Kornegay Family Farms LLC v. Cross Creek Seed, Inc.
Kornegay Family Farms LLC v. Cross Creek Seed, Inc.
Opinion
**24 In this case we consider whether defendant Cross Creek Seed, Inc. may enforce several limitation of remedies clauses pursuant to Article 2 of the Uniform Commercial Code (UCC) as codified in N.C.G.S. § 25-2-719(1)(a) against Kornegay Family Farms, LLC and a number of other commercial farmers (plaintiffs) in defense of lawsuits premised on defendant's distribution of allegedly mislabeled tobacco seed. Because it is the policy of this State, as expressed by the General Assembly in the North Carolina Seed Law of 1963 (Seed Law), see N.C.G.S. §§ 106-277 to -277.34 (2015), to protect farmers from the potentially devastating consequences *378 of planting mislabeled seed, we conclude that defendant's limitation of remedies clauses are unenforceable against plaintiffs. Accordingly, we affirm the North Carolina Business Court's 20 April 2016 order and opinion denying defendant's motions for partial summary judgment.
Defendant is headquartered in Raeford, North Carolina, and is in the business of breeding, developing, and producing tobacco seeds. The eight plaintiffs in this case all are commercial farmers in North Carolina who had purchased one or more of four varieties of defendant's tobacco seed between January and February 2014. Between June and August 2015, each plaintiff filed a separate suit against defendant alleging that defendant had sold them mislabeled, certified tobacco seed for planting. The complaints were filed in the superior courts of six different counties across North Carolina. Plaintiffs complained that "[c]ontrary to the order and the labeling on the containers delivered to [them], a substantial portion of the seed was of an unknown variety" and not the type or types of certified seed each plaintiff contracted to receive from defendant. Plaintiffs learned that they had not received the correct types of seed after the seeds had been planted and consequently produced "plants which were defective, disease prone, inferior, and unmarketable." Several plaintiffs subsequently filed complaints with the North Carolina Seed Board pursuant to relevant provisions of the Seed Law. See N.C.G.S. §§ 106-277.30, -277.34. The Seed Board investigated these complaints and determined that the yields of what it described as "off-type" plants were "consistent with the presence of genetic abnormalities" in the seed. The Seed Board also determined that the yields of "off-type" plants were not "consistent with nutritional deficiencies" nor were they responses to "environmental or agronomic factors" such as chemical injury. Defendant denied selling unknown varieties of tobacco seed to plaintiffs-and most relevant to our review of this case-argued that in accord with the limitation of remedies clause on each container **25 of seed, plaintiffs' alleged damages were "limited to repayment of the purchase price of the seed."
On 7 July 2015, the Chief Justice of the Supreme Court of North Carolina designated the suit by Kornegay Family Farms-the named plaintiff-as a mandatory complex business case, and the matter was subsequently assigned to Chief Special Superior Court Judge for Complex Business Cases James L. Gale. By a consent order signed by Judge Gale on 15 October 2015, the other seven cases were consolidated in a "Master File" established in conjunction with the case filed by the named plaintiff.
In October and November 2015, defendant filed motions for partial summary judgment against all eight plaintiffs seeking to bar recovery of any damages exceeding the purchase price of the seed. The Business Court heard the motions on 4 February 2016. At the hearing, defendant reiterated its argument that any damages sustained by plaintiffs were limited to the purchase price of the seeds as stated in the limitation of remedies clause printed on the labels affixed to each container of seed. Defendant argued that these limitation of remedies clauses governed the transactions with plaintiffs pursuant to the provision of UCC Article 2 codified at N.C.G.S. § 25-2-719. 1
On 20 April 2016, the Business Court issued an order and opinion denying all of defendant's motions for partial summary judgment on the grounds that limitation of remedies clauses appearing on the labels of mislabeled seed must fail by virtue of the public policy central to the Seed Law as interpreted and applied by this Court. The Business Court observed that, faced with a set of facts similar to those presented in the instant case, this Court held that a limitation of remedies clause was unenforceable after determining that the Seed Law "has declared the policy of North Carolina to be one of protecting the farmer from the disastrous consequences of planting seed of one kind, believing he is planting another."
*379
Kornegay Family Farms, LLC v. Cross Creek Seed, Inc.
, No. 15 CVS 1646,
On interlocutory appeal from the order of the Business Court denying defendant's motions for partial summary judgment, defendant argues that its limitation of remedies clauses are enforceable pursuant to the UCC and that this Court's prior analysis of the public policy underlying the Seed Law does not apply in this case. We disagree.
The stated purpose of the Seed Law, codified in Chapter 106, Article 31 of the General Statutes, is "to regulate the labeling, possessing for sale, sale and offering or exposing for sale or otherwise providing for planting purposes of agricultural seeds and vegetable seeds; to prevent misrepresentation thereof; and for other purposes." N.C.G.S. § 106-277. Accordingly, the Seed Law makes it unlawful "[t]o transport, to offer for transportation, to sell, distribute, offer for sale or expose for sale within this State agricultural or vegetable seeds for seeding purposes" if those seeds, inter alia , are "[n]ot labeled in accordance with the provisions of this Article," present a "false or misleading labeling or claim," or have "affixed names or terms that create a misleading impression as to the kind, kind and variety, history, productivity, quality or origin of the seeds." Id. § 106-277.9(1).
In 1971 we first were confronted with determining whether and how the Seed Law affects private, civil litigation premised on allegations of mislabeled seed.
See generally
Gore
,
LIMITATION OF WARRANTY: Geo. J. Ball, Inc. warrants, to the extent of the purchase price, that seeds, plants, bulbs, growers supplies and other materials sold are as described on the container, within recognized tolerances. We give no other or further warranty, express or implied.
**27
Id. at 195,
On appeal from the trial court, the Court of Appeals held the trial court had erred in part in granting a directed verdict for the defendant and remanded the case to the trial court on the breach of contract claim on the
*380
grounds that a jury could award nominal damages on the plaintiff's contract claim.
Id. at 197,
Even though the jury should find that the provision entitled 'Limitation of Warranty' was so located and printed in the catalogue and other documents relied upon by the defendant as to bring it to the plaintiff's attention and so make it a part of the contract, it will not avail the defendant if it is contrary to the public policy of this State. A provision in a contract which is against public policy will not be enforced.
Id. at 203,
[T]he statute has declared the policy of North Carolina to be one of protecting the farmer from the disastrous consequences of planting seed of one kind, believing he is planting another. To permit the supplier of seed to escape all real responsibility for its breach of contract by inserting therein a skeleton warranty, such as was here used, would be to leave the farmer without any substantial recourse for his loss.
Id. at 208,
In the present case we consider facts that are nearly identical to those in Gore : plaintiffs purchased particular types of seed, received packages of the wrong seed mislabeled as the type or types ordered, and only discovered the mistake after the planted seeds yielded crops different from those anticipated. Furthermore, both cases involve contract clauses that purport to limit recoverable damages to the purchase price of the seed in any action potentially arising from the seed purchase transaction. Despite these nearly identical facts, defendant contends that our reasoning in Gore should not be applied in the present case because the transaction at issue in Gore predated the effective date of the UCC in North Carolina. Defendant contends that although the Court in Gore may have accurately described and applied the law in seed mislabeling cases in a pre-UCC world, the reasoning in Gore no longer remains correct in view of current North Carolina law on the subject. We do not agree with this argument.
Article 2 of the UCC, which was enacted in North Carolina in 1965, states that a seller's warranty "may limit or alter the measure of damages recoverable under this article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts."
**29
N.C.G.S. § 25-2-719(1)(a). If a limited remedy "is expressly agreed to be exclusive," then "it is the sole remedy,"
In addition, since our decision in
Gore
the General Assembly has taken no steps to repudiate our construction and application of the Seed Law. "[T]he legislature is always presumed to act with full knowledge of prior and existing law and [ ] where it chooses not to amend a statutory provision that has been interpreted in a specific way, we may assume that it is satisfied with that interpretation."
Polaroid Corp. v.
Offerman
,
**30
Defendant next argues that, in accord with the opinion of the Court of Appeals in
Billings v. Joseph Harris Co.
, which was affirmed by this Court, limitation of remedies clauses such as the one at issue here are enforceable pursuant to Article 2 of the UCC. The plaintiff in
Billings
purchased cabbage seed that was infected with a seed borne disease that caused the plants to rot in the field. In
Billings
the plaintiff argued before the Court of Appeals that its case was not governed by Article 2 of the UCC but by the Seed Law and this Court's decision in
Gore
.
Billings
,
We do not agree that the decision of the Court of Appeals in
Billings
is determinative in the present case. When this Court considered
Billings
on appeal, we distinguished it from our preceding decision in
Gore
.
Billings
,
Defendant also argues that the legislature "did not intend for the Seed Law to prevent a seller from enforcing its limitation of remedies in private litigation." In support of this position, defendant contends that the Seed Law is a regulatory statute that does not create a private right of action by which an injured party may seek damages for a violation. Defendant further contends that the Seed Law explicitly affects private, civil litigation in only two ways: first, factual evidence and scientific
**31
opinions contained in a report of the Seed Board may be introduced in court proceedings pursuant to subsection 106-277.34(a), and second, subsection 106-277.34(b) limits damages in private actions in which the buyer did not make a sworn complaint against the dealer pursuant to the Seed Law to the "expenses incurred in connection with the cultivation of the seed alleged to be defective." N.C.G.S. § 106-277.34. Applying the doctrine of
expressio unius est exclusio alterius
-"[w]here a statute ... sets forth the instances of its application or coverage, other methods or coverage are necessarily excluded,"
State ex rel. Hunt v. N.C. Reinsurance Facil.
,
Although the Seed Law is regulatory in nature, it does not bar aggrieved parties from pursuing private, civil litigation for damages resulting from mislabeled seed. In fact, certain provisions of the Seed Law clearly demonstrate that the General Assembly contemplated such recourse. As defendant observes, the 1998 amendments to the Seed Law provide for certain evidentiary constraints in "any court action involving a complaint that has been the subject of an investigation under G.S. 106-277.32," quoting N.C.G.S. § 106-277.34(a), and outline recovery limitations in "any court action where a buyer alleges that he or she suffered damages due to the failure of agricultural or vegetable seed to produce or perform as labeled ... and the buyer failed to make a sworn complaint against the dealer as set forth in G.S. 106-277.30," quoting
In
Gore
we interpreted the Seed Law to invalidate enforcement of limitation of remedies clauses in private, civil actions based on mislabeled seed.
AFFIRMED.
Section 25-2-719 states that "[c]onsequential damages may be limited or excluded unless the limitation or exclusion is unconscionable." N.C.G.S. § 25-2-719(3) (2015).
Reference
- Cited By
- 4 cases
- Status
- Published
- Syllabus
- Interlocutory appeal from N.C. Business Court order denying partial summary judgment for defendant application of N.C. Seed Law and Uniform Commercial Code to plaintiffs' complaints that defendant sold them mislabeled seed whether defendant is allowed to limit plaintiffs' recovery of damages to the sale price of the seed or whether standard UCC remedies can apply.