Clements Farms, Inc. v. Ben Fish & Son

814 P.2d 917, 120 Idaho 185, 15 U.C.C. Rep. Serv. 2d (West) 799, 1991 Ida. LEXIS 114

• Court: Idaho Supreme Court
• Decided: June 14, 1991
• Docket: 19047
• Status: Published

Opinions

BAKES, Chief Justice.

Plaintiff respondent Clements Farms, Inc. (Clements) planted a crop of lima beans, with seeds which had been acquired from Shields Seed Company (Shields), a seed warehouse in Nampa, Idaho, who had purchased them from defendant appellant Ben Fish & Son (Ben Fish). The crop failed to mature before the growing season ended, and thereafter Clements brought this action against Shields and Ben Fish alleging breach of implied warranty of fitness for a particular purpose. The trial court found that Ben Fish had breached an implied warranty of fitness and rendered judgment in favor of Clements against Ben Fish. Ben Fish appealed this ruling to the Court of Appeals, which affirmed the decision of the district court. We granted Ben Fish’s petition for review of the opinion of the Court of Appeals.

The issues in this case are framed by a series of transactions involving Ben Fish, a California seed producer; Clements, a Canyon County farmer; and Shields, a seed warehouse. The seed producer, Ben Fish, is a California enterprise which has developed numerous strains of proprietary lima bean seed to meet various agricultural needs. In order to test its products in differing climates, Ben Fish distributed its seed through warehouses in various parts of the country. Prior to 1985, Ben Fish sold one of its bean seed strains, known as GBL 8-78, to Shields for test growing in Idaho. Those prior seed crops had matured. Shields contracted with Clements to grow a lima bean seed crop from the GBL 8-78 seed. This crop did not mature. The following chronology describes the events leading up to this lawsuit.

On March 6, 1985, Clements entered into a contract with Shields, entitled “Contract for the Growing of Commercial Beans,” in which Clements agreed to plant 9600 pounds of G-78 baby lima bean seed “as the bailee of said seeds,” and to plant those seeds on a particular 80 acres described in the contract, and to care for the crop, harvest the same, and to deliver back to Shields the harvested product which would meet certain conditions concerning quality, etc. Clements was to be paid $21.00 per hundredweight for those beans which met the contract standards. The contract provided that “title and ownership of said beans to be grown under this contract shall at all times remain with Shields____” The contract was a typical bailment/seed contract similar to contracts which this Court has had occasion to consider in the past. See Washburn Wilson Seed Co. v. Alexie, 54 Idaho 727, 35 P.2d 990 (1934); Smith v. Washburn Wilson Seed Co., 40 Idaho 191, 232 P. 574 (1925); Thiel v. Pacific Fruit & Produce Co., 51 Idaho 145, 4 P.2d 356 (1931); Peterson v. Conida Warehouses, Inc., 98 Idaho 883, 575 P.2d 481 (1978); Chapman v. Haney Seed Co., Inc., 102 Idaho 26, 624 P.2d 408 (1981).

The contract further provided that responsibility for any crop failure was Clements’, and in the event of such failure Clements would pay Shields $37.00 per hundredweight for the seed stock furnished. The contract further contained a disclaimer by Shields of any warranties, express or implied, concerning the seeds furnished pursuant to the bailment contract.

Pursuant to that bailment contract, Shields delivered the seed to Clements on May 8, 1985. However, before the seed had been planted, Clements learned that Shields was in financial difficulty. Discussions ensued between Clements and Shields over whether Shields would be financially able to purchase the harvested crop in the fall. When these discussions did not satisfy Clements’ concerns, it communicated directly with Ben Fish, the seed producer in California, exploring the possibility of a direct purchase agreement between Clements and Ben Fish that would avoid any risk of a future default by the Shields warehouse. Ben Fish’s president flew to Idaho and met with Clements. As a result of those negotiations, Shields and Clements voided their March 6, 1985, contract on May 29, 1985, and Ben Fish and Clements signed a new contract on the same day, entitled “Bean Contract,” consisting of an agreement typewritten on Ben Fish’s letterhead. This new contract provided that Clements would plant, cultivate and harvest 80 acres of GBL 8-78 lima bean seed “with stock seed furnished by you at Shields Warehouse Co., Nampa, Idaho____” Unlike the Shields contract, this was not a bailment contract by which title to the bean crop remained in Ben Fish, but was rather a contract whereby Clements agreed to plant, cultivate and harvest GBL 8-78 stock seed, and Ben Fish agreed to purchase the crop of beans which conformed to the U.S. No. 1 grade standards and other conditions. Delivery was to be at the warehouse of Shields of Idaho. In the event that Shields was no longer operating, the agreement required Clements to deliver the beans at Triangle Bean at Homedale, Idaho.

The agreement which Clements signed further provided that:

This agreement when accepted by you [Ben Fish] shall constitute a contract between us. There are no agreements or understandings regarding the subject matter of this agreement other than expressed above.

The contract was written on Ben Fish & Son letterhead. Immediately between the letterhead and the beginning of the “Bean Contract,” and not surrounded by any other typing, was the following disclaimer which was written in smaller print than was contained in the balance of the contract:

Ben Fish & Son warrants to the extent of the purchase price that seeds sold are as recognized on the container within recognized tolerances. Seller gives no further warranty, express or implied.¹

This new Clements/Ben Fish contract was signed on May 29,1985. The seed had already been delivered to Clements by Shields on May 8, 1985, pursuant to the original Shields/Clements contract; however, the seed had not yet been planted when the Shields contract was voided and the new contract with Ben Fish was signed on May 29, 1985. As the evidence later would show, the GBL 8-78 seed had an unusually slow maturation rate, rendering it more susceptible than most seed strains to crop loss in the event of a short growing season. The district court found that this unusual characteristic was not disclosed to Clements by Shields or by Ben Fish. Rather, the trial court found that Clements was simply advised by Ben Fish at the negotiations on May 29th to “get [the bean seed] in the ground as soon as possible.” After preparing a field for cultivation, Clements planted the GBL 8-78 seed in mid-June. The crop was ultimately lost because of frost before it had matured.

Clements brought this action against Shields and the seed producer, Ben Fish, seeking reimbursement for money spent in attempting to grow the ill-fated crop. The case against the warehouse, Shields, was dismissed prior to trial. With respect to Ben Fish, Clements asserted a breach of an implied warranty of fitness under the Uniform Commercial Code. Clements alleged that Ben Fish had represented the seed to be capable of maturing into a harvestable crop. Following a bench trial, the district court rendered judgment in favor of Clements against Ben Fish for compensatory damages and attorney fees. Ben Fish appealed, and the Court of Appeals affirmed the trial court’s decision. We granted review of the Court of Appeals decision.

Regarding our standard of review, where a case comes to us on a petition for review from the Court of Appeals, we review the opinion of the district court directly. While we accord the views of our Court of Appeals serious consideration, we are not bound by those views. State ex rel. Evans v. Barnett, 116 Idaho 429, 776 P.2d 438 (1989). Additionally, the determination of a contract’s meaning and legal effect are questions of law to be decided by the court where the contract is clear and unambiguous. Galaxy Outdoor Advertising, Inc. v. Idaho Trans. Dept., 109 Idaho 692, 710 P.2d 602 (1985). On issues of law, this Court exercises free review. Moses v. Idaho State Tax Comm’n, 118 Idaho 676, 799 P.2d 964 (1990); Safeco Ins. Co. of America v. Yon, 118 Idaho 367, 796 P.2d 1040 (1990).

We first address the trial court’s holding that the Clements/Ben Fish contract was a contract of bailment² and gave rise to an implied warranty of fitness by Ben Fish which was breached. Ben Fish argues that the May 29, 1985, contract between it and Clements was not a bailment contract. The Court of Appeals neither confirmed nor denied the trial court’s bailment finding, stating simply that “we do not think the bailment controversy controls this ease,” and affirmed the trial court on the alternative rationale that, while the U.C.C. did not apply directly to the contract, by analogy the remedies of the U.C.C. were available to Clements.

First, it is clear that, unlike the original Shields/Clements contract, the Clements/Ben Fish contract was not a bailment/seed contract. Both the contract and the evidentiary record before us reveal that Clements was not a bailee of the bean seed vis-a-vis Ben Fish. The Clements/Ben Fish contract makes no reference either to bailment or to the title to the seed. The evidence in the record is uncontroverted that the seed, while initially produced by Ben Fish, was sold to Shields, who then delivered it to Clements on May 8, 1985, pursuant to the Shields/Clements bailment contract which was subsequently voided. While the Clements/Ben Fish contract does refer to “stock seed furnished by you [Ben Fish] at Shields Warehouse Co., Nampa, Idaho,” the uncontroverted facts are that, while Ben Fish initially furnished the seed to Shields, Clements received the seed from Shields pursuant to its March 6, 1985, bailment contract which was void on May 29, 1985. Clements received the seed from Shields on May 8,1985, was always in possession of it, and would no doubt have planted the seed pursuant to its contract with Shields had not Clements become concerned about Shields’ ability to perform because of its financial problems. Thus, on May 29, 1985, when Shields’ and Clements voided the March 6, 1985, contract, and when Clements and Ben Fish entered into their bean seed contract on that same day, Clements was agreeing to plant and harvest lima bean seed which it already had in its possession, and Ben Fish was agreeing to buy the harvested crop under the terms and conditions set out in the bean contract. The bean contract between Clements and Ben Fish was not a bailment contract, and the district court erred in treating it as such.

Based on that record, appellant Ben Fish asserts two main issues on appeal. Ben Fish first contends that there is no support for the trial court’s finding that there was created an implied warranty of fitness from Ben Fish in favor of Clements, since Ben Fish was in essence the purchaser and not the seller under the May 29, 1985, contract. Secondly, Ben Fish argues that even if it were a seller under the bean contract, the contract has an express disclaimer of any warranty, express or implied. On this latter issue, we agree with appellant’s argument and therefore vacate the decision of the Court of Appeals and reverse the decision of the district court.

Under the U.C.C., § 28-2-316, parties to a sales contract may effectively disclaim any warranties by an appropriate disclaimer in the contract. The trial court acknowledged the disclaimer, but concluded that the disclaimer contained in the Clements/Ben Fish contract was not sufficiently conspicuous and therefore did not meet the requirements of the U.C.C.

The U.C.C. provides that a warranty disclaimer is conspicuous when “it is so written that a reasonable person against whom it is to operate ought to have noticed it.” I. C. § 28-1-201(10). A disclaimer in a contract is conspicuous “if it is in larger or other contrasting type or color.” Id. “Whether a term or clause is ‘conspicuous’ or not is a question for the court.” I.C. § 28-1-201(10). Farmer v. International Harvester Company, 97 Idaho 742, 558 P.2d 1306 (1976). With respect to the disclaimer in this case, the trial court merely stated: “It is in fine print under the letter head at the top of the page. It is not conspicuous as required by the statute.”

Fine print of itself, however, does not render a disclaimer inconspicuous. The statute says that disclaimers in “contrasting” type are conspicuous; the statute does not say the type must be both contrasting and larger. Nor does the fact that the disclaimer is “under the letterhead,” but above the body of the contract, detract from its conspicuousness; on the contrary, in this case it amplifies its visibility and increases the likelihood of discovery. The disclaimer is located in the middle of the front page of the contract and is set off by indentation. It is short, direct, and is not surrounded by any other language. We believe a reasonable person would have noticed the disclaimer and accordingly we hold that it was conspicuous. Farmer v. International Harvester Company, 97 Idaho 742, 553 P.2d 1306 (1976).

Additionally, the written portion of the contract, immediately preceding the signatures, states:

This agreement when accepted by you [Ben Fish] shall constitute a contract between us. There are no agreements or understandings regarding the subject matter of this agreement other than expressed above.

There is nothing in the agreement which suggests that, in the event that Clements was not successful in raising a crop of beans which met the standards set out in the contract, Ben Fish would reimburse Clements for its expenses in attempting to raise the crop.

Accordingly, we hold that, based upon our independent review of the written contract and uncontroverted evidence in the record, the “bean contract” effectively disclaimed the implied warranty of fitness claimed by Clements. Accordingly, the district court’s judgment in favor of Clements is reversed and the cause remanded with directions to enter judgment in favor of appellant Ben Fish.³

Costs to appellant. No attorney fees allowed.

JOHNSON, BOYLE and McDEYITT, JJ., concur.

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1 . A copy of the contract is attached as Appendix A.

2 . Our prior cases indicate that a bailment seed contract occurs when a seed warehouse delivers seed to a farmer, retaining the title to the seed, under a contract by which the farmer agrees to grow the seed, usually to certain stated standards, and then redelivers the crop back to the seedman who, under the contract, retains title to both the original seed and the resulting crop.

3 . Since we have found the disclaimer in this case to be conspicuous within the meaning of the statute, we need not address the issue raised by Ben Fish that, under the May 29, 1985, contract with Clements, it was a buyer, rather than a seller, and therefore no implied covenant under the U.C.C., or by analogy, could occur.