Allied Grape Growers v. Bronco Wine Co.

• Decision Date: 29 July 1988
• Docket Number: No. F007207,F007207
• Citation: 249 Cal.Rptr. 872,203 Cal.App.3d 432
• Court: California Court of Appeals Court of Appeals
• Parties: , 6 UCC Rep.Serv.2d 1059 ALLIED GRAPE GROWERS, Plaintiff and Appellant, v. BRONCO WINE COMPANY, Defendant and Appellant.

Page 872

249 Cal.Rptr. 872

203 Cal.App.3d 432, 6 UCC Rep.Serv.2d 1059

ALLIED GRAPE GROWERS, Plaintiff and Appellant, v. BRONCO WINE COMPANY, Defendant and Appellant.

No. F007207.

Court of Appeal, Fifth District, California.

July 29, 1988.

Certified For Partial Publication. ^*

As Modified on Denial of Rehearing Aug. 26, 1988.

Review Denied Oct. 26, 1988.

[203 Cal.App.3d 437] Furth, Fahrner, Bluemle & Mason, Frederick P. Furth, Thomas R. Fahrner, George F. Bishop, Kathleen Styles Rogers, Martin H. Myers, San Francisco, for defendant and appellant.

[203 Cal.App.3d 436] McCutchen, Doyle, Brown & Enerson, Stephen Grant, John R. Reese, Stephen A. Zovickian, Sherri J. Conrad, San Francisco, for plaintiff and appellant.

OPINION

BALLANTYNE, Associate Justice.

INTRODUCTION

Bronco Wine Company crushes grapes for use as wine. Allied Grape Growers is a cooperative corporation consisting of many grape growers inthe business of supplying grapes to wineries. In 1981, Bronco and Allied entered into a contract for the supply and purchase of approximately 30,000 tons of red and white grapes per year for use in bulk wines.

A major dispute arose in 1982 when Bronco allegedly breached the contract by not accepting grapes or for downgrading grapes and paying lower prices for them. Allied eventually won its lawsuit with a jury award of approximately $3.4 million for its breach of contract claims. The jury was unable to reach a verdict on Allied's two fraud claims.

In a separate hearing conducted by the trial court on Allied's claim of unfair business practices, the trial court granted injunctive relief for Allied pursuant to Business and Professions Code section 17200. (Bronco's requests for a judgment non obstante veredicto and for a new trial were denied.)

On appeal Bronco contends that there is insufficient evidence to support the jury verdicts and that the trial court erred in not granting its motions for judgment non obstante veredicto or for a new trial. Bronco claims that there was juror misconduct and that the trial court erred in applying Business and Professions Code section 17200 as a matter of law. Allied cross-appeals on the theory that it was entitled to special late charges pursuant to Food and Agricultural Code section 55881 for Bronco's late payment for those portions of the contract that it did honor.

FACTS AND PROCEEDINGS BELOW

Because most of Bronco's contentions on appeal involve the sufficiency of evidence, we have abbreviated this statement of facts and discuss the pertinent facts in far greater detail below as they bear upon that particular issue.

Bronco and Allied first entered into a contractual relationship in 1978. In June of 1981 the contract was renewed for another three-year term. Under the terms of the agreement, Allied was to supply approximately 20,000 tons of Thompson seedless grapes and somewhere between 10,000 and 13,000 tons of other varieties each season between 1981 and 1984. Through the first year of the contract neither party had any complaints about the other's performance.

In 1982, however, two events tremendously undermined the expectations of the parties. First, the grape crop and crush was the largest to date in California history and there also was a glut of wine from foreign producers. Second, rainfall in the San Joaquin Valley during late September caused damage to the crop.

Bronco complained that the quality of the grapes being delivered in late September and early October was far below its standards. Bronco further complained that the grapes were below its sugar content standards.

Allied contended at trial that Bronco had substantially overcontracted for Thompson seedless grapes in 1982. Allied complained that Bronco deliberately did not open its winery in Fresno until September 20 and did not open its winery in Ceres until September 28, despite its repeated pleas for Bronco to open its wineries earlier. When Bronco finally did open its plants, over half the grapes statewide had already been crushed. Also, according to Allied, rain in September was highly probable and everyone in the wine business knew that it would cause damage. Allied's president, Robert McInturf, was concerned at the late opening of the Bronco plants because it would take up to 30 days to harvest, transport and crush a 30,000 ton contract.

Allied contended at trial that Bronco's three-tiered quality program, initiated by Bronco in 1982, and Bronco's practice of downgrading its grapes breached the general contract standards agreed to by the parties. Allied contended that the practices were totally arbitrary, that its grapes met contract standards including sugar content, and that Bronco's purpose in engaging in these practices was that it had purchased more grapes to crush than it had contracts to sell to other wineries.

Allied succeeded in delivering approximately 17,500 tons of Thompson grapes under the contract. Bronco paid an average price of $103 per ton. Allied contended that its grapes met contract standards and that it was entitled to $150 per ton because the Thompson grapes averaged 21.1 degrees Brix.

On March 16, 1983, Bronco repudiated its contract with Allied. Because there was no other market for its grapes, other than the Bronco contract, Allied formed a subsidiary corporation called ISC to purchase the grapes. Allied contended that the market value of its grapes in 1983 was $100 per ton and that ISC could only purchase the grapes for $85 per ton, for a loss of $15 per ton.

The jury awarded $2.65 million for Bronco's breach of contract in 1982. It awarded another $744,658 for Bronco's breach of contract in 1983. The trial court further awarded prejudgment interest and granted an injunction on Bronco's business practices pursuant to Business and Professions Code section 17200 after a court hearing without a jury.

DISCUSSION

I-III. ^**

IV.

ESTOPPEL AND THE STATUTE OF FRAUDS UNDER THE CALIFORNIA UNIFORM COMMERCIAL CODE.

Bronco contests the jury's award of damages for undelivered Carnelian grapes. The original written contract between the parties does not include Carnelians. Allied claims there was an oral contract for delivery of 850 tons of Carnelians. Bronco accepted and paid for one load of Carnelian grapes and rejected deliveries of the rest. Bronco argues, however, that under the California Uniform Commercial Code it is obligated to pay for only those grapes delivered and accepted. Allied replies that partial performance takes the case outside the statute of frauds.

California Uniform Commercial Code section 2201 creates a statute of frauds for the sale of all goods with the value of $500 or more. This changed the common law rule of many jurisdictions that prevented operation of the statute of frauds in contracts for the sale of goods. (See Varnell v. Henry M. Milgrom, Inc. (1985) 78 N.C.App. 451, 337 S.E.2d 616, 618-619; Maryland Supreme Corp. v. Blake Co. (1977) 279 Md. 531, 369 A.2d 1017, 1028, fn. 5.) Without a written memorandum between the parties, the California Uniform Commercial Code's statute of frauds will still not bar enforcement of an oral contract under two instances set forth in subdivision (3) of section 2201, which reads:

"(3) A contract which does not satisfy the requirements of subdivision (1) but which is valid in other respects is enforceable

"(a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

"(c) With respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2606)." (NOTE: Subd. (b) was not enacted in California.)

Allied's assertion that partial performance takes an oral contract outside the statute of frauds is not supported by any California case authority. The California Uniform Commercial Code was not operative until June 1, 1965, and it does not have retroactive application. (Cal.U.Com.Code § 10101.) The disputes in the three authorities cited by Allied predate the California Uniform Commercial Code and rely upon the California Civil Code as authority for the proposition that partial performance takes an oral contract outside the statute of frauds even if the partial performance does not complete the performing party's obligations under the contract. (Nelson v. Specialty Records, Inc., (1970) 11 Cal.App.3d 126, 141, 89 Cal.Rptr. 540; Sloan v. Hiatt (1966) 245 Cal.App.2d 926, 933, 54 Cal.Rptr. 351; Price v. McConnell (1960) 184 Cal.App.2d 660, 667, 7 Cal.Rptr. 695.)

In fact, the Sloan case actually indicates that partial performance is limited in application under section 2201, subdivision (3)(c), and the Official Code Comments. (245 Cal.App.2d at p. 933, 54 Cal.Rptr. 351.) Official comment No. 2 limits the buyer's obligation to make a payment under the oral contract to only those goods which are actually received. Comment No. 2 states:

"2. 'Partial performance' as a substitute for the required memorandum can validate the contract only for the goods which have been accepted or for which payment has been made and accepted.

"Receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists. If the court can make a just apportionment, therefore, the agreed price of any goods actually delivered can be recovered without a writing or, if the price has been paid, the seller can be forced to deliver an apportionable part of the goods. The overt actions of the parties made admissible evidence of the other terms of the contract necessary to a just apportionment. This is true even though the actions of the parties are not in themselves inconsistent with a different...