Packwood Elevator Co. v. Heisdorffer

• Decision Date: 21 December 1977
• Docket Number: No. 59295,59295
• Citation: 260 N.W.2d 543
• Parties: 23 UCC Rep.Serv. 293 PACKWOOD ELEVATOR COMPANY, Appellee, v. David R. HEISDORFFER, Appellant.
• Court: Iowa Supreme Court

Page 543

260 N.W.2d 543

23 UCC Rep.Serv. 293

PACKWOOD ELEVATOR COMPANY, Appellee, v. David R. HEISDORFFER, Appellant.

No. 59295.

Supreme Court of Iowa.

Dec. 21, 1977.

Bailey C. Webber of Webber & Gaumer, Ottumwa, for appellant.

Gary L. Cameron of Parkin & Cameron, Fairfield, for appellee.

Heard by MOORE, C. J., and MASON, RAWLINGS, REYNOLDSON and HARRIS, JJ.

MOORE, Chief Justice.

Defendant-farmer appeals judgment entered in favor of plaintiff-elevator for breach of an oral contract for the sale of soybeans. We affirm.

In a telephone conversation on January 31, 1973, defendant Heisdorffer, after receiving price quotations from Dale Sullivan, plaintiff's manager, that the elevator would pay $4.72 per bushel for soybeans picked up at his farm, agreed to sell 5900 bushels for that price. No written confirmation was ever made of this agreement.

There was no further contact between the parties until February 22 when Mr. Sullivan called and tried to arrange to pick up the soybeans. Defendant refused to make delivery stating the contract expired 14 days from the date of the contract as originally agreed. The elevator disagreed declaring the contract was to run through the month of February. On February 24, Sullivan and one of his employees, Gary Benell, went to defendant's farm to take delivery but to no avail.

As a result of the disagreement the elevator was forced to "cover" the contract with other purchases at approximately $6.145 per bushel (market price on 2/22/73) from another producer in order to mitigate damages and also honor its own contracts with large soybean dealers.

Thereafter plaintiff initiated this lawsuit for breach of contract. Defendant answered by way of denial and raised as an affirmative defense the Iowa Uniform Commercial Code statute of frauds, section 554.2201(1).

The case then proceeded to trial. Defendant, called as an adverse witness, testified that there was an oral agreement for sale of soybeans but that he had imposed a 14-day time limit for the elevator to pick up the produce because he needed cash to pay on various note obligations. Mr. Sullivan was then called to testify regarding the terms of the oral agreement and its breach by defendant and the resulting damages. Defendant objected to his testimony concerning the telephone call on the ground that the statute of frauds made the party seeking enforcement of the contract incompetent to testify to any provision of the contract. Trial court overruled the objection and Sullivan then testified he told Mr. Heisdorffer he would take delivery within the "30-day" period as in all contracts.

Defendant's evidence was limited to his testimony and that of his spouse. Both testified there was an agreement to sell the beans but it expired at the end of 14 days prior to the time plaintiff sought to take delivery. The main thrust of their side of the controversy was that the contract did exist at one point in time but that it had terminated by its own terms prior to any alleged breach on their part. On cross-examination there was evidence the rising bean prices were a benefit to defendant who was ultimately able to sell the beans to another elevator in May for $7.48 per bushel.

Trial court in its findings and conclusions found that since the contract was oral and involved a sales price of over $500, section 554.2201 applied. However, it concluded that once defendant admitted the January 31 agreement, the defense of statute of frauds was no longer available under section 554.2201(3)(b). On the specific issue of time for delivery the court found the defendant's failure to pay off his notes combined with the skyrocketing bean prices and conflicting testimony from Mr. Sullivan rendered defendant's claim of a two-week delivery period "incredible." Accordingly the court found defendant had breached the contract and awarded damages in the amount of $8,407.50 which reflected the difference between the contract price and the market price of $6.145 per bushel at the time of the breach.

Defendant appeals asserting that trial court erred in permitting plaintiff's manager to testify in violation of the statute of frauds and that there was no substantial evidence supporting the finding that the oral agreement contained a 30-day delivery term.

I. We review this law action on errors assigned. Findings of fact by the trial court have the effect of a special verdict and if supported by substantial evidence they are binding on us and will not be disturbed. Furthermore, we view the evidence in a light most favorable to the judgment and in case of ambiguity construe to uphold rather than defeat the judgment. Pillsbury Co. v. Ward, Iowa, 250 N.W.2d 35, 38; Holm v. Hansen, Iowa, 248 N.W.2d 503, 505. However, these principles do not preclude inquiry into whether trial court applied erroneous rules of law which materially affected its decree. We are not bound by trial court determinations of law. Nora Springs Co-op Co. v. Brandau, Iowa, 247 N.W.2d 744, 747; Sand Seed Service, Inc. v. Bainbridge, Iowa, 246 N.W.2d 911, 912.

II. Defendant raised the statute of frauds defense under the Uniform Commercial Code, section 554.2201 as an affirmative defense in his answer and later as grounds for his objection to Dale Sullivan's testimony. That statute provides:

"554.2201 Formal requirements statute of fraud.

"1. Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars 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. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

"2. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received.

"3. A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable

"a. if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

"b. if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted ; or

"c. with respect to goods for which payment has been made and accepted or which have been received and accepted. (Emphasis supplied.)

This case turns on whether the statute of frauds defense was still available to defendant after he admitted an oral agreement was reached on January 31, 1973. Our resolution of this issue requires some examination of the purpose behind the code admission provision.

Prefatorily, we note the factual pattern presented here is scarcely unique to this lawsuit. It arises often because of the manner in which corn and soybeans are normally bought and sold over the telephone with the elevator-buyer later sending a written confirmation to the farmer-seller. When this informal system is combined with potentially significant fluctuations in market conditions between the time crops are contracted for and later delivery dates as occurred throughout 1973, the field is ripe for litigation over whether an enforceable agreement existed because no formal writing was executed.

Recently we have discussed the merchant provision, section 554.2201(2) in two separate cases. In Sand Seed Service, Inc. v. Poeckes, Iowa, 249 N.W.2d 663, we held whether a farmer is a merchant for purposes of this exception is ordinarily a question of fact. However, there we sustained trial court's ruling sustaining a summary judgment in the farmer's favor because under the uncontroverted facts from the farmer's affidavit it was clear he was not a merchant as a matter of law.

Shortly thereafter in McCubbin Seed Farm, Inc. v. Tri-Mor Sales, Iowa, 257 N.W.2d 55, we construed the section further and held a merchant's silence after receipt of a confirmation has the effect of negating the statute of frauds defense; however, the party claiming a contract must still prove it. To hold otherwise would have permitted a party to create a...