Traylor v. Gray

• Decision Date: 06 January 1977
• Docket Number: No. 1076,1076
• Citation: 547 S.W.2d 644
• Parties: Idris TRAYLOR, Individually and d/b/a Idris Traylor Cotton Company, Appellant, v. Oscar B. GRAY et al., Appellees.
• Court: Texas Court of Appeals

Page 644

547 S.W.2d 644

Idris TRAYLOR, Individually and d/b/a Idris Traylor Cotton Company, Appellant, v. Oscar B. GRAY et al., Appellees.

No. 1076.

Court of Civil Appeals of Texas, Corpus Christi.

Jan. 6, 1977.

Rehearing Denied Feb. 17, 1977.

Jack Skaggs, Stiernberg, Skaggs & Koppel, Harlingen, for appellant.

Gordon L. Briscoe, McCullough, Murray & McCullough, Bonner & Bonner, Merrill W. Russell, Greenwood & Russell, Harlingen, for appellees.

OPINION

YOUNG, Justice.

The Grays, a farming partnership, sued defendants Traylor and Palmetal for losses sustained upon their discovery that an advance contract to sell their 1974 cotton crop had not been accepted by the purchaser (Traylor) as represented to them by Dan Davis, manager of Palmetal Gin Company. Plaintiffs-appellees (Grays) consist of Oscar B. (Buster) Gray, Sterling S. Gray, and Jimmy A. Gray, individually and d/b/a Oscar B. Gray & Sons. Defendant-appellant Traylor is Idris Traylor, individually and d/b/a Idris Traylor Cotton Company. Defendant-appellee Palmetal includes Major Davis, Dan A. Davis, G. Wayne Davis, and Jean E. Kirkland, Jr., individually and d/b/a Palmetal Gin Company. From a jury verdict for the Grays, Traylor has appealed. Palmetal has not appealed.

The factual setting of this case requires an understanding of the cotton marketing customs in the Rio Grande Valley, and of the long-term relationship between the Grays and Dan Davis, and also between Davis and Traylor. For example, for many years a cotton farmer in the Rio Grande Valley marketed his cotton by delivering the harvested crops to a gin for processing and then selling to buyers after exhibiting samples from the ginned bales. As one of several services to customers, ginners often displayed the processed samples for the farmers and dealt directly with the buyer or broker in effecting the sale. The buyer paid the ginner, who deducted the cost of ginning and any other costs, such as seed or fertilizer previously advanced by the ginner to the farmer, and paid the remaining proceeds to the farmer. Ginners performed these various services for farmers in order to retain the farmers as gin customers.

For 10 to 12 years the Grays ginned their cotton at Palmetal Gin. Dan Davis offered the processed cotton samples to buyers, made the sales to Traylor (the only buyer with whom he dealt), received the purchase price from Traylor, and disbursed the net proceeds to the Grays.

In 1972, a system of advance contracting was begun in which the future crop was purchased in the fall or early winter before it was planted. At harvest time the farmer received his advance contract price for the cotton regardless of the harvest time market price. Ginners performed similar services for farmers under the new system. Instead of effecting a sale by displaying samples of processed cotton, however, the ginners negotiated an offering price from the farmer and purchase price from the buyer.

The price quoted by the buyer was considered firm for only the day on which the agreement was made. This was due to the daily fluctuation in cotton futures and the practice of buyers reselling their contract rights to mills or other ultimate users on the same day the deal with the farmers was made. All these negotiations were often conducted by telephone. The ginner would then secure a form contract from the buyer (or use a form already in his possession), present it to the farmer for signature, and send it to the buyer for signature.

In 1972 and 1973, Dan Davis of Palmetal Gin Company completed the negotiations with Traylor, used a Traylor "Confirmation of Purchase" form from a supply kept at the Palmetal office, and took the form to the Grays for signature. After he and a member of the Gray partnership signed the form, Davis detached one of the carbon copies and left it with the Grays. By contrast other ginners would send all copies to the buyers and wait until a fully signed copy was returned by the buyer before giving a copy to the farmer.

Without questioning the whereabouts of the missing copy, Traylor duplicated an additional copy to replace the missing one, signed two copies to be returned to Palmetal for the gin and the farmer, and kept the third completed copy for his own file. Instead of giving the Grays their fully signed copy, Davis kept both the gin's copy and the Grays' copy in the gin safe. The Grays never saw a confirmation form with Traylor's signature, although Davis told them he kept the signed copy at the gin.

As it appeared to the Grays, therefore, the sale was complete upon oral agreement between Davis and Traylor, and the contract formalities to reflect this oral agreement were completed when the confirmation form was signed by themselves and Davis. In fact, the contract was complete when the oral agreement was made, but without a subsequent writing, the statute of frauds would prevent its enforcement. Tex.Bus.Com.Code 2.201. However, Traylor's practice of reselling its contract rights to mills immediately after the oral agreement and before the writing was signed shows the reasonableness of the Grays' belief that a firm commitment had been made orally.

Idris Traylor or Buster Atkins, a member of the Traylor firm, actually agreed to the purchase price for the 1972 and 1973 crops, signed the confirmation forms, and sent the signed forms to Davis. In 1974, however, Traylor never agreed to the price shown on the confirmation form, nor did it sign or even receive the confirmation form signed by the Grays and Davis. It is the 1974 advance contract which gave rise to this lawsuit.

In early January of 1974, the price of cotton had been rising and had reached 75cents per pound. Eva Gray, wife of Oscar B. Gray, testified she received a purchase offer of 76cents per pound from Ross Bigham of the Elrod Gin with whom the Grays had ginned prior to their use of Palmetal Gin. Mrs. Gray called Davis to see if he could meet that price. Davis testified that the request was for 75cents rather than 76cents, that he received a firm acceptance from Traylor for 75cents, and that he prepared a confirmation form accordingly. In the meantime, Bigham suggested the Grays should offer their cotton for 78cents per pound. Upon learning the Grays now sought 78cents, Davis disposed of the 75cents confirmation form, told the Grays he would call Lubbock, and then called the Traylor home office in Lubbock to inquire about a 78cents deal. Traylor agreed to work on it, but indicated there was little or no hope the higher price would be accepted. Davis said he was told the 75cents price was probably still good, but no commitment was made by Traylor.

In danger of losing the Grays' ginning business which comprised a substantial proportion of Palmetal's business, Davis devised a plan to retain their business by absorbing some of the price himself. He and his partner Jean Kirkland agreed to absorb up to 3cents per pound if necessary. Davis called Mrs. Gray and told her "We are going to take the cotton." He also informed Mrs. Gray that 3cents of the 78cents price might have to be absorbed by Palmetal if cotton was bringing less than 78cents at harvest time. Following this conversation, Mrs. Gray called Bigham at Elrod Gin to break off their negotiations, reporting to him that their cotton had been sold.

The testimony is disputed as to the time when various information was transmitted by telephone between Davis and Traylor's office in Lubbock. Although disputed by Davis, there was testimony that Davis asked if he could use a Traylor form or use the Traylor name, to which Atkins replied emphatically that the Traylor form could not be used unless a price commitment had been made by Traylor. In a subsequent call to Kirkland, Fred Traylor restated the instruction not to use the form without Traylor's authorization. Nevertheless, Davis prepared a Traylor confirmation of purchase form listing the contract price as 78cents per pound. Davis took the form to the Grays' home, and again led the Grays to believe their cotton was sold. Mr. Gray signed the form, Davis signed for Palmetal, tore off one carbon copy which he left with the Grays exactly as was done in prior years, and said he would keep a copy signed by Traylor at the gin.

At that point, the Grays had completed all steps in advance contracting their 1974 cotton crop just as in 1972 and 1973. Unknown to them, neither Traylor nor anyone else had agreed to purchase their 1974 crop at 78cents per pound or any other price. Davis knew that Traylor, the only buyer with whom he negotiated, had not agreed to purchase the Grays' cotton. He knew it was fruitless to mail the 78cents confirmation form to Traylor since no agreement had been reached with Traylor. He merely kept it at the gin. Davis also knew that Traylor would not sign a 78cents form even if Traylor were willing to pay 75cents and Palmetal supply the additional 3cents per pound. Davis was aware that Traylor sold the contract forms as commercial paper and could not sell a contract that did not reflect the true obligations of the parties.

Although the information transmitted by Davis was disputed, the jury found in special issue 7 that Buster Atkins of the Traylor firm learned in a telephone conversation with Davis on the day it was signed that a 78cents confirmation form had been signed. Not until harvest time in July of 1974, did the Grays learn that Traylor had not purchased their cotton. In the meantime, the market price of cotton had dropped dramatically, and in fact had reached and passed its peak at the time Davis was requesting a price commitment from Traylor.

The Grays instituted this suit alleging breach of oral contract and fraud by Traylor and Palmetal. Damages were sought against Palmetal for 3cents per pound on a production of 321,792 pounds of cotton, and against Traylor and Palmetal jointly and severally for the difference in the harvest time market price and 75cents per pound. The jury's answers to special...