RM Campbell Indus. v. Midwest Renewable Energy

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
07/29/2016 08:06 AM CDT
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Nebraska Supreme Court A dvance Sheets
294 Nebraska R eports
RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
RM Campbell Industrial, Inc., appellee,
v. M idwest R enewable Energy,
LLC, appellant.
___ N.W.2d ___
Filed July 29, 2016. No. S-15-529.
1. Res Judicata: Collateral Estoppel. The applicability of claim and issue
preclusion is a question of law.
2. Statutes. Statutory interpretation presents a question of law.
3. Principal and Agent. The scope of an agent’s authority is a question
of fact.
4. Jury Instructions: Appeal and Error. Whether a jury instruction
is correct is a question of law, which an appellate court indepen-
dently decides.
5. Jury Instructions: Proof: Appeal and Error. To establish reversible
error from a court’s failure to give a requested jury instruction, an appel-
lant has the burden to show that (1) the tendered instruction is a correct
statement of the law, (2) the tendered instruction was warranted by the
evidence, and (3) the appellant was prejudiced by the court’s failure to
give the requested instruction.
6. Contracts. The determination of whether goods or nongoods predomi-
nate a contract is generally a question of law.
7. Judgments: Res Judicata. The doctrine of res judicata, or claim pre-
clusion, bars the relitigation of a matter that has been directly addressed
or necessarily included in a former adjudication if (1) the former
judgment was rendered by a court of competent jurisdiction, (2) the
former judgment was a final judgment, (3) the former judgment was
on the merits, and (4) the same parties or their privies were involved in
both actions.
8. Res Judicata. The doctrine of res judicata, or claim preclusion, bars
relitigation not only of those matters actually litigated, but also of those
matters which might have been litigated in the prior action.
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Nebraska Supreme Court A dvance Sheets
294 Nebraska R eports
RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
9. ____. The doctrine of res judicata, or claim preclusion, rests on the
necessity to terminate litigation and on the belief that a person should
not be vexed twice for the same cause.
10. Judgments: Collateral Estoppel. Under the doctrine of collateral estop-
pel, or issue preclusion, when an issue of ultimate fact has been deter-
mined by a final judgment, that issue cannot again be litigated between
the same parties in a future lawsuit.
11. Collateral Estoppel. There are four conditions that must exist for issue
preclusion to apply: (1) The identical issue was decided in a prior action,
(2) there was a judgment on the merits which was final, (3) the party
against whom the rule is applied was a party or in privity with a party
to the prior action, and (4) there was an opportunity to fully and fairly
litigate the issue in the prior action.
12. Res Judicata: Collateral Estoppel. In contrast to claim preclusion, the
doctrine of issue preclusion does not apply to matters which might or
could have been litigated but were not.
13. Principal and Agent: Words and Phrases. An “agent” is a person
authorized by the principal to act on the principal’s behalf and under the
principal’s control.
14. Agency. For an agency relationship to arise, the principal manifests
assent to the agent that the agent will act on the principal’s behalf and
subject to the principal’s control and the agent manifests assent or other-
wise consents so to act.
15. Agency: Intent. An agency relationship may be implied from the
words and conduct of the parties and the circumstances of the case evi-
dencing an intention to create the relationship irrespective of the words
or terminology used by the parties to characterize or describe their
relationship.
16. Principal and Agent. Actual authority is authority that the princi-
pal expressly grants to the agent or authority to which the principal
consents.
17. ____. A subcategory of actual authority is implied authority, which
courts typically use to denote actual authority either to (1) do what is
necessary to accomplish the agent’s express responsibilities or (2) act
in a manner that the agent reasonably believes the principal wishes the
agent to act, in light of the principal’s objectives and manifestations.
18. ____. When a principal delegates authority to an agent to accomplish
a task without specific directions, the grant of authority includes the
agent’s ability to exercise his or her discretion and make reasonable
determinations concerning the details of how the agent will exercise
that authority.
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Nebraska Supreme Court A dvance Sheets
294 Nebraska R eports
RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
19. ____. Apparent authority is authority that is conferred when the princi-
pal affirmatively, intentionally, or by lack of ordinary care causes third
persons to act upon an agent’s apparent authority.
20. ____. Apparent authority gives an agent the power to affect the princi-
pal’s legal relationships with third parties. The power arises from and
is limited to the principal’s manifestations to those third parties about
the relationships.
21. Principal and Agent: Proof. Apparent authority for which a principal
may be liable exists only when the third party’s belief is traceable to the
principal’s manifestation and cannot be established by the agent’s acts,
declarations, or conduct. Manifestations include explicit statements the
principal makes to a third party or statements made by others concern-
ing an actor’s authority that reach the third party and the third party can
trace to the principal.
22. Principal and Agent. For apparent authority to exist, the principal
must act in a way that induces a reasonable third person to believe that
another person has authority to act for him or her.
23. ____. Whether an agent has apparent authority to bind the principal
is a factual question determined from all the circumstances of the
transaction.
24. Jury Instructions: Pleadings: Evidence. A litigant is entitled to have
the jury instructed upon only those theories of the case which are pre-
sented by the pleadings and which are supported by competent evidence.
25. Contracts: Actions: Substantial Performance. To successfully bring
an action on a contract, a plaintiff must first establish that the plaintiff
substantially performed the plaintiff’s obligations under the contract. To
establish substantial performance under a contract, any deviations from
the contract must be relatively minor and unimportant.
26. Contracts: Substantial Performance. If there is substantial perform­
ance, a contract action may be maintained, but without prejudice to any
showing of damage on the part of the defendant for failure to receive
full and complete performance.
27. Contracts: Substantial Performance: Damages. Where there is a
lack of substantial performance, but there has been a part performance
and it has been of substantial benefit to the other party and he or she
has accepted and retained the benefits thereof, he or she should not
be permitted entirely to avoid the duties assumed by him or her under
his or her contract, and, under such circumstances, the party partially
performing is entitled to recover the reasonable or fair value of such
performance, subject to the reciprocal right of the other party to recoup
such damages as he or she has suffered from the failure of the part-
performing party to perform fully or substantially his or her contract.
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Nebraska Supreme Court A dvance Sheets
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
28. Uniform Commercial Code. Nebraska’s Uniform Commercial Code
applies to transactions in goods. If a transaction is not for the sale of
goods, the provisions of the Uniform Commercial Code do not apply to
that transaction.
29. Uniform Commercial Code: Sales: Warranty. The test for inclusion
in or exclusion from the sales provisions of the Uniform Commercial
Code is not whether the contracts are mixed but, granting that they are
mixed, whether their predominant factor, their thrust, their purpose,
reasonably stated, is the rendition of service, with goods incidentally
involved, or whether they are transactions of sale, with labor inciden-
tally involved.
30. ____: ____: ____. The Uniform Commercial Code applies when the
principal purpose of the transaction is the sale of goods, even though
in order for the goods to be utilized, some installation is required. On
the other hand, if the contract is principally for services and the goods
are merely incidental to the contract, the provisions of the Uniform
Commercial Code do not apply.
31. Contracts: Quantum Meruit. Quantum meruit is premised on the
existence of a contract implied by law; however, the law only implies a
contract and allows a recovery under the theory when the parties have
not entered into an express agreement.
Appeal from the District Court for Douglas County: Timothy
P. Burns, Judge. Affirmed.
Jerrold L. Strasheim for appellant.
Karl Von Oldenburg, of Brumbaugh & Quandahl, P.C.,
L.L.O., for appellee.
Heavican, C.J., Wright, Connolly, Miller-Lerman, Cassel,
Stacy, and K elch, JJ.
Heavican, C.J.
INTRODUCTION
RM Campbell Industrial, Inc. (Campbell), filed suit against
Midwest Renewable Energy, LLC (Midwest), for breach of
contract and sought damages in the amount of $158,010.98.
Following trial, the jury found for Campbell in the amount of
$154,510.98. Midwest appeals. We affirm.
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Nebraska Supreme Court A dvance Sheets
294 Nebraska R eports
RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
FACTUAL BACKGROUND
Midwest owns an ethanol plant in Sutherland, Nebraska. At
the relevant time, Randall Kramer worked for both Midwest and
another entity, KL Process Design Group, LLC (KL Process).
In August 2006, at a time when Kramer worked for both enti-
ties simultaneously, Kramer entered into a purchase order con-
tract with Campbell for work on the first phase in the construc-
tion of the Sutherland plant. It is not disputed that the work
pursuant to this contract was paid for and completed.
In November 2006, Kramer again approached Campbell
about doing work as a subcontractor on the expansion of the
Sutherland plant. Second and third phases were anticipated,
but Campbell and Kramer entered into a contract for goods and
services for only the second phase of the project. The contract,
entered into on November 9, totaled $2,411,431.02. By this
time, Kramer was employed only by KL Process and the terms
of the contract itself indicated that the contract was between
Campbell and KL Process.
Initially, Campbell sent invoices for payment to KL Process’
offices in South Dakota. But by May 2007, the owner and
president of Campbell testified he was told to send the invoices
directly to Midwest at the address of the Sutherland plant.
Invoices were approved by KL Process and then paid by
Midwest’s controller on Midwest’s account; the evidence shows
that this was done primarily to take advantage of tax incentives
offered by the State of Nebraska, colloquially referred to as
“L.B. 775” incentives.1
In August 2007, KL Process updated Campbell on its finan-
cial situation and Midwest’s current inability to pay outstand-
ing balances until new financing had been obtained. No com-
plaint was made about Campbell’s performance. In February
2008, Midwest wrote to Campbell regarding Midwest’s lack of
1
See, 1987 Neb. Laws, L.B. 775; Employment and Investment Growth
Act, Neb. Rev. Stat. §§ 77-4101 to 77-4112 (Reissue 2009 & Cum. Supp.
2014).
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
payment and acknowledged an amount owed of $919,020.45.
Midwest also sent a check for $32,089.96, with the promise of
an additional $30,000 to be paid monthly thereafter.
But no payment was made in March. Midwest acknowl-
edged the debt in writing once more, made no complaint about
Campbell’s services, and promised to make payment as soon
as there was money to do so. That same month, KL Process
informed Campbell that it had ceased work on the second
phase of the project, but that it believed the work stoppage
was temporary; however, work never resumed on the sec-
ond phase.
Campbell filed suit against KL Process (now KL Energy
Corporation) and Midwest. KL Energy Corporation is in bank-
ruptcy and is not a party to this appeal. Suit proceeded against
Midwest for breach of contract based upon the 2-page pur-
chase order between KL Process and Campbell.
Several threshold issues were decided prior to trial and are
relevant on appeal. Midwest contended that a prior lien action
involving the Sutherland plant filed in Lincoln County District
Court barred Campbell’s action under the principles of col-
lateral estoppel and res judicata. Midwest also contended that
Campbell, a foreign corporation, lacked the appropriate certifi-
cate to transact business or file suit in Nebraska. These argu-
ments were both rejected by the district court.
At trial, Midwest argued that there was no contract between
it and Campbell because KL Process lacked the actual or
apparent authority to bind Midwest to any agreement. Midwest
also argued that Campbell failed to substantially complete its
obligations under the contract. The jury found for Campbell in
the amount of $154,510.98.
ASSIGNMENTS OF ERROR
Midwest assigns, consolidated and restated, that the district
court erred in (1) finding that Campbell’s breach of contract
action was not barred by res judicata or collateral estoppel; (2)
finding that Campbell could maintain suit despite its failure to
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Nebraska Supreme Court A dvance Sheets
294 Nebraska R eports
RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
hold a Nebraska certificate of authority; (3) concluding there
was sufficient evidence for a jury question on (a) whether
KL Process acted as an agent of Midwest in entering into the
subcontract with Campbell and (b) whether KL Process had
actual or apparent authority to bind Midwest to the subcontract,
such that there was an enforceable contract between Midwest
and Campbell, and in instructing the jury as it did; (4) not find-
ing that Campbell had to prove substantial compliance with
the subcontract and not instructing the jury on this; (5) finding
there was a jury question regarding proximate causation; (6)
applying article 2 of Nebraska’s Uniform Commercial Code
(U.C.C.) and not the common law to the agreement; and (7)
finding there was a jury question on damages and incorrectly
instructing the jury regarding damages.
STANDARD OF REVIEW
[1] The applicability of claim and issue preclusion is a ques-
tion of law.2
[2] Statutory interpretation presents a question of law.3
[3] The scope of an agent’s authority is a question of fact.4
[4] Whether a jury instruction is correct is a question of law,
which an appellate court independently decides.5
[5] To establish reversible error from a court’s failure to
give a requested jury instruction, an appellant has the burden
to show that (1) the tendered instruction is a correct statement
of the law, (2) the tendered instruction was warranted by the
evidence, and (3) the appellant was prejudiced by the court’s
failure to give the requested instruction.6
2
McGill v. Lion Place Condo. Assn., 291 Neb. 70, 864 N.W.2d 642 (2015).
3
Pettit v. Nebraska Dept. of Corr. Servs., 291 Neb. 513, 867 N.W.2d 553
(2015).
4
Koricic v. Beverly Enters. - Neb., 278 Neb. 713, 773 N.W.2d 145 (2009).
5
Golnick v. Callender, 290 Neb. 395, 860 N.W.2d 180 (2015).
6
Id.
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
[6] The determination of whether goods or nongoods pre-
dominate a contract is generally a question of law.7
ANALYSIS
Effect of Lincoln County
Construction Lien.
In its first assignment of error, Midwest assigns that the dis-
trict court erred in not finding that the dismissal of Campbell’s
construction lien at the time of the judicial foreclosure of
another lienholder’s lien operated to preclude Campbell’s suit.
Campbell filed a construction lien on the Sutherland plant
in Lincoln County, Nebraska, on April 11, 2008. Another sup-
plier, Avid Solutions, Inc. (Avid), subsequently commenced a
foreclosure on its own construction lien on September 29. Avid
named Campbell as a fellow lienholder and served it with the
complaint against Midwest. Campbell did not appear.
Proceedings continued against Midwest in Avid’s foreclo-
sure. In a journal entry dated June 7, 2011, the district court
ruled on several preliminary matters, including noting that a
“default judgment will be entered against any Defendant who
does not appear at the contested trial.” The district court’s
decree, entered on July 14, noted that Campbell, as well as oth-
ers, did not appear at trial and that their liens were “dismissed
and released.”
[7-9] The doctrine of res judicata, or claim preclusion, bars
the relitigation of a matter that has been directly addressed or
necessarily included in a former adjudication if (1) the former
judgment was rendered by a court of competent jurisdiction,
(2) the former judgment was a final judgment, (3) the for-
mer judgment was on the merits, and (4) the same parties or
their privies were involved in both actions.8 The doctrine bars
7
See MBH, Inc. v. John Otte Oil & Propane, 15 Neb. Ct. App. 341, 727 N.W.2d
238 (2007) (citing to other jurisdictions as issue of first impression in
Nebraska).
8
Eicher v. Mid America Fin. Invest. Corp., 270 Neb. 370, 702 N.W.2d 792
(2005).
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
relitigation not only of those matters actually litigated, but also
of those matters which might have been litigated in the prior
action.9 The doctrine rests on the necessity to terminate litiga-
tion and on the belief that a person should not be vexed twice
for the same cause.10
[10,11] Under the doctrine of collateral estoppel, or issue
preclusion, when an issue of ultimate fact has been deter-
mined by a final judgment, that issue cannot again be litigated
between the same parties in a future lawsuit.11 There are four
conditions that must exist for issue preclusion to apply: (1) The
identical issue was decided in a prior action, (2) there was a
judgment on the merits which was final, (3) the party against
whom the rule is applied was a party or in privity with a party
to the prior action, and (4) there was an opportunity to fully
and fairly litigate the issue in the prior action.12
[12] As an initial matter, we conclude that issue preclu-
sion is not applicable here to bar Campbell’s suit. In contrast
to claim preclusion, the doctrine of issue preclusion does not
apply to matters which might or could have been litigated but
were not.13 Campbell never appeared in Avid’s lien foreclosure
proceedings, and the issue of whether Campbell and Midwest
had an agreement was not fully and fairly litigated for pur-
poses of issue preclusion.
Turning next to claim preclusion, we conclude that the
issue of an agreement between Campbell and Midwest was
not decided on its merits. Claim preclusion bars relitigation,
not only of those matters actually litigated, but also of those
matters which might have been litigated in the prior action.
But we conclude that there was no decision on the merits in
the underlying lien foreclosure, because Campbell did not
9
Id.
10
Id.
11
Id.
12
Id.
13
47 Am. Jur. 2d Judgments § 493 (2006).
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
participate in the Avid foreclosure and was a party only by
virtue of Neb. Rev. Stat. § 52-155(2) (Reissue 2010), which
provides that “all claimants having recorded liens may join as
plaintiffs and those who do not join as plaintiffs may be joined
as defendants.”
The district court and Campbell rely on Tilt-Up Concrete
v. Star City/Federal,14 which holds that a construction lien
did not eliminate a contractor’s common-law right to sue for
breach of contract. While we do not find Tilt-Up Concrete to
be absolutely dispositive as to issue preclusion, we noted in
that case that a plaintiff on similar facts was not precluded
from bringing a contract action simply because the plaintiff
also foreclosed on a construction lien. The choice inherent
from Tilt-Up Concrete would be obviated if we were to con-
clude that, here, Avid’s foreclosing on its own lien precluded
other lienholders from bringing a separate action to recover
contract damages.
Midwest’s first assignment of error is without merit.
Certificate of Authority.
In its second assignment of error, Midwest assigns that the
district court erred in not dismissing Campbell’s suit, because
Campbell is a foreign corporation that does not hold a Nebraska
certificate of authority. It is not disputed that Campbell is a
foreign corporation and has not, at any relevant time, held a
certificate of authority in Nebraska.
Neb. Rev. Stat. § 21-20,168(1) (Reissue 2012) provides
that “[a] foreign corporation may not transact business in
this state until it obtains a certificate of authority from the
Secretary of State.” As relevant to this analysis, subsection
(2) of § 21-20,168 explains that, among other exceptions,
transacting business in interstate commerce shall not constitute
transacting business within the meaning of subsection (1) of
14
Tilt-Up Concrete v. Star City/Federal, 261 Neb. 64, 621 N.W.2d 502
(2001).
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
§ 21-20,168.15 Neb. Rev. Stat. § 21-20,169(1) (Reissue 2012)
provides that “[a] foreign corporation transacting business in
this state without a certificate of authority may not maintain a
proceeding in any court in this state until it obtains a certificate
of authority.”
A court must attempt to give effect to all parts of a statute,
and if it can be avoided, no word, clause, or sentence will be
rejected as superfluous or meaningless.16 Statutes relating to
the same subject, although enacted at different times, are in
pari materia and should be construed together.17
Reading §§ 21-20,168 and 21-20,169 together, we conclude
that because Campbell was transacting business in interstate
commerce, it was not transacting business for purposes of
§ 21-20,169(1).
This result is consistent with Allenberg Cotton Co. v.
Pittman.18 There, the plaintiff, a foreign corporation, sued
to enforce a contract with a Mississippi defendant. The
Mississippi Supreme Court held that the contract was in intra-
state commerce and could not be maintained by a foreign cor-
poration. The U.S. Supreme Court disagreed and held that the
contract was in interstate commerce and that the Mississippi
statute precluding suit by a foreign corporation which did
not hold a certificate of authority was in contravention of the
Commerce Clause.
We conclude that Campbell did not need to obtain a certifi-
cate of authority in order to maintain this suit against Midwest.
There is no merit to Midwest’s second assignment of error.
Existence of Contract.
In its third assignment of error, Midwest contends that
there was no enforceable contract between it and Campbell,
15
See, also, Allenberg Cotton Co. v. Pittman, 419 U.S. 20, 95 S. Ct. 260, 42
L. Ed. 2d 195 (1974).
16
Stick v. City of Omaha, 289 Neb. 752, 857 N.W.2d 561 (2015).
17
Caniglia v. Caniglia, 285 Neb. 930, 830 N.W.2d 207 (2013).
18
Allenberg Cotton Co. v. Pittman, supra note 15.
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
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because it did not directly enter into a contract with Campbell
and because KL Process was not Midwest’s agent and was not
acting with actual or apparent authority. Midwest also assigns
that instruction No. 5 was an incorrect statement of the law
and that the district court erred in not giving its proposed
instructions Nos. 6 through 8.
[13-15] An “agent” is a person authorized by the principal to
act on the principal’s behalf and under the principal’s control.19
For an agency relationship to arise, the principal “manifests
assent” to the agent that the agent will “‘act on the principal’s
behalf and subject to the principal’s control.’”20 And the agent
“‘manifests assent or otherwise consents so to act.’”21 An
agency relationship may be implied from the words and con-
duct of the parties and the circumstances of the case evidencing
an intention to create the relationship irrespective of the words
or terminology used by the parties to characterize or describe
their relationship.22
[16-18] Actual authority is authority that the principal
expressly grants to the agent or authority to which the prin-
cipal consents.23 A subcategory of actual authority is implied
authority, which courts typically use to denote actual authority
either to (1) do what is necessary to accomplish the agent’s
express responsibilities or (2) act in a manner that the agent
reasonably believes the principal wishes the agent to act, in
light of the principal’s objectives and manifestations.24 When
a principal delegates authority to an agent to accomplish a
task without specific directions, the grant of authority includes
the agent’s ability to exercise his or her discretion and make
19
Koricic v. Beverly Enters. - Neb., supra note 4.
20
Id. at 717, 773 N.W.2d at 150.
21
Id.
22
Id.
23
Id.
24
Koricic v. Beverly Enters. - Neb., supra note 4.
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
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r­easonable determinations concerning the details of how the
agent will exercise that authority.25
[19-21] Apparent authority is authority that is conferred
when the principal affirmatively, intentionally, or by lack of
ordinary care causes third persons to act upon an agent’s appar-
ent authority.26 Apparent authority gives an agent the power
to affect the principal’s legal relationships with third parties.27
The power arises from and is limited to the principal’s mani-
festations to those third parties about the relationships.28 Stated
another way, apparent authority for which a principal may be
liable exists only when the third party’s belief is traceable
to the principal’s manifestation and cannot be established
by the agent’s acts, declarations, or conduct.29 Manifestations
include explicit statements the principal makes to a third party
or statements made by others concerning an actor’s author-
ity that reach the third party and the third party can trace to
the principal.30
[22,23] For apparent authority to exist, the principal must
act in a way that induces a reasonable third person to believe
that another person has authority to act for him or her.31
Whether an agent has apparent authority to bind the principal
is a factual question determined from all the circumstances of
the transaction.32
Midwest is, of course, correct in that it did not directly
contract with Campbell. Midwest further argues that this
25
Id.
26
StoreVisions. v. Omaha Tribe of Neb., 281 Neb. 238, 795 N.W.2d 271
(2011).
27
Id.
28
Id.
29
Id.
30
Id.
31
Id.
32
Id.
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
Cite as 294 Neb. 326
court need look no further than the terms of the contract
between it and KL Process to see that KL Process was not
acting as its agent. That contract specifically notes:
Nothing in the Contract Documents is intended or deemed
to create any legal or contractual relationship between
[Midwest] and Design Consultant, any Subcontractor
or Sub-Subcontractor, except that KL Process shall
provide in its contracts with such Subcontractor and
Sub-Subcontractors that [Midwest] is an intended third
party beneficiary of those contracts with the right to
enforce them.
But there is no evidence that Campbell or its owner and
president was aware of the terms of the contract between
Midwest and KL Process. Moreover, the contract between
Campbell and KL Process was executed in November 2006. At
that time, the contract between Midwest and KL Process had
not yet been executed; the latter contract was not entered into
until July 18, 2007.
A review of other provisions of that contract show that while
Midwest may not have wanted to be liable on contracts entered
into by KL Process, it nevertheless maintained a significant
amount of control over KL Process. For example, KL Process
had to provide notice to Midwest of any design consultant or
subcontractor it wished to use and could not enter into bind-
ing contracts with those parties without notice to Midwest.
And Midwest had veto power over any design consultant or
subcontractor.
In any case, how KL Process and Midwest characterized
their relationship does not affect our resolution of this issue.
As this court has noted, an agency relationship may be implied
from the words and conduct of the parties and the circum-
stances of the case evidencing an intention to create the rela-
tionship, irrespective of the words or terminology used by the
parties to characterize or describe their relationship.
The jury was instructed in instruction No. 4 as follows:
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RM CAMPBELL INDUS. v. MIDWEST RENEWABLE ENERGY
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An agency relationship existed in this case between
[Midwest] and KL Process if you find [Midwest] con-
sented to these two things:
1. That KL Process would act on behalf of [Midwest],
and
2. That [Midwest] would have the right to control
KL Process’ acts. It does not matter whether [Midwest]
actually exercised control over KL Process, so long as
[Midwest] had the right to do so.
Instruction No. 5 provided:
An agency may also exist, by apparent authority, if
you find:
1. That [Midwest] led [Campbell] to believe that KL
Process was authorized to act on behalf of [Midwest],
and
2. That [Campbell’s] belief that KL Process had author-
ity to act for [Midwest] was reasonable.
If you so find, then as between [Midwest] and
[Campbell], [Midwest] is bound by the acts of KL Process.
The evidence at trial was that the contract between Midwest
and KL Process indicated that Midwest was not legally bound
by any contract with a subcontractor. But the evidence also
showed that Midwest hired KL Process to build its ethanol
plant and that Campbell knew the work it had been hired to do
was to be done for Midwest. The evidence also showed that at
the time of the first phase of the project, Kramer worked for
both Midwest and KL Process when he hired Campbell. The
evidence showed that Midwest paid Campbell and acknowl-
edged the debt owed to Campbell on multiple occasions via
e-mail and letter. Finally, the evidence showed that because
of the tax incentives,33 it was to Midwest’s advantage to pay
Campbell directly. Given all this, we conclude there was suf-
ficient evidence that an agency relationship existed in this
case, by either actual or apparent authority.
33
See, L.B. 775; §§ 77-4101 to 77-4112.
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[24] We turn next to Midwest’s arguments regarding the jury
instructions on the question of apparent authority. To estab-
lish reversible error from a court’s failure to give a requested
jury instruction, an appellant has the burden to show that (1)
the tendered instruction is a correct statement of the law, (2)
the tendered instruction was warranted by the evidence, and
(3) the appellant was prejudiced by the court’s failure to give
the requested instruction.34 A litigant is entitled to have the
jury instructed upon only those theories of the case which are
presented by the pleadings and which are supported by compe-
tent evidence.35
Midwest objected to instruction No. 5 and had requested
instead that its proposed instructions Nos. 6 through 8 be given
to the jury.
As to instruction No. 5, Midwest contends that the jury
should have been instructed that the party relying on apparent
authority cannot be negligent and must use ordinary prudence
and that instruction No. 5 was in error because it did not so
state. Midwest contended that its proposed instruction No. 6
was a virtual copy of NJI2d Civ. 6.08, entitled “Agency—
Apparent Authority,” and that instruction No. 7, regarding
reliance on apparent authority, and instruction No. 8, defining
negligence, should have also been given to the jury.
We disagree with Midwest’s characterization of its pro-
posed instruction No. 6. In reality, the instruction given,
instruction No. 5, and not proposed instruction No. 6, was
almost identical to NJI2d Civ. 6.08. Contrary to Midwest’s
assertion, NJI2d Civ. 6.08 does not require that the jury find
that the party relying on the apparent authority not be negli-
gent and use ordinary prudence. Rather, a jury must only find
that the party must be acting reasonably.
The district court did not err in instructing the jury in con-
formity with instruction No. 5 instead of Midwest’s proposed
34
Golnick v. Callender, supra note 5.
35
Worth v. Kolbeck, 273 Neb. 163, 728 N.W.2d 282 (2007).
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instructions Nos. 6 and 7, dealing with apparent authority.
And because the jury did not need to be instructed as to
negligence, it was not error for the court to refuse proposed
instruction No. 8. There is no merit to Midwest’s third assign-
ment of error.
Substantial Compliance.
In its fourth assignment of error, Midwest contends that the
district court erred in not finding that Campbell had to prove
that it had substantially complied with the contract and so
instructing the jury.
[25,26] To successfully bring an action on a contract, a
plaintiff must first establish that the plaintiff substantially
performed the plaintiff’s obligations under the contract.36 To
establish substantial performance under a contract, any devia-
tions from the contract must be relatively minor and unimport-
ant.37 If there is substantial performance, a contract action may
be maintained, but without prejudice to any showing of dam-
age on the part of the defendant for failure to receive full and
complete performance.38
[27] Where there is a lack of substantial performance, but
there has been a part performance and it has been of substan-
tial benefit to the other party and he or she has accepted and
retained the benefits thereof, he or she should not be permitted
entirely to avoid the duties assumed by him or her under his or
her contract, and, under such circumstances, the party partially
performing is entitled to recover the reasonable or fair value of
such performance, subject to the reciprocal right of the other
party to recoup such damages as he or she has suffered from
the failure of the part-performing party to perform fully or
substantially his or her contract.39
36
VRT, Inc. v. Dutton-Lainson Co., 247 Neb. 845, 530 N.W.2d 619 (1995).
37
Id.
38
Id.
39
See Young v. Tate, 232 Neb. 915, 442 N.W.2d 865 (1989).
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Midwest argues that instructions Nos. 3 and 8, provid-
ing for damages generally and giving the specific measure
of damages, were incorrect, because they did not instruct
regarding substantial performance. But on these facts, we find
no error.
There is no dispute that the full terms of the goods and
services contract were not met; Campbell ceased providing
goods and services when Midwest stopped paying for the
work already done. But the record shows that on these facts,
this was part performance that was a substantial benefit to
Midwest, which accepted and retained the benefit through both
the goods received and the tax incentives.
First, we note that the record shows that Midwest attempted
to resell the products which Campbell provided under the con-
tract. And Midwest acknowledged on various occasions that
it owed the amount now at issue in this litigation. As such,
Midwest should not be permitted to avoid the duty to pay.
There is no merit to Midwest’s fourth assignment of error.
Proximate Causation.
In its fifth assignment of error, Midwest contends Campbell
did not prove that Midwest’s ceasing payments was the proxi-
mate cause of its claimed damages. Particularly, Midwest con-
tends that Campbell’s contract was with KL Process and that
the reason Campbell was not paid was because KL Process
declared bankruptcy.
Having concluded that the jury could find that KL Process
was acting as Midwest’s agent, there was also sufficient evi-
dence for a jury to find that Campbell’s contract losses were
due to Midwest’s failure to pay. The record is replete with
evidence that Midwest, and not KL Process, paid Campbell’s
invoices and that Midwest acknowledged that a cash short-
age meant it had not paid Campbell what was due and further
indicated Midwest would pay Campbell as soon as it had
funds to do so.
This assignment of error is without merit.
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Applicability of U.C.C.
In its sixth and seventh assignments of error, Midwest
contends that the district court erred in treating this as a con-
tract under the U.C.C. rather than as one under common law
and, accordingly, erred in its damages instruction to the jury.
Specifically, Midwest objected to instructions Nos. 6 and 8.
As to instruction No. 6, Midwest argues that it utilized sale-
of-goods language from the U.C.C. when the contract was not
controlled by the U.C.C. but by common law. And Midwest
contends that, accordingly, the instruction on damages—
instruction No. 8—should have been on quantum meruit, not
the contract price instruction given to the jury.
[28-30] The U.C.C. applies to transactions in goods.40 If a
transaction is not for the sale of goods, the provision of the
U.C.C. do not apply to that transaction.41
The test for inclusion in or exclusion from the sales
provisions is not whether the contracts are mixed but,
granting that they are mixed, whether their predominant
factor, their thrust, their purpose, reasonably stated, is the
rendition of service, with goods incidentally involved, or
whether they are transactions of sale, with labor inciden-
tally involved.42
The U.C.C. applies when the principal purpose of the transac-
tion is the sale of goods, even though in order for the goods to
be utilized, some installation is required.43 On the other hand,
if the contract is principally for services and the goods are
merely incidental to the contract, the provisions of the U.C.C.
do not apply.44
40
Neb. U.C.C. § 2-102 (Reissue 2001).
41
Mennonite Deaconess Home & Hosp. v. Gates Eng’g Co., 219 Neb. 303,
363 N.W.2d 155 (1985).
42
Id. at 308, 363 N.W.2d at 160.
43
Design Data Corp. v. Maryland Cas. Co., 243 Neb. 945, 503 N.W.2d 552
(1993).
44
Id.
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The total original contract was for $2,411,431.02. From
examining that contract, over one-half of the total contract
appears to be for goods, with the remainder for services. As
such, we conclude that this contract was predominantly for the
sale of goods and that the U.C.C. controls. There was no error
in the damages instruction as given.
[31] And even if the contract were governed by the common
law, we disagree that the proper measure of damages would
have been under quantum meruit. Quantum meruit is premised
on the existence of a contract implied by law; however, the law
only implies a contract and allows a recovery under the theory
when the parties have not entered into an express agreement.45
But there is no dispute that there was an express contract
in this case; the real issue is whether Midwest is a party to
it. We have concluded that it was. Quantum meruit is there-
fore inapplicable.
Moreover, contrary to Midwest’s contention, Campbell
introduced proof of its damages in the form of the original
contract price, the amount of goods and services provided to
Midwest, and the amount actually paid by Midwest. This was
an adequate measure of damages.
There is no merit to Midwest’s sixth and seventh assign-
ments of error.
CONCLUSION
The decision of the district court is affirmed.
A ffirmed.
45
Tobin v. Flynn & Larsen Implement Co., 220 Neb. 259, 369 N.W.2d 96
(1985).