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Kaste v. Land O'Lakes Purina Feed, LLC

Court of Appeals of Oregon

March 8, 2017

Neal KASTE and Nancy Kaste, dba Hightide Holsteins, Plaintiffs-Respondents,
v.
LAND O'LAKES PURINA FEED, LLC, a foreign limited liability company, dba Land O'Lakes Feed, Defendant-Appellant.

          Argued and submitted March 21, 2016

         Tillamook County Circuit Court 092124; Jonathan R. Hill, Judge.

         Brad S. Daniels argued the cause for appellant. With him on the briefs was Stoel Rives LLP.

          Brian R. Talcott argued the cause for respondents. With him on the brief was Dunn Carney Allen Higgins & Tongue LLP.

          Before Ortega, Presiding Judge, and Lagesen, Judge, and Wollheim, Senior Judge.

         Case Summary:

         Plaintiffs operate a dairy farm in Tillamook County, and contracted with defendant to provide them with feed for their dairy cows. That feed sickened a number of plaintiffs' cows and killed others, causing plaintiffs to incur veterinary expenses to care for the cows as well as other losses. Plaintiffs sued defendant, alleging two contract claims and two tort claims: breach of contract; breach of warranty; negligence; and strict products liability. A jury found for plaintiffs on all claims, awarding them $89, 197.73 on the contract and warranty claims, and $750, 000 on the tort claims. Because the complaint alleged total damages in the amount of $750, 000, the trial court entered a general judgment for a total of $750, 000, allocating $89, 197.73 to the contract and warranty claims, and $660, 802.27 to the tort claims. The court subsequently entered a supplemental judgment awarding plaintiffs their attorney fees. On appeal from those judgments, defendant contends that the trial court erred in four respects: (1) by permitting plaintiffs' contract and warranty claims to go to the jury because, in defendant's view, plaintiffs did not adequately plead or prove recoverable contract damages; (2) by concluding that the parties' contract did not, as a matter of law, bar plaintiffs from recovering damages on their tort claims or limit the amount that they could recover on those claims; (3) by not requiring plaintiffs to elect between recovering on their tort claims or their contract claims; and (4) by granting plaintiffs leave to amend their complaint to assert entitlement to attorney fees. Held: (1) Even if plaintiffs insufficiently alleged that they had suffered damages from defendant's breach of contract apart from consequential damages, that is a defect that they could have cured by amendment. Moreover, plaintiffs presented evidence that they paid the bills for the feed that they were promised, but received inferior feed that was toxic to their cows. From that evidence, the jury permissibly could find that plaintiffs had been damaged in an amount equal to the purchase price of the feed since the feed could have had no value, given its toxicity. (2) The provision in the parties' contract purporting to limit or bar plaintiffs from recovering damages on their tort claims reasonably can be interpreted to apply only to plaintiffs' contract claims, and it therefore is ambiguous as to whether it applies to plaintiffs' tort claims. (3) The jury was instructed that nonoverlapping measures of damages applied with respect to the contract claims and the tort claims, and the jury is presumed to have followed those instructions; under those circumstances, the trial court did not err when it did not require plaintiffs to make an election of remedies. (4) Defendant itself drafted the contract that gave rise to plaintiffs' claimed entitlement to fees on the contract claims and, for that reason, could not have been unfairly surprised by the fact that plaintiffs ultimately invoked that provision in connection with their contract claims.

         Affirmed.

          LAGESEN, J.

         Plaintiffs Neal and Nancy Kaste operate a dairy farm in Tillamook County, and contracted with defendant, Land O'Lakes Purina Feed LLC, to provide them with feed for their dairy cows. That feed sickened a number of plaintiffs' cows and killed others, causing plaintiffs to incur veterinary expenses to care for the cows as well as other losses. Plaintiffs sued defendant, alleging two contract claims and two tort claims: breach of contract; breach of warranty; negligence; and strict products liability. A jury found for plaintiffs on all claims, awarding them $89, 197.73 on the contract and warranty claims, and $750, 000 on the tort claims. Because the complaint alleged total damages in the amount of $750, 000, the trial court entered a general judgment for a total of $750, 000, allocating $89, 197.73 to the contract and warranty claims, and $660, 802.27 to the tort claims.[1] The court subsequently entered a supplemental judgment awarding plaintiffs their attorney fees. On appeal from those judgments, defendant contends that the trial court erred in four respects: (1) by permitting plaintiffs' contract and warranty claims to go to the jury because, in defendant's view, plaintiffs did not adequately plead or prove recoverable contract damages; (2) by concluding that the parties' contract did not, as a matter of law, bar plaintiffs from recovering damages on their tort claims or limit the amount that they could recover on those claims; (3) by not requiring plaintiffs to elect between recovering on their tort claims or their contract claims; and (4) by granting plaintiffs leave to amend their complaint to assert entitlement to attorney fees. For the reasons that follow, we conclude that the trial court did not err in the manners claimed and, accordingly, affirm the judgments of the trial court.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiffs are dairy farmers in Tillamook County. They entered into a one-year sales contract with defendant for the purchase of feed for their dairy cows. Defendant prepared the written contract and Neal Kaste signed it. Under the terms of the agreement, defendant agreed to deliver monthly shipments of feed meeting certain specifications. Pertinent to the central issues on appeal, the contract also discussed warranties and limitations on defendant's liability, providing:

"EXCLUSIONS OF WARRANTIES: LAND O'LAKES WARRANTS THAT THE PRODUCTS SOLD HEREUNDER MEET THE DESCRIPTION AS SET FORTH ON THE FRONT OF THIS CONTRACT. THERE ARE NO OTHER WARRANTIES, EXPRESS, IMPLIES [sic], STATUTORY, OR ARISING FROM COURSE OF DEALING OR USAGE OF THE TRADE, OF QUALITY, FITNESS FOR PURPOSE, CAPACITY, DESCRIPTION OR OTHERWISE OF THE PRODUCTS SOLD HEEUNDER [sic]. SELLER [sic] WAIVES ALL CLAIMS FOR BREACH OF WARRANTY OR FOR FAILURE OF THE PRODUCTS SOLD HEREUNDER UNLESS MADE IN WRITING AND DELIVERED TO LAND O'LAKES WITHIN 10 DAYS AFTER RECEIPT OF THE PRODUCT. LAND O'LAKES SHALL IN NO EVENT BE LIABLE TO BUYER FOR CONSEQUENTIAL DAMAGES; AND LAND O'LAKES LIABILITY FOR DAMAGES SHALL IN NO EVENT EXCEED THE PURCHASE PRICE OF THE PARTICULAR SHIPMENT WITH RESPECT TO WHICH A CLAIM IS MADE."

(Underscoring and capitalization in original.)

         At some point after beginning the dairy cows on defendant's feed, plaintiffs noticed problems within their herd. Some cows died, and many other cows suffered from a variety of health problems that interfered with their ability to produce milk. As a result, plaintiffs incurred expenses to care for their ailing cows, as well as losses to their business. Plaintiffs determined that defendant's feed was causing their cows' health problems and filed this civil action seeking $750, 000 in damages against defendant, alleging claims for breach of contract, breach of express and implied warranties, negligence, and strict products liability.

         At trial, plaintiffs' theory was that harmful levels of proteins, phosphorous, and copper in the delivered feed had caused harm to their herd. They sought to recover a range of damages incurred as a result of the harm to their herd. They also sought to recover the difference in value between the feed that defendant had provided them and feed that would have complied with the parties' contractual standards.

         At the close of plaintiffs' case, defendant moved for a directed verdict. Defendant's primary argument in support of that motion was that the contractual provision regarding warranties and damages limitations precluded plaintiffs from recovering any damages resulting from their cows' consumption of the feed, regardless of whether plaintiffs sought those damages in contract or in tort. Defendant asserted that the limitation on recovery of consequential damages precluded plaintiffs from obtaining any relief on their tort claims because, in defendant's view, all tort damages sought by plaintiffs qualified as "consequential damages" under the contract. As to the contract claims, defendant also argued that plaintiffs had failed to present any evidence of damages apart from consequential damages. Therefore, defendant argued, it was entitled to a directed verdict on all of plaintiffs' claims. Alternatively, defendant contended that the contractual provision limited the total damages that plaintiffs could recover on both the tort claims and the contract claims.

         The trial court denied the motion for a directed verdict. It concluded that the provision limiting damages was ambiguous as to whether it applied to plaintiffs' tort claims and, for that reason, did not operate as a matter of law to bar or limit plaintiffs' recovery on those claims. The court agreed with defendant that the contractual limitation on damages barred plaintiffs from recovering more than the purchase price of the feed on their contract claims. The court also agreed that the provision barred plaintiffs from recovering consequential damages on their contract claims, but denied defendant's motion for a directed verdict on the contract claims because it determined that plaintiffs had presented evidence that would permit a jury to find that plaintiffs incurred damages other than consequential damages as a result of defendant's breach of contract.

         The jury found for plaintiffs on all four claims. It awarded them $89, 197.73 for breach of contract and breach of warranty, and $750, 000 for negligence and strict products liability. The court noted that plaintiffs sought $750, 000 in the complaint and capped the total recovery at that amount. The court then allocated that award between the two claims, reducing the recovery under the tort theories by the $89, 197.73 awarded by the jury on the contract claims, and entering a general judgment for $750, 000. In doing so, the court rejected defendant's contention that plaintiffs were required to elect between recovering on their tort claims and recovering on the contract claims.

         The court then entertained plaintiffs' petition for attorney fees and entered a supplemental judgment awarding plaintiffs $762, 283.41 in attorney fees. Although plaintiffs initially did not plead an entitlement to attorney fees in the complaint, during trial the court granted plaintiffs leave to amend the complaint to assert a right to recover attorney fees.

         Defendant appeals. As noted, defendant contends that the trial court erred in the following four respects: (1) by denying its motion for a directed verdict on plaintiffs' contract and warranty claims; (2) by concluding that the parties' contract did not, as a matter of law, bar plaintiffs from recovering damages on their tort claims or limit the amount that they could recover on those claims, and in denying defendant's motion for a directed verdict as to the tort claims based on that conclusion; (3) by granting plaintiffs leave to amend their complaint to assert entitlement to attorney fees; and (4) by not requiring plaintiffs to elect between recovering on their tort claims or their contract claims.

         II. ANALYSIS

         A. Directed Verdict Issues

         We start with defendant's contentions that it was entitled to directed verdicts on all of plaintiffs' claims. We review a trial court's denial of a directed verdict motion by viewing the evidence in the light most favorable to the non-moving party and determining whether the moving party was entitled to judgment as a matter of law. Mauri v. Smith, 324 Or 476, 479, 929 P.2d 307, cert den, 519 U.S. 813 (1996); Najjar v. Safeway. Inc.. 203 Or.App. 486, 489-90, 125 P.3d 807 (2005).

         1. Directed verdict on contract claims

         Defendant's contention that it was entitled to a directed verdict on plaintiffs' contract claims-that is, the breach of contract claim and the breach of warranty claim- is predicated on the provision in the parties' contract stating that "LAND O'LAKES SHALL IN NO EVENT BE LIABLE TO BUYER FOR CONSEQUENTIAL DAMAGES." (Capitalization in original.) Defendant argues that the only damages alleged in the complaint were consequential damages and that, at trial, plaintiffs put on evidence only of consequential damages and not of direct damages. Defendant ...


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