Transammonia Export Corp. v. Conserv, Inc.

• Decision Date: 23 June 1977
• Docket Number: No. 75-3696,75-3696
• Citation: 554 F.2d 719
• Parties: 22 UCC Rep.Serv. 301 TRANSAMMONIA EXPORT CORPORATION, Plaintiff-Appellant Cross Appellee, v. CONSERV, INC., Defendant-Appellee Cross Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 719

554 F.2d 719

22 UCC Rep.Serv. 301

TRANSAMMONIA EXPORT CORPORATION, Plaintiff-Appellant Cross Appellee, v. CONSERV, INC., Defendant-Appellee Cross Appellant.

No. 75-3696.

United States Court of Appeals Fifth Circuit.

June 23, 1977.

Monterey Campbell, Bartow, Fla., for plaintiff-appellant cross appellee.

E. Snow Martin, Michael D. Martin, Lakeland, Fla., for defendant-appellee cross appellant.

Appeals from the United States District Court for the Middle District of Florida.

Before WISDOM and GEE, Circuit Judges and BOOTLE ^*, District Judge.

WISDOM, Circuit Judge:

The issue in this breach of contract action is whether sufficient evidence supports the jury's verdict. In its general verdict the jury necessarily decided that an oral contract for the sale of anhydrous ammonia existed between the parties but that the plaintiff should not receive the full amount of its alleged damages. The defendant-appellee, Conserv, Inc., challenges the imposition of liability for breach of the oral contract; the plaintiff-appellant, Transammonia Export Corp., challenges the amount of damages awarded. We reject both appeals.

I.

Transammonia, an exporter of fertilizer and fertilizer raw materials, began negotiations in the Spring of 1972 with Conserv, a dealer in anhydrous ammonia, for the purchase of ammonia for export. The negotiations for Transammonia were conducted by Ronald Van Kleek, a vice president of the company. Wyllys Taylor, a principal stockholder of Conserv, represented the defendant. According to Stephan Ward, another Transammonia vice president, these negotiations led to an oral agreement for the sale of 60,000 short tons of ammonia. This agreement was reached at a June convention of persons engaged in the fertilizer business. Transammonia agreed to pay $28 a ton for the chemical. It was to be delivered at a rate of 15,000 tons every three months. Because Conserv did not own production facilities, it did not manufacture the ammonia. Instead, it purchased the tonnage from the Mississippi Chemical Corporation. Ward said that Conserv insisted on establishing a final agreement at the convention because Taylor wanted to sell the ammonia before leaving the meeting.

The companies exchanged confirmations of the arrangement after the convention. On June 30, 1972, J. W. Venable, president of Conserv, wrote to Van Kleek This will confirm our agreement to sell you 60,000 short tons of anhydrous ammonia during the period July 1, 1972-June 30, 1973.

The price agreed upon is $28.00/short ton at either one of the loading points, Pascagoula, Mississippi, or Donaldsonville, Louisiana. It is our intent that most of this production will come from the Donaldsonville plant.

It was further agreed that you would arrange to pick up this total tonnage in equal quarterly amounts of 15,000 tons. The payment term would be net 30 days.

Would you please issue us a confirming purchase order or contract for this tonnage.

Because Transammonia did not have a standard form for purchase contracts, it altered a standard sales form to provide Conserv with the requested documentation of the agreement. ¹ Although the form provides blank spaces for its acceptance, Conserv did not execute the acceptance and did not return a copy of the form to Transammonia.

In July Mississippi Chemical developed production problems that prevented Conserv from delivering any ammonia in July, August, or September. The parties discussed this failure, but took no further action to solve it.

In early October, however, Conserv notified Transammonia that Mississippi Chemical would soon resume production. Venable communicated with Ward, who testified that they agreed to sales of 15,000 tons of ammonia every three months at the same price with a total quantity of 45,000 tons. The earlier failures of delivery were excused. Ward sent another standard form purchase contract to confirm the agreement, along with a cover letter that stated:

While the agreement calls for the shipment of 15,000 tons per quarter, it is understood that due to delay in securing the product, we may only be able to lift 10,000 tons during the period 10-15/12-31-72. You may be sure, however, that we will use our best efforts to move the material as scheduled.

I am certainly pleased that we were able to finally put this together and if the contract represents your understanding of our arrangement, kindly sign the original and return for our records.

In October and November Conserv delivered 15,036.43 short tons. It never acknowledged acceptance of the second standard form order.

In late November Mississippi Chemical again experienced production difficulties, the result of a natural gas shortage. Upon receiving notice of the problems, Ward requested a meeting with Venable and Taylor. During the conference, which occurred in early December, the Conserv representatives reportedly warned Transammonia only of the possibility of another cessation of its supply of ammonia.

Transammonia received no additional ammonia from Conserv. Although Conserv said it would continue its attempts to procure the tonnage from Mississippi Chemical, it did not attempt purchases from other producers. On February 8, 1973, Conserv returned the second confirmation purchase order to Transammonia and said that it held out no hope for future deliveries. Although additional deliveries were not due until the end of the first quarter of 1973, Transammonia told Conserv on February 26 that Transammonia would have to protect its interests. According to Ward, it made cover purchases for the 30,000 undelivered tons on February 14, March 2, April 10, and April 17. Because the natural gas shortage had driven up the price of ammonia, Transammonia paid from $40 to $60 a ton in these transactions and therefore claimed cover damages of $632,731.43 plus interest.

Conserv disputes the Transammonia interpretation of several of the transactions between the two companies. Despite the June 30 confirmation letter, Taylor testified that the discussions at the convention were merely negotiations and that the parties never established a binding contract in June. He explained that Conserv would never have agreed to a contract without a contingency clause for relief from liability similar to a clause in the Conserv-Mississippi Chemical contract. Conserv contends that it did not accept the first purchase order to Transammonia because of the absence of this provision.

When the ammonia became available from Mississippi Chemical in October, Conserv says it offered to sell only the 15,000 tons later delivered, not 45,000 tons for delivery over the next nine months. According to Venable, the transaction constituted a one-time spot sale. The defendant therefore did not accept the second purchase order and contends that no contract existed for future sales.

Conserv also disputes the substance of the December meeting. When Mississippi Chemical notified it of renewed production problems, the defendant submits, it told Transammonia not to expect any further deliveries. At the meeting, Conserv concedes, it offered to continue to attempt to procure the chemical. But it insists that it stressed the certainty of the expected interruption of supply.

Based on this evidence, the district court rejected both parties' motions for directed verdicts. It submitted the case to the jury, which returned a general verdict in favor of the plaintiff and set damages at $95,575. After the district court entered judgment on the jury verdict and denied the motions for judgments notwithstanding the verdict, both parties appealed.

II.

To overturn the jury's imposition of liability, Conserv asserts two objections to the conclusion, implicit in the general verdict, that a contract existed between the companies. ²

First, the defendant argues that the district court incorrectly instructed the jury that the plaintiff bore only the burden to prove the existence of an oral contract by a preponderance of the evidence. Conserv cites Sultan v. Jade Winds Construction Co., Fla.App.1973, 277 So.2d 574, for the proposition that Florida requires plaintiffs to prove the existence of oral agreements "by . . . more than a preponderance of the evidence. The evidence should be clear, full, and free from suspicion". Id. at 576.

Although the defendant correctly asserts that Florida law controls issues of burden of proof in diversity cases, ³ the district court did not misconstrue Florida law in this case. In Sultan the oral agreement changed a written employment contract not covered by the Florida Uniform Commercial Code. Despite the changes, the employee asserted that the oral agreement included the termination clause of the earlier written contract. The court held that the employee faced a burden of proving the inclusion by more than a preponderance of the evidence, basing its decision on a case involving an oral real estate lease, also not covered by the UCC, Alexander v. Bess, 1936, 123 Fla. 713, 167 So. 533.

Florida courts have never directly addressed the question of the burden of proof required for the recognition of oral contracts covered by the UCC; Sultan and Alexander do not control the determination of this issue. In adopting the UCC, the Florida legislature apparently intended to adopt a preponderance standard for cases covered by the Code. In section 671.1-201(8) the "burden of establishing" a fact is defined as "the burden of persuading the triers of fact that the existence of the fact is more probable than its non-existence". As Sam G. Harrison, Jr., explains in the Florida Code Comments to section 671.1-201(8), this wording apparently intends to establish "the burden of ultimate persuasion" by a preponderance of the evidence. The sections on oral agreements indicate no intention to deviate from the general standard. Until the Florida courts decide otherwise, then, we will continue to approve jury instructions that do not impose a heavier burden. See I. S. Joseph Co. v....