Cavendish Farms, Inc. v. Mathiason Farms, Inc.
2010 ND 236
| N.D. | 2010Background
- Cavendish Farms contracted with Mathiason Farms and Valley View Farms to grow and sell 25,000 hundredweight of russet burbank potatoes for crop year 2005 at a base price of $4.70 per hundredweight, with Cavendish free to reject potatoes not meeting quality and growers barred from selling to others without Cavendish rejection or release.
- In November 2005 Cavendish paid advance payments to both growers; later quality issues emerged and the growers attempted to recondition, while Cavendish refused the next scheduled advances in February 2006 and rejected two loads in late February 2006 after inspecting them.
- Cavendish formally rejected the potatoes by April 3, 2006, after which conditions deteriorated and the potatoes were unmarketable; Cavendish sought damages and return of the November advances, while the growers counterclaimed for various contract-related claims including alleged defective seed and breaches.
- The district court found Cavendish liable for underpayments on 2004 contracts, found Cavendish breached the 2005 contracts by delaying rejection, awarded $50,000 damages to each grower, and found the growers breached the 2005 contracts by not providing usable potatoes, with Cavendish to recover the advances.
- On appeal, Cavendish argued the 2005 contracts were not governed by the UCC; the court held the contracts were sales of goods within N.D.C.C. tit. 41, subject to the UCC.
- The Growers cross-appealed, contending Cavendish’s damages were improper and that Cavendish should not recover the advance payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the 2005 contracts governed by the UCC? | Cavendish contends they are not sale of goods. | Growers contend UCC applies to contract for future crop. | Contracts are sales of goods under UCC. |
| Did the district court secretly revive a dismissed good-faith claim? | Cavendish alleges revival without notice or opportunity to be heard. | Growers argue no revival occurred and record supports it. | No improper revival; due process not violated. |
| Did Cavendish breach the contracts by delaying rejection of the potatoes in bad faith? | Cavendish could reject at any time; delay was not a breach. | Delay in rejection breached duty of good faith and fair dealing. | Cavendish breached the contracts by delaying rejection in bad faith. |
| Are damages and advance payments properly awarded to Cavendish? | Growers argue advances are payable regardless of performance; damages are speculative. | Cavendish argues damages are supported by evidence of loss and advances are recoverable. | Damages awarded within evidence; Cavendish entitled to recover advance payments. |
Key Cases Cited
- Red River Commodities, Inc. v. Eidsness, 459 N.W.2d 811 (N.D. 1990) (contracts for sale of future crops governed by UCC even before planting)
- Red River Commodities, Inc. v. Eidsness, 459 N.W.2d 805 (N.D. 1990) (alternative high court citation on related issue)
- Dalan v. Paracelsus Healthcare Corp., 2002 ND 46 (N.D. 2002) (implied covenant good-faith standard in contract context)
- Jerry Harmon Motors, Inc. v. First Nat’l Bank & Trust Co., 472 N.W.2d 748 (N.D. 1991) (good-faith obligation in contract interpretation)
- Union State Bank v. Woell, 434 N.W.2d 712 (N.D. 1989) (application of good-faith standard to contract performance)
- Centronics Corp. v. Genicom Corp., 562 A.2d 187 (N.H. 1989) (implied covenant limits discretionary contract decisions)
- Speedway SuperAmerica, LLC v. Tropic Enters., Inc., 966 So. 2d 1 (Fla. Dist. Ct. App. 2007) (implied covenant limits discretionary action in contracts)