Cargill, Inc. v. Atkins Farms, Inc.

• Citation: 422 F. Supp. 239
• Decision Date: 28 October 1976
• Docket Number: No. ED 74-69-C.,ED 74-69-C.
• Parties: CARGILL, INC., Plaintiff, v. ATKINS FARMS, INC. and F. K. Bradshaw, Defendants.
• Court: U.S. District Court — Western District of Arkansas

422 F. Supp. 239

CARGILL, INC., Plaintiff, v. ATKINS FARMS, INC. and F. K. Bradshaw, Defendants.

No. ED 74-69-C.

United States District Court, W. D. Arkansas, El Dorado Division.

October 28, 1976.

Martin G. Gilbert, Coleman, Gantt, Ramsay & Cox, Pine Bluff, Ark., for plaintiff.

Bill R. Holloway, Holloway & Haddock, Lake Village, Ark., for defendants.

MEMORANDUM OPINION

OREN HARRIS, District Judge.

In this diversity action, the plaintiff, Cargill, Inc., seeks damages for an alleged breach of contract against the defendants, Atkins Farms, Inc. and F. K. Bradshaw. The plaintiff is a corporation organized under the laws of a state other than Arkansas with its principal place of business in Minneapolis, Minnesota. The defendant, Atkins Farms, Inc., is a corporation, organized under Arkansas law with its principal place of business in Hamburg, Arkansas. The defendant, F. K. Bradshaw, is a citizen and resident of Hamburg, Arkansas. The amount in controversy exceeds $10,000.00. exclusive of interest and costs. Jurisdiction is admitted and established pursuant to 28 U.S.C. § 1332.

There is little dispute as to the material facts which gave rise to this controversy. There are two contracts between the parties upon which the claim of the plaintiff is based.

First, the plaintiff, Cargill, Inc., and the defendants, Atkins Farms, Inc. and F. K. Bradshaw, entered into a contract, on July 16, 1974, which, by its terms, Atkins and Bradshaw sold and agreed to deliver to Cargill 25,000 bushels of # 1 yellow soybeans, for which Cargill agreed to pay the defendants $6.74 per bushel. The contract was on Cargill standard printed forms with delivery (time of shipment) due July 31, 1974. The contract provided that Cargill, as processor, reserved the right to refuse over 14.5 MST and 8% DMG.¹

On the same date, July 16, 1974, the plaintiff, Cargill, Inc., and the defendant, Atkins Farms, Inc., entered into a similar contract which was identical in all respects except Atkins agreed to deliver to Cargill 10,000 bushels of # 1 yellow soybeans for which Cargill agreed to pay $6.74 per bushel.

It is undisputed and established by the record that all parties understood that, as a part of the contract, the provision "Processor Scale of Discounts" referred to the practice prevalent in the industry whereby the processor, Cargill, upon tender of a truckload of soybeans, would inspect and grade a sample of the truckload and, based upon the results of such inspection and grading, make certain deductions from the contract price. The standard discounts applied by Cargill during 1974, as well as the previous year, 1973, was included as evidence in the record by the plaintiff. Discounts acceptable were made from the contract price in accordance with this standard of discounts depending upon such factors as test weight, moisture, heat damage and other damage revealed by the inspection and grading of the sample.

Similarly, it is established that the parties understood that 14.5 MST, as included in the contracts, referred to 14.5% moisture and that DMG referred to damage.

Pursuant to the contract, the defendants, Atkins Farms and Bradshaw, commenced the trucking of soybeans to Cargill's Yellow Bend elevator on July 18, 1974. Five truckloads were delivered on that date. On Friday, July 19, 11 truckloads were delivered and on Monday, July 22, 9 truckloads were delivered, making a total of 11,896 bushels delivered by the defendants.

When the last truckload of soybeans was delivered, late afternoon, Monday, July 22, Fred Cooper, Cargill's superintendent of the elevator, advised the driver of the truck not to deliver any more soybeans until he, Cooper, talked to Mr. Atkins of Atkins Farms or Mr. Bradshaw.

The testimony on just what happened at this time is in conflict. Mr. Cooper testified that he had become concerned about the level of damage in the samples being inspected as the trucks arrived. Since the grading of damage was largely a judgment matter, he wanted to have some of the samples graded by the Mississippi State grader to determine whether his grading was too strict. It was a custom, and established as regular procedure, that soybeans, upon being barged out from the Yellow Bend elevator of the plaintiff, are inspected and graded by the Mississippi State grader. According to Cooper's testimony, he had become superintendent of the Yellow Bend elevator as of July 1, 1974, having been previously a foreman at Cargill's New Madrid, Missouri, elevator, and he wanted to see how the Mississippi State grader would grade some of the samples. He stated that if he found that he was grading the soybeans more strictly than they would be graded by the Mississippi State grader, upon being barged out, he would relax his grading accordingly.

The level of damages was important because all of the beans from the Yellow Bend elevator were being barged to Baton Rouge, Louisiana. From there, they would ultimately be exported. Federal regulations prohibited the exporting of soybeans with over 3.0% damage. Therefore, any quantity of soybeans having over 3.0% damage would, of necessity, have to be mixed with a sufficient quantity of soybeans with less than 3.0% damage in order to comply with the regulations. It was explained by the plaintiff's witnesses that this was the reason for including the provision in the contracts that gave Cargill the right to refuse over 8.0% damage. If a given quantity of soybeans showed damage over 8.0%, the processor, Cargill, would evaluate the soybean market and supply situation at the time and make a judgment as to whether or not to accept the beans.

Mr. Cooper testified that he talked, by telephone, with Mr. Bradshaw late the afternoon that he had advised the truck driver not to deliver any more beans until he had discussed it with the defendants. He advised Bradshaw that he was concerned about the level of damage of the soybeans and that he wanted to have some samples checked by the Mississippi State grader. He stated that Bradshaw offered no objection to temporarily suspending the hauling until that could be done. Further, he stated that Bradshaw explained that he had some irrigation work that the men could be doing in the meantime.

The driver of the last truck delivery, on Monday, July 22, testified that Mr. Cooper, the superintendent of the plaintiff, told him to not deliver any more of the defendants' soybeans. Mr. Bradshaw testified that he objected to the temporary suspension of the hauling for the above stated reason but admitted that he did not protest and, in fact, went along with Cooper's request.

Superintendent Cooper immediately called the Mississippi State grader; he responded by coming to the Yellow Bend elevator the next day, Tuesday, July 23, and inspected three (3) of the defendants' samples of beans for damage. On the first sample, the Mississippi State grader assigned 17.0% damage with no significant heat damage. This compared with Cooper's grading of 6.9% damage and 1.0% heat damage. On the second sample, the Mississippi State grader found 20.8% damage with no significant heat damage, whereas Cooper had assigned 6.8% damage and 1.9% heat damage. On the third sample, the Mississippi State grader assigned 14.7% damage and no heat damage, as compared to Cooper's grading of 8.0% damage and 1.8% heat damage.²

On Tuesday afternoon, July 23, Mr. Cooper called both Mr. Atkins and Mr. Bradshaw and reported to them the results of the Mississippi State grader's inspection for one of the samples which showed 14.7% damage. He did not receive the results of grading by the Mississippi State grader on the other two samples until the morning of July 24. He was told that they, Atkins and Bradshaw, also had a sample checked and that the damage was not that bad. Mr. Cooper inquired as to who had checked the sample; they refused to reveal the information.

On the same day, Tuesday, July 23, that the Mississippi State grader visited the Yellow Bend elevator, the evidence revealed that Messrs. Atkins and Bradshaw delivered a truckload of soybeans to Riverside Soybean Corporation, which assigned a total damage of 17.4%. The evidence failed to show whether it included any heat damage. Apparently, Atkins and Bradshaw made no effort to obtain any information as to the samples graded by anyone other than Riverside. At this time, Cooper offered to submit samples from their beans to any licensed inspector they might select. They failed to accept the suggestion and, in fact, displayed no interest in doing so.

The following day, July 24, Messrs. Atkins and Bradshaw met with Mr. Cooper in his office at the Yellow Bend elevator. They advised him that, since the damage was running over 8.0%, they considered the contracts no longer binding. They also requested at this time payment for the soybeans which had already been delivered.

It was the custom that payment for soybeans delivered to the Yellow Bend elevator be made in one of two ways. Either the seller could request payment for each truckload delivered, or he could ask that payment be held up until requested. In this instance, payment was made by check out of Cargill's Memphis Office and required that the truck tickets, for which payment was requested, be mailed to Memphis where they would be processed and the checks mailed to the customer. Initially, Atkins and Bradshaw had requested their checks not be made and delivered until requested.³

At their meeting on Wednesday, July 24, Mr. Cooper told Messrs. Atkins and Bradshaw that Cargill wanted, and expected, the soybeans to be delivered under the contracts. They advised him that they would discuss further delivery after they had been paid for the beans that had already been delivered.

Mr. Cooper informed them that it would be necessary for him to check with the Cargill office at Baton Rouge to see whether they would get paid for the beans already delivered in view of their statement that the contracts were no longer binding...