Godchaux-Henderson Sugar Co., Inc. v. Dr. Pepper-Pepsi Cola Bottling Co. of Dyersburg, Inc.
| Decision Date | 29 August 1985 |
| Docket Number | DEFENDANT-APPELLANT,GODCHAUX-HENDERSON,PEPPER-PEPSI,PLAINTIFFS-APPELLEES |
| Citation | 772 F.2d 906 |
| Parties | Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. SUGAR CO., INC. QWS INTERNATIONAL TRADING CO.,, v. DR.COLA BOTTLING COMPANY OF DYERSBURG, INC., NO. 83-5730 |
| Court | U.S. Court of Appeals — Sixth Circuit |
W.D.Tenn.
VACATED AND REMANDED
On Appeal from the United States District Court for the Western District of Tennessee
Before: ENGEL and MERRITT, Circuit Judges; and SPIEGEL, * District Judge.
Few events in American business life are so likely to make enemies of erstwhile business friends and colleagues as sudden and unexpected changes in market conditions. The appeal in this Tennessee diversity case involves, as the district judge expressed it, 'an honest to goodness contract dispute between obviously excellent businessmen.'
The dispute concerns two contracts for the purchase of sugar by Dr. Pepper-Pepsi Cola Bottling Company of Dyersburg, Inc. (Dr. Pepper), as the purchaser, and Godchaux-Henderson Sugar Co., Inc. (Godchaux), as supplier of the sugar.
Dr. Pepper belongs to a cooperative organization of bottling companies known as Miss-Ark-Tenn (the Co-op), which performs various services for its member bottlers, including negotiating sugar purchases. In 1974 or 1975, the Co-op and its individual member bottlers began purchasing sugar from Godchaux.
Customarily, Godchaux's broker would contact the Co-op's general manager with an offer to sell sugar at a specified price. After deciding whether to buy for the Co-op at the offering price, the general manager would contact the member bottlers to determine which of them wanted to purchase sugar at the offering price for their individual needs. The general manager then would inform Godchanux's broker which bottlers had agreed to purchase. Godchaux would send each purchaser a written contract setting forth the agreed price, the contract period, and a specific quantity of sugar to be purchased. The purchasers usually would sign the written contract and return a copy to Godchaux; however, even when the purchasers failed to sign and return the contract, both parties would perform their obligations under the agreement.
Although the written contracts often covered more than one quarter of a year, the prices usually were set by quarters. Therefore, contracts covering more than one quarter often contained more than one price term. The quantity terms listed in the contracts were determined unilaterally by Godchaux based upon the amount of sugar purchased by the bottler during the same quarter of the preceeding year. Although the bottlers knew how these quantity terms were calculated, neither they nor Godchaux paid much attention to the listed amounts in actual practice. 1 For example, from the fourth quarter of 1978 through the second quarter of 1980, Dr. Pepper three times purchased less and four times purchased more than the contract amount for the particular quarter. 2 The bottlers would order sugar from Godchaux against their contracts as needed, usually over the telephone.
All went well until the autumn of 1980. At a meeting in October 1980, representatives of Godchaux told members of the Co-op that they expected sugar prices to rise sharply soon and suggested that the members 'book' their sugar needs for the first and second quarters of 1981 at then existing prices. After the meeting, the Co-op decided to book one-half of its sugar requirements with Godchaux for the first quarter of 1981. Don Adams, the general manager of the Co-op, contacted W. E. Burks, president of Dr. Pepper, and Burks also agreed to book one-half of Dr. Pepper's first quarter needs with Godchaux at that time. Burks later received a written contract numbered 1598, which he signed and returned to Godchaux. The contract price was $48.50 per hundredweight (cwt.), and because to a clerical error the quantity listed was 1750 cwt. although it should have been 750 cwt. 3
Approximately two weeks later, Adams notified Burks that the Co-op had decided to book at that time the remainder of its first quarter needs at $45.80 per cwt. and all of its second quarter needs at $46.65 per cwt. Burks agreed to have Dr. Pepper's needs booked the same way. This agreement was memorialized in a written contract numbered 1634, which Godchaux sent to Dr. Pepper. The quantities listed were 700 cwt. for the first quarter and 2000 cwt. for the second quarter. No one at Dr. Pepper signed or returned a copy of this contract to Godchaux. 4
In December 1980, sugar prices fell sharply. Dr. Pepper made some attempt to renegotiate the contract prices with Godchaux. However, at a meeting in March, 1981, a vice president of Godchaux informed the members of the Co-op that Godchaux would not renegotiate the prices. He also told the bottlers that Godchaux intended to treat the quantity terms as minimum requirements, contrary to the earlier dealings between the parties.
Dr. Pepper subsequently refused to purchase any sugar from Godchaux during the first two quarters of 1981. Instead, it used surplus sugar that it had in inventory during the first quarter and purchased 1400 cwt. from a different supplier during the second quarter.
Godchaux brought a diversity action in the United States District Court for the Western District of Tennessee seeking damages for the breach of both contracts. Following trial, the district judge entered judgment for Godchaux, reformed the quantity term of contract No. 1598 to reflect the correct amount, and awarded damages for the full quantities in both contracts and attorney fees as provided in the contracts.
Dr. Pepper appeals.
While we generally agree with the findings of fact and conclusions of law of the district judge, we are bound, from an examination of the record, to conclude that his finding that the agreements in question were not requirements or needs contracts are clearly erroneous and inconsistent with his other supported findings of fact. We accordingly modify the findings of the district court and the determination of damages flowing therefrom and, as modified, affirm the judgment. Since this is an unpublished opinion, we refer the parties to the extensive findings of fact and conclusions of law rendered by the trial court in its Supplemental Findings of Fact and Conclusions of Law [hereinafter cited as Supplemental Findings], filed on September 21, 1983. Our opinion must be understood in the light of those findings, which we accept other than the determinations relating to the nature of the contracts, which we find to be clearly erroneous and inconsistent with the balance of the trial judge's findings.
In its appeal, Dr. Pepper correctly points out the inconsistencies in the trial judge's opinion. Dr. Pepper contends that the course of dealing between the parties established that the contracts were in fact good-faith requirements or needs contracts. The district court in fact found that the parties had not adhered to the quantity terms in earlier contracts:
The preponderance of the evidence on this issue is that the quantities stated in the contract did not mean anything. Over several years of business dealings between the parties, the numbers were never noticed or even adhered to. The substantial evidence is that the custom, practice and course of business dealings between the parties was that the buyer would order sugar on the contract as needed regardless of the quantities stated in the contract.
Supplemental Findings at 5. Notwithstanding these findings, the district court still held that Contracts 1598 and 1634 were not requirement contracts:
The preponderance of the evidence in this case is that the quantities stated in both contracts were based upon sugar needs and usages for the same quarters of the prior year. The practice of establishing a quantity term based upon prior needs, consistently followed by the contracting parties, is a specific and definite measure of quantity and should be followed here. If the analysis of the proof is correct, and the Court thinks that it is, then the quantity terms specified in Contracts 1598 and 1634 should be ruled valid and binding upon Dr. Pepper.
We find the two determinations of the court internally inconsistent and are left with the problem of resolving the inconsistency upon the basis of Tennessee's Uniform Commercial Code.
Under the U.C.C., as adopted in Tennessee, an established course of dealing between the parties supplements or qualifies the express terms of an agreement. Tenn. Code Ann. Sec. 47-2-202 provides:
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:
(a) by course of dealing or usage of trade (Sec. 47-1-205) or by course of performance (Sec. 47-2-208) . . ..
Section 47-1-205(1) defines course of dealing:
(1) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
Subsections (3) and (4) of section 47-1-205 further provide:
(3) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.
(4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be...
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