M & W Farm Service Co. v. Callison

• Decision Date: 14 November 1979
• Docket Number: No. 62515,62515
• Citation: 285 N.W.2d 271
• Parties: 27 UCC Rep.Serv. 1239 M & W FARM SERVICE COMPANY, Appellee, v. Ken CALLISON d/b/a Winterset Hybrid, Appellant.
• Court: Iowa Supreme Court

Page 271

285 N.W.2d 271

27 UCC Rep.Serv. 1239

M & W FARM SERVICE COMPANY, Appellee, v. Ken CALLISON d/b/a Winterset Hybrid, Appellant.

No. 62515.

Supreme Court of Iowa.

Nov. 14, 1979.

G. Stephen Walters of Webster, Jordan, Oliver & Walters, Winterset, for appellant.

William F. Fanter of Bradshaw, Fowler, Proctor & Fairgrave, Des Moines, for appellee.

Considered by LeGRAND, P. J., and REES, HARRIS, ALLBEE, and McGIVERIN, JJ.

ALLBEE, Justice.

Defendant Ken Callison, d/b/a Winterset Hybrid, aggrieved by an interlocutory ruling on a motion to adjudicate law points, sought and was granted this appeal in advance of final judgment. See Iowa R.App.P. 2.

The appeal arises out of this pleading background. Plaintiff M & W Service Company brought action against Callison on an open account, demanding $7030.92 alleged to be due for items supplied, including petroleum, LP gas, drier gas and feed. Callison responded not only by answer, in which he denied liability for the money demanded, but also with a counterclaim pleaded in two divisions. The first division alleged an oral agreement between the parties under which M & W agreed both to sell Callison LP gas for use in drying seed corn and to rent to Callison four LP gas tanks for storage of the LP gas for so long as he needed them for seed corn drying during the fall of 1976. Callison further alleged that on October 11, 1976, M & W, without permission, notice or warning, wrongfully removed one of the tanks without replacing it, and in so doing breached the express or implied terms of the oral agreement. The result of this breach, according to the counterclaim, was Callison's inability to properly dry a considerable amount of seed corn, leaving it unfit for seed and diminished in value. For this Callison claimed loss in seed corn value of $79,009.92, damages of $25,000 to his seed corn business, and exemplary damages of $208,000 for M & W's "willful and reckless disregard for (his) rights."

The counterclaim's second division asserted the same damage items and sums for each, and pleaded a tort claim against M & W. This claim was predicated upon M & W's negligent removal of the gas tank without permission, notice, warning or prompt replacement upon Callison's demand.

M & W, by reply, admitted that it removed one of the gas tanks but denied Callison's allegations of breach of an oral agreement and tortious conduct. In addition, the reply, and an amendment to it, stated that M & W did not rent or lease any gas tanks to Callison, but merely provided the tanks for temporary use; that Callison was charged by M & W only for "goods," including LP gas, at an agreed upon price; and that M & W neither contemplated nor made a charge for use of the gas tanks. M & W also pleaded, as a bar to enforcement of Callison's claims founded upon an oral agreement, section 554.2201, The Code (the Uniform Commercial Code Statute of Frauds).

Later, M & W filed a motion and an amended motion to adjudicate law points, asking the dismissal of Callison's counterclaims. It is the propriety of the ruling sustaining the amended motion upon which this decision turns.

The motion raised three grounds for dismissal. The gist of the first is that the oral agreements pleaded by both parties involve the sale of goods for the price of five hundred dollars or more and, consequently, neither agreement is enforceable due to the UCC Statute of Frauds unless an exception to the statute is applicable. See § 554.2201, The Code. M & W further states that its action, however, falls within the exceptions contained in section 554.2201(3) (c) (goods for which payment has been made and accepted or which have been received and accepted), but that no exception applies which could permit enforcement of the oral agreement alleged in Callison's counterclaim.

The remaining two motion grounds are urged in the alternative and each is directed at the tort action pleaded in the second division of the counterclaim. Essentially, one ground was that the only duty which Callison asserted that M & W owed him was a contractual duty, which is not cognizable by the law of torts. Accordingly, whether or not there existed an oral contract which plaintiff breached, no tort could have been committed. The other ground was that even a duty of care inappropriately premised on the alleged oral contract would be extinguished by the Statute of Frauds bar to the contract's enforcement.

As alluded to earlier, trial court sustained each ground of M & W's motion. In the process, it also ruled that M & W's open account action was maintainable because it came within the exceptions of section 554.2201(3)(c). The latter ruling is not questioned on this appeal. Thus, we now consider only the propriety of the court's challenged rulings.

I. A motion for separate adjudication of law points, authorized by Iowa R.Civ.P. 105, permits only the consideration of questions of law which arise from uncontroverted pleadings. No facts established outside the pleadings may be examined; no evidence may be taken to either support or resist the motion. IMT Insurance Co. v. Myer, 283 N.W.2d 316, 318 (Iowa 1979). The motion is appropriate only when the material facts are undisputed. Woodburn v. Northwestern Bell Telephone Co., 275 N.W.2d 403, 406 (Iowa 1979).

M & W's key assertion is that Callison's claims against M & W are based on a contract which the pleadings indisputably reveal was unwritten and therefore unenforceable. In its view, any controverted facts relating to the alleged oral contract are immaterial because of the contract's unenforceability. Hence, it contends that an adjudication by trial court was appropriately based on the undisputed material facts.

What these assertions ignore is that the remaining disputed facts raise the possible applicability of at least two exemptions from the UCC Statute of Frauds. The first is that, if a true lease agreement did exist, as alleged by Callison but denied by M & W, as a lease it would be exempt from UCC provisions, including the Statute of Frauds. See, e. g., DeKalb Agresearch, Inc. v. Abbott, 391 F.Supp. 152, 153-54 (N.D.Ala.1974), Aff'd, 511 F.2d 1162 (5th Cir. 1975) (per curiam). This is because the UCC applies only to contracts for the present or future sale of goods, which involves the passing of title. § 554.2106, The Code. See generally J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code § 2-2, at 45 (1972). ¹

The second possible exemption raised by the disputed pleadings is that of a mixed contract for goods and, in predominant part, services. The coverage of mixed contracts under the UCC is discussed in Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974). In Bonebrake written contracts for the sale and installation of bowling alley equipment were made between a dealer in equipment and the owners of a bowling alley damaged by fire. The court construed those contracts to be mixed contracts for goods and services, concluding that clearly the contracts were for the replacement of equipment destroyed by fire, thus involving goods as defined and covered by the UCC. To determine whether a mixed contract should be covered as a sale of goods under the UCC, that court said the test is not whether the contract is mixed but "whether (its) predominant factor, (its) thrust, (its) purpose, reasonably stated, is the rendition of service, with goods incidentally involved . . . or is a transaction of sale, with labor incidentally involved . . .." Id. at 960; Cf. Ranger Construction Co. v. Dixie Floor Co., 433 F.Supp. 442 (D.S.C.1977) (predominant purpose of the contract for the installation of resilient flooring was for the performance of services with the sale of goods necessary to such services being incidental, thereby exempting UCC applicability).

M & W contended, as previously indicated, that the principal object of the parties' transaction was the sale of goods, and that the providing of gas tanks was only an incidental service of supplying LP gas. Consequently, it argues that, as a matter of law, all of the transactions are governed by the UCC. Trial court agreed, relying primarily upon Bonebrake.

We do not quarrel with either the Bonebrake test or result, but that case does not control the result in this one for several reasons. First, in this case there is no written instrument to construe and determine, as a matter of law, its legal effect. See Brammer v. Allied Mutual Insurance Co., 182 N.W.2d 169, 172 (Iowa 1970). Secondly, as already pointed out, the pleadings here are not uncontroverted. Callison's counterclaim contradicts the assertions in M & W's reply that the tanks were supplied without additional charge, merely as an incident to the sale of LP gas. Also, trial court's ruling erroneously rested in part upon an exhibit. M & W's exhibit B, attached to its petition and consisting of copies of monthly statements of Callison's account, was referred to as part of the basis for trial court's conclusion that the gas tanks "were incidentally supplied to facilitate the sale of LP gas," thus "merely incidental to the sale of gas and . . . therefore the principle object was the Sale of goods exceeding $500.00 which must be settled according to the provisions of the Iowa Uniform Commercial Code." But Callison's answer denied M & W's allegation pertaining to exhibit B,...