Decatur Co-op. Ass'n v. Urban

• Decision Date: 06 March 1976
• Docket Number: No. 47877,47877
• Citation: 547 P.2d 323,219 Kan. 171
• Parties: , 18 UCC Rep.Serv. 1160 The DECATUR COOPERATIVE ASSOCIATION, a corporation, Appellant, v. Franklin URBAN, Appellee.
• Court: Kansas Supreme Court

Page 323

547 P.2d 323

219 Kan. 171, 18 UCC Rep.Serv. 1160

The DECATUR COOPERATIVE ASSOCIATION, a corporation, Appellant, v. Franklin URBAN, Appellee.

No. 47877.

Supreme Court of Kansas.

March 6, 1976.

Syllabus by the Court

1. K.S.A. 84-1-206, prescribing a statute of frauds for kinds of personal property not otherwise covered in the uniform commercial code, is not applicable to contracts for the sale of goods, which are encompassed by the provisions of K.S.A. 84-2-201.

2. Professionalism, special knowledge and commercial experience are to be used in determining whether a person in a particular situation is to be held to the standards of a 'merchant' as defined in K.S.A. 84-2-104.

3. The fact that a farmer raises and sells his own wheat at cash sales to local grain elevators is not sufficient to make him a dealer in goods within a statute of frauds provision defining 'merchant' as one who deals in goods of the kind; nor does a wheat farmer solely by his occupation hold himself out as being a 'merchant' within a statutory proviso that, as between merchants, a written confirmation of oral sale contracts satisfies writing requirements of the statute of frauds unless written notice of objection to its contents is given within ten days after it is received.

4. The statute of frauds was enacted to prevent fraud and injustice, not to foster or encourage it, and a court of equity will not ordinarily permit its use as a shield to protect fraud or to enable one to take advantage of his own wrong.

5. The doctrine of promissory estoppel may render enforceable any promise upon which the promisor intended, or should have known, that the promisee would act to his detriment, and which is indeed acted upon in such a manner by the promisee, where application of the statute of frauds to that promise would thus work a fraud or gross injustice upon the promisee.

6. Before the doctrine of promissory estoppel can be invoked in a case involving the statute of frauds the promisee must first show by competent evidence that a valid and otherwise enforceable contract was entered into by the parties.

7. In order for the doctrine of promissory estoppel to be invoked the evidence must show that the promise was made under circumstances where the promisor intended and reasonably expected that the promise would be relied upon by the promisee and further that the promisee acted reasonably in relying upon the promise. Furthermore promissory estoppel should be applied only if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice.

8. In an action brought against a farmer to obtain possession of wheat allegedly sold by him to a cooperative grain elevator under oral contract, or alternatively, for damages for failure to deliver the what, it is held: (1) The defendant farmer was not a 'merchant' within the meaning of the uniform commercial code so as to render inoperative the defense afforded by the statute of frauds; and (2) sufficient facts were pleaded and presented to the trial court to invoke the doctrine of promissory estoppel so as to render an oral promise enforceable despite the statute of frauds, and rendition of summary judgment is favor of defendant was improper.

Stan Morgan, of Wolfe & Morgan, Oberlin, argued the cause and was on the brief for appellant.

Robert J. Lewis, Jr., of Lewis, Lewis & Beims, Atwood, argued the cause and was on the brief for appellee.

David W. Dewey, Wichita, was on the brief amicus curiae for the Wichita Bank For Cooperatives.

HARMAN, Commissioner:

This action was brought to obtain possession of 10,000 bushels of wheat allegedly purchased under an oral contract, or alternatively, for damages for failure to deliver the wheat. The primary issue is whether the alleged seller, a farmer, was a 'merchant' within the meaning of the uniform commercial code so as to remove the oral contract from operation of the statute of frauds. A secondary issue is whether the seller was equitably estopped from relying on the statute of frauds as a defense to an action on the oral contract.

Appellant, The Decatur Cooperative Association, commenced this action August 24, 1973, by filing its petition against appellee, Franklin Urban, alleging an oral purchase of 10,000 bushels of wheat from Urban on July 26, 1973, at $2,86 per bushel and a repudiation by him of the agreement on August 14, 1973. Other facts were alleged which will be noticed later. Urban answered, denying the alleged purchase and raising the defense of the statute of frauds. Urban also moved for summary. judgment.

For the purpose of ruling on the request for summary judgment the parties stipulated to the facts, which we summarize.

Appellant is a corporation which has been in existence since 1953. It owns and operates a grain elevator and its principal business is the purchasing of wheat and other grains from area farmers which it markets to larger regional elevators and grain dealers. During the fiscal year ending March 31, 1973, appellant purchased grain from about 500 farmers and sold grain to four regional elevators.

Appellant has a well-established policy of never speculating on the price of grain. Therefore, as soon as it purchases grain from a farmer or farmers amounting to one train carload or about 2000 bushels, it places a phone call to a terminal elevator and orally sells the grain to that elevator at the prevailing price. There after, a written confirmation of sale is sent by the terminal elevator to the cooperative. This procedure is a well-established and well-known method of handling and marketing grain in Decatur county, Kansas. Appellant has a general manager and an assistant manager to run its daily operations, each of whom is authorized to enter into sales contracts on behalf of the cooperative.

Appellee Urban is a resident of Decatur county and was a member of the cooperative throughout the year 1973. He has been engaged in the wheat farming business for about twenty years. He owns about 2,000 acres of his total farmed acreage of 2,320 acres. About 1,200 acres are broken out and farmable while the remaining acreage is unbroken and devoted to pasture. In the year 1974 Appellee had approximately 500 acres sown in wheat. Appellee also owns a cow herd of about 200 head. He is engaged solely in the farming business, although he has in the past done some custom harvesting of wheat and other grains. He has sold wheat and other grains, which he raises, to the appellant cooperative and to other elevators in the area since 1966 and has sold livestock through area sale barns.

On July 26, 1973, appellee was in St. Francis, Kansas, on his way to Colorado to do some custom wheat harvesting. While in St. Francis he placed two phone calls to the cooperative. On the first call he requested to speak to the assistant manager but was told he was not available. Later that afternoon appellee placed a second call to the cooperative office and did reach the assistant manager. As a result of this second call, appellant contends the parties entered into an oral contract whereby appellee agreed to sell to the cooperative 10,000 bushels of wheat at $2.86 per bushel, to be delivered on or before September 30, 1973. Appellee denies that any contract of sale was made during this phone call and he has never admitted by pleading, testimony or otherwise that a sale agreement was reached during the call. The total cash value of the wheat alleged to have been sold was $28,600.00.

During the phone conversation there was discussion of a written memorandum of sale to be prepared and sent to appellee later. It is appellant's practice to send a signed written confirmation of sale to the seller immediately after oral conversations and appellant did in fact send such a confirmation to appellee. This confirmation was signed by appellant's assistant manager and was binding as against appellant. Appellee received the confirmation within a reasonable time, read it, and gave no written notice of objection to its contents within ten days after it was received.

Early in the morning of July 27, 1973, in reliance on the alleged oral contract of sale, appellant placed a phone call to Far-Mar-Co., a regional terminal elevator in Kansas City, Missouri, and sold the wheat for $3.46 per bushel, the cooperative to pay freight and other charges. During the latter part of July and early part of August of 1973, the price of wheat rose substantially.

On August 13, 1973, appellee notified appellant that he would not deliver the wheat. The price of wheat at the cooperative on that date was $4,50 per bushel.

Upon the foregoing the trial court made the following findings:

'1. The Court finds that under the provisions of K.S.A. 84-1-206 that the amount of the contract price exceeded $5,000.00 and that under that statute the oral agreement was void for lack of being signed by the parties to be bound thereby to-wit, the defendant, and that the supposed contract is void under the provisions of that statute.

'2. The term 'Merchant' is defined under provisions of K.S.A. 84-2-104 and it is the finding and conclusion of this Court that such term is not applicable to the parties to this action, particularly the defendant, Franklin Urban.

'3. The Court also finds that the fact that a farmer, whether he be large, intermediate or small is not a merchant under the facts of this case and that by reason thereof the provisions of K.S.A. 84-2-201 are not applicable to this case in so far as the defendant is concerned.'

The court sustained Urban's motion for summary judgment and Decatur Cooperative has appealed.

Appellant first asserts the trial court erred in gratuitously determining in its first finding that K.S.A. 84-1-206 was applicable to this case and voiding the contract on that ground. Appellee concurs in this assertion, and correctly so. This statute provides:

'Statute of frauds for kinds of personal property not otherwise...