Beasley Cotton Co. v. Ralph ( 2000 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
Assigned on Briefs July 14, 2000
CAROLYN B. BEASLEY COTTON COMPANY v. KEM RALPH,
Individually and d/b/a RALPH BROTHERS
Direct Appeal from the Chancery Court for Tipton County
No. 15,011 Dewey C. Whitenton, Chancellor
No. W1999-00273-COA-R3-CV - Filed October 25, 2000
This appeal arises from a breach of contract between Farmer and Broker. After signing a contract
to deliver cotton to Broker, Farmer failed to do so. Broker was then forced to purchase the cotton
elsewhere for a substantial loss and brought suit to recover the losses. At the start of the trial, Farmer
requested that the trial court dismiss the case and order the parties to proceed to arbitration. Finding
that Farmer had waived his rights under the contract to arbitration, the trial court refused.
Proceeding with the case, court found that Farmer had breached the contract and awarded damages
to Broker. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; and
Remanded.
DAVID R. FARMER , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and HOLLY K. LILLARD , J., joined.
David M. Livingston, Brownsville, Tennessee, for the appellant, Kem Ralph.
Russell W. Savory, Memphis, Tennessee, for the appellee, Carolyn B. Beasley Cotton Company.
OPINION
On May 25 and again on June 8, 1995, Kem Ralph entered into written contracts with the
Carolyn B. Beasley Cotton Company (Beasley).1 Each contract stated that Mr. Ralph would sell
Beasley 100 bales of cotton during the 1995-96 crop year. The dispute in this case arose sometime
between December of 1995 and February of 1996, with each party arguing a different set of facts.
Mr. Ralph claims that he informed Beasley in December of 1995 that he would be unable to fulfill
his contracts. Beasley claims that it had no notice that Mr. Ralph intended to breach these contracts
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While Beasley and Mr. Ralph entered into several additional contracts during this period, in this case we are
only concerned with the two cotton delivery contracts on May 25, and June 8, 1995.
until it sent demands for delivery in late January and early February of 1996 that went unanswered.
It is undisputed, however, that Beasley received no cotton from Mr. Ralph and had to purchase
cotton on the open market to fulfill its obligations, resulting in a loss to Beasley of $13,050. Beasley
demanded reimbursement from Mr. Ralph for this loss, and upon receiving no reply, filed suit for
breach of contract.
Both sides conducted pre-trial discovery before the trial date set in August, 1997. However,
at the beginning of this trial, Mr. Ralph moved the court that the case be sent to binding arbitration
as provided in the contract. The trial court then delayed the start of the trial and took this request
under consideration. Thereafter, the court found that Mr. Ralph, by his failure to request arbitration
before the scheduled start of the trial, had waived his right to arbitration and denied the motion. The
trial was conducted in March 1999. The court rejected Mr. Ralph’s arguments that the contracts had
no set price and were thus unenforceable. It also found that Beasley had acted properly to mitigate
its damages. As such, Mr. Ralph was ordered to pay $13,050 in damages, plus pre-judgment interest,
attorney’s fees and court costs. This appeal followed.
The issues presented by the appellant on appeal, as we perceive them, are as follows:
1. Did the trial court err in denying the motion to transfer this matter to
arbitration as provided under the contract?
2. Did the trial court err in failing to find the contract void due to
contradicting terms regarding price?
3. Did the trial court err in failing to reduce the damages through a
finding that Beasley did not act to mitigate its damages?
To the extent that these issues involve questions of fact, our review of the trial court’s ruling is de
novo with a presumption of correctness. See Tenn. R. App. P. 13(d). Accordingly, we may not
reverse the court’s factual findings unless they are contrary to the preponderance of the evidence.
See, e.g., Randolph v. Randolph, 937 S.W.2d 815, 819 (Tenn. 1996); Tenn. R. App. P. 13(d). With
respect to the court’s legal conclusions, however, our review is de novo with no presumption of
correctness. See, e.g., Bell ex rel. Snyder v. Icard, Merrill, Cullis, Timm, Furen and Ginsburg,
P.A., 986 S.W.2d 550, 554 (Tenn. 1999); Tenn. R. App. P. 13(d). The interpretation of a written
contract is a matter of law, and thus, no presumption of correctness in its interpretation exists. See
NSA DBA Benefit Plan, Inc. v. Connecticut Gen. Life Ins. Co., 968 S.W.2d 791 (Tenn. Ct. App.
1997).
Arbitration
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This court recently addressed the question of the waiver of arbitration in Rebound Care
Corp. v. Universal Constructors, Inc., No. M1999-00868-COA-R3-CV, 2000 WL 758610, at *1
(Tenn. Ct. App. June 13, 2000) (no perm. app. filed). We stated in that case that
[i]n general, even in those jurisdictions where a contract for arbitration is irrevocable,
the right to arbitration under the contract may be waived either by express words or
by necessary implication, for example, where the conduct of a party clearly indicates
an intent to waive the right to arbitrate. In those cases involving the issue of whether
the defendant’s participation in an action constitutes a waiver of the right to arbitrate
the dispute involved therein, no general rules are readily apparent for determining
waiver other than the general adherence by the courts to the principle that waiver is
to be determined from the particular facts and circumstances of each case. . . .
Id. at *7 (citation omitted). Examining further, we noted that “[w]a i v e r i s a m a t t e r o f f a c t t o b e
s h o w n b y t h e e v i d e n c e . ” Id. at *6 (quoting Koontz v. Fleming, 65 S.W.2d 821, 824 (Tenn. Ct. App.
1933)).
The determination of whether Mr. Ralph waived his right to arbitration is a factual
determination for the trial court. Thus, we may not reverse the court’s findings in this matter unless
it is contrary to the preponderance of the evidence. See, e.g., Randolph v. Randolph, 937 S.W.2d
815, 819 (Tenn. 1996); Tenn. R. App. P. 13(d). Upon our examination of the record, we note several
actions by Mr. Ralph that suggest he waived his right to arbitration. As stated in the trial court’s
opinion denying the motion to proceed to arbitration, Mr. Ralph filed an answer to Beasley’s original
Complaint For Damages, as well as an answer to Beasley’s Request for Production of Documents.
In addition, Mr. Ralph took pretrial depositions, filed pretrial motions and attended pretrial
settlement conferences. Indeed, Mr. Ralph made no mention of the arbitration clause until the
original trial court date when he filed a motion to refer the matter to arbitration. With this evidence,
we cannot state that the trial court’s ruling is contrary to the preponderance of the evidence. As such,
we hereby affirm the trial court’s decision that Mr. Ralph, through his actions surrounding this
dispute, waived his right to arbitration under the contract.
Validity of the Contracts
In determining the validity of a contract, the court should “ascertain the intention of the
parties from the contract as a whole and . . . give effect to that intention consistent with legal
principles.” Winfree v. Educators Credit Union, 900 S.W.2d 285, 289 (Tenn. Ct. App. 1995),
perm. app. denied (Tenn. May 01, 1995) (citations omitted). The words expressing the intentions
of the parties should be given their usual and ordinary meanings. See Taylor v. White Stores, Inc.,
707 S.W.2d 514, 516 (Tenn. Ct. App. 1985). Thus, it is necessary for this court to examine the
disputed portion of the contract to ascertain the intentions of the parties. This examination will allow
us to determine if the parties formed the meeting of the minds required for a valid contract.
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Mr. Ralph argues that the contract he entered into with Beasley did not represent a meeting
of the minds between the two parties as to the price to be paid. The price portion of the disputed
contract states:
PRICE AND OTHER TERMS: THE PRICES TO BE PAID FOR ACCEPTABLE
COTTON SHALL BE AS FOLLOWS:
**__73.00 NET__**, 41 COLOR 4 & BETTER LEAF, 34 AND LONGER
STAPLE, 3.5-4.9 MICRONAIRE 1994-95 C.C.C. LOAN DISCOUNTS TO APPLY
EXCEPT: 1- NO PREMIUM FOR STAPLE LONGER THAN 1-1/16". 2- 50
POINTS PREMIUM PAID FOR 31 & BETTER COLOR 3 & BETTER LEAF AND
1-1/16" & LONGER. 3- THERE WILL BE NO PREMIUM PAID FOR LEAF
GRADES HIGHER THAN THE CORRESPONDING COLOR GRADES (I.E. A 51
COLOR WITH 3 LEAF WILL BE PAID AR THE 51-5 VALUE.) 4- NO
MICRONAIRE OR STRENGTH PREMIUMS. 5- NO PREMIUM FOR COLOR
GRADE 31 LEAF 4. 6- REMARKS AND/OR EXTRANEOUS MATTER
DISCOUNTED AN ADDITIONAL 250 PTS. RULE 5 OF THE MEMPHIS
COTTON EXCHANGE TO GOVERN. MODULE AVERAGING FOR
CLASSIFICATION ACCEPTED OR REJECTED AT BUYERS OPTION.
COTTON WITH WAREHOUSE RECEIPTS DATED AFTER DECEMBER 25,
1995, SHALL BE DISCOUNTED 200 POINTS ON THIS CONTRACT.
(73.00 LESS RESEARCH AND PROMOTION FEES, IF COMPRESS CHARGES
REMAIN THE SAME.)
Mr. Ralph argues that “73.00 NET” was the price he believed he would be paid upon the delivery
of his cotton. In his testimony, he describes the net price as the money he would be paid after “[a]ll
the deductions.” Beasley believed that the contract provided for a price of “73.00 less research and
promotion fees.” Thus, Mr. Ralph argues that as he believed that the price was to be “73.00 NET”
and Beasley believed the price to be paid was “73.00 less research and promotion fees” and, as such,
there was no meeting of the minds.
We believe that Mr. Ralph’s argument ignores the clear language of the contract. It is
apparent from the contract that the parties intended the price to be paid as “73.00 less research and
promotion fees.” While the term “73.00 NET” may have been confusing, the section of the contract
referring to price clearly states what the final price would be for Mr. Ralph’s cotton. Indeed, Mr.
Ralph’s own expert, Mr. Jim Nunn, testified on this matter. He stated that “the net price was the
price unless the contract specified certain deductions.” Mr. Ralph’s expert went on to examine the
contracts in this case and noted the contracts provided “the seller pays the research and promotion.”
From this testimony, it is evident that the contract clearly presented that the final price to be paid for
Mr. Ralph’s cotton was “73.00 less research and promotion fees.” The contract between them was
valid and we affirm the trial court’s finding that a valid contract existed between the parties.
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Mitigation of Damages
“ I t i s a w e ll e s t a b li s h e d r u l e in T e n n e s s e e t h a t t h e p a r t y i n j u r e d b y th e w r o n g f u l a c t o f a n o t h e r
h a s a le g a l d u ty to e x e r c is e r e a s o n a b le a n d o r d i n a r y c a r e u n d e r t h e s e c i r c u m s t a n c e s to p r e v e n t a n d
d i m i n i s h t h e d a m a g e s . ” North Carolina Mut. Life Ins. Co. v. Evans, S h e l b y L a w N o . 6 6 , 1 9 9 0 W L
2 1 2 8 5 4 , a t * 3 ( T e n n . C t . A p p . D e c . 3 1 , 1 9 9 0 ) ( c i t i n g Arkansas River Packet Co. v. Hobbs, 5 8 S . W .
2 7 8 ( T e n n . 1 9 0 0 ) ) . H o w e v e r , a n i n j u r e d p a r t y i s n o t r e q u i r e d t o m a k e e x t r a o r d i n a r y e f f o r t s . See id.“ [ T ] h e b u r d e n o f s h o w i n g t h a t l o s s e s c o u ld h a v e b e e n a v o id e d b y th e p la in t i f f b y a r e a s o n a b le e f f o r t
t o m i t i g a t e d a m a g e s a f t e r d e f e n d a n t 's b r e a c h o f c o n tr a c t i s o n t h e d e f e n d a n t w h o b r e a c h e d t h e
c o n t r a c t . ” Id. ( c i t a t i o n s o m i t t e d ) .
W e n o t e t h a t a p l a i n t i f f i s o n l y r e q u i r e d t o m i t i g a t e d a m a g e s after t h e d e f e n d a n t ’ s b r e a c h o f
a c o n tr a c t . T h u s , t h e e s s e n ti a l q u e s t i o n t h a t m u s t b e a n s w e r e d in t h i s c a s e is e x a c tl y w h e n t h e c o n t r a c t
w a s b r e a c h e d b y M r . R a lp h . O n l y a f t e r w e d e t e r m i n e th e e x a c t m o m e n t o f th e b r e a c h o f th e c o n t r a c t
c a n w e d e t e r m i n e if Beasley properly acted to mitigate its damages. If, as Mr. Ralph argues, he
breached the contract in December of 1995, then Beasley was under a duty to act promptly to
mitigate its damages. If the breach occurred in late January or early February of 1996, then Beasley
properly acted to mitigate its damages.
In this case, the exact moment of the breach is a question of fact for the trial court to decide.
From the court’s ruling that Beasley was entitled to $13,050 in actual damages, it is clear that the
court found that the contract between the parties had been breached in late January or early February
of 1996. As such, the trial court necessarily found that Beasley properly acted to mitigate its
damages. As already stated in this opinion, we may not reverse the court’s factual findings unless
they are contrary to the preponderance of the evidence. See, e.g., Randolph v. Randolph, 937
S.W.2d 815, 819 (Tenn. 1996); Tenn. R. App. P. 13(d). Upon our examination of the record, we
cannot say that this finding is contrary to the preponderance of the evidence. Thus, we hereby affirm
the trial court’s decision on the date of the breach of the contract and its finding that Beasley acted
properly to mitigate its damages.
Conclusion
Based on the foregoing conclusions, we hereby affirm the judgment of the trial court. Costs
on appeal are assessed against the appellant, Kem Ralph, and his surety, for which execution may
issue if necessary.
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DAVID R. FARMER, JUDGE
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