Summary of a Recent
Judicial
Development in
Commercial Transactions
Grain Bank Purchase Constitutes Sale Under
Uniform Commercial Code
Steve WhiteNational AgLaw Center Graduate Assistant
Summary of Decision
In Duxbury v. Spex Feeds, Inc., 681 N.W.2d 380 (Minn. Ct. App. 2004), the Minnesota Court of Appeals held that the Uniform Commercial Code requirement for a "sale" was satisfied when a grain bank depositor purchased feed from the grain bank.
Background
The Duxburys were farmers who raised corn and hogs. Duxbury v. Spex Feeds, 681 N.W.2d at 384. Defendant Spex Foods, Inc. was a company that produced and sold feed and feed additives and operated a grain bank at which farmers could deliver corn and "receive a proportional share of the corn commingled in the bank." Id.
The Duxburys delivered grain to Spex to the grain bank in 1998 and 1999 and made arrangements with Spex to mix and deliver hog feed made from their share of corn in the grain bank. See id. Spex manufactured the hog feed by combining ground corn with soybean meal and other medicines and supplements. See id. The price paid by the Duxburys covered all components of the hog feed, minus the price for the corn. See id. They also paid an additional fee for the grinding, mixing, and delivery of the feed. See id.
The Duxburys' hogs experienced gestational problems caused by toxins in the hog feed they purchased from Spex. See id. Consequently, they brought an action for products liability and breach of implied warranty against Spex, contending that Spex did not take proper care in controlling the moisture level of grain in the bins and that it did not take the necessary steps to check for mold or toxins in the grain. See id. The jury ruled in favor of the Duxburys' and Spex appealed that judgement to the Minnesota Court of Appeals. See id.
Arguments
Spex argued that because the Duxburys retained title to the corn used to produce the hog feed, "the 'sale' requirement under the Uniform Commercial Code was not satisfied." Id. at 385. It asserted that because the Code was inapplicable the Duxburys claims for breach of implied warranty and products liability were precluded. See id.
Analysis and Holding
The court first examined whether or not title had passed from Spex to the Duxburys when they deposited corn in the grain bank. See id. at 386. The court explained that when a depositor places grain in a grain bank, a bailment relationship is formed. See id. It determined that because of this bailment relationship, Spex retained title to the corn in the grain bin. See id.
The court next discussed whether the parties' transaction was governed by the Uniform Commercial Code. See id. It explained that the Code defines a "sale" as "'the passing of title from the seller to the buyer for a price'" and that the "'predominant factor test'" is used to determine whether a transaction constitutes a sale under the Code. Id. (citations omitted). It also explained that the predominant factor test examines the predominant factor in a transaction to determine whether more emphasis is placed on the "transfer of goods or the provision of services." Id. The court noted that Spex "is in the business of selling animal feed and feed supplements" and that when the Duxvburys purchased the hog feed from Spex they paid $74 per ton for the additives and supplements and $8.50 per ton for processing and delivery. See id. at 387. The court, based on these facts, decided the predominant factor in this transaction was the transfer of goods, and that the transaction therefore constituted a sale under the Uniform Commercial Code. See id.
The case was decided on June 15, 2004; this summary was posted Feb. 16, 2005.