Lohman v. Wagner

¹²⁵ MEREDITH, J. This case involves a suit for an alleged breach of .contract concerning the sale of weaner pigs. The term “weaner pigs” refers to young pigs in the developmental stage from the time of their birth until they are weaned from their mothers at a weight of seven to fourteen pounds, after which they are known as “feeder pigs” until they reach a weight of 50 pounds. Appellant, Charles D. Lohman, trading as Lohman Farms, filed a complaint in the Circuit Court for Washington County against Appellees, John C. Wagner and Joyce E. Wagner, trading as Swine Services. The complaint alleged the breach of a “Weaner Pig Purchase Agreement” between the parties.

After a three-day bench trial, the trial judge entered judgment for the defendants. The trial court found that the alleged contract did not meet the requirements of the UCC statute of frauds (Md Code (1957, 2001 Replacement Volume), Commercial Law Article, § 2-201), and that the alleged agreement was not enforceable against the Wagners. Lohman appealed. We shall affirm the judgment entered by the trial court.

Questions Presented Lohman raises three contentions in this appeal: 1. That the trial court erred in concluding the Maryland Uniform Commercial Code applies to the Weaner Pig Purchase Agreement; 2. That the trial court erred in concluding a quantity term was required to be stated in the Weaner Pig Purchase Agreement in order for that agreement to be enforceable under Commercial Law Article, § 2-201; 3. That the trial court erred in concluding the Weaner Pig Purchase Agreement did not contain a quantity term and, therefore, was not an enforceable contract under Commercial Law Article, § 2-201.

We agree "with the trial court that the alleged contract contemplated the sale of goods, and that the Maryland Uniform Commercial Code therefore applies. We further agree with the trial court that § 2-201 of the Commercial Law ¹²⁶ Article requires a quantity term to be included in a writing signed by the party to be charged. Having considered the evidence in a light most favorable to the prevailing party, as required by Maryland Rule 8-131(c) and cases applying the “clearly erroneous” standard of appellate review, see, e.g., Murphy v. 24th Street Cadillac Corp., 353 Md. 480, 497 , 727 A.2d 915 (1999), we affirm the trial court’s finding that there was no writing that satisfied the requirements of Commercial Law Article, § 2-201. Background Prior to 1998, Lohman operated a “farrow to finish” pig raising operation at his farm in Washington County.

A “farrow to finish” pig operation involves the breeding, gestation, and raising of pigs to a weight of 50 pounds so that they can be transferred to a finishing floor, where they continue to mature until they reach a market weight of 250 to 300 pounds. Lohman knew John Wagner because of Wagner’s longtime involvement in various aspects of the pork industry. In approximately December 1997, Lohman contacted Wagner and asked if Wagner knew of any business opportunities for Lohman. Wagner responded that Lohman’s timing was good because Wagner was in the process of putting together a network of pork producers and buyers.

Lohman and Wagner met numerous times and had a number of telephone conversations concerning Lohman becoming a weaner pig producer for the pork network being proposed by Wagner. By January 1998, Lohman had decided he wanted to convert his farrow to finish operation into a weaner pig facility. This would entail remodeling his building to provide for more gestation space, reducing his feeder pig inventory, and increasing the number of sows he maintained. Lohman began the conversion process by selling his feeder pigs.

In May or June 1998, Lohman began selling weaner pigs to Wagner even though Lohman had not yet remodeled his barn to accommodate an operation that was exclusively devoted to ¹²⁷ producing weaner pigs. Wagner’s pork network was still not in place. In July 1998, Lohman sought financing from First National Bank of Mercersburg to fund the remodeling of his facility. Wagner testified that Lohman contacted him at home on a Friday or Saturday night in July, and that Lohman had asked Wagner to give him a sample copy of a weaner pig purchase agreement that the pork network would be using.

According to Wagner, he did not have any sample agreements for the weaner pig operation at that time because Wagner’s contemplated network of pork purchasers was still not ready to enter into contracts. Lohman told Wagner that he was meeting with his banker the next day and needed something to show his banker. Wagner testified as follows: He [Lohman] called me at home.... And said he needed something to show to his banker that he was trying to get financing for the remodeling.

And I didn’t have anything, but ... I found an old one ... from one of my files and ... I think my wife actually retyped it and put together what we were calling a sample or a draft of what, what it would look like when we were ready to put a true network agreement together.... There seemed to be some urgency ... so we put one together and faxed it to Mr. Lohman....

There were several blank lines in the document that Wagner faxed to Lohman, but Wagner nevertheless had signed the document on the signature line for the purchaser. The fax cover sheet said: “Dear Charlie, I trust this will help you in securing financing as we had discussed.” Wagner testified that after he faxed the document to Lohman, “I never saw it again and really wasn’t expecting to see it because it was simply a draft or a sample.” When asked if he had intended the faxed sample of a weaner pig purchase agreement to be a contract with Lohman, Wagner testified, “It was strictly a sample or a draft of what we were going to be using.... No this was not the contract.” Lohman admitted that he filled in several blanks on the document he received from Wagner. Most significantly, there ¹²⁸ was a blank line for the number of pigs to be supplied and purchased under the agreement.

The document as faxed by-Wagner read: “PRODUCER agrees to ... supply approximately _weaner pigs weekly.” Without having any further communications with Wagner, Lohman inserted the quantity “300” as the approximate number of weaner pigs to be supplied weekly. Although Lohman signed his copy of the agreement as “Producer” and faxed a copy to his bank, it was undisputed that he never sent Wagner a copy of the agreement containing his handwritten alterations. Lohman became a producer exclusively of weaner pigs in July 1998 and continued shipping weaner pigs to Wagner at $28 per head. This price was consistent with the pricing schedule contained in the weaner pig purchase agreement that Wagner had faxed to Lohman.

Lohman shipped weaner pigs to Wagner at $28 per head until October 1998, when Lohman received a telephone call from Wagner about a price decrease. Wagner said he needed to reduce the price to $18 per head because of an extreme drop in market prices for pork. When Lohman responded that this price reduction would probably put him out of business, Wagner told Lohman he would see what he could do, but Wagner never offered to pay Lohman any higher price after October 1998. Lohman continued selling pigs to Wagner at $18 per head until March 1999, when Lohman wound down his business.

During this time, Lohman attempted to find another buyer for his pigs, but was unable to do so. Lohman acknowledged that prior to filing suit he never told Wagner he believed Wagner breached their agreement. Wagner’s pork network never came into being. Lohman filed a one-count complaint against the Wagners, alleging breach of contract and seeking damages.

I. Goods and Services Lohman asserts that the trial court erred in finding the Maryland Uniform Commercial Code applies to the alleged ¹²⁹ contract in this case. Lohman contends the agreement with Wagner was a contract for the provision of services, not a contract for the sale of goods, and therefore, the UCC does not apply. Lohman argues that the language of the agreement “was carefully crafted to avoid a sales transaction” by requiring the “Producer” (Lohman) to furnish housing facilities, labor, utilities, and production supplies in producing and raising weaner pigs. Additionally, Lohman notes that the agreement gave Wagner the authority to access Lohman’s facility and to oversee various aspects of breeding and raising the pigs.

Lohman contends the agreement is therefore one for the provision of services by him, and not a contract for the sale of weaner pigs. In DeGroft v. Lancaster Silo Co., Inc., 72 Md.App. 154, 164 , 527 A.2d 1316 (1987), this Court recognized that “Section 2-102 of the UCC provides that ‘[ujnless the context otherwise requires,’ the UCC applies to ‘transactions in goods,’ a term which has been said to be broader than the sale of goods” (citation omitted). “Goods” are defined in § 2-105(1), which states: “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Title 8) and things in action. “Goods”, also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (§ 2-107). Md.Code (1957, 2002 RepLVoL), Commercial Law Art. (“C.L.”) § 2-105(1). The Official Comment to § 2-105 further states: The young of animals are also included expressly in this definition since they, too, are frequently intended for sale and may be contracted for before birth.

The period of gestation of domestic animals is such that the provisions of the section on identification can apply as in the case of crops to be planted. ¹³⁰ C.L. § 2-105(1). The definition of the goods that are subject to Article 2 of the UCC covers young animals and even the unborn young of animals. The definition of goods would cover the weaner pigs that were raised by Lohman. Other courts have found that contracts for the sale of pigs are governed by the UCC.

See, e.g., Purina Mills, L.L.C. v. Less, 295 F.Supp.2d 1017, 1031 (N.D.Iowa 2003) (weanling pigs are goods); Flanagan v. Consolidated Nutrition, L.C., 627 N.W.2d 573, 577 (Iowa Ct.App.2001)(because the definition of “goods” encompasses livestock, Article 2 governs a contract to buy and sell pigs). See also Embryo Progeny Assoc. v. Lovana Farms, 203 Ga.App. 447, 448 , 416 S.E.2d 833, 834 (1992) (sales of animals found to be transactions in goods). Lohman is correct that the alleged weaner pig purchase agreement involves providing certain services. However, as the trial court correctly observed, the UCC may apply to contracts involving both services and the delivery of goods.

These hybrid or mixed sales and services contracts were discussed by the Court of Appeals in Burton v. Artery Co., Inc., 279 Md. 94 , 367 A.2d 935 (1977), where the Court adopted the test used in Bonebrake v. Cox, 499 F.2d 951 (8th Cir.1974), to assess the UCC’s applicability to mixed contracts by analyzing the predominant purpose of the agreement. Burton involved a contract for the sale and installation of trees, shrubs, and sod. The Court explained that the fact that the contract required substantial amounts of labor as well as sales of goods did not remove the contract from the purview of the Uniform Commercial Code. Burton, 279 Md. at 108 , 367 A.2d 935 (quoting Bonebrake, 499 F.2d at 959 ).

The Bonebrake test requires examining the contract to determine its main purpose. The court said in Bonebrake : [T]he cases presenting mixed contracts of this type are legion. The test for inclusion or exclusion is not whether they 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 {e.g., contract with artist for painting) or is ¹³¹ a transaction of sale, with labor incidentally involved {e.g., installation of a water heater in a bathroom). 499 F.2d at 960 (footnotes omitted). Applying this test, the Bonebrake court found that a contract involving the delivery and installation of used bowling equipment was primarily a “goods” contract and was governed by the UCC even though it involved a substantial amount of services.

In Burton , the Court of Appeals expressly adopted the Bonebrake analysis, stating: We adopt the criteria enunciated in Bonebrake . We have