Washington Hop Producers, Inc. Liquidation Trust v. Goschie Farms, Inc.

 

Parties:  P = Washington State Hop Producers.  James W. Butzow, Trustee

              D = hop growers (Goschie Farms)

 

Procedural History:  P appealed superior courts summary judgment in favor of D rescinding various contracts for the purchase of hop allotments.  Wash. Appeals court affirmed.

 

Facts:  In 1966 a federal marketing act required allotments from the department of agriculture in order to market hops.  The allotments were based on past year growth and acreage.  The secretary of agriculture regulated upon recommendation of the hop administrative committee (HAC).  Hop growers were also allowed to transfer their excess allotments to others.  Once the HAC was notified and conditions were met the sales would be recognized.

 

Washington State Hop Producers is a corp. established to sell and lease allotments.  It acted as a broker, the allotments remained in the name of the owner, they were advertised and bid upon, and then they had meetings at the HAC office to make the transfer.

 

From 1983 – 85, there were many hearings by the Department of Agriculture to consider amending regulations.  There were minor changes that were sought but even as late as 1985, HAC and many growers did not anticipate that the marketing order would be terminated.  Evidence shows that neither did the Secretary of Agriculture

 

In May 1985, the Trust solicited bids for 1,066,139 lbs of hop allotments that it held as a result of the order of liquidation and dissolution.  The proposed sale included two pools Pool A:  1985 allotments, Pool B: 1986 allotments, subject to 1985 leases.

 

Trust received bids and mailed notices of acceptance to hop growers on June 21st

Secretary of agriculture announced the marketing allotments order would be terminated. July 1, 1985 termination order by Secretary of Agriculture.

Dec. 31. 1985 terminated.

July 23 announced that the transfer would take place on 26th.  Only some came.  Later the trust sold the rest for cheep, .0025 to .05 per pound.  Less the bids which were .50 to .76 lbs.

 

Those growers who had paid sued for return of their money, the trust sued the non payers.

Actions were consolidated

 

The court granted summary judgement holding the trust was not entitled to the money, and the growers were entitled to a return of their money.

The order was on several grounds:

Lack of consideration

Mutual mistake of fact

Impossibility of performance

Destruction of the specific thing necessary for performance

Unjust enrichment

 

One ground specifically supports the court order.  Supervening impracticability.

 

R2k § 261 pp 554 

R2k § 265 pp 555

Substantially frustrated –

  1. the purpose  that is frustrated must have been a principal purpose of that party making the contract
  2. the frustration must be substantial
  3. the non occurrence of the frustrating event must be a basic assumption upon which the contract was made
  4. neither the language nor the circumstances indicate the contrary.

 

Reason:  a drop in price to 1/10th  was a substantial frustration.  Neither party knew of impending termination.  There was an assumption that it would remain open.  If the supervening event was not reasonably foreseeable then party claiming discharge could not be expected to have provided against its occurrence.  Even if the event was foreseeable, it does not compel the conclusion that its non occurrence was not such a basic assumption. 

 

Therefore, the court found that there was a frustration of purposes substantial enough to discharge the purchasers from their contractual obligation.