Columbia Grain Intern. v. Cereck

• Decision Date: 20 May 1993
• Docket Number: No. 92-503,92-503
• Citation: 852 P.2d 676,258 Mont. 414
• Parties: COLUMBIA GRAIN INTERNATIONAL, Plaintiff and Respondent, v. James and William CERECK, d/b/a Cereck Brothers, Defendants and Appellants.
• Court: Montana Supreme Court

Page 676

852 P.2d 676

258 Mont. 414

COLUMBIA GRAIN INTERNATIONAL, Plaintiff and Respondent, v. James and William CERECK, d/b/a Cereck Brothers, Defendants

and Appellants.

No. 92-503.

Supreme Court of Montana.

Submitted on Briefs March 4, 1993.

Decided May 20, 1993.

Dirk Larsen, Larsen & Neill, Great Falls, for defendants and appellants.

K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, Great Falls, for plaintiff and respondent.

WEBER, Justice.

Defendants, James and William Cereck, appeal the decision of the District Court of the Eighth Judicial District, Cascade County, which awarded damages for breach of a contract to sell grain to plaintiff, Columbia Grain International. We affirm.

The issues for review are restated as follows:

1. Did the District Court err in finding that an oral contract existed for the sale of grain between the parties?

2. Did the District Court err in determining that the statute of frauds did not apply as a defense to enforcing the contract?

3. Did the District Court err in calculating damages?

James and William Cereck (the Cerecks) formed a partnership in 1972 to raise and market grain. Columbia Grain International (Columbia Grain) operates a grain elevator in Great Falls, Montana and regularly deals in buying and selling grain. This appeal concerns an alleged oral agreement between Columbia Grain and the Cerecks to buy and sell 6,500 bushels of No. 1 dark northern spring wheat to be delivered to Columbia Grain's Great Falls elevator in June of 1988.

Marcus Raba (Raba), a grain buyer for Columbia Grain, testified that he initially contacted James Cereck on May 2, 1988 concerning the purchase of the grain at issue here. At that time, James Cereck did not agree to sell. Raba further testified that he had a total of six conversations with James Cereck throughout May, and that each time, Cereck did not commit to a sale. Raba was away on vacation for two weeks in early June. Raba testified that on June 14, 1988, after he had returned from his vacation, he again spoke with James Cereck over the telephone and Cereck agreed to sell 6,500 bushels of No. 1 dark northern spring wheat at $4.05 per bushel, for a total contract price of $26,325.00.

Raba prepared a "workup" copy of the contract terms while he spoke with James Cereck. He testified that he read the terms back to James Cereck to make certain the terms were clear. He further testified that he considered the grain sold to Columbia Grain on June 14, 1988, when James Cereck told him over the telephone that he would sell 6,500 bushels of grain to Columbia Grain. Raba delivered a copy of the workup to a Columbia Grain merchandiser who in turn sold the grain to a third party.

Columbia Grain's office staff prepared a written Contract of Purchase from the workup copy, dated June 14, 1988. Raba then signed the Contract of Purchase and mailed two copies to the Cerecks at James Cereck's address. James Cereck testified that he received the copies within a day or two of their conversation and then left on a vacation of a week to ten days.

Neither of the Cerecks signed or returned the contract copies to Columbia Grain. However, Columbia Grain sold the grain in the open market in reliance on the sale.

The price of grain rose significantly after June 14, 1988. The Cerecks did not deliver the grain to Columbia Grain. On July 12, 1988, Raba contacted James Cereck about delivery of the grain. James Cereck advised him that the Cerecks would not deliver the grain and did not feel obligated to deliver because neither of them had signed the contract. Raba asked James Cereck to reconsider. The next day, Raba again contacted James Cereck and Cereck again refused to deliver the grain. The Cerecks later sold their grain to another elevator for $4.45 per bushel. On July 14, 1988, Columbia Grain purchased 10,000 bushels of grain from another seller for $4.68 per bushel.

Columbia Grain brought this action against the Cerecks to recover contract damages. The Cerecks raised the statute of frauds defense in a motion to dismiss which the District Court denied. The Cerecks later filed an answer generally denying the existence of a contract. The Cerecks did not affirmatively plead the statute of frauds as a defense, nor did they move to amend the pleadings to add the statute of frauds as a defense. After trial, the District Court found that an oral contract existed between the parties and concluded that the contract was enforceable because the Cerecks had waived their right to rely on the statute of frauds defense by not affirmatively pleading it in their answer. The Court further found that damages equaled the difference between the contract price of $4.05 per bushel and the $4.68 per bushel that Columbia Grain paid to replace the grain on July 14, 1988.

I.

Did the District Court err in finding that an oral contract existed between Columbia Grain and the Cerecks for the sale of 6,500 bushels of grain?

The District Court found that the Cerecks and Columbia Grain entered into an oral contract. Under its terms, Columbia Grain agreed to buy and the defendants agreed to sell 6,500 bushels of No. 1 dark northern spring wheat for $4.05 per bushel. The grain was to be delivered to Columbia Grain's Great Falls elevator in June 1988. The court further found that the contract terms were as alleged by Columbia Grain and that the Cerecks had breached this express oral contract.

The Cerecks contend that there is no contract here because there was no mutual consent of the parties as required by § 28-2-102, MCA. They argue that they consented only to discuss the price offered by Columbia Grain, but did not consent to sell the grain on June 14, 1988 at the price of $4.05 per bushel. They contend that James Cereck communicated his lack of consent by telling Raba that he would have to discuss the proposed price with his brother, William Cereck, and that he expressed a desire not to enter into a contract until after he had discussed Columbia Grain's proposal with his brother.

Columbia Grain contends that § 30-2-204, MCA, provides that a contract for the sale of grain can be made in any manner sufficient to show agreement. Section 30-2-204, MCA, provides in pertinent part:

Formation in general. (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract....

The District Court's finding that an oral contract existed was based on the prior course of dealing between the parties and the general practices in the industry.

The standard of review for a district court's findings of fact is whether they are clearly erroneous. Interstate Production Credit Ass'n v. DeSaye (1991), 250 Mont. 320, 322, 820 P.2d 1285, 1287. To determine whether a finding is clearly erroneous, this Court uses the following three-part test: (1) the Court will review the record to see if the findings are supported by substantial evidence; (2) if they are supported by substantial evidence, we determine if the trial court has misapprehended the effect of the evidence; and (3) if the findings are supported by substantial evidence and the trial court has not misapprehended the effect of the evidence, the Court may still find that a finding is clearly erroneous although there is evidence to support it, if a review of the record leaves the Court with the definite and firm conviction that a mistake has been made. DeSaye, 820 P.2d at 1287.

The District Court's finding is supported by substantial evidence. The evidence established that the Cerecks were experienced in farming and the sale of crops. Both were raised on a farm and, at the time of this contract, had been partners in their grain operation for eighteen years. Both Cerecks testified they were familiar with the methods farmers use to market their grain.

The evidence presented at trial also established that during the period from September 26, 1980, through February 12, 1988, the Cerecks entered into eighteen separate grain sales transactions with Columbia Grain. Each time, Columbia Grain prepared a contract on its standard form and mailed the first two copies to the Cerecks at James Cereck's address. The Cerecks never returned signed copies of any of the former contracts.

Testimony established that it is not unusual for farmers not to return signed contracts to the buyer. Other testimony established that Columbia Grain buys most of its grain over the telephone and mails contracts to the selling farmer. Rada testified that this is standard industry practice and that it is impracticable to buy grain in other ways because of the distance involved and daily grain price fluctuations.

When a farmer has agreed to sell grain over the telephone, it is Columbia Grain's business practice to repeat the terms back to the farmer to make sure the farmer has agreed to them. A workup copy is not submitted to accounting department staff unless a sale is agreed to. When a sale is agreed to, the information is then transcribed by the accounting department onto a printed "Contract of Purchase" form which is signed by the grain buyer. Two copies of the Contract of Purchase are then mailed to the seller.

Typically, James Cereck handled grain sales transactions for the partnership. He had dealt with Raba on several occasions in the previous one and one-half years. At the time of trial, Raba had been a grain buyer for twelve years. Raba also testified that he keeps a daily record of his conversations with farmers. He testified that there were times he and James Cereck would communicate frequently and James Cereck would not agree to sell. No contract was mailed to the Cerecks in those instances. Raba and representatives of other grain companies which had also dealt with the Cerecks testified that James Cereck always sold the grain for the partnership and that he had never told them he would have to discuss an offer with his brother before a...