Dickson v. Delhi Seed Co.

• Decision Date: 23 November 1988
• Docket Number: No. CA,CA
• Citation: 760 S.W.2d 382,26 Ark.App. 83
• Parties: , 8 UCC Rep.Serv.2d 925 Ray DICKSON and Dickson Farms, Inc., Appellants, v. DELHI SEED COMPANY, Appellee/Cross-Appellant. 88-139.
• Court: Arkansas Court of Appeals

Page 382

760 S.W.2d 382

26 Ark.App. 83, 8 UCC Rep.Serv.2d 925

Ray DICKSON and Dickson Farms, Inc., Appellants, v. DELHI SEED COMPANY, Appellee/Cross-Appellant.

No. CA 88-139.

Court of Appeals of Arkansas Division I.

Nov. 23, 1988.

Wilbur Botts, Dewitt, Malcolm R. Smith, Stuttgart, for appellants.

Russell D. Berry, Dewitt, for appellee/cross-appellant.

CORBIN, Chief Judge.

This appeal comes to us from Arkansas County Circuit Court. Appellants, Ray Dickson and Dickson Farms, Inc., appeal from the judgment in favor of appellee, Delhi Seed Company, filed July 27, 1987, and the court's February 5, 1988, order denying their motion for a judgment notwithstanding the verdict and new trial. Appellee cross-appeals from the court's February 5, 1988, order granting appellants' motion for remittitur. We affirm in part, reverse in part and remand.

Appellee, a Louisiana corporation, initiated this action in Arkansas County Circuit Court on August 2, 1985. Appellee alleged that on May 17, 1985, appellee's president, Mike Merrit, after receiving a call from Ray Dickson, met with Mr. Dickson and reached an agreement that appellee would purchase appellants' entire oat production at harvest from approximately 200 acres of land at $2.25 per bushel. Appellee also alleged that it mailed a written confirmation of the agreement to appellants the next business day and contracted to re-sell the oats to a third party. Appellee contends that appellants breached the contract by selling their oats upon harvest to another seed company. Appellants denied that the parties had reached such an agreement, and filed motions to dismiss the action asserting both a statute of frauds defense and a defense predicated upon the Wingo Act. Both motions were denied. The case was tried to a jury on July 15, 1987. The jury returned a verdict in favor of appellee and against each appellant in the sum of $35,000, which appellee stipulated to be joint and several liability against the appellants. Following a judgment entered on the jury verdict, appellants moved for a judgment notwithstanding the verdict, a new trial, and for a remittitur. By order dated February 5, 1988, the trial court granted appellants' motion for remittitur, reducing the judgment by one-third, and denied the other motions. From the judgment and subsequent order comes this appeal.

For reversal, appellants raise the following five arguments: (1) The trial court erred in failing to dismiss the plaintiff's complaint under the provisions of the Wingo Act; (2) the trial court erred in failing to dismiss the plaintiff's complaint under the provisions of the Statute of Frauds; (3) the trial court erred in admitting evidence of the market price of processed oats, as combine run bob oats were the subject of this controversy, and further erred in admitting evidence of anticipated profits, incidental or consequential damages; (4) the trial court erred in failing to order a new trial when the jury returned a verdict which demonstrated that they had utilized evidence of anticipated profits in computing damages, which measure was not a proper measure of damage; and (5) the court erred in failing to direct a verdict on the basis of the proof of damages being speculative. On cross-appeal, appellee contends that the trial court erred in reducing the jury verdict by one-third. The points will be addressed in order.

Appellants first argue that the trial court erred in failing to dismiss appellee's complaint because appellee failed to comply with the provisions of the Wingo Act, more specifically Arkansas Code Annotated § 4-27-104 (1987).

Rule 12(b) of the Arkansas Rules of Civil Procedure provides that every defense, in law or fact, shall be asserted in responsive pleadings but states that certain enumerated defenses may be raised by motion. Failure to state facts upon which relief may be granted is a defense which may be raised by motion. Ark.R.Civ.P. 12(b)(6). Prior to trial appellants moved to dismiss the complaint based upon the Wingo Act. Although appellants failed to characterize the motion as a 12(b)(6) motion, it must be construed as such. Further, the rule provides that "[i]f, on a [12(b)(6) motion], matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56...." See also, Maas v. Merrell Assocs., Inc., 13 Ark.App. 240, 682 S.W.2d 769 (1985). The record reflects that prior to the court's ruling on the motion, trial briefs were submitted as was an affidavit from the president of appellee corporation relating to the Wingo Act defense. It does not appear that these matters were excluded by the court in its consideration of the motion and therefore the motion must be viewed as one for summary judgment. Summary judgment is appropriate only where the pleadings, depositions and answers to interrogatories, together with the affidavits, show there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law. Moeller v. Theis Realty, Inc., 13 Ark.App. 266, 683 S.W.2d 239 (1985). In order to set up the Wingo Act as a defense, the party must show that the foreign corporation is doing business in Arkansas. See North American Phillips Commercial Elecs. Corp. v. Gaytri Corp., 291 Ark. 11, 722 S.W.2d 270 (1987). Whether a corporation is doing business in Arkansas is a question of material fact, and neither Rule 12 nor Rule 56 of the Arkansas Rules of Civil Procedure authorizes the trial court to summarily dismiss the complaint where an issue of material fact remains to be resolved. See Maas, 13 Ark.App. at 244, 682 S.W.2d at 771. We find no error in the court's failure to dismiss the complaint.

Although appellants' point for reversal is limited to the trial court's failure to dismiss the complaint, both parties submitted their briefs on the substantive issues of the Wingo Act provisions and we, therefore, dispose of those arguments as well.

The Wingo Act requires that a foreign corporation doing business in Arkansas file a copy of its articles of incorporation or similar instrument, together with a statement of its assets and liabilities, and capital employed in the state, in the office of the Secretary of State. Ark.Code Ann. § 4-27-104(a) (1987). As a penalty for failing to comply with the provisions, the foreign corporation is prohibited from enforcing a contract made in this state. Ark.Code Ann. § 4-27-104(c) (1987).

The Arkansas Supreme Court in North American Phillips Commercial Elecs. Corp. v. Gaytri Corp., 291 Ark. 11, 722 S.W.2d 270 (1987) enunciated a two-part test to determine whether the threshold requirements for application of the penalty provisions of the Wingo Act have been met. First, it must be demonstrated that the contract was made by a non-qualifying foreign corporation which was "doing business" in the state; and second, it must be shown that the particular contract in question was made in Arkansas. Id. at 13, 722 S.W.2d at 271. Further, if it is raised as a defense, the court must consider whether the Commerce Clause of the United States Constitution precludes application of the sanctions of the penalty provision. Id.

Appellee does not dispute that the contract was made in Arkansas. However, it contends that it was not "doing business" in Arkansas and further that the transaction is protected by the Commerce Clause. We agree. The supreme court has said that "a corporation is doing business in Arkansas within the meaning of the Wingo Act when it transacts some substantial part of its ordinary business in this state." Worthen Bank & Trust Co. v. United Underwriters Sales Corp., 251 Ark. 454, 474 S.W.2d 899 (1971) (emphasis original). Mike Merrit, president of appellee corporation, filed an affidavit stating among other things that the ordinary business of Delhi Seed was to purchase rough grain, process the grain at its Louisiana plant, store the grain in Louisiana and re-sell it throughout the South; that the only activity with regard to this transaction was to contract for the purchase of rough grain; and that appellee sells only five percent of its finished product in Arkansas and buys only ten percent of its rough grain in Arkansas. In the absence of contrary evidence presented by appellants, the trial court could have concluded that the evidence was insufficient to establish that appellee was "doing business" in Arkansas, and that one of the threshold requirements for application of the Wingo Act had not been met.

Even had the threshold requirements been met, the Commerce Clause would have precluded application of the Act in the case at bar. Although the state law of Arkansas is applied to determine the threshold application of the act to appellee's activities, characterization of the activity as interstate commerce for purposes of testing the validity of the application against the Commerce Clause is a question of federal law. Uncle Ben's, Inc. v. Crowell, 482 F.Supp. 1149 (E.D.Ark.1980). The factual setting in this case is remarkably similar to that of Uncle Ben's. For purposes of the Commerce Clause analysis, the two cases are indistinguishable and therefore, the Commerce Clause would have precluded application of the Wingo Act in any event.

Next, appellants argue that the trial court erred in failing to dismiss the plaintiff's complaint under the Statute of Frauds. Arkansas Code Annotated § 4-2-201 (1987) provides in pertinent part:

(1) 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....

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and...