Brooks Cotton Company, Inc. v. Bradley F. Williams , 2012 Tenn. App. LEXIS 262 ( 2012 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
MARCH 21, 2012 Session
BROOKS COTTON COMPANY, INC. v. BRADLEY F. WILLIAMS
Direct Appeal from the Chancery Court for Crockett County
No. 9423 George R. Ellis, Chancellor
No. W2011-01415-COA-R9-CV - Filed April 23, 2012
This interlocutory appeal concerns the question of whether a farmer may be considered a
merchant for purposes of the Uniform Commercial Code Statute of Frauds. Appellant farmer
allegedly entered into an oral contract to sell his cotton crop to Appellee cotton company.
The farmer failed to deliver the cotton and the cotton company sued for specific performance.
The farmer defended the suit by arguing that the alleged oral contract was unenforceable due
to the Statute of Frauds. The cotton company countered that the farmer was a merchant for
purposes of the merchant exception to the Statute of Frauds. The trial court granted partial
summary judgment in favor of the cotton company, finding that the farmer was a merchant
for purposes of the Statute of Frauds. We hold that a farmer may be considered a merchant
for purposes of the Uniform Commercial Code Statute of Frauds, the determination of which
is a mixed question of law and fact. However, because the question of whether this particular
farmer qualifies as a merchant raises genuine issues regarding the inferences to be drawn
from the facts, we reverse the grant of partial summary judgment and remand to the trial
court for a trial on the merits.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Affirmed
in Part, Reversed in Part and Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and D AVID R. F ARMER, J., joined.
Oscar C. Carr, III, Don L. Hearn, Jr., and Patrick T. Burnett, Memphis, Tennessee, for the
appellant, Bradley F. Williams.
C. Barry Ward and Richard S. Townley, Memphis, Tennessee, for the appellee, Brooks
Cotton Company, Inc.
OPINION
I. Background
Defendant/Appellant Bradley F. Williams is a cotton and soybean farmer with a high
school education. According to Plaintiff/Appellee Brooks Cotton Company, Inc. (“Brooks
Cotton”), on or about August 5, 2010, Mr. Williams entered into a oral contract to sell his
2010 cotton production to Brooks Cotton. The alleged contract was recorded in the Brooks
Cotton purchase book on August 6, 2010 and provided that Mr. Williams would sell his
entire 1000 acre cotton production to Brooks Cotton. The price allegedly agreed upon was
$0.20 per pound over the guaranteed government loan amount of $0.542 per pound, totaling
$0.742 per pound of cotton.1 At the time of the alleged agreement, Mr. Williams had not yet
harvested his cotton.2 According to the record, Mr. Williams ultimately produced
approximately 1206 bales of cotton in 2010. If the contract had been performed as allegedly
agreed, the total contract price for Mr. Williams’ cotton would have been approximately
$446,000.00. Brooks Cotton sent written confirmation of the alleged agreement to Mr.
Williams on or about September 4, 2010, nearly thirty days after the contract was allegedly
agreed to on the phone. Mr. Williams asserts that he never entered into an oral contract with
Brooks Cotton, although he did not call or write Brooks Cotton to object to the written terms
sent to him.
Mr. Williams did not deliver all of his 2010 cotton production to Brooks Cotton. On
October 30, 2010, Mr. Williams partially performed on the alleged oral contract, delivering
307 bales of the estimated 1206 bales of cotton produced by his farm in 2010. Mr. Williams
refused to deliver the remaining cotton, asserting that there was not a valid contract between
Mr. Williams and Brooks Cotton.
On or about November 18, 2010, Brooks Cotton filed a Complaint for Specific
Performance, Injunctive Relief, and Damages against Mr. Williams. An injunction hearing
was held on November 30, 2010. Mr. Williams testified at the hearing regarding his
experience and skills in marketing cotton, stating that he had been a cotton farmer for
approximately twenty-five years. Mr. Williams testified that, in the majority of the years prior
to 2010, he had entered into a contract with Brooks Cotton to sell his cotton crop. In most of
those years, however, Mr. Williams agreed to the contract in person at Brooks Cotton’s office
1
According to Mr. Williams’ testimony, the $0.542 amount represents a Commodity Credit
Corporation loan. The Commodity Credit Corporation is an entity of the federal government. The amount
was to be repaid to the government after the harvest of the crop and the sale of the cotton.
2
This type of contract, wherein the farmer agrees to sell his crops prior to the harvest, is referred to
as a “forward crop contract.”
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after the cotton had been harvested, rather than over the telephone prior to the harvest. Mr.
Williams did testify that he was familiar with the practice of “booking” cotton over the
phone, as he had previously “booked” his cotton with Brooks Cotton in 2003. Mr. Williams
testified, however, that he did not “book” his cotton with Brooks Cotton in August 2010, but
that he merely called to discuss cotton prices. In addition, Mr. Williams explained his
process for determining the price at which he will sell his cotton, wherein he reviews the
selling price of his cotton crop in the previous three years. Although Mr. Williams testified
that he receives daily texts regarding the price of cotton, he explained that he was not familiar
with the common practice of “hedging”3 engaged in by many cotton merchants. David
Brooks of Brooks Cotton explained that hedging is a common practice in the cotton trade.
In addition, Mr. Williams testified that he never uses his potential cotton crop as collateral
on loans to finance the cotton crop, instead relying on various equipment and land. Mr.
Williams went on to testify that he owed approximately $400,000.00 to the bank in loans, but
that he had approximately $40,000.00 in bank accounts due to his off-season construction
work. Based on the testimony, the court issued a preliminary injunction on the sale of Mr.
Williams’ 2010 production of cotton.
Several motions were subsequently filed in the trial court that are not the subject of
this appeal.4 Importantly, Mr. Williams filed a motion for summary judgment on December
21, 2010, asserting, inter alia, that he was not a merchant under Tennessee’s version of the
Uniform Commercial Code (“U.C.C.”); therefore, the merchant exception to the Statute of
Frauds did not apply and there was no valid contract between himself and Brooks Cotton. In
the alternative, Mr. Williams argued that, if he was considered a merchant for purposes of
the U.C.C., no valid contract existed because the written memorialization was not sent to him
within a reasonable time.
Brooks Cotton filed a response in opposition on February 24, 2011, arguing that
Tennessee did not provide an exception that prevented farmers such as Mr. Williams from
being considered merchants under the U.C.C., and that the statutory definition of a
“merchant” pursuant to Tennessee Code Annotated Section 47-2-104 was broad enough to
3
“Hedging” refers to a practice by merchants, wherein the merchant protects his financial interests
by “offsetting his purchases with a sale of futures contracts on the cotton exchange.” Allenberg Cotton Co.,
Inc. v. Pittman, 419 U.S. 20, 26–27 (1974). According to the U.S. Supreme Court, hedging “drastically
reduces the risk to both merchants and lenders.” Id. at 27.
4
These motions include a motion to dismiss filed by Mr. Williams, a motion to increase the cash
bond established pursuant to the temporary injunction, a motion to require Mr. Williams to pay proceeds of
some of the cotton that was accidently burned into the court, and a motion that the cotton that is the subject
of the action be sold and its proceeds be deposited with the court.
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encompass Mr. Williams.
Mr. Williams filed an answer to the complaint on February 16, 2011, denying the
material allegations contained therein.
On March 7, 2011, Brooks Cotton filed a cross-motion for partial summary judgment,
arguing that Mr. Williams should be considered a merchant for purposes of the merchant
exception to the Statute of Frauds and that the notice to Mr. Williams was sent within a
reasonable time. To support the motion, Brooks Cotton supplemented the record with the
depositions of several area farmers, many of whom testified that the practice of orally
booking cotton was common in the trade. Many of the farmers, however, testified that they
were familiar with the practice of hedging, and that they had engaged in hedging themselves.
Brooks Cotton also submitted Mr. Williams’ deposition, wherein he testified that he receives
several monthly farming periodicals, such as Cotton Grower and Tennessee Farmer.
The trial court heard oral argument on the cross-motions on April 19, 2011. The trial
court orally ruled that Mr. Williams was a merchant under the U.C.C. and granted partial
summary judgment in favor of Brooks Cotton on that limited issue (the trial court did not
determine whether Mr. Williams ever entered into an agreement with Brooks Cotton or
whether the memorialization of the alleged contract was made within a reasonable time). The
trial court also orally granted Mr. Williams’ motion for interlocutory appeal pursuant to Rule
9 of the Tennessee Rules of Appellate Procedure. Accordingly, the trial court denied Mr.
Williams’ motion for summary judgment.
On May 9, 2011, the trial court entered its ruling denying Mr. Williams’ motion for
summary judgment and granting partial summary judgment to Brooks Cotton. The order
granting the motion stated:
The Court is persuaded that a transaction between
merchants is one with respect to which both parties are charged
with the knowledge or skill of merchants. The Court concludes
that the transaction here between a long-time farmer and a long-
time buyer for the sale of cotton is one between merchants. In
considering the questions at issue, the Court notes that cases
which hold that the farmer is [a] merchant[s] [sic] reflect on the
fact that today’s farmers are involved in far more than simply
planting and harvesting crops. Based on the depositions [of
various area farmers not involved in this litigation regarding the
knowledge and skill of farmers with regard to the sale of crops]
. . . the Court is persuaded that Bradley Williams and today’s
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Tennessee farmer possess an extensive knowledge and
sophistication regarding the purchase and sale of crops.
On May 19, 2011, Mr. Williams filed a written Motion for Permission to File Interlocutory
Appeal, which the trial court granted on June 23, 2011. This Court granted Mr. Williams’
Application for Permission to File Interlocutory Appeal on September 7, 2011 on a single
issue, which is taken from Mr. Williams’ brief:
Whether the trial court erred in denying Mr. Williams’ motion
for summary judgment and granting Brooks Cotton’s motion for
partial summary judgment by finding that Mr. Williams was a
merchant as a matter of law under the merchant exception to the
Uniform Commercial Code Statute of Frauds? 5
II. Standard of Review
Because this case was adjudicated by summary judgment, we first note that a trial
court's decision on a motion for summary judgment presents a question of law. Our review
is, therefore, de novo with no presumption of correctness afforded to the trial court's
determination. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997). “This Court must make a
fresh determination that the requirements of Tennessee Rule of Civil Procedure 56 have been
satisfied.” Mathews Partners, L.L.C. v. Lemme, No. M2008-01036-COA-R3-CV, 2009 WL
3172134, at *3 (Tenn. Ct. App. Oct. 2, 2009) (citing Hunter v. Brown, 955 S.W.2d 49,
50–51 (Tenn. 1977)).
When a motion for summary judgment is made, the moving party has the burden of
showing that “there is no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law.” Tenn. R. Civ. P. 56.04. The moving party may
accomplish this by either: (1) affirmatively negating an essential element of the non-moving
party's claim; or (2) showing that the non-moving party will not be able to prove an essential
element at trial. Hannan v. Alltel Publ'g Co., 270 S.W.3d 1, 8–9 (Tenn. 2008). However,
“[i]t is not enough for the moving party to challenge the nonmoving party to ‘put up or shut
up’ or even to cast doubt on a party's ability to prove an element at trial.” Id. at 8. If the
5
Often this Court has been called upon to review appellate records that contain multiple copies of
the same documents or filings in the trial court that are specifically excluded from the appellate record by
Rule 24(a) of the Tennessee Rules of Appellate Procedure. In those cases, we have chastised the attorneys
for failing to follow the rules of this Court. In this case, however, we must commend the attorneys and the
Crockett County Chancery Court Clerk for having done a thorough job of creating an appellate record with
neither irrelevant nor repetitive filings.
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moving party's motion is properly supported, “[t]he burden of production then shifts to the
nonmoving party to show that a genuine issue of material fact exists.” Id. at 5 (citing Byrd
v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993)). The non-moving party may accomplish this by:
“(1) pointing to evidence establishing material factual disputes that were overlooked or
ignored by the moving party; (2) rehabilitating the evidence attacked by the moving party;
(3) producing additional evidence establishing the existence of a genuine issue for the trial;
or (4) submitting an affidavit explaining the necessity for further discovery pursuant to Tenn.
R. Civ. P. 56.06.” Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008) (citations
omitted).
When reviewing the evidence, we must determine whether factual disputes exist. In
evaluating the trial court's decision, we review the evidence in the light most favorable to the
non-moving party and draw all reasonable inferences in the non-moving party's favor. Stovall
v. Clarke, 113 S.W.3d 715, 721 (Tenn. 2003). If we find a disputed fact, we must “determine
whether the fact is material to the claim or defense upon which summary judgment is
predicated and whether the disputed fact creates a genuine issue for trial.” Mathews
Partners, 2009 WL 3172134, at *3 (citing Byrd, 847 S.W.2d at 214). “A disputed fact is
material if it must be decided in order to resolve the substantive claim or defense at which
the motion is directed.” Byrd, 847 S.W.2d at 215. A genuine issue exists if “a reasonable jury
could legitimately resolve the fact in favor of one side or the other.” Id. “Summary
[j]udgment is only appropriate when the facts and the legal conclusions drawn from the facts
reasonably permit only one conclusion.” Landry v. South Cumberland Amoco, et al., No.
E2009-01354-COA-R3-CV, 2010 WL 845390, at *3 (Tenn. Ct. App. March 10, 2010) (citing
Carvell v. Bottoms, 900 S.W.2d 23 (Tenn. 1995)). However, if there is any uncertainty
concerning a material fact, then summary judgment is not the appropriate disposition. As
stated by our Supreme Court in Evco Corp. v. Ross, 528 S.W.2d 20 (Tenn. 1975):
The summary judgment procedure was designed to provide a
quick, inexpensive means of concluding cases, in whole or in
part, upon issues as to which there is no dispute regarding the
material facts. Where there does exist a dispute as to facts which
are deemed material by the trial court, however, or where there
is uncertainty as to whether there may be such a dispute, the
duty of the trial court is clear. He [or she] is to overrule any
motion for summary judgment in such cases, because summary
judgment proceedings are not in any sense to be viewed as a
substitute for a trial of disputed factual issues.
Id. at 24–25.
III. Analysis
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The central issue presented in this interlocutory appeal is whether a farmer, such as
Mr. Williams, may be considered a merchant under the U.C.C.. In this case, Mr. Williams’
designation as a merchant is critical to the outcome of the lawsuit. If Mr. Williams is
considered a merchant, then the merchant exception to the Statute of Frauds applies and the
case can proceed; if Mr. Williams cannot be considered a merchant, regardless of whether
he entered into an oral contract with Brooks Cotton, an oral contract will not be sufficient to
bind him.
Generally contracts need not be in writing to be enforceable, unless they are of the
kind that the Statute of Frauds or other law requires to be written. See Castelli v. Lien, 910
S.W.2d 420, 426 (Tenn. Ct. App. 1995). One type of contract that must be in writing is a
contract for the sale of goods priced over $500.00:
Except as otherwise provided in this section, a contract for sale
of goods for the price of five hundred dollars ($500) or more is
not enforceable by way of action or defense unless there is some
writing or record sufficient to indicate that a contract for sale
has been made between the parties and signed by the party
against whom enforcement is sought or by his authorized agent
or broker. A writing or record is not insufficient because it omits
or incorrectly states a term agreed upon but the contract is not
enforceable under this paragraph beyond the quantity of goods
shown in such writing or record.
Tenn. Code Ann. §47-2-201(a). It is undisputed that the alleged contract for the sale of Mr.
Williams’ 2010 cotton production far exceeded $500.00. Accordingly, unless an exception
applies, the Statute of Frauds requires that the contract be in writing to be enforceable.
However, the U.C.C. provides an exception to this rule in situations where both parties are
merchants:
Between merchants if within a reasonable time a writing or
record in confirmation of the contract and sufficient against the
sender is received and the party receiving it has reason to know
its contents, it satisfies the requirements of subsection (1)
against such party unless written notice of objection to its
contents is given within ten (10) days after it is received.
Tenn. Code Ann. §47-2-201(b). Accordingly, for Mr. Williams to be bound by any oral
contract, this Court must first determine whether he is a “merchant” for purposes of the
U.C.C. Statute of Frauds. The question of what is required to be considered a merchant for
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purposes of the Statute of Frauds is a question of first impression in this State. To resolve this
issue, we must interpret the meaning of the word “merchant” in Tennessee Code Annotated
Section 47-2-201(b). The Tennessee Supreme Court recently outlined the applicable
principles when faced with a question of statutory interpretation:
When dealing with statutory interpretation, well-defined
precepts apply. Colonial Pipeline Co. v. Morgan, 263 S.W.3d
827, 836 (Tenn. 2008). Our primary objective is to carry out
legislative intent without broadening or restricting the statute
beyond its intended scope. Houghton v. Aramark Educ. Res.,
Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative
enactments, we presume that every word in a statute has
meaning and purpose and should be given full effect if the
obvious intention of the General Assembly is not violated by so
doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When
a statute is clear, we apply the plain meaning without
complicating the task. Eastman Chem. Co. v. Johnson, 151
S.W.3d 503, 507 (Tenn. 2004). Our obligation is simply to
enforce the written language. Abels ex rel. Hunt v. Genie
Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006). When a statute
is ambiguous, however, we may refer to the broader statutory
scheme, the history of the legislation, or other sources to discern
its meaning. Colonial Pipeline, 263 S.W.3d at 836. Courts must
presume that a legislative body was aware of its prior
enactments and knew the state of the law at the time it passed
the legislation. Owens v. State, 908 S.W.2d 923, 926 (Tenn.
1995).
Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011). Accordingly, we
will first consider the plain language of the statute. The term “merchant” is defined by
Tennessee law:
“Merchant” means a person who deals in goods of the kind or
otherwise by his occupation holds himself out as having
knowledge or skill peculiar to the practices or goods involved in
the transaction or to whom such knowledge or skill may be
attributed by his employment of an agent or broker or other
intermediary who by his occupation holds himself out as having
such knowledge or skill.
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Tenn. Code Ann. §47-2-104(1). Accordingly, a contract “‘[b]etween merchants’ means [] any
transaction with respect to which both parties are chargeable with the knowledge or skill of
merchants.” Id. at -104(3). The comments to this section elaborate on who is considered a
merchant for purposes of the Statute of Frauds:
The term “merchant” as defined here roots in the “law
merchant” concept of a professional in business. The
professional status under the definition may be based upon
specialized knowledge as to the goods, specialized knowledge
as to business practices, or specialized knowledge as to both and
which kind of specialized knowledge may be sufficient to
establish the merchant status is indicated by the nature of the
provisions.
The special provisions as to merchants appear only in this
Article and they are of three kinds. Sections 2-201(2), 2-205,
2-207 and 2-209 dealing with the statute of frauds, firm offers,
confirmatory memoranda and modification rest on normal
business practices which are or ought to be typical of and
familiar to any person in business. For purposes of these
sections almost every person in business would, therefore, be
deemed to be a “merchant” under the language “who . . . by
his occupation holds himself out as having knowledge or
skill peculiar to the practices . . . involved in the transaction
. . .” since the practices involved in the transaction are
non-specialized business practices such as answering mail.
In this type of provision, banks or even universities, for
example, well may be “merchants.” But even these sections only
apply to a merchant in his mercantile capacity; a lawyer or bank
president buying fishing tackle for his own use is not a
merchant.
Tenn. Code Ann. §47-2-104, cmt. 2 (emphasis added). As such, the definition of merchant
for purposes of the Statute of Frauds encompasses “almost every person in business.” Id.
From the above statute, it is clear that the framers of the U.C.C. intended the term
merchant to encompass three distinct classes. Accordingly, for an individual to be considered
a merchant he or she must either be:
1. A person who deals in goods of the kind;
2. A person who by his occupation holds himself out as
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having knowledge or skill peculiar to the practices or
goods involved in the transaction; or
3. A person who employs an agent or broker or other
intermediary who by his occupation holds himself out as
having such knowledge or skill.
See Tenn. Code Ann. §47-2-104(1). Indeed, many other states have adopted this definition of
“merchant” based on the plain language of the statute. See e.g., Loe & Co., Inc. v. Schreiner,
321 So. 2d 199 (Ala. 1975). While this definition is instructive, it does not end the inquiry into
whether a farmer is one who “deals in goods” or who “by his occupation holds himself out
as having knowledge or skill peculiar to the practices or goods involved in the transaction.”
Accordingly, we must look beyond the plain language of the statute in order to determine
whether a farmer is a merchant under the U.C.C Statute of Frauds.
Mr. Williams argues that the law in Tennessee evidences a public policy against
holding that a farmer can be a merchant, as a matter of law. Mr. Williams points to a provision
in the Cotton Arbitration Act, Tennessee Code Annotated Section 29-5-201 through -222. The
provision provides that a written agreement to submit any matter concerning the cotton
industry to arbitration, other than a forward crop contract, is enforceable and irrevocable,
unless otherwise prohibited by law. Tenn. Code Ann. §29-5-202(a). The Act states, however,
that “[t]he provisions of this part shall not apply to any controversy within or related to the
cotton industry if any party involved in such controversy is a cotton farmer or cotton ginner.”
Id. at 202(c). Based on this provision, Mr. Williams argues that Tennessee law evidences a
policy against holding farmers to the same exacting contractual requirements as merchants.
We do not agree. The provisions of the Cotton Arbitration Act cited by Mr. Williams apply
in a specific situation that is not present in this case. First, the provision applies to agreements
to waive one’s right to a trial and to submit to arbitration outside of court. Accordingly the
provision involves the waiver of a “consequential fundamental constitutional right: the right
of access to the courts,” and not simply a contract for the sale of goods. Poole v. Union
Planters Bank, N.A., 337 S.W.3d 771, 781 (Tenn. Ct. App. 2010). Second, the provision
applies only if there is a written contract between the parties; as previously discussed, there
is no written contract between the parties in this case. Third, the provision does not apply to
a forward crop contract; the alleged contract between Mr. Williams and Brooks Cotton is a
forward crop contract. Accordingly, the provisions of the Cotton Arbitration Act are not
appropriately considered in this case.
We next turn to persuasive authority from outside our jurisdiction to inform our
decision in this case. According to Williston on Contracts, the question of whether a farmer
can be a merchant for purposes of the Statute of Frauds has led to different applications
among the states. First, courts have differing views as to whether the determination of who
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is a merchant is considered a factual question or a question of law:
The majority of courts maintain that the question whether
one is a merchant in a particular case, and for purposes of being
bound by a confirmatory writing, is one of fact, although there
are cases holding or suggesting that whether an entity can
qualify as a merchant is a question of law for the courts to
decide by applying the U.C.C. definition of merchant to the facts
of the particular case, and it has been said that the question
presents a mixed question of law and fact that whether there are
circumstances in existence that would make one a merchant is
a question of fact, but that once those facts are determined,
whether they make a person a merchant is a question of law.
10 Williston on Contracts § 29:25 (4th ed.) (footnotes omitted). In addition, the question of
whether a farmer is a merchant for purposes of the Statute of Frauds constitutes one of the
more difficult and controversial issues with regard to the U.C.C. and, as such, has led to
considerable disagreement among the states:
Part of the difficulty with assessing the question of
whether merchant status presents a question of law, one of fact
or a mixed question of law and fact, involves the varied settings
in which the question arises, since there are many provisions of
the U.C.C., and not just the merchants' exception, that apply
only or differently when one or both of the parties is a
merchant.
This may be seen in a review of perhaps the most
controversial issue with respect to the application of the
merchants' exception, whether farmers are to be considered
merchants for purposes of the exception, with the courts split
nearly evenly on the question, with a slight majority adopting
the rule that a farmer can be a merchant, at least under some
circumstances.
A significant minority maintains that farmers are not
merchants either based on the facts of the particular case or as
a matter of law.
The courts have indicated that the factors to be
considered in making the determination whether a farmer is a
merchant include the length of time the farmer has been
engaged in the practice of selling the product raised or produced
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to marketers; the degree of business acumen shown by the
farmer in dealing with other parties; the farmer's awareness of
the operation and existence of farm markets; and the farmer's
past experience with or knowledge concerning the customs and
practices that are unique to the marketing of the product being
raised or produced and sold.
Id. (footnotes omitted). Indeed, American Jurisprudence contains an entire section devoted
to the question of whether a farmer is a merchant under the U.C.C. Statute of Frauds, stating:
Courts have held that a farmer is a "merchant" for the purposes
of . . . the statute of frauds.
In some cases, it has been noted that the duty imposed
upon the farmer as a merchant is based on the principle that a
farmer is only required to have nonspecialized business
knowledge to be considered a merchant. On the other hand, it
has been noted that the term "merchant" as defined in Uniform
Commercial Code § 2-104(1) has its roots in the law merchant
concept of a professional in business, suggesting that a farmer
does not solely by virtue of his or her occupation hold himself
or herself out as being a professional merchant.
67 Am. Jur. 2d Sales § 70 (footnotes omitted). Because there is no clear weight of authority
regarding this issue, we find it instructive to consider cases from our sister states.
Mr. Williams cites various cases that have applied the above rule and found that a
farmer cannot be considered a merchant for purposes of the Statute of Frauds. For example
in Loeb & Co., Inc. v. Schreiner, 321 So. 2d 199 (Ala. 1975), the Alabama Supreme Court
stated:
We hold that in the instant case the appellee was not a
“merchant” within the meaning of [the merchant exception to
the Statute of Frauds]. We do not think the framers of the
Uniform Commercial Code contemplated that a farmer should
be included among those considered to be “merchants.”
* * *
It is not sufficient . . . that one hold himself out as having
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knowledge or skill peculiar to the practices or goods involved,
he must [b]y his occupation so hold himself out. Accordingly, a
person cannot be considered a ‘merchant’ simply because he is
a braggart or has a high opinion of his knowledge in a particular
area. We conclude that a farmer does not solely [b]y his
occupation hold himself out as being a professional cotton
merchant.
The remaining thing which a farmer might do to be
considered a merchant is to become a dealer in goods. Although
there was evidence which indicated that the appellee here had a
good deal of knowledge, this is not the test. There is not one
shred of evidence that appellee ever sold anyone's cotton but his
own. He was nothing more than an astute farmer selling his own
product. We do not think this was sufficient to make him a
dealer in goods.
* * *
Although a farmer might sell his cotton every year, we do
not think that this should take him out of the category of a
“casual seller” and place him in the category with
“professionals.”
Id. at 201–02.
The reasoning espoused in Loeb was followed in an number of jurisdictions. See, e.g.,
Pierson v. Arnst, 534 F. Supp. 360, 362 (D. Mont. 1982); Cook Grains, Inc. v. Fallis, 395
S.W.2d 555, 555 (Ark. 1965); Sand Seed Service, Inc. v. Poeckes, 249 N.W.2d 663, 666
(Iowa 1977); Decatur Cooperative Association v. Urban, 547 P.2d 323, 328 (Kan. 1976);
Terminal Grain Corp. v. Freeman, 270 N.W.2d 806 (S.D. 1978); Lish v. Compton, 547
P.2d 223 (Utah 1976); Gerner v. Vasby, 250 N.W.2d 319, 670–71 (Wis. 1977). These courts
reasoned that the framers did not contemplate including farmers as merchants because “the
term ‘merchant,’ as used in the Uniform Commercial Code, contemplates special knowledge
and skill associated with the . . . operation of the commodities market,” rather than skill and
knowledge with the practice of farming. Pierson, 534 F.Supp. at 362 ("It is inconceivable
that the drafters of the Uniform Commercial Code intended to place the average farmer, who
merely grows his yearly crop and sells it to the local elevator, etc., on equal footing with the
professional commodities dealer whose sole business is the buying and selling of farm
commodities.”); see also Sand Seed Service, 249 N.W.2d at 666 (noting that a farmer selling
only his annual production “may make him an expert or professional in Growing crops, it
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does not do so in Selling them.”); Decatur, 547 P.2d at 328 (“Appellee as a farmer
undoubtedly had special knowledge or skill in raising wheat but we do not think this factor,
coupled with annual sales of a wheat crop and purchases of seed wheat, qualified him as a
merchant in that field.”). The South Dakota Supreme Court clearly expressed this rationale,
stating:
Through training and years of experience a farmer may well
possess or acquire special knowledge, skills, and expertise in the
production of grain crops but this does not make him a
“professional,” equal in the marketplace with a grain buying and
selling company, whose officers, agents, and employees are
constantly conversant with the daily fluctuations in the
commodity market, the many factors affecting the market, and
with its intricate practices and procedures.
Terminal Grain, 270 N.W.2d at 812. Other courts agreed with the result in Loeb, but based
their decisions on other rationales. For example, some courts noted the lack of evidence
establishing that the particular farmer dealt in goods or had any special knowledge regarding
the sale of those goods, and instead relied on the traditional definition of the farming
occupation. See Cook Grains, 395 S.W.2d at 555 (defining a farmer as “one devoted to the
tillage of the soil”). Other courts focused on the amount of time the farmer actually spent
engaged in the business of selling crops in relation to the time the farmer spent growing
crops, noting that the term merchant “refers primarily to one whose occupation is that of
buying and selling.” Lish v, 547 P.2d at 226 (framing the issue of whether a particular farmer
is a merchant as a question of whether the practice of selling the crops “is done with such
regularity that it forms at least a substantial part of his occupation”).
However, many of the courts cited by Mr. Williams note that a farmer could be
considered a merchant, but that the facts simply were insufficient to conclude that the farmer
was a merchant in that particular case. See Pierson, 534 F. Supp. at 362 (“The court in each
case must determine, on the basis of the evidence presented, whether an individual who is
considered a farmer also possesses expertise in the area of marketing grain sufficient enough
to classify him as a “merchant” within the purview of the Uniform Commercial Code.”);
Sand Seed Service, 249 N.W.2d at 666 (“It should be clear from what we have said that a
farmer may indeed also be a merchant under certain circumstances. Whether he is or is not
is ordinarily a question of fact.”); Lish, 547 P.2d at 226 (“However, we would not exclude
therefrom one who sells products he makes or raises, or otherwise acquires, if that is done
with such regularity that it forms at least a substantial part of his occupation.”). Accordingly,
in many jurisdictions where the courts have held that farmers were not merchants with regard
to the Statute of Frauds, the courts have not foreclosed the possibility that a farmer could
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meet that standard.
In contrast, Brooks Cotton cites a number of jurisdictions where the courts have found
that a farmer may qualify as a merchant for purposes of the Statute of Frauds. See
Colorado-Kansas Grain Co. v. Reifschneider, 817 P.2d 637 (Colo. Ct. App. 1991);
Goldkist, Inc. v. Brownlee, 355 S.E.2d 773 (Ga. Ct. App. 1987); Sierens v. Clausen, 328
N.E.2d 559 (Ill. 1975); Sebasty v. Perschke, 404 N.E.2d 1200 (Ind. Ct. App.1980); Barron
v. Edwards, 206 N.W.2d 508 (Mich. Ct. App. 1973); Dotts v. Bennett, 382 N.W.2d 85 (Iowa
1986); Musil v. Hendrich, 627 P.2d 367 (Kan. Ct. App. 1981); Glacial Plains Co-op. v.
Lindgren, No. A10-185, 2010 WL 3307077, at *5 (Minn. Ct. App. Aug. 4, 2010); Dawkins
& Co. v. L&L Planting Co., 602 So. 2d 838, 843 (Miss. 1992); Rush Johnson Farms, Inc.
v. Mo. Farmers Ass'n, 555 S.W.2d 61 (Mo. Ct. App. 1977); Smith v. Gen. Mills, Inc., 968
P.2d 723 (Mont. 1998); Agrex, Inc. v. Schrant, 379 N.W.2d 751 (Neb. 1986); R.F.
Cunningham & Co. V. Driscoll, 790 N.Y.S.2d 368 (N.Y. City Ct. 2005); Currituck Grain,
Inc. v. Powell, 246 S.E.2d 853 (N.C. Ct. App. 1978); Hagert v. Hatton Commodities, 350
N.W.2d 591 (N.D. 1984); Ohio Grain Co. v. Swisshelm, 318 N.E.2d 428 (Ohio 1973);
Nelson v. Union Equity Co-op. Exchange, 548 S.W.2d 352 (Tex. 1977); Lish v. Compton,
547 P.2d 223 (Utah 1976); Aube v. O'Brien, 433 A.2d 298 (Vt. 1981); Fred J. Moore, Inc.
v. Schinmann, 700 P.2d 754 (Wash Ct. App. 1985).
We find the Colorado case of Colorado-Kansas Grain Co. v. Reifschneider, 817 P.2d
637 (Colo. Ct. App. 1991), to be particularly instructive. In determining that a farmer may
be considered a merchant with regard to the Statute of Frauds, the Colorado Court of Appeals
stated:
In considering the question at issue, we note that the
cases which hold that farmers may be merchants reflect on the
fact that today's farmer is involved in far more than simply
planting and harvesting crops. Indeed, many farmers possess an
extensive knowledge and sophistication regarding the purchase
and sale of crops on the various agricultural markets. Often, they
are more aptly described as agri-businessmen.
Id. at 640. Having determined that a farmer could be a merchant for purposes of the Statute
of Frauds, the court went on to determine whether the particular farmer in the case should
be considered a merchant. In doing so, the court articulated the following test:
In reaching its determination, a trier of fact should
consider the following as well as any other relevant factors: (1)
the length of time the farmer has been engaged in the practice of
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selling his product to the marketers of his product; (2) the degree
of business acumen shown by the farmer in his dealings with
other parties; (3) the farmer's awareness of the operation and
existence of farm markets; and (4) the farmer's past experience
with or knowledge of the customs and practices which are
unique to the particular marketing of the product which he sells.
Id. (citations omitted). Accordingly, the court found that because the farmer at issue had
twenty years of experience selling corn, the farmer could be considered a “person who deals
in goods of the kind.” In addition, the court held that the farmer’s extensive experience and
knowledge of the futures market “supports [a] determination that he ‘by his occupation [held]
himself out as having knowledge or skill peculiar to the practices or goods involved in the
transaction.’” Id.
Mr. Williams argues, however, that facts are present in Colorado-Kansas Grain that
are not present in the instant case. Specifically, Mr. Williams points out that the farmer in
Colorado-Kansas Grain was the “president of a corporation involved in the purchase and
sale of hay under futures contracts” in addition to being a farmer. Id. Accordingly, Mr.
Williams argues that the farmer’s specialized knowledge of business, rather than his simple
practice of selling his annual crop, qualified him as a merchant for purposes of the Statute
of Frauds.
However, other courts have found that farmers can be merchants based on facts
similar to the facts in this case. For example, in Goldkist, Inc. v. Brownlee, 355 S.E.2d 773(Ga. Ct. App. 1987), the Georgia Court of Appeals reversed summary judgment based on the
trial court’s determination that the farmers in the case could not be considered merchants as
a matter of law. Id. at 290. Instead, the court held that farmers who were familiar with the
practice of oral booking of crops, as was allegedly practiced in this case, could be considered
merchants for purposes of the Statute of Frauds. Id. at 298–90. In so holding, the court stated:
To allow a farmer who deals in crops of the kind at issue, or
who otherwise comes within the definition of “merchant” [for
purposes of the Statute of Frauds], to renege on a confirmed oral
booking for the sale of crops, would result in a fraud on the
buyer. The farmer could abide by the booking if the price
thereafter declined but reject it if the price rose; the buyer, on
the other hand, would be forced to sell the crop following the
booking at its peril, or wait until the farmer decides whether to
honor the booking or not.
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Defendants' narrow construction of “merchant” would, given the
booking procedure used for the sale of farm products, thus
guarantee to the farmers the best of both possible worlds (fulfill
booking if price goes down after booking and reject it if price
improves) and to the buyers the worst of both possible worlds.
On the other hand, construing “merchants” [for purposes of the
Statute of Frauds] as not excluding as a matter of law farmers
such as the ones in this case, protects them equally as well as the
buyer. If the market price declines after the booking, they are
assured of the higher booking price; the buyer cannot renege, as
[the merchant exception to the Statute of Frauds] would apply.
Id. at 289.
In another case, Rush Johnson Farms, Inc. v. Mo. Farmers Ass'n, 555 S.W.2d 61(Mo. Ct. App. 1977), the Missouri Court of Appeals held that the farmer at issue was a
merchant for purposes of the Statute of Frauds when, for “many, many years,” the farmer
kept abreast of market prices in order to annually sell his crops. The court relied on the
ordinary dictionary definition of the term “deals” to mean “to buy or sell.” Id. at 64 (quoting
Ballentine’s Law Dictionary 308 (3rd ed. 1969)). Based on that definition, the court held that
the farmer’s practice of selling his annual crop for “many, many years” proved that the
farmer “deals in goods of the kind.” Rush Johnson Farms, 555 S.W.2d at 64. In addition,
the court stated:
This court does not believe that anyone in this day and age looks
upon any person or corporation who conducts a farming
operation as a simple tiller of the soil. It is well known that the
marketing of a crop is certainly as important as the raising of it.
[The farmer] fully revealed in this case his knowledge of the
market and his thorough familiarity with marketing practices
and procedures in trying to obtain the best price possible for his
product. Under the definition of merchant, as contained in the
UCC, Johnson fully qualified as such so that the oral contract in
this case was not barred under the statute of frauds . . . .
Id. The court further relied on the definition of goods contained in Missouri’s version of the
U.C.C., which is identical to the version adopted in Tennessee. According to the court,
Missouri Revised Statute Section 400.2-105 defines goods as including “the unborn young
of animals and growing crops.” Id. at 63; see also Tenn. Code Ann. §47-2-105 (same
definition). The court, therefore, concluded that the framers of the U.C.C. contemplated
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farmers in their description of those who qualify as merchants under the Statute of Frauds
when the framers approved the expansive definition of “almost every person in business.”
Rush Johnson Farms, 555 S.W.2d at 64–65. However, the court cautioned that not every
farmer may meet the definition of a merchant, but that the determination of whether a farmer
should be considered a merchant for purposes of the Statute of Frauds “would depend on the
individual experience and activities of the person involved.” Id. at 65.
We find the reasoning in Colorado-Kansas Grain, Goldkist, and Rush Johnson
Farms, as well as other cases holding that farmers may be considered merchants, to be
persuasive. See also Dotts v. Bennett, 382 N.W.2d 85 (Iowa 1986) (holding that jury’s
decision to consider farmer a merchant was not against the weight of the evidence even
though the farmer only sold twenty percent of roughly 150 acres of hay per year when the
farmer had fifteen years of experience selling hay, kept abreast of hay prices, and sold hay
out of state); Agrex, Inc. v. Schrant, 379 N.W.2d 751 (Neb. 1986) (holding that
“experienced grain producers who regularly grow and market grain on the open market as
the principal means of providing for their livelihood, and by reason of such occupation have
acquired and possess knowledge or skill peculiar to the practices and operations of grain
marketing, are merchants”); Ohio Grain Co. v. Swisshelm, 318 N.E.2d 428 (Ohio 1973)
(holding that the farmer was a merchant because he was “clearly familiar with farm markets
and their operation and followed them with some care, . . . knew that corn was sold for
varying prices, depending upon its moisture, quality and condition, and admitted having some
idea that the same was true of beans”); Nelson v. Union Equity Co-op. Exchange, 548
S.W.2d 352 (Tex. 1977) (holding that the farmer who sold his annual wheat crop for his
living and stayed abreast of market prices was a merchant because the merchant exception
to the Statute of Frauds is intended to apply to all but the most casual and inexperienced
sellers).
We conclude that the framers of the U.C.C. did not intend to exclude all farmers from
the category of merchants, simply because a farmer’s primary occupation is the cultivation,
rather than the sale, of crops. The sale of crops is as integral to the business of commercial
farming as the cultivation. The framers included crops in their definition of goods. Tenn.
Code Ann. §47-2-105. Therefore, the framers clearly intended to include those that sell crops
commercially in the definition of merchant, so long as that person either “deals in goods of
the kind” or who “by his occupation holds himself out as having knowledge or skill peculiar
to the practices or goods involved in the transaction.” In addition, the definition of merchant
is broadly construed for purposes of the Statute of Frauds, encompassing “almost every
person in business,” including an experienced commercial farmer. Tenn. Code. Ann. §47-2-
104, cmt. 2.
Based on the foregoing, we cannot conclude that the framers intentionally intended
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to omit experienced commercial farmers from the category of merchants. Accordingly, we
adopt the rule that a farmer may be considered a merchant for the purposes of the merchant
exception to the Statute of Frauds, when the farmer possesses sufficient expertise in not only
the cultivation, but also the sale of crops. However, the determination of whether a particular
farmer is a merchant is a mixed question of fact and law, which must be determined on a
case-by-case basis, taking into account “the individual experience and activities of the person
involved.” Rush Johnson Farms, 555 S.W.2d at 65. Accordingly, we reverse the trial court’s
determination that “Tennessee’s farmer[s],” as a whole, are considered merchants for
purposes of the Statute of Frauds. Instead, trial courts should consider the following,
nonexhaustive, criteria in determining whether a particular farmer is a merchant for purposes
of the Statute of Frauds:
(1) the length of time the farmer has been engaged in the
practice of selling his product to the marketers of his product;
(2) the degree of business acumen shown by the farmer in his
dealings with other parties; (3) the farmer's awareness of the
operation and existence of farm markets; and (4) the farmer's
past experience with or knowledge of the customs and practices
which are unique to the particular marketing of the product
which he sells.
Colorado-Kansas Grain, 817 P.2d at 640 (citations omitted).
Applying the above factors to Mr. Williams, we note that several factors weigh in
favor of a determination that Mr. Williams was a merchant for purposes of the Statute of
Frauds. First, Mr. Williams testified that he had been a cotton farmer for approximately
twenty-five years and that throughout the years, he sold both his and his landlord’s cotton
production. Next, Mr. Williams testified that he had previously engaged in oral crop
“booking,” a practice that other farmers testified was common in the cotton trade. Mr.
Williams also testified that he determined when to sell his cotton, and at what price, by using
a three-year history of his cotton sales, as well as daily notifications about the price of cotton
on the cotton market. Mr. Williams also testified that he receives periodicals about cotton
farming, such as Cotton Grower.
However, some factors weigh against a determination that Mr. Williams is a merchant
for purposes of the Statute of Frauds. First, Mr. Williams testified that he does not engage
in the practice of hedging; indeed, Mr. Williams testified that he was unaware of what the
term “hedging” meant. However, the testimony of Mr. Brooks, as well as the depositions of
several other area farmers, established that hedging is a practice that is unique and integral
to the marketing of cotton. In addition, though Mr. Williams testified that he had previously
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orally booked his cotton with Brooks Cotton, his testimony shows that he had only engaged
in this practice once over the last several years. Further, the record is unclear whether the
periodicals Mr. Williams receives deal with the cotton trade, or solely with cotton farming.
From our review of the pertinent factors, it is clear that the parties “disagree about the
inferences and conclusions to be drawn from the facts,” specifically whether the facts show
that Mr. Williams was, in fact, a merchant. CAO Holdings, Inc. v. Trost, 333 S.W.3d 73, 87
(Tenn. 2010). Accordingly, to determine this issue, this Court would be forced to weigh the
evidence in favor, and against, a conclusion that Mr. Williams is a merchant for purposes of
the U.C.C. Statute of Frauds. However, summary judgment proceedings have never been
envisioned as substitutes for trials of disputed factual issues. Id. (citing Fruge v. Doe, 952
S.W.2d 408, 410 (Tenn. 1997)). Summary judgment “should not replace a trial when
disputed factual issues exist, because its purpose is not to weigh the evidence, to resolve
factual disputes, or to draw inferences from the facts.” Downs v. Bush, 263 S.W.3d 812, 815
(Tenn. 2008) (emphasis added). Courts should grant summary judgment “only when both the
facts and the conclusions to be drawn from the facts permit a reasonable person to reach only
one conclusion.” Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995). However, there are
facts in this case both supporting and undermining a conclusion that Mr. Williams is a
merchant for purposes of the U.C.C. Statute of Frauds. Therefore, we conclude that the
existence of genuine issues involving the inferences to be drawn from the facts in this case
should have prevented the trial court from granting summary judgment to either party.
Accordingly, we affirm the denial of Mr. Williams motion for summary judgment, reverse
the grant of Brooks Cotton’s motion for partial summary judgment and remand to the trial
court for a trial on the merits to determine if Mr. Williams should be considered a merchant
for purposes of the U.C.C. Statute of Frauds.
VI. Conclusion
The judgment of the Chancery Court of Crockett County is affirmed in part, reversed
in part, and remanded for further proceedings in accordance with this opinion. Costs are
taxed equally to Appellant Bradley F. Williams, and his surety, and to Appellee Brooks
Cotton Company, Inc., for all of which execution may issue if necessary.
_________________________________
J. STEVEN STAFFORD, JUDGE
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