Peace River Seed Co-Operative, Ltd. v. Proseeds Mktg., Inc.

• Decision Date: 20 March 2014
• Docket Number: SC S060957).,CA A144564,(CC 03C15778
• Citation: 322 P.3d 531,355 Or. 44
• Parties: PEACE RIVER SEED CO–OPERATIVE, LTD., dba Peace River Seed Co–Op, Ltd., a Canadian corporation, Respondent on Review, v. PROSEEDS MARKETING, INC., an Oregon corporation, Petitioner on Review.
• Court: Oregon Supreme Court

355 Or. 44

322 P.3d 531

PEACE RIVER SEED CO–OPERATIVE, LTD., dba Peace River Seed Co–Op, Ltd., a Canadian corporation, Respondent on Review,

v.PROSEEDS MARKETING, INC., an Oregon corporation, Petitioner on Review.

(CC 03C15778; CA A144564; SC S060957).

Supreme Court of Oregon.

Argued and Submitted Sept. 19, 2013.

Decided March 20, 2014.

On review from the Court of Appeals.^*

C. Robert Steringer, Harrang Long Gary Rudnick P.C., Portland, argued the cause and filed the briefs for petitioner on review. With him on the briefs were James E. Mountain, Jr., J. Michael Alexander, and John C. Rake.

Wm. Randolph Turnbow, Eugene, argued the cause and filed the brief for respondent on review.

BALMER, Chief Justice, and KISTLER, WALTERS, LINDER, BREWER, and BALDWIN, Justices.^**

BALMER, C. J.

In this breach of contract case, we examine the availability of different remedies under the Uniform Commercial Code (UCC) for an aggrieved seller of goods after a buyer breaches a contract to purchase those goods. Specifically, we consider the relationship between ORS 72.7080(1), which measures a seller's damages as the difference between the unpaid contract price and the market price at the time and place for tender, and ORS 72.7060, which measures a seller's damages as the difference between the contract price and the resale price. We examine those provisions to determine whether an aggrieved seller who has resold goods can recover a greater amount of damages using the market price measure of damages than the seller would recover using the resale price measure of damages.

Plaintiff, a seller seeking damages from a buyer that breached contracts to purchase goods, argued at trial that it was entitled to recover its market price damages. The trial court determined that plaintiff was entitled to the lesser of its market price damages or its resale price damages, and the court ultimately awarded plaintiff its resale price damages. The Court of Appeals reversed and remanded, because the court determined that plaintiff could recover its market price damages, even though it had resold some of the goods at issue. Peace River Seed Co–Op. v. Proseeds Marketing, 253 Or.App. 704, 717, 293 P.3d 1058 (2012). The Court of Appeals also reversed the trial court's decision not to award plaintiff its attorney fees under the parties' contracts, and remanded for the trial court to determine whether the parties intended the ambiguous contract term “charges for collection” to include attorney fees. Id. at 724–25, 293 P.3d 1058. For the reasons that follow, we agree that plaintiff was entitled to recover its market price damages, even if those damages exceeded plaintiff's resale price damages. We conclude, however, that plaintiff is not entitled to recover its attorney fees under the parties' contracts.

FACTS AND PROCEEDINGS BELOW

The facts material to our discussion are mostly undisputed. Peace River Seed Co–Operative (“plaintiff”) is a Canadian company that buys grass seed from and sells grass seed for grass seed producers. Proseeds Marketing (“defendant”) is an Oregon corporation that purchases grass seed from various sources to resell to end users. A broker prepared and the parties agreed to multiple contracts for defendant to purchase from plaintiff the total production of grass seed from a certain number of acres for a fixed price over a period of two years. The contracts incorporated the NORAMSEED Rules for the Trade of Seeds for Planting, which have been adopted by the American and Canadian Seed Trade Associations to govern the trade of seed. The NORAMSEED Rules provide that the UCC applies to transactions within the United States, and both parties have litigated this case under the UCC.

Under the contracts, defendant was to provide shipping and delivery instructions to plaintiff. During the contract period, however, the price of grass seed fell dramatically. Although defendant initially provided shipping instructions and plaintiff shipped conforming seed, defendant eventually refused to provide shipping instructions for delivery of additional seed under the contracts. After multiple requests for shipping instructions, and defendant's continued refusal to provide them, plaintiff cancelled the contracts. Over the next three years, plaintiff was able to sell at least some of the seed that defendant had agreed to purchase to other buyers.

The parties submitted their contract dispute to arbitration. Following an arbitrator's award in plaintiff's favor, plaintiff sought to enforce the award in court, and the trial court entered judgment over defendant's objection. Defendant appealed, and the Court of Appeals remanded for trial after concluding that the arbitration was not binding. Peace River Seed Co–Op v. Proseeds Marketing, 204 Or.App. 523, 526, 534, 132 P.3d 31,rev. den.,341 Or. 216, 140 P.3d 1133 (2006). In the subsequent bench trial, the court concluded that defendant had breached the contracts and that plaintiff had been entitled to cancel the contracts and seek damages. When the trial court awarded plaintiff its damages, the court noted that the parties had entered into fixed price contracts, “regardless of the market price at the time of harvest and shipment,” and the court explained that “[e]ach party takes certain risks and hopes for certain benefits in this type of a contract.” Nonetheless, the court concluded that plaintiff had an “obligation to mitigate damages” and was “not entitled to recover damages in an amount greater than actually incurred.” Accordingly, the trial court awarded plaintiff the lesser of two measures of damages: the difference between the unpaid contract price and the market price (the measure under ORS 72.7080(1)) or the difference between the contract price and the resale price (the measure under ORS 72.7060). The trial court directed plaintiff to submit calculations of each measure of damages.

Both parties sought reconsideration. At a hearing on those motions, the trial court stated that it would not be “absolutely one-hundred percent convinced” about the appropriate measure of damages until it could see how each party calculated market price damages and resale price damages. The trial court acknowledged that plaintiff previously had submitted its calculation of market price damages and had proven those damages, but the court also directed the parties to calculate damages to account for any seed that had been resold. Subsequently, defendant submitted its analysis of damages based on the prices that plaintiff had received when it resold. Plaintiff criticized defendant's analysis and stuck by its calculation of market price damages, without submitting an analysis of damages based on resale prices.

Each party's calculation of damages for one of the breached contracts, contract 1874, illustrates the implications of using the market price or the resale price to calculate damages. The evidence at trial showed that the contract price for contract 1874 was $0.72 per pound. Plaintiff sought damages of $3,736.00 for that contract, apparently based on a market price of $0.64 per pound, resulting in a contract price minus market price differential of $0.08 per pound for 46,700 pounds of seed not accepted by defendant.¹ Defendant argued, however, that plaintiff had resold at least some of that seed for $0.75 per pound, $0.03 per pound above the contract price and $0.11 per pound above plaintiff's market price calculation. Thus, according to defendant, plaintiff did not have any damages for that resold seed because plaintiff had resold for more than the contract price. If plaintiff recovered $0.08 per pound in market price damages, in addition to the $0.75 per pound that plaintiff allegedly had received on the resale, plaintiff ultimately would recover $0.83 per pound, which was $0.11 more than the contract price. ²

For that same contract, however, where the contract price was $0.72 per pound, defendant noted that some of the seed had been resold for $0.60 per pound. That meant that the resale price damages would be $0.12 per pound. That is, for at least some of the resold seed from contract 1874, plaintiff's resale price damages of $0.12 per pound would exceed plaintiff's claimed market price damages of $0.08 per pound. In sum, the parties' calculations of damages for contract 1874 showed that, with regard to some seed, the market price damage calculation would lead to a larger award, but that, with regard to other seed, the resale price damage calculation would lead to a larger award. On the whole, however, defendant calculated that plaintiff would receive a smaller amount of damages using the resale price measure of damages than plaintiff calculated that it would receive using the market price measure of damages.

The trial court awarded plaintiff damages using the resale price measure of damages as calculated by defendant.³ The trial court reasoned that plaintiff had not calculated damages as ordered by the court. The court stated that “even if Plaintiff [was] correct that Defendant's calculations [were] somehow flawed or incorrect, no alternative calculation ha[d] been offered.” Thus, the trial court concluded that it was “left with no option but to accept Defendant's calculation.”

The trial court also denied plaintiff's request for attorney fees. The court concluded that plaintiff had not adequately alleged its request for attorney fees, and, on the merits, rejected plaintiff's argument that it was entitled to recover attorney fees under a provision of the NORAMSEED Rules, which the parties had incorporated into their contracts. Those rules allowed a seller to recover “charges for collection of payment” if the buyer did not pay in full and immediately when due. Rather than construing the phrase “charges for collection of payment,” however, the trial court stated that the term “fees” in the NORMASEED Rules was ambiguous, and the court purported to construe the term against plaintiff as the drafter of the...