Royster-Clark, Inc. v. Olsen's Mill, Inc., 2006 WI 46 (Wis. 5/18/2006)

• Decision Date: 18 May 2006
• Docket Number: No. 2003AP1534.,2003AP1534.
• Citation: 2006 WI 46
• Parties: Royster-Clark, Inc., Plaintiff-Appellant, v. Olsen's Mill, Inc., Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

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2006 WI 46

Royster-Clark, Inc., Plaintiff-Appellant, v. Olsen's Mill, Inc., Defendant-Respondent-Petitioner.

No. 2003AP1534.

Supreme Court of Wisconsin.

Opinion Filed: May 18, 2006.

Appeal from the Circuit Court, Waushara County, Lewis Murach, Judge.

REVIEW of a decision of the Court of Appeals. Reversed and cause remanded. Reported at: 285 Wis. 2d 804, 701 N.W.2d 652 (Ct. App. 2005-Unpublished)

For the defendant-respondent-petitioner there were briefs by John B. Selsing, James D. Peebles, and Selsing Law Office, Berlin, and oral argument by James D. Peebles.

For the plaintiff-appellant there was a brief by Brian D. Hamill and Dempsey, Williamson, Young, Kelly & Hertel, LLP, Oshkosh, and oral argument by Brian D. Hamill.

N. PATRICK CROOKS, J.

¶ 1 Petitioner, Olsen's Mill, Inc. (Olsen's Mill), seeks review of an unpublished court of appeals' decision¹ that reversed and remanded the decision of the circuit court in a contract dispute. We address two principal issues on appeal. First, whether the circuit court's finding that there was an oral agreement to modify a contract between Royster-Clark, Inc. (Royster) and Olsen's Mill was clearly erroneous. Second, whether Olsen's Mill owes Royster interest for late payment on a second, oral, contract.

¶ 2 We reverse the decision of the court of appeals. Doing so, we hold that the circuit court's finding of fact regarding the oral modification was not clearly erroneous, as there was sufficient evidence in the record from which the circuit court could reasonably find that a valid oral modification had occurred. Because we determine that the circuit court's finding of an oral modification was not clearly erroneous, and because we determine that the circuit court was legally correct in its conclusion that Olsen's Mill was entitled to a setoff against the money it owed Royster on the second contract, we are satisfied that Royster has no basis for its claim of interest due.

I

¶ 3 In 2001, Royster and Olsen's Mill entered into two contracts with one another. The first was a written contract, dated January 21, 2001, for Olsen's Mill to purchase 2000 tons of 32 percent nitrogen fertilizer from Royster at $192 per ton. This product is principally used to fertilize corn, and is applied at the time of planting. Olsen's Mill had sufficient storage capacity to take the entire product at any time. Under the terms of the contract, Olsen's Mill prepaid Royster for the entire order, which came to $384,000. Payment was made on the nitrogen fertilizer on January 29, 2001. The contract expressly provided that it was subject to the provisions of the Uniform Commercial Code (UCC), and contained language that prohibited oral modification of the contract.² The contract further called for delivery³ by June 30, 2001. Both parties regarded this date as the end of the fertilizer "crop year," as it was unlikely to be used by farmers after that date. The nitrogen contract also reserved the right for Royster to impose a storage fee upon fertilizer that was not removed from Royster's facility by that date.

¶ 4 When the crop year began, the supply of 32 percent nitrogen fertilizer was scarce. Olsen's Mill cooperated with Roger Ralston (Ralston), a Royster sales agent, in his efforts to coordinate distribution of the fertilizer to various buyers so that no buyer would come up short. During this time, Royster provided approximately 700 of the contracted 2000 tons of nitrogen fertilizer to Olsen's Mill. Because of Royster's rationing, Olsen's Mill was forced to purchase an additional 1,000 tons of the same nitrogen fertilizer from a Royster competitor, in order to fulfill its obligations to its own customers.

¶ 5 The second contract between the companies was an oral contract in which Olsen's Mill agreed to purchase from Royster a batch of Super Rainbow, a different type of fertilizer used mainly on potato crops. Although Olsen's Mill did not need a full batch, because this product was mixed in batches, it was not feasible for Royster to mix the additional small quantity Olsen's Mill needed. The agreement, therefore, called for Olsen's Mill to take a full batch, sell what it could in 2001, and store the remainder until it could be sold in 2002. Payment to Royster was to be based upon Olsen's Mill's sales of the product that year, which would be determined at the end of the crop year, when Royster could assess how much Super Rainbow Olsen's Mill sold in 2001.

¶ 6 Beginning April 28, 2001, excessive rain interrupted regular agricultural activity, causing farmers to delay planting corn. As a result, the demand for nitrogen fertilizer dropped precipitously, as did the fertilizer price. Paul Olsen (Olsen), president of Olsen's Mill, contacted Ralston to discuss the situation. Olsen's Mill sought to terminate or buy out its contract with Royster, as did many other Royster customers. Instead of terminating the contract, Royster wanted Olsen's Mill to take all of Royster's remaining nitrogen fertilizer. In return for doing so, concessions on the nitrogen contract were discussed, in the form of either a rebate or a credit for the remaining prepaid 1300 tons based upon the current market price. Following these discussions, Olsen's Mill retracted its buyout request, took all the remaining nitrogen fertilizer, amounting to the remaining 1300 tons on the contract, plus an additional 34.6 extra tons, and sold it at a loss.

¶ 7 Royster demanded full payment for its invoice. Olsen's Mill responded by claiming offsets for the Super Rainbow, as well as a refund on part of its prepayment of the nitrogen contract based upon the oral modification.

¶ 8 Royster then sued Olsen's Mill, seeking to collect the outstanding balance owed on the 34.6 tons of the nitrogen fertilizer, as well as payment for the Super Rainbow fertilizer. Olsen's Mill counterclaimed, alleging an overpayment on the original nitrogen contract.

¶ 9 The issues at trial, after the parties had stipulated to or settled certain issues, were Olsen's Mill's counterclaim alleging the contract for nitrogen fertilizer had been orally modified and Royster's claim for interest owed on the unpaid Super Rainbow contract.

¶ 10 The circuit court, Judge Lewis R. Murach presiding, after hearing testimony from Olsen, Ralston, and a Royster executive, Roger Rainey (Rainey), determined that the nitrogen contract had been orally modified the second week of June 2001 when Olsen agreed to take the balance of Royster's nitrogen fertilizer in return for either an offsetting credit or free future product. Therefore, the circuit court held that Olsen's Mill was entitled to a rebate of $83,000 on the 1300 tons of nitrogen fertilizer.⁴ The circuit court used the $83,000 owed to Olsen's Mill to offset the $54,278.31 Olsen's Mill stipulated it owed Royster on the Super Rainbow contract, awarding Olsen's Mill $28,721.69, and also determined that Royster was not entitled to interest on the Super Rainbow contract.

II

¶ 11 The standard of review we apply to a circuit court's findings of fact is highly deferential. Wisconsin statutes require that a circuit court's "[f]indings of fact shall not be set aside unless clearly erroneous . . . ." Wis. Stat. § 805.17(2)(2003-04)⁵; see also State v. Van Camp, 213 Wis. 2d 131, 140, 569 N.W.2d 577 (1997). In other words, this court defers to the circuit court's findings of fact unless they are unsupported by the record and are, therefore, clearly erroneous. Mentzel v. City of Oshkosh, 146 Wis. 2d 804, 808, 432 N.W.2d 609 (Ct. App. 1988)(citing Wis. Stat. § 805.17(2)).

¶ 12 A circuit court's findings of fact are clearly erroneous when the finding is against the great weight and clear preponderance of the evidence. Wassenaar v. Panos, 111 Wis. 2d 518, 525, 331 N.W.2d 357 (1983). Under the clearly erroneous standard, "even though the evidence would permit a contrary finding, findings of fact will be affirmed on appeal as long as the evidence would permit a reasonable person to make the same finding." Reusch v. Roob, 2000 WI App 76, ¶8, 234 Wis. 2d 270, 610 N.W.2d 168 (citation omitted). Moreover, we search the record not for evidence opposing the circuit court's decision, but for evidence supporting it. See Mentzel, 146 Wis. 2d at 808.

¶ 13 "This court reviews conclusions of law independently and without deference to the decision of the circuit court." Hillegass v. Landwehr, 176 Wis. 2d 76, 79, 499 N.W.2d 652 (1993) (citation omitted). Statutory interpretation is an issue of law which we review independently of lower court decisions. While our review is de novo, this court benefits from the analyses of the circuit court and the court of appeals. State v. Anderson, 2005 WI 54, ¶23, 280 Wis. 2d 104, 695 N.W.2d 731 (citing State v. Waushara County Bd. of Adjustment, 2004 WI 56, ¶14, 271 Wis. 2d 547, 679 N.W.2d 514).

¶ 14 Given the high level of deference we must afford the circuit court's findings of fact, and for the further reasons discussed herein, we determine that its finding that Royster and Olsen's Mill entered into an oral contract in mid-June 2001 to modify their written agreement for the nitrogen fertilizer, was not clearly erroneous.

III

¶ 15 Royster maintains that the UCC governs the contract, and that both the UCC statute of frauds and the contract itself require that modifications must be in writing. The nitrogen contract between Royster and Olsen's Mill expressly provides for such, stating "this contract shall be governed by and interpreted pursuant to the provisions of the Uniform Commercial Code. . . ." The contract additionally provides that "[n]o additional or different terms shall be binding on seller unless specifically accepted by seller in writing." See, e.g., Wis. Stat. § 402.209(2); see also 810 ILCS 5/2-209(2)(2005).

¶ 16 Olsen's Mill acknowledges the applicability of the UCC. However, Olsen's Mill argues that there are recognized exceptions to the statute of frauds requirement that a contract for...