The Court of
Appeals here affirms the judgment of a trial court regarding a breach
of contract case, despite the fact that the trial judge employed
the U.C.C.’s provisions regarding a contract for a sale of
goods, where the sales contract at issue provided for the transfer
of both goods and nongoods
MBH,
Inc. v. John Otte Oil & Propane, 15 Neb. App. 341 (2007)
Nebraska
Court of Appeals Headnotes
Breach of
Contract:
- [Damages:]
(Appeal and Error.) A suit for damages arising from breach of
a contract presents an action at law. In a bench trial of a law
action, the trial court's factual findings have the effect of a
jury verdict and will not be disturbed on appeal unless clearly
wrong.
Contracts:
- The determination
of whether goods or nongoods predominate a contract is generally
a question of law. ••• It is a fundamental rule that
in order to be binding, an agreement must be definite and certain
as to the terms and requirements. It must identify the subject matter
and spell out the essential commitments and agreements with respect
thereto. ••• The general rule is that the assertion
of the invalidity of a contract is nullified by the subsequent acceptance
of benefits growing out of the contract claimed to have been breached.
- [Appeal
and Error.] The construction of a contract is a matter of law,
and an appellate court has an obligation to reach an independent,
correct conclusion irrespective of the determinations made by the
court below.
- [Proof.]
A party seeking to enforce a contract has the burden of establishing
the existence of a valid, legally enforceable contract.
- [Parties:](Time).
A contract is not formed if the parties contemplate that something
remains to be done to establish contractual arrangements or if elements
are left for future arrangement.
- [Time.]
When an agreement stipulates that certain terms shall be settled
later by the parties, such terms do not become binding unless and
until they are settled by later agreement.
- [Waiver:]
Conditions precedent in a contract may be waived. (Proof.) A
written contract may be waived in whole or in part, either directly
or inferentially, and the waiver may be proved by express declarations
manifesting the intent not to claim the advantage, or by so neglecting
and failing to act as to induce the belief that it was the intention
to waive.
Damages:
- [Appeal
and Error.] The amount of damages to be awarded is a determination
solely for the fact finder, and the fact finder's decision will
not be disturbed on appeal if it is supported by the evidence and
bears a reasonable relationship to the elements of the damages proved.
Uniform Commercial
Code:
- [Words
and Phrases.] The Uniform Commercial Code defines goods as all
things (including specially manufactured goods) which are movable
at the time of identification to the contract for sale other than
the money in which the price is to be paid, investment securities
(article 8 of the code), and things in action.
- [Contracts:
Sales.] The Uniform Commercial Code applies when the principal
purpose of a transaction is the sale of goods, but does not apply
when the contract is principally for services.
- [Damages.]
In a breach of contract case, the ultimate objective of a damages
award is to put the injured party in the same position the injured
party would have occupied if the contract had been performed, that
is, to make the injured party whole. ••• In a case
involving a breach of contract, the proper measure of damages is
an amount which will compensate the injured party for loss which
fulfillment of the contract would have prevented or breach of it
has entailed.
Waiver:
- [Words
and Phrases.] Waiver is a voluntary and intentional relinquishment
or abandonment of a known existing legal right or such conduct as
warrants an inference of the relinquishment of such right.
- [Estoppel.]
In order to establish a waiver of a legal right, there must be clear,
unequivocal, and decisive action of a party showing such purpose,
or acts amounting to estoppel on his or her part.
Date Filed
and Case No.: January 23, 2007. No. A-05-292.
Court Appealed
From: District Court for Lancaster County: John A. Colborn,
Judge.
Attorneys
for the Appeal: Mark A. Fahleson and Glen Th. Parks for John
Otte Oil & Propane, Inc., appellant. Shaylene M. Smith and Bradley
T. Kalkwarf for MBH, Inc., appellee.
Judges:
Sievers, Carlson, and Cassel, Judges.
Authored
By: Cassel, Judge.
Summary:
John Otte Oil & Propane, Inc. (Otte), appeals from a judgment
of the district court for Lancaster County which awarded $26,605.39
to MBH, Inc., as damages resulting from Otte's breach of a sales
contract and $200 to Otte for MBH's breach of the same contract.
On 09/13/96, MBH, d.b.a. Hallam Grain Co., entered into a contract
with Otte for the sale of Hallam Grain Co., a business that bought
and sold grain, chemicals, and fertilizer. MBH agreed to sell Hallam
Grain Co. to Otte as an ongoing business. The sales contract provided
for the sale of real estate, buildings, fixtures, furniture, equipment,
personal property, goodwill, inventory, and other assets associated
with the said business. MBH also agreed to sell the name "Hallam
Grain Co." to Otte and signed a covenant not to compete as
part of the transaction. The contract provided for a purchase price
of $430,000.
After the sale
was closed, MBH filed a petition against Otte in the district court,
alleging that Otte failed to pay MBH for several items of inventory
listed in the contractt, which items had been in Otte's possession
after Hallam Grain Co. was transferred to Otte. The district court
sustained a demurrer by Otte and dismissed the action. In MBH,
Inc. v. John Otte Oil & Propane, Inc., No. A-00-287, 2001
WL 880683 (Neb. App. Aug. 7, 2001) (not designated for permanent
publication), the Nebraska Court of Appeals held that taken liberally,
MBH's petition set forth a cause of action, and therefore, remanded
the cause for further proceedings in accordance with the opinion.
In accordance
with the mandate, the trial court reinstated MBH's petition. MBH
alleged in its second amended petition that it entered into a contract
with Otte for the sale of Hallam Grain Co., the contract was closed,
and that on that same day, MBH provided Otte with a detailed inventory
of all the chemicals to be purchased. The amended petition alleged
that Otte had had continuous possession of the items listed in the
inventory the closing, to the time the amended petition was filed
and that MBH made repeated attempts at collection but Otte refused
to pay. MBH alleged that the value of the chemical inventory is
$21,827.39. MBH also alleged that it provided Otte billings representing
the amount of anhydrous ammonia and wheat it transferred to Otte
and that MBH was due $3,471.50 for the anhydrous ammonia and $3,386.71
for wheat.
Otte filed an
answer admitting that it entered into a contract but alleged that
Otte requested that MBH retrieve the chemicals and that MBH refused.
Otte denied the majority of MBH's other allegations.
A bench trial
was held upon completion of which, the court entered judgment. The
court held that Article 2 of the U.C.C. applied to the contract
between MBH and Otte. The court concluded that Otte breached the
contract by not paying for the chemicals and awarded MBH $21,827.39
in damages. The court also concluded that anhydrous ammonia and
wheat were transferred to Otte, that Otte failed to pay for either,
and that therefore, Otte was liable to MBH for $3,471.50 for the
anhydrous ammonia and $1,306.50 for the wheat. The court further
determined that Otte was entitled to the fair market value of the
grain vacuum MBH sold to Otte that was repossessed by a third party
after the sale. The court awarded Otte $200 because evidence showed
that the vacuum was sold for this amount after it was repossessed.
After entry of the trial court's order, Otte appealed to the Nebraska
Court of Appeals.
On appeal, Otte
alleged that the trial court erred (1) by finding that article 2
of the Nebraska U.C.C. applied to the contract; (2) in determining
the damage amount Otte was entitled to as compensation for the repossessed
grain vacuum; (3) by finding that paragraph 5 of the contract was
enforceable; (4) by determining that the goods conformed to the
contract and therefore not finding that Otte's rejection of the
goods was effective; (5) by finding that the condition precedent
in paragraph 5 of the contract was waived by Otte; (6) by awarding
MBH the value of materials other than chemicals, grain, and fertilizer;
and (7) in determining the damage amount for Otte's alleged breach.
The Court
first addressed alleged error 1:. Here the sales contract at
issue provide for the transfer of both goods and nongoods. The goods
at issue included furniture, equipment, personal property, and inventory,
including chemicals, grain, and fertilizer. The nongoods include
real estate, buildings, goodwill, the business' trade name, and
the covenant not to compete. The Court therefore was confronted
with a mixed contract and had to decide whether the U.C.C. applied.
The trial court held that the U.C.C. applied to the sales contract.
The Court therefore engaged in an independent review of this issue.
Here, the Court determined that the U.C.C. is inapplicable. “The
predominant purpose of the contract was the sale of an ongoing business.
The essential elements of the contract are nongoods, including real
estate, buildings, and goodwill. Several factors lead us to this
conclusion. First, the majority of the purchase price is allocated
to the purchase of nongoods. This is true even when considering
the maximum purchase price for the chemicals, grain, and fertilizer.
Second, we believe that the heart of the contract is the goodwill
and the real estate. Without the transfer of these things, many
of the goods transferred to Otte would be of little or no use. Further,
a large part of the goods, including the chemicals, grain, and fertilizer,
contemplated in the sale were not itemized in the contract. An inventory
of these goods was to occur on the day before the closing. It seems
unlikely that elements which are the primary purpose of a contract
would remain unspecified until the day before the closing.”
Viewing the entire contract, the Court ruled that the primary purpose
was the sale of nongoods and the U.C.C. did not apply.
Re: Assignment
(2) Damages for Grain Vacuum: Here the trial court relied on
evidence submitted during trial showing that the vacuum was sold
for $200 after it was repossessed and awarded Otte $200. The Court
concluded that the trial court's determination of damages was not
clearly wrong.
Re Otte's
third, fourth, and fifth assignments of error: Because the Court
determined that the U.C.C. is not applicable, Otte's fourth assignment
of error was not discussed in the opinion.
Because MBH
sought to collect damages for a breach of paragraph 5, the Court
determined whether paragraph 5 created enforceable obligations.
When the parties entered into the sales contract the terms of paragraph
5 were not definite. The quantity of goods to be transferred was
not defined. The provision contemplated that the specific items
to be transferred would be determined by a joint inventory to be
performed on the day preceding the closing. The trial court found
that the joint inventory did not occur. The terms specified that
the price for the items was not to exceed $100,000, but did not
further specify how the price was to be determined. Because the
parties left elements of this provision for future arrangement,
this was not an enforceable contract provision on the date the contract
was signed.
In accordance
with the Nebraska Supreme Court's decision in Nebraska Nutrients
v. Shepherd, 261 Neb. 723, 626 N.W.2d 472 (2001), the Court
continued its analysis to determine if paragraph 5 of the contract
became enforceable at any time after it execution on September 13.
The Court found that the facts of the instant case are similar to
the facts at issue in Nebraska Nutrients. Here, the terms
of paragraph 5 became enforceable after the closing as items defined
by the parties' subsequent actions indicated their interpretation
of the terms. Otte argued the trial court correctly found that the
joint inventory was a condition precedent to Otte's obligation to
purchase the items listed in paragraph 5 and that the condition
precedent was not met. Because neither party contested the court's
determination, the Court assumed without deciding that performance
of the joint inventory was a condition precedent. However, it rejected
Otte's argument that the court erred when it found that Otte waived
this condition. The trial court's resolution of this issue led it
to conclude as a matter of law that the terms of paragraph 5 are
binding and enforceable. MBH's creation of inventory lists and transfer
of items to Otte and Otte's acceptance of the items supplied the
quantity absent from paragraph 5. “We find that by accepting
the goods, Otte also accepted the prices calculated by MBH at the
time the inventory lists were created and billed to Otte” said
the Court.
Otte’s
Assignment of Error (6): Otte's final assignments of error pertain
to the damages the trial court awarded to MBH for Otte's breach.
Otte argues that the district court erred when it awarded MBH $21,827.39
as compensation for Otte's failure to pay for the chemicals transferred
to Otte. The Court recognized that the amount of damages to be awarded
is a determination solely for the fact finder, and the fact finder's
decision will not be disturbed on appeal if it is supported by the
evidence and bears a reasonable relationship to the elements of
the damages proved. The Court concluded that the determination of
credibility falls within the province of the trial court and that
the court awarded MBH an amount of damages that is supported by
the evidence. AFFIRMED.
The Court of
Appeals here affirms the judgment of a trial court regarding a breach
of contract case, despite the fact that the trial judge employed
the U.C.C.’s provisions regarding a contract for a sale of
goods, where the sales contract at issue provided for the transfer
of both goods and nongoods
MBH,
Inc. v. John Otte Oil & Propane, 15 Neb. App. 341 (2007)
Nebraska
Court of Appeals Headnotes
Breach of
Contract:
- [Damages:]
(Appeal and Error.) A suit for damages arising from breach of
a contract presents an action at law. In a bench trial of a law
action, the trial court's factual findings have the effect of a
jury verdict and will not be disturbed on appeal unless clearly
wrong.
Contracts:
- The determination
of whether goods or nongoods predominate a contract is generally
a question of law. ••• It is a fundamental rule that
in order to be binding, an agreement must be definite and certain
as to the terms and requirements. It must identify the subject matter
and spell out the essential commitments and agreements with respect
thereto. ••• The general rule is that the assertion
of the invalidity of a contract is nullified by the subsequent acceptance
of benefits growing out of the contract claimed to have been breached.
- [Appeal
and Error.] The construction of a contract is a matter of law,
and an appellate court has an obligation to reach an independent,
correct conclusion irrespective of the determinations made by the
court below.
- [Proof.]
A party seeking to enforce a contract has the burden of establishing
the existence of a valid, legally enforceable contract.
- [Parties:](Time).
A contract is not formed if the parties contemplate that something
remains to be done to establish contractual arrangements or if elements
are left for future arrangement.
- [Time.]
When an agreement stipulates that certain terms shall be settled
later by the parties, such terms do not become binding unless and
until they are settled by later agreement.
- [Waiver:]
Conditions precedent in a contract may be waived. (Proof.) A
written contract may be waived in whole or in part, either directly
or inferentially, and the waiver may be proved by express declarations
manifesting the intent not to claim the advantage, or by so neglecting
and failing to act as to induce the belief that it was the intention
to waive.
Damages:
- [Appeal
and Error.] The amount of damages to be awarded is a determination
solely for the fact finder, and the fact finder's decision will
not be disturbed on appeal if it is supported by the evidence and
bears a reasonable relationship to the elements of the damages proved.
Uniform Commercial
Code:
- [Words
and Phrases.] The Uniform Commercial Code defines goods as all
things (including specially manufactured goods) which are movable
at the time of identification to the contract for sale other than
the money in which the price is to be paid, investment securities
(article 8 of the code), and things in action.
- [Contracts:
Sales.] The Uniform Commercial Code applies when the principal
purpose of a transaction is the sale of goods, but does not apply
when the contract is principally for services.
- [Damages.]
In a breach of contract case, the ultimate objective of a damages
award is to put the injured party in the same position the injured
party would have occupied if the contract had been performed, that
is, to make the injured party whole. ••• In a case
involving a breach of contract, the proper measure of damages is
an amount which will compensate the injured party for loss which
fulfillment of the contract would have prevented or breach of it
has entailed.
Waiver:
- [Words
and Phrases.] Waiver is a voluntary and intentional relinquishment
or abandonment of a known existing legal right or such conduct as
warrants an inference of the relinquishment of such right.
- [Estoppel.]
In order to establish a waiver of a legal right, there must be clear,
unequivocal, and decisive action of a party showing such purpose,
or acts amounting to estoppel on his or her part.
Date Filed
and Case No.: January 23, 2007. No. A-05-292.
Court Appealed
From: District Court for Lancaster County: John A. Colborn,
Judge.
Attorneys
for the Appeal: Mark A. Fahleson and Glen Th. Parks for John
Otte Oil & Propane, Inc., appellant. Shaylene M. Smith and Bradley
T. Kalkwarf for MBH, Inc., appellee.
Judges:
Sievers, Carlson, and Cassel, Judges.
Authored
By: Cassel, Judge.
Summary:
John Otte Oil & Propane, Inc. (Otte), appeals from a judgment
of the district court for Lancaster County which awarded $26,605.39
to MBH, Inc., as damages resulting from Otte's breach of a sales
contract and $200 to Otte for MBH's breach of the same contract.
On 09/13/96, MBH, d.b.a. Hallam Grain Co., entered into a contract
with Otte for the sale of Hallam Grain Co., a business that bought
and sold grain, chemicals, and fertilizer. MBH agreed to sell Hallam
Grain Co. to Otte as an ongoing business. The sales contract provided
for the sale of real estate, buildings, fixtures, furniture, equipment,
personal property, goodwill, inventory, and other assets associated
with the said business. MBH also agreed to sell the name "Hallam
Grain Co." to Otte and signed a covenant not to compete as
part of the transaction. The contract provided for a purchase price
of $430,000.
After the sale
was closed, MBH filed a petition against Otte in the district court,
alleging that Otte failed to pay MBH for several items of inventory
listed in the contractt, which items had been in Otte's possession
after Hallam Grain Co. was transferred to Otte. The district court
sustained a demurrer by Otte and dismissed the action. In MBH,
Inc. v. John Otte Oil & Propane, Inc., No. A-00-287, 2001
WL 880683 (Neb. App. Aug. 7, 2001) (not designated for permanent
publication), the Nebraska Court of Appeals held that taken liberally,
MBH's petition set forth a cause of action, and therefore, remanded
the cause for further proceedings in accordance with the opinion.
In accordance
with the mandate, the trial court reinstated MBH's petition. MBH
alleged in its second amended petition that it entered into a contract
with Otte for the sale of Hallam Grain Co., the contract was closed,
and that on that same day, MBH provided Otte with a detailed inventory
of all the chemicals to be purchased. The amended petition alleged
that Otte had had continuous possession of the items listed in the
inventory the closing, to the time the amended petition was filed
and that MBH made repeated attempts at collection but Otte refused
to pay. MBH alleged that the value of the chemical inventory is
$21,827.39. MBH also alleged that it provided Otte billings representing
the amount of anhydrous ammonia and wheat it transferred to Otte
and that MBH was due $3,471.50 for the anhydrous ammonia and $3,386.71
for wheat.
Otte filed an
answer admitting that it entered into a contract but alleged that
Otte requested that MBH retrieve the chemicals and that MBH refused.
Otte denied the majority of MBH's other allegations.
A bench trial
was held upon completion of which, the court entered judgment. The
court held that Article 2 of the U.C.C. applied to the contract
between MBH and Otte. The court concluded that Otte breached the
contract by not paying for the chemicals and awarded MBH $21,827.39
in damages. The court also concluded that anhydrous ammonia and
wheat were transferred to Otte, that Otte failed to pay for either,
and that therefore, Otte was liable to MBH for $3,471.50 for the
anhydrous ammonia and $1,306.50 for the wheat. The court further
determined that Otte was entitled to the fair market value of the
grain vacuum MBH sold to Otte that was repossessed by a third party
after the sale. The court awarded Otte $200 because evidence showed
that the vacuum was sold for this amount after it was repossessed.
After entry of the trial court's order, Otte appealed to the Nebraska
Court of Appeals.
On appeal, Otte
alleged that the trial court erred (1) by finding that article 2
of the Nebraska U.C.C. applied to the contract; (2) in determining
the damage amount Otte was entitled to as compensation for the repossessed
grain vacuum; (3) by finding that paragraph 5 of the contract was
enforceable; (4) by determining that the goods conformed to the
contract and therefore not finding that Otte's rejection of the
goods was effective; (5) by finding that the condition precedent
in paragraph 5 of the contract was waived by Otte; (6) by awarding
MBH the value of materials other than chemicals, grain, and fertilizer;
and (7) in determining the damage amount for Otte's alleged breach.
The Court
first addressed alleged error 1:. Here the sales contract at
issue provide for the transfer of both goods and nongoods. The goods
at issue included furniture, equipment, personal property, and inventory,
including chemicals, grain, and fertilizer. The nongoods include
real estate, buildings, goodwill, the business' trade name, and
the covenant not to compete. The Court therefore was confronted
with a mixed contract and had to decide whether the U.C.C. applied.
The trial court held that the U.C.C. applied to the sales contract.
The Court therefore engaged in an independent review of this issue.
Here, the Court determined that the U.C.C. is inapplicable. “The
predominant purpose of the contract was the sale of an ongoing business.
The essential elements of the contract are nongoods, including real
estate, buildings, and goodwill. Several factors lead us to this
conclusion. First, the majority of the purchase price is allocated
to the purchase of nongoods. This is true even when considering
the maximum purchase price for the chemicals, grain, and fertilizer.
Second, we believe that the heart of the contract is the goodwill
and the real estate. Without the transfer of these things, many
of the goods transferred to Otte would be of little or no use. Further,
a large part of the goods, including the chemicals, grain, and fertilizer,
contemplated in the sale were not itemized in the contract. An inventory
of these goods was to occur on the day before the closing. It seems
unlikely that elements which are the primary purpose of a contract
would remain unspecified until the day before the closing.”
Viewing the entire contract, the Court ruled that the primary purpose
was the sale of nongoods and the U.C.C. did not apply.
Re: Assignment
(2) Damages for Grain Vacuum: Here the trial court relied on
evidence submitted during trial showing that the vacuum was sold
for $200 after it was repossessed and awarded Otte $200. The Court
concluded that the trial court's determination of damages was not
clearly wrong.
Re Otte's
third, fourth, and fifth assignments of error: Because the Court
determined that the U.C.C. is not applicable, Otte's fourth assignment
of error was not discussed in the opinion.
Because MBH
sought to collect damages for a breach of paragraph 5, the Court
determined whether paragraph 5 created enforceable obligations.
When the parties entered into the sales contract the terms of paragraph
5 were not definite. The quantity of goods to be transferred was
not defined. The provision contemplated that the specific items
to be transferred would be determined by a joint inventory to be
performed on the day preceding the closing. The trial court found
that the joint inventory did not occur. The terms specified that
the price for the items was not to exceed $100,000, but did not
further specify how the price was to be determined. Because the
parties left elements of this provision for future arrangement,
this was not an enforceable contract provision on the date the contract
was signed.
In accordance
with the Nebraska Supreme Court's decision in Nebraska Nutrients
v. Shepherd, 261 Neb. 723, 626 N.W.2d 472 (2001), the Court
continued its analysis to determine if paragraph 5 of the contract
became enforceable at any time after it execution on September 13.
The Court found that the facts of the instant case are similar to
the facts at issue in Nebraska Nutrients. Here, the terms
of paragraph 5 became enforceable after the closing as items defined
by the parties' subsequent actions indicated their interpretation
of the terms. Otte argued the trial court correctly found that the
joint inventory was a condition precedent to Otte's obligation to
purchase the items listed in paragraph 5 and that the condition
precedent was not met. Because neither party contested the court's
determination, the Court assumed without deciding that performance
of the joint inventory was a condition precedent. However, it rejected
Otte's argument that the court erred when it found that Otte waived
this condition. The trial court's resolution of this issue led it
to conclude as a matter of law that the terms of paragraph 5 are
binding and enforceable. MBH's creation of inventory lists and transfer
of items to Otte and Otte's acceptance of the items supplied the
quantity absent from paragraph 5. “We find that by accepting
the goods, Otte also accepted the prices calculated by MBH at the
time the inventory lists were created and billed to Otte” said
the Court.
Otte’s
Assignment of Error (6): Otte's final assignments of error pertain
to the damages the trial court awarded to MBH for Otte's breach.
Otte argues that the district court erred when it awarded MBH $21,827.39
as compensation for Otte's failure to pay for the chemicals transferred
to Otte. The Court recognized that the amount of damages to be awarded
is a determination solely for the fact finder, and the fact finder's
decision will not be disturbed on appeal if it is supported by the
evidence and bears a reasonable relationship to the elements of
the damages proved. The Court concluded that the determination of
credibility falls within the province of the trial court and that
the court awarded MBH an amount of damages that is supported by
the evidence. AFFIRMED.
