Gold Kist, Inc. v. Citizens and Southern Nat. Bank of South Carolina, 0519

• Citation: 286 S.C. 272,333 S.E.2d 67
• Decision Date: 25 February 1985
• Docket Number: No. 0519,0519
• Parties: , 41 UCC Rep.Serv. 327 GOLD KIST, INC., d/b/a Farmers Mutual Exchange, Appellant, v. The CITIZENS AND SOUTHERN NATIONAL BANK Of SOUTH CAROLINA, as Executors of The Estate of J.C. Lanham, Respondent. . Heard
• Court: Court of Appeals of South Carolina

Page 67

333 S.E.2d 67

286 S.C. 272, 41 UCC Rep.Serv. 327

GOLD KIST, INC., d/b/a Farmers Mutual Exchange, Appellant, v. The CITIZENS AND SOUTHERN NATIONAL BANK Of SOUTH CAROLINA as Executors of The Estate of J.C. Lanham, Respondent.

No. 0519.

Court of Appeals of South Carolina.

Heard Feb. 25, 1985.

Decided July 8, 1985.

E. Ellison Walker, of Prioleau & Walker, Columbia, for appellant.

Daphne D. Sipes, San Antonio, Tex., for respondent.

CURETON, Judge:

Appellant Gold Kist brought suit against respondent Citizens & Southern National Bank, executor of the Estate of J.C. Lanham, for $38,885 owed on an open account for agricultural and farming products. The Lanham estate counterclaimed for actual and punitive damages arising out of fraud and breach of express and implied warranties in the sale of corn seed. The jury returned a verdict of $2,500 for Gold Kist and it appeals. We affirm.

The facts giving rise to the dispute are fairly simple. The decedent's two sons, James and Butler Lanham, operated the decedent's 2,000-acre farm following his death. In the fall of 1978, they had occasion to discuss their 1979 corn crop needs with representatives of Gold Kist, a retail supply store. Among other recommendations, Gold Kist advised the Lanhams to plant Coker-77 corn seed for silage to feed the Lanhams' dairy cows. Unquestionably, Gold Kist represented to the Lanhams that the Coker-77 variety of corn seed would produce a high tonnage of corn silage per acre, and would give the Lanhams the maximum amount of feed they could expect to harvest from any other variety of corn seed.

In February 1979, the Lanhams purchased approximately twenty-five bags of Coker-77 corn seed from Gold Kist. They planted the seed using accepted and prudent farming methods. Nevertheless, they got a poor stand of corn. The entire 88.9-acre field of Coker-77 corn yielded only fifty tons of silage (approximately 40-45 bushels per acre) instead of the anticipated yield of 2,235 tons. The Lanhams' yield on their other corn acreage planted with a different variety of seed was above average.

Upon the Lanhams' refusal to pay their account, Gold Kist initiated this action to recover the amount owed. The Lanhams defended the action on the ground the corn seed was defective. They also counterclaimed for actual and punitive damages of $200,000 based on (1) breach of express warranty that the Coker-77 seed would produce healthy plants or 140 bushels of feed per acre, (2) breach of implied warranty of merchantability, (3) breach of implied warranty of fitness for a particular purpose, and (4) fraudulent misrepresentation that the seed was adequately tested and would yield a normal harvest. In reply, Gold Kist alleged that it had disclaimed the warranties alleged and limited its liability to the purchase price of the seed based on a disclaimer printed on the bags of corn seed delivered to the Lanhams.

At appropriate stages of the trial, Gold Kist moved for the entry of judgment in its favor as a matter of law. The motions were denied and the case was submitted to the jury on all of the causes alleged. The jury was instructed it could return a general verdict for either Gold Kist or the Lanhams. It returned a verdict for Gold Kist for $2,500. Gold Kist's motion for judgment notwithstanding the verdict was also denied.

Gold Kist has preserved for appellate review by appropriate objection or motion, exception and argument, the questions (1) whether the trial court erred in denying Gold Kist's motions for a directed verdict and judgment n.o.v. (a) on its action on the account, (b) against the Lanhams on their actions for breach of implied warranties of merchantability and fitness for a particular purpose, and (c) against the Lanhams on their action for fraud, and (2) whether the court erred in excluding the deposition of a witness for Gold Kist. ¹

I. Account

Gold Kist first contends the court erred in failing to direct a verdict for it on its action on the account for the sum claimed less the purchase price of the corn seed. It maintains that the Lanhams' sole defense to liability on the account was the defectiveness of the seed. Gold Kist argues that assuming the seed was defective, the Lanhams' maximum recovery was limited to the purchase price of the seed. Gold Kist therefore contends that as a matter of law the court should have directed the jury to return a verdict of no less than the amount claimed on the account minus the purchase price of the seed, assuming the jury found the seed defective.

Central to acceptance of this contention is the validity of Gold Kist's disclaimer which included an exclusion of warranties and a limitation of remedies. ² If the disclaimer fails, as the Lanhams contend it should, they are entitled to recover any damages proximately caused by the breach. We find evidence which reasonably supports the jury's implicit finding (upon proper instructions) that the disclaimer is invalid because it amounts to a post-contract, unbargained-for unilateral attempt by Gold Kist to limit its obligations under the contract.

According to the prevailing interpretation of the Uniform Commercial Code, a disclaimer printed on a label or other document and given to the buyer at the time of delivery of the goods is ineffective if a bargain has already arisen. Pennington Grain and Seed, Inc. v. Tuten, 422 So.2d 948 (Fla.App.1982) (disclaimer on soybean seed bags delivered after purchase invalid); Pfizer Genetics, Inc. v. Williams Management Co., 204 Neb. 151, 281 N.W.2d 536 (1979) (disclaimer on corn seed bag and in invoice delivered subsequent to written contract of sale ineffective); Hartwig Farms, Inc. v. Pacific Gamble Robinson Co., 28 Wash.App. 539, 625 P.2d 171 (1981) (disclaimer in invoice delivered with seed potatoes following oral contract invalid); Christopher & Son, Inc. v. Kansas Paint & Color Co., 215 Kan. 185, 523 P.2d 709 (1974) (disclaimer in invoices accompanying delivery of paint ineffective); Klein v. Asgrow Seed Co., 246 Cal.App.2d 87, 54 Cal.Rptr. 609 (1966) (disclaimer in invoices and on containers in which seed delivered ineffective); Willoughby v. Ciba-Geigy Corp., 601 S.W.2d 385 (Tex.Civ.App.1979) (disclaimer on container of herbicide ineffective where never brought to buyer's attention).

The evidence in this case reveals that the bargain or agreement between the parties occurred prior to the delivery of the seed bags with the disclaimer. The Lanhams entered into an oral contract to purchase a quantity of Coker-77 corn seed. There is no evidence that the disclaimer was brought to the Lanhams' attention at that time. Gold Kist subsequently delivered the bags to the Lanham farm. Clearly the evidence supports the conclusion that the disclaimer was not a part of the bargain between the parties.

Of course we recognize that Section 36-2-209 of the South Carolina Code of Laws of 1976 ³ indicates that a disclaimer made after the closing of the sale can be made a binding part of the contract if the parties agree to the modification. See White and Summers, Uniform Commercial Code, p. 446 (2d ed. 1980). An agreement to modify can only be found, however, if the evidence reveals that the buyer acquired knowledge of the offered modification and had an opportunity to object to it. Pennington Grain and Seed, Inc. v. Tuten, supra; Pfizer Genetics, Inc. v. Williams Management Co., supra. Here, there is no evidence that the Lanhams ever learned of or accepted the terms of the disclaimer prior to the litigation in issue.

Gold Kist relies on Hill v. BASF Wyandotte Corp., 696 F.2d 287 (4th Cir.1982), a case interpreting South Carolina UCC provisions, which holds that a disclaimer containing a merger or integration clause and appearing on the label of a container of herbicide effectively excludes prior oral express warranties and limits the buyer's remedies to those stated in the disclaimer. In Hill, however, the Court specifically found (without explanation) that the disclaimer was not a post-contract attempt to limit liability. The opinion reveals that the buyer read the disclaimer before using the herbicide and, although invited to return the product if the terms were unacceptable, retained and used it. We are unable to determine upon what basis the Court held the disclaimer to be part of the bargain between the parties and therefore decline to follow the decision. See Hill v. BASF Wyandotte Corp., 280 S.C. 174, 311 S.E.2d 734 (1984).

We hold the court did not err in denying Gold Kist a directed verdict on its action on the account minus the purchase price of the corn seed. Based on the evidence, the question of whether the disclaimer was a part of the agreement between the parties was a jury question. Likewise, based on the jury's findings regarding the disclaimer, the issue of the Lanhams' liability on the account was also a jury question.

II. Implied Warranties

Gold Kist also assigns as error the denial of its motion for a directed verdict and judgment n.o.v. against the Lanhams on their actions for breach of implied warranties of merchantability and fitness for a particular purpose. Gold Kist contends that the Lanhams were bound by the disclaimer to the single express warranty contained in the disclaimer. We find no merit in the contention based upon our prior holding that the disclaimer was ineffective to exclude any warranties which arose prior to or at the time of the contract of sale.

III. Fraud

The Lanhams' counterclaim alleged that Gold Kist fraudulently misrepresented that the Coker-77 corn seed had been adequately and fully tested and that when planted and cultivated properly, would yield a normal harvest. Gold Kist contends that the trial court should have directed a verdict against the Lanhams on the fraud action because there was no evidence of fraud. We agree.

The legal principles upon which a cause of action for fraud and deceit is based are familiar and settled:

The [complainant], in order to...