APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-3500-97T3
INTEGRITY MATERIAL HANDLING
SYSTEMS, INC.,
Plaintiff-Appellant,
vs.
DELUXE CORPORATION and
PAPER DIRECT, INC.,
Defendants-Respondents.
________________________________________
Argued: November 30, 1998 - Decided: January 19, 1999
Before Judges Petrella and Cuff.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County.
Donald J. Maizys argued the cause for appellant (Karas, Kilstein, Hirschklau, Feitlin & Youngman, attorneys; Mr. Maizys, on the brief).
Hugh P. Francis argued the cause for respondent (Francis & O'Farrell, attorneys; Mr. Francis, of counsel, Peter A. Olsen, on the brief).
The opinion of the court was delivered by
CUFF, J.A.D.
Plaintiff is a disappointed bidder for a contract
to dismantle a private storage and distribution facility and to purchase
and dispose of its equipment. It commenced an action to prevent defendants
from selling the equipment to another and for damages. After its request
for injunctive relief was denied, Judge Guida granted defendants' motion
for summary judgment and dismissed plaintiff's complaint. On appeal, plaintiff
contends that it presented ample evidence to raise a genuine issue of material
fact concerning the existence of a contract. We affirm.
Our statement of facts reflects our consideration
of the evidence in the light most favorable to the plaintiff, the party
opposing summary judgment. Brill v. Guardian Life Ins. Co. of Am.,
142
N.J. 520, 523 (1995); Dairy Stores, Inc. v. Sentinel Publ'g Co.,
104
N.J. 125, 135 (1986).
Plaintiff, Integrity Material Handling Systems,
Inc., is in the business of dismantling and liquidating business equipment.
In the Summer of 1996, defendant Deluxe Corporation decided to close the
Lyndhurst warehouse and distribution facility of its wholly-owned subsidiary,
defendant Paper Direct, Inc. To effectuate the closure, all stock had to
be moved from the warehouse and all shelving and conveyor systems had to
be dismantled and removed. Charles Pedrani, President of plaintiff, learned
of the impending closure and met with representatives of defendant Deluxe,
Larry Sieber and Ray Knapp, at the Lyndhurst facility on August 12, 1996.
Also present was Ken Orchard of Norell Systems, Inc., who had informed
Pedrani of the availability of the equipment.
Pedrani visited the site to view the equipment and
to evaluate the resources needed to dismantle and remove it in accordance
with defendants' timetable. During the facility inspection, Pedrani gave
Sieber and Knapp a $100,000 oral quote to remove and purchase the equipment.
According to Sieber, he emphasized to Pedrani that the equipment had to
be dismantled by September 15, and removed by September 30. The meeting
continued over dinner where the men discussed their respective responsibilities
under the agreement.
On August 14, 1996, Pedrani and Orchard again met
with Sieber at the Lyndhurst facility. They discussed the project and the
timetable. After Pedrani assured Sieber that he could complete the job
by September 30, he hand-wrote a purchase order for the three major items
of equipment. The purchase order did not list the total price but did state
"1/
3
Dep 1/
3
Down 1/3 Out." Pedrani gave Sieber a $34,000 check which Sieber took
but did not negotiate.
During the August 14 meeting, Sieber introduced
Pedrani to Bill Hall as a contractor employed by defendants to dismantle
the facility. Pedrani and Hall talked for a while about removing the materials
from the building. In his deposition, Hall stated that Sieber told him
that Pedrani had the contract. Hall stated that he was worried about "the
onset of litigation" after defendants reneged on the deal. Sieber told
Hall that he had been "bullied" by Pedrani, a "big burly New Jersey guy,"
into accepting the check and handshake.
Later that day, Pedrani wrote a memo which he claims
confirmed the agreement reached by Sieber and him. Significantly, two signature
lines were placed on the document: one for Pedrani's signature on behalf
of plaintiff and one read "Acceptance by Deluxe Corporation." This document
was never signed by defendants.
As to other events of August 12 and 14 and their
significance, the parties disagree. According to Sieber, he and Knapp informed
Pedrani that a written contract would have to be executed, and it would
not become binding until the entire proposal was reviewed and approved
by the engineering and legal staffs in Minnesota. Sieber claimed further
that Pedrani did not object to this and understood that several other firms
had submitted competing bids. According to Pedrani, he was told that a
decision would be reached within a few days and he believed that Sieber
and Knapp were comfortable with his proposal. Pedrani claimed that nobody
informed him that the legal department in Minnesota had to approve the
agreement.
Pedrani also contends that he and Sieber shook hands
on August 14 which signified to him the conclusion of an oral contract.
Sieber denied shaking hands with Pedrani and claimed that an oral contract
was never reached because Pedrani knew that he needed approval from the
home office. Furthermore, Sieber notes that the purchase order was handwritten
solely by Pedrani and was never signed by Sieber.
Sieber asserted that Pedrani insisted that he accept
the check and that he did so reluctantly. Sieber stated that he considered
the check simply a show of good faith and never cashed it. He claimed that
before he took the check, he again told Pedrani that the agreement would
not be finalized until a written proposal was reviewed and approved by
the home office. Orchard testified that he never heard Sieber say anything
about needing approval from Minnesota.
On August 15, 1996, Sieber and Knapp returned to
Minnesota. At the home office, the Engineering Department told them that
if the Lyndhurst facility was not vacated by September 30, defendants would
incur an additional month's rent of $70,000. A determination was made that
any agreement to liquidate defendants' Lyndhurst facility had to contain
a $70,000 penalty clause.
Subsequently, Sieber called Pedrani and informed
him that any deal had to include a penalty clause. Pedrani was surprised
at this development and stated that a bonus clause for timely completion
should also be added. Sieber claimed that Pedrani talked about lowering
the amount of the penalty and adding a bonus of $15,000 for timely completion.
During this period, defendants received a higher
bid from East Coast Storage Systems. This company also agreed to the $70,000
penalty provision. On August 19, 1996, Sieber informed Pedrani of the other
bid, but Pedrani refused to accept the agreement with the penalty provision.
On August 20, Pedrani spoke to Knapp who told him that defendants would
not accept an agreement without the clause. On August 21, Sieber called
Pedrani and left a message that defendants had accepted the competing bid.
He asked whether Pedrani wanted the check returned or destroyed.
On August 30, 1996, plaintiff filed a Verified Complaint
for breach of contract and an Order to Show Cause seeking to restrain defendants
from completing the contract with East Coast Storage Systems. After plaintiff's
request for injunctive relief was denied, discovery proceeded and defendants
subsequently moved for summary judgment.
In opposition, plaintiff argued that the parties
had reached an agreement but conceded there was no writing to satisfy the
Statute of Frauds. However, plaintiff argued the oral contract was valid
because it fell within either of two exceptions to the Statute of Frauds,
N.J.S.A.
12A:2-201(3)(b) (admission of contract) and (c) (part performance).
Plaintiff also asserted that this agreement was a contract for the provision
of services rather than a sale of equipment; therefore, Article 2 of the
Uniform Commercial Code (UCC), N.J.S.A.
12A:2-101 through -725, did not apply to this transaction.
Judge Guida granted defendants' motion. He found
that "the evidence suggests no more than an offer was made by [plaintiff]
to purchase and remove the equipment from defendant's Lyndhurst warehouse."
The judge concluded that Sieber did not admit to the contract's existence
and did not accept the check in the normal course. By implication, the
court decided the agreement was for the sale of goods.
As a preliminary matter, we reject plaintiff's argument
that the transaction between the parties is not governed by the UCC and
specifically its Statute of Frauds, N.J.S.A.
12A:2-201. When a contract is a mixed contract for goods and services,
a court must determine whether the sales or services aspect predominates.
Custom Communications Eng'g, Inc. v. E.F. Johnson Co., 269
N.J. Super. 531, 537 (App. Div. 1993). See also Huyler
Paper Stock Co. v. Information Supplies Corp. 117
N.J. Super. 353, 360 (Law Div. 1971). To make this determination, courts
look to the language and circumstances surrounding the contract, the relationship
between the goods and services, the compensation structure and the intrinsic
worth of the goods provided. Quality Guaranteed Roofing, Inc. v. Hoffmann-La
Roche, Inc., 302
N.J. Super. 163, 166-67 (App. Div. 1997). Although this determination
is a factual issue, the record in this case allows no other conclusion
than that the dismantling service was tangential to the primary purpose
of the transaction, acquisition of the shelving and conveyor system for
resale by plaintiff at a substantial profit.
Having concluded that a writing was required to
form the contract, N.J.S.A.
12A:2-201(1), we must decide whether the acts of the parties, either
by acknowledgement of the existence of the contract or part performance,
allow enforcement of an oral agreement. In the context of a summary judgment
motion, we conduct this analysis in accordance with the standard set forth
in Brill,
supra.
Brill instructs us how to determine when
an alleged disputed issue of fact should be considered genuine for purposes
of R. 4:46-2. The Court emphasized that a motion judge should evaluate
the evidence in the same manner as a motion for a directed verdict at the
end of a plaintiff's case at trial, R. 4:37-2(b), and observed that
the essence of the inquiry is "whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law." Brill, supra,
142 N.J. at 536 (quoting Anderson v. Liberty Lobby, Inc.,
477
U.S. 242, 251-52, 106
S. Ct. 2505, 2512, 91
L. Ed.2d 202, 214 (1986)). Measured against this standard, we conclude
that plaintiff failed to raise a genuine issue of material fact of acknowledgment
of the contract by defendants or partial performance by plaintiff.
The Statute of Frauds provides:
Except as otherwise provided
in this section a contract for the sale of goods for the price of $500
or more is not enforceable by way of action or defense 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 authorized agent or broker. A writing is not insufficient
because it omits or incorrectly states a term agreed upon but the contract
is not enforceable under this paragraph beyond the quantity of goods shown
in such writing.
[N.J.S.A. 12A:2-201(1).]
Plaintiff does not dispute that there was not a
sufficient writing to satisfy the Statute of Frauds, or that neither the
purchase order nor the confirmatory correspondence remitted by plaintiff
was ever signed by defendants. Plaintiff claims that the contract was enforceable
because it fell outside the Statute of Frauds based on either of two exceptions.
The relevant part of the statute reads:
(3) A contract which does
not satisfy the requirements of subsection (1) but which is valid in other
respects is enforceable.
* * *
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods
for which payment has been made and accepted or which have been received
and accepted (12A:2-606).
[N.J.S.A.
12A:2-201(3)(b), (c).]
The Statute of Frauds is a controversial rule
first adopted by the English Parliament in 1677 and eventually adopted
in early American common law. See N.J.S.A.
12A:2-201, New Jersey Study Comment. While some commentators believe
the statute prevents fraud, others contend that it aids in the perpetration
of fraud. Ibid. The drafters of the UCC, believing that the statute
did more good than harm, retained the writing requirement for the sale
of goods over $500 subject to certain exceptions. Ibid.
The exceptions to the Statute of Frauds set out
in N.J.S.A.
12A:2-201(3)(b) & (c) contemplate the enforcement of certain oral
contracts without a writing. See 1 James J. White and Robert S.
Summers, Uniform Commercial Code, § 2-5 at 70 (4th ed. 1995)
(hereinafter White and Summers). For each exception, the plaintiff must
prove the existence of a valid oral contract "plus something more." Ibid.
This additional requirement of something more "is a kind of special indicator
that a contract, albeit oral, was in fact made." Ibid.
Accordingly, to prevail under the exception set
out in
N.J.S.A.
12A:2-201(3)(b), plaintiff must prove the existence of a valid oral
contract and must demonstrate that the defendant admitted that a contract
was reached. To prevail under N.J.S.A.
12A:2-201(3)(c), the plaintiff must prove the oral contract and demonstrate
that goods or payment were accepted by the defendant. To prevail under
either exception, therefore, plaintiff must first demonstrate that an oral
contract was reached.
For purposes of this opinion, we will assume that
plaintiff has submitted sufficient evidence to raise a genuine issue of
fact that the parties had reached agreement concerning most of the significant
terms of the transaction. We conclude, however, that the evidence would
not allow a rational fact-finder to find that defendants acknowledged the
oral agreement.
The purpose behind the admission exception to the
writing requirement is that "[t]he statute of frauds was not designed to
protect a party who made an oral contract, but rather to aid a party who
did not make a contract, though one is claimed to have been made orally
with him." Cohn v. Fisher, 118
N.J. Super. 286, 296 (Law Div. 1972). Thus, when a party admits to
making an oral contract, he should be held to this bargain. Ibid.
Defendants never admitted the existence
of a contract. Plaintiff's argument to the contrary and his attempt to
discredit Sieber's testimony goes to whether an oral contract was ever
reached, a prerequisite to invoking the exception to the Statute of Frauds.
However, plaintiff submits no evidence of the "something more" contemplated
by the statutory exception. An admission by defendants that an oral contract
existed is lacking. Therefore, this exception is not available to plaintiff.
Similarly, the part performance exception to the
Statute of Frauds is not available to plaintiff. The
Uniform Commercial Code Comment to N.J.S.A.
12A:2-201 notes,
[p]art performance by the
buyer requires the delivery of something by him that is accepted by the
seller as such performance. Thus, part payment may be made by money or
check, accepted by the seller.
The UCC "prohibits a party from invoking the Statute
of Frauds defense if that party has received and accepted payment." First
Valley Leasing, Inc. v. Goushy, 795
F. Supp. 693, 696 (D.N.J. 1992); see also Buffaloe
v. Hart, 441
S.E.2d 172, 176 (N.C. Ct. App. 1994) (acceptance of check presents
a question of fact). The agreement, however, is only enforceable with respect
to the amount of goods for which payment has been accepted. N.J.S.A.
12A:2-201(3)(c). In other words, this exception "expressly limits enforceability
only to the apportionable part ... for which seller has received and accepted
payment...." See White and Summers,
supra at 74.
White and Summers note the different results that
have been reached in determining whether a down payment on a single nondivisible
item indicates a contract permitting a party making the payment to prove
and recover in full on the oral contract. Id. at 76. For instance,
in Cohn, supra, the court held that a check for half of the
agreed upon price given by the defendant-buyer to the plaintiff-seller
could constitute partial performance of a contract to purchase a boat.
Cohn, supra, 118 N.J. Super. at 296. The court noted
that because the check was given to and accepted by the seller, the contract
should, pursuant to N.J.S.A.
12A:2-201(3)(c), be held enforceable under the Statute of Frauds. Ibid.
The court decided to uphold the entire contract because the agreement concerned
the sale of only one boat. Id. at 297. Finally, the court held that
the fact that defendant stopped payment on the check was of no legal consequence.
Ibid.
Furthermore, in Cohn, the buyer had admitted
to an oral contract, id. at 296, and had delivered a signed check
describing the boat and stating its full price. Id. at 293. The
court held that the check was sufficient to constitute a writing that satisfied
the Statute of Frauds. Id. at 294.
On the other hand, in Jones v. Wide World of
Cars, Inc., 820
F. Supp. 132, 136 (S.D.N.Y. 1993), the court held that a buyer's deposit
towards the purchase of a car was insufficient to establish an enforceable
contract absent additional conduct or a writing. The court noted, however,
that cases under the Statute of Frauds have suggested that the recipient
of a deposit, but not the buyer, may be bound. Id. at 137.
White and Summers cite approvingly cases in which
acceptance of a deposit has rendered enforceable an entire oral agreement
for a nondivisible item. White and Summers, supra, at 76. See
The Press, Inc. v. Fins & Feathers Publ'g Co., 361
N.W.2d 171, 174 (Minn. Ct. App. 1985) (upholding an oral contract where
part payment was received for a two million piece print run); Morris
v. Perkins Chevrolet, Inc., 663
S.W.2d 785, 787 (Mo. Ct. App. 1984) ("partial payment for a single
indivisible commercial unit validates an oral contract...."); Paloukos
v. Intermountain Chevrolet Co., 588
P.2d 939, 944 (Idaho 1978) ("payment of $120, which was accepted ...
though later returned, constitutes sufficient part performance to excuse
compliance with the statute of frauds"). Here, however, the evidence is
insufficient to support a conclusion that defendants ever accepted the
down payment. The check was never cashed. In fact, there is no evidence
that Sieber, the employee to whom Pedrani gave the check, ever submitted
the check for negotiation. Of greater significance, however, is that the
single act of giving the check to Sieber, when viewed in context, allows
no other conclusion than that Pedrani submitted the check as a sign of
his interest and ability to do the job. This conclusion is directly supported
by his deposition testimony in which he stated that the check was tendered
to show his good faith as a bidder. His subsequent conduct of placing his
offer in writing reinforces the conclusion that even Pedrani believed more
was required to close his deal.
In summation, we conclude that the transaction between
the parties involved a sale of goods which required a writing in order
for the agreement to be enforceable. We also conclude that plaintiff failed
to raise a genuine issue of material fact that defendants admitted or acknowledged
the oral agreement or part performance by plaintiff to except this agreement
from the writing requirement of N.J.S.A.
12A:2-201. Accordingly, defendants' motion for summary judgment was
properly granted.
Affirmed.
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