P. D. UPTON, AN UNDERWRITER AT LLOYD'S OF LONDON, ON HIS OWN BEHALF AND ON BEHALF OF THOSE CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON SUBSCRIBING TO CERTIFICATE NO. TA42735 v. ELDEN GINN AND ELDEN GINN TOBACCO WAREHOUSES, INC.
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RENDERED: AUGUST 10, 2007; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2005-CA-001062-MR
P. D. UPTON, AN UNDERWRITER AT LLOYD'S OF
LONDON, ON HIS OWN BEHALF AND ON BEHALF
OF THOSE CERTAIN UNDERWRITERS AT LLOYD'S OF
LONDON SUBSCRIBING TO CERTIFICATE NO.
TA42735
v.
APPELLANTS
APPEAL FROM MONTGOMERY CIRCUIT COURT
HONORABLE WILLIAM B. MAINS, JUDGE
ACTION NO. 00-CI-90026
ELDEN GINN AND ELDEN GINN TOBACCO
WAREHOUSES, INC.
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ABRAMSON AND TAYLOR, JUDGES; KNOPF,1 SENIOR JUDGE.
ABRAMSON, JUDGE: P. D. Upton, on behalf of Lloyd's of London, appeals from the
April 5, 2005 Findings of Fact and Conclusions of Law entered by the Montgomery
Circuit Court finding that Elden Ginn and Elden Ginn Tobacco Warehouses, Inc.
1
Senior Judge William L. Knopf sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5) of the Kentucky Constitution and KRS 21.580.
(collectively “Ginn”) did not repudiate a contract to purchase tobacco from Lloyd's, and
further adjudging Lloyd's liable to Ginn for wrongfully selling a portion of that tobacco to
a third party after it had previously been sold to Ginn. Upton also appeals the trial court's
April 22, 2005 Order denying Lloyd's motion to alter, amend or vacate. Finding no error,
we affirm.
On February 6, 1998, the weight of new-fallen snow caused the roof of the
Farmers Tobacco Warehouse in Mt. Sterling, Kentucky, to collapse. At the time, the
warehouse was filled with hundreds of thousands of pounds of tobacco awaiting sale.
Both the warehouse and its contents were insured by Lloyd's. In an attempt to salvage at
least some of the tobacco, Lloyd's held a sealed-bid auction ten days following the
warehouse collapse. Ginn was among the bidders.
Following an inspection of the tobacco, Ginn successfully submitted the
high bid for the tobacco, $0.71 per pound. On February 20, 1998, Ginn tendered a check
to Lloyd's in the amount of $177,500.00, representing advance payment of one-half of the
estimated value of the damaged tobacco. When Ginn arrived three days later to begin the
process of removing the tobacco, he concluded that between 10,000 and 12,000 pounds
of “good tobacco” had already been removed from the warehouse and replaced with poor
quality “junk” tobacco. Nonetheless, Ginn's employees began preparing and removing
the tobacco using pallets, a forklift and a tobacco press that were brought in for the task.
The process continued between February 23-28, 1998, with an additional load being
removed on March 3. Ginn then advised Lloyd's that he would not be able to remove any
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tobacco during the period March 4-8, 1998, due to a previously scheduled machinery
show in Maysville, Kentucky, that he was sponsoring. Ginn also indicated that removal
had to cease during the show because his equipment was needed for use in conjunction
with the show, and further because his available storage space for the tobacco was
temporarily filled with show-related equipment. When Ginn removed his employees and
his equipment from the Mt. Sterling warehouse to Maysville, he left behind
approximately forty-three pallets of tobacco (approximately 90,000 pounds) that were
ready for removal as well as numerous additional empty pallets and thousands of pounds
of stacked but not yet palleted tobacco.
Upon the return of Ginn's representative to the tobacco warehouse
following the conclusion of the machinery show, he discovered that the doors were
chained and locked. Ginn subsequently learned that during his absence, Lloyd's had sold
the remaining tobacco to a third party, Mack Bailey, at the rate of $0.05 per pound.
Lloyd's subsequently initiated this action against Ginn, contending that it was forced to
sell the tobacco because Ginn repudiated his contract and abandoned the remaining
tobacco. Lloyd's sought to recover from Ginn the difference between the unpaid contract
amount and the amount actually received from Bailey.
Following a bench trial, the trial court rendered Findings of Fact and
Conclusions of Law on April 5, 2005, in which it found that Ginn did not abandon its
contract and Lloyd's had no authority to resell to Bailey any of the tobacco Ginn had
previously purchased. The trial court further found that Lloyd's sale to Bailey was not
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commercially reasonable because Lloyd's failed to provide any notice of it to Ginn. Ginn
was awarded $16,506.79, representing the amount that Ginn had paid for tobacco that he
did not receive. This appeal followed.
Lloyd's argues that the trial court's findings were erroneous in that Ginn
himself testified that he repudiated the contract. According to Lloyd's, Ginn testified at
trial that he refused to remove all of the tobacco he had purchased unless Lloyd's agreed
to adjust the price to reflect the alleged disappearance of approximately 12,000 pounds of
high quality tobacco shortly after the auction. Characterizing Ginn's testimony as proof
of his intention to repudiate the contract, Lloyd's contends that it was justified in treating
the tobacco remaining in the warehouse as abandoned and, consequently, in offering it
for sale to a third party.
Our review of the trial court's findings is governed by Kentucky Rule of
Civil Procedure (CR) 52.01 which provides, in pertinent part, that “[f]indings of fact shall
not be set aside unless clearly erroneous, and due regard shall be given to the opportunity
of the trial court to judge the credibility of the witnesses.” See also Largent v. Largent,
643 S.W.2d 261 (Ky. 1982); Taylor v. Taylor, 591 S.W.2d 369 (Ky. 1979); Alvey v.
Union Inv., Inc., 697 S.W.2d 145 (Ky. App. 1985). Whether a contract has been
anticipatorily repudiated is a question of fact. Leibson & Nowka, The Uniform
Commercial Code of Kentucky § 2.06[2] (3rd ed. 2004), citing Thunder Basin Coal Co. v.
Southwestern Pub. Serv. Co., 104 F.3d 1205 (10th Cir. 1997). However, in making that
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factual determination, the fact-finder must be guided by Kentucky law regarding
anticipatory repudiation.
KRS 355.2-610 provides:
When either party repudiates the contract with respect to a
performance not yet due the loss of which will substantially
impair the value of the contract to the other, the aggrieved
party may
(a)
for a commercially reasonable time await performance
by the repudiating party; or
(b)
resort to any remedy for breach (KRS 355.2-703 or
355.2-711), even though he has notified the
repudiating party that he would await the latter's
performance and has urged retraction; and
(c)
in either case suspend his own performance or proceed
in accordance with the provisions of this article on the
seller's right to identify goods to the contract
notwithstanding breach or to salvage unfinished goods
(KRS 355.2-704).
The Official Comment to this section states that “anticipatory repudiation centers upon an
overt communication of intention or an action which renders performance impossible or
demonstrates a clear determination not to continue with performance.”2 U.C.C. § 2-610
(1958), Official Comment 1. The words or facts alleged to constitute the anticipatory
repudiation must be “unequivocal.” Brownsboro Road Restaurant, Inc. v. Jerrico, Inc.,
674 S.W.2d 40 (Ky.App. 1984).
Turning then to the record, we first note that Ginn, in fact, did testify during
the trial that he wanted an adjustment of the contract price due to his belief that over
2
In KRS 355.1-103(3), the Kentucky legislature provided that the Official Comments of the
National Conference of Commissioners on Uniform State Laws “represent the express legislative
intent of the General Assembly and shall be used as a guide for interpretation of this chapter,
except that if the text and the official comments conflict, the text shall control.” There is no
conflict here.
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10,000 pounds of high quality tobacco had been removed from the warehouse subsequent
to the auction but before he began removal. Ginn also testified that without the price
adjustment he would not remove the poor quality tobacco he termed “junk,” i.e., that
tobacco he believed was placed in the location where the missing high quality tobacco
originally was located. Despite the disagreement over the alleged missing tobacco and
the price adjustment, however, Ginn also repeatedly stated during his testimony that he
never intended to repudiate the contract or abandon the almost 100,000 pounds of
tobacco remaining at the warehouse when he removed his equipment for use in his
machinery show. Several times during his testimony he noted that between 40 and 50
pallets were fully loaded with good tobacco and awaiting transport when the previously
scheduled machinery show temporarily halted the removal work. In addition to the
palleted tobacco, Ginn also testified that he left in the warehouse a quantity of empty
pallets that were intended for use after the machinery show as well as tens of thousands
of additional pounds of tobacco that had not yet been placed on them.
Clearly, the evidence before the trial court does not reflect an unequivocal
intent on Ginn's part to repudiate his contract. On the contrary, Ginn's testimony
demonstrates a dispute over a small percentage—less than 2%—of the tobacco
purchased by him at the auction. His testimony also reveals that he did not intend to
abandon the vast majority of the tobacco that was ultimately sold by Lloyd's to Bailey.3
3
Interestingly, the testimony at trial indicates that the “junk” tobacco that was the subject of the
parties' dispute was likewise rejected by Bailey. In fact, no party ever removed the
approximately 10,000 to 15,000 pounds of “junk” tobacco. It was buried in the remains of the
warehouse when it was later torn down.
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Thus, because there is “substantial and credible evidence” supporting the trial court's
findings, we are foreclosed from setting them aside on appeal. White v. Howard, 394
S.W.2d 589 (Ky. 1965).
Lloyd's next asserts that, even if Ginn did not expressly admit in his
testimony that he abandoned the tobacco in the warehouse, his conduct constituted an
anticipatory repudiation as a matter of law. According to Lloyd's, because Ginn
expressly refused to remove the poor quality tobacco without an adjustment in the selling
price, he necessarily breached the entire contract which required him to remove all of the
tobacco. We disagree.
Under Kentucky law, the doctrine of anticipatory repudiation “requires
unequivocal words or conduct evidencing an intent to repudiate the contract.”
Brownsboro Road Restaurant, Inc. v. Jerrico, Inc., supra, 674 S.W.2d at 42. As
discussed above, the evidence before the trial court does not indicate Ginn's
“unequivocal” intent to repudiate his contract with Lloyd's. Rather, both his testimony
and his actions (e.g., leaving palleted tobacco and empty pallets in the tobacco warehouse
during the machinery sale and returning thereafter to continue with the removal) indicate
an intent on his part to continue performance of his contractual obligations by removing
the vast majority of the remaining tobacco from the warehouse.
Moreover, as quoted, supra, KRS 355.2-610 provides that in order for a
party to a contract to take action based upon the alleged anticipatory repudiation of the
contract by the other party, the other party's failure of performance must “substantially
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impair the value of the contract” to the party claiming the breach. See Fredonia
Broadcasting Corp, Inc. v. RCA Corp., 481 F.2d 781 (5th Cir. 1973). There is no
evidence in the record that had Ginn refused to remove the small quantity of allegedly
substituted poor quality tobacco the value of the contract to Lloyd's would have been
“substantially impair[ed].” There is also nothing in the record suggesting that if Lloyd's
had refused to agree to a price adjustment that Ginn would have then refused to pay the
full contract amount; Ginn simply refused to load and transport away the small
percentage of poor quality tobacco —less than 2%—that he believed was substituted for
good quality tobacco. Moreover, to the extent Lloyd's asserts that rejection of the poor
quality tobacco substantially impaired the value of the contract, its position is
undermined by the fact that Bailey, the subsequent purchaser, also did not remove the
disputed poor quality tobacco but left it to be buried when the damaged warehouse was
demolished. Under these circumstances we do not find that, as a matter of law, Ginn's
actions constituted an anticipatory repudiation of the contract.
Finally, in order for a privately consummated resale of goods to be
commercially reasonable, notice must be provided to the original buyer of the intent to
resell. KRS 355.2-706(3). It is undisputed that no notice was provided by Lloyd's to
Ginn prior to the resale of the tobacco to Bailey. However, having found that the trial
court correctly held that Lloyd's was not authorized to resell Ginn's tobacco in the first
instance, we need not address the effect of Lloyd's failure to provide notice to him of the
resale.
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In conclusion, we find no error in the trial court's finding that Ginn did not
repudiate his contract to purchase the tobacco in question from Lloyd's. Consequently,
we affirm the April 5, 2005 Findings of Fact and Conclusions of Law of the Montgomery
Circuit Court, as well as the April 22, 2005 Order denying Lloyd's motion to alter, amend
or vacate.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Todd S. Page
Stoll, Keenon Ogden, PLLC
Lexington, Kentucky
Gregory L. Monge
VanAntwerp, Monge, Jones & Edwards
Ashland, Kentucky
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