Farmers Elevator Co. of Reserve v. Anderson

No. 13189

I N THE SUPREME COURT O THE STATE OF M N A A
F OTN

1976

FARMERS ELEVATOR C M A Y OF
O PN
RESERVE, a c o r p o r a t i o n ,

P l a i n t i f f and Respondent,

-vs -

DALE ANDERSON,

Defendant and A p p e l l a n t .

Appeal from: D i s t r i c t Court of t h e F i f t e e n t h J u d i c i a l D i s t r i c t ,
Honorable J a c k L. Green, Judge p r e s i d i n g .

Counsel o f Record:

For A p p e l l a n t :

Loren J. O'Toole a r g u e d , Plentywood, Montana

F o r Respondent :

G r a y b i l l , Ostrem, Warner and C r o t t y , G r e a t F a l l s ,
Montana
H a r r i s o n , Loendorf and Poston, Helena, Montana
Jerome T. Loendorf argued, Helena, Montana

Submitted: May 24, 1976
T
Decided: dU!- - 2 197f.
---
Filed :
JFEL -.z ;:j~-;.
M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e
Court.

T h i s a p p e a l i s t a k e n from a judgment e n t e r e d August 2 5 , 1975,

i n t h e d i s t r i c t c o u r t , Sheridan County. Farmers E l e v a t o r Co.

of Iieserve, a c o o p e r a t i v e e n t e r p r i s e , s u c c e s s f u l l y sought d a m a s s

f o r b r e a c h of a c o n t r a c t made w i t h Dale Anderson, a l o c a l farmer

i n t h e Dagmar a r e a .

Anderson had been a p a t r o n of Farmers E l e v a t o r Co. f o r

s e v e r a l y e a r s , and d u r i n g t h e year 1972 he made numerous c o n t r a c t s

w i t h i t f o r t h e s a l e and purchase of h i s durum wheat. A t t h e time

r h i s a c t i o n was commenced, Anderson had been farming f o r about t e n

years. He was t h u s g e n e r a l l y f a m i l i a r w i t h t h e n a t u r e of g r a i n

t r a d i n g i n h i s a r e a , and w i t h t h e customs and procedures u t i l i z e d

b y p l a i n t i f f i n t h e conduct of i t s o p e r a t i o n s .

On October 28, 1972, Anderson c o n t r a c t e d w i t h t h e Farmers

E l e v a t o r Co. f o r t h e s a l e of 18,000 b u s h e l s of durum wheat a t a

p r i c e s t i p u l a t e d i n t h e r e c o r d t o be $1.80 p e r b u s h e l . Farmers

E l e v a t o r Co. r e s o l d t h e wheat t h r e e days l a t e r f o r $2.44 p e r b u s h e l

t o t h e Farmers Union G r a i n Terminal A s s o c i a t i o n o u t l e t i n G r e a t

F a l l s , Montana. The c o n t r a c t was s t r i c t l y o r a l , t h e o n l y w r i t t e n

evidence of t h e agreement being an unsigned n o t a t i o n i n a s m a l l

"book" used by Farmers E l e v a t o r Co. t o r e c o r d i t s purchases i n t h e

ordinary course of i t s business. Testimony and a c o n f i r m a t o r y mem-

orandum e s t a b l i s h t h a t t h e approximate d e l i v e r y d a t e contemplated by

t h e p a r t i e s was February 1973.

Although the c o n t r a c t was o r a l i n n a t u r e , we n o t e Anderson

has a t no time denied t h e e x i s t e n c e of t h e c o n t r a c t , t h e q u a n t i t y

contracted f o r , or the s t i p u l a t e d price. Farmers E l e v a t o r Co.

normally c o n t r a c t s o r a l l y w i t h i t s p a t r o n s and pays by check upon
d e l i v e r y , whether i n f u l l o r p a r t i a l s a c i s f a c t i o n d f i t s purchase

contracts.

Pursuant t o h i s c o n t r a c t , Anderson d e l i v e r e d 8,802 b u s h e l s

of durum wheat i n approximately 36 t r u c k l o a d s between March 27,

1973, and May 30, 1973. He was p a i d f o r t h e d e l i v e r e d g r a i n by

customary check, e x c e p t f o r t h e sum of $2,575.33. Although a check

f o r t h i s amount w a s i s s u e d by Farmers E l e v a t o r Co., i t h a s n o t been

d e l i v e r e d and i s s t i l l due and owing t o Anderson.

The r e a s o n f o r t h e v a r i a n c e between t h e proposed d e l i v e r y

d a t e and t h e d a k s t h a t d e l i v e r y a c t u a l l y took p l a c e , i s c r i t i c a l

t o t h e r e s o l u t i o n of t h e i s s u e s p r e s e n t e d . The r e c o r d e s t a b l i s h e s ,

and t h e d i s t r i c t c o u r t i n f a c t found, t h a t Farmers E l e v a t o r Co. ' s

a b i l i t y t o a c c e p t d e l i v e r i e s from i t s p a t r o n s i s wholly dependent

upon t h e a v a i l a b i l i t y of e l e v a t o r space. In turn, the availability

o f e l e v a t o r space depends d i r e c t l y on t h e a v a i l a b i l i t y of t r a n s -

o o r t a t i o n f o r outgoing shipments. When s u f f i c i e n t r a i l c a r s o r

t r u c k s cannot be found t o t r a n s p o r t t h e g r a i n , t h e e l e v a t o r becomes

backlogged f o r s p a c e . The d e l i v e r y d a t e s of e s t a b l i s h e d c o n t r a c t s

must o f t e n be extended u n t i l t r a n s p o r t a t i o n i s s e c u r e d , and t h e

e l e v a t o r i s a g a i n c a p a b l e of h a n d l i n g incoming d e l i v e r i e s . During

t h e f a l l 1972 and e a r l y 1973, a s e r i o u s r e g i o n a l boxcar s h o r t a g e

e x i s t e d and consequently d e l i v e r y d a t e s on a l l purchase c o n t r a c t s

were moved ahead. Because of t h e r e s u l t a n t s h o r t a g e of e l e v a t o r

s p a c e , Anderson was allowed t o d e l i v e r l e s s t h a n h a l f of t h e durum

wheat which he had s o l d , u n t i l t r a n s p o r t a t i o n was o b t a i n e d i n e a r l y

June 1973.

By e a r l y summer t h e e l e v a t o r was a g a i n i n a p o s i t i o n t o

r e c e i v e wheat from Anderson. Anderson was w e l l aware of t h i s , a s
t h e r e c o r d r e v e a l s he was c o n t a c t e d by phone, a s w e l l a s by l e t t e r s

d a t e d J u l y 31, August 13, and September 18, 1973. During August

1973 Anderson was p e r s o n a l l y v i s i t e d by p l a i n t i f f ' s Board of

Directors. O September 27, 1973, t h e Board Chairman l e a r n e d
n

b y t e l e p h o n e of Anderson's r e f u s a l t o d e l i v e r f u r t h e r on h i s c o n t r a c t .

The n e x t day p l a i n t i f f was f o r c e d t o cover f o r t h e u n d e l i v e r e d

wheat, and purchased 9,198 b u s h e l s a t t h e t h e n c u r r e n t market p r i c e ,

which by t h a t time had r i s e n t o $6.50 p e r b u s h e l . I t was e s t a b -

l i s h e d a t t r i a l t h a t Anderson s o l d h i s wheat t o a n o t h e r e l e v a t o r

i n North Dakota f o r $5.35 p e r b u s h e l . Anderson r a i s e d and h a r v e s t e d

more wheat i n August and September 1973, b u t he never t e n d e r e d

any of t h i s t o p l a i n t i f f o r made any f u r t h e r e f f o r t t o honor h i s

contract with it.

Two b a s i c i s s u e s a r e r a i s e d on a p p e a l :

(1) I s enforcement of t h e o r a l agreement and t h e a l l e g e d

m o d i f i c a t i o n a s t o t h e d a t e of d e l i v e r y b a r r e d by t h e S t a t u t e of

Frauds, s e c t i o n 87A-2-201, R.C.M. 1947?

(2) Were t h e d e l i v e r y terms of t h e agreement i n f a c t

modified by a c o u r s e of performance w i t h i n t h e meaning of s e c t i o n

87A-2-208, R.C.M. 1947?

I n a commercial s e t t i n g such a s h e r e , Montana law p r o v i d e s

t h a t no c o n t r a c t f o r t h e s a l e of goods, f o r t h e p r i c e of $500 o r

more, i s e n f o r c e a b l e u n l e s s some w r i t i n g e x i s t s s u f f i c i e n t t o

e s t a b l i s h t h a t an agreement between t h e p a r t i e s was reached.

S e c t i o n 87A-2-201, R.C.M. 1947. However, s e v e r a l e x c e p t i o n s a r e

l i s t e d i n t h e s t a t u t e , one i s :

" ( 3 ) A c o n t r a c t which does n o t s a t i s f y t h e r e q u i r e -
ments of s u b s e c t i o n ( 1 ) b u t which i s v a l i d i n o t h e r
respects is enforceable
 " ( b ) if t h e p a r t y a g a i n s r whom enforcement
i s sought admits i n h i s p l e a d i n g , testimony o r
o t h e r w i s e i n c o u r t t h a t a c o n t r a c t f o r s a l e was
made, b u t t h e c o n t r a c t i s n o t e n f o r c e a b l e under
t h i s p r o v i s i o n beyond t h e q u a n t i t y of goods ad-
mitted ** *."
That t h e agreement, b u t f o r t h e l a c k of w r i t i n g , i s " v a l i d

i n o t h e r r e s p e c t s " i s n o t c o n t e s t e d by t h e p a r t i e s . There can

h e no doubt of Anderson's admissions, i n h i s d e p o s i t i o n and a t

t r i a l , a s t o t h e e x i s t e n c e of t h e c o n t r a c t . A t t r i a l he t e s t i -

f ied :

"Q. So your testimony i s t h a t t h e r e was an
agreement f o r you t o s e l l e i g h t e e n thousand b u s h e l s
of durum? A . Yes.

"Q. And t h a t agreement was made i n October, October
2 8 t h , of 1972, i s t h a t c o r r e c t ? A . Yes. I I

The s o - c a l l e d " j u d i c i a l admission" e x c e p t i o n t o t h e S t a t u t e

o f Frauds a s s e t f o r t h by s e c t i o n 87A-2-201(3)(b) p r e v e n t s a liti-

g a n t from s i m u l t a n e o u s l y a d m i t t i n g t h e e x i s t e n c e of a c o n t r a c t

and claiming t h e b e n e f i t s of t h e s t a t u t e . 2 W i l l i s t o n on S a l e s ,

( 4 t h E d . ) , 514-9, p. 303. The b a s i c r a t i o n a l e behind t h i s excep-

t i o n r e l a t e s d i r e c t l y t o t h e v e r y purpose of t h e r u l e i t s e l f , a s

e n u n c i a t e d i n G r a v e l i n v. P o r i e r , 7 7 Mont. 260, 281, 282, 250 P.

" ' A s t h e primary o b j e c t i s t o p r e v e n t m i s t a k e s ,
f r a u d s , and p e r j u r i e s , by s u b s t i t u t i n g w r i t t e n f o r
o r a l evidence i n t h e most important c l a s s e s of
c o n t r a c t s , t h e c o u r t s of e q u i t y have e s t a b l i s h e d t h e
principle *** t h a t i t s h a l l n o t be used a s an
i n s t r u m e n t f o r t h e accomplishment of f r a u d u l e n t pur-
poses; designed t o prevent f r a u d , i t s h a l l n o t be
p e r m i t t e d t o work f r a u d . "I

I n t h a t t h e o r i g i n a l o r a l c o n t r a c t i s n o t rendered unenforce-

a b l e by t h e S t a t u t e of Frauds, we n e x t examine t h e e f f e c t of t h e

a l l e g e d m o d i f i c a t i o n a s t o t h e d a t e of d e l i v e r y . S e c t i o n 87A-2-

209 ( 3 ) , provides :
 "The requirements of t h e s t a t u t e of f r a u d s s e c t i o n
of t h i s c h a p t e r ***
must be s a t i s f i e d i f t h e con-
t r a c t a s modified i s w i t h i n i t s p r o v i s i o n s ."
While t h e r e c o r d i s c l e a r a s t o Anderson's "admissions"

r e g a r d i n g t h e o r i g i n a l c o n t r a c t , no such admission was shown

concerning t h e a l l e g e d m o d i f i c a t i o n of t h e d e l i v e r y d a t e . Ander-

son argues t h a t i f t h e o r i g i n a l c o n t r a c t i s e n f o r c e a b l e that

t h e e x c e p t i o n which brought t h e o r i g i n a l o r a l c o n t r a c t o u t of

t h e S t a t u t e of Frauds, cannot be a p p l i e d t o t h e a l l e g e d o r a l

m o d i f i c a t i o n and enforcement of t h e c o n t r a c t a s modified under

s e c t i o n 87A-2-209(3) i s barred. However, t h i s does n o t complete t h e

a n a l y s i s under t h e f a c t s h e r e . Anderson's d e l i v e r i e s a f t e r t h e s e t

d a t e must be c o n s i d e r e d .

S e c t i o n 878-2-209(4) provides t h a t an a t t e m p t a t modifica-

t i o n which i s v o i d under t h e s t a t u t e of f r a u d s may s t i l l o p e r a t e

a s a waiver t o a s s e r t t h e d e f e n s e through t h e c o u r s e of performance

engaged i n by t h e p a r t i e s under s e c t i o n 878-2-208, R.C.M. 1947.

2 W i l l i s t o n on S a l e s ( 4 t h E d . ) , 5 12-6, p . 23. While t h e t r i a l

c o u r t d i d n o t make a s p e c i f i c f i n d i n g h o l d i n g t h e r e was a w a i v e r ,

i t s f i n d i n g s when r e a d a s a whole, do f i n d t h e r e was a waiver and

consent by Anderson. Under s e c t i o n 87A-1-103, t h e Uniform

Commercial Code can be supplemented, f o r purposes of i n t e r p r e t a t i o n ,

b y t h e g e n e r a l p r i n c i p l e s of law and e q u i t y , u n l e s s s p e c i f i c a l l y

d i s p l a c e d by t h e Code. The f a c t s p r e s e n t e d i n t h e i n s t a n t c a s e ,

r e q u i r e t h a t we f i n d t h a t a waiver such a s i s contemplated by

s e c t i o n 87A-2-209(4) occurred and we a g r e e .

The term "waiver" i s g e n e r a l l y defined a s a v o l u n t a r y and

i n t e n t i o n a l r e l i n q u i s h m e n t of a known r i g h t , c l a i m o r p r i v i l e g e .

Mundt v . Mallon, 106 Mont. 242, 76 P.2d 326; S t a t e e x r e l . Bingham
v. District Court, 80 Mont. 97, 257 P. 1014. In Northwestern Fire

& Marine Insurance Co. v. Pollard, 74 Mont. 142, 149, 238 P. 594,

it is stated:

"I* * * waiver is a voluntary relinquishment or re-
nunciation of some right, a foregoing or giving up
of some benefit or advantage, which, but for such
waiver, a party would have enjoyed. It may be proved
by express declarations * * * or by a course of acts
and conduct **
* as to induce the belief that it was
his intention and purpose to waive."' (Emphasis supplied.)

By delivering, pursuant to contract, approximately 36
truckloads of wheat to the elevator between March 27 and May 30,

1973, Anderson established a course of conduct sufficient to con-

stitute a waiver of his right to assert a defense under the

statute of frauds. Anderson began to deliver on a date well
after the delivery date originally contemplated, and his actions

certainly induced plaintiff's apparent belief the contract would

be honored. The enforcement of the oral contract, as modified,

is not barred under section 87A-2-201, R.C.M. 1947.

The remaining issue is whether the actions of Anderson

between March 27 and May 30, 1973, constituted a "course of per-
formance" and whether these acts were, in fact, sufficient to
modify the original oral contract as to the date of delivery.

Section 87A-1-205(1), R.C.M. 1947, defines a course of performance

as:
It* *a sequence of previous conduct between the parties
to a particular transaction which is fairly to be regarded
as establishing a common basis of understanding for inter-
preting their expressions and other conduct."
Under section 87A-2-208(1) "any course of performance accepted or
acquiesced in without objection" is relevant to determine the

meaning of the agreement .under scrutiny.
 It is clear the delivery of 36 truckloads of wheat by

Anderson is a course of performance within the ambit of section

878-1-205(1), and these repeated acts of delivery were sufficient
for the district court to imply a finding of acceptance or acquies-

cense in the elevator's need to extend the delivery date. Ander-
son's failure to make timely objection to the elevator's temporary

refusal to accept delivery is of particular significance here.

For although section 87A-2-208 would not specifically require a
timely objection under these circumstances, such a condition must

be implied if the law is to be construed with any meaning in the

commercial setting. Oskey Gasoline and Oil Co., Inc. v. OKC

Refining, Inc., 364 F.Supp. 1137; Flood v. M.P. Clark, Inc.,

319 F.Supp. 1043.

The judgment is affirmed.

We Concur:

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Justices

II

Hon. Gordon R. Be
Judge, sitting for Mr. Chief
Justice James T. Harrison.