Opinion
No. 429.
Argued June 3, 1975. —
Decided June 30, 1975.
APPEAL from a judgment of the county court of Juneau county: RAYMOND E. GIERINGER, County Judge of Adams County, Presiding. Affirmed.
For the appellant there was a brief by Hill, Quale Hartman of Baraboo, and oral argument by James Hill.
For the respondent there was a brief by Cross, Karch, Langer Wagner of Baraboo, and oral argument by John Langer.
Action by plaintiff, LaVerne Schmieder, to recover the sum of $5,103.50 for personal property taken by the defendant, Standard Oil Company of Indiana, pursuant to a contract executed by the parties.
LaVerne Schmieder became an agent as a bulk distributor of Standard Oil on October 11, 1954. As such, Schmieder delivered fuel oil, sold and delivered motor oil, serviced farm accounts with gasoline, fuel oil and motor oil, furnished equipment, such as storage tanks, pumps and hoses, for some of the farmers who did not have their own and furnished equipment for some service stations.
The contract between the parties was terminated November 15, 1967. At this time, Schmieder owned tanks, pumps, valves, hoses and nozzles located throughout his territory. The contract between the parties gave Standard Oil an option to purchase this equipment. The option clause provides:
"Company shall have the option, exercisable at any time within thirty (30) days after termination of Employee's employment, to purchase his interest in or rights (ownership, contract, lease or otherwise) to any or all equipment loaned by Employee to any customer (consumer or reseller) at a price equal to Employee's costs, minus such depreciation as may be mutually agreed upon. Said option may be exercised by written notice to Employee. If said option is exercised, Employee will deliver a bill of sale to Company, transferring title to said equipment free and clear of all liens and encumbrances. During said thirty-day period, Company and its customers may use such equipment without charge. Any sums due Employee pursuant to the exercise of this option may first be credited by Company on any unpaid indebtedness by Employee to Company."
On December 14, 1967, Schmieder received a letter from W.C. Matthei, Standard Oil's district manager, informing him that Standard Oil was exercising its option to purchase his interest in or right to all equipment loaned by him to any customer at a price equal to his costs, minus depreciation as may be mutually agreed upon.
Pursuant to the option being exercised, plaintiff submitted a list of items to defendant which set forth the values plaintiff placed on each item listed, which values were purportedly his cost values, and that many months later he deducted $1,000 as the amount of depreciation he was claiming. Some of the equipment was obtained by plaintiff when he took over the agency in 1954, while the rest was purchased during the period he had the agency.
By a letter dated September 6, 1968, to Schmieder's attorney, who did not represent him at trial or on this appeal, W.C. Matthei notified Schmieder that:
"After a thorough investigation of this entire matter, we are not interested in purchasing Mr. Schmieder's equipment as we cannot come to a mutually agreed upon price for said equipment. This letter releases Mr. Schmieder from any previous options that were either verbally or written and, naturally, he is free to sell any of this equipment to anyone that he chooses."
The rest of the letter indicates that numerous discussions had taken place relative to the value of the equipment and that the parties were unable to arrive at a mutually agreed upon price.
The matter was tried on October 19, 1972, before Judge RAYMOND E. GIERINGER. On direct examination, Schmieder testified that the $6,103.50 figure submitted to Standard Oil was actually his cost and that $5,103.50 represents his cost less depreciation and also the fair market value of the equipment. On cross-examination, he testified that he bought certain equipment from the agent who had the agency before him. Some of the tanks he bought in 1954 were still in existence at the time of the termination of the agreement. He did claim depreciation of this equipment for income tax purposes, but he did not recall at what rate he was depreciating it. As to some specific items, Schmieder was unable to recall in which year he acquired them or what he had paid for them. Some of the prices on the list were not the same as prices testified to at trial.
Three of the places listed were service stations where he owned the equipment. At the time of trial, he could not recall the costs to him of this equipment other than by stating what prices were on the list given to Standard Oil.
John T. Early testified that he was the consumer marketing representative for Standard Oil for an area which included Schmieder's agency. Schmieder gave him the list of equipment and costs after Early requested it in September of 1967. Early first became aware of the depreciation being claimed by Schmieder six to eight months later.
Early further testified that the equipment at William Harrison's filling station cost Schmieder $1, not $500. He also testified that Schmieder bought the equipment at Slater's filling station for $15. The list gave a cost figure of $810 for equipment there. Early said that Schmieder had told him he secured the tanks at Fred Steinhaus' station from a construction job in Janesville for nothing. The list price for all the equipment at Steinhaus' was $1,200. Early placed a value on the equipment other than that at the filling stations at $2,055.50. Early stated he tried to discover Schmieder's costs but was told that Schmieder was unable to locate his records. Standard Oil was not able to agree on a depreciation figure with Schmieder.
The trial court in its written decision pointed out that the testimony relating to the costs of the equipment at the three filling stations was very controversial and Schmieder could not produce evidence to establish costs on these items or that they were actually installed by him. The court held, therefore, that the plaintiff did not meet his burden of proof on these items so that the net depreciable value was reduced to $3,593.50. This amount was reduced by $1,198.08 as depreciation at 33 1/3 percent which the court held was a reasonable depreciation rate. Therefore, as to the equipment involved in this part of the case, the court held that Standard Oil owed Schmieder $2,395.42. Schmieder was also granted judgment in the other aspects of his action.
The sole issue presented upon this appeal is whether Standard Oil accepted Schmieder's equipment and "invoice price" as a matter of law.
Schmieder contends that by Standard Oil's failure to reject the equipment involved until September, 1968, it is required to pay the "invoice price" because it accepted the equipment with knowledge of such price and did not reject the equipment within a reasonable time. Standard Oil does not contend it is not obligated to pay for the equipment, but argues that it was not required to pay the price demanded by the plaintiff.
Both parties agree that Article 2 of the Uniform Commercial Code — Sales, ch. 402, Stats., applies to the transaction in question. They also agree that the clause of the employment contract giving Standard Oil an option to purchase Schmieder's equipment at cost less such depreciation as may be mutually agreed upon left the element of price to further agreement between the parties.
Sec. 402.305, Stats., allows parties to conclude a contract for the sale of goods without setting the matter of price. That section provides in part:
"(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if:
"(a) Nothing is said as to price; or
"(b) The price is left to be agreed by the parties and they fail to agree; or
(C) . . ."
Therefore, Standard Oil, by exercising its option to purchase the equipment, did create a valid contract to purchase that equipment although the price was yet to be determined.
Plaintiff cites numerous authorities for the proposition that a buyer, who fails to reject goods within a reasonable time, must pay for them. Kelsey v. J.W. Ringrose Net Co. (1913), 152 Wis. 499, 140 N.W. 66 (reasonable time to test machine to determine if it complies with warranty); Hiltgen v. Biever (1916), 162 Wis. 315, 156 N.W. 132 (reasonable time to try goods to determine if they were in compliance with the terms of the sale); Robinson v. Jonathan Logan Financial (D.C.App. 1971), 277 A.2d 115 (reasonable time to reject goods delivered late); and Axion Corp. v. G.D.C. Leasing Corp. (1971), 359 Mass. 474, 269 N.E.2d 664 (reasonable time to reject nonconforming goods).
Plaintiff also relies on George J. Meyer Mfg. Co. v. Howard Brass Copper Co. (1945), 246 Wis. 558, 573, 18 N.W.2d 468, where this court said:
"By the issuance and confirmation of the blanket order and the acceptance of the purchase orders by the defendant, these provisions in the price schedules in legal effect became terms of the contract between the parties." From these cases, Schmieder argues that Standard Oil accepted the equipment, became obligated to pay for it and accepted the price, $5,103.50, set forth in the list he submitted to it.
These cases are inapplicable to the case at bar, however. Here, the contract between the parties established that the price to be paid for the equipment was to be Schmieder's cost minus such depreciation as may be mutually agreed upon by them. The statute permits such a standard. Therefore, Standard Oil could, and did, accept the equipment so as to become obligated to pay for it without agreeing at that time what amount it would have to pay. The fact that the parties could not reach agreement as to the price did not, however, obligate Standard Oil to pay the amount claimed by Schmieder.
Here the parties never agreed upon the depreciation. The contract provided no method for determining depreciation in the event mutual agreement could not be reached. Since plaintiff did not provide defendant with his claimed depreciation until many months after the termination of the contract, the trial court, of necessity, had to determine a reasonable depreciation and did so. See: Sec. 402.305 (4), Stats. Under the facts, a 33 1/3 percent rate of depreciation was reasonable.
We conclude that the purchase price to be paid by Standard Oil to plaintiff is controlled by the terms of the contract; that the cost as determined by the trial court is reasonable; that plaintiff failed to prove his cost for the equipment at the three filling stations; that the plaintiff did not meet the burden of proof in establishing any depreciation as claimed; that the depreciation allowed by the trial court was reasonable and that, therefore, the judgment appealed from must be confirmed.
By the Court. — Judgment affirmed.