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SIAM NUMHONG PRODS. CO. v. EASTIMPEX

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


September 29, 1994

SIAM NUMHONG PRODUCTS CO., LTD., a limited company organized and registered under the laws of Thailand, Plaintiff,
v.
EASTIMPEX, a California corporation, Defendant. AND RELATED COUNTERCLAIM

PATEL

The opinion of the court was delivered by: MARILYN HALL PATEL

MEMORANDUM AND ORDER

Plaintiff Siam Numhong Products, Co., Ltd. ("SNH") brought this action against defendant Eastimpex alleging breach of two written contracts and one oral contract for the manufacture and purchase of Thai bamboo shoots. Eastimpex filed related counterclaims. Now before the court is Eastimpex's motion for summary judgment on SNH's first and third claims for relief for breach of written contract and breach of oral contract.

 Having considered the parties' arguments and submissions, and for the reasons set forth below, the court enters the following memorandum and order.

 BACKGROUND1

 Plaintiff SNH is a Thai company that processes and sells Thai agricultural products to foreign distributors. Defendant Eastimpex is a California corporation that, among other things, imports foreign foodstuffs for resale to restaurant suppliers.

 On August 1, 1991, Eastimpex offered to purchase and SNH agreed to provide 30,000 cartons of cultivated bamboo shoots at a certain price, pursuant to Eastimpex's purchase order number SE-8917 (the "SE-8917 contract"). Payment under the SE-8917 contract was to be made pursuant to a letter of credit executed by Eastimpex in favor of SNH. Originally, this letter of credit was open through December 31, 1991. Eastimpex did not take delivery of all of the product under the SE-8917 contract by December 31, 1991, and the parties dispute whether Eastimpex was obligated to take up delivery of all of the product by that date.

 SNH requested that Eastimpex amend the SE-8917 contract letter of credit because otherwise SNH would incur bank penalties and a reduction of its credit rating, and payment under the contract would be unsecured. In response to SNH's request, Eastimpex obtained two extensions, the first to March 31, 1992 and the second to July 31, 1992.

 Between August 1, 1991 and August 1, 1992 the market price for bamboo shoots declined. Between February 1992 and May 1993, SNH resold some of the SE-8917 product. By July 1992, SNH had resold at least 9,763 of the 30,000 cartons of bamboo shoots contracted for in the SE-8917 contract.

 In June, 1991 Eastimpex opened a letter of credit in favor of SNH for a second agreement, this one involving wild bamboo shoots ("Wild Bamboo Shoot Contract"). No written purchase order was ever issued for this contract. Eastimpex refused to take up delivery of all of the wild bamboo shoot product it had ordered, claiming that there were problems with the product. On January 10, 1992 Eastimpex wrote that it would not extend the Wild Bamboo Shoot Contract letter of credit.

 On October 19, 1993 SNH filed this action against Eastimpex alleging, inter alia, breach of written contract and breach of oral contract. Eastimpex answered and counterclaimed for breach of contract, breach of warranty of merchantability, breach of implied warranty of fitness and negligence.

 LEGAL STANDARD

 Under Federal Rule of Civil Procedure 56, summary judgment shall be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial . . . since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). See also T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (the nonmoving party may not rely on the pleadings but must present significant probative evidence supporting the claim); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (a dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.").

 The court's function, however, is not to make credibility determinations, Anderson, 477 U.S. at 249, and the inferences to be drawn from the facts must be viewed in a light most favorable to the party opposing the motion. T.W. Elec. Serv., 809 F.2d at 631.

 DISCUSSION

 Eastimpex moves for summary judgment on SNH's first and third claims for relief. The court will discuss each claim in turn. *fn2"

 I. The SE-8917 Written Contract

 In its first claim for relief, SNH alleges that although Eastimpex was to have taken delivery of the bamboo shoots under the SE-8917 contract by December 31, 1991, Eastimpex actually took delivery of only about 4,000 of the 30,000 cartons ordered by that date. SNH claims that Eastimpex told SNH to sell the remaining SE-8917 bamboo shoots to third parties to mitigate losses. SNH alleges that it therefore resold some of the SE-8917 bamboo shoots starting in February 1992, but did so at a lesser price and was unable to resell all of them.

  Eastimpex contends that it is entitled to summary judgment on this claim because it never gave written approval for the resales and in fact was not notified of them until February 25, 1993. Eastimpex argues that by reselling the bamboo shoots SNH breached by anticipatory repudiation within the meaning of California Uniform Commercial Code section 2610, *fn3" and that SNH's failure to obtain prior written approval for the resales violated the statute of frauds for sales of goods, section 2201, as required by section 2209(3).

 In response, SNH argues that Eastimpex is equitably estopped from asserting a statute of frauds defense because it actually authorized SNH to resell the bamboo shoots both orally and in writing, and SNH detrimentally relied on that authorization. Furthermore, SNH contends not only that SNH did not anticipatorily repudiate the SE-8917 contract, but that Eastimpex itself anticipatorily breached the contract.

 California's statute of frauds provides that a contract for the sale of goods in the amount of $ 500 or more is not enforceable "unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized agent . . . ." Cal. Com. Code § 2201(1). Modifications that fall within this provision must satisfy the same requirements. Id. at § 2209(3). SNH admits that Eastimpex's resale authorizations were not in writing. Declaration of Mark M. Mullen, Ex. C, Resp. No. 2 to Req. for Adm. Accordingly, Eastimpex argues that the statute of frauds bars SNH's first claim for relief and it is therefore entitled to summary judgment on that claim.

 SNH does not argue that section 2209(3) is inapplicable. *fn4" Rather, it contends that Eastimpex is estopped from asserting the statute of frauds by section 1103, which preserves common law principles of law and equity unless specifically displaced by the Code. Thus, promissory estoppel may operate as an exception to the statute of frauds. See Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 442-444, 249 Cal. Rptr. 872, rev. denied (1988). *fn5" A party asserting estoppel must prove detrimental reliance and unconscionable injury in order to avoid the bar of the statute of frauds. Id. at 444. "Unconscionable injury results from denying enforcement of a contract after one party is induced by another party to seriously change position relying upon the oral agreement." Id.

 SNH has produced evidence that Suwimol "Molly" Korapintanont, general manager of Eastimpex Thailand, Ltd., authorized SNH to sell some of the bamboo shoots to mitigate losses. Declaration of Wipawadee Tivasuradej P 13; Deposition of Wipawadee Tivasuradej at 77-78, 85-86; Declaration of Supoj Sathianvichitr P 9. SNH claims that it reported the results of the resales to Eastimpex on an "almost daily basis" and that Eastimpex never complained. Tivasuradej Dec. P 13; Tivasuradej Dep. at 86. SNH also points to an internal Eastimpex letter dated June 1992 purportedly confirming the authorization of the sale of remaining stock. Pl.'s Ex. L at SNH-54, Letter from Don A. Chan to Molly Korapintanont; Tivasuradej Dec. P 13. This letter, signed by Eastimpex chairman Don A. Chan, proposes that "SNH sell to any other buyer from the remaining stock at whatever price it can get" then "ship to San Francisco all unsold stock remaining." In response, Eastimpex points out that this letter was sent five months after SNH began its resales and claims that the letter was merely a proposal that was never accepted.

 SNH has produced evidence from which a reasonable jury could conclude that it detrimentally relied on Eastimpex's verbal instructions (and other conduct) to resell the remaining bamboo shoots. Should a jury so conclude, Eastimpex's statute of frauds defense would fail. Accordingly, Eastimpex's motion for summary judgment on the SE-8917 contract claim must be denied. *fn6"

 II. The Wild Bamboo Shoot Oral Contract

 In its third claim for relief, SNH alleges that in July 1991 Eastimpex orally agreed to purchase 30,000 cartons of wild bamboo shoots from SNH for a certain price ("Wild Bamboo Shoot Agreement"), and that Eastimpex breached the agreement by taking delivery of only 22,500 of 30,000 cartons ordered.

 Eastimpex argues that it is entitled to summary judgment on this claim for relief because the Wild Bamboo Shoot Agreement was oral and is therefore unenforceable under the statute of frauds. Eastimpex places a premium on SNH's admission and characterization of the Wild Bamboo Shoot Agreement as an oral rather than written contract. See Complaint P 18; Mullen Dec., Ex. B, Pl.'s Resp. No. 13 to Def.'s Req. for Adm. In response, SNH contends that the irrevocable letter of credit issued at Eastimpex's direction constitutes a written contract. Neither party's contention is entirely persuasive.

 It is undisputed that Eastimpex issued an irrevocable letter of credit in favor of SNH for the Wild Bamboo Shoot Contract. This letter of credit described the goods, sales price, date for delivery, identity of the parties and the bank's obligations. See Pl.'s Ex. L at SNH-146-151, Letter of Credit. California courts have held that such letters of credit satisfy the requirements of sections 2201(1) and (2) and are enforceable against the sender. *fn7" See Procyon Corp. v. Components Direct, Inc., 203 Cal. App. 3d 409, 411-13, 249 Cal. Rptr. 813 (1988). Like the letter of credit in Procyon, Eastimpex's letter of credit incorporated the terms of the oral contract and its very purpose was to guarantee payment and bind Eastimpex.

 With respect to the requirement of a signature, the court in Procyon reasoned that the company that directed the bank to issue the letter and supplied the relevant terms "signed" it upon its issuance, since the bank "was acting as [the sender's] agent when it sent the letter." Id. at 413. Similarly, Eastimpex instructed the issuing bank as to the terms of the letter of credit and must be held responsible upon issuance.

 Although the letter of credit did not constitute a written contract, as urged by SNH, it did sufficiently "indicate that a contract for sale has been made between the parties" within the meaning of 2201(1). Accordingly, because SNH has produced probative evidence that takes the Wild Bamboo Shoot Contract out from under the statute of frauds, Eastimpex's motion for summary judgment on this claim must be denied.

 There is a further reason why Eastimpex is not entitled to summary judgment on this claim: the judicial admissions exception to the statute of frauds. Eastimpex has acknowledged the existence of a wild bamboo shoot contract in numerous pleadings and papers submitted to this court. See Joint Statement PP 29 & 32; Stip. Case Mgmt. Ord., Princ. Issues b and h; Counterclaim P 5; Pl.'s Ex. J, Def.'s Resp. No. 5 to Req. to Adm.; Mullen Dec., Ex. A, Def.'s Req. for Adm., Defin. G.

 California amended its statute of frauds in 1988, effective 1990, to provide a "judicial admissions" exception where "the party against whom enforcement is sought admits in his or her pleading, testimony, or otherwise in court that a contract for sale was made . . . ." Cal. Com. Code § 2201(3)(b). The adoption of the judicial admissions exception emphasizes the evidentiary purpose of the statute of frauds. The California Supreme Court previously recognized this purpose in Seaman's Direct Buying Service, Inc. v. Standard Oil Co., 36 Cal. 3d 752, 764, 206 Cal. Rptr. 354, 686 P.2d 1158 (1984), noting that the statute of frauds' primary purpose is to bar fraud-induced enforcement of contracts never actually made by requiring reliable evidence of the existence and terms of the contract. The statute of frauds is meant to prevent courts from enforcing an alleged oral contract that never actually was entered into, not to prevent enforcement of all oral contracts. See id.; Cal. Com. Code § 2201 Comm. 9. Thus, the statute of frauds defense may be asserted only against a wrongful allegation that one is a party to a contract, not simply to prevent enforcement of an agreement that happened to be oral.

 There is no California case-law defining "judicial admission" under section 2201(3)(b). However, authorities from other jurisdictions with a similar exception are instructive. The rationale for the exception is that a party charged with a contractual obligation should not be able to assert the defense where it has admitted the existence of the contract. Courts have recognized that the danger of perjury by the party seeking to enforce the contract is dispelled when the other party admits to the oral agreement. See Anchorage-Hynning & Co. v. Moringiello, 225 U.S. App. D.C. 114, 697 F.2d 356, 360-63 (D.C. Cir. 1983) (discussing the exception as a judicially-created one although the District of Columbia statute contains such an exception).

 A judicial admission may be contained in a statement of undisputed facts, an answer, a bill of particulars or any other pleading, or it may be contained in testimony such as a deposition. See Dairyland Financial Corp. v. FICB of St. Paul, 852 F.2d 242, 246 (7th Cir. 1988) (deposition testimony); Babst v. FMC Corp., 661 F. Supp. 82, 88 (S.D. Fla. 1986) (same); Forest Nursery Co. v. I.W.S., Inc., 534 N.Y.S.2d 86, 88 (N.Y. Dist. Ct. 1988) (bill of particulars). Furthermore, the admission need not contain all the terms of the contract; it is sufficient if it describes the "conduct or circumstances from which the trier of fact can infer a contract." Gruen Indus. Inc. v. Biller, 608 F.2d 274, 278 (7th Cir. 1979) (discussing the Wisconsin statutory exception, which is more restrictive than California's).

 The court finds that Eastimpex's numerous "admissions" that an oral contract existed constitute a judicial admission within the meaning of section 2201(3)(b), and therefore defeat its reliance on the statute of frauds. *fn8"

 CONCLUSION

 For the foregoing reasons, defendant's motion for summary judgment on the first and third claims for relief is hereby DENIED.

 IT IS SO ORDERED.

 Dated: SEP 29 1994

 MARILYN HALL PATEL

 United States District Judge


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