Hanson v. Funk Seeds International

373 N.W.2d 30, 41 U.C.C. Rep. Serv. (West) 1244, 1985 S.D. LEXIS 338

• Court: South Dakota Supreme Court
• Decided: August 14, 1985
• Docket: 14395, 14405
• Status: Published

Opinions

HENDERSON, Justice (on reassignment).

ACTION

This is an appeal by Funk Seeds International, defendant-appellant herein, from a judgment entered on a jury verdict for $26,253 in favor of Larry Hanson, plaintiff-appellee. We affirm this verdict arising from a suit on breach of warranty on the sale of seed corn.'

FACTS

Appellee Hanson farms approximately 2,500 acres in Turner County, South Dakota. In the early spring of 1980, appellee attended a Funk Seeds promotional meeting wherein Funk representatives depicted Funk’s G-4507 to be a very high-yielding corn. Thereafter, and based on these representations, appellee switched his order from another Funk hybrid to G-4507.

The seed was delivered and accepted by an agent of appellee who signed the delivery receipt in appellee’s name. Said delivery receipt stated in part:

LIMITATION OF WARRANTY AND REMEDY

Funk Seeds International warrants that the seeds are as described on the tag attached to the bag, subject to tolerances established by law. THE FOREGOING EXPRESS WARRANTY EXCLUDES ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION THEREON.

By acceptance and use of the seed, Buyer agrees that the Company’s liability and the Buyer’s exclusive remedy for breach of any warranty except those expressly provided herein shall be limited in all events to a return of the purchase price of the seed. Claims for defects in the seeds must be presented within a reasonable time after discovery. Legal' actions shall be commenced within one year after date of discovery of defects. Crop yields and quality are due to so many causes and conditions beyond the Company’s control that neither the Company nor the distributor or the dealer can warrant yield or quality and unless accepted on these terms, the Buyer shall return the seed in the original unopened container within fifteen days of purchase for a refund of the purchase price. This Limitation of Warranty and Remedy does not apply if prohibited by law. Punk Seeds International is a Company of CIBA-GEIGY Corporation.

I have read and agreed that the LIMITATION OF WARRANTY AND REMEDY are a part of the terms of this sale.

The Limitation of Warranty and Remedy provisions, minus the last paragraph, were also contained on a tag attached to each of the 55 bags of G-4507 delivered.

On April 24, 1980, appellee, began planting this seed in 130 acres designated as field No. 2. This process was completed on April 26, 1980. Field No. 1 had been planted two days prior to this time. Fields No. 3 and 4 were planted two days after. The seeds planted in these other fields were of the same hybrid (Missouri 17) but were from differing seed dealers. Each field was irrigated, of the same soil composition and fertility, all were within a two and one-half mile vicinity, and all received the same farming practices.

The fields germinated properly but after coming up, field No. 2 was hit by a slight frost which left a few ice crystals. Appel-lee and Jay Parsons (appellee’s neighbor and the Funk dealer who sold the seed in question) testified, however, that in their opinions, the corn crop was not damaged.

Appellee began irrigating all four fields in mid-June of 1980. Thereafter, all the fields began pollinating and at the same time continued to pollinate. After pollination, appellee noticed that the Funk’s field (No. 2) was much taller than the other fields, was spindly, and appeared to not produce any ears of corn on 40% to 60% of the stalks. Good ears of corn were grown in certain low areas of field No. 2 but many of the ears grown elsewhere in this field were either half barren or merely spotted with kernels.

Appellee contacted Jay Parsons who again examined the Funk’s field and noted its uniform lack of ear development. Parsons contacted Funk Seeds who sent their agronomist, Gordon Johnson, to examine the field on August 20, 1980. This examination revealed no disease, insects, insecticide, herbicide, mechanical injury, or fertilizer problems. The soil, however, had high fertility and sufficient water and appellee’s other fields (planted with the same hybrid, at about the same time, and farmed under the same farming practices) did not experience these problems. Other corn fields in this area planted with G-4507 also did not experience such problems.

On September 3, 1980, appellee began cutting the field for silage. During this process, the corn stalks turned white overnight and the few ears which were produced would fall off the stock.

At trial, no direct evidence was presented as to the cause of field No. 2’s problems or the nature of any defect which might have caused the problems. Appellee’s case rested on circumstantial evidence. Expert witnesses for appellant Funk Seeds stated ap-pellee’s crop failure was due to heat stress and inadequate, moisture during pollination. Notwithstanding, the jury returned a verdict for appellee and assessed damages at $26,253. The trial court entered judgment on this jury verdict. From this judgment, appellant now appeals. Appellant has framed five issues, whereas appellee has presented four issues. We distill these into four issues and address them seriatim.

DECISION

I.

WAS THE TRIAL COURT CORRECT IN NOT GRANTING APPELLANT’S MOTION FOR A DIRECTED VERDICT? WE HOLD THAT IT WAS.

On this issue, appellant Funk advances two arguments. First, appellant contends that appellee Hanson was required to prove the corn seed contained a specific defect, and since appellee failed to prove such a defect existed, appellant was entitled to a directed verdict. We disagree.

Although plaintiffs burden of proof requires him or her to show a defect existed when the product left defendant’s hands, this Court has held that: “No specific defect need be shown if the evidence, direct or circumstantial, permits the inference that the problem was caused by a defect. A defect may be inferred from proof that the product did not perform as intended by the manufacturer. . . .” Drier v. Perfection, Inc., 259 N.W.2d 496, 504 (S.D.1977) (citations omitted). Identification of an existing defect is not essential to recovery upon express warranty. It is sufficient if, as here, the evidence demonstrates, either directly or by permissible inference, that the corn was defective in its performance or function or that it otherwise failed to conform to the warranty. Osburn v. Bendix Home Systems, Inc., 613 P.2d 445, 448 (Okla.1980). Osburn cites nine jurisdictions supporting this proposition, including Drier. See also, Community Television Services v. Dresser Industries, 586 F.2d 637, 641 (8th Cir.1978), cert. denied, 441 U.S. 932, 99 S.Ct. 2052, 60 L.Ed.2d 660 (1979); Fajardo v. Cammack, 322 N.W.2d 873, 876 (S.D.1982); Pearson v. Franklin Laboratories, Inc., 254 N.W.2d 133, 140 (S.D.1977); Shaffer v. Honeywell, Inc., 249 N.W.2d 251, 256 (S.D.1976); Swenson v. Chevron Chemical Co., 89 S.D. 497, 505, 234 N.W.2d 38, 42-43 (1975); Sweetman Constr. Co., Inc. v. Dakota Pump, 88 S.D. 650, 654, 226 N.W.2d 792, 794 (1975); and Valentine v. Ormsbee Exploration Corp., 665 P.2d 452, 462 (Wyo.1983), holding that “[a] product is defective when it fails to perform reasonably and safely the function for which it was intended[,]” quoting Drier, 259 N.W.2d at 504. There was no evidence that the seed purchased by appellee was tampered with or otherwise exposed to any elements that would alter its condition from the date it was purchased from appellant and the date it was planted by appel-lee. We extended our holding in Drier in Crandell v. Larkin & Jones Appliance Co., 334 N.W.2d 31, 34 (S.D.1983), expressing that a plaintiff does not have to show that a defendant “created the defect, but only that the defect existed when the product was distributed by and under [defendant’s] control.”

At trial, appellee Hanson presented testimony that the field planted with G-4507 (field No. 2) was planted at about the same time as his other fields, was subject to the same farming practices and weather conditions, but failed to produce a crop while his other fields — planted with the same hybrid — did grow corn. Testimony disclosed that field No. 2 did not experience disease, insects, insecticide, herbicide, mechanical injury, or fertilizer problems, but instead was highly fertile and sufficiently watered.

Appellant’s expert did testify that appel-lee’s problems might have resulted from other factors, i.e., slight frost, heat stress, and the application of a certain herbicide. However, in light of the complete evidence and testimony offered at trial, particularly that this plot of corn was properly planted and cultivated, and that all of appellee’s plots of corn were subject to the same heat stress, the jury could reasonably have determined, without speculation or conjecture, that appellee’s crop failure in field No. 2 of failing to produce ears was the result of defects in Funk’s G-4507; and, thus, appellant’s product did not comply with its warranty that it would produce corn. Swenson v. Chevron Chemical Co., 234 N.W.2d 38.

Second, appellant contends that a directed verdict should have been granted because there was no evidence of a breach of warranty. Appellant asserts that this case is controlled by the Federal Seed Act¹ and the South Dakota Seed Act² and that the only warranty that exists is that the seed complies with statutory requirements and specifications on the label. Appellant argues that the seed in question met the statutory and label requirements and thus the trial court should have directed a verdict on the breach of warranty issue. We disagree.

The Federal and South Dakota Seed Acts were enacted to protect the purchasers of seed from falsely labeled products. They provide criminal sanctions and were not intended to abrogate civil remedies for breach of warranty provided in the Uniform Commercial Code. Funk’s contentions in this regard are without merit.

“A directed verdict is proper only when the evidence is undisputed or such that reasonable minds could not draw different inferences or conclusions from the facts.” Swiden Appliance v. Nat’l Bank of S.D., 357 N.W.2d 271, 277 (S.D.1984). In the case at bar, the evidence was not undisputed. Neither was the evidence such that reasonable minds could not draw different conclusions on the existence of a defect or a breach of warranty that the seed would grow corn. There were questions of fact to be resolved by the jury. If sufficient evidence exists, so that reasonable minds could differ, a directed verdict is not appropriate. Cox v. Brookings Int’l Life Ins. Co., 331 N.W.2d 299, 300 (S.D.1983). This was represented to be high-yielding corn; it was not; evidence presented by appellee reflected that the corn was properly planted and cultivated; appellee presented sufficient circumstantial evidence, under the rule established in Drier, to prima facie establish a cause of action for breach of warranty, express or implied. The evidence must be accepted which is most favorable to the nonmoving party and the trial court must indulge all legitimate inferences therefrom in his favor. Weber v. Bernard, 349 N.W.2d 51, 53 (S.D.1984). The trial court did not err by failing to grant appellant’s motion for directed verdict.

II.

DID THE TRIAL COURT ERR IN HOLDING THE WARRANTY DISCLAIMER AND LIMITATION OF REMEDY PROVISIONS TO BE UNCONSCIONABLE AND INVALID? WE HOLD THAT IT DID NOT.

At trial, appellant Funk attempted to introduce delivery receipts and a tag which was attached to the bags of seed delivered to appellee Hanson. These exhibits contained the warranty disclaimer and limitation of remedy provisions outlined in the facts above. The trial court, however, denied admission of these exhibits and found the provisions in question to be unconscionable. Appellant here asserts that such a determination was in error. We disagree.

The exclusion or modification of warranties and the contractual modification or limitation of remedies is permitted under SDCL 57A-2-316 and SDCL 57A-2-719, respectively. In sum, a seller may use a disclaimer clause to control his liability by reducing the manner in which he can be found to have breached; and, also, a seller may attempt to restrict the type of remedy available once a breach is infixed. However, the trial court may refuse- to enforce such provisions if it finds them to have been unconscionable when made and if it affords the parties a reasonable opportunity to present evidence concerning its commercial setting, purpose, and effect so as to aid the court’s decision. SDCL 57A-2-302(1). The trial court properly followed these procedural requirements by accepting pretrial memoranda and offers of proof at trial and correctly excluded the exhibits, determining their provisions to be unconscionable. SDCL 57A-2-302(2).

In reaching our determination, we are most persuaded by our past decision in Durham v. Ciba-Geigy Corp., 315 N.W.2d 696 (S.D.1982). In Durham, 315 N.W.2d at 700, this Court stated:

To permit the manufacturer of the pesticide to escape all consequential responsibility for the breach of contract by inserting a disclaimer of warranty and limitation of consequential damages clause, such as was used herein, would leave the pesticide user without any substantial recourse for his loss. One-sided agreements whereby one party is left without a remedy for another party’s breach are oppressive and should be declared unconscionable.[3]

In this case, loss of the intended crop due to ineffectiveness of the herbicide is inevitable and potential plaintiffs should not be left without a remedy. Furthermore, the purchasers of pesticides are not in a position to bargain with chemical manufacturers for contract terms more favorable than those listed on the pre-printed label, nor are they in a position to test the effectiveness of the pesticide prior to purchase....

... [P]ublic policy should not allow a chemical manufacturer to avoid responsibility for the ineffectivenss of a product which was offered for one purpose, the effective control of corn rootworm larvae. (Citations omitted; emphasis supplied mine.)

Although the product in Durham was manufactured and the product here in question, to wit, corn seed, is a product of nature, the process used in marketing both products is nearly identical so as to permit application of the considerations found relevant in Durham.

Appellee Hanson, like most farmers, was not in a position to bargain for more favorable contract terms, nor was he able to test the seed before the purchase. A crop failure is inevitable if the corn seed is ineffective and to enforce the provisions here in question, which would only allow the return of the purchase price, would leave appellee without any substantial recourse for his loss. In essence, appellee would be left without a remedy for another’s breach. Cf. Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241, 242 (S.D.1984). The trial court’s determination that these provisions were unconscionable is therefore not in error and we uphold its decision in this regard.

III.

DID THE TRIAL COURT ERR IN PERMITTING CERTAIN TESTIMONY WITHOUT PROPER FOUNDATION? WE HOLD THAT IT DID NOT.

Appellant Funk argues that appel-lee Hanson should not have been allowed to compare yields from other corn fields because sufficient similarity did not exist so as to justify a comparison. We disagree.

Testimony was presented which established that the comparison fields were of the same soil composition, farmed with the same procedures, planted at about the same time with the same hybrid (Missouri 17), irrigated in the same manner, and were within a two and one-half mile vicinity. Although the Funk’s field (field No. 2) was subjected to a slight, nondamaging frost and used a different brand of herbicide, the similarities among the fields were enough to allow yield comparisons. In Durham, this Court approved the admission of testimony concerning problems with a herbicide, even though the fields there in question had more differences than the comparison fields here. The admission of the yield comparisons based on the foundational testimony elicited at trial was not an eviden-tiary error.

IV.

DID THE TRIAL COURT ERR IN FAILING TO AWARD PREJUDGMENT INTEREST? WE HOLD THAT IT DID NOT.

Appellee Hanson here contends that prejudgment interest should have been awarded because his damages were capable of being made certain by calculation upon a particular day.⁴ We disagree.

SDCL 21-1-11 provides:

Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor, from paying the debt.

To be awarded prejudgment interest under this statute, the exact amount of damages must be known or readily ascertainable. State v. Ed Cox & Son, 81 S.D. 165, 180, 132 N.W.2d 282, 290-91 (1965); Beka v. Lithium Corp. of America, 77 S.D. 370, 375, 92 N.W.2d 156, 160 (1958). Prejudgment interest is not to be awarded' if the damages are uncertain until determined by the trier of fact. Arcon Constr. Co. v. S.D. Cement Plant, 349 N.W.2d 407, 416 (S.D.1984). “Thus, the test for awarding interest is not whether liability was clear, but whether (assuming liability) the damages were reasonably ascertainable by reference to prevailing markets.” Cole v. Melvin, 441 F.Supp. 193, 210 (D.S.D.1977).

In the present case, appellee’s lost yields were unknown and thus his damages could not become certain by the mere application of his proposed arithmetic calculation because the lost yields were to be determined by the jury. Yields, per appel-lee’s own testimony, varied year by year. Appellee was therefore not entitled to prejudgment interest under the statute and the trial court’s denial of the same did not constitute error.

The judgment is affirmed in all respects.

DUNN, Retired Justice, and MOSES, Circuit Judge, concur. WOLLMAN, J., and MILLER, Circuit Judge, concur in part and dissent in part. MILLER, Circuit Judge, sitting for POSHEIM, C.J., disqualified. MOSES, Circuit Judge, sitting for MORGAN, J., disqualified. WUEST, Circuit Judge, Acting as Supreme Court Justice, not participating.

1 . 7 U.S.C.S. § 1551 (1985).

2 . SDCL ch. 38-12, et seq.

3 . Cited with approval as principal authority in Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241 (S.D.1984).

4 . The calculation advanced by appellee to arrive at a sum certain is: the price of corn at the time field No. 2 was harvested ($2.76 a bushel) times the loss of yield.