No
No. 98-034
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 280
MONICA R. SMITH,
Plaintiff and Appellant,
v.
GENERAL MILLS, INC.,
a corporation,
Defendant and Respondent.
APPEAL FROM: District Court of the Twelfth Judicial District,
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In and for the County of Liberty,
Honorable John Warner, Judge Presiding.
COUNSEL OF RECORD:
For Appellant:
Keith A. Maristuen and John F. Jenks, Bosch, Kuhr, Dugdale,
Martin and Kaze, Havre, Montana
For Respondent:
K. Dale Schwanke, Jardine, Stephenson, Blewett and Weaver,
Great Falls, Montana
Argued: September 29, 1998
Submitted: October 20, 1998
Decided: November 17, 1998
Filed:
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__________________________________________
Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
¶1. Monica R. Smith (Monica) appeals from the order of the Twelfth Judicial District
Court, Liberty County, denying her post-trial motions in an action filed by her
against General Mills, Inc. (General Mills), for conversion of funds and breach of
contract. Monica also appeals from the ruling of the District Court that General
Mills was not barred from seeking enforcement of a separate contract under the
Uniform Commercial Code's statute of frauds. We affirm.
ISSUES
¶2. 1. Did the District Court err in holding that John Smith was a "merchant" for
purposes of applying the exception to the statute of frauds found under § 30-2-201(2),
MCA?
¶3. 2. Did the District Court err in failing to enter judgment as a matter of law?
¶4. 3. Did the District Court err in denying Monica's motion for an award of court
costs?
BACKGROUND
¶5. Monica and her husband operated a farm north of Chester, Montana (the Smith
farm or the farm), from 1945 until his death in 1984. After their father's death,
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Monica's sons, Frank Smith (Frank) and John Smith (Jack) operated the farm as
partners for a number of years. Eventually, Jack went on to pursue other
occupations, and Frank continued to operate the farm on his own. Frank died in
1993, leaving Monica as his sole heir. Monica nominated Jack as the personal
representative of Frank's estate.
¶6. During 1993 and part of 1994, Jack operated the Smith farm under a lease from
Frank's estate. Some of the land had been seeded with spring wheat prior to Frank's
death, and this crop was harvested by Jack in 1993. Unfortunately, the 1993 spring
wheat crop was damaged by frost and so became marketable only as feed wheat.
After harvesting the 1993 crop, Jack placed approximately 21,000 bushels of the feed
wheat into storage on the farm. Although the 1993 feed wheat belonged to Monica,
Jack was authorized to sell the wheat on her behalf at such times and at such prices
as he deemed appropriate.
¶7. It was alleged by General Mills, and the jury in this case so found, that on August
12, 1994, Jack, acting as an agent on behalf of Monica during the course of a
telephone conversation between Jack and the manager of General Mills' Joplin,
Montana, grain elevator, entered a contract for the sale of the feed wheat to the
Joplin elevator for a price of $2.55 per bushel (hereinafter the Joplin elevator
contract or Joplin contract). Following this conversation, a written agreement
confirming the terms of this contract was prepared and mailed to Jack. Although
Jack admitted receiving the contract, he did not execute or return it to the Joplin
elevator. Jack later denied the existence of the Joplin contract, and ultimately sold
the feed wheat to General Mills' Tiber, Montana, grain elevator for $3.00 per bushel
under a contract formed on September 16, 1994 (hereinafter the Tiber elevator
contract or Tiber contract).
¶8. The controversy between these parties arose when General Mills withheld
$15,000 out of the payment issued to Monica on the Tiber elevator contract, asserting
that due to Jack's breach of the Joplin elevator contract, General Mills was entitled
to an offset of the difference on the two contracts. In an effort to recover the withheld
payment, Monica filed this complaint against General Mills alleging conversion of
the funds or, in the alternative, breach of the Tiber elevator contract. General Mills
counterclaimed, asserting that Monica, through her agent, Jack, was in breach of the
Joplin elevator contract, and that General Mills was therefore entitled to offset the
debt it owed to Monica on the Tiber contract by the amount of damages it sustained
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through nonperformance of the Joplin contract. Monica responded by asserting that
enforcement of the Joplin contract was barred by the statute of frauds, because Jack
had never signed the contract mailed to him by the Joplin elevator.
¶9. At the close of the evidence in a jury trial on the merits, the District Court ruled
as a matter of law that enforcement of the Joplin elevator contract was not barred by
the statute of frauds under the Uniform Commercial Code's "merchant exception"
to the statute of frauds. All other issues were submitted to the jury, and a verdict was
issued in favor of General Mills. Findings of fact set forth in the jury's special verdict
include a finding that Jack had entered into a contract with General Mills' Joplin
elevator on behalf of Monica for the sale of 20,000 bushels of feed wheat, that this
contract was breached when Jack refused to deliver the grain, and that under the
terms of the contract, General Mills was entitled to cancel the contract and recover
the cost of pricing out that contract at the market price for feed wheat as of the time
of cancellation. At the close of trial, Monica filed a motion for new trial, or in the
alternative for a judgment as a matter of law, and for an award of court costs. The
District Court denied both of Monica's motions, and this appeal followed.
DISCUSSION
¶10. Did the District Court err in holding that John Smith was a "merchant" for purposes of applying the
exception to the statute of frauds found under § 30-2-201(2), MCA?
¶11. Whether or not a person qualifies as a merchant under the Uniform
Commercial Code is a mixed question of law and fact. See Dawkins & Co. v. L&L
Planting Co. (Miss. 1992), 602 So.2d 838, 843. Our standard of review as to
conclusions of law, questions of law, legal components of ultimate facts, or mixed
questions of law and fact is whether the lower court's determination of law is correct.
Maguire v. State (1992), 254 Mont. 178, 182, 835 P.2d 755, 757-58.
¶12. Section 30-2-201, MCA, sets forth the statute of frauds governing contracts for
the sale of goods in Montana. The general provision of that statute reads in pertinent
part:
Except as otherwise provided in this section a contract for the sale of goods for the price
of $500 or more is not enforceable by way of action or defense unless there is some
writing sufficient to indicate that a contract for sale has been made between the parties and
signed by the party against whom enforcement is sought or by his authorized agent or
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broker.
Section 30-2-201(1), MCA. Section 30-2-201(2), MCA, commonly referred to as the
"merchant exception" to the statute of frauds, abrogates the requirement that a contract be
in writing to be enforceable when the contract is between merchants:
Between merchants if within a reasonable time a writing in confirmation of the contract
and sufficient against the sender is received and the party receiving it has reason to know
its contents, it satisfies the requirements of subsection (1) against such party unless written
notice of objection to its contents is given within 10 days after it is received.
Section 30-2-201(2), MCA. The term "merchant" is defined by § 30-2-104(1), MCA, as
a person who deals in goods of the kind or otherwise by his occupation holds himself out
as having knowledge or skill peculiar to the practices or goods involved in the transaction
or to whom such knowledge or skill may be attributed by his employment of an agent or
broker or other intermediary who by his occupation holds himself out as having such
knowledge or skill.
¶13. Although the question of whether a farmer may be deemed a merchant for
purposes of § 30-2-201(2), MCA, is a matter of first impression for this Court, there
are a number of other jurisdictions which have had occasion to address it. Despite
the split of authority on this issue, a majority of courts have held that under the
Uniform Commercial Code, a farmer may be included under the definition of
"merchant" in some instances. See, e.g., Prenger v. Baker (Iowa 1995), 542 N.W.2d
805; Dawkins & Co., 602 So.2d at 838; Colorado-Kansas Grain Co. v. Reifschneider
(Colo. App. 1991), 817 P.2d 637; Burkhart v. Marshall (Ohio App. 1989), 578 N.E.2d
827; Goldkist, Inc. v. Brownlee (Ga. App. 1987), 355 S.E.2d 773; Agrex, Inc. v. Schrant
(Neb. 1986), 379 N.W.2d 751; Nelson v. Union Equity Co-op. Exchange (Tex. 1977),
548 S.W.2d 352. However, whether a particular farmer qualifies as a merchant
cannot be determined through application of a per se rule; rather, it is a conclusion
that must be reached on a case by case basis. Pierson v. Arnst (D. Mont. 1982), 534 F.
Supp. 360, 362; Rush Johnson Farms, Inc. v. Missouri Farmers Ass'n., Inc. (Mo. App.
1977), 555 S.W.2d 61, 65.
¶14. The facts relied upon by the District Court in its determination that Jack was a
merchant subject to the "merchant exception" to the statute of frauds were explicitly
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set forth in the record by the District Court and were not in substantial dispute at
trial. Among the considerations given weight by the District Court were the fact that
Jack had an operative knowledge of the grain marketing system, including how the
buying and selling worked, how competition moved the market, and what factors
affected price. He was familiar with all facets of marketing the grain, including
knowledge of the product, how to produce it, how to store it, where and how to sell it,
and how to negotiate the best terms possible for its disposition. Jack's experience in
marketing grain spanned a period of many years, and he had even been entrusted
with the marketing of grain in a fiduciary capacity for his mother and his brother's
estate. Furthermore, Jack acknowledged in writing as part of the Tiber elevator
contract that he was a merchant for purposes of marketing the grain he produced.
¶15. Our review of the record supports the District Court's conclusion that Jack was
a dealer in grain or otherwise by his occupation held himself out as having
knowledge or skill peculiar to the marketing of grain. We therefore affirm the ruling
of the District Court that the confirmation sent to Jack by the Joplin elevator was
sufficient to satisfy the statute of frauds under § 30-2-201(2), MCA.
¶16. Did the District Court err in failing to enter judgment as a matter of law?
¶17. Our standard of review of denial of a motion for judgment as a matter of law
under Rule 50(b), M.R.Civ.P., is whether substantial evidence supports the verdict of
the jury. Kapner, Wolfberg & Assoc. v. Blue Cross (1995), 270 Mont. 283, 285, 891
P.2d 530, 532. Substantial credible evidence is evidence which a reasonable mind
might accept as adequate to support a conclusion. Kneeland v. Luzenac America, Inc.,
1998 MT 136, ¶ 45, ___ P.2d ___, 55 St.Rep. 541, ¶ 45. Upon reviewing a jury verdict
the evidence must be viewed in the light most favorable to the prevailing party.
Kneeland, ¶ 45.
¶18. Monica contends that the evidence in this case does not support the jury's
findings that an oral contract existed between Jack and General Mills' Joplin
elevator. We disagree. Jack's testimony indicates that on the day the oral contract
was formed he was out in the field combining barley, and so could not have placed
the phone call to the Joplin elevator for the sale of the feed wheat. However, the
testimony of the manager of the Joplin elevator was that Jack did in fact place such a
call and that a contract was negotiated on that day. Furthermore, the secretary at the
Joplin elevator testified that she overheard the telephone conversation between Jack
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and the elevator manager and shortly thereafter prepared the contract documents in
conformity with the substance of the conversation.
¶19. The jury's findings in this instance are dependent upon a determination of the
credibility of each of these witnesses. When conflicting evidence exists, it is the
province of the jury to judge the credibility and weight of the evidence; this Court
will not retry a case or reweigh evidence on appeal. Kneeland, ¶ 45; Fox Grain and
Cattle Co. v. Maxwell (1994), 267 Mont. 528, 539, 885 P.2d 432, 439. We therefore
hold that there is substantial credible evidence in the record to support the jury's
verdict that a contract was formed on August 12, 1994, between Jack and General
Mills' Joplin elevator for the sale of 20,000 bushels of feed wheat.
¶20. Monica also contends that no substantial evidence was presented at trial to
support the jury's verdict that November 2, 1994, was an appropriate date for
General Mills to cancel and price out the Joplin contract. In particular, Monica relies
upon testimony which indicated General Mills knew of Jack's repudiation of the
Joplin contract as early as September 20, 1994, a date when the market price for
covering the undelivered goods would have cost five cents less per bushel. It is
Monica's contention that General Mills was obligated to price out the Joplin contract
at the market price for feed wheat on September 20, 1994, rather than on November
2, 1994.
¶21. Our review of the record reveals that there was substantial credible evidence to
support the jury's verdict that November 2, 1994, was a reasonable date upon which
to cancel and price out the Joplin contract. Upon being notified that Jack was not
going to deliver the grain under the Joplin contract, the manager of the Joplin
elevator contacted his superior in the regional office in Great Falls, Montana, who
followed up on that information with a written letter to Jack requesting performance
under the contract and setting a deadline for cancellation of the contract if
performance was not forthcoming. When its deadline was not met, General Mills
canceled the contract and priced out its damages at the market price for feed wheat
on that day, as it was entitled to do under the terms of its contract.
¶22. Section 30-2-610(a), MCA, specifically authorizes an aggrieved party to a
repudiated contract to await the performance of the repudiating party for a
commercially reasonable time before deeming the contract breached. The jury found
General Mills' actions in urging Jack's performance before canceling the contract to
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be commercially reasonable, and we see no reason to disturb this finding on appeal.
We therefore affirm the decision of the District Court in denying Monica's motion
for judgment as a matter of law.
¶23. Did the District Court err in denying Monica's motion for an award of court costs?
¶24. Monica assigns as her third error on appeal the failure of the District Court to
award her court costs as the prevailing party on General Mills' counterclaim. In
reviewing a district court's award of costs, our standard of review is whether the
district court abused its discretion. Gilluly v. Miller (1995), 270 Mont. 272, 274, 891
P.2d 1147, 1148. In its Order on Post-Trial Motions, the District Court declined to
award court costs to Monica on the grounds that Monica was not the prevailing
party on General Mills' counterclaim. General Mills abandoned its counterclaim at
the close of the evidence, and no instructions were given to the jury in relation to the
counterclaim. Monica made no objection to the lack of jury instructions on that
issue, and the jury's verdict made no reference whatsoever to the allegations in the
counterclaim. Based on these considerations, we hold that the District Court did not
abuse its discretion in denying Monica's request for court costs.
¶25. For the reasons stated above, we affirm the rulings of the District Court on all
issues presented in this appeal.
/S/ J. A. TURNAGE
We concur:
/S/ KARLA M. GRAY
/S/ TERRY N. TRIEWEILER
/S/ JIM REGNIER
/S/ JAMES C. NELSON
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/S/ WILLIAM E. HUNT, SR.
/S/ W. WILLIAM LEAPHART
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