] imposes as obligation of
good faith in its performance or enforcement."
Relying on this good faith provision, the Oreqon Court
of Appeals in Potter v. Hatter Farms, Inc. (Ore. 1982) , 641
P.2d 628, in a factual situation much like the situation
here, held that estoppel as a bar to enforcement of the
statute of frauds, is consistent with the obligation of good.
faith required in all UCC transaction. And other cases with
factual pa-tterns similar to this case have recognized
estoppel as a principle to defeat reliance on the statute of
frauds as a defense to a contract suit. See Warder and Lee
Elevator v. Britten (Iowa 1979), 274 N.W.2d 339; Decatur
Cooperative Association v. Urban (Ks. 1976), 547 P.2d 323;
Farmers Elevator Company of Elk Point v. Lyle (S.D. 1976),
238 N.W.2d 290. And, although the case did not involve a
statute of frauds issue, this Court applied estoppel to UCC
banking procedures in Reyer v. First National Bank of Dillon
,
(1-980) Mont . , 612 P.2d 1285. Clearly, in the
absence of a provision expressly prohibiting application of
estoppel to particular provisions of the UCC, estoppel
applies to UCC transactions.
This Court has recognized equitable estoppel, promissory
estoppel, and estoppel by silence. Sweet v. Colburn School
Supply (1982), 196 Mont. 367, 639 P.2d 521 (equitable
estoppel); Keil v. Glacier Park, Inc. (1980), Mont.
614 P.2d 502 (promissory estoppel) ; City of Billings v.
Pierce Packing Company (1945), 117 Mont. 755, 161 P.2d 636.
McCullough argues that he is entitled to relief by
application of any one of these prj-nciples of estoppel-, and
he has set forth in detail the evidence to support that
conclusion. Beck, on the other hand, presented no evidence
to refute McCul-lough' evidence, and Beck's appellate brief
s
ignores the evidence marshalled by McCullough to support an
estoppel application. Beck simp1.y argues that estoppel does
not apply to a UCC statute of frauds transaction, a
contention that we decide to the contrary.
Although we base our decision on estoppel by silence, we
cannot deny that the facts may fit elements of estoppel also
appropriate to equitable estoppel. This is so, because as is
so often the case in any branch of the law, each form of
estoppel does not fall into a neatly packaged and exclusive
category. Rather, the forms of estoppel also blend with each
other. For example, here there was not only a duty to speak
imposed on Beck because of his relationship to PlcCullough and
his knowledge that McCullough wa.s relying on a be1 ief that a.
contract existed, there was also active conduct by Beck that
can only be interpreted as constituting an intent to mislead
McCullough into thinking that Beck wou1.d honor the July 17th
contract.
This Court set out the rule of estoppel by silence in
Sherlock v. Greaves (1938), 106 Mont. 206, 76 ~ . 2 d87, where
we stated:
"To constitute an estoppel by silence or
acquiescence, it must appear that the party to be
estopped was hound in equity and good conscience to
speak, and that the party claiming estoppel relied
upon the acquiescence and was misled thereby to
change his posi-tion to his prejudice. [citing
authority] Mere silence cannot work an estoppel.
To be effective for this purpose, the person to be
estopped must have had an intent to mislead or a
willingness that another would be deceived; and the
other must have been misled by the silence."
Sherlock v. Greaves, supra, 106 Mont. at 217, 76
P.2d at 91.
The general situatj.on is that Beck and McCullough knew
each other well for many years, they had many dealings with
each other over the years, and. they had three previous potato
seed sales where the same procedure was followed. Rased on
past experience, Reck knew that McCull.ough had most probably
committed the 10,000 cwt of Beck potatoes to Washington
"table-stock" farmers, and Beck testified that he assumed
such was the case in this transaction. Beck further
testified that from July 17, 1980, until the end of November,
1980, McCullough at all times believed that he had a contract
with Beck. And yet if Beck did subjectively believe that he
had no contract with McCullough, he admitted he did nothing
to inform McCullough of his position until the end of
November. If Beck believed he had no contract with
McCullough, he was clearly bound in equity and good
conscience to tell. McCullough at his earliest opportunity
that he believed he had no contract. But Beck was silent.
However, the situation that existed after Beck received
the July 17th contract in the mail, involves more than mere
silence. Between July 17th and the end of November,
McCullough testified that both Beck and Beck's wife told him
on more than one occasion that the contract would be signed
and sent to McCullough. Although Mrs. Beck denied the
substance of these conversations with McCullough by stating
that she could not recall the details of the calls,
McCulloughls testimony about his conversations with Charles
Reck stands unrefuted. Further, on two occasions Beck told
McCullough that his banker was concerned that he had not made
a good deal but that he (Beck) was unconcerned because he was
running the operation, not the banker. One of these
occasions was in October when McCullough stopped at the Beck
place an his way from Townsend, Montana to the state of
Washington. This testimony also stand unrefuted. And
finally, McCullough testified to a visit to the Beck place in
August to check on the potato crops. Although Charles Reck
was not there (he was in Dillon according to the farm hand
who spoke to McCullough) , and Mrs. WcCullough testified that
she could not recall whether McCullough visited the farm in
August, McCullough's testimony about his visit and the
details of his ~risit cannot be ignored. Clearly, he would
not have visited the Beck place to check on the progress of
the seed potato crop unless he thought he had a contract with
Beck. All of this is clear evidence that Beck, by his active
as well as passive conduct, led McCullough to believe that he
had a contract with Beck.
The uncontradicted evidence is that McCullough clearly
relied to his detriment on the belief, fostered by Beck's
active and passive conduct, that he had a contract with Beck.
It was not until the end of November, when the market price
for seed potatoes was up to $9.00 per cwt, that Beck first
told McCullough that a misunderstanding had occurred, that he
had never agreed to the contract, and that in any event he
had not signed the contract. When McCullough learned of
Beck's decision, in order to cover his commitment to
Washington "table-stock" farmers for 10,000 cwt of Beck's
seed potato crop, McCullough was forced to borrow an
additional $45,000 at interest to purchase the potato seeds
at the existing higher market price of $9.00 per cwt.
Finally, although Beck now makes an issue of not having
signed the July 17th contract, he did not hesitate in selling
his 1980 seed potato crops to others on the basis of
unwritten, unsigned contracts. The only difference was that
*w\
Beck sold his crops for the k k m existing market price of
approximately $9.00 per cwt rather than the $4.50 per cwt he
would have obtained had he honored the July 17th contract
with McCullough.
These facts establish an estoppel by silence as a matter
of law.
We reverse the iudgment of the District Court and remand
for consideration of the proper damages owed to McCul.lough.
We Concur:
Justices