Cargill Inc. v. Wilson, 12826

• Decision Date: 31 March 1975
• Docket Number: No. 12826,12826
• Citation: 166 Mont. 346,532 P.2d 988
• Parties: , 16 UCC Rep.Serv. 615 CARGILL INCORPORATED, a corporation, Plaintiff and Respondent, v. Kenneth L. WILSON, Defendant and Appellant.
• Court: Montana Supreme Court

Page 988

532 P.2d 988

166 Mont. 346, 16 UCC Rep.Serv. 615

CARGILL INCORPORATED, a corporation, Plaintiff and Respondent, v. Kenneth L. WILSON, Defendant and Appellant.

No. 12826.

Supreme Court of Montana.

Submitted Jan. 15, 1975.

Decided March 11, 1975.

Rehearing Denied March 31, 1975.

Tipp & Hoven, Vernon Hoven (argued), Missoula, for defendant and appellant.

Jardine, Stephenson, Blewett & Weaver, L. Morris Ormseth (argued), Great Falls, for plaintiff and respondent.

JOHN C. HARRISON, Justice.

This is an appeal from a judgment entered in the district court, Hill County, in a breach of contract action initiated by Cargill Incorporated against Kenneth Wilson, a Hill County wheat farmer. The jury held in favor of Cargill and damages were assessed at $21,011.50, including interest and costs.

Defendant Kenneth Wilson, hereinafter referred to as Wilson, is a Havre resident who operates a farm consisting of four sections of land near Rudyard, Montana. Plaintiff Cargill Incorporated, hereinafter referred to as Cargill, is a large, national grain company which maintains a grain elevator in Hingham, Montana. The Hingham elevator is managed by one Marcus 'Ole' Warren. Warren purchased wheat from Wilson during the ten or twelve years prior to this lawsuit.

The events which gave rise to the instant litigation are: On the morning of August 24, 1972, Wilson telephoned Warren at the Hingham grain elevator to inquire about the current price of wheat. Warren quoted price of $1.50 a bushel. Wilson declined to sell his wheat at that time.

However, during the afternoon of the same day Wilson again telephoned Warren and was informed the price of winter wheat had dropped four cents a bushel to $1.46. At this point there is a conflict in the testimony. Warren testified he and Wilson then entered into an oral contract over the telephone whereby Wilson was to sell 28,000 bushels of ordinary winter wheat at $1.48 a bushel and 6,000 bushels of higher protein wheat at $1.63 a bushel. On the other hand, Wilson admitted he had entered into an oral agreement but testified he had agreed to sell only 11,000 bushels of ordinary winter wheat at $1.48 a bushel. Following the telephone call, Warren contacted Cargill's head office in Great Falls and notified it of the purchase. He also completed two standard grain purchase contracts, one numbered 86027 for the ordinary winter wheat; the other numbered 86028 for the higher protein winter wheat. The contracts reflected the terms of the agreement as testified to by Warren. Warren signed the contracts as agent of Cargill and signed Wilson's name in the seller's signature block.

A few days later Warren delivered a copy of each contract to Wilson who noted the terms of the contracts and made no objection to them. He also made no objection to the fact that his name had been signed to the contracts by Warren.

On August 30, 1972, Wilson received an interest free advance of $10,000 from Cargill. Such an advance is a loan from a grain company secured by existing future delivery contracts for grain. This loan was interest free by custom but as an advance on the contract. Had it not been an advance it would not have been interest free. The advance was made by check connected to a detachable part of a standard from which identified the transaction and the purpose of the payment. The form identified the transaction as 'Advance on 86027 and 86028'. Wilson accepted the check with the form attached and made no objection that the form referred to the contracts as testified to by Warren.

During the months of September and October 1972, Wilson began hauling his wheat to the grain elevator; 11,000 bushels of ordinary winter wheat at the agreed price of $1.48 and 6,000 bushels at a higher current market price. However, in December, Warren discovered that Wilson did not intend to abide by the terms of the grain purchase contracts and deliver the balance of the wheat. A breach of contract action was initiated. A Hill County jury found Wilson liable under the oral agreement as testified to by Warren. Wilson asserted the defense of the statute of frauds at all times during this action.

Appellant Wilson presents several issues for review on appeal but we find the controlling issue is: Whether the oral agreement for the sale of the wheat, plus the exchange of several documents, was sufficient to remove the oral agreement from the statute of frauds?

We find in the affirmative.

Montana's statute of frauds, set forth in the Uniform Commercial Code, section 87A-2-201(1), R.C.M1947, provides:

'Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.'

The official comment to this section in the Uniform Commercial Code states this rule:

'Only three definite and invariable requirements as to the memorandum are made by this subsection. First, it must evidence a contract for the sale of goods; second, it must be 'signed', a word which includes any authentication which identifies the party to be charged; and third, it must specify a quantity.'

Section 87A-2-201(2), R.C.M.1947, sets forth this principles:

'Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received.'

In Gravelin v. Porier, 77 Mont. 260, 281, 250 P. 823, 829, this Court citing Pomeroy on Contracts, Specific Performance, Sec. 74, p. 104, said:

"The controlling motive of the statute is one of expediency and convenience, and this motive has always been kept in view by the ablest courts in their work of interpretation. As the primary object is to prevent mistakes, frauds, and perjuries, by substituting written for oral evidence in the most important classes of contracts, the courts of equity have established the principle, which they apply under various circumstances, that it shall not be used as an instrument for the accomplishment of fraudulent purposes; designed to prevent fraud, it shall not be permitted to work fraud."

In the world of business transactions, the injustices resulting from a literal, rigid application of the statute of frauds have caused courts, legislators and scholars to reshape and define the statute. Two of the qualifications developed are applicable to the instant case. One was developed by the legal scholars and enacted by the legislature; the other was developed by the courts. The two qualifications have two things in common:

1) A recognition that the law should require some writing exchanged between the parties which sets forth their agreement; and 2) A requirement that the relationship and course of dealings between the parties justifies one party's belief that the other has consented to the written statement of the contract, even though he has not signed it. When these conditions are found to exist, the contract may be enforced. The beneficial purposes of the statute of frauds are preserved-the dangers of mistake or fraud are averted-and the ends of justice are served.

Under section 87A-2-201, R.C.M.1947, the question of whether or not Wilson is a merchant within the meaning of the statute, will not be considered here for it is obvious that other requirements of the statute are met. Evidence of confirmation of the two contracts is:

1) They were given Wilson 'within a reasonable time', a few days following the oral agreement and on the next time Wilson visited the elevator.

2) The agreements were 'sufficient against the sender' in that they were complete as to all details and signed by Warren on behalf of Cargill.

3) They were received by one 'who had reason to know its contents'-Wilson admitted the prior oral agreement and that he had read the contents of the contracts when he received them.

4) He did not object 'within ten days' after receipt of the contracts, nor even within four months.

We find the requirement of a signed writing was met with the interchange of the documents between the parties. The general law on the subject is set forth in Restatement of Contracts § 208:

' § 208. WHEN SEVERAL WRITINGS CONSTITUTE A SUFFICIENT MEMORANDUM.

'The memorandum may consist of several writings, * * *

'(b) though one writing only is signed if

'(i) the signed writing is physically annexed to the other writing by the party to be charged, or

'(ii) the signed...