Lockwood Corp. v. Black, Civ. A. No. CA-5-77-147.
| Decision Date | 13 November 1980 |
| Docket Number | Civ. A. No. CA-5-77-147. |
| Citation | 501 F. Supp. 261 |
| Parties | LOCKWOOD CORPORATION, Plaintiff, v. Clifford BLACK and Bill Jim St. Clair, d/b/a B & S Irrigation Company, a Partnership, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
COPYRIGHT MATERIAL OMITTED
Don Graf, George H. McCleskey, McCleskey, Harriger, Brazill & Graf, Lubbock, Tex., for plaintiff.
Gordon H. Green, Muleshoe, Tex., for defendants.
This case came on for trial before the court, without a jury, on the 3rd day of November, 1980, with all parties and attorneys present. After hearing and considering the evidence, the pleadings, and the briefs and arguments of counsel, the court enters this memorandum, which shall constitute the court's findings of fact and conclusions of law. In addition, all of the stipulations of the parties contained in the Pre-trial Order will be considered as findings of fact by the court where relevant.
Defendants Black and St. Clair, doing business as a partnership under the name B & S Irrigation Co., purchased various irrigation equipment from Plaintiff Lockwood Corporation pursuant to a written agreement dated September 28, 1971. Defendants are residents of Texas while plaintiff is a Delaware corporation with its principal place of business in Gering, Nebraska. On May 29, 1974, St. Clair submitted a letter to Lockwood declaring he would no longer be associated with B & S Irrigation and asking that the contract be cancelled. The vice-president of marketing for Lockwood complied with this request and notified defendants of the termination of the contract effective May 29, 1974. Subsequently, defendant Black maintained business as B & S Irrigation in an individual capacity and although no written contract was consummated, Black continued to purchase irrigation systems and parts from Lockwood until 1976. Plaintiff filed this action against defendant Black for $6,613.90 claimed to be due or owing on the B & S Irrigation account and for interest and attorney's fees. Since this amount is for equipment ordered and delivered after May 29, 1974, plaintiff is no longer seeking judgment against St. Clair but only against Black doing business as an individual.
Black has filed a counterclaim alleging that Lockwood has assessed, claimed, and collected interest at a usurious rate and praying for damages and attorney's fees. The usurious interest complained of pertains to a "service charge" which was assessed to each of the B & S Irrigation sub-accounts: the Machine Dating Account (MDA) represented the complete irrigation system sold by Lockwood, and the Regular Account (RA) represented sale of spare parts. The Defendant argues that these service charges were not made pursuant to any agreement and are therefore illegal and usurious. Further, Black claims that failure to receive a cash discount which is offered if an invoice price is paid on or before a certain date, also constitutes usury.
The written contract between the parties effective from 1971 to May 29, 1974 contained the following provision:
In two previous orders dated August 8, 1979 and December 20, 1979, this court has affirmed the validity of this clause and has ruled that the law of Nebraska would apply to the cause of action. The defendant asserts that since the contract was terminated on May 29, 1974, Texas law should apply to transactions occurring after that date. In turn, plaintiff contends that the parties' dealings and conduct after May 29, 1974 evidenced their intent to contract in reference to the laws of the State of Nebraska.
To begin, it is clear that the written contract between plaintiff and defendant was cancelled for all purposes on May 29, 1974 as evidenced by the letter written by Lockwood's vice-president to B & S Irrigation. The forum-selection clause also terminated as of that date. Consequently, the law which governs the remaining transactions and which determines whether those dealings created a contract depends upon Texas conflict of laws relating to the formation and validity of a contract. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Texas rules dictate the validity, interpretation and effect of contracts in general is determined by the law of the place where the contract is made. Diaz v. Southeastern Drilling Co. of Argentina, 324 F.Supp. 1 (N.D.Tex.1969) affd. 449 F.2d 258 (5th Cir. 1971). Stated another way, the law intended by the parties will be controlling, and particularly, in the absence of a contrary manifestation, the presumption is the parties contract with reference to the law of the place where the contract was made. Austin Building Co. v. National Union Fire Ins. Co., 432 S.W.2d 697 (Tex.1968). Texas law defines the place of making of a contract as the place where the last act necessary to complete the contract is done, namely where the offer is accepted. Reliance Universal, Inc. v. I. C. S. Corp., 452 S.W.2d 926 (Tex.Civ.App.-Ft. Worth 1970, no writ); Dailey v. Transitron Overseas Corp., 349 F.Supp. 797 (S.D.Tex.1972), aff'd, 475 F.2d 12 (5th Cir. 1973). When an acceptance is given by telephone, the situs of the contract is where the acceptor speaks his acceptance, and it is that law which controls the interpretation of the contract. Lipschutz v. Gordon Jewelry Corp., 373 F.Supp. 375 (S.D. Tex.1974).
In applying the foregoing rules to the facts of this case, it is apparent that Nebraska law should apply because the parties made an oral contract in Nebraska for the continued purchase of equipment after May 29, 1974. Black telephoned his orders to Lockwood in Gering, Nebraska which action amounted to an offer. Lockwood accepted the offer at that time and subsequently shipped the equipment F.O.B., Gering. Thus, the contract was formulated in Nebraska and that state's law must apply to all transactions between the parties.
The same result is concluded under the approach suggested by the Restatement (Second) of Conflicts. The procedure contemplated there hinges primarily on which of the two states has the more significant relationship to the transaction and the parties. See Restatement of Conflicts (Second) §§ 6, 188 (1971). Clearly, Nebraska is more closely associated to the parties' dealings since it is the situs of acceptance and where the contract is effectively made, since it is where the goods are shipped and where the Buyer assumes risk, and since it is the place of payment. The only relation the contract has to Texas is the fact that one of the parties resides in Texas and it is where the offer was initiated. See Lipschutz, supra at 385; Diaz, supra at 4.
Finally, as the opinion more fully sets forth below, the court finds that by their conduct, the parties were operating under the terms of their previous written contract. It is thus inferred that they intended to have Nebraska law apply to transactions occurring after the termination on May 29, 1974. U.C.C. § 2-208(1), § 1-205.
Since the sale of the equipment in question is a sale of goods under the Uniform Commercial Code, the existence of a contract between Black and Lockwood and the determination of its terms are prescribed by the UCC as enacted in Nebraska. U.C.C. § 2-102; see also § 1-105 (). There is no doubt that a contract existed between the parties in view of Black's practice of ordering equipment over the telephone and Lockwood's policy of accepting and fulfilling the requests. U.C.C. § 2-204(1); § 2-206.1 While it is true that a contract of this type for an amount over $500 must be in writing, an oral contract which is valid in other respects other than a writing is enforceable with respect to goods for which payment has been made and accepted or which have been received and accepted. U.C.C. § 2-201(3)(c).
Black has received the equipment in question and has failed to reject it in accordance with Code provisions. Therefore, the contract is sufficiently binding on the parties although it does not comply with the statute of frauds.
The remaining question to be resolved is a definition of terms of the contract since the only written...
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