Court Opinion

ID: 3036482
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:54:24.429194+00
Date Added: 2024-06-11T12:03:52.844947
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 04-2387
                                  ___________

Pieper, Inc.,                             *
                                          *
            Appellant,                    *
                                          * Appeal from the United States
      v.                                  * District Court for the
                                          * Southern District of Iowa.
Land O’Lakes Farmland Feed, LLC,          *
a Delaware limited liability corporation, *
                                          *
            Appellee.                     *
                                   ___________

                         Submitted: November 4, 2004
                             Filed: December 9, 2004
                                 ___________

Before RILEY, MELLOY, and COLLOTON, Circuit Judges.
                            ___________

RILEY, Circuit Judge.

       This appeal arises out of Pieper, Inc.’s (Pieper) breach of contract action
against Land O’Lakes Farmland Feed, LLC (LOLFF). Pieper appeals the district
court’s1 grant of summary judgment to LOLFF on its affirmative defense of
frustration of purpose. Frustrating Pieper, we affirm.

      1
       The Honorable Robert W. Pratt, United States District Judge for the Southern
District of Iowa.
I.     BACKGROUND
       Pieper and LOLFF entered into a Weaned Pig Purchase Agreement
(Agreement), in which LOLFF agreed to purchase weaner pigs, i.e., weaned piglets,
from Pieper. LOLFF intended to sell these pigs to third-party finishers, who would
raise the pigs to market weight. Farmland Industries, Inc. (Farmland) then would buy
market hogs from third-party finishers under the terms of an existing contract
between Farmland and Pieper.

      Recital D of the Agreement explains LOLFF was to buy Pieper’s weaner pigs
only while Farmland purchased market hogs from third-party finishers:

      LOLFF will purchase such pigs from [Pieper] only while its Customers
      have the ability to market such pigs utilizing the Farmland America’s
      Best Pork Marketing Agreement No. 8073 dated November 14, 2000
      and originally assigned to Pieper, Inc.

In a deposition, Pieper’s president, Michael Pieper (Mr. Pieper), testified the
Agreement depended on Farmland’s purchase of market hogs from third-party
finishers:

      Q:    Farmland had to take the pigs in order for this whole arrangement
            to work[,] right?
      A:    Farmland had to take the pigs to make this whole agreement
            work.
      Q:    Because the hogs that were raised by [third-party finishers] had
            to go to Farmland. Otherwise [Pieper] would be in trouble under
            [its] contract [with Farmland,] right?
      A:    Yes, that’s right. We required [LOLFF] to sell the pigs back to
            Farmland.
      Q:    And this deal was dependent upon [third-party finishers] being
            able to sell the market hogs to Farmland under Pieper’s . . .
            contract [with Farmland,] right?
      A:    Yes.

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      Q:     Because the hogs had to go to Farmland[,] right?
      A:     Yes, they had to be delivered to Farmland.

      Farmland subsequently refused to buy market hogs from third-party finishers,
declining to consent to an assignment of the Pieper and Farmland contract. Without
the ability to sell weaner pigs to third-party finishers for sale to Farmland, LOLFF
had no reason to buy pigs from Pieper. As a result, LOLFF advised Pieper “it will no
longer purchase pigs from Pieper under the [Agreement], and such Agreement shall
be terminated effective immediately.”

       Pieper filed suit against LOLFF, alleging LOLFF breached the Agreement by
failing to buy Pieper’s weaner pigs. In its answer, LOLFF asserted frustration of
purpose as an affirmative defense. The parties filed cross motions for summary
judgment. Pieper argued summary judgment was appropriate, because there was no
genuine issue of material fact that LOLFF had breached the Agreement. LOLFF
argued it was excused from performing, because its principal purpose behind the
Agreement had been frustrated.

      The district court first determined LOLFF had breached the Agreement;
however, the district court later granted summary judgment to LOLFF on its
affirmative defense of frustration of purpose. The district court relied on Recital D
and Mr. Pieper’s testimony to determine LOLFF’s principal purpose in entering into
the Agreement. The district court determined LOLFF’s principal purpose was to sell
Pieper’s pigs to third-party finishers who then would sell market hogs to Farmland,
and the principal purpose had been frustrated by Farmland’s refusal to buy market
hogs from third-party finishers.

      On appeal, Pieper argues the district court erred in relying on extrinsic
evidence to determine LOLFF’s principal purpose in entering into the Agreement.
Pieper contends (1) the Agreement is clear and unambiguous, (2) Recital D creates

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no legal obligation, and (3) LOLFF’s primary purpose was to sell feed to third parties
purchasing weaner pigs LOLFF acquired from Pieper.2

II.    DISCUSSION
       We review de novo a district court’s grant of summary judgment.
Schoolhouse, Inc. v. Anderson, 275 F.3d 726, 728 (8th Cir. 2002). When considering
a motion for summary judgment, we view the evidence in the light most favorable to
the nonmoving party. Id. Summary judgment is proper if there is no genuine issue
as to any material fact and the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c); Lambert v. City of Dumas, 187 F.3d 931, 934 (8th Cir. 1999).

       Under Minnesota law,3 frustration of purpose will excuse contract performance
when: “(1) [t]he party’s principal purpose in making the contract is frustrated; (2)
without that party’s fault; (3) by the occurrence of an event, the non-occurrence of
which was a basic assumption on which the contract was made.” City of Savage v.
Formanek, 459 N.W.2d 173, 176 (Minn. Ct. App. 1990) (citation omitted). “The
principal purpose: ‘must be so completely the basis of the contract that, as both
parties understand, without it the transaction would make little sense.’” Id. (quoting
Restatement (Second) of Contracts § 265, cmt. a (1981)).

      Pieper argues the district court erred in relying on Recital D and on Mr.
Pieper’s testimony to determine LOLFF’s principal purpose behind the Agreement.
Pieper contends the district court should have relied on only the operable terms of the

      2
      “Always remember the distinction between contribution and commitment.
Take the matter of bacon and eggs. The chicken makes a contribution. The pig
makes a commitment.” John Mack Carter.
      3
       The Agreement expressly provides that the Agreement, and any disputes
arising thereunder, “shall be governed and construed in accordance with the laws of
the State of Minnesota.”

                                          -4-
Agreement and should have found the principal purpose of the Agreement was to
merely buy and sell pigs, with LOLFF supplying feed for third parties purchasing the
weaner pigs LOLFF purchased from Pieper.

       Pieper correctly notes that, under Minnesota law, recitals do not create legal
obligations. Berg v. Berg, 275 N.W. 836, 841-42 (Minn. 1937). However, in this
case, the district court did not create any legal obligation beyond the operative
provisions of the Agreement. Instead, the district court relied on extrinsic evidence
to determine LOLFF’s principal purpose in entering into the Agreement.

       Minnesota courts have not directly addressed the question of whether a court
may rely on extrinsic evidence to determine a party’s principal purpose. Without
deciding the issue, the Minnesota Court of Appeals relied on extrinsic evidence to
determine an employer’s principal purpose in entering into an employment contract
with an employee. See Nat’l Recruiters, Inc. v. Toro Co., 343 N.W.2d 704, 708
(Minn. Ct. App. 1984) (in applying the doctrine of frustration of purpose, the court
considered testimony from a company manager explaining the company’s purpose in
hiring the individual was frustrated by elimination of the position).

       The use of extrinsic evidence to show a party’s principal purpose first was
demonstrated in Krell v. Henry, [1903] 2 K.B. 740 (C.A.), the landmark case on
frustration of purpose. In Krell, the court excused a prospective tenant from his
obligation to pay for a room overlooking the King’s coronation route, when the King
became ill and the coronation parade was cancelled. Id. at 740-41. The contract
involved in Krell did not refer explicitly to the coronation, but the court nonetheless
inferred the principal purpose had been frustrated. Id. at 754. Krell thus set forth the
principle that a contract’s purpose may be inferred from surrounding circumstances:

      I think that you first have to ascertain, not necessarily from the terms of
      the contract, but, if required, from necessary inferences, drawn from

                                          -5-
      surrounding circumstances recognised by both contracting parties, what
      is the substance of the contract, and then to ask the question whether
      that substantial contract needs for its foundation the assumption of the
      existence of a particular state of things.

Id. at 749.

       Relying on the principles enunciated in Krell, and the indirect authority from
the Minnesota Court of Appeals in National Recruiters, Inc., we hold the district court
did not err in considering extrinsic evidence to determine LOLFF’s principal purpose
in entering into the Agreement. Based on the undisputed evidence outside the
operative provisions of the Agreement, no doubt exists that LOLFF entered into the
Agreement to sell weaner pigs to third-party finishers, who then would sell market
hogs to Farmland. Recital D explicitly states LOLFF’s obligation to purchase weaner
pigs from Pieper depended on Farmland’s purchase of market hogs from third-party
finishers. Even Mr. Pieper testified the Agreement assumed Farmland would
purchase market hogs from third-party finishers, and the “deal was dependent upon
[third-party finishers] being able to sell the market hogs to Farmland.”

       Having determined LOLFF’s principal purpose in entering into the Agreement,
we ask whether LOLFF’s performance was excused under the doctrine of frustration
of purpose. Our review of the record leads us to conclude, as a matter of law,
LOLFF’s purpose in buying pigs from Pieper was frustrated by Farmland’s refusal
to purchase market hogs from third-party finishers. Farmland’s refusal completely
frustrated the basic assumption upon which the Agreement was made and without
which the Agreement makes no sense. Without the ability to sell the weaner pigs to
third-party finishers for eventual sale to Farmland, LOLFF had no commercial reason
to purchase pigs from Pieper. Additionally, Pieper did not present any evidence
showing LOLFF was at fault with regard to Farmland’s decision not to purchase
market hogs from third-party finishers.

                                         -6-
III.  CONCLUSION
      The district court properly granted summary judgment to LOLFF, and we
affirm.
                       _____________________________

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