Center State Farms v. Campbell Soup Co., 94-1491

• Decision Date: 06 July 1995
• Docket Number: No. 94-1491,94-1491
• Citation: 58 F.3d 1030
• Parties: CENTER STATE FARMS, Plaintiff-Appellee, v. CAMPBELL SOUP COMPANY; Herider Farms, Incorporated, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1030

58 F.3d 1030

CENTER STATE FARMS, Plaintiff-Appellee, v. CAMPBELL SOUP COMPANY; Herider Farms, Incorporated Defendants-Appellants.

No. 94-1491.

United States Court of Appeals, Fourth Circuit.

Argued March 6, 1995.

Decided July 6, 1995.

ARGUED: Forrest Arthur Hainline, III, Hainline & Associates, Washington, DC, for appellants. Edwin Russell Jeter, Jr., McNair & Sanford, P.A., Columbia, SC, for appellee.

Before NIEMEYER and HAMILTON, Circuit Judges, and BUTZNER, Senior Circuit Judge.

Affirmed by published per curiam opinion. Judge HAMILTON wrote a dissenting opinion.

OPINION

PER CURIAM:

In September 1983, Campbell Soup Company and Center State Farms orally agreed to a business relationship under which Center State Farms would take possession of flocks of new born turkeys, grow the turkeys for several months, and return them to Campbell Soup for use in its food products. In early 1991, Campbell Soup ended the relationship prompting Center State Farms to sue for breach of contract. The case was submitted to a jury which awarded Center State Farms $150,000 in damages. This appeal followed, and we affirm.

Campbell Soup's arguments raise three broad questions: (1) Was the oral contract alleged by Center State Farms unenforceable by reason of the South Carolina Statute of Frauds or by the integration clause of individual written turkey contracts signed separately for each flock placed with Center State Farms? (2) Did Center State Farms retain standing to sue under the oral contract after leasing its turkey-growing facilities to independent contractors who assumed the turkey growing responsibilities? (3) Was the evidence sufficient to permit a jury to find that Center State Farms performed its duties satisfactorily?

Center State Farms presented evidence at trial that it agreed to grow turkeys for Campbell Soup and to make an initial investment of approximately $150,000 to convert its chicken houses to grow turkeys based on Campbell Soup's agreement to continue the relationship indefinitely. Center State Farms contends that Campbell Soup orally promised "to provide poults, feed and medicine and pay for grown turkeys as long as Center State performed satisfactorily." Pursuant to the alleged arrangement, Campbell Soup placed the first flock of turkeys with Center State Farms in December 1983 at which time the parties signed a "Turkey Contract" for that particular flock. The Turkey Contract provided that the poults which were delivered to Center State Farms remained the property of Campbell Soup, that Center State Farms would grow the turkeys for a period of 8 to 30 weeks, and that it would deliver the grown turkeys to Campbell Soup when Campbell Soup came for delivery. The parties agreed that the written terms of that agreement comprise "the entire agreement between the parties." As each flock was subsequently delivered to Center State Farms, an individual written Turkey Contract was signed. During the course of dealing that followed, Center State Farms simultaneously grew three flocks of turkeys but in different stages of development, and it cycled about five to six flocks per year through its facilities.

Campbell Soup contends that the oral agreement claimed by Center State Farms was unenforceable under South Carolina's Statute of Frauds because it "is not to be performed within the space of one year from the making thereof." S.C.Code Ann. Sec. 32-3-10. Because Center State Farms testified that it did not expect to recoup its initial investment "for approximately 20 years," Campbell Soup argues the oral contract was "not to be performed" within one year and therefore is unenforceable.

We disagree with Campbell Soup's interpretation of the nature of the contract. The contract claimed by Center State Farms was indefinite in time and was to continue so long as Center State Farms performed satisfactorily. Under South Carolina law, such an arrangement is terminable at will, subject to reasonable notice. See Carolina Cable Network v. Alert Cable TV, Inc., 447 S.E.2d 199, 201 (S.C.1994). A contract terminable at will does not fall under South Carolina's statute of frauds. See Weber v. Perry, 201 S.C. 8, 21 S.E.2d 193, 194 (1942). Even though the contract was terminable at will, we agree with Center State Farms' contention that the contract was enforceable for a reasonable period because, in addition to providing a turkey growing service to Campbell Soup, it made a permanent capital investment in the turkey-growing operation which provided "independent consideration" for the agreement. Under South Carolina law, independent consideration converts this terminable at will contract to one for a reasonable period of time to enable Center State Farms to recoup its investment. See Weber, 21 S.E.2d at 194-95; cf. Orsini v. Trojan Steel Corp., 219 S.C. 272, 64 S.E.2d 878 (1951) (denying duration enforcement of at-will employment contract where no capital invested). This was the theory under which Center State Farms presented its case to the jury, and the district court properly instructed the jury on the South Carolina law of contracts for an indefinite period.

Campbell Soup also argues that the integration clause of the individual turkey contracts precludes consideration of evidence about an overarching oral agreement. Under South Carolina law, the issue of whether an individual contract containing an integration clause comprises the entire relationship between parties is a factual question of intent, and evidence of terms understood by the parties but not covered by the contract is probative of that intent. See Rentco v. Tamway Corp., 283 S.C. 265, 321 S.E.2d 199, 201 (App.1984). In this case, there was ample evidence for a jury to conclude that the overall arrangement between the parties was significantly broader than that contained in each individual Turkey Contract. For example, Center State Farms showed that the Turkey Contracts did not include specific arrangements for the annual number of flocks that Center State Farms would receive, the continuity of use of the "grow-out" houses, or the conversion and equipping of the houses. Nor did these Turkey Contracts provide for loading costs, propane costs, or other basic costs incidental to the parties' relationship. In short, we conclude that the evidence was sufficient to permit the jury to find that each individual Turkey Contract did not constitute the entire arrangement between the parties and thus each integration clause of these individual contracts did not preclude evidence of an overarching oral agreement between the parties.

Campbell Soup next argues that Center State Farms relinquished any rights in the turkey-raising arrangement and therefore lacked standing to sue for breach of contract when Campbell Soup shut down its turkey processing operation in 1991. Campbell Soup notes that in December 1986 Center State Farms stated that it did not intend to take any more flocks of turkeys, and thereafter it never signed any individual Turkey Contract. Center State Farms confirmed this point in two similar letters, the latter of which states:

I want to confirm by this letter what I previously advised you, that is, that I do not intend to contract to grow out another flock of turkeys. This has been my position since the middle of last December and has not changed.

Center States Farms has had difficulty justifying continuing our turkey operations ever since [Campbell Soup] changed its contracting formula in the latter part of 1985. This came to a head this past December.

Beginning in January 1987, a tripartite arrangement was reached between Campbell Soup, Center State Farms, and three independent farmhands who were willing to grow turkeys. Center State Farms entered into "leases" with the independent farmhands in which they took full responsibility, as independent contractors, for growing the turkeys. The farmhands paid Center State Farms for use of the growing facilities and signed the individual turkey growing contracts with Campbell Soup upon delivery of each flock. Center State Farms also entered into a letter agreement which was signed by each independent farmhand and sent to Campbell Soup, providing in part:

I hereby authorize[d] [Campbell Soup] to make all payments due to [independent grower] in connection with the turkey production owned by Center State Farms at Eastover, S.C., payable jointly to [grower] and Center State Farms.

(Emphasis added).

Campbell Soup argues that this new arrangement in January 1987 effectively removed Center State Farms from turkey growing, so that it had no basis to complain when Campbell Soup terminated its turkey operations. While Campbell Soup points to some evidence supporting its position that Center State Farms relinquished its rights under the arrangement with Campbell Soup, Center State Farms points to contrary evidence which supports the contention that while Center State Farms initially threatened to terminate its relationship with Campbell Soup, the two parties "settled" their differences with the tripartite arrangement signed by the independent growers. Specifically, Center State Farms emphasizes that the letter agreement sent to Campbell Soup refers to "the turkey production owned by Center State Farms." Indeed, Campbell Soup's own witness testified that that phrase addresses future flocks to be delivered after the January 1987 arrangement was entered. Center State Farms presented testimony that as far as it was concerned, its overall relationship with Campbell Soup did not change in January 1987, and Center State Farms was "still obligated to perform" thereafter. Center State Farms' general partner testified that Center State Farms still had a contractual relationship with Campbell Soup until Campbell Soup terminated the relationship without adequate notice and without providing Center State Farms an adequate opportunity to recoup its initial $150,000 investment.

Even though both sides presented...