Bartlett & Company, Grain v. Merchants Company

• Decision Date: 03 October 1963
• Docket Number: No. 20210.,20210.
• Citation: 323 F.2d 501
• Parties: BARTLETT & COMPANY, GRAIN, Appellant, v. The MERCHANTS COMPANY, Appellee. The MERCHANTS COMPANY, Appellant, v. BARTLETT & COMPANY, GRAIN, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

323 F.2d 501 (1963)

BARTLETT & COMPANY, GRAIN, Appellant, v. The MERCHANTS COMPANY, Appellee.

The MERCHANTS COMPANY, Appellant, v. BARTLETT & COMPANY, GRAIN, Appellee.

No. 20210.

United States Court of Appeals Fifth Circuit.

October 3, 1963.

COPYRIGHT MATERIAL OMITTED

William E. Suddath, Jr., Jackson, Miss., Henry G. Eager, Charles B. Blackmar, Kansas City, Mo., William E. Suddath, Jr., Jackson, Miss., Watkins & Eager, Jackson, Miss., Swanson, Midgley, Jones, Blackmar & Eager, Kansas City, Mo., of counsel, for appellant.

Billy H. Quin, Vicksburg, Miss., Brunini, Everett, Grantham & Quin, Vicksburg and Jackson, Miss., of counsel, for appellee.

Before CAMERON and WISDOM, Circuit Judges, and DeVANE, District Judge.

WISDOM, Circuit Judge.

This action is for breach of contract. The subject of the contract is a barge load of corn which, according to official inspection certificates, was one grade when shipped and two very different grades when it reached its destination. As we see it, the case turns on the construction of a contract which contains two apparently inconsistent provisions. The overall issue is whether the loss should fall on the purchaser or the seller. The district court decided in favor of the buyer. We reverse and remand.

The Merchants Company, and buyer and appellee, is a Mississippi corporation. As the Vicksburg Terminal Division, it is in the business of buying and selling grains. As the Valley Mills Division it manufactures feeds. Bartlett and Company, the seller and appellant, is a Missouri Corporation which maintains grain storage facilities in six mid-western states, including terminal elevators on the Missouri River at Nebraska City, Nebraska. Its general offices are in Kansas City, Missouri.

Merchants contracted through a broker to purchase from Bartlett four barge loads of No. 2 yellow corn. The terms and conditions of sale are found in three documents: (1) a confirmation order from Bartlett to Valley Mills (Merchants); (2) a confirmation order from the broker to both parties; and (3) a confirmation of purchase from Valley Mills (Merchants), signed "accepted" by B. O. Cottier, Bartlett's official secretary in charge of merchandising. The contract called for four barges of No. 2 yellow corn at 5¼ cents under the Chicago July option, F. O. B. the buyer's barges, "If seller elects to load at Nebraska City `In Barge' Official Weights & Grades to Govern." Merchants's confirmation order, accepted by Bartlett's representative, contained the following clause: "Mark bills of lading `inspection allowed'. If draft is paid at sight, we do not waive our right to reject shipment in event quality proves to be below contract grade."

Bartlett loaded four double-skin barges, furnished by the buyer, at Nebraska City, Nebraska, on June 19, 1959. The grain in only one of these barges, ABL-2519, is involved in this dispute. That barge was examined at Nebraska City by a federally licensed grain inspector, who, on the date the loading was completed, certified that the barge contained No. 2 yellow corn. Meanwhile, since Merchants had sold four barges of No. 2 yellow corn to O. J. Walls in Guntersville, Alabama, Merchants routed the barges to Guntersville and applied the grain in barge ABL-2519 on the Walls contract. While the barge was in transit from Nebraska City to Guntersville, Merchants paid Bartlett for the grain by draft with the bill of lading attached.

The grain arrived in Guntersville on July 7. Walls first discovered it to be partly "overheating and musty" on July 13. He refused to accept it, since it was below contract grade, and he called for a federal appeal grade inspection. At this inspection, on July 16, 1959, it was certified that approximately 17,000 bushels of the corn in barge ABL-2519 were No. 1 yellow corn and approximately 15,000 bushels were sample grade¹ yellow corn. Walls agreed to handle the barge for Merchants's account and accordingly unloaded, trucked, dried, turned, stored, and again trucked the grain. For these services he charged $7,164.61 and deducted that amount from Merchants's invoice. Both parties to this action agree that these charges were excessive, but Merchants contends that no one else was available to perform the services.

Merchants then sued Bartlett, seeking $7,164.61 for breach of contract and $5,000 in punitive damages. The suit was originally brought in a Mississippi state court as an attachment in chancery (a quasi-in rem action) by attaching Bartlett's deposits in a Mississippi bank. The suit was removed to the United States District Court for the Southern District of Mississippi where it was tried before the court without a jury. The district court found that the grain inspection certificate of June 19, 1959, at Nebraska City "was erroneous and inaccurate"; that it was "not fair * * * and failed to reveal the true condition in this barge on the date of shipment". The district court found that "an inescapable inference from the evidence * * * is that barge was loaded in Nebraska City with an excessive amount of molded wheat which contaminated the cargo and accounted for the unsalable condition at Guntersville." The court held that Merchants was not bound by the certificate's recitals, because of the clause in Merchants's purchase confirmation, accepted by Bartlett, giving the buyer the right to reject shipment in the event that the quality proved to be below contract grade. The court awarded damages in the amount of $6,500 with six per cent interest from July 3, 1959, against the funds in the hands of the resident bank. The suit was dismissed as to Bartlett personally for lack of in personam jurisdiction. The court declined to award punitive damages, since the court found no evidence of gross negligence, willfulness, or oppressiveness on the part of the seller.

On appeal, Bartlett makes two major contentions. First, Bartlett contends that there is no evidence the grain in barge ABL-2519 was other than No. 2 yellow corn when it left Nebraska City in the buyer's barge. Second, the official grade certificate at origin should have been conclusive under the terms of the sale agreement, in the absence of gross neglect or willful wrongdoing.

Both parties have acted on the assumption that the legal questions are to be determined by the substantive law of Missouri. The negotiations and the acceptance of the contract were all carried on in Missouri, and that state has sufficient contacts with the transaction to warrant the application of its law. Mississippi, the state in which this action was brought, would recognize the parties' mutual choice as to which law should govern in this situation. See Castleman v. Canal Bank & Trust Co., 1934, 171 Miss. 291, 156 So. 648. Under Klaxon Co. v. Stentor Elec. Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, governing the choice of law in diversity cases, we follow Mississippi's rules and give effect to the intention of the parties to be governed by Missouri's substantive law. To the best of our ability, therefore, and to the extent that these are Missouri cases in point, we have relied on Missouri cases, notwithstanding their antiquity.

I. THE BUYER'S RIGHT TO INSPECT

A buyer dealing with a distant vendor and purchasing goods of a specified quality without first seeing them has a right to inspect them upon receipt. Pope v. Allis, 1885, 115 U.S. 363, 372, 6 S.Ct. 69, 29 L.Ed. 393 (dictum); see Rivers Bros. Co. v. Putney, 1921, 27 N.M. 177, 199 P. 108, 27 A.L.R. 520 at 522; Fore v. Plant Seed Co., Mo.Ct.App. 1921, 232 S.W. 169. And, in the absence of any contractual provision to the contrary, the buyer may reject an F.O.B. shipment at destination. N. W. Helm Feed & Coal Co. v. Butler County Milling Co., 1925, 218 Mo.App. 290, 269 S.W. 630; Fore v. Plant Seed Co. But the parties may agree instead to abide by the judgment of another, and that judgment, if honestly exercised, is binding on the buyer. Del Bondio v. Jacob Dold Packing Co., 1899, 79 Mo.App. 465; see Great Atl. & Pac. Tea Co. v. Smith, W.D.Ark., 75 F.Supp. 156, aff'd 8 Cir., 1948, 170 F.2d 474; 46 Am.Jur., Sales § 248; cf. Arkla Lumber & Mfg. Co. v. Henry Quellmalz Lumber & Mfg. Co., Mo.1923, 252 S.W. 961 (seller also bound). The buyer cannot thereafter substitute his own inspection for that conducted by the third party. In Gratiot St. Warehouse Co. v. Wilkinson, 1902, 94 Mo.App. 528, 68 S.W. 581, a contract for sale provided that corn was to be shipped F.O.B. St. Louis, Missouri, "St. Louis inspection" to Jackson, Mississippi. The St. Louis inspection showed the corn to be in good condition but upon its arrival in Jackson the purchaser refused to accept it because an inspection there ascertained it to be wet, moldy, and rotten. The court, however, found that the St. Louis inspection was conclusive as to grade and quality, and stated,

"We need not stop to inquire whether the title passed to appellants when the grain was delivered to the carrier in St. Louis to be transported to Jackson. It is enough that they had agreed to buy on St. Louis inspection. When that inspection determined the grain was of the quality ordered, they became bound by their agreement to accept and pay for it when it reached Jackson, and are responsible for the damages respondent sustained by their refusal to do so." 68 S.W. at 585.

Such an inspection is held to have a conclusive effect even if there is no express provision in the contract that it shall be final. E. g., Chapman v. Kansas City, C. & S. R. Co., 1893, 114 Mo. 542, 21 S.W. 858; Massman Const. Co. v. Lake Lotawana Ass'n, 1948, 240 Mo.App. 469, 210 S.W.2d 398; see Rogers v. Rehard, 1906, 122 Mo.App. 44, 97 S.W. 951, 953.

The contract in question here provides that "`in barge' official weights & grades" are to govern — if the shipment is made from Nebraska City. But — if the shipment is made from Omaha, although "official `in barge' grades" still govern, "destination official weights" are to govern. Thus,...