Webb v. Dessert Seed Co., Inc.

• Decision Date: 05 May 1986
• Docket Number: 83SC455,Nos. 83SC428,s. 83SC428
• Parties: 1 UCC Rep.Serv.2d 738 Eula Mae WEBB, Independent Executrix of the Estate of George H. Webb, deceased, Petitioner, v. DESSERT SEED COMPANY, INC., Respondent, and Kenneth Fagerberg; David J. Fagerberg, Jr.; Richard C. Fagerberg; Lynn Fagerberg; Rhinie Brunner; Brancucci Produce Company, Inc., a Colorado Funding Company, d/b/a Brancucci Produce Company, Respondents. Kenneth FAGERBERG; David J. Fagerberg, Jr.; Richard C. Fagerberg; Lynn Fagerberg; Rhinie Brunner; Brancucci Produce Company, Inc., a Colorado Funding Company, d/b/a Brancucci Produce Company, Petitioners, v. Eula Mae WEBB, Independent Executrix of the Estate of George H. Webb, deceased, Respondent, and Dessert Seed Company, Inc., Respondent.
• Court: Colorado Supreme Court

Page 1057

718 P.2d 1057

1 UCC Rep.Serv.2d 738

Eula Mae WEBB, Independent Executrix of the Estate of George

H. Webb, deceased, Petitioner, v. DESSERT SEED COMPANY, INC., Respondent, and Kenneth Fagerberg; David J. Fagerberg, Jr.; Richard C.

Fagerberg; Lynn Fagerberg; Rhinie Brunner; Brancucci

Produce Company, Inc., a Colorado Funding Company, d/b/a

Brancucci Produce Company, Respondents.

Kenneth FAGERBERG; David J. Fagerberg, Jr.; Richard C.

Fagerberg; Lynn Fagerberg; Rhinie Brunner; Brancucci

Produce Company, Inc., a Colorado Funding Company, d/b/a

Brancucci Produce Company, Petitioners, v. Eula Mae WEBB, Independent Executrix of the Estate of George

H. Webb, deceased, Respondent,

and

Dessert Seed Company, Inc., Respondent.

Nos. 83SC428, 83SC455.

Supreme Court of Colorado En Banc.

May 5, 1986.

Rehearing Denied June 9, 1986.

West & Winters, William L. West, Denver, for Webb.

Sutherland & Gerber, Lowell F. Sutherland, El Centro, Cal.; Renner & Rodman, John R. Rodman, Denver, Colo., for Dessert Seed Co., Inc.

Sherman & Howard, Michael A. Williams, Kenneth B. Siegel, Denver, for Fagerbergs, Brunner, and Brancucci.

ROVIRA, Justice.

We granted two petitions for certiorari to review the opinion of the Colorado Court of Appeals in Fagerberg v. Webb, 678 P.2d 544 (Colo.App.1983), an appeal from the Weld County District Court. We now reverse the judgment of the court of appeals in Case No. 83SC455 and reverse in part, affirm in part, and remand for further proceedings in Case No. 83SC428.

I.

In April of 1974, Dessert Seed Company, Inc. (Dessert Seed), an importer of onion seeds which sells between one-third and one-half of all the onion seeds sold in the United States, entered into a contract to sell 1,200 pounds of Yellow Spanish Utah onion seeds to George Webb. Webb owns a farm which grows seeds into small plants that are sold to other farmers who transplant them and grow them into mature plants. Due to a crop failure, and resulting nationwide shortage of all types of Yellow Spanish onions, Dessert Seed could not fulfill its contract with Webb. The contract was modified during a late fall 1974 telephone conversation between Joe Ahern, a Dessert Seed vice president, and both George Webb and his son, John, who manages Webb's farm. The Webbs called Ahern in California from their farm in Texas. Ahern testified that he told the Webbs that Dessert Seed could sell them a different kind of onion seed, Giant Yellow Zittau, which could only be used in the garden trade in the Northeast and Upper Midwest. ¹ According to the Webbs, however, Ahern told them that Zittau seeds were Spanish-type seeds, grew like Yellow Spanish Utah seeds, and could take the place of Yellow Spanish Utah seeds.

George Webb offered to buy 800 pounds of the Zittau seeds, and Ahern assented. The prior written contract which was modified by this conversation stated that delivery would be "f.o.b. Growing Stations." According to the agreement, Dessert Seed assumed all responsibility for delivery of the Zittau seeds to Webb's farm in Texas. Dessert Seed does not dispute this aspect of the agreement. When the seeds arrived in Texas, they were labeled as Giant Yellow Zittaus.

The Webbs grew the seeds into small plants. Representing the plants as "Yellow Spanish," the Webbs sold the plants through a produce broker, C.H. Robinson Company, to Brancucci Produce Company (Brancucci), which, in April 1975, sold them to the Fagerbergs, who were northern Colorado farmers. ² The Fagerbergs planted the Zittau transplants shortly thereafter. The plants failed to bulb properly, and therefore did not produce commercially salable onions. Expert testimony established that the plants failed to bulb properly primarily because Northern European onions such as the Zittau need longer periods of sunlight than that available in northern Colorado. Plaintiffs' expert, Dr. Richard Foskett, testified that he would not expect Zittaus to produce mature bulbs within the continental United States. A text on onions written by Dr. Henry Jones, a Dessert Seed employee and a widely acknowledged expert in the field of onion breeding, clearly warned that such seeds might not produce onion bulbs even in the most northern parts of the United States, where summer days are longest. Despite this knowledge, Dessert Seed failed to follow its normal practice of testing all new varieties of seeds under likely growing conditions prior to placing them in the market. Moreover, Dessert Seed had no previous experience raising Zittau onions and knew of no case in which Zittau seeds had been successfully raised on a commercial basis anywhere in the United States.

The Fagerbergs sued Brancucci for breach of implied warranties of merchantability and fitness for a particular purpose, negligence, and breach of contract. Brancucci in turn filed a third party complaint against Webb on the same grounds. Webb in turn sued Dessert Seed for negligence and breach of implied warranty of merchantability. Brancucci then filed a third party complaint against Dessert Seed alleging breach of both implied warranties and negligence. The Fagerbergs amended their complaint, adding claims against Dessert Seed on the same grounds asserted by Brancucci. Dessert Seed responded by cross claiming against Webb for indemnification. Several of the parties also filed various claims against Robinson, the produce broker, but all claims by and against Robinson were dismissed by the trial court. The court also dismissed claims for exemplary damages filed by several of the parties. Finally, the Fagerbergs filed a claim against Webb for breach of implied warranties of merchantability and fitness. However, they did not charge Webb with negligence.

Prior to the time they filed their warranty complaint against Webb, the Fagerbergs entered into an undated agreement with Brancucci, which provided that Brancucci would pay $200,000 and advance all costs of the litigation against Webb and Dessert Seed to the Fagerbergs. In consideration for these payments, the Fagerbergs agreed that Brancucci would first be entitled to recover the litigation costs and then the first $225,000 collected from Webb or Dessert Seed by way of judgment or settlement. The next $25,000 was earmarked for the Fagerbergs, with any remaining amount to be divided equally between the Fagerbergs and Brancucci. The agreement's "Recitals" stated that the Fagerbergs agreed to these terms because, inter alia, they needed funds to operate their farms and to pursue their claims against Dessert Seed. Once it received notice of the agreement, the trial court realigned Brancucci as a plaintiff.

After a three-week trial, the Fagerberg claims against Webb for breach of warranty and against Dessert Seed for negligence were presented to the jury in the form of special verdicts. ³ The jury found that Dessert Seed had acted negligently towards plaintiffs (defined in Jury Instruction No. 1 as both the Fagerbergs and Brancucci) and that Webb had breached its express and implied warranties to plaintiffs. Over Brancucci's objection, the court included a jury instruction and special verdict form that called for an assessment of each party's relative degree of negligence. Although Brancucci contended that consideration of comparative negligence was inappropriate in light of the fact that the Fagerbergs had not asserted a negligence claim against Webb, the court held that comparative negligence provided a proper method for assessing damages. ⁴ The jury assessed the parties' negligence as follows: Dessert Seed 40%, Webb 40%, Brancucci 13%, and Fagerbergs 7%. The jury determined that plaintiffs' total damages amounted to $521,182. The court denied Webb's and Dessert Seed's claims against each other for indemnity (pursuant to an agreement between Webb and Dessert Seed that their indemnity claims would be determined by the trial judge) and reduced the jury awards by the $200,000 that Brancucci paid the Fagerbergs. ⁵ The court of appeals reversed the jury's determination and held that the trial court should have granted Dessert Seed's motion for a directed verdict on the issue of its negligence. Fagerberg v. Webb, 678 P.2d 544, 547 (Colo.App.1983). The court of appeals also held that the judgments should not have been reduced by the amount of the settlement payment, id. at 548-49, and affirmed the denial of Webb's indemnity claim against Dessert Seed. ⁶

Webb petitioned this court for certiorari, as did the Fagerbergs and Brancucci. In No. 83SC455, we granted the Fagerberg and Brancucci petition to review whether the court of appeals erred in reversing the jury's determination and holding that, as a matter of law, Dessert Seed was not negligent. We also granted certiorari on two issues raised by Webb in No. 83SC428: First, whether the trial court erred in rejecting Webb's claim for indemnification from Dessert Seed; and, second, whether the court of appeals erred by holding that the trial court's deduction of $200,000 from the jury's award was incorrect. We now reverse the judgment of the court of appeals in No. 83SC455, and reinstate the jury verdict finding that Dessert Seed was negligent. In 83SC428, we affirm the court of appeals holding that the $200,000 should not have been deducted from the jury awards, and remand for further proceedings on Webb's indemnification claim.

II.

The Fagerbergs and Brancucci argue that the court of appeals erred in dismissing their negligence claims on the ground that Dessert Seed owed no duty to the Fagerbergs or Brancucci other than to label the seeds properly. No one disputes that Dessert Seed fulfilled this duty. However, in determining that Dessert Seed violated no duty of care owed to another party, the court of appeals stated, "It was not disputed that Dessert Seed did all that was required of it by statutes and the customs existing within the industry. All of the parties agreed that the basic and primary duty of a seed distributor is to properly label...