Wolpert v. Foster

• Citation: 312 Minn. 526,254 N.W.2d 348
• Decision Date: 15 April 1977
• Docket Number: No. 46556,46556
• Parties: , 90 A.L.R.3d 1132, 21 UCC Rep.Serv. 516 Herschel WOLPERT, Individually and d.b.a. Sales Enterprises, Respondent, v. Charles R. FOSTER, et al., Appellants.
• Court: Supreme Court of Minnesota (US)

Page 348

254 N.W.2d 348

312 Minn. 526, 90 A.L.R.3d 1132, 21 UCC Rep.Serv. 516

Herschel WOLPERT, Individually and d.b.a. Sales Enterprises, Respondent, v. Charles R. FOSTER, et al., Appellants.

No. 46556.

Supreme Court of Minnesota.

April 15, 1977.

Syllabus by the Court

1. A seller may maintain an action for the price of goods held for the buyer under Minn.St. 336.2-709, even though he has resold some of the contract goods in a manner not in conformity with all the requirements of a commercially reasonable resale under Minn.St. 336.2-706, where the seller's net proceeds from the resale are less than the contract price of the resold goods. Since plaintiff in the instant case was unable after reasonable efforts to resell the remaining goods at a reasonable price, he was entitled to recover the contract price for these goods.

2. The trial court's finding that an implied agreement to pay interest arose from defendant's conduct is not clearly erroneous.

3. The requirement that an interest rate different than 6 percent be contracted for in writing, Minn.St. 334.01, subd. 1, is not a "defense of usury" that a corporation is prevented from interposing under Minn.St. 334.021. Thus, the implied contract in this case to pay interest at a 12-percent rate is valid only to 6 percent.

Nielsen, Blackburn & Merritt and Steven J. Tierney, Minneapolis, for appellants.

Maslon Kaplan Edelman Borman Brand & McNulty and Charles W. Quaintance, Jr., Minneapolis, for respondent.

Heard before ROGOSHESKE, KELLY and TODD, JJ., and considered and decided by the court en banc.

KELLY, Justice.

Defendants appeal from a judgment of the Hennepin County District Court entitling plaintiff to recover damages arising from a contractual relationship with defendants. We affirm in part and reverse in part.

Plaintiff, Herschel Wolpert, was the sole proprietor of Sales Enterprises for the years in question, 1967 to 1970. The principal business of Sales Enterprises was the sale of fishing equipment to distributors and retail outlets. Defendant Charles R. Foster was the owner of defendant Strike Master, Inc., a concern whose principal business was the manufacture and sale of terminal fishing tackle and ice fishing equipment to wholesalers and major chain stores. Defendant ¹ in 1967 was having financial difficulties and the parties worked out a two-part arrangement to aid him. The arrangement was intended to be temporary only, but no suitable permanent financing was discovered. The first part was a lending agreement, wherein defendant would assign his accounts receivable to plaintiff in exchange for a cash loan equalling an agreed percentage of the amount of the invoice. The second method of providing financial assistance is the focus of this appeal.

Defendant was having difficulty obtaining credit from suppliers. Plaintiff offered to use his cash or credit to purchase merchandise defendant desired; defendant, in turn, agreed to purchase those goods from plaintiff. The contract price was to be plaintiff's cost, plus a markup of 10 percent for domestic and 20 percent for foreign merchandise, unless otherwise agreed. Payment originally was intended to be in cash or merchandise, but plaintiff gradually permitted defendant to make an increasing number of purchases from him on unsecured credit, on a so-called "open account." Plaintiff charged no interest on this account, because the markup charged defendant for the merchandise was in part to cover the cost of money and because the parties did not anticipate that large amounts of credit would be involved.

In 1969, however, the amount of credit extended to defendant on the open account had grown to $55,000. Plaintiff was also concerned because he discovered defendant had diverted some $32,000 in receipts from him in connection with the first part of the arrangement. Thus, in the fall of 1969, plaintiff advised defendant that if the parties were to continue to do business, plaintiff would charge defendant interest at the rate of 1 percent per month on the unpaid open account balance, commencing in January 1970. No agreement was reached, but defendant continued to deal with plaintiff through July 1970, when defendant arranged alternative financing.

On July 24, 1970, defendant terminated the arrangement. Plaintiff held inventory he had purchased for defendant at a cost of $19,055.08. He offered to sell it en masse to defendant at cost plus markup, but refused to permit defendant to purchase only the most desirable items. When the parties could not agree as to disposition of the inventory, plaintiff undertook to minimize his damages by selling or using it. Some of the inventory plaintiff used as components for his own products; some of it he sold in the regular course of his business or at cost or on a distress sale basis. The inventory consisted of thousands of items, disposed of in a multitude of transactions. By the time of trial he had reduced the inventory to items that he could not dispose of and that had a cost to him of $4,703.43, and had a contract price to defendant of $5,515.56. As of July 31, 1970, the open account had a principal balance of $21,817.50. By the time of trial, surplus monies received from the assigned account receivables reduced the balance to $12,886.59.

Plaintiff commenced the instant action in May 1971 to recover the principal and interest on the open account and the contract price for the remaining inventory. Sitting without a jury, the trial court found in plaintiff's favor. Defendant appeals from the judgment and challenges the award of interest and of the contract price for the remaining goods.

1. Plaintiff brought this action for the price of the remaining inventory under Minn.St. 336.2-709. That section provides in part:

"(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price

"(b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.

"(2) Where the seller sues for the price be must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold."

Plaintiff holds the remaining goods for delivery to defendant upon payment of the contract price. Defendant concedes the goods have been identified to the contract and does not challenge the reasonableness of plaintiff's efforts to resell the remaining inventory. Instead, defendant contends that plaintiff has failed to adequately credit under § 336.2 709(2) the part of the inventory that plaintiff was able to resell, because those resales did not comport with Minn.St. 336.2 706. ² It should be noted that plaintiff is not seeking damages with respect to that part of the inventory which has been resold. The trial court found that plaintiff "neither made nor lost any substantial amount of money" on the resales. Our perception of the evidence similarly reveals that the net proceeds from the resales were less than the contract price for those goods.

We find that § 336.2 709 does not incorporate the resale requirements of § 336.2 706. The Uniform Commercial Code makes it clear that a seller's remedies are cumulative. U.C.C. Comment 1, 21A M.S.A., § 336.2 703. A resale of goods conforming to the requirements of § 336.2 706 entitles a seller to damages measured by the resale price. Minn.St. 336.2 706(1). A resale failing to conform to these requirements may relegate the seller to measurement of his damages based on the market price at the time and place of tender. U.C.C. Comment 2, 21A M.S.A., § 336.2 706; Minn.St. 336.2 708(1); Miller v. Belk, 23 N.C.App. 1, 207 S.E.2d 792 (1974). An action for the price arises in this situation only when reasonable resale efforts do not dispose of the goods. ³ It is a remedy distinct from an action for damages under § 336.2 706 or § 336.2 708, and thus we would hesitate to incorporate the requirements of § 336.2 706 with respect to the goods that have been sold as a prerequisite for maintaining an action under § 336.2 709 for the price of the remaining goods. Minn.St. 336.2 709 confirms our conclusion. It mandates crediting resale proceeds only of goods still held for the buyer at the time of suit and not of goods amenable to sale by reasonable efforts and for which no action for the price would lie. Minn.St. 336.2 709(2): " * * * The net proceeds of any such resale * * * ". (Italics supplied.) Because the trial court found that plaintiff handled the resold goods in a commercially reasonable manner and because plaintiff's net proceeds from the resale were less than the contract price for the items, no factor appears in the instant case to alter our conclusion. ⁴

In sum, plaintiff resold some of the goods identified to the contract but decided not to seek damages with respect to those goods. Instead, he sought to recover the contract price for the goods he could not resell. He has satisfied the requirements of § 336.2 709 and is entitled to the contract price, even though he failed to comply with the requirements § 336.2 706 imposes on an action to recover damages measured by the resale price. Thus, the trial court's judgment in this respect is affirmed, and defendant is entitled to the goods in plaintiff's possession upon payment of the contract price. ⁵

2. Defendant also challenges the amount of interest awarded by the trial court on the open account. It is well settled that an agreement to modify a written contract may be found in conduct on the part of the offeree, e.g., Mitchell v. Rende, 225 Minn. 145, 30 N.W.2d 27 (1947), and the trial court's finding that an...