No. 12826 INTHE SUPREME COURT OF THE STATE OF MONTANA 1975

CARGILL INCORPORATED, a corporation, Plaintiff and Respondent,

-vs

# - KENNETH L. WILSON, Defendant and Appellant.

Appeal from: District Court of the Twelfth Judicial District, 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, Blewett & Weaver, Great Falls,

Montana L. Morris Ormseth argued, Great Falls, Montana

- - Submitted

### : January 15, 1975 Decided

### :

# MAR 1

## 11975 Filed: 

## WAR 1 

## 1

## 1975

ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court

# . This 

### is an appeal from a judgment entered in the district court, HillCounty, in a breach of contract action initiatedby Zargill Incorporated against Kenneth Wilson, a HillCounty wheat farmer. The jury held in favor of Cargill and damages were assessed at $21,011.50, including interest and costs. Defendant Kenneth Wilson, hereinafter referred to asWilson, is a Havre resident who operates a farm consisting of four sections of land near Rudyard, Montana. Plaintiff Cargill Incorporated, hereinafter referred to as Cargill, 

### isa large, national grain company which maintains a grain elevator inHingham, Montana. The Hingham elevator ismanaged by one Marcus "Ole" Warren. Warren purchased wheat fromWilson during the ten or twelve years prior to this lawsuit. The events which gave rise to the instant litigation are: On the morning of August 24, 1972, Wilson telephoned Warren atthe Hingham grain elevator to inquire about the current price of wheat. Warren quoted a price of $1.50 a bushel. Wilson declined to sell his wheat atthat time. However, during the afternoon of the same day Wilson again telephoned Warren and was informed the price of winter wheat had dropped four cents a bushel to $1.46. Atthis point there isa conflict in the testimony. Warren testified he and Wilson then entered intoan oral contract over the telephone whereby Wilson was to sell 28,000 bushels of ordinary winter wheat at $1.48 a bushel and 6,000 bushels of higher protein wheat at$1.63 a bushel. On the other hand, Wilson admitted he had entered into an oral agreement but testified he had agreed to sellonly 11,000 bushels of ordinary winter wheat at$1.48 a bushel. Following the telephone call, Warren contacted Cargill's head office in Great Falls and notified it of the purchase. He also completed two standard grain purchase contracts, one numbered 86027 for the ordinary winter wheat; the other numbered 86028 for thehigher protein winter wheat. The contracts reflected the terms of the agreement as testified toby Warren. Warren signed the contracts as agent of Cargill and signedWilson's name inthe seller's signature block. A few days laterWarren delivered a copy of each contract to Wilson who noted the terms of the contracts and made no objection to them. He alsomade no objection to the fact that hisname had been signed tothe contracts by Warren. On August 30, 1972, Wilson received an interest free advance of $10,000 from Cargill. Such an advance is a loan from a grain company secured by existing future delivery contracts for grain. This loan was interest freeby custom but as an advance on the contract. Had itnot been an advance it would not have been interest free. The advance was made by check connected toa detachable part of a standard form which identified the transaction and the purpose of the payment. The form identified the transaction as "Advance on 80027 and 86028''. Wilson accepted the check with the form attached and made no objection that the form referred tothe contracts as testified toby Warren. During the months of September and October 1972, Wilson began hauling hiswheat to the grain elevator; 11,000 bushels of ordinary winter wheat atthe agreed price of $1.48 and 6,000 bushels ata higher current market price. However, inDecember, Warren discovered thatWilson did not intend toabideby the terms of the grain purchase contracts and deliver thebalance of thewheat. A breach of contract action was initiated. A HillCounty jury found Wilson liableunder the oral agreement as testified toby Warren. Wilson asserted the defense of the statuteof frauds atalltimes during this action. Appellant Wilson presents several issues forreview on appeal but we find the controlling issue is: Whether the oral agreement for the sale of the wheat, plus the exchange of several documents,

was sufficient to remove the oral agreement from the statute of frauds? We find in the affirmative.~ontana's statute of frauds, set forth in the Uniform Commercial Code, section 878-2-201(1), R.C.M.1947, provides:

11

Except as otherwise provided inthis section a contract for the sale of goods for the price of $500 ormore 

### isnot enforceable by way of action or defense unless there 

### is some writing sufficient to indicate that a contract for salehas been made between the parties and signedby the party against whom enforcement is sought orby his authorized agent orbroker. A writing isnot insufficient because it omits or incorrectly states a term agreed upon but the contract isnot enforceable under this paragraph beyond the quantity of goods shown in such writing. 1 The officialcomment to this section in the Uniform Commercial Code states thisrule: "Only three definite and invariable requirements as to the memorandum aremade by this subsection. First, it must evidence a contract for the sale of 1 goods; second, itmust be signedf,a word which includes any authentication which identifies the party tobe charged; and third, it must specify a quantity.I1 Section 87A-2-201(2), R.C.M. 1947, sets forth this principle:

I1

Between merchants ifwithin a reasonable time a writing inconfirmation of the contract and sufficient against the sender is received and the party receiving it has reason toknow itscontents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to itscontents is given within ten days after it isreceived." In Gravelin v. Porier, 

### 77 Mont. 260, 281, 250 P. 823, this Court citing Pomeroy on Contracts, Specific Performance, Sec. 74, p. 104, said: 

### he controllingmotive of the statute 

### is one of expediency and convenience, and thismotive has always been kept in view by the ablest courts in their work of interpretation. As the primary object istoprevent mistakes, frauds, and perjuries, by substituting written for oral evidence in the most important classes of contracts, the courts of equity have established the principle, which they applyunder various circumstances, that it shallnot be used as an instrument for the accomplishment of fraudulent purposes; designed to prevent fraud, it shallnot be permitted towork fraud."' In the world of business transactions, the injustices resulting from a literal, rigid application of the statuteof frauds have caused courts, legislators and scholars toreshape and define the statute. Two of the qualifications developed are applicable to the instant case. One was developed by the legal scholars and enactedby the legislature; the other was developed by the courts. The two qualifications have two things in common: 1) A recognition that the law should require some writing exchanged between the parties which sets forth their agreement; and 2) A requirement that therelationship and course of dealings between the partiesjustifies one party's belief that the other has consented to the written statement of the contract, even though he has not signed it. When these conditions are found to exist, the contract may be enforced. The beneficial purposes of the statute of frauds are preserved---the dangers of mistake or fraud are averted--- and the ends of justice are served. Under section 87A-2-201, R.C.M. 1947, the question of whether

ornotWilson isa merchant within themeaning of the statute, 

### willnot be considered here for it 

### is obvious that other requirements of the statute aremet. Evidence of confirmation of the two contracts 

### is:

It 1) They were given Wilson within a reasonable time", 

### a few days following the oral agreement and on thenext time Wilson visited the elevator.

II 2) The agreements were sufficient against the sender" in that they were complete as toalldetails and signed by Warren on behalf of Cargill. 

### 3) They were received by one "who had reason toknow its contents"

# ---Wilson admitted the prior oral agreement and that he had read the contents of the contractswhen he received them. 4) He didnot object "within ten days" afterreceipt of the contracts, nor even within four months. We find the requirement of a signed writingwas met with the interchange of the documents between the parties. The general law

on the subject is set forth inRestatement of Contracts 9 208:

### ''9 208. WHEN SEVERAL WRITINGS CONSTITUTE A SUFFICIENT MElOP&NDUM.

1IThe memorandum may consist of several writings, 

# *** "(b) though one writing only 

### is signed if "(i) the signed writing 

### isphysically annexed to the other writing by the party tobe charged, or "(ii) the signedwritingrefers to the unsigned writing, or

11(iii) it appears from examination of allthe writings that the signedwritingwas signedwith reference to the unsigned writings. II Here, Wilson admits he was handed contracts numbered 86027 and 86028 and that he did not then nor later object to their contents. Within a few days thereafter, he asked for and received an advance payment of $10,000. The memorandum given tohim, towhich the $10,000 check was attached, incorporated the earlier contracts by referring specifically to their numbers. The numbered contracts did contain allof the essentialelements of a contract; the later memorandum incorporated these documents by specific reference to theirnumbers. Wilson accepted this memorandum, againwithout any objection as to

### its contents, and he took the further step of signing hisname to the check which was attached. When he did this, he either signed a sufficient memorandum of an earlier oral contract,

or he accepted an offerwhich had been made by Cargillwhen its agent handed him thewritten numbered contracts. Research does not disclose any cases similar to the instant one, however, we direct attention to Leach v. Crucible Center Company, (1st Cir. 1968), 388 F.2d 176, where the circuit court of appeals found that a check and a receipt for the check which were exhan5ed on August 4, 1965, and each of which described the property and the agreed sales price, fixed the date of a binding transaction

asAugust 

### 4, even though a detailed sales agreement and a signed statement that an offerhad been accepted were not submitted to the purchaser until a day later.Higby v. Hooper, 124Mont. 331, 221 P.2d 1043, although not closely in point, isa casewhere a party was bound to the terms of

a previous oralcontract forbuildingahouse by his signature on
a letter toa lending agency which referred toplans and specifications set forth on other pieces of paper. Johnson v. Elliot, 123 Mont. 597, 218 P.2d 703; Johnson v. Ogle, 120 Mont. 176, 181P.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 in general. (1) A contract for sale of goods may be made in any manner suEcient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

I'(2) An agreement sufficient to constitute a contract for salemay be found even though themoment of itsmaking 

### isundetermined

# . 11(3) Even though one ormore terms are leftopen a contract for saledoes not failfor indefiniteness if the parties have intended tomake a contract and there isa reasonably certain basis for giving an appropriate remedy.

## 'l "87A-2-205. Firm offers. An offerby a merchant tobuy or sellgoods in a signedwritingwhich by itsterms gives assurance that it

### willbe held open 

### isnot revocable, for lack of consideration, during the time stated or ifno time 

### is stated for a reasonable time, but inno event may such period of irrevocabilityexceed three months; but any such term of assurance on a form suppliedby the offeree must be spearately signed by the offeror." "87A-2-206. Offer and acceptance in formation of contract. (1) Unless otherwiseunambiguously indicated by the language or circumstances "(a) an offer tomake a contract shallbe construed as inviting acceptance inany manner and by any medium reasonable in the circumstances ;k 

# **." Section 87A-2-204(2) isdirected primarily to the situationwhere the interchanged correspondence does not disclose the exact point atwhich the dealwas closed, but the actiomof the parties indicate that a binding obligation has been undertaken. Under section 87A-2-205, the signed copy of the contract thatWarren gave Wilson

was at leastbinding upon Cargill as an offer, and Wilson's subsequent conduct with respect thereto may be found to be an acceptance within the meaning of section 87A-2-206, R.C.M. 1947.The :problem 

### is thoroughly considered in

### 3 ~ender's Uniform ommercial Code Service, 

### 5 2.04(2), pp. 2-51 through 

### 2-55: "A more troublesome problem Inascertaining the form required of a writing for it to meet the test of a memorandum arises inconnection with separate pieces of paper, none of which alone 

### is sufficient, but all of which, when taken together, would qualify. What 

### isrequired to incorporate past writings? What is necessary to permit a reading together of several

### writings to establish the existence of singlememorandum?

IFThis problem was clearlypresented in a well-known case inwhich a printed form containing allthe essentialterms of thebargain had been completed, except for the signature of eitherparty. About sixmonths later, the defendant-buyer wrote to the seller, asking I I him to please cancel my order, and signed the letter. The court stated the rule of incorporation inits classic.form: "'In order to satisfy the requirements of [the statute], the note or memorandum may consist of several writings,though the writing containing the requisite terms 

### isunsigned, if it appears from an examination of allthewritings that thewritingwhich 

### is signed by the party tobe charged was signed with the intention that it refer to theunsigned writing, and that thewritings are so connected by internalreference in the signed memorandum to the unsigned one, that they may be said to constitute one paper relating tothe contract. 1 "As applied tothe case, this statement of the rulewas not necessarily dispositive of the issue. The later writing contained a reference to an order, but the order towhich itreferred was not specifically identified. Obviously, an identification, asby number, would make application of the rulerelatively easy. But theword 'order' of itself could refer tothe prior writing constituting a purchase order, or it could refer toanother oral communication. It 

### isnot essential that the signed writing intentionally refer to the prior unsigned writing which contains the essential terms of the contract, but it 

### is essential that the referencebe internal to the writing which 

### is signed. The reference must be to the writing, and not necessarily to the same transaction. In disposing of the case, the court said:

I1IIf the signed memorandum makes no reference to the unsigned memorandum, they may not be read together. Parol evidence 

### is inadmissible toconnect them

# **

# *. Here, we have nothing to indicate that the postal card refers toan extrinsicwriting. It does not identify the unsigned written memorandum 9: 

# * 9: nor does it identify any of its terms 9: 

# *. To conclude otherwise would be to subvert the spirit of the statute. I

tIThis isthe generally accepted view, though admittedly it 

### is a fine distinctionbetween a referencewhich is to the same transaction and one which 

### is to another paper. The reference to the other paper must be contained in the signed writing, whereas that the transaction towhich several writings refer isthe same transaction is a matter which may be shown by parol evidence. Though parol evidence is not admissible to supply the reference, it is admissible toconstruewords for purposes of establishingthe internal incorporation by the signedwriting. The internal evidence of a common subject matter may be sufficient to make the connection. Because of the subjectivity of the rules in this area, it 

### isnot surprising that the cases from jurisdiction tojurisdiction arenot in complete accord, and the Code makes no attempt to settle the uncertainty. In view of 

### thewidespread disposition that the statute 

### isnot always used toprevent fraud, but may be an instrument of itsperpetration, the admonition of Judge Cardozo that the staute should not be pressed to the extreme of a literaland rigid logic, should be kept inmind. "In several of the casesjust referred to, the writings were negative in character; they were attempted cancellacions, rather than positive memoranda of an existing contract. That such documents may satisfy the statute is not in question, for it isnot the intention of the document that is important, but rather its internal evidencing of a contract. Thus, a negative writing alone, or coupled with a prior unsigned writing, may constitute II a sufficient memorandum. (Emphasis supplied.)

The judgment of the district court 

### is affirmed.

We Concur:

" .* -d---------'------------r----------,- Chief Justice



## ....................................... Justices.

Mr. Justice Frank I. Haswell: I concur in the result.

Justice