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06/25/97 MARION PRESLEY v. P & S GRAIN CO.

June 25, 1997

MARION PRESLEY, PLAINTIFF AND COUNTERDEFENDANT,
v.
P & S GRAIN CO., INC., DEFENDANT AND COUNTERPLAINTIFF. P & S GRAIN CO., INC., THIRD-PARTY PLAINTIFF-APPELLEE, V. MISSOURI FARMERS ASSOCIATION, INC., A MISSOURI CORPORATION, THIRD-PARTY DEFENDANT-APPELLANT. MISSOURI FARMERS ASSOCIATION, INC., A MISSOURI CORPORATION, THIRD-PARTY PLAINTIFF-APPELLEE, V. KEN-MO AGRICULTURE CENTER, INC., A MISSOURI CORPORATION, THIRD-PARTY DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Williamson County. No. 94-L-103. Honorable William H. Wilson, Judge, presiding.

The Honorable Justice Hopkins delivered the opinion of the court. Maag, J., and Rarick, J., concur.

The opinion of the court was delivered by: Hopkins

JUSTICE HOPKINS delivered the opinion of the court:

Third-party defendant, Ken-Mo Agriculture Center, Inc. (Ken-Mo), appeals the judgment of the Williamson County circuit court ordering it to pay damages to third-party plaintiff, Missouri Farmers Association, Inc. (MFA), for indemnification of breach of warranty under the Uniform Commercial Code (810 ILCS 5/2-607(5) (West 1994)). MFA, as third-party defendant, appeals the same judgment ordering it to pay damages to third-party plaintiff, P & S Grain Co., Inc. (P & S), pursuant to section 2-607(5) of the Uniform Commercial Code (810 ILCS 5/2-607(5) (West 1994)). On appeal, Ken-Mo raises the following issues: (1) whether the trial court had in personam jurisdiction over it under the long-arm statute and whether the exercise of such jurisdiction violated Ken-Mo's due process rights under the Illinois and United States Constitutions; (2) whether the trial court had subject matter jurisdiction based upon the Seed Arbitration Act (710 ILCS 25/1 et seq. (West 1994)); (3) whether MFA stated a proper cause of action against Ken-Mo in its third-party complaint; (4) whether the trial court erred in finding that a limitation-of-liability provision was not a term of the contract between Ken-Mo and MFA; and (5) whether the court erred in determining that the purchase price of the soybean seeds was an improper limitation of liability. MFA, in its appeal, raises the following issues: (1) whether the court had subject matter jurisdiction under the Seed Arbitration Act; and (2) whether the court erred in finding that a provision limiting liability to the purchase price of the soybean seeds was not a term of the contract between MFA and P & S. For the reasons set forth below, we affirm in part and vacate in part.

FACTS

On or about June 23, 1992, plaintiff, Marion Presley, a farmer, contacted R. L. Waldron at P & S, a corporation located in Marion, Illinois. P & S is a business that distributes seed, fertilizer, and other agricultural products. Waldron, P & S's president, testified that Presley wanted to purchase 360 bushels of Essex soybean seeds with a germination rate of at least 80%. Waldron did not have the seeds needed by Presley, but Waldron called MFA, a corporation located in Columbia, Missouri, that same day and talked to Terry Spickert. Waldron told Spickert that he needed 400 bushels of Essex soybean seeds, and Spickert stated that MFA would get the seeds for Waldron. Waldron and Spickert discussed the purchase price; however, no other terms or conditions were discussed, and nothing was said about limiting liability to the purchase price of the seeds.

Subsequently, Spickert sent Waldron a sales order form, which Waldron received after P & S received the soybean seeds. Waldron did not look at the back of MFA's sales order form until the morning of trial. Waldron admitted that paragraph five on the back of the order form stated as follows:

"The Seed Operations gives no warranty, express or implied, as to productiveness of any seeds its sells and will not be in any way responsible for the crop. The liability, in all instances, is limited to the purchase price of seed."

Waldron also stated that P & S does approximately a million dollars worth of business per year with MFA, and that this is the first time he became aware of this paragraph limiting liability. Waldron, who had been in the seed industry for 38 years, was unaware of any standard or trade usage limiting damages to the price of the seeds.

Waldron became aware that the purchased seeds were from Ken-Mo when the soybeans were delivered to P & S on June 26, 1992. The truck's delivery order indicated that the seeds came directly from Ken-Mo in Kennett, Missouri, to P & S in Marion, Illinois. When the seeds were delivered to P & S on June 26, 1992, Presley's employees loaded 360 bags of seed directly from the delivery truck onto Presley's truck. The remaining 40 bags were placed in P & S's warehouse.

Waldron stated that, approximately a week or two after Presley planted the soybean seeds, Presley came to P & S and asked to see the label on the Essex soybean bags. Presley did not believe he had good germination with the seeds. Waldron showed Presley the label, which stated that the seeds would germinate at 80%. Waldron did not contact anyone at that time about a possible problem with the seeds. It was not until Waldron received a stop-sale order from the Illinois Department of Agriculture (the Department) on August 21, 1992, for the remaining 40 bags of Essex seeds that Waldron contacted Ken-Mo. Waldron was unsure if he contacted MFA about the seed problem before or after he received the stop-sale order.

Leon Billingsley, vice president of P & S, testified that approximately 10 to 14 days after Presley planted the seeds, he inspected Presley's field where the Essex seeds were planted. In Billingsley's opinion, the seeds were planted appropriately, and there was ample moisture in the ground. Billingsley estimated that only 20 to 25% of the Essex seeds had germinated.

George Maksin, inspector for the Department, on July 21, 1992, did an unannounced inspection of P & S's seed warehouse, took samples of Ken-Mo's Essex soybean seed from P & S's warehouse, and submitted the seeds to the Department's testing laboratory in Springfield. As a result of the Department's tests on the seed, a stop-sale order was issued to P & S on August 21, 1992. A copy of the stop-sale order was sent to Ken-Mo.

Nellie Tonelle, a seed analyst for the Department, testified that she analyzed the soybean seed brought in by Maksin. She determined the germination rate of the Essex soybean seed to be 36%. On a retest, which is required under the Department's rules, Tonelle found the germination rate to be 27%.

Spickert, manager of MFA's seed division, testified that he took Waldron's soybean seed order over the phone. MFA did not have the seeds ordered by Waldron in stock, so he called Hubert Snipes at Ken-Mo, a seed producer in Missouri, and ordered the Essex soybean seeds from Ken-Mo. Spickert stated that normally MFA would pick up the seeds from Ken-Mo and deliver the seeds to P & S, but MFA's trucks were unavailable at that time. Spickert asked Snipes if Ken-Mo would deliver the seeds directly to P & S. Snipes agreed and told Spickert that the cost to MFA for delivery would be $275. Spickert testified that only the purchase price and the cost of delivery were discussed by Spickert and Snipes on the telephone.

On June 29, 1992, MFA received an invoice from Ken-Mo for the purchase of the seeds. Attached to the invoice was the trucker's delivery order, showing that the seeds were delivered on June 26, 1992, to P & S in Marion, Illinois, by Ross Farms, the trucking company hired by Ken-Mo.

Spickert testified that a seed tag indicates whether seed is certified, registered, or unregistered seed. Spickert was aware of the limitation-of-liability language contained on seed tags in Missouri. Spickert ...


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