Tallackson Potato Co., Inc. v. MTK Potato Co.

• Decision Date: 30 April 1979
• Docket Number: No. 9512,9512
• Parties: 26 UCC Rep.Serv. 929 TALLACKSON POTATO COMPANY, INC., Plaintiff and Appellee, v. MTK POTATO COMPANY and Allan C. Thompson, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 417

278 N.W.2d 417

26 UCC Rep.Serv. 929

TALLACKSON POTATO COMPANY, INC., Plaintiff and Appellee, v. MTK POTATO COMPANY and Allan C. Thompson, Defendants and Appellants.

Civ. No. 9512.

Supreme Court of North Dakota.

April 30, 1979.

F. W. Greenagel, of Dahl & Greenagel, Grafton, for plaintiff and appellee.

John H. Moosbrugger, of Mack, Moosbrugger, Ohlsen & Dvorak, Grand Forks, for defendants and appellants.

VANDE WALLE, Justice.

Tallackson Potato Company, Inc. ("Tallackson"), brought an action for breach of contract against MTK Potato Company and Allan C. Thompson (both referred to as "MTK"). MTK appeals from the district court's judgment, rendered after a trial to the court, against it and in favor of Tallackson. We affirm.

MTK, a partnership with three members (one of whom was Allan C. Thompson), and Tallackson, a corporation, were members of the International Co-op ("Co-op"), a cooperative association formed to buy and process the potatoes of member growers. By individual contract, each member of the Co-op, including the parties to this appeal, agreed to deliver a certain amount of potatoes to the Co-op over a specified period of months.

In November, 1976, Thomas Tallackson, a stockholder of Tallackson Potato Company, Inc., contacted an official of the Co-op and told him that if any Co-op member lacked sufficient potatoes with which to satisfy the amount due from it under the Co-op agreement, that member could purchase potatoes from Tallackson. Shortly thereafter, MTK (through Allan C. Thompson), which was in need of potatoes to fulfill its contractual requirement with the Co-op, and Tallackson discussed by telephone the possibility of a sale of potatoes by Tallackson to MTK. In the course of the conversation, the parties agreed that Tallackson would sell to MTK 6,000 hundredweight of Kennebec potatoes for $2.60 per hundredweight. Tallackson also agreed to deliver the potatoes to the Co-op for 30 cents per hundredweight as transportation and handling costs. To confirm the agreement for the purchase of the potatoes, MTK, through Allan Thompson, sent Tallackson a mailgram that stated:

"MTK POTATO CO OF WALHALLA ND AGREES TO BUY FROM TOM TALLACKSON OF GRAFTON ND APPROXIMATELY 6000 HUNDRED WEIGHT OF KENNEBEC POTATOES TO B(E) DELIVERED TO THE INTERNATIONAL CO-OP IN GRAND FORKS ND STARTING APPROXIMATELY DECEMBER 1. PURCHASE PRICE OF SAID POTATOES IS TO BE $2.60 PER HUNDRED WEIGHT PLUS FREIGHT ALLOWANCE BY INTERNATIONAL CO-OP FROM WALHALLA TO GRAND FORK (Sic ) MTK IS TO PAY TALLACKSON AS THEY RECEIVE THEIR MONIES FROM THE INTERNATIONAL CO-OP." ¹

Tallackson received the mailgram and did not object to any of its provisions.

Tallackson delivered the specified amount of potatoes to the Co-op in accordance with the contract between it and MTK. MTK, in turn, made payments for the potatoes totaling $8,532.15 by endorsing to Tallackson checks issued to it by the Co-op pursuant to the agreement between the Co-op and MTK. ²

Early in 1977, the Co-op informed its members that it no longer would make payments according to the payment schedule contained in the agreements between it and the member growers, and, instead, would defer these payments until a later unspecified time. At that point, MTK refrained from making further payments to Tallackson for the potatoes that it purchased from Tallackson.

It is clear that Tallackson and MTK agreed that MTK would buy, and Tallackson would sell, a specified amount of potatoes. It is also clear that the parties discussed during their contractual negotiations the manner in which MTK would pay Tallackson for the potatoes that it purchased. It is not so clear, however and this issue is the crux of this appeal what the parties agreed to about the manner of payment for the potatoes. Tallackson argues that the parties agreed that MTK was to pay for the potatoes in accordance with the payment schedule set forth in the agreements between the Co-op and its member growers. ³ Hence, Tallackson argues, the Co-op's failure to make payments to MTK in no way relieved MTK of its obligation to pay Tallackson for the potatoes that it purchased from Tallackson. Contrary to this, MTK argues that the agreement between it and Tallackson obligated it to pay for the potatoes only when it received payment for them from the Co-op. It contends that because it has not received payment from the Co-op it is not yet obligated to pay the balance of the contract price to Tallackson.

After unsuccessfully demanding that MTK make final payment, Tallackson sued MTK for breach of contract in the district court. The case was tried to the court on the merits, and judgment was rendered in favor of Tallackson and against MTK in an amount equal to the sum unpaid by MTK under the sale agreement between itself and Tallackson. The court concluded that the sale agreement between the two parties required that MTK pay Tallackson in accordance with the Co-op payment schedule, and did not authorize MTK to refrain from making payment until it actually received monies owed it by the Co-op. ⁴

MTK appeals from the district court's judgment to this court and raises three issues:

"I. Was MTK's purchase of potatoes from Tallackson conditional on the allowance of MTK to pay for said potatoes as they received their money from International Coop on their own Contract?

"II. Did the trial judge incorrectly admit into evidence testimony regarding the price paid for the potatoes by Tallackson to a third party?

"III. Should the contract between Tallackson and MTK be reformed in light of the challenged circumstances regarding the payment schedule of the International Coop?"

I

First, MTK argues that its agreement with Tallackson conditioned its obligation to pay Tallackson on receipt of the money owed it by the Co-op. Thus, according to MTK, the district court erred in its interpretation of the agreement.

Because this case was tried in the district court without a jury, Rule 52(a), North Dakota Rules of Civil Procedure, determines the scope of our review of the district court's interpretation. In Metcalf v. Security International Ins. Co., 261 N.W.2d 795 (N.D.1978), this court discussed the application of Rule 52(a), N.D.R.Civ.P., in cases involving an interpretation of a written contract:

"Security asserts that the trial court's interpretation of the written contracts involved findings of fact which cannot be set aside by this court on appeal unless they are clearly erroneous pursuant to Rule 52(a) of the North Dakota Rules of Civil Procedure. Judith asserts, on the other hand, that the district court's interpretation of the written contracts was based solely on documentary evidence and therefore this court's review is not limited by Rule 52(a), N.D.R.Civ.P. Judith contends that this court should independently examine and construe the written contracts.

"The object of interpreting and construing a contract is to ascertain and give effect to the intention of the parties. Delzer Construction Co. v. New Marian Homes Corp., 117 N.W.2d 851 (N.D.1962). The construction of a written contract to determine its legal effect is always a question of law for the court to decide. Floyd v. Ring Const. Corporation, 165 F.2d 125 (8th Cir. 1948); Connie's Const. v. Fireman's Fund Ins., 227 N.W.2d 207 (Iowa 1975). However, the interpretation of the parties' intentions as to the meaning of certain words or phrases in a written contract may involve either a question of law or a question of fact depending on whether or not the interpretation requires the use of extrinsic evidence. If the parties' intentions in a written contract can be ascertained from the writing alone, then the interpretation of the contract is a question of law for the court to decide. See Grove v. Charbonneau Buick-Pontiac, Inc., 240 N.W.2d 853 (N.D.1976); Stuart v. Secrest, 170 N.W.2d 878 (N.D.1969); Anderson v. First Nat. Bank of Grand Forks, 6 N.D. 497, 72 N.W. 916 (1897), aff'd 172 U.S. 573, 19 S.Ct. 284, 43 L.Ed. 558 (1899); Otten v. Stonewall Insurance Company, 511 F.2d 143 (8th Cir. 1975); See, also Annot. 65 A.L.R. 648 (1930). If, however, the parties' intentions cannot be determined from the writing alone and reference must be made to extrinsic evidence, then those questions in regard to which extrinsic evidence is adduced are questions of fact to be determined by the trier-of-fact. See Farmers Elevator Company v. David, 234 N.W.2d 26 (N.D.1975); Otten v. Stonewall Insurance Company, supra; Pleasure Time, Inc. v. Kuss, 78 Wis.2d 373, 254 N.W.2d 463 (1977); RTE Corporation v. Maryland Cas. Co., 74 Wis.2d 614, 247 N.W.2d 171 (1976); Blocher v. Mayer Bros. C., 127 Minn. 241, 149 N.W. 285 (1914); Rosenthal v. Ogden, 50 Neb. 218, 69 N.W. 779 (1897); See, also, Annot. 65 A.L.R. 648 (1930)." 261 N.W.2d at 799-800.

We hold that the same general principles apply to a court's interpretation of an oral contract. See, e. g., Curran v. Hastreiter, 579 P.2d 524 (Alaska 1978); Jackson v. White, 556 P.2d 530 (Alaska 1976); B. B. & S. Construction Co., Inc. v. Stone, 535 P.2d 271 (Alaska 1975); Nordin v. Zimmer, 373 P.2d 738 (Alaska 1962); Van Ruiten v. Van Ruiten, 268 Cal.App.2d 619, 74 Cal.Rptr. 186 (1969); 17A C.J.S. Contracts § 618, pp. 1256-1258. Obviously, however, the terms of an oral contract can be established only through extrinsic evidence. A determination of these terms, if they are disputed, must therefore be made by the trier of fact, and will be reversed by this court on appeal only if "clearly erroneous." After the terms of the oral contract have been determined, the issue of the parties' intentions, if ascertainable from those terms, involves a question of law for the court to decide, and will be reversed by this court on appeal if erroneous. Yet, if the parties' intentions are not ascertainable from the terms of the oral contract and must therefore be established by extrinsic evidence, the question once again becomes one for the trier of fact and this court will...