Spartan Grain & Mill Co. v. Ayers, 74-3134

• Citation: 517 F.2d 214
• Decision Date: 08 August 1975
• Docket Number: No. 74-3134,74-3134
• Parties: 17 UCC Rep.Serv. 693 SPARTAN GRAIN & MILL COMPANY, Plaintiff-Appellee-Cross-Appellant, v. Virgil AYERS, W. C. Meaders, Jr., and Boyce Blackmon, Defendants-Appellants-Cross-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 214

517 F.2d 214

17 UCC Rep.Serv. 693

SPARTAN GRAIN & MILL COMPANY, Plaintiff-Appellee-Cross-Appellant, v. Virgil AYERS, W. C. Meaders, Jr., and Boyce Blackmon,

Defendants-Appellants-Cross-Appellees.

No. 74-3134.

United States Court of Appeals, Fifth Circuit.

Aug. 8, 1975.

Jerre B. Swann, Atlanta, Ga., William O. Carter, Hartwell, Ga., for defendants-appellants-cross-appellees.

James M. Landis, John C. Butters, Atlanta, Ga., J. Vincent Cook, Athens, Ga., for plaintiff-appellee-cross-appellant.

Appeals from the United States District Court for the Middle District of Georgia.

Before COLEMAN, MORGAN and CLARK, Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

Spartan Grain and Mill Co. ("Spartan") filed suit in November, 1972, seeking to recover the unpaid balances owed by three defendants-appellants ("producers") for chicken feed purchased from Spartan. At the conclusion of the trial, the district judge directed a verdict in favor of Spartan on four issues; the producers, choosing not to put all their eggs in one basket, appeal all these rulings. On the one issue which the judge allowed the jury to decide, it returned verdicts in favor of the producers; Spartan cross appeals, challenging the trial court's denial of its motions for directed verdict and for judgment notwithstanding the verdict. As explained below, we find merit in two of producers' contentions and reject all other claims of error, including the cross appeal.

I.

The transactions giving rise to this suit were a series of contracts, each specifying that in return for the individual producer's promise to use only Spartan feed in raising a flock of chickens, Spartan would, subject to certain conditions, purchase all the eggs produced by the flock and arrange for them to be hatched. The first issue on appeal concerns the price Spartan charged for its feed; producers contend that although the product was chicken feed, the price was not. Since the contracts did not specify a price for the feed, Ga.Code § 109A-2-305(1) ¹ required that the price be a "reasonable" one; consequently the producers attempted by various methods to show that Spartan had breached the agreement by charging an unreasonably high price.

Producers first attempted to show that there were other feeds on the market selling at much lower prices, but the district judge ruled the offered evidence inadmissible. Producers offered to compare the prices charged by Spartan with those of a Georgia cooperative and those of the Ralston Purina Co. Neither of these associations offered a similar marketing program, however, and the cooperative did not even attempt to profit by its feed sales. Producers then attempted to compare Spartan's prices to those of Marbut Milling Co. Although Marbut did for a time offer services similar to Spartan's, it only finalized three such contracts, and the court refused to permit the comparison.

The district judge was correct in ruling that the prices charged by these other sellers could not validly be compared to those charged by Spartan. Spartan's prices were not necessarily unreasonable simply because they were higher than those charged by the other sellers, since it also committed itself to purchase and market all the producers' eggs; likewise it was logical for the producers to be willing to pay more for Spartan feed since by buying it they assured themselves of a guaranteed market for their eggs. The products offered by the other organizations were simply not similar enough to Spartan's package of feed and services to be used for comparative purposes. ² See Smith v. Nelson, 123 Ga.App. 712, 725, 182 S.E.2d 332 (1971); Sammons v. Webb, 86 Ga.App. 382, 71 S.E.2d 832 (1952).

Producers also attempted to prove Spartan's price was unreasonable by proving its markup over its cost for the feed. The court properly rejected this attempt. Although there may be situations in which such an inquiry is the only possible way in which to determine the reasonableness of prices charged, see Kuss Machine Tool and Dye Co. v. El-Tronics, 393 Pa. 353, 143 A.2d 38 (1958), such is not the case here. Rather, we agree with the district judge that even if the producers were able to ascertain and prove exactly how much Spartan marked up the grain it sold to the producers, the possibility of prejudice prevented such an inquiry since another method of proving unreasonableness was available. The possibility of prejudice was especially strong here. Since Spartan was selling its feed as part of a marketing package, its markup on the grain, when introduced in isolation, might well have appeared to be unreasonably high.

II.

The amount claimed by Spartan to be owed by producers includes "chargebacks" to their accounts based on alleged sub-standard hatching rates. According to the terms of the contracts, Spartan was permitted to reduce the price it paid to producers for any shipment of eggs in which less than 75% of the eggs hatched; if less than 65% hatched, Spartan could terminate the contract governing the shipment. Producers' attempted to introduce evidence showing that any inferior hatching rate occurring in Blackmon's and Ayers' flocks was due to Spartan's mishandling of the eggs, and that consequently Spartan should not be permitted to charge back their accounts. Their second argument on appeal is that the district judge erred in excluding this evidence and in directing a verdict for Spartan on the issue. Both points in this argument have merit; the evidence introduced or offered proved facts as follows.

Spartan utilized two methods for picking up the eggs: (a) with certain flocks the eggs were picked up in a trailer and transported directly to a hatchery in Pennsylvania; (b) with other flocks the eggs were picked up either in an old school bus or a van and taken to a facility in Royston, Georgia, reloaded into a trailer and transported to hatcheries in Ohio or Maryland. Appellant Meaders, whose eggs were transported by the first method, had no problems with hatchability. Blackmon, whose eggs were transported by both methods, had hatchability problems only with the second. Ayers, all of whose eggs were transported by the second method, had significant problems with hatchability resulting not only in chargebacks but also in the early termination of contracts. ³

The principal factors affecting the hatchability of eggs are: (a) the handling of the eggs; (b) the temperature and humidity levels under which the eggs are maintained; (c) the length of time before the eggs are placed in an incubator; and (d) the quality of the hen's feed. These factors become more critical in the latter portion of the laying life of the flock. While Blackmon and Ayers had no control over the third and fourth factors, they had the proper facilities for maintaining temperature and humidity, and they complied with all industry standards in producing and handling the eggs. Spartan admitted that Blackmon was a "good producer" and that it had referred to Ayers as one of the more "conscientious" producers in its program. The driver employed in the second method of pickup did not recall any adverse reports when the eggs of these two producers were inspected at their farms.

On the other hand, there was evidence to the effect that in the loading process the eggs were handled roughly by Spartan's agents and that neither the school bus nor the van, in which the eggs often sat overnight, was equipped with a temperature and humidity control. Moreover, the route covered by the school bus or the van encompassed a three-county area; driving the complete route consumed as much as a day. Even the trailers onto which the eggs were reloaded were often unequipped with a temperature and humidity control, or if so equipped the device was not in working order. Finally, certain hatcheries had trouble with all of Spartan's eggs.

In making rulings on the foregoing evidence, the trial judge repeatedly excluded testimony and exhibits which did not directly relate to producers by name even though such evidence did relate to the pickup practices generally employed by Spartan in connection with Blackmon's and Ayers' eggs. Producers introduced scientific evidence on the impact of rough handling on hatchability through the testimony of an expert witness, ⁴ but the court ultimately ruled that with respect to each hatchability chargeback and contract termination, the producers would be required to establish the facts and circumstances surrounding the particular shipment of eggs from which it arose. The trial court likewise characterized evidence with respect to Spartan's failure to maintain proper temperature and humidity controls as creating mere suspicion and directed a verdict as to all of producers claims as to hatchability.

We hold that the district judge erred in making these rulings. Evidence of a trade or business custom is admissible for the purpose of showing that the custom was followed in a particular instance; likewise, evidence of other transactions or occurrences is admissible if relevant and not too likely to confuse a jury or prejudice the opposing party. T. F. Greene, The Georgia Law of Evidence 169, 171 (1957); McCormick, Evidence, 464, 2nd Ed. (1972); Russell v. Pitts, 105 Ga.App. 147, 149, 123 S.E.2d 708, 710 (1961) ("(I)t is...