592 F. 2d 238 - Fmc Finance Corporation v. Reed

In this Mississippi diversity action, FMC Finance Corporation ("Finance") sued Wayne Reed to recover the outstanding principal and interest due on notes financing Reed's purchase of seventeen cotton module builders from Finance's parent, FMC Corporation ("FMC").1 Reed then filed a third party complaint against FMC seeking damages for breach of an alleged agreement by FMC to sell cotton module trailers in combination with the module builders. After reviewing the jury's answer to a special interrogatory, the district court entered judgment in favor of Finance on the original complaint and dismissed Reed's third party complaint. We affirm in both respects.

In regard to Finance's action to recover on the notes, Reed's principal contention on appeal relates to Finance's authority to pay FMC on Reed's behalf for the module builders and its right to reimbursement from Reed for amounts thus advanced. The record unequivocally indicates, and the parties do not dispute, that Reed purchased and received from FMC seventeen cotton module builders. Pursuant to a finance agreement, Reed authorized Finance to pay over to FMC, at the latter's request, any balance due on the purchase price of the module builders. Furthermore, pursuant to a power of attorney granted in the finance agreement, Reed authorized Finance to execute notes evidencing Reed's obligation to FMC or (upon payment by Finance to FMC) to Finance. At Reed's insistence, the standard form finance agreement was amended to condition Finance's authority to pay FMC on prior submission by Reed to Finance of invoices for the module builders approved in writing by Reed. Reed never submitted approved invoices to Finance and therefore contends that Finance had no authority to pay FMC and no right to recover funds so paid from Reed. The jury found, however, in response to a single special interrogatory, that Reed ratified Finance's payment to FMC. That finding relieved Finance of the consequences of its failure to obtain approved invoices from Reed as a precondition to payment to FMC. Since Finance's right of recovery against Reed was otherwise unquestioned, the court entered judgment in favor of Finance. On appeal, Reed contends that the jury was not properly instructed in accordance with Mississippi law on the ratification question and that there was insufficient evidence from which the jury could have concluded that Reed had actual knowledge of the ratified transaction (Finance's payment to FMC) as required by Mississippi law.2

Reed is correct in his contention that under Mississippi law a principal can effectively ratify the unauthorized action of his agent only if he has actual knowledge of the facts of the transaction. See Gulf Refining Co. v. Travis, 201 Miss. 336, 29 So.2d 100 (1947). The trial judge, however, correctly instructed the jury to that effect, and ample evidence supports the jury's conclusion that Reed was aware of Finance's payment to FMC and knowingly received and retained the benefits thereof (the cotton module builders purchased from FMC with the aid of Finance's financing). Specifically, the Finance employee assigned to supervise Reed's account testified that, upon receiving invoices from FMC covering the balance owed by Reed on the module builders and prior to paying FMC that amount, he contacted Reed who assured him that he would pay Finance as agreed in the finance plan. Subsequently, almost two months after Finance paid FMC, Reed sent Finance a check for $50,000, made out to Finance, carrying the typed words: "Payment on Module Builders." Furthermore, although he never approved the invoices for the module builders in writing, Reed voiced no complaint about the module builders, accepted them, resold them, and apparently retains the proceeds to this day, without having paid either Finance or FMC the full amount of the purchase price. Thus, from evidence of Reed's acknowledgment of his obligation to Finance and of his acceptance and resale of the module builders, the jury was justified in concluding that Reed ratified Finance's payment of the obligation to FMC. Hence, the trial court acted correctly in entering judgment in favor of Finance for the outstanding balance due for the module builders.

Reed further contends, however, that the finance agreement was usurious under Mississippi law and, hence, that Finance was prohibited from recovering any finance charges or interest on its principal. The district court concluded that the law of California, rather than of Mississippi, was applicable on the usury question and that under California law Finance's interest rate was legal.3 We agree.

In this diversity action the district court was required to apply the conflicts of law rules of the forum state, Mississippi. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In contract cases, Mississippi courts apply "the most significant relationship" or "center of gravity" approach to choice of law. Under that approach, the court "applies the law of the place which has the most significant relationship to the event and parties, or which, because of the relationship or contact with the event and parties, has the greatest concern with the specific issues with respect to the liabilities and rights of the parties to the litigation." Craig v. Columbus Compress & Warehouse Co., 210 So.2d 645, 649 (Miss.1968). See also Bunge Corp. v. Biglane, S.D.Miss., 1976,418 F.Supp. 1159, 1162-65.4

In this case, the place with the most significant relationship to the finance agreement between Reed and Finance was California, as the district court properly concluded.5 The finance agreement was negotiated at Finance's office in California; the formal document was mailed to Reed from California and returned by Reed to California; and Finance performed under the agreement by making payment for the module builders to FMC in California.6 The agreement's only significant connections with Mississippi were Reed's Mississippi residency and the fact that some of the module builders, in which Finance was given a security interest, were shipped to Reed in Mississippi.7 In these circumstances, application of Mississippi's usury law would frustrate Finance's legitimate expectation that it had entered a finance agreement with Reed (indeed, at Reed's request) which was enforceable under California law. In sum, we conclude that Mississippi courts would apply California law on the usury question here in keeping with the basic "most significant relationship" approach to conflicts of law questions in contract cases.

In regard to Reed's third party claim against FMC alleging breach of an agreement to provide trailers in combination with the module builders, the district court concluded, after an In camera presentation of evidence by Reed, that there was insufficient evidence of such an agreement to justify presentation of Reed's case to the jury. The court therefore dismissed the third party claim without allowing Reed to present to the jury any evidence concerning the alleged trailer agreement. We agree with the court's disposition.

We agree with the district court that Reed failed to proffer sufficient evidence of an agreement covering trailers to create a jury question. In fact, the documentary evidence clearly and overwhelmingly indicates that Reed intended to purchase trailers independent of FMC from a third party, Riggs Built, Inc. Most importantly, in a letter of June 17, 1974, from Reed to George Saywell of FMC, written subsequent to the negotiations in which the trailer agreement was allegedly reached, Reed stated: "Trailers will be purchased from Riggs Built, Inc. of Chandler, Arizona, for the year 1974, totally independent of FMC, unless there would possibly be a financial arrangement between your finance department, Ben Riggs and myself." In the face of such documentary evidence, and without offering anything but his own testimony to the contrary, Reed could not have prevailed before the jury and proved an agreement by FMC to sell trailers.

Furthermore, even if such an agreement could have been proved, it would not be enforceable since Reed has produced no writing sufficient to satisfy the requirements of Mississippi's applicable statute of frauds' provision.8 To satisfy the statute of frauds, Reed relies upon a letter of May 30, 1974, addressed to him from Roy Hodges of FMC.9 That letter, however, does not indicate that a contract for sale of trailers had been made between Reed and FMC. At most, it conditioned Reed's obligation to purchase module builders on his acceptance of trailers from Riggs and allowed for possible financing of the trailers by Finance. We cannot construe the letter as evidence of an agreement by FMC actually to provide the trailers.

There is no merit in Reed's contention that the alleged trailer agreement was enforceable under the doctrine of promissory estoppel. Under that doctrine, as outlined in the Restatement of Contracts and quoted by Reed in his brief on appeal: "A promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise." Restatement of Contracts § 90. See also Brewer v. Universal Credit Company,191 Miss. 183, 192 So. 902 (1940); Associated Tabulating Services, Inc. v. Olympic Life Insurance Co., 5 Cir., 1969, 414 F.2d 1306. In this case, however, the deficiency in Reed's claim is that he has adduced insufficient evidence that FMC made any promise regarding trailers. Furthermore, a recent decision of the Mississippi Supreme Court prohibits application of the doctrine of promissory estoppel to cure failure to comply with the statute of frauds. Thomas v. Prewitt, 355 So.2d 657 (Miss.1978). Reed's reliance on promissory estoppel is therefore ill placed.

To summarize, we affirm the judgment in favor of Finance, rendered upon the jury's verdict that Reed ratified Finance's payment to FMC. We also affirm the dismissal of Reed's third party claim.

AFFIRMED.