Clements Farms, Inc. v. Ben Fish & Son

SWANSTROM, Judge,

dissenting in part.

I respectfully disagree with the majority’s determination that the Uniform Commercial Code can be applied to this case by “analogy.” In my view, Article 2 of the UCC is not applicable to a seedman’s contract, particularly to the contract here. I believe there is no liability in this case under any theory of implied warranty under the UCC. Absent liability, there is no need to address any question relating to damages. I concur only in that part of the majority opinion which overturns an award of attorney fees to Clements Farms.

The majority opinion does not cite, and my research does not disclose, another case where Article 2 of the UCC has been extended to a seedman’s contract. Unlike the majority, I do not think Article 2 applies simply because goods have changed hands in a commercial transaction. Rather, I think Article 2 applies only to sales and to certain well-recognized categories of transactions resembling sales. Leases constitute such a category, as the majority opinion states. This case does not involve a lease. The only other recognized category appears to be bailments, and even this category is not universally accepted. See generally Annot., What Constitutes a Transaction, a Contract for Sale, or a Sale within the Scope of UCC Article 2, 4 A.L.R. 4th 85 (1981 and later supplements). In extending the UCC’s warranties to “bailments” the district court was led down a dubious path. The majority, seeking to arrive at the same destination, have blazed their own way. I cannot follow either route for the law and the facts guide me in a different direction.

In a typical seedman’s contract, the seed-man furnishes the seed and agrees to pay the grower for raising the seed, a certain sum per pound or bushel for all seed produced meeting the requirements of the contract. Schoonover v. Igleheart Bros., Inc., 163 Kan. 689, 186 P.2d 109 (1947). These contracts have, under certain circumstances, been held to constitute bailments. See Washbum-Wilson Seed Co. v. Alexie, 54 Idaho 727, 35 P.2d 990 (1934); Smith v. Washbum-Wilson Seed Co., 40 Idaho 191, 232 P. 574 (1925). The factor distinguishing a bailment contract, where the grower is merely hired to provide the service of producing the crop, from a contract for sale, where the grower is agreeing to sell the specified crop to a stated buyer, has been whether the agreement provides for title in the seed and in the resulting crop to remain in the party furnishing the seed. Thiel v. Pacific Fruit & Produce Co., 51 Idaho 145, 4 P.2d 356 (1931). These earlier Idaho cases recognize that where title is reserved by the party furnishing the seed, the grower merely performs a service under a bailment, rather than owning the ultimate product. The most recent case recognizing and wholly applying the bailment concept to a seedman’s contract was decided thirty years ago. Kent v. Campbell, 80 Idaho 57, 324 P.2d 398 (1958). The dispute was between two growers and their seed supplier. In Kent, however, all parties agreed that the contracts initially were bailment contracts. The disagreement was whether the seedman-bailor had — as he contended — rejected the crop grown by the bailees and thereafter had entered into a new oral agreement with them to sell their crop on a consignment basis.¹

Recently, the application of the theory of bailment to seedman’s contracts has been questioned by members of our Supreme Court. See Peterson v. Conida Warehouses, Inc., 98 Idaho 883, 575 P.2d 481 (1978) (Bakes, J., and Bistline, J., special concurring opinions). In Chapman v. Haney Seed Co., Inc., 102 Idaho 26, 624 P.2d 408 (1981), the Court noted that the bailment theory had been “seriously criticized” and expressly avoided addressing the “question of ‘bailment’.” The court could do so because Chapman, like Kent, did not involve any third-party claims to the crop grown by the “bailee.”

However, in special concurring opinions in Peterson, Justice Bistline and Justice Bakes agreed that the Court should not have sidestepped the issue. Justice Bistline suggested that seedman’s contracts were first viewed as bailments in Idaho in 1922 when the Idaho Supreme Court uncritically adopted a Montana case which, on “tenuous ground,” had applied “18th century English law of common carriers to Montana seed contracts.” 98 Idaho at 887, 575 P.2d at 485. Justice Bistline concluded:

I submit that it is unrealistic to continue to indulge in the fiction that a bean, which is irretrievably planted in the ground, and whose very existence as a bean ceases as it turns into a plant, may be the subject of a bailment, entitling the supplier of the bean to claim all the beans produced from that plant. The parties essentially have entered into a joint venture, with the seed company supplying the seed beans, and the grower, ..., supplying the land in which the beans may be planted, together with all the labor which goes into planting, cultivating, harvesting, and hauling to the warehouse____ Here the grower’s share was agreed upon at so much per hundred-weight, which seems to be what he was to receive for services rendered in the adventure, and not, by any stretch of the imagination, as compensation for storing the beans one inch apart in rows in the ground.

Id. at 887-8, 575 P.2d at 485-6.

Justice Bakes also wrote persuasively in his special concurrence:

In my view, the bailment theory accepted in Kent should be rejected by this Court, not merely sidestepped as we have done in this case. I agree with Justice Bistline that it is stretching the concept of bailment beyond its breaking point to assert that one may deliver beans to another to plant them and harvest the crop and still retain title to the crop produced by the planting.

Id. at 886, 575 P.2d at 484.

I believe our Supreme Court has already abandoned the “tenuous ground” underlying the application of the bailment theory to seedman contracts. Any ground once supporting the theory has been seriously undercut by the decision of the Court in Peterson and NBC Leasing Company. These decisions have carved out “policy exception^] to the Kent rule in favor of landlords (and perhaps in subsequent litigation other lien claimants) without expressly saying so.” Peterson at 886, 575 P.2d at 484 (Bakes, J., special concurrence).

The concept that seedman’s contracts are bailments has been directly challenged here. We are compelled to respond directly. I submit that our Supreme Court, if deciding this issue, would hold that seed-man’s contracts no longer should be construed as bailment contracts. Accordingly, we also should conclude that those cases applying UCC warranties to equipment leases, such as Glenn Dick Equipment Co. v. Galey Construction Co., 97 Idaho 216, 541 P.2d 1184 (1975), and All-States Leasing Co. v. Bass, 96 Idaho 873, 538 P.2d 1177 (1975), should not be followed or extended here to create any implied warranties of fitness for a particular purpose.

The theory upon which this case was tried and upon which the district court held there was an implied warranty that the seed furnished to Clements was fit for a particular purpose cannot be sustained. Furthermore, no warranty can be based upon a “sale” of the seed to Clements. The parties agree that the seed producer, Ben Fish & Son, did not sell the seed in question to Clements. It is true that Ben Fish wanted its seed grown by farmers in different areas, including Idaho. Ben Fish also wanted to purchase some of the crops produced from its seed to assure a continuing supply of seed. For these purposes, Ben Fish supplied Shields of Idaho, Inc. (Shields), an independent warehouse, with seed. Shields entered into its own contracts with some of its farmer customers to grow the seed. Some of this seed was in turn contracted by Shields to be sold to Ben Fish. It is undisputed that Ben Fish provided Shields with relevant information about the maturational characteristics of this particular seed, at least what was known from growing the seed elsewhere. It is also undisputed that Shield’s employees had instructions to inform its farmer customers about growing requirements of the lima bean seed at issue here.

On or about March 6, 1985, Clements Farms signed a seedman’s contract with Shields agreeing to plant and grow eighty acres of beans for Shields, using a specified “Green Baby Lima” seed. The contract placed all risk on Clements Farms for any crop failure and all warranties regarding the seed furnished were expressly waived. The contract stated that Clements would pay Shields $37 per hundred-weight for the seed it was to grow. When Clements signed the Shields contract to grow the green lima bean seed, Clements had no contact whatsoever with Ben Fish. Clements has not contended that Shields was the agent for Ben Fish and the proof at trial does not suggest any agency relationship.

Pursuant to its contract with Clements, Shields delivered the bean seed to Clements Farms about May 8. Thus, if there was any transaction in this case which — to use the words of the majority opinion — “resembled a sale of goods,” or could give rise to any implied warranties, it was this transaction. Even though some weeks later the Shields-Clements contract was voided and replaced by the Ben Fish-Clements contract, the record shows that Clements remained liable to Shields for the seed which Shields had previously delivered to Clements Farms.

The majority opinion ignores the fact that Clements decided as early as March 6, 1985, to grow this particular seed for Shields. The majority also did not mention that Shields delivered this seed to Clements on or about May 8. The majority did not mention that Clements remained liable to Shields, not to Ben Fish, for the cost of the seed. The later contract between Ben Fish and Clements said nothing about the cost of seed. It recited only that Clements agreed to raise “80 acres of GBL 8-78 Lima Beans ... with Stock Seed furnished by” Ben Fish. In focusing upon this “furnished by” language of the contract, the majority ignored the fact that when the seed was selected, purchased and delivered Clements was dealing with Shields, not with Ben Fish. The evidence will not support a finding that Clements, an extensive agri-business operated by an experienced farmer-businessman, was relying on Ben Fish’s skill or judgment in choosing to grow the lima bean crop. As noted, Clements contacted Ben Fish only after Clements learned of Shield’s shaky financial situation. Clements wanted to avoid entangling itself and the prospective crop in any bankruptcy proceeding involving Shields. Ben Fish then became concerned because of its own plans and commitments which were based in part on the contract Clements had made with Shields in March to produce eighty acres of the desired bean seed. These are the circumstances which brought Ben Fish and Clements together. These circumstances produced a simple seedman’s contract by which Clements agreed to grow a crop of beans for Ben Fish.

The majority would have the reader of this opinion believe that Ben Fish designated itself a “seller” in this contract. The only place where the word appears is in a printed disclaimer which is part of the Ben Fish letterhead. The disclaimer is above the contract. The contract itself, which just happened to be typed on the letterhead, does not even contain the word “seller.” This “labeling” attempt will not stick.

In summary, the evidence does not show that Ben Fish was a “seller” of goods who had reason to know that Clements was relying on Ben Fish to furnish appropriate goods. Nor does the evidence show that Clements did in fact rely upon Ben Fish’s skill or judgment. The requirements of I.C. § 28-2-315 have not been met.

Finally, there was nothing wrong with the seed “furnished by” Ben Fish. Crops were successfully grown in Idaho using this seed despite the fact that the lima bean had a longer maturation time than the pinto beans which Clements usually grew. Other factors, including Clements’s two-week delay in planting the crop after signing the Ben Fish contract, contributed to the crop failure. In any event, we have not been shown any basis for holding that the implied warranty of fitness for a particular purpose applied to this transaction. Accordingly, I would reverse the judgment.

1 . The cases cited above all predate the adoption in Idaho of the Uniform Commercial Code. Consequently, the contracts construed in those cases all have language discussing passage and retention of title, a subject now of lesser importance under the UCC (see I.C. § 28-2-401) and recent Idaho Supreme Court decisions. See, e.g., Peterson v. Conida Warehouses, Inc., 98 Idaho 883, 575 P.2d 481 (1978) (a bailment type contract between a seed supplier and a tenant farmer held ineffective as against the land owner’s interest in the crop under a “share crop arrangement"). A similar holding occurred in NBC Leasing Co. v. R&T Farms, Inc., 112 Idaho 500, 733 P.2d 721 (1987) (landowner’s proprietary interest in one-third of the crop under a lease cannot be affected by any contract between the lessee-grower and the seed supplier even though the seed supplier had a perfected security interest in the crop and the landowner did not perfect a security interest in the crop).