Oxley v. Ralston Purina Company, 15898.

• Court: U.S. Court of Appeals — Sixth Circuit
• Writing for the Court: O'SULLIVAN, Circuit , McALLISTER, Senior Circuit , and WEINMAN
• Citation: Oxley v. Ralston Purina Company, 349 F.2d 328 (6th Cir. 1965)
• Decision Date: 30 July 1965
• Docket Number: No. 15898.,15898.
• Parties: James OXLEY, Plaintiff-Appellee, v. RALSTON PURINA COMPANY, Defendant-Appellant.

349 F.2d 328 (1965)

James OXLEY, Plaintiff-Appellee, v. RALSTON PURINA COMPANY, Defendant-Appellant.

No. 15898.

United States Court of Appeals Sixth Circuit.

July 30, 1965.

Gilbert A. Deibel, Saginaw, Mich., for appellant, Crane, Crane, Kessel & Deibel, Saginaw, Mich., on the brief.

Robert A. Steadman, Flint, Mich., for appellee.

Before O'SULLIVAN, Circuit Judge, McALLISTER, Senior Circuit Judge, and WEINMAN, District Judge.

WEINMAN, District Judge.

In this action, defendant,^* Ralston Purina Company, seeks to set aside the judgment of the District Court, wherein plaintiff, James Oxley, was awarded damages in the sum of $142,735.20. Plaintiff's original action was filed in a Michigan State Court and was subsequently removed to the District Court. The suit was one for damages allegedly sustained because defendant breached an oral contract, the substance of which dealt with a "hog-leasing" program. Trial by jury was waived and the case was heard by the District Judge who found, by clear and convincing evidence, that an oral contract between plaintiff and defendant existed, that defendant was estopped to rely upon the statute of frauds; damages were then assessed.

In this appeal, defendant argues that an oral contract which cannot be performed in one year, although substantially performed by plaintiff and breached by defendant, is void under the Michigan statute of frauds. Defendant further contends that under the applicable statute of frauds the doctrine of equitable estoppel does not apply to an oral contract not performable within one year where no fraud or conveyance of real estate is involved. Finally, defendant contends that the amount of damages awarded by the District Judge was excessive.

The District Judge applied the correct rule as to the quantum of proof necessary in this type of case, i. e., clear and convincing evidence,¹ and since there is sufficient evidence in the record to sustain the Judge's findings, we accept his factual findings relating to the existence of an oral contract. The following is a résumé of the facts in this case and we state them substantially as the Trial Judge did in his opinion, with the addition of a few uncontested facts: Plaintiff, a successful business man who desired to own a farm and go into farming, terminated his employment and his business interests and in January of 1957 purchased a 160 acre farm near Byron, Michigan. He spent substantial sums on the house located on the farm to make it suitable for year-around living for his family. He began utilizing the farm for the production of corn and related cash crops. As he proceeded with this operation, he came into contact with Eugene King, the operator of the elevator at Byron and the local Ralston Purina dealer. During their visits together, there were discussions of plaintiff's undeveloped plans of going into a farming operation other than the simple cash crop program to which his farm was then devoted. Among various plans considered was a hog-fattening program.

Vernon Hamilton, the Ralston Purina salesman for the Byron area, learned of plaintiff's inquiry about changing his farm operation and thereafter plaintiff, King and Hamilton discussed the possibility of having plaintiff embark on a hog-leasing program which Hamilton had learned about at a seminar conducted by J. Blake Pullen for Ralston Purina.

In February of 1959, plaintiff attended a meeting with Hamilton, King and Robert McGranahan, the District Sales Manager for Ralston Purina. These men felt that plaintiff was a good prospect for the Ralston hog-leasing program as he had the forty or fifty thousand dollars needed to launch such a program. Mr. Hamilton made certain projections of what could be done under such a program, relying in the main on quotations and figures contained in a manual printed for defendant and called "Commercial Hog Production Dealer Presentation and Group Selling Meeting Guide-February 1959." The hog-leasing manual in great detail considers a program whereby a parent farmer would develop a good strain of hogs for breeding purposes; the breeder animals would be placed out in units of twelve gilts (females) and one boar on lessee farms where the lessee would raise hogs for market. The parent or lessor farm would receive a commission on the market price of the marketed hogs as rental. The parent farm would own all of the leased breeding animals while the lessee farmer would feed and market the progeny thereof as 200-pound hogs and retain the proceeds, except for the mentioned rental or commission. The parent farm, in addition to rental income, would enjoy a build-up in value of herd on the parent farm as well as of the leased animals on lessee farms, and would also have income from cull animals not eligible for the leasing program, from breeders no longer productive, and from the sale of breeder animals after the program was well established. The program required an investment of approximately $40,000 to carry the costs of initial breeder animals, equipment, buildings and operating capital.

Plaintiff had certain reservations and questions about the proposed plan and it was agreed that the parties would visit a farm which was operating under the plan. Accordingly, arrangements were made by the Ralston people for such a visit to a farm in or near Union City, Tennessee. Plaintiff, King, Hamilton, and Mr. Hughey, plaintiff's representative, met with Mr. Pullen at the farm and went over the physical layout, installations and operations and later spent most of the balance of the day at a motel or hotel dining room, where Mr. Hamilton's projections and facts of the hog-leasing program were discussed.

Plaintiff had had little or no experience or training or education respecting farming generally, and none whatsoever respecting hog operations on a farm, whether of the commercial or leasing type. On this point, he had the reassurances of defendant's representatives that he needed none as they would supply all the know-how he would need.

As a result of the meetings, capped by the Union City meeting, it was agreed between plaintiff and defendant, through the latter's employees and agents, Hamilton and Pullen, who had actual or apparent authority to act, that plaintiff was to invest the necessary money in setting up the physical plant needed for the production of pure-bred stock; that he would do his part in the certification work; that he would supply the manpower and management services; that he would use only Ralston Purina supplies; and that he would cooperate with the Ralston people in the performance of their commitments and duties under the agreement.

The defendant, in turn, agreed that it would supply the food supplement, sanitation and other forms of supplies; that it would provide the necessary technical guidance and assistance; that it would obtain the leasing farms; and that during the period before the full operation of leasing could be established, it would take all of plaintiff's surplus stock.

The parties also agreed to adopt the projections of Mr. Hamilton for a five-year program at $2.00 per leased hog.

Soon after plaintiff's return from Union City, he embarked on his building program and there was cooperation and performance by him and defendant's representatives. Thereafter, plaintiff continued to perform in accordance with the terms of the oral agreement and defendant made use of plaintiff's operations in the hog-leasing program in promoting the public acceptance of its products by pictures and information disseminated through its house publications and by arranging a public gathering at plaintiff's farm. There was no problem until the time came for defendant to take, and dispose of, plaintiff's surplus stock. At this point, defendant failed and refused to perform; leaving plaintiff to rescue what he could from the operation. Defendant had neither arranged for and secured leasing farms, nor would it take the surplus stock.

After stating his factual findings, the Trial Judge rejected defendant's argument that plaintiff's action was barred by the Michigan statute of frauds and held that defendant was prevented, under the doctrine of equitable estoppel or estoppel in pais, from interposing the statute as a defense.

The applicable Michigan statute of frauds provides:

"In the following cases specified in this section, every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say:

"1. Every agreement that, by its terms, is not to be performed in 1 year from the making thereof * * *."²

As previously stated, defendant argues that the oral contract is void under the above quoted statute and also contends that the doctrine of equitable estoppel has no application to the facts in this case because it is only where an oral contract not performable within a year is related to a conveyance of real estate or where there is fraud that performance or change of position by one party is recognized as being an exception to the operation of the statute. Plaintiff argues that the determination of whether the doctrine of equitable estoppel will be applied by the Michigan Courts has always been based upon the actions of the parties in the individual case, not upon the particular type of case involved.

At the outset we note that neither counsel for plaintiff, counsel for defendant nor the Court has been able to find a Michigan case which has dealt with the specific problem. We have found no Michigan case which has said that in oral contracts not performable within one year under the applicable statute the doctrine of equitable estoppel can be applied to deny use of the statute as an affirmative defense, nor have we found any Michigan case which has said that the doctrine of equitable estoppel cannot be so applied.

Defendant...