Court Opinion

ID: 2782870
Source: CourtListenerOpinion
Date Created: 2015-02-27 15:04:36.093497+00
Date Added: 2024-06-11T11:28:25.317117
License: Public Domain

Nebraska Advance Sheets
230	290 NEBRASKA REPORTS

           Siouxland Ethanol, LLC, a Nebraska limited
               liability company, appellee, v. Sebade
                Brothers, LLC, a Nebraska limited
                liability company, and R ick Sebade,
                     an individual, appellants.
                                    ___ N.W.2d ___

                      Filed February 27, 2015.     No. S-14-126.

 1.	 Summary Judgment. Summary judgment is proper if the pleadings and admis-
      sible evidence offered at the hearing show that there is no genuine issue as to any
      material facts or as to the ultimate inferences that may be drawn from those facts
      and that the moving party is entitled to judgment as a matter of law.
 2.	 Summary Judgment: Appeal and Error. In reviewing a summary judgment, an
      appellate court views the evidence in the light most favorable to the party against
      whom the judgment was granted, and gives that party the benefit of all reasonable
      inferences deducible from the evidence.
 3.	 Breach of Contract. A material breach will excuse the nonbreaching party from
      its performance of the contract.
 4.	 Breach of Contract: Words and Phrases. A material breach is a failure to do
      something that is so fundamental to a contract that the failure to perform that
      obligation defeats the essential purpose of the contract or makes it impossible for
      the other party to perform under the contract.
 5.	 Breach of Contract. Whether or not a breach is material and important is a
      question of degree which must be answered by weighing the consequences of the
      breach in light of the actual custom of persons in the performance of contracts
      similar to the one involved in the specific case.
 6.	 Breach of Contract: Judgments. Although whether a material breach has
      occurred is commonly a fact question, in some circumstances, a court may deter-
      mine the question as a matter of law.
  7.	 ____: ____. If the materiality question in a breach of contract case admits of only
      one reasonable answer, then the court must intervene and address what is ordinar-
      ily a factual question as a question of law.
 8.	 Contracts. A contract must receive a reasonable construction, and a court must
      construe it as a whole and, if possible, give effect to every part of the contract.
 9.	 Summary Judgment: Proof. The party moving for summary judgment has the
      burden to show that no genuine issue of material fact exists and must produce
      sufficient evidence to demonstrate that the moving party is entitled to judgment
      as a matter of law. If the movant meets this burden, then the nonmovant must
      show the existence of a material issue of fact that prevents judgment as a matter
      of law.
10.	 Summary Judgment: Evidence. When the parties’ evidence would support
      reasonable, contrary inferences on the issue for which a movant seeks summary
      judgment, it is an inappropriate remedy.
                     Nebraska Advance Sheets
	                SIOUXLAND ETHANOL v. SEBADE BROS.	231
	                        Cite as 290 Neb. 230

   Appeal from the District Court for Dakota County: Paul
J. Vaughan, Judge. Affirmed in part, and in part reversed and
remanded for further proceedings.
    David Geier and Stuart B. Mills for appellants.
  Brian C. Buescher and Garth Glissman, of Kutak Rock,
L.L.P., for appellee.
    Wright, Connolly, Stephan, McCormack, and Cassel, JJ.
    Cassel, J.
                       INTRODUCTION
   In this breach of contract action, the buyer failed repeatedly
to meet its monthly purchase requirement and the seller sold
its unpurchased product to others. The district court determined
that the seller was entitled to summary judgment and awarded
damages and prejudgment interest.
   Upon the buyer’s appeal, we conclude that the buyer’s
breach during the first three quarters of the contract was mate-
rial and that it excused the seller of its obligation to adjust the
buyer’s shipments in the fourth quarter. However, the evidence
concerning damages presents a genuine issue of material fact
as to the market price of the product during each quarter.
   We therefore affirm the district court’s summary judgment in
favor of the seller on the issue of liability, but we reverse the
court’s judgment for damages and prejudgment interest, and
remand the cause for further proceedings.
                       BACKGROUND
                          Contract
   On September 12, 2008, Rick Sebade and Sebade Brothers,
LLC (collectively Sebade Brothers), entered into a “Priced
Sale Contract” with Siouxland Ethanol, LLC (Siouxland).
Sebade Brothers agreed to purchase modified wet distillers
grains with solubles (product), which Siouxland manufactured
as a byproduct of ethanol production. The contract ran from
October 1, 2008, to September 30, 2009. During that time,
Sebade Brothers was obligated to order and take delivery of
    Nebraska Advance Sheets
232	290 NEBRASKA REPORTS

2,500 tons of product per month, for a total of 30,000 tons. It
agreed to pay $80 per ton.
   The contract provided Sebade Brothers with a limited
authority to vary the amounts purchased. Specifically, it stated,
“Buyer may, at its option, adjust the amount of Product deliv-
ered during any month by a maximum of 30 Tons either over or
under the Monthly Quantity, subject to a maximum adjustment
of 30 Tons per quarter for each of the first three quarters dur-
ing the Delivery Period.” Thus, from October 1 to December
31, 2008, it required Sebade Brothers to purchase not less than
7,470 tons nor more than 7,530. The same amounts applied to
the first 3 months of 2009 and then to the next 3-month period.
Thus, by the end of the third quarter of the contract term,
Sebade Brothers could vary the total quantity by no more than
90 tons, plus or minus.
   The contract also provided that Siouxland was to adjust
Sebade Brothers’ fourth-quarter shipments so that by the end
of the contract, the total shipments to Sebade Brothers equaled
30,000 tons. The contractual language stated:
         Adjustments to the Monthly Quantity in one quarter
      shall not affect Buyer[’]s option to make adjustments to
      the Monthly Quantity in subsequent quarters, provided,
      however, that during the fourth quarter of the Delivery
      Period, Seller shall adjust Buyer’s fourth quarter ship-
      ments in such amounts as Seller determines, so that total
      shipments of Product to Buyer equal to the Total Contract
      Quantity set forth above by the end of the Delivery
      Period. In no event shall the total amount of Product
      shipped exceed the total Contract Quantity.
   The contract also contained a provision stating the measure
of damages if Sebade Brothers failed to purchase the required
amount of product. This provision stated:
      If the total volume of Product order[ed] by Buyer in
      any quarter is less than [the] contracted volume for that
      quarter minus 30 Tons, Buyer will be responsible for the
      difference between the contracted price per ton set forth
      above and [the] current market price of Product (if less
      than the contracted price) on the shortfall of Product
      delivered to Buyer during such quarter.
                  Nebraska Advance Sheets
	             SIOUXLAND ETHANOL v. SEBADE BROS.	233
	                     Cite as 290 Neb. 230

                   P erformance and Breach
   Sebade Brothers rarely purchased the contractual amount of
2,500 tons of product per month. The following table shows
the amounts of product that Sebade Brothers purchased for
each month of the contract.
		                             Tons of Product Bought
	            Month	               by Sebade Brothers
	       October 2008	                   1,720.90
	       November 2008	                  2,530.23
	       December 2008	                  2,653.46
	       January 2009	                   2,515.64
	       February 2009	                  1,694.60
	       March 2009	                     1,449.67
	       April 2009	                     2,030.90
	       May 2009	                       2,166.67
	       June 2009	                      1,392.06
	       July 2009	                      1,525.32
	       August 2009	                    1,079.82
	       September 2009	                     0.00
	TOTAL	                                20,759.27
   There is no dispute that Sebade Brothers purchased only
20,759.27 tons of product, which was 9,240.73 fewer than it
was contractually obligated to buy. Without taking into account
the contractual provision allowing for a 30-ton deviation each
month subject to a maximum adjustment of 30 tons per quarter,
Sebade Brothers was 595.41 tons short of its quota the first
quarter, 1,840.09 tons short the second quarter, and 1,910.37
tons short the third quarter, for a cumulative shortage prior to
the fourth quarter of 4,345.87.

                            P leadings
   Siouxland filed an amended complaint against Sebade
Brothers, setting forth a claim for breach of contract. Siouxland
alleged that Sebade Brothers’ failure to comply with the con-
tract forced Siouxland to sell over 9,000 tons of product at
market prices in effect at the time, which prices fell sig-
nificantly below the price Siouxland was guaranteed by the
contract. Siouxland alleged that it suffered over $290,000
in damages.
    Nebraska Advance Sheets
234	290 NEBRASKA REPORTS

   Sebade Brothers set forth three defenses in its answer. First,
it alleged that Siouxland did not give notice of its intention
to resell the product. Second, Sebade Brothers alleged that
Siouxland did not adjust quantities in the fourth quarter as
required and that thus, Siouxland breached its obligation under
the Uniform Commercial Code to act in good faith and waived
any further claims against Sebade Brothers. Third, Sebade
Brothers alleged that Siouxland did not tender delivery in the
amount of shortfalls Siouxland alleged and that thus, Sebade
Brothers “had no duty to accept or pay.”

                 Summary Judgment Hearing
   Siouxland moved for summary judgment, and the district
court held a hearing on the motion. Evidence established
that Sebade Brothers typically would call Siouxland 1 to 2
days in advance to ensure sufficient product was available
and then would send a truck to pick up the product. Sebade
testified that he would not expect Siouxland to arrive with
a load of product at Sebade Brothers’ feedlots without any
prior arrangement.
   There is no dispute that Siouxland did not adjust Sebade
Brothers’ shipments of product in the fourth quarter. But the
parties disputed whether Siouxland informed Sebade Brothers
that it needed to pick up more product in the last quarter and
whether Sebade stated that Sebade Brothers would not accept
or pay for unordered product from Siouxland.

                  District Court’s Judgment
   The district court entered summary judgment in favor of
Siouxland. The court determined, as a matter of law, that
Sebade Brothers materially breached the contract. The court
reasoned that after the first three quarters, Sebade Brothers
had a shortfall of 4,499.56 tons, which meant that it failed to
order and take delivery of $359,964.80 worth of product. This,
the court found, was a material breach of the contract. The
court also concluded, as a matter of law, that Sebade Brothers’
material breach excused Siouxland from performing its obliga-
tion to adjust shipments in the fourth quarter. Thus, the court
                        Nebraska Advance Sheets
	                   SIOUXLAND ETHANOL v. SEBADE BROS.	235
	                           Cite as 290 Neb. 230

granted summary judgment in favor of Siouxland on the issue
of liability.
   The court also granted summary judgment on the issue
of damages and prejudgment interest. The court found
Siouxland’s damages to be $290,201.83. The court determined
that Siouxland was entitled to prejudgment interest “‘as a
matter of right’” and that the interest began running from the
dates that Sebade Brothers was obligated to make a payment.
After determining the amount for prejudgment interest to be
$27,465.74, the court entered judgment of $317,667.57 in favor
of Siouxland.
   Sebade Brothers timely appealed, and we moved the case to
our docket under our statutory authority to regulate the case­
loads of the appellate courts of this state.1

                ASSIGNMENT OF ERROR
   Sebade Brothers assigns that the district court erred in grant-
ing summary judgment in favor of Siouxland.

                   STANDARD OF REVIEW
   [1,2] Summary judgment is proper if the pleadings and
admissible evidence offered at the hearing show that there is
no genuine issue as to any material facts or as to the ultimate
inferences that may be drawn from those facts and that the
moving party is entitled to judgment as a matter of law.2 In
reviewing a summary judgment, an appellate court views the
evidence in the light most favorable to the party against whom
the judgment was granted, and gives that party the benefit of
all reasonable inferences deducible from the evidence.3

                        ANALYSIS
                         Liability
  Sebade Brothers argues that a genuine issue of fact existed
on its “waiver” defense. It asserts that under the contract,

 1	
      Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).
 2	
      Stick v. City of Omaha, 289 Neb. 752, 857 N.W.2d 561 (2015).
 3	
      Id.
    Nebraska Advance Sheets
236	290 NEBRASKA REPORTS

Siouxland had the right to deliver additional product dur-
ing the fourth quarter to make up for earlier deficiencies.
According to Sebade Brothers, Siouxland failed to do so,
thereby waiving the deficiencies. “Whether a waiver is to
be implied from acts or conduct of a party is a question of
fact.”4 Here, the contract provided that Siouxland “shall” adjust
Sebade Brothers’ shipments so that the total shipments equal
the total contract amount.
   [3] But Siouxland counters that it was excused from adjust-
ing shipments based upon Sebade Brothers’ material breach
of the contract prior to the fourth quarter. A material breach
will excuse the nonbreaching party from its performance of
the contract.5 Thus, a material breach by Sebade Brothers
during the first three quarters of the contract would relieve
Siouxland of its obligation to adjust Sebade Brothers’ ship-
ments of product during the fourth quarter. And if that is the
situation, Sebade Brothers’ arguments concerning waiver and
tender of delivery have no merit. We therefore begin by con-
sidering whether we can determine, as a matter of law, that
Sebade Brothers materially breached the contract prior to the
fourth quarter.
   [4,5] “[A] ‘material breach’ is a failure to do something
that is so fundamental to a contract that the failure to perform
that obligation defeats the essential purpose of the contract or
makes it impossible for the other party to perform under the
contract.”6 Whether or not a breach is material and important
is a question of degree which must be answered by weighing
the consequences of the breach in light of the actual custom
of persons in the performance of contracts similar to the one
involved in the specific case.7 On the other hand, substantial

 4	
      17B C.J.S. Contracts § 1041 at 486 (2011).
 5	
      Gary’s Implement v. Bridgeport Tractor Parts, 270 Neb. 286, 702 N.W.2d
355 (2005).
 6	
      23 Samuel Williston, A Treatise on the Law of Contracts § 63:3 at 438
      (Richard A. Lord ed., 4th ed. 2002).
 7	
      Domjan v. Faith Regional Health Servs., 273 Neb. 877, 735 N.W.2d 355
      (2007).
                       Nebraska Advance Sheets
	                  SIOUXLAND ETHANOL v. SEBADE BROS.	237
	                          Cite as 290 Neb. 230

performance may be established as long as any deviations
from the contract are relatively minor and unimportant.8
    [6,7] Although whether a material breach has occurred is
commonly a fact question, in some circumstances, a court may
determine the question as a matter of law.
           The determination whether a material breach has
        occurred is generally a question of fact. Nevertheless,
        the materiality of a breach of contract is not always a
        question of fact, even if the issue is disputed; thus, if
        there is only one reasonable conclusion, a court must
        address what is ordinarily a factual question as a ques-
        tion of law.9
Thus, as a federal circuit court has stated, “[I]f the materiality
question in a given case admits of only one reasonable answer
. . . , then the court must intervene and address what is ordinar-
ily a factual question as a question of law.”10
    The breaches in this case went to the heart of the agree-
ment. Sebade Brothers failed to order and take delivery of
the required monthly allotment of 2,500 tons of product. And
Sebade Brothers’ failure to meet the 2,500-ton requirement
was not a one-time issue; it met the requirement in only 3 of
the first 9 months of the contract. Further, the shortfalls were
significant. Of those 6 months in which it did not meet the
requirement (even considering the permissible 30-ton short-
fall), the closest it came was 303.33 tons short, with the largest
shortfall being 1,077.94 tons. These are not minor deviations.
While the breach did not completely frustrate the entire pur-
pose of the contract, it was so important that it made continued
performance by Siouxland virtually pointless.11
    [8] Sebade Brothers’ apparent interpretation of the contract
is not reasonable. It seems to contend that even if it ordered
nothing during the first three quarters, Siouxland would remain
obligated to make all 30,000 tons of product available for

 8	
      Phipps v. Skyview Farms, 259 Neb. 492, 610 N.W.2d 723 (2000).
 9	
      23 Williston, supra note 6, § 63:3 at 440-41.
10	
      Gibson v. City of Cranston, 37 F.3d 731, 736 (1st Cir. 1994).
11	
      See Gibson, supra note 10.
    Nebraska Advance Sheets
238	290 NEBRASKA REPORTS

Sebade Brothers in the fourth quarter without its approval. A
contract must receive a reasonable construction, and a court
must construe it as a whole and, if possible, give effect to
every part of the contract.12 Evidence established that it would
not have been possible for Siouxland to ship 9,000 tons of
product in 1 day or 30,000 tons in 2 weeks. The contract spe-
cifically allowed for a shortfall of up to 30 tons of product in
each of the first three quarters; thus, 90 tons is the maximum
amount that Siouxland could have needed to adjust Sebade
Brothers’ total shipments during the fourth quarter. With that
understanding in mind, it is not reasonable to expect Siouxland
to generate an additional 4,400 tons of product during the
final quarter.
   We conclude that Sebade Brothers materially breached the
contract and that this material breach excused Siouxland’s
obligation to make adjustments to shipments during the fourth
quarter. We affirm the district court’s sustaining of Siouxland’s
motion for summary judgment as to Sebade Brothers’ liability
for its breach of the contract.

                            Damages
   Sebade Brothers next argues that summary judgment was
not proper due to the existence of questions of fact relevant to
Siouxland’s losses. We agree.
   The contract provided the measure of damages for a failure
to purchase the contractually required volume of product. The
measure of damages was the difference between the contracted
price per ton of $80 and the “current market price of Product
(if less than the contracted price) on the shortfall of Product
delivered to Buyer during such quarter.”
   Sebade Brothers claims that Siouxland failed to prove that
there was no dispute of material fact regarding the “current
market price.” To establish its damages under the contract,
Siouxland presented the district court with a calculation based
on the prices at which Siouxland resold the product on the
“spot market” during the months in which Sebade Brothers

12	
      Hearst-Argyle Prop. v. Entrex Comm. Servs., 279 Neb. 468, 778 N.W.2d
465 (2010).
                       Nebraska Advance Sheets
	                  SIOUXLAND ETHANOL v. SEBADE BROS.	239
	                          Cite as 290 Neb. 230

failed to order and take delivery of 2,500 tons of product.
Sebade Brothers challenges Siouxland’s evidence of market
price, claiming that Siouxland merely “presented evidence of
a variety of private sales transactions to many other custom-
ers, spread over the period of the contract, and broken down
month-by-month.”13
   Siouxland cites other jurisdictions in support of its position
that market value may be proved by a resale of the goods at
a reasonable time and place. The Supreme Judicial Court of
Maine, for example, stated that it found “no difficulty in sus-
taining the presiding Justice in his use of the resale price as
evidence of market values of the property resold.”14 Similarly,
the Supreme Court of Washington stated that “the resale price
of goods may be considered as appropriate evidence of the
market value at the time of tender in determining damages.”15
And in a case where the only evidence as to market value of
the goods at the time of the breach was that it was about the
same as what the goods ultimately sold for, a U.S. district
court in Kansas stated that the market price of the goods was
the same as the resale price and noted evidence that the seller
obtained the highest possible price for the goods.16 Although
we recognize that there is authority supporting the use of
resale price as evidence of market value, as we discuss below,
deficiencies in Siouxland’s proof prevent us from determining
as a matter of law that resale price equaled market price in
this case.
   [9,10] The party moving for summary judgment has the
burden to show that no genuine issue of material fact exists
and must produce sufficient evidence to demonstrate that
the moving party is entitled to judgment as a matter of law.
If the movant meets this burden, then the nonmovant must
show the existence of a material issue of fact that prevents

13	
      Brief for appellant at 15.
14	
      Dehahn v. Innes, 356 A.2d 711, 722 (Me. 1976).
15	
      Sprague v. Sumitomo Forestry, 104 Wash. 2d 751, 759, 709 P.2d 1200,
      1205 (1985).
16	
      Sharp Electronics Corp. v. Lodgistix, Inc., 802 F. Supp. 370 (D. Kan.
      1992).
    Nebraska Advance Sheets
240	290 NEBRASKA REPORTS

judgment as a matter of law.17 But when the parties’ evidence
would support reasonable, contrary inferences on the issue for
which a movant seeks summary judgment, it is an inappropri-
ate remedy.18
   The evidence before us demonstrates a genuine issue of
material fact as to the market price for the product, which is
a necessary component of the contractual formula for deter-
mining damages. The evidence shows many instances of
Siouxland’s selling product at different prices on the same day,
with prices differing as much as $10 a ton. Further, in June
2009, there were numerous days in which Sebade Brothers
purchased product on the spot market at a higher price than
Siouxland sold product on the same day. On one of those
days, Sebade Brothers paid $13 more per ton than Siouxland
charged. This evidence presents a genuine issue as to whether
the prices at which Siouxland sold product on the spot market
were indeed the market price. This evidence might well have
been sufficient to enable a fact finder at trial to determine
the market prices and, thus, calculate damages with reason-
able certainty. But on Siouxland’s motion for summary judg-
ment, the district court was not permitted to decide disputed
issues of fact. And in determining the amount of damages
and prejudgment interest, that is essentially what the court
did. Accordingly, the district court erred in awarding dam-
ages and prejudgment interest at the summary judgment stage.
We therefore reverse in part the court’s order and remand the
cause for further proceedings.

                         CONCLUSION
   We conclude that Sebade Brothers’ breach of its contract
with Siouxland was material and that it relieved Siouxland of
any obligation to adjust Sebade Brothers’ shipments during
the fourth quarter of the contract. However, we conclude that
there is a genuine issue of material fact concerning Siouxland’s
damages under the contract. We therefore affirm the judgment

17	
      C.E. v. Prairie Fields Family Medicine, 287 Neb. 667, 844 N.W.2d 56
      (2014).
18	
      Id.
                       Nebraska Advance Sheets
	                   SYNERGY4 ENTERS. v. PINNACLE BANK	241
	                           Cite as 290 Neb. 241

of the district court regarding Sebade Brothers’ liability for
its material breach of the contract, but we reverse the court’s
award of damages and prejudgment interest, and remand the
cause for further proceedings.
	Affirmed in part, and in part reversed and
	                 remanded for further proceedings.
   Heavican, C.J., and Miller-Lerman, J., not participating.

                Synergy4 Enterprises, Inc., a Nebraska
                  corporation, et al., appellants, v.
                      Pinnacle Bank, appellee.
                                    ___ N.W.2d ___

                       Filed February 27, 2015.     No. S-14-176.

 1.	 Summary Judgment: Appeal and Error. In reviewing a summary judgment, an
     appellate court views the evidence in the light most favorable to the party against
     whom the judgment was granted, and gives that party the benefit of all reasonable
     inferences deducible from the evidence.
 2.	 Statutes: Judgments: Appeal and Error. The meaning and interpretation of a
     statute are questions of law. An appellate court independently reviews questions
     of law decided by a lower court.
 3.	 Statutes: Appeal and Error. Statutory language is to be given its plain and ordi-
     nary meaning, and an appellate court will not resort to interpretation to ascertain
     the meaning of statutory words which are plain, direct, and unambiguous.
 4.	 Statutes: Legislature: Intent. In order for a court to inquire into a statute’s leg-
     islative history, the statute in question must be open to construction, and a statute
     is open to construction when its terms require interpretation or may reasonably be
     considered ambiguous.

   Appeal from the District Court for Douglas County: Duane
C. Dougherty, Judge. Affirmed.
   James S. Mitchell, of Law Offices of James S. Mitchell,
P.C., and, on brief, Clifford T. Lee for appellants.
    Steven D. Davidson, of Baird Holm, L.L.P., for appellee.
   Robert J. Hallstrom, of Brandt, Horan, Hallstrom & Stilmock,
for amicus curiae Nebraska Bankers Association, Inc.
    Heavican, C.J., Connolly, McCormack, and Cassel, JJ.