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Siouxland Ethanol, LLC v. Sebade Bros., LLC

Supreme Court of Nebraska

February 27, 2015

SIOUXLAND ETHANOL, LLC, A NEBRASKA LIMITED LIABILITY COMPANY, APPELLEE,
v.
SEBADE BROTHERS, LLC, A NEBRASKA LIMITED LIABILITY COMPANY, AND RICK SEBADE, AN INDIVIDUAL, APPELLANTS

Page 587

Appeal from the District Court for Dakota County: Paul J. Vaughan, Judge.

AFFIRMED IN PART, AND IN PART REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.

David Geier and Stuart B. Mills for appellants.

Brian C. Buescher and Garth Glissman, of Kutak Rock, L.L.P., for appellee.

WRIGHT, CONNOLLY, STEPHAN, McCORMACK, AND CASSEL, JJ. HEAVICAN, C.J., and MILLER-LERMAN, J., not participating.

OPINION

Page 588

[290 Neb. 231] Cassel, J.

INTRODUCTION

In this breach of contract action, the buyer failed repeatedly to meet its monthly purchase requirement and the seller sold its unpurchased product to others. The district court determined tat the seller was entitled to summary judgment and awarded damages and prejudgment interest.

Upon the buyer's appeal, we conclude that the buyer's breach during the first three quarters of the contract was material and that it excused the seller of its obligation to adjust the buyer's shipments in the fourth quarter. However, the evidence concerning damages presents a genuine issue of material fact as to the market price of the product during each quarter.

We therefore affirm the district court's summary judgment in favor of the seller on the issue of liability, but we reverse the court's judgment for damages and prejudgment interest, and remand the cause for further proceedings.

Page 589

BACKGROUND

Contract

On September 12, 2008, Rick Sebade and Sebade Brothers, LLC (collectively Sebade Brothers), entered into a " Priced Sale Contract" with Siouxland Ethanol, LLC (Siouxland). Sebade Brothers agreed to purchase modified wet distillers grains with solubles (product), which Siouxland manufactured as a byproduct of ethanol production. The contract ran from October 1, 2008, to September 30, 2009. During that time, Sebade Brothers was obligated to order and take delivery of [290 Neb. 232] 2,500 tons of product per month, for a total of 30,000 tons. It agreed to pay $80 per ton.

The contract provided Sebade Brothers with a limited authority to vary the amounts purchased. Specifically, it stated, " Buyer may, at its option, adjust the amount of Product delivered during any month by a maximum of 30 Tons either over or under the Monthly Quantity, subject to a maximum adjustment of 30 Tons per quarter for each of the first three quarters during the Delivery Period." Thus, from October 1 to December 31, 2008, it required Sebade Brothers to purchase not less than 7,470 tons nor more than 7,530. The same amounts applied to the first 3 months of 2009 and then to the next 3-month period. Thus, by the end of the third quarter of the contract term, Sebade Brothers could vary the total quantity by no more than 90 tons, plus or minus.

The contract also provided that Siouxland was to adjust Sebade Brothers' fourth-quarter shipments so that by the end of the contract, the total shipments to Sebade Brothers equaled 30,000 tons. The contractual language stated:

Adjustments to the Monthly Quantity in one quarter shall not affect Buyer[']s option to make adjustments to the Monthly Quantity in subsequent quarters, provided, however, that during the fourth quarter of the Delivery Period, Seller shall adjust Buyer's fourth quarter shipments in such amounts as Seller determines, so that total shipments of Product to Buyer equal to the Total Contract Quantity set forth above by the end of the Delivery Period. In no event shall the total amount of Product shipped exceed the total Contract Quantity.

The contract also contained a provision stating the measure of damages if Sebade Brothers failed to purchase the required amount of product. This provision stated:

If the total volume of Product order[ed] by Buyer in any quarter is less than [the] contracted volume for that quarter minus 30 Tons, Buyer will be responsible for the difference between the contracted price per ton set forth above and [the] current market price of Product (if less than the ...

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