Harris Moran Seed Co., Inc. v. Phillips

949 So.2d 916

HARRIS MORAN SEED COMPANY, INC. v. Edward A. PHILLIPS, individually, and Eddie Phillips, individually, and Edward A. Phillips and Eddie Phillips d/b/a Phillips Tomato Farms

Edward A. Phillips, individually, and Eddie Phillips, individually, and Edward A. Phillips and Eddie Phillips d/b/a Phillips Tomato Farms v. Harris Moran Seed Company, Inc.

2040746.

Court of Civil Appeals of Alabama.

June 23, 2006.

Rehearing Denied August 4, 2006.

Robert S. Lamar, Jr., and Rick D. Norris, Jr., of Lamar, Miller, Norris, Haggard & Christie, P.C., Birmingham, for appellant/cross-appellee Harris Moran Seed Company, Inc.

Larry W. Harper, William D. Motlow, Jr., and W. Perry Webb of Porterfield, Harper, Mills & Motlow, P.A., Birmingham, for appellees/cross-appellants Edward A. Phillips, individually, and Eddie Phillips, individually, and Edward A. Phillips and Eddie Phillips d/b/a Phillips Tomato Farms.

CRAWLEY, Presiding Judge.

Edward A. Phillips, individually, and Eddie Phillips, individually, and Edward A. Phillips and Eddie Phillips doing business as Phillips Tomato Farms (hereinafter collectively referred to as "the farmers") sued Bueford Haynes, Haynes Plant Farm, Harris Moran Seed Company, Inc. ("HMSC"), Philip Ashcraft, and several fictitiously named defendants. The farmers' complaint alleged claims of, among others, breach of contract, fraudulent suppression, negligence, wantonness, and claims seeking damages under the Alabama Extended Manufacturer's Liability Doctrine ("the AEMLD"). Ashcraft was never served, named parties were never substituted for the fictitiously named defendants, and the claims against Haynes and Haynes Plant Farm were dismissed,¹ thus leaving HMSC as the sole defendant.

The farmers' complaint alleged that they were commercial farmers; that they had bought from Haynes and Haynes Plant Farm tomato plants that were represented to be of the "Mountain Fresh" variety; that the tomato plants had been grown from seeds produced and distributed by HMSC; that the tomatoes harvested from the plants were small, misshapen, and uncharacteristic of Mountain Fresh tomatoes; that the tomatoes were unmarketable; and, consequently, that the farmers had suffered a reduced crop yield, and lost income and business profits, for which they were seeking compensatory and punitive damages.

The case was tried to a jury. The evidence at trial established that HMSC is a California corporation engaged in the business of producing and selling vegetable seeds, including tomato seeds. During 1998 and 1999, HMSC sold a variety of hybrid tomato seeds known as "Mountain Fresh" to independent dealers pursuant to written dealer agreements. One of HMSC's independent dealers was Clifton Seed Company of North Carolina. In 1998, Clifton Seed Company purchased from HMSC a quantity of Mountain Fresh tomato seeds for resale.

The farmers decided, based upon the results of Auburn University field trials and good reports from other commercial growers, to plant Mountain Fresh tomatoes during the 1999 growing season.² They informed Bueford Haynes, the owner of Haynes Plant Farm in Cullman County, of their decision, and Haynes ordered Mountain Fresh seeds from Clifton Seed Company. Clifton Seed Company sent Haynes Plant Farm seeds that were a part of HMSC lot number 140382.021. Haynes Plant Farm grew the seeds into seedling tomato plants and sold 96,000 plants to the farmers. The farmers set out the plants in six staggered plantings of 16,000 each. The first two plantings were successful, producing healthy plants with large, rounded Mountain Fresh tomatoes as the farmers had anticipated. The other four plantings, however, yielded very different results. Although the plants themselves were vigorous and healthy, the tomatoes were undersized, misshapen, and bore no resemblance to Mountain Fresh tomatoes. Most of the tomatoes in the last four plantings were unmarketable. The farmers complained to Haynes and Haynes Plant Farm and also wrote a letter to HMSC. HMSC sent senior sales representative Michael Hannah to the farmers' fields in October 1999. HMSC recalled the seeds in lot number 140382.021 sometime in the fall of 1999.

HMSC had obtained the seeds in lot number 140382.021 from a seed producer in the Peoples Republic of China, with which it had done business for two years. After HMSC received the seeds from China, it performed test "grow-outs" of randomly selected seeds from the shipment. The grow-outs produced no "off-type" fruit, that is, no fruit uncharacteristic of Mountain Fresh tomatoes. After selling the seeds at issue in this case, however, HMSC began receiving complaints about the tomatoes produced from the seeds in lot number 140382.021. HMSC then performed another grow-out of the seeds in that lot and determined that 14 percent of the seeds were off-type, that is, not Mountain Fresh hybrid seeds. HMSC then performed an electrophoresis hybridity test on the seeds; that test indicated that some of the seeds in lot number 140382.021 were the product of female inbreeding. The evidence at trial established that female inbreeding occurs as a result of the self-pollination of a tomato plant. In hybrid-tomato-seed production, the pollen-producing part of a female parent plant must be removed before self-pollination occurs; pollen from a male parent plant must then be collected and used to pollinate the female parent plant. If the pollen-producing part of the female plant is not removed in time, the plant will self-pollinate and hybridization will be thwarted.

At the close of the farmers' evidence, the trial court granted HMSC's motion for a judgment as a matter of law ("JML") on all claims except the one alleging the breach of a contract between HMSC and Clifton Seed Company to which the farmers asserted they were third-party beneficiaries. The jury rendered a verdict in favor of the farmers and assessed damages at $55,000. Following the denial of its postjudgment motion, HMSC filed a timely appeal to the Alabama Supreme Court, and the farmers filed a timely cross-appeal. The supreme court transferred the appeals to this court pursuant to § 12-2-7(6), Ala.Code 1975.

On appeal, HMSC raises three issues. First, it argues that the trial court erred by failing to grant its motion for a JML on the contract claim because, it says, the farmers were not intended third-party beneficiaries of the dealer agreement between HMSC and Clifton Seed Company or, in the alternative, the farmers' claim was barred by the one-year time-to-sue limitation specified in the dealer agreement between HMSC and Clifton Seed Company. Second, HMSC contends that the trial court erred by charging the jury that it could award the farmers compensatory damages, including damages for loss of crop yield and loss of profits, because, HMSC maintains, the dealer agreement between HMSC and Clifton Seed Company included a limitation-of-remedies provision that excluded incidental and consequential damages such as loss of crop yield and loss of profits. Third, HMSC claims that the trial court erred by denying its postjudgment motion without a hearing. On the cross-appeal, the farmers argue that the trial court erred by entering a JML as to their claims alleging negligence, wantonness, fraudulent suppression, and liability under the AEMLD.

HMSC's Arguments on the Appeal

The Third-Party-Beneficiary Claim

At trial, the farmers based their theory of recovery against HMSC on their assertion that they were intended third-party beneficiaries of HMSC's dealer agreement with Clifton Seed Company and that their breach-of-contract claim was premised on the "true to type" express warranty made by HMSC in that agreement. HMSC argues that they were entitled to a JML on the farmers' third-party-beneficiary claim.

"`"[T]his Court uses the same standard the trial court used initially in granting or denying a JML. Palm Harbor Homes, Inc. v. Crawford, 689 So.2d 3 (Ala.1997). Regarding questions of fact, the ultimate question is whether the nonmovant has presented sufficient evidence to allow the case or the issue to be submitted to the jury for a factual resolution. Carter v. Henderson, 598 So.2d 1350 (Ala.1992). For actions filed after June 11, 1987, the nonmovant must present `substantial evidence' in order to withstand a motion for a JML. See § 12-21-12, Ala.Code 1975; West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989). A reviewing court must determine whether the party who bears the burden of proof has produced substantial evidence creating a factual dispute requiring resolution by the jury. Carter, 598 So.2d at 1353. In reviewing a ruling on a motion for a JML, this Court views the evidence in the light most favorable to the nonmovant and entertains such reasonable inferences as the jury would have been free to draw. Motion Industries, Inc. v. Pate, 678 So.2d 724 (Ala.1996). Regarding a question of law, however, this Court indulges no presumption of correctness as to the trial court's ruling. Ricwil, Inc. v. S.L. Pappas & Co., 599 So.2d 1126 (Ala.1992)."'"

Alabama Great S. R.R. Co. v. Johnson, 874 So.2d 517, 520 (Ala.2003).

HMSC argues that the farmers were only incidental beneficiaries, as opposed to intended beneficiaries, of the dealer agreement containing the express warranty.

"To recover under a third-party beneficiary theory, the complainant must show: 1) that the contracting parties intended, at the time the contract was created, to bestow a direct benefit upon a third party; 2) that the complainant was the intended beneficiary of the contract; and 3) that the contract was breached."

Sheetz, Aiken & Aiken, Inc. v. Spann, Hall, Ritchie, Inc., 512 So.2d 99, 101-02 (Ala.1987). Whether the farmers were third-party beneficiaries is a mixed question of law and fact, and the determination of third-party beneficiary-status is a conclusion of law that we review de novo. See Glass v. United States, 258 F.3d 1349, 1353 (Fed.Cir.2001). In...