Opinion ID: 4680221
Heading Depth: 3
Heading Rank: 6

Heading: cancel.

Text: Rembrandt availed itself of the resale remedy under Iowa Code § 554.2706(1), which provides: Under the conditions stated in section 554.2703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article (section 554.2710), but less expenses saved in consequence of the buyer’s breach. Subsection (2) further requires that “[t]he resale must be reasonably identified as referring to the broken contract”; however, “it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.” Id. § 554.2706(2); see also Matt Crockett, The Law of Sales Under the Uniform Commercial Code § 8.2 (2020 update) (“The Code makes it clear that the goods need not be in existence at the time of resale, and if they are in existence they need not have been identified to the original sales contract.”). The key is that “every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable.” Iowa Code § 554.2706(2). 26 Nos. 20-1726 & 20-1727 The official commentary to the UCC provides guidance on how UCC § 2-706 applies in situations where, as here, there has been an “anticipatory repudiation of a contract for future goods.” UCC § 2-706 cmt. 7 (Am. L. Inst. & Unif. L. Comm’n 1977). It states: The provision of subsection (2) that the goods need not be in existence to be resold applies when the buyer is guilty of anticipatory repu- diation of a contract for future goods, before the goods or some of them have come into ex- istence. In such a case the seller may exercise the right of resale and fix his damages by “one or more contracts to sell” the quantity of con- forming future goods affected by the repudia- tion. The companion provision of subsection (2) that resale may be made although the goods were not identified to the contract prior to the buyer’s breach, likewise contemplates an antic- ipatory repudiation by the buyer but occurring after the goods are in existence. If the goods so identified conform to the contract, their resale will fix the seller’s damages quite as satisfactorily as if they had been identified before the breach. Id. Thus, as long as the eggs that Rembrandt used for resale “conform” to the Purchase Agreement, it is not necessary that the eggs resold by Rembrandt and used as the basis of its § 554.2706 remedy be the exact eggs that it would have sold to Rexing had Rexing not repudiated the contract. Moreover, courts have recognized that, when the resale involves fungible goods, there is “no reason why … a seller Nos. 20-1726 & 20-1727 27 could not recover a deficiency award under section 2-706 based upon a resale of goods other than those identified to the contract inasmuch as such a sale would not affect or alter the price received for the goods in either a private or public sale.” Servbest Foods, Inc. v. Emessee Indus., Inc., 403 N.E.2d 1, 9 (Ill. App. Ct. 1980); Firwood Mfg. Co. v. Gen. Tire, Inc., 96 F.3d 163, 168 (6th Cir. 1996) (“[W]e find persuasive the reasoning of those courts that allow sellers to substitute fungible goods for purposes of resale so long as the goods truly are fungible and the resale itself is commercially reasonable.”); Apex Oil Co. v. Belcher Co. of New York, 855 F.2d 997, 1005 (2d Cir. 1988) (“[A]t least where fungible goods are concerned, identification is not always an irrevocable act and 54 does not foreclose the possibility of substitution.”). Here, 54 Rexing argues that Apex Oil Co. v. Belcher Co. of New York, 855 F.2d 997 (2d Cir. 1988), found fault with the analysis in Servbest Foods, Inc. v. Emessee Indus., Inc., 403 N.E.2d 1 (Ill. App. Ct. 1980). See Appellants’ Br. 15–16. Although Apex Oil did disagree with part of the court’s rationale in Servbest, Apex Oil supports application of the resale remedy here. Specifically, the court in Apex Oil explained that “the provision regarding nonexistent and nonidentified goods deals with the special circumstances involving anticipatory repudiation by the buyer. Under such circumstances, there can of course be no resale remedy unless the seller is allowed to identify goods to the contract after the breach.” 855 F.2d at 1003–04 (citation omitted). Thus, Apex Oil explicitly noted that the resale remedy was available in circumstances where, as here, Rexing repudiated the contract before the goods that would satisfy the later loads had come into existence. In its brief, Rexing relies most heavily on Nobs Chemical, U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir. 1980), which involves a different provision of the UCC, § 2-708, applicable to “jobber[s]”—sellers who never acquire the contract goods and therefore cannot avail themselves of the resale remedy. Id. at 215. Here, it is undisputed that Rembrandt (continued … ) 28 Nos. 20-1726 & 20-1727 55 Rexing acknowledged both in its brief and at oral argument that the shell eggs supplied by Rembrandt to Rexing were fungible, and, more specifically, that there was no difference between the Tipton and non-Tipton eggs. Consequently, Rexing’s argument that Rembrandt is not entitled to the full measure of its resale damages because the eggs were not all sourced from Tipton finds no support in the UCC or in the interpreting case law. Rexing maintains, however, that the rule set forth in Servbest is best understood as establishing “a means to quan56 tify damages through a substitute transaction.” However, it continues, “there is no need to resort to a substitute transaction … to quantify damages where the originally identified 57 goods never come … into existence.” According to Rexing, “Rembrandt never planned, expended money, or had a reasonable expectation that Rexing … would take any of its 58 other supply at any time.” Because Rembrandt had no expectation that Rexing would accept any eggs from non-Tipton facilities, it could not use the sale of non-Tipton eggs as a basis for damages for lost sales under the contract. ( … continued) owned and possessed the eggs that were the subject of the Purchase Agreement. 55 See Appellants’ Br. 15. 56 Id. at 17. 57 Id. at 18. 58 Id. at 18–19. Nos. 20-1726 & 20-1727 29 Rexing is incorrect as a matter of law and of fact. Iowa Code § 554.2706(2) explicitly makes the resale remedy available to sellers even when the goods have not come into existence: “[I]t is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.” We are bound by this unambiguous statutory language. See State v. Richardson, 890 N.W.2d 609, 616 (Iowa 2017) (explaining that if statutory language “is unambiguous, [the] inquiry stops there”). Moreover, there was evidence in the record that Rexing would, and did, accept non-Tipton eggs. Prior to Rexing’s repudiation, approximately ten percent of the eggs delivered 59 to Rexing were sourced from locations other than Tipton. And, although Rexing lodged many complaints with Rembrandt regarding the quality of the eggs, it has not directed us to any part of the record reflecting complaints about the 60 origin of the eggs. At bottom, Rexing is attempting to create an exception to the UCC’s resale remedy that is not tethered to the statutory language, the official comments, or the case law. Contrary to Rexing’s assertions, the resale remedy is available for con- 59 See Appellants’ Br. 19 n.5; Trial Tr. I at 156–57. 60 In its summary judgment order, the district court determined that Rexing could not establish that Rembrandt had breached the Purchase Agreement by sourcing eggs from places other than Tipton farms because Rexing received the agreed-upon discounts for non-Tipton eggs and because the contract explicitly precluded incidental and consequential damages. See R.110 at 29. Rexing does not challenge that aspect of the court’s summary judgment order. 30 Nos. 20-1726 & 20-1727 tracts involving future sales of fungible products, and the seller may recover its damages as long as “every aspect of the sale including the method, manner, time, place and terms [is] commercially reasonable.” Iowa Code § 554.2706(2). The question whether Rembrandt acted in a commercially reasonable manner following Rexing’s repudiation was submitted to the jury. The jury found in favor of Rembrandt, and Rexing has not challenged the jury’s finding 61 on appeal.