Four Rivers Seed Co. v. Circle K Farms, Inc.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
No. 00-522
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 360
303 Mont. 342
16 P.3d 342
FOUR RIVERS SEED COMPANY
and TED COOK,
Plaintiffs and Respondents,
v.
CIRCLE K FARMS, INC.,
and C. KENT KIRKSEY,
Defendants and Appellants.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Broadwater,
Honorable Dorothy McCarter, Judge Presiding
COUNSEL OF RECORD:
For Appellants:
Patrick F. Hooks, Hooks Law Office, Townsend, Montana
For Respondents:
Richard J. Dolan, Goetz, Gallik, Baldwin & Dolan, P.C., Bozeman,
Montana
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (1 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
Submitted on Briefs: October 18, 2000
Decided: December 27, 2000
Filed:
__________________________________________
Clerk
Justice Terry N. Trieweiler delivered the Opinion of the Court.
¶1 The Plaintiffs, Four Rivers Seed Company and Ted Cook, filed this action in the
District Court for the First Judicial District in Broadwater County to recover damages for
breach of contract and conversion from the Defendants, Circle K Farms and Kent Kirksey,
owner of Circle K Farms and for injunctive relief. The District Court issued a preliminary
injunction. Circle K Farms and Kent Kirksey appeal. We affirm the judgment of the
District Court.
¶2 Appellants present two issues on appeal:
¶3 1. Did the District Court err when it enjoined Circle K Farms from having its potato
crop certified?
¶4 2. Did the District Court abuse its discretion when it did not require the Plaintiffs to
post a bond pursuant to § 27-19-306, MCA?
FACTUAL BACKGROUND
¶5 The United States Department of Agriculture and various universities (called public
breeders) cross-breed certain varieties of seed potatoes and then grow them on a trial
basis. Since the public breeders do not have the resources to grow the seeds in large
numbers, they depend on private seed growers, including Ted Cook, to do so and complete
the development process. Cook has worked in the seed potato business for 18 years.
¶6 The private seed potato growers take what is called "nuclear stock" from the public
breeders and grow generation one (G-1) seed potatoes. From those, they produce G-2
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (2 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
potatoes. From the G-2 potatoes, they can grow G-3 potatoes. During this process, the
grower sees no income for approximately four years because there is not enough seed to
market. All seed potato crops must be certified by the State of Montana before they can be
sold.
¶7 Approximately 11 years prior to commencement of this action, Cook began growing
the Umatilla seed potato variety. He testified that it will take several more years before the
degree of acceptance of this variety by commercial growers (as opposed to seed potato
growers) is known. Although Cook and other potato growers have achieved much success
with this variety, it is vulnerable to fusereum dry rot. With each successive generation, the
vulnerability increases. Therefore, farmers in Montana (with the exception of Defendants)
have chosen not to grow G-4 Umatilla seed potatoes despite regulations from the State of
Montana allowing farmers to grow G-4 potato crops.
¶8 On February 8, 1999, Four River Seed Company and Ted Cook contracted with Circle
K Farms and C. Kent Kirksey to sell 3500 hundred-weight (cwt) of Umatilla Generation
Two seed potatoes to Circle K. The contract provided that Circle K would "grow, store
and make ready for sale and delivery from their farm, 140 acres of certified Umatilla G-3
seed potatoes during the 1999 growing season." In the contract, Cook retained the
exclusive right to market the G-3 seed potatoes grown by Circle K. Subsequently, Cook
discovered that Circle K replanted part of the G-3 seed grown from the G-2 seed given to
them in the contract in an attempt to grow their own G-4 certified seed potato.
¶9 According to Cook, Montana maintains one of the best reputations for seed potatoes in
the country. Cook, as well, has earned a solid reputation as a potato farmer. Concerned
about both the danger to Montana and his reputation as well as the loss of his investment,
Cook filed a complaint and a motion for a preliminary injunction to enjoin Circle K from
certifying the crop as G-4 seed potatoes. This action was not intended to otherwise limit
use or sale of the potato crop. The District Court granted the preliminary injunction and
Circle K appeals.
DISCUSSION
ISSUE ONE
¶10 Did the District Court err when it enjoined Circle K Farms from having its potato crop
certified?
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (3 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
¶11 Circle K contends that the District Court misinterpreted the contract and, therefore,
erred by granting the preliminary injunction. It also asserts that because money damages
can be easily ascertained, a preliminary injunction is not necessary. We review a
preliminary injunction for an abuse of discretion. See Sweetgrass Farms, LTD. v. Board of
County Comm'rs of Sweetgrass County, 2000 MT 147, ¶ 20, 300 Mont. 66, ¶ 20, 2 P.3d
825, ¶ 20.
¶12 A preliminary injunction does not resolve the merits of a case but rather prevents
further injury or irreparable harm by preserving the status quo of the subject in
controversy pending an adjudication on its merits. Knudson v. McDunn (1995), 271 Mont.
61, 65, 894 P.2d 295, 298. The court has a duty to balance the equities and minimize
potential damage when considering an application for a preliminary injunction. Porter v.
K&S Partnership (1981), 192 Mont. 175, 180, 627 P.2d 836, 839.
¶13 According to § 27-19-201, MCA, a preliminary injunction may be granted
(1) when it appears that the applicant is entitled to the relief demanded and the relief
or any part of the relief consists in restraining the commission or continuance of the
act complained of, either for a limited period or perpetually;
(2) when it appears that the commission or continuance of some act during the
litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or threatens
or is about to do or is procuring or suffering to be done some act in violation of the
applicant's rights, respecting the subject of the action, and tending to render the
judgment ineffectual . . . .
Section 27-19-201, MCA. These subsections are disjunctive and a district court is not
required to make a finding that each circumstance exists. Stark v. Borner (1987), 226
Mont. 356, 358, 735 P.2d 314, 317. However, in this case, the District Court found and
concluded that injunctive relief was justified pursuant to all three bases.
¶14 The District Court found that if the potatoes became certified before the conclusion of
the case, Cook would likely lose the ability to keep G-4 seed potatoes out of the market
and would lose control over them.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (4 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
¶15 The contract limited Circle K's use of the G-2 seed to "grow[ing], stor[ing], and mak
[ing] ready for sale and delivery from their farm, 140 acres of certified Umatilla G-3 seed
potatoes during the 1999 growing season." However, Circle K planted some of the seed
potatoes to increase its own supply and create a fourth generation. During the trial, Kent
Kirksey admitted that these actions contravened the language of the contract. This
admission at trial established a prima facie case of breach of contract and conversion.
However, Kirksey contends that the remedy is simply the amount of damages Cook has
coming for the loss of his exclusive right to market the G-3 seed and that injunctive relief
is neither necessary nor justified.
¶16 Cook, on the other hand, contends that use of the G-3 seed to grow G-4 seed poses a
serious threat to his reputation and to the market for Montana grown seed potatoes. He
testified that the spread of fusereum in the G-4 seed is guaranteed and that the entire
market for that variety would dry up-wiping out his investment and future returns. He
testified that the monetary damages from the loss of his exclusive right to market was only
a small part of the problem.
¶17 The District Court held that irreparable injury to Cook would likely occur absent a
preliminary injunction. The District Court found that a failed crop "would threaten the
reputation of the Umatilla seed variety, and destroy or severely diminish the Plaintiff's
investment in that variety." We find substantial evidence to support the District Court's
finding that irreparable injury to Plaintiffs would occur without injunctive relief.
¶18 Furthermore, without a preliminary injunction, any monetary or legal remedy would
likely be ineffectual. According to the record, pecuniary compensation does not afford
Cook adequate relief. Monetary damages are inadequate because of the risk to Cook's
investment and the risk of damage to his reputation, the value of which is difficult to
calculate. The District Court found that "once the reputation of the seed potato variety is
tainted, it is difficult or impossible to repair that reputation." This finding is also supported
by substantial evidence.
¶19 Therefore, we conclude that the District Court did not abuse its discretion when it
issued a preliminary injunction.
ISSUE TWO
¶20 Did the District Court abuse its discretion when it did not require the Plaintiffs to post
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (5 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
a bond pursuant to § 27-19-306, MCA?
¶21 Circle K contends that the District Court erred by not requiring Respondents to post a
bond for damages pursuant to § 27-19-306, MCA which provides that:
[O]n granting an injunction or restraining order, the judge shall require a written
undertaking to be given by the applicant for the payment of the costs and damages
that may be incurred or suffered by any party who is found to have been wrongfully
enjoined or restrained. Except as provided in subsection (2), the undertaking:
(a) must be fixed at a sum that the judge considers proper; and
(b) may be waived:
(i) in domestic disputes; or
(ii) in the interest of justice.
Section 27-19-306, MCA. The decision whether to require a security bond is within the
sound discretion of the district court and will not be overturned absent an abuse of
discretion. May v. First Nat'l Pawn Brokers, Ltd. (1995), 270 Mont. 132, 134, 890 P.2d
386, 388.
¶21 Circle K contends that the District Court must require Cook to provide security in this
situation. Circle K relies on Stark v. Borner (1987), 226 Mont. 356, 735 P.2d 314. In
Stark, we permitted a lower court to waive the security requirement because the court had
adequately protected the interests of both parties. Circle K therefore asserts that since the
lower court did not adequately protect its interests, security should have been required.
However, this rationale is inconsistent with the language of the statute. Section 27-19-306,
MCA, provides an opportunity for the district court to waive the security whenever it
would be in the interests of justice. Limiting the statutory discretion to situations where
the court protects the defendant would impermissibly narrow the discretion provided for in
§ 27-19-306.
¶22 The record demonstrates that the District Court considered all the evidence and
determined that requiring a bond would be unfair to Cook. All Circle K has been denied is
the opportunity to certify fourth generation seed potatoes which it admits that it never had
the contractual right to do in the first place. The injunction does not take the crop away
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (6 of 7)4/2/2007 1:46:32 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm
from the Circle K, nor does it permanently deprive them of any profit. Therefore, we
conclude that the District Court did not abuse its discretion when it waived the security
requirement.
¶23 We affirm the judgment of the District Court.
/S/ TERRY N. TRIEWEILER
We concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-522%20Opinion.htm (7 of 7)4/2/2007 1:46:32 PM