GB" Boots" Smith Corp. v. Cobb

• Decision Date: 30 October 2003
• Docket Number: No. 2002-CA-00525-SCT.,2002-CA-00525-SCT.
• Citation: 860 So.2d 774
• Parties: G.B. "BOOTS" SMITH CORPORATION v. Henry R. COBB, Jr. and Richard Cobb.
• Court: Mississippi Supreme Court

860 So.2d 774

G.B. "BOOTS" SMITH CORPORATION v. Henry R. COBB, Jr. and Richard Cobb.

No. 2002-CA-00525-SCT.

Supreme Court of Mississippi.

October 30, 2003.

Rehearing Denied December 18, 2003.

Tom T. Ross, Jr., Clarksdale, attorney for appellant.

C. Kent Haney, Clarksdale, attorney for appellees.

WALLER, Justice, for the Court.

¶ 1. Henry R. Cobb, Jr., and Richard Cobb filed suit in the Chancery Court of Coahoma County, Mississippi, against G.B. "Boots" Smith Corporation for damages resulting from an alleged breach of contract. After a bench trial, judgment was entered against Smith.

FACTS

¶ 2. Smith is a Mississippi corporation engaged in, among other things, the road construction business. Smith entered into a contract with the State of Mississippi to construct a bypass on U.S. Highway 61 in Coahoma County. The completion of this contract would require Smith to purchase a large amount of fill dirt. Smith entered into a contract with the Cobbs as follows: "The Sellers (the Cobbs) hereby sell to Buyer (Smith) all fill dirt for Project No. SDP-009-4(34) on Highway 61 Bypass South from the Sunflower River West to the end of said project, in Coahoma County, Mississippi." The contract further stated that the quantity of fill dirt needed would be approximately 550,000 cubic yards, and that Smith would purchase the fill dirt at the rate of $.40 per cubic yard.

¶ 3. After Smith had removed 443,716.30 cubic yards from the Cobbs' property, it began purchasing fill dirt from a third party. When the Cobbs discovered that Smith was acquiring fill dirt elsewhere, they filed suit alleging that the contract required Smith to purchase all fill dirt for the project solely from the Cobbs.

¶ 4. The chancery court found that, as a matter of law, the contract was unambiguous, was a mutual contract between the parties, required the Cobbs to provide all the fill dirt for the project, and required Smith to purchase all fill dirt for the project from the Cobbs. The chancery court then allowed the parties to put on testimony as to the amount of damages that the Cobbs suffered as a result of Smith's breach of contract.

¶ 5. The chancery court awarded $105,134.80, which is the contractual value of the amount of fill dirt used on the project that was not purchased from the Cobbs at $.40 per cubic yard. The chancery court further found that, because Smith was receiving monthly checks from the State of Mississippi for supplies for the project, Smith was considered a contractor, and the Cobbs were considered subcontractors, a fifteen percent (15%) damages penalty pursuant to Miss.Code Ann. § 31-5-27 (Rev.2000) should be imposed against Smith. The total judgment entered against Smith was for $120,905.02. Smith appeals.

DISCUSSION

¶ 6. We will not interfere with or disturb a chancellor's findings of fact unless those findings are manifestly wrong, clearly erroneous, or an erroneous legal standard was applied. Pilgrim Rest Missionary Baptist Church ex rel. Bd. of Deacons v. Wallace, 835 So.2d 67, 71 (Miss. 2003). Questions concerning the construction of contracts are questions of law that are committed to the court rather than questions of fact committed to the fact finder. Parkerson v. Smith, 817 So.2d 529, 532 (Miss.2002); Miss. State Hwy. Comm'n v. Patterson Enters., Ltd., 627 So.2d 261, 263 (Miss.1993). The standard of review for questions of law is de novo. Parkerson, 817 So.2d at 532; Starcher v. Byrne, 687 So.2d 737, 739 (Miss.1997).

I. WHETHER THE CHANCERY COURT ERRED IN FINDING THAT THE CONTRACT BETWEEN SMITH AND THE COBBS REQUIRED SMITH TO PURCHASE FILL DIRT SOLELY FROM THE COBBS.

¶ 7. "In contract construction cases a court's focus is upon the objective fact—the language of the contract. [A reviewing court] is concerned with what the contracting parties have said to each other, not some secret thought of one not communicated to the other." Turner v. Terry, 799 So.2d 25, 32 (Miss.2001); Osborne v. Bullins, 549 So.2d 1337, 1339 (Miss.1989). Only if the contract is unclear or ambiguous can a court go beyond the text to determine the parties' true intent. "[T]he mere fact that the parties disagree about the meaning of a contract does not make the contract ambiguous as a matter of law." Turner, 799 So.2d at 32; Cherry v. Anthony, 501 So.2d 416, 419 (Miss.1987).

¶ 8. Here, Smith filed a motion in limine to prevent any parol evidence that would add terms to the contract upon which this suit was based. Smith, in essence, requested that the chancellor make his findings on the face of the contract alone. The chancellor then found that the contract was clear and unambiguous on its face and that he did not need to go beyond the text by having the parties testify to what was meant by the contract.

¶ 9. The Cobbs contend that the contract meant that they would sell all the fill dirt needed for the project to Smith and that Smith would buy all the fill dirt needed for the project exclusively from them. This type of contract is called a "requirements contract." A requirements contract requires the buyer to purchase all his "requirements" for goods or services solely from one seller. Requirements contracts are recognized in Mississippi and are not void for indefiniteness. Miss.Code Ann. § 75-2-306(1) (Rev.2002). "An essential element of a requirements contract is the promise of the buyer to purchase exclusively from the seller either the buyer's entire requirements or up to a specified amount." Mid-South Packers, Inc. v. Shoney's, Inc. 761 F.2d 1117, 1120 (5th Cir.1985) (applying Mississippi law).

¶ 10. A Missouri federal court has found that

an express promise by the buyer to purchase exclusively from the seller is not always required. In construing a contract in which only the seller has agreed to sell, a court may find an implied reciprocal promise on the part of the buyer to purchase exclusively from the seller, at least when it is apparent that a binding contract was intended.

Propane Indus., Inc. v. Gen. Motors Corp., 429 F.Supp. 214, 219 (W.D.Mo.1977). "Thus there is no requirements agreement where the buyer fails to make an express or implied promise to purchase solely from the seller." 67A Am.Jur.2d Sales § 225, at 394 (2003) (footnote omitted). Had the formation of a requirements contract called for an express promise to purchase solely from the seller, then the contract at issue here would not be a requirements contract. The plain language of the contract provides an implied contract. While the contract does not contain the phrase "buyers agree to buy all fill dirt for the Project," the wording that was used in the contract implied exactly that. There would be no reason to include the wording "all fill dirt for project" unless Smith intended to buy all the fill dirt needed for the project from these particular sellers.

¶ 11. The chancellor reviewed the contract and, from the words in the contract alone, found that it was clear and unambiguous on its face and that it was a requirements contract. We agree.

II. WHETHER DAMAGES WERE APPROPRIATE IN LIGHT OF THIS COURT'S FINDING IN ISSUE I.

¶ 12. After he found that Smith was required to purchase all fill dirt for the project from the Cobbs, the chancellor awarded damages to the Cobbs based on the amount of fill dirt purchased by Smith from third parties. Based on the parties' testimony, the chancellor determined the amount of fill dirt needed for the project to be 706,553.3 cubic yards. He then found that the 262,837 cubic yards of dirt not purchased from the Cobbs¹ multiplied by $0.40 per yard, the stated contract price, was the measure of damages and awarded such to the Cobbs.

¶ 13. Smith claims that the chancellor abused his discretion in awarding damages for the 262,837 cubic yards of dirt not purchased from the Cobbs, since the contract estimated the amount of dirt needed for the project to be 550,000 cubic yards. Smith contends that the chancellor's award of damages essentially requires him to purchase 23% more dirt than anticipated under the contract which is unreasonably disproportionate to the stated estimate in the contract.

¶ 14. Smith relies on Miss.Code Ann. § 75-2-306(1) (Rev.2002), which states in part as follows:

A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate ... may be tendered or demanded.

¶ 15. Smith contends that the "unreasonably disproportionate" language refers to the volume of goods to be purchased under a requirements contract, not to damages for breach of a requirements contract. Smith incorrectly interprets the statute, which clearly refers to the terms of a contract and the performance of the contract. See, e.g., Chem. Distribs., Inc. v. Exxon Corp., 1 F.3d 1478, 1483 (5th Cir. 1993)

.

¶ 16. Although Smith's argument is without merit, we find that the chancellor's award of damages was clearly erroneous. The principle governing breaches of sales contracts is to give the aggrieved party the benefit of the contract by putting the party in as good a position as the party would have been in had the breaching party performed the agreement. The appropriate measure of damages is found in Miss.Code Ann. § 75-2-708 (Rev. 2002), "Seller's damages for nonacceptance of goods or repudiation of the sales contract." See, e.g., Chem. Distribs.,1 F.3d at 1486. Subsection (1) provides for damages equal to the difference between the agreed price and the market value of the goods. If subsection (1)'s damages are inadequate, subsection (2)'s measure of damages, "the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages," applies. The chancellor awarded the Cobbs the full sales price as damages. Because the Cobbs are still in possession of the dirt they were to sell and...