Cole v. Melvin

Decision Date21 November 1977
Docket NumberNo. Civ. 75-3002.,Civ. 75-3002.
PartiesTerry James COLE v. Warren MELVIN.
CourtU.S. District Court — District of South Dakota

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Robert C. Riter, Jr., Pierre, S. D., for plaintiff.

William J. Srstka, Jr., Pierre, S. D., for defendant.

MEMORANDUM OPINION

BOGUE, District Judge.

This lawsuit arose from a disagreement about the meaning of a contract for the sale of exotic cattle. Plaintiff Terry Cole is from Gainsborough, Saskatchewan; Defendant Warren Melvin lives in Hyde County, South Dakota. The parties are properly before this Court under 28 U.S.C. § 1332(a)(2).

Although several material facts are at issue, the series of events leading to the commencement of this lawsuit is generally agreed upon and will be narrated in a summary manner. In May of 1974 Cole agreed to purchase sixteen (16) Blonde D'Aquitaine heifers from Melvin. The terms of this agreement were set forth in their entirety in a written contract (Exhibit 1). The same written contract indicates that Melvin agreed to repurchase "same heifers" from Cole later in 1974.1

The agreement was made in Gainsborough, Saskatchewan where the parties happened to meet. Cole had previously bought cattle from Melvin. On this occasion the two men talked over a possible cattle deal; and after some deliberation, Cole decided to buy some heifers which Melvin had offered to sell.

A form for a written contract was provided by Melvin. Cole's wife wrote the terms of this particular agreement in the blank spaces. Paragraphs three and four, the construction of which is very important for a resolution of this case, state as follows:

Whereas the two parties named above consider it advantageous to agree upon sale and purchase price for above described cattle, Terry James Cole has agreed to purchase the above 16 heifers from Warren Melvin for the total sum of Forty-nine Thousand dollars with the guarantee of health papers and also guarantee that all heifers will be fertile for breeding. Also Warren Melvin agrees to purchase same heifers at Four Thousand dollars each guaranteed safe in calf to Purebred Blonde D'Aquitaine bulls.
If Terry James Cole sells the Blonde heifers before July 31, 1974 this contract will be dissolved. If not then the heifers will be kept and guaranteed safe in calf for delivery to the closest United States Port of Entry no later than October 1st, 1974.

The first question to be resolved in this lawsuit is whether the parties intended that Melvin would be obligated to repurchase each heifer that became pregnant (even if less than 16 became pregnant) or alternatively whether Melvin would be obligated to repurchase all 16 heifers, but only if all 16 were guaranteed safe in calf. The answer to this question may be outcome-determinative on the question of liability. There are, however, other provisions in the contract as well as subsequent acts of the parties which will merit some attention.

On or about June 15, 1974, Melvin hauled the heifers to Portal, North Dakota. In accordance with prior business practice, the parties met at Portal where the facilities of one Oliver Granrude were used for transfer of the cattle. Because Cole's first check for the cattle had been returned for non-sufficient funds, the men discussed the question of payment. Cole assured Melvin that he had obtained financing and that his account had sufficient funds, so Melvin let Cole take delivery of the heifers. They parted without altering the terms of the contract.

The contract allowed Cole an option for disposition of the heifers. Cole could have sold them to whomever he pleased before July 31, 1974. If he had exercised that option, then the agreement to resell them to Melvin would have been dissolved. No sale was made by Cole as of July 31, 1974, so the agreement between Cole and Melvin for repurchase of "same heifers" (whatever the agreement meant) remained binding.

On September 8, 1974, Cole wrote a letter to Melvin (Exhibit 2). The letter appears to deal in part with a problem of exchange rates and although defendant has tried to convince us otherwise, the letter appears to raise a question about Melvin's intention of performing according to the terms of the contract. As far as we know, Melvin made no response to this letter.

October 1 came and went. It has been stipulated that Cole never did deliver the cattle to the Port of Entry at Portal, North Dakota (Tr. 120-1). In the weeks following October 1, beginning on October 8, Cole made several telephone calls to Melvin (see Exhibit 3). Cole testified that he "was trying to get ahold of Warren to see when he would be ready to take purchase of these cattle . . .." (Tr. 10.) Cole further testified: "I told him there was 11 head that was guaranteed safe with calf ready to be tested to take to the border." (Tr. 11.) According to Cole, Melvin was not just stalling; rather he was trying to move the cattle. Melvin would get back to him as soon as he (Melvin) found a buyer.

Melvin acknowledges the telephone conversations, but his recollection of the substance of the conversations is somewhat different than Cole's. As Melvin recalls it, the first telephone conversation, on October 8, 1974, began (in relevant part) with an inquiry by Cole as to whether Melvin was ready to take delivery on the heifers. According to Melvin the dialogue continued substantially as follows:2

Melvin: Yes, if you have all the heifers safe in calf, I am ready to take delivery.
Cole: I don't have.
Melvin: I can't see how I can take delivery on the heifers. The heifers are not completely safe in calf as the contract reads.
Cole: (Apparently affirms that at least 11 heifers are safe in calf.)
Melvin: How do you know? Did you have them pregnancy tested?
Cole: No. They had never come back in heat.

Cole denied that Melvin ever told him that he would not take the heifers because only 11 were safe in calf. (Tr. 23.)

Cole has records to indicate that he called several more times. The next telephone call Melvin recalls was in November, sometime before the "Agribition" at Regina. It appears that the cattle deal was not discussed extensively after October 8 on the telephone nor was it discussed at the "Agribition" when the two men met.

The price of cattle dropped; Cole foresaw loss of money coming; and by the end of November, 1974, he had contacted a lawyer to initiate legal proceedings.3 (Ex. 9.) He kept the cattle several months, however, as it appears that the animals were sold in January of 1976. (Ex. 5.) Due to a considerable change in markets, Cole got slightly more than $7,000.00 for cattle which he had purchased from Melvin at the price of $49,000.00.

I.

Initially we face some questions as to what law should be applied to the facts of this case. The parties have agreed that the Uniform Commercial Code (U.C.C.) as adopted by South Dakota is applicable. In applying the U.C.C. we will refer to various sections as they are numbered in the S.D. Comp. Laws Ann. (S.D.C.L.) and will include parenthetically the citations to the official version.4

The case presents some questions, however, that cannot be resolved by reference to the U.C.C. alone. This Court has determined that the contract in question has some ambiguities, especially where the obligations of Plaintiff Cole are set forth. The U.C.C. contains many aids to construction of contracts, but it does not embody the commonly accepted canons of construction that can be invoked when an ambiguity arises; hence, we have looked to S.D.C.L. 57-1-25 (1-103) which allows that principles of law and equity may be applied to problems of commercial law where the code itself does not govern.

The ambiguities as to Cole's duties are patent rather than latent ambiguities, i. e. they arise from the obscurity of the language used in the contract and not by virtue of some extrinsic fact. As a general rule parol evidence is admissible to explain ambiguous terms of a contract. L. Simpson, LAW OF CONTRACTS, § 101 (2nd Ed. 1965). This Court's task, therefore, is to consider all of the evidence produced at the trial and to arrive at an understanding of what the written contract meant at the time of its creation.

We are fully aware that the Court must avoid rewriting the contract; rather, it will be this Court's endeavor to establish the intention of the parties at the time the agreement was made. See 17 Am.Jur.2d, Contracts, § 244 (1964). We cannot pierce the parties' mental processes to find out what images were on their brains, but must be content to examine the words which were used in the business context in which they were used in order to objectively establish the parties' intentions. Looking at the words of the contract in the business setting in which they were written, the Court will try to answer the primary questions upon which a resolution of the controversy turns.

II.

As has been stated, supra, a crucial question is whether Melvin agreed to purchase each heifer guaranteed safe in calf, or whether he agreed to purchase 16 heifers on the contingency that all sixteen would be guaranteed safe in calf. This question is closely connected with the question of whether or not Cole was required to provide proof of pregnancy before Melvin would be obligated to take delivery. For clarity of analysis, we will take the second question first.

A. In order for Cole to perform his obligations in accordance with the contract, was he required to have the heifers pregnancy tested, and to provide proof of pregnancy to Melvin before tendering the heifers?

We begin our analysis with some study of Melvin's earlier "guarantee" of fertility. Melvin guaranteed that all sixteen heifers were fertile, but he was not required to provide, and did not provide, at any time any proof of fertility. He fully admitted that he could have hired a veterinarian and had the heifers tested for fertility. (Tr. 113.) The written contract required no such tests,...

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