Kentucky Court of Appeals
UNPUBLISHED, 2004 WL 758341
APRIL 9, 2004
Summary of Opinion
Defendant Beason was a horse breeder who contracted with defendant for two breedings, one for $20,000 and the other for $40,000. The breeding contract provided that payment would be due and payable from sales proceeds. The foals sold for substantially less than the breeding fees and plaintiff Ashford Stud brought a lawsuit for the unpaid balance. The trial court granted judgment for the plaintiff. In his opinion, the court of appeals agrees with that decision. The contract provision was intended merely to state when payment was due, not to state the exclusive source of the funds from which payment was to be made.
Text of Opinion
Appellant, Lawrence Beason (Beason), appeals an order of the Woodford Circuit Court granting Appellee, Bemax, N.V. d/b/a Ashford Stud, summary judgment on a claim for stallion service fees. We affirm the grant of summary judgment, and denial of Beason's motion for reconsideration.
The record reflects that both Beason and Ashford were experienced horse breeders, and that the parties had contracted for stallion service contracts before. On December 15, 1997, and February 27, 1998, the parties entered into Stallion Service Contracts to breed Beason's two mares to two stallions of Ashford. Each contract provided that the payments by Beason "shall be due and payable from sales proceeds." The service fee on one horse was $40,000, and the fee on the other was $20,000. Both mares had foals, and the foals were sold in the 2000 Keeneland September yearling sale. One foal sold for $3,000 and the other sold for $2,000. These sums were substantially less than expected by Beason. Ashford was paid all sums received by Beason from the sales proceeds. Ashford then filed an action against Beason seeking additional sums it claims were due and owing. Beason's defense to the claim was that he negotiated a contract with Ashford to pay the fees from a specific fund; that being the sales proceeds, and that he had no individual liability to pay any sum in excess of the sales proceeds.
The contracts stated:
Buyer agrees to pay Seller as a service fee for the breeding nomination herein sold to Buyer the sum of _________ plus applicable Kentucky tax thereon, which sum shall be due and payable from the 1999 November sales proceeds.
The contract contains multiple additional provisions regarding payment, including provisions requiring immediate payment of the service fee should the Buyer fail to present the mare ready to be bred during the breeding season, or should the Buyer breed the mare to another stallion during the breeding season. The contract states that:
A service fee of one (1%) per month shall be paid by Buyer to Seller on any part of the service fee which is not paid when due from its due date until paid in full.
The contract provides that the service fee is waived only where the mare fails to become pregnant or to produce a live foal that can stand and nurse alone. If the Buyer produces a veterinary certificate showing that the mare is not pregnant, the service fee is waived under the contract. Should the mare be unable to produce a live foal that can stand and nurse in the year following the breeding season contracted for, the contract requires the Seller to refund the service fee paid. The terms of the contract clearly show that the parties contemplated payment in full of the service fee detailed in the contract.
Beason argues that the provisions in the contract, other than the one providing payment is due at the time of the sales, come from Ashford's "standard contract," and that those provisions are contradicted by the provision he relies on. Beason asserts that the time of payment clause relates solely to his contract, and is not part of Ashford's usual service agreement. Beason claims that he, as a "mom and pop" breeder, could not have entered into a service agreement without this provision, as he could not afford to pay the service charge personally, and relied solely upon the sales proceeds to pay that service charge. Beason also cites a provision of the contract which provides that the stallion service certificates on the foals "shall be held by Seller until the service fee and tax thereon is paid in full." At the time of the foal sale, Ashford released these certificates to the purchasers of the foals. Beason claims that at that point the service fee and tax thereon was paid in full as shown by Ashford's actions.
Ashford asserts that the clause at issue relates only to when the service contract must be paid, rather than the source of the funds for the service contract. Ashford asserts that clause merely granted Beason additional time in which to pay the service fee, but did not limit the service fee to sale proceeds. The testimony provided by Ashford shows that service fees are usually due and owing at the time of service. In this case, Ashford testified that they extended the time of payment until the sales in agreement with Beason.
The parties agree that the foals sold at the September, 2000, sale, rather than the November, 1999, sale. The change in sale dates was made by Ashford at the request of Beason. The trial court adopted Ashford's argument that the contractual language established a time when the fees were due, rather than providing the sole source of payment. The trial court granted Ashford $18,000 for the balance due on one stud fee, and $37,000 for the balance due on the other stud fee. The court also granted Ashford sales tax, late fees, and attorney fees. The court stated that the sales tax, late fee and attorney fees were provided for in the contract between the parties.
Ashford cites A.L. Pickens Company, Inc. v. Youngstown Sheet & Tube Company, 650 F.2d 118 (6 th Cir.1981) as being dispositive of the issue before this Court. In Pickens, the seller contracted to act as Youngstown's sales agent for a specific territory. The contract provided that Pickens was to be paid in the following manner:
We (Youngstown) will pay you (Pickens) a sales commission of 5% on our F.O.B. net realized mill value of our products covered by this agreement. This commission will be paid once each month on sales of our products on the invoices which have been fully paid.
Pickens, 650 F.2d at 119. Pickens made a sales contract for Youngtown products with a third party for $3,000,000 of steel. Youngstown closed the plant and never satisfied the sales contract. Pickens sued for its commission. Youngstown claimed that the contract terms constituted a condition precedent to payment, and denied that it had to pay a commission on any product which was not fully paid for. The Sixth Circuit held that allowing the clause to be a condition precedent to payment would "deprive Pickens of a commission when it had done everything under the contract that it could to consummate a sale." Pickens, supra., 650 F.2d at 121. Kentucky law similarly disfavors conditions precedent to payment under a contract. See: Mock v. Trustees of First Baptist Church of Newport, 252 Ky. 243, 67 S.W.2d 9 (1934).
Ashford asserts that Beason would be depriving it of funds rightfully due and owing if Beason is permitted to claim that receipt of sufficient funds at the yearling sale was a condition precedent to payment of the fee. To be considered enforceable, a condition precedent must be clear, and the contract must show that the parties have no agreement in the absence of the condition precedent. Horn v. Ranier, Ky.App., 560 S.W.2d 233, 234 (1977). A contract cannot fairly be construed so as to make payment "contingent on the receipt of sufficient funds ... to pay for it" absent clear evidence of an agreement so holding. Cox v. Venters, Ky.App., 867 S.W.2d 563, 565 (1994). In the present case, the contractual terms make clear that the service fee is due and owing at the time a live foal is born. The additional clause in the contract at issue here merely provided additional time before such payment was due. There is no basis in the contract or the record for the court to find that Ashford agreed to release Beason from the contractual sum due and owing should the foals sell for less than the service fee. No genuine issue of material fact barring entry of summary judgment has been raised by Appellant herein. Under such circumstances, the determination of the Woodford circuit court must be affirmed.
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