Blue Valley Co-op. v. NAT. FARMERS ORG., S-97-1006.

• Citation: 600 N.W.2d 786,257 Neb. 751
• Decision Date: 01 October 1999
• Docket Number: No. S-97-1006.,S-97-1006.
• Parties: BLUE VALLEY COOPERATIVE, a cooperative corporation, appellee, v. NATIONAL FARMERS ORGANIZATION, an Iowa corporation, appellant.
• Court: Nebraska Supreme Court

600 N.W.2d 786

257 Neb. 751

BLUE VALLEY COOPERATIVE, a cooperative corporation, appellee, v. NATIONAL FARMERS ORGANIZATION, an Iowa corporation, appellant.

No. S-97-1006.

Supreme Court of Nebraska.

October 1, 1999.

Robert L. Nefsky and Timothy L. Moll, of Rembolt Ludtke & Berger, Lincoln, for appellant.

David A. Jarecke, of Crosby, Guenzel, Davis, Kessner & Kuester, Lincoln, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

GERRARD, J.

I. NATURE OF CASE

Blue Valley Cooperative (BVC) sued National Farmers Organization (NFO) to recover contractual costs of storing and handling NFO's white corn. NFO counterclaimed that BVC's negligence had damaged NFO's white corn and that BVC had breached an oral contract to reimburse NFO for that damage. After a jury found in favor of BVC on the written contract cause of action and against NFO on NFO's counterclaims, the trial court awarded BVC prejudgment interest. NFO appeals the judgment entered pursuant to the jury's verdict and the court's award of prejudgment interest. For the reasons that follow, we affirm in part, and in part reverse and remand for a new trial on the negligence counterclaim. We also reverse the trial court's award of prejudgment interest.

II. FACTUAL BACKGROUND

After a windstorm damaged grain bins that stored white corn belonging to certain NFO member-producers in 1993, NFO representatives contacted BVC to arrange for delivery and storage of the white corn at BVC's facility in Seward County. On July 9, 1993, BVC and NFO entered into a written agreement to facilitate such storage. The agreement stated that BVC was to receive and store NFO's white corn. The agreement recited that the white corn would be grade No. 2 with a moisture content of 15 percent. If any of the white corn received by BVC was offgrade or had a higher moisture content, the agreement called upon BVC to reject the load unless instructed otherwise by a representative of NFO.

The agreement also contained a waiver clause stating, "Quality liability will be waived if Blue Valley Cooperative is instructed to receive lesser than grade # 2 corn and moisture content higher than 15.0%." Under the agreement, NFO was to arrange for the white corn to be shipped out of BVC's facility by August 31, 1993. BVC was to load the grain onto railcars when the time came for the white corn to be shipped. The agreement placed the responsibility for railcar delay (demurrage) charges on NFO. Shortly after the parties entered into the agreement, NFO member-producers delivered approximately 115,000 bushels of their white corn to BVC.

Despite the agreement to remove the white corn from BVC by August 31, 1993, railcars were not dispatched to do so until January 21, 1994. On that day, a 54-car train arrived to haul the white corn to buyers in Mexico. NFO member-producers delivered more white corn from their farms to be commingled with the white corn stored at BVC and loaded onto the train. After BVC had loaded roughly 27 railcars with the NFO's commingled white corn, the Lincoln Inspection Service reported that the white corn was below grade No. 2 and had excessive damage. As such, BVC personnel unloaded the train and placed all the white corn back into BVC's storage facility.

BVC and NFO offered conflicting reasons at trial for the low grade of the corn. In particular, BVC presented testimony and exhibits suggesting that the white corn delivered by NFO had been infected with blue-eye mold. BVC witnesses testified that the blue-eye mold, as opposed to any negligent handling or storage, had caused the corn to deteriorate while warehoused at BVC and to ultimately rate below grade No. 2. Meanwhile, NFO witnesses asserted that heat had damaged the corn while stored at BVC's facility, which resulted from BVC's failure to keep the white corn cool and at a low moisture content.

After BVC unloaded the damaged white corn from the railcars, NFO member-producers delivered nearly 190,000 bushels of grade No. 2 white corn to fill the train on January 26, 1994. The railcars departed with the corn on February 9. BVC acknowledged that part of the reason for the railcar delay was having to load, unload, and reload the white corn. Burlington Northern Railroad billed BVC $15,120 for the demurrage on March 24, with a due date of April 8. BVC paid Burlington Northern Railroad, but remained confused about which of BVC's clients should be held accountable for the demurrage. For some reason, BVC agents thought the demurrage should be charged to Harvest States (a different BVC client) and did not realize that the demurrage was NFO's responsibility until sometime in March 1995.

On March 1, 1994, representatives from NFO and BVC met to discuss how the remaining white corn would be disposed of and how costs and damages would be apportioned. At trial, the parties disputed what was orally agreed upon at that meeting. After the meeting, NFO paid BVC storage charges of $18,566.69 for storing the original 115,000 bushels of white corn from July 1993 to January 1994. NFO also paid BVC $19,058.59 for handling the 190,000 bushels of white corn delivered by NFO and loaded directly on railcars in January 1994. Finally, NFO paid BVC $2,566.82 for handling 25,668 bushels of the damaged white corn that NFO sold after January 1994. The remaining white corn was removed from BVC's facility by October 1994.

Thereafter, BVC initiated the instant suit claiming that NFO still owed BVC $8,843.03 in storage and handling costs (after discounting 2 cents per point on each bushel with damaged kernels) pursuant to the alleged oral agreement on March 1, 1994, and $15,120 in demurrage charges pursuant to the original written agreement. In response, NFO asserted counterclaims that BVC had negligently damaged NFO's white corn and breached an oral contract to reimburse NFO for that damage. NFO alleged damages in the amount of $77,398 by calculating the difference between the $3.05 per bushel the corn would have brought if it were grade No. 2 in January 1994 and the $2.60 per bushel for which it was actually sold.

On the morning of trial, NFO filed a motion in limine to exclude the waiver clause. NFO argued that the waiver clause was void and unenforceable under Neb. U.C.C. § 7-204 (Reissue 1992) and, therefore, irrelevant. The trial court overruled NFO's motion. After the jurors were sworn but before any evidence was admitted, NFO objected to admission of the waiver clause. Again, the trial court overruled NFO's objection.

When BVC attempted to adduce testimony from BVC representative Robert H. Kohtz regarding the waiver clause, NFO objected and was again overruled. At that point, NFO requested a continuing objection, which the trial court noted. In so doing, the trial court stated that NFO's continuing objection "continues to be overruled." The entire written contract containing the waiver clause and a facsimile copy of it were both admitted into evidence.

Kohtz briefly described the waiver clause in the contract and said it was included because BVC had reason to believe that the white corn delivered by NFO had been exposed to rain. Kohtz explained that storing corn with a moisture content in excess of 15 percent can lead to problems and that BVC wanted to protect against that with the waiver clause. BVC also adduced testimony regarding the waiver clause while cross-examining Edwin Tvrdy, a representative of NFO.

In discussing the jury instructions with counsel for both parties, the trial court indicated that instruction No. 10 "took care of the limitation on liability" by paraphrasing § 7-204. Instruction No. 10 defined negligence and res ipsa loquitur, outlined the elements of those theories and the standard of proof, and explained that BVC could be held liable for failing to exercise care that a reasonably prudent person would under similar circumstances. Neither BVC nor NFO objected, so instruction No. 10 was submitted to the jury.

The jury returned a verdict in favor of BVC on the written contract cause of action for demurrage charges (in the sum of $15,120) and against NFO on NFO's counterclaim for negligence. The jury found against each party's breach-of-an-oral-contract claim. The trial court entered judgment on the jury's verdict and, without explaining its rationale, awarded BVC prejudgment interest from May 8, 1994. NFO timely appealed.

III. ASSIGNMENTS OF ERROR

NFO assigns two errors. First, NFO claims that the contractual waiver of "quality liability" (waiver clause) is void and unenforceable under § 7-204; thus, it was reversible error to allow the jury to learn of it. Second, NFO argues that its dispute with BVC was unliquidated and that therefore, prejudgment interest should not have been charged against NFO.

IV. STANDARD OF REVIEW

In order to resolve NFO's first assignment of error, this court must interpret § 7-204 to determine whether BVC's waiver clause was void or unenforceable. Questions of statutory interpretation require an appellate court to reach a conclusion independent of the decision made by the court below. Schmidt v. State, 255 Neb. 551, 586 N.W.2d 148 (1998).

We must also determine whether it was reversible error to admit the waiver clause into evidence. To constitute reversible error in a civil case, the wrongful admission of evidence must unfairly prejudice a substantial right of a litigant complaining about evidence admitted. Radecki v. Mutual of Omaha Ins. Co., 255 Neb. 224, 583 N.W.2d 320 (1998).

Regarding the prejudgment interest awarded to BVC and whether BVC's damages were liquidated, our scope of review is de novo. See, e.g., Quantum Elec., Inc. v. Concept Dev., Inc., 237 Neb. 927, 468 N.W.2d 372 (1991) (mentioning that de novo review was conducted without explicitly setting forth scope of review for awards of prejudgment interest); Northwestern Bell Tel. Co. v. Woodmen of the World Life Ins. Soc., 189 Neb. 30, 199 N.W.2d 729 (1972) (failing to set...