Title: CARGILL INC v WILSON

State: montana

Issuer: Montana Supreme Court

Document:

No. 12826 I N T H E S U P R E M E C O U R T O F THE STATE O F M O N T A N A 1975 CARGILL INCORPORATED, a corporation, P l a i n t i f f and Respondent, -vs - K E N N E T H L. WILSON, Defendant and Appellant. Appeal from: District Court of the Twelfth J u d i c i a l D i s t r i c t , Honorable Bernard W. Thomas, Judge presiding. Counsel of Record: For Appellant: Tipp and Hoven, Missoula, Montana Vernon Hoven argued, Missoula , Montana For Respondent : Jardine, Stephenson, B l e w e t t & Weaver, Great F a l l s , Montana L. Morris Ormseth argued, Great F a l l s , Montana - - Submitted : January 15, 1975 Decided : MAR 1 1 1975 F i l e d : WAR 1 1 1975 Clerk M r . J u s t i c e John Conway Harrison delivered t h e Opinion of t h e Court . This i s an appeal from a judgment entered i n t h e d i s t r i c t c o u r t , H i l l County, i n a breach of c o n t r a c t a c t i o n i n i t i a t e d by Z a r g i l l Incorporated a g a i n s t Kenneth Wilson, a H i l l County wheat farmer. The jury held i n favor of C a r g i l l and damages were assessed a t $21,011.50, including i n t e r e s t and c o s t s . Defendant Kenneth Wilson, h e r e i n a f t e r r e f e r r e d t o a s Wilson, i s a Havre r e s i d e n t who operates a farm c o n s i s t i n g of four s e c t i o n s o f land near Rudyard, Montana. P l a i n t i f f C a r g i l l Incorporated, h e r e i n a f t e r r e f e r r e d t o a s C a r g i l l , i s a l a r g e , n a t i o n a l g r a i n company which maintains a grain e l e v a t o r i n Hingham, Montana. The Hingham e l e v a t o r i s managed by one Marcus "Ole" Warren. Warren purchased wheat from Wilson during t h e ten o r twelve years p r i o r t o t h i s lawsuit. The events which gave r i s e t o the i n s t a n t l i t i g a t i o n a r e : O n t h e morning of August 24, 1972, Wilson telephoned Warren a t the Hingham g r a i n elevator t o inquire about t h e current p r i c e of wheat. Warren quoted a p r i c e of $1.50 a bushel. Wilson declined t o sell h i s wheat a t t h a t time. However, during t h e afternoon of the same day Wilson again telephoned Warren and was informed the p r i c e of winter wheat had dropped four cents a bushel t o $1.46. A t t h i s point t h e r e i s a c o n f l i c t i n t h e testimony. Warren t e s t i f i e d he and Wilson then entered i n t o an o r a l c o n t r a c t over t h e telephone whereby Wilson was t o s e l l 28,000 bushels of ordinary winter wheat a t $1.48 a bushel and 6,000 bushels of higher protein wheat a t $1.63 a bushel. O n t h e other hand, Wilson admitted he had entered i n t o an o r a l agreement but t e s t i f i e d he had agreed t o s e l l only 11,000 bushels of ordinary winter wheat a t $1.48 a bushel. Following t h e telephone c a l l , Warren contacted C a r g i l l ' s head o f f i c e i n Great F a l l s and n o t i f i e d it of t h e purchase. He a l s o completed two standard grain purchase c o n t r a c t s , one numbered 86027 f o r t h e ordinary winter wheat; the other numbered 86028 f o r t h e higher protein winter wheat. The contracts reflected the terms of the agreement a s t e s t i f i e d t o by Warren. Warren signed the contracts a s agent of Cargill and signed Wilson's name i n the s e l l e r ' s signature block. A few days l a t e r Warren delivered a copy of each contract t o Wilson who noted t h e terms of the contracts and made no objection t o them. He a l s o made no objection t o t h e f a c t that h i s name had been signed t o the contracts by Warren. O n August 30, 1972, Wilson received an i n t e r e s t f r e e advance of $10,000 from Cargill. Such an advance i s a loan from a grain company secured by existing future delivery contracts f o r grain. This loan was i n t e r e s t f r e e by custom but a s an advance on the contract. Had i t not been an advance it would not have been i n t e r e s t free. The advance was made by check connected t o a detachable part of a standard form which i d e n t i f i e d the transaction and the purpose of the payment. The form identified the transaction a s "Advance on 80027 and 86028''. Wilson accepted the check with the form attached and made no objection t h a t the form referred t o the contracts a s t e s t i f i e d t o by Warren. During the months of September and October 1972, Wilson began hauling h i s wheat t o the grain elevator; 11,000 bushels of ordinary winter wheat a t the agreed price of $1.48 and 6,000 bushels a t a higher current market price. However, i n December, Warren discovered t h a t Wilson did not intend t o abide by the terms of the grain purchase contracts and deliver t h e balance of the wheat. A breach of contract action was i n i t i a t e d . A H i l l County jury found Wilson l i a b l e under the o r a l agreement a s t e s t i f i e d t o by Warren. Wilson asserted the defense of the s t a t u t e of frauds a t a l l times during t h i s action. Appellant Wilson presents several issues f o r review on appeal but we find the controlling i s s u e is: Whether the o r a l agreement f o r the s a l e of the wheat, plus the exchange of several documents, was s u f f i c i e n t t o remove the o r a l agreement from the s t a t u t e of frauds? W e find i n the affirmative. ~ o n t a n a ' s s t a t u t e of frauds, s e t f o r t h i n the Uniform Com- mercial Code, section 878-2-201(1), R.C.M.1947, provides: 11 Except a s otherwise provided i n t h i s section a contract f o r the s a l e of goods f o r the price of $500 o r more i s not enforceable by way of action o r defense unless there i s some writing s u f f i c i e n t t o indicate t h a t a contract f o r s a l e has been made between the p a r t i e s and signed by the party against whom enforcement i s sought o r by h i s authorized agent o r broker. A writing i s not insufficient be- cause i t omits or incorrectly s t a t e s a term agreed upon but the contract i s not enforceable under t h i s para- graph beyond the quantity of goods shown i n such writing. 1 The o f f i c i a l comment t o t h i s section i n the Uniform Commercial Code s t a t e s t h i s r u l e : "Only three d e f i n i t e and invariable requirements a s t o the memorandum a r e made by t h i s subsection. F i r s t , it must evidence a contract f o r the s a l e of 1 goods; second, i t must be s i g n e d f , a word which in- cludes any authentication which i d e n t i f i e s the party t o be charged; and t h i r d , it must specify a quantity. I1 Section 87A-2-201(2), R.C.M. 1947, s e t s f o r t h t h i s principle: I1 Between merchants i f within a reasonable time a writing i n confirmation of the contract and s u f f i c i e n t against the sender is received and the party receiving it has reason t o know i t s contents, it s a t i s f i e s the requirements of subsection (1) against such party unless written notice of objection t o i t s contents i s given within ten days a f t e r it i s received." In Gravelin v. Porier, 77 Mont. 260, 281, 250 P. 823, t h i s Court c i t i n g Pomeroy on Contracts, Specific Performance, Sec. 74, p. 104, said: he controlling motive of the s t a t u t e is one of expediency and convenience, and t h i s motive has always been kept i n view by the a b l e s t courts i n t h e i r work of interpretation. As the primary object i s t o prevent mistakes, frauds, and perjuries, by substituting written f o r o r a l evidence i n the most important classes of contracts, the courts of equity have established the principle, which they apply under various circumstances, t h a t it s h a l l not be used a s an instrument f o r the accom- plishment of fraudulent purposes; designed t o prevent fraud, i t s h a l l not be permitted t o work fraud."' In the world of business transactions, the i n j u s t i c e s r e s u l t i n g from a l i t e r a l , r i g i d application of the s t a t u t e of frauds have caused courts, l e g i s l a t o r s and scholars t o reshape and define t h e s t a t u t e . Two of the qualifications developed a r e applicable t o the i n s t a n t case. One was developed by the l e g a l scholars and enacted by t h e l e g i s l a t u r e ; the other was developed by the courts. The two qualifications have two things i n common: 1) A recognition t h a t t h e law should require some writing exchanged between the p a r t i e s which s e t s f o r t h t h e i r agreement; and 2) A requirement t h a t t h e relationship and course of dealings between the p a r t i e s j u s t i f i e s one party's b e l i e f t h a t the other has consented t o the written statement of the contract, even though he has not signed it. When these conditions a r e found to e x i s t , the contract may be en- forced. The beneficial purposes of the s t a t u t e of frauds a r e preserved---the dangers of mistake o r fraud a r e averted--- and the ends of j u s t i c e a r e served. Under section 87A-2-201, R.C.M. 1947, the question of whether o r not Wilson i s a merchant within t h e meaning of t h e s t a t u t e , w i l l not be considered here f o r it i s obvious t h a t other requirements of the s t a t u t e a r e met. Evidence of confirmation of the two con- t r a c t s is: I t 1 ) They were given Wilson within a reasonable time", a few days following the o r a l agreement and on the next time Wilson v i s i t e d the elevator. I I 2) The agreements were s u f f i c i e n t against the sender" i n t h a t they were complete a s t o a l l d e t a i l s and signed by Warren on behalf of Cargill. 3 ) They were received by one "who had reason t o know i t s contents" --- Wilson admitted the p r i o r o r a l agreement and t h a t he had read the contents of the contracts when he received them. 4) H e did not object "within ten days" a f t e r r e c e i p t of the contracts, nor even within four months. W e find the requirement of a signed writing was met with the interchange of the documents between t h e parties. The general law on the subject is s e t f o r t h i n Restatement of Contracts 9 208: ''9 208. WHEN SEVERAL WRITINGS CONSTITUTE A SUFFICIENT M E l O P & N D U M . 1 I The memorandum may consist of several writings, * * * "(b) though one writing only i s signed i f " ( i ) the signed writing i s physically annexed t o the other writing by the party t o be charged, o r " ( i i ) the signed writing r e f e r s t o the unsigned writing, o r 11 ( i i i ) it appears from examination of a l l the writings t h a t the signed writing was signed with reference t o the unsigned writings. I I Here, Wilson admits he was handed contracts numbered 86027 and 86028 and t h a t he did not then nor l a t e r object t o t h e i r contents. Within a few days t h e r e a f t e r , he asked f o r and received an advance payment of $10,000. The memorandum given t o him, t o which the $10,000 check was attached, incorporated the e a r l i e r contracts by r e f e r r i n g s p e c i f i c a l l y t o t h e i r numbers. The numbered contracts did contain a l l of the e s s e n t i a l elements of a contract; the l a t e r memorandum incorporated these documents by specific reference t o t h e i r numbers. Wilson accepted t h i s memorandum, again without any objection a s t o i t s contents, and he took the further s t e p of signing h i s name t o the check which was attached. When he did t h i s , he e i t h e r signed a s u f f i c i e n t memorandum of an e a r l i e r o r a l contract, o r he accepted an o f f e r which had been made by Cargill when i t s agent handed him t h e written numbered contracts. Research does not disclose any cases similar t o the i n s t a n t one, however, we d i r e c t a t t e n t i o n t o Leach v. Crucible Center Company, (1st C i r . 1968), 388 F.2d 176, where the c i r c u i t court of appeals found t h a t a check and a receipt f o r t h e check which were exhan5ed on August 4, 1965, and each of which described the property and t h e agreed sales price, fixed the date of a binding transaction a s August 4, even though a detailed s a l e s agreement and a signed statement t h a t an o f f e r had been accepted were not submitted t o the purchaser u n t i l a day l a t e r . Higby v. Hooper, 124 Mont. 331, 221 P.2d 1043, although not closely i n point, i s a case where a party was bound t o the terms of a previous o r a l contract f o r buildinga house by h i s signature on a l e t t e r t o a lending agency which referred t o plans and specifica- tions s e t f o r t h on other pieces of paper. Johnson v. E l l i o t , 123 Mont. 597, 218 P.2d 703; Johnson v. Ogle, 120 Mont. 176, 181 P.2d 789; Gantt v. Harper, 86 Mont. 69, 281 P. 915. The Uniform Commercial Code, sections 87A-2-204, 87A-2-205 and 87A-2-206, R.C.M. 1947, read: "87A-2-204. Formation i n general. (1) A contract f o r s a l e of goods may be made i n any manner s u E c i e n t t o show agreement, including conduct by both p a r t i e s which recognizes the e x i s t - ence of such a contract. I' (2) A n agreement s u f f i c i e n t t o c o n s t i t u t e a contract f o r s a l e may be found even though t h e moment of i t s making i s unde termined . 11 (3) Even though one o r more terms a r e l e f t open a contract f o r s a l e does not f a i l f o r indefiniteness i f the p a r t i e s have intended t o make a contract and t h e r e i s a reasonably c e r t a i n basis f o r giving an appropriate remedy. ' l "87A-2-205. Firm offers. A n o f f e r by a merchant t o buy o r s e l l goods i n a signed writing which by i t s terms gives assurance t h a t i t w i l l be held open i s not revocable, f o r lack of consideration, during the time s t a t e d o r i f no time i s s t a t e d f o r a reasonable time, but i n no event may such period of i r r e v o c a b i l i t y exceed three months; but any such term of assurance on a form supplied by t h e offeree must be spearately signed by the offeror." "87A-2-206. Offer and acceptance i n formation of contract. (1) Unless otherwise unambiguously indicated by the language o r circumstances "(a) an o f f e r t o make a contract s h a l l be construed a s i n v i t i n g acceptance i n any manner and by any medium reasonable i n the circumstances ; k * *." Section 87A-2-204(2) i s directed primarily t o the s i t u a t i o n where the interchanged correspondence does not disclose the exact point a t which t h e deal was closed, but the a c t i o m o f the p a r t i e s indicate t h a t a binding obligation has been undertaken. Under section 87A-2-205, the signed copy of the contract t h a t Warren gave Wilson was a t l e a s t binding upon Cargill a s an o f f e r , and Wilson's subse- quent conduct with respect thereto may be found t o be an acceptance within the meaning of section 87A-2-206, R.C.M. 1947. The :problem i s thoroughly considered i n 3 ~ e n d e r ' s Uniform ommercial Code Service, 5 2 . 0 4 ( 2 ) , pp. 2-51 through 2-55: "A more troublesome problem I n ascertaining the form required of a writing f o r i t t o meet the test of a memorandum a r i s e s i n connection with separate pieces of paper, none of which alone is s u f f i c i e n t , but a l l of which, when taken together, would qualify. What i s required t o incorporate past writings? What is necessary t o permit a reading together of several w r i t - ings t o e s t a b l i s h the existence of single memorandum? I F This problem was c l e a r l y presented i n a well-known case i n which a printed form containing a l l the essen- t i a l terms of the bargain had been completed, except f o r the signature of e i t h e r party. About s i x months l a t e r , t h e defendant-buyer wrote t o the s e l l e r , asking I I him t o please cancel m y order, and signed t h e l e t t e r . The court stated the r u l e of incorporation i n i t s c l a s s i c . form: "'In order t o s a t i s f y the requirements of [the s t a t u t e ] , the note o r memorandum may consist of several writings,though the writing containing the r e q u i s i t e terms i s unsigned, i f it appears from an examination of a l l the writings t h a t the writing which i s signed by the party t o be charged was signed with the intention t h a t it r e f e r t o the unsigned writing, and t h a t the writings a r e so connected by i n t e r n a l reference i n the signed memorandum t o the unsigned one, t h a t they may be said t o c o n s t i t u t e one paper r e l a t i n g t o the contract. 1 "As applied t o the case, t h i s statement of the r u l e was not necessarily dispositive of the issue. The l a t e r writing contained a reference t o an order, but the order t o which it referred was not s p e c i f i c a l l y identified. Obviously, an i d e n t i f i c a t i o n , a s by number, would make application of the r u l e r e l a t i v e l y easy. But t h e word 'order' of i t s e l f could r e f e r t o the prior writing con- s t i t u t i n g a purchase order, o r it could r e f e r t o another o r a l communication. It i s not e s s e n t i a l t h a t the signed writing intentionally r e f e r t o the p r i o r unsigned writing which contains the e s s e n t i a l terms of the contract, but it i s e s s e n t i a l t h a t the reference be i n t e r n a l t o the writing which i s signed. The reference must be t o the writing, and not necessarily t o the same transaction. I n disposing of the case, the court said: I 1 I I f the signed memorandum makes no reference t o the unsigned memorandum, they may not be read together. Parol evidence i s inadmissible t o connect them * * *. Here, we have nothing t o indicate t h a t the postal card r e f e r s t o an e x t r i n s i c writing. It does not i d e n t i f y the unsigned written memorandum 9 : * 9 : nor does it i d e n t i f y any of i t s terms 9 : *. To conclude otherwise would be t o subvert t h e s p i r i t of the s t a t u t e . I t I This i s the generally accepted view, though admittedly it i s a f i n e d i s t i n c t i o n between a reference which i s t o the same transaction and one which i s t o another paper. The reference t o t h e other paper must be contained i n the signed writing, whereas t h a t the transaction t o which several writings r e f e r i s the same transaction i s a matter which may be shown by parol evidence. Though parol evidence i s not admissible t o supply the reference, it i s admissible t o construe words f o r purposes of establishing the i n t e r n a l incorporation by the signed writing. The i n t e r n a l evi- dence of a common subject matter may be s u f f i c i e n t t o make the connection. Because of the subjectivity of the rules i n t h i s area, it i s not surprising t h a t the cases from jurisdiction t o jurisdiction a r e not i n complete accord, and the Code makes no attempt t o s e t t l e the uncertainty. In view of t h e widespread disposition t h a t the s t a t u t e i s not always used t o prevent fraud, but may be an instrument of i t s perpetration, the admonition of Judge Cardozo t h a t the s t a u t e should not be pressed t o the extreme of a l i t e r a l and r i g i d logic, should be kept i n mind. "In several of the cases j u s t referred t o , the writings were negative i n character; they were attempted cancella- cions, r a t h e r than positive memoranda of an e x i s t i n g contract. That such documents may s a t i s f y the s t a t u t e is not i n question, f o r it i s not the intention of the document t h a t is important, but r a t h e r i t s i n t e r n a l evidencing of a contract. Thus, a negative writing alone, o r coupled with a p r i o r unsigned writing, may c o n s t i t u t e I I a s u f f i c i e n t memorandum. (Emphasis supplied.) The judgment of the d i s t r i c t court is affirmed. W e Concur: " .* -d---------'------------r----------,- Chief J u s t i c e ....................................... Justices. M r . J u s t i c e Frank I. Haswell: I concur i n t h e r e s u l t . J u s t i c e