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Laws-info.com » Cases » Illinois » 2nd District Appellate » 2002 » Byington v. Dept. of Agriculture 
Byington v. Dept. of Agriculture 
State: Illinois
Court: 2nd District Appellate
Docket No: 2-00-1467 Rel
Case Date: 02/13/2002

No. 2--00--1467


IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT


 
ALAN BYINGTON and GENE BYINGTON, ) Appeal from the Circuit Court
d/b/a Byington Brothers, ) of Carroll County.
)
            Plaintiffs-Appellees, )
)  Nos. 97--MR--9
v. )           00--MR--1(Cons.)
)
THE DEPARTMENT OF AGRICULTURE )
and CONLEY GRAIN COMPANY, ) Honorable
) Michael T. Mallon,
          Defendants-Appellants.  ) Judge, Presiding.


 

JUSTICE GEIGER delivered the opinion of the court:

The plaintiffs, Alan and Gene Byington, d/b/a ByingtonBrothers, filed a complaint for administrative review in thecircuit court of Carroll County after defendant Illinois Departmentof Agriculture (the Department) found that they were not entitledto recovery under the Grain Code (240 ILCS 40/1--1 et seq. (West1998)). The trial court reversed the decision of the Departmentand entered a judgment in favor of the plaintiffs in the amount of$85,642.91. The Department and defendant Conley Grain Company nowappeal from the decision of the trial court, arguing that theplaintiffs' claim does not fall within the scope of the Grain Code. We affirm.

The instant controversy arose from the economic failure ofHahnaman-Albrecht, a licensed grain dealer and Class I grainwarehouseman. See 240 ILCS 40/1--10(b) (West 1998). On February13, 1997, the Department conducted a routine examination ofHahnaman-Albrecht's records and found a working capital deficiencyof nearly $5 million. Consequently, on February 27, 1997, theDepartment suspended Hahnaman-Albrecht's grain dealer andwarehouseman licenses. The Department then sent Hahnaman-Albrechtnotice of a revocation hearing. On March 6, 1997, prior to therevocation hearing, Hahnaman-Albrecht voluntarily surrendered itsgrain licenses.

On March 7, 1997, Conley Grain was licensed by the Departmentas a grain dealer and Class I grain warehouseman. On that sameday, Conley Grain entered into a successor agreement, acquiring allof Hahnaman-Albrecht's grain assets and obligations. See 240 ILCS40/1--10(b) (West 1998). However, on March 13, 1997, Conley Grainsurrendered its grain dealer and warehouse licenses.

Sometime after March 13, 1997, the plaintiffs filed a claimwith the Department, seeking compensation pursuant to section 25--10 of the Grain Code (240 ILCS 40/25--10 (West 1998)). Theplaintiffs contended that Conley Grain owed them for graindelivered to Hahnaman-Albrecht.

On July 21, 1998, the Department held an administrativehearing. The following evidence was introduced at the hearing. Alan Byington testified that in 1996 and 1997 the plaintiffs hadsold 110,279 bushels of corn to Hahnaman-Albrecht and that theyshould have been paid $196,538.28 for the corn. Byington testifiedthat they were paid only $95,771.92, leaving a balance of$100,756.36 still due. Alan Byington identified weight ticketsdocumenting the delivery of 110,279 bushels of corn to Hahnaman-Albrecht. Alan Byington testified that when Hahnaman-Albrechtsurrendered its licenses and was succeeded by Conley Grain, Hahnaman-Albrecht still owed the plaintiffs $100,756.36. AlanByington maintained that Conley Grain did not pay this amountbefore surrendering its licenses.

Gerald Franks testified that he was a warehouse examiner forthe Department. After Hahnaman-Albrecht surrendered its licenses,Franks examined Hahnaman-Albrecht's books to determine if anyoutstanding grain claims existed. Franks testified that, accordingto Hahnaman-Albrecht's records, the plaintiffs had been paid infull.

David Von Holten testified that he was an operations managerfor Hahnaman-Albrecht. Von Holten testified that the discrepancyin Hahnaman-Albrecht's records and the plaintiffs' records stemmedfrom a contract dispute that arose between the parties in September1995. Von Holten identified two unsigned contracts. According tothese contracts, the plaintiffs had agreed to sell Hahnaman-Albrecht 50,000 bushels of corn at a future date. Subsequently,the price of corn rose and the plaintiffs denied entering into thecontracts. When the plaintiffs refused to honor the contracts,Hahnaman-Albrecht purchased 50,000 bushels of corn on the Board ofTrade at a higher price. Hahnaman-Albrecht charged the pricedifference of $72,725 against the plaintiffs' account. In 1996 and1997, the plaintiffs continued to sell corn to Hahnaman-Albrecht. Before paying the plaintiffs for these sales however, Hahnaman-Albrecht deducted the disputed amount.

Von Holten also testified that it was customary for Hahnaman-Albrecht to take oral orders from sellers. Von Holten testifiedthat it was Hahnaman-Albrecht's procedure to mail a copy of thecontract to the seller the day after receiving an oral order, as awritten confirmation of the order. Von Holten testified that, ifthe contracts were not returned signed after four weeks, aHahnaman-Albrecht manager would hand deliver the contracts.

Gerald Lessman testified that he was a manger for Hahnaman-Albrecht. In April or May 1996, Lessman hand delivered the twoSeptember 1995 contracts to the plaintiffs, along with five othercontracts. Lessman testified that Alan Byington denied placing theSeptember 1995 orders and refused to sign those two contracts.

On December 19, 1998, the Department's hearing officer deniedthe plaintiffs' claim for compensation under the Grain Code. Indenying the plaintiffs' claim, the hearing officer found that theDepartment did not have jurisdiction because the claim involved acontract dispute. Additionally, the hearing officer found that,notwithstanding the jurisdictional issue, the plaintiffs hadentered into the disputed contracts and were responsible forHahnaman-Albrecht's cost in acquiring the 50,000 bushels of cornelsewhere.

On January 25, 1999, the plaintiffs filed a motion toreconsider with the director of the Department. On December 1999,the director affirmed the order of the hearing officer. Thedirector found that the plaintiffs had received writtenconfirmation of their oral order within a reasonable time and,therefore, the disputed contracts were enforceable pursuant tosection 2--201 of the Uniform Commercial Code (Commercial Code)(810 ILCS 5/2--201 (West 1998)).

On January 7, 2000, the plaintiffs filed an action foradministrative review in the circuit court of Carroll County,naming both the Department and Conley Grain as defendants. OnNovember 20, 1999, the trial court reversed the decision of theDepartment, finding that the disputed contracts violated thestatute of frauds and that both Hahnaman-Albrecht and Conley Grainhad left indebtedness to the plaintiffs upon their failure. Pursuant to the Grain Code, the trial court awarded the plaintiffs85% of the unpaid amount due them, which equaled $85,642.91. See240 ILCS 40/25--10(e) (West 1998). Conley Grain filed a timelynotice of appeal. The Department subsequently joined in theappeal.

The defendants' first argument is that the Department lackedjurisdiction over the plaintiffs' claim. The defendants argue thatthe plaintiffs' claim did not fall within the provisions of theGrain Code, as it involved a contract dispute rather than a claimagainst a failed grain licensee.

The term "jurisdiction," although not strictly applicable toan administrative body, may be used to designate the authority ofthe administrative body to act. Armstead v. Sheahan, 298 Ill. App.3d 892, 894-95 (1998). The issue of an administrative agency'sjurisdiction is a question of law (County of Knox ex rel. Mastersonv. The Highlands, L.L.C., 188 Ill. 2d 546, 554 (1999)), and, thus,the standard of review is de novo (Branson v. Department ofRevenue, 168 Ill. 2d 247, 264-65 (1995)). Since an administrativeagency, such as the Department, is a creature of statute, itsjurisdiction or authority must be found within the provisions ofthe statute by which it acts. Schalz v. McHenry County Sheriff'sDepartment Merit Comm'n, 113 Ill. 2d 198, 202-03 (1986). Accordingly, we will turn to an analysis of the Grain Code.

The Grain Code was enacted and the Grain Insurance Fund wasestablished to "protect producers in the event of the failure of alicensed grain dealer or licensed warehouseman and to ensure theexistence of an adequate resource so that persons holding validclaims may be compensated for losses." 240 ILCS 40/1--5 (West1998). Section 25--10(e) of the Grain Code provides that theDepartment will compensate claimants who have incurred financiallosses due to the failure of a licensed grain dealer, for 85% of avalid claim, up to $100,000. 240 ILCS 40/25--10(e) (West 1998).

The Grain Code defines a claimant to include "a producer ***who possesses evidence of the sale at an Illinois location of graindelivered to a failed grain dealer and who was not paid in full." 240 ILCS 40/1--10(b) (West 1998). The Grain Code defines a failureas:

"(a) a formal declaration of insolvency;

(b) a revocation of a license;

(c) a failure to apply for license renewal, leavingindebtedness to claimants;

(d) a denial of license renewal, leaving indebtedness toclaimants; or

(e) a voluntary surrender of license, leavingindebtedness to claimants." 240 ILCS 40/1--10(b) (1998).

The Grain Code expressly authorizes the Department toadjudicate claims made against a failed grain licensee. 240 ILCS40/25--5 (West 1998). Section 25--5(f) of the Grain Code providesthat "[t]he Department shall determine the validity, category, andamount of each claim within 120 days after the date of failure ofthe licensee." 240 ILCS 40/25--5(f) (West 1998). Section 25--5(h)further provides that "[a] claimant *** may request a hearing onthe Department's determination." 240 ILCS 40/25--5(h) (1998).

In the instant case, we hold that the Department hadjurisdiction over the plaintiffs' claim. In their claim, theplaintiffs alleged that they had sold and delivered grain toHahnaman-Albrecht and had documentation of their sales. Theplaintiffs further alleged that neither Hahnaman-Albrecht nor its successor, Conley Grain, had paid them in full before theyvoluntarily surrendered their licenses. Although the Departmenthad to determine whether the parties had entered into the disputedcontracts in order to determine whether Hahnaman-Albrecht andConley Grain had left indebtedness to the plaintiffs, the GrainCode gives the Department the authority to determine "the validity"of such grain claims (240 ILCS 40/25--5(f) (West 1998)). Therefore, the Department was not without authority to resolve theinstant dispute, and the trial court did not err in reversing theDepartment's finding.

In so holding, we note that Kaufman Grain Co., Inc. v.Director of the Department of Agriculture, 179 Ill. App. 3d 1040(1988), relied upon by the defendants, is distinguishable from thecase at bar. In Kaufman, a grain producer filed a claim with theDepartment because he disputed the damage discount that a grainwarehouse had charged him. Kaufman Grain Co., 179 Ill. App. 3d at1040, 1041-42. The Kaufman court held that the Department waswithout statutory authority to dispute claims between grainproducers and grain dealers and warehouses concerning the qualityof grain. Kaufman Grain Co., 179 Ill. App. 3d at 1047. As theKaufman case did not involve a failed grain licensee however, wefail to see how it is analogous to the instant case.

The defendants' next argument on appeal is that trial courterred in reversing the Department's finding that the disputedcontracts were enforceable because the plaintiffs had received awritten confirmation of their oral order within a reasonable time. See 810 ILCS 5/2--201(2) (West 1998). The defendants conclude thatthe disputed contracts were not prohibited by the statute of fraudsand that, therefore, the plaintiffs were properly charged for theirfailure to provide the 50,000 bushels of corn.

We must first determine the applicable standard of review. Under the Administrative Review Law (735 ILCS 5/3--101 et seq.(West 1998)), an agency's finding of fact will be reversed only ifit against the manifest weight of the evidence; however an agency'sdetermination on an issue of law is reviewed de novo. Branson, 168Ill. 2d at 264. In the case before us, the Department found thatthe disputed oral contracts were enforceable because the plaintiffshad received a written confirmatory memorandum within a reasonabletime as required by section 2--201(2) of the Commercial Code (810ILCS 5/2--201(2) (West 1998)). The question of whether a writtenconfirmation of an oral contract was received is a question offact. See Tabor & Co. v. Gorenz, 43 Ill. App. 3d 124, 129 (1976);Pillsbury Co. v. Buchanan, 37 Ill. App. 3d 876, 878 (1976). Accordingly, we will review the Department's factual finding todetermine if it was against the manifest weight of the evidence.

The parties agree that the provisions of the Commercial Code govern this transaction. Section 2--201(1) of the Commercial Codeprovides:

"A contract for the sale of goods for the price of $500or more is not enforceable by way of action or defense unlessthere is some writing sufficient to indicate that a contractfor sale has been made between the parties and signed by theparty against whom enforcement is sought or by his authorizedagent or broker." 810 ILCS 5/2--201(1) (West 1998).

However, for purposes of the Commercial Code, both grainproducers and the grain licensees are considered merchants. Sierens v. Clausen, 60 Ill. 2d 585, 588-89 (1975). Section 2--201(2) of the Commercial Code provides:

"Between merchants if within a reasonable time a writingin confirmation of the contract and sufficient against thesender is received and the party receiving it has reason tonote its content, it satisfies the requirement of subsection(1) against such party unless written notice of objection toits contents is given within ten days after it is received."810 ILCS 5/2--201(2) (West 1998).

In this case, we hold that the Department's finding that theplaintiffs received a confirmatory memorandum from Hahnaman-Albrecht was against the manifest weight of the evidence. AlthoughVon Holten testified that it was Hahnaman-Albrecht's policy to mailout a confirmatory memorandum the day after receiving an oralorder, there is no corroborating evidence that a confirmatorymemorandum was in fact mailed. See First National Bank of Antiochv. Guerra Construction Co., Inc. 153 Ill. App. 3d 662, 668 (1987). In Guerra Construction, this court held that, without othercorroborative evidence, testimony of general office practiceregarding the mailing of a confirmatory memorandum is insufficientto prove that the confirmatory memorandum was received. GuerraConstruction Co., 153 Ill. App. 3d at 667. In that case, we foundcorroborating evidence, based on a bank employee's testimony thatshe typed, sealed, and addressed the confirmation. GuerraConstruction Co., 153 Ill. App. 3d at 668. Additionally, anotherbank employee testified that he had spoken to a person from theconstruction company who told him that the confirmatory memorandumhad been received. Guerra Construction Co., 153 Ill. App. 3d at668.

Here, unlike First National Bank of Antioch, the record doesnot corroborate that Hahnaman-Albrecht's general office practiceswere followed. Rather, the record suggests that Hahnaman-Albrechtdid not follow its usual policies in this case. Von Holtentestified that it was also Hahnaman-Albrecht's policy to handdeliver contracts after four weeks if they had not been returnedsigned. However, Lessman testified that he had not hand deliveredthe September 1995 contracts until April or May 1996, approximatelyseven months after the plaintiffs allegedly placed the oral order. Accordingly, the plaintiffs did not receive a written confirmationof their oral order prior to April or May 1996. Due to thevolatility of the grain market, a seven-month delay in sending aconfirmatory memorandum is unreasonable. See Bureau Service Co. v.King, 308 Ill. App. 3d 835, 839 (1999) (an eight-month delay insending a written confirmation was unreasonable as a matter oflaw).

As the disputed contracts were not signed, nor was aconfirmatory memorandum received within a reasonable time, theywere unenforceable. Since the contracts were not enforceable, itwas improper for them to be charged against the plaintiffs'account. Therefore, the plaintiffs were still owed money for grainthat they delivered to Hahnaman-Albrecht when Conley Grainsurrendered its license, and they should have been compensatedunder section 25--10 of the Grain Code. (240 ILCS 40/25--10 (West1998)).

For the foregoing reasons, the judgment of the circuit courtof Carroll County is affirmed.

Affirmed.

HUTCHINSON, P.J., and CALLUM, J., concur.

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