859 N.W.2d 586
Neb.2015Background
- Siouxland Ethanol (seller) and Sebade Brothers (buyer) entered a one-year contract (Oct 1, 2008–Sept 30, 2009) for 30,000 tons of modified wet distillers grains at $80/ton (2,500 tons/month).
- Contract allowed buyer to vary monthly deliveries by up to 30 tons and up to 30 tons per quarter for each of the first three quarters; seller was to adjust fourth-quarter shipments so total equaled 30,000 tons.
- Sebade Brothers purchased only 20,759.27 tons total, leaving a shortfall of 9,240.73 tons; cumulative shortfall after the first three quarters was ~4,345.87 tons (far exceeding allowed deviations).
- Siouxland resold unpurchased product on the spot market and sought damages under the contract measure (difference between $80 and the current market price for shortfall per quarter).
- District court granted summary judgment for Siouxland on liability and awarded damages and prejudgment interest (~$317,667.57). Sebade appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sebade’s under‑ordering was a material breach that excused Siouxland’s obligation to adjust fourth‑quarter shipments | Siouxland: Sebade’s repeated, significant shortfalls frustrated contract purpose and were material | Sebade: Siouxland’s failure to deliver/adjust in Q4 constituted waiver; Sebade relied on seller’s conduct | Court held Sebade materially breached as a matter of law; breach excused Siouxland’s Q4 adjustment obligation |
| Whether Siouxland waived its right to demand shortfalls by not proactively delivering/adjusting in Q4 | Sebade: seller’s conduct in Q4 implied waiver of earlier shortfalls | Siouxland: waiver inapplicable because buyer’s prior material breach relieved seller | Court rejected waiver defense because buyer’s prior material breach controlled |
| Proper measure and proof of damages (market price for shortfalls) | Siouxland: damages proven by resale prices on spot market | Sebade: resale transactions offered did not reliably prove the “current market price”; evidence showed inconsistent prices (same day price differences, buyer sometimes paid more) | Court found genuine issues of material fact about market price; district court erred in deciding damages and prejudgment interest on summary judgment and remanded for factual determination |
Key Cases Cited
- Gary’s Implement v. Bridgeport Tractor Parts, 270 Neb. 286 (2005) (defines material breach principles)
- Domjan v. Faith Regional Health Servs., 273 Neb. 877 (2007) (materiality assessed by consequences and customary practice)
- Phipps v. Skyview Farms, 259 Neb. 492 (2000) (contract interpretation requires reasonable construction)
- Gibson v. City of Cranston, 37 F.3d 731 (1st Cir. 1994) (when only one reasonable conclusion on materiality exists, court may decide as matter of law)
- Dehahn v. Innes, 356 A.2d 711 (Me. 1976) (resale price may be admissible evidence of market value)
- Sprague v. Sumitomo Forestry, 104 Wash. 2d 751 (1985) (resale price can be appropriate evidence of market value)
- Sharp Electronics Corp. v. Lodgistix, Inc., 802 F. Supp. 370 (D. Kan. 1992) (resale price used to show market price where seller obtained highest possible price)