McKenzie v. Olmstead
1999 Minn. App. LEXIS 80, 37 U.C.C. Rep. Serv. 2d (West) 1027, 587 N.W.2d 863 (1999)
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Rule of Law:
Under the Uniform Commercial Code (UCC), while the risk of loss generally remains with a merchant-seller until the buyer's physical receipt of goods, parties may shift this risk by a clear and unequivocal "contrary agreement" implied from their conduct or circumstances, even if not express or written.
Facts:
- Mark Olmstead, doing business as World Cargo, was a merchant selling custom-made trailers from various locations, including Elk River, Minnesota.
- In late January 1997, Gerald McKenzie ordered a custom-made trailer from Olmstead and mailed him a check for payment.
- The trailer was manufactured and shipped to Olmstead’s Elk River site about three weeks later, where it was initially stored within a locked, fenced area.
- Olmstead repeatedly attempted to contact McKenzie over more than a month to inform him the trailer was ready for pickup.
- When McKenzie finally returned Olmstead’s call, Olmstead told him the trailer could be picked up any Tuesday or Thursday before 6:00 p.m.
- The parties discussed arrangements for McKenzie to pick up the trailer after hours, with conflicting testimony on who suggested moving it outside the fence.
- On Thursday, April 3, 1997, Olmstead moved the trailer outside the fenced area and secured it with a chain around the tires.
- On Sunday, April 6, 1997, McKenzie arrived to pick up the trailer but discovered it was gone, having been stolen.
Procedural Posture:
- Gerald McKenzie sued Mark Olmstead, d/b/a World Cargo, in trial court to recover $3,620 for a stolen trailer.
- McKenzie initially also sued Tailwind Trailers, the manufacturer, but this party was dismissed by agreement at the start of the trial.
- Following trial, the trial court determined that the risk of loss had passed to McKenzie due to a "contrary agreement" and ruled in favor of Olmstead.
- McKenzie, as appellant, appealed the trial court's decision.
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Issue:
Does a buyer's specific instructions to a merchant-seller regarding the placement and security of goods, outside a secured area and prior to physical receipt, constitute a "contrary agreement" that shifts the risk of loss to the buyer under Minn.Stat. § 336.2-509(4)?
Opinions:
Majority - Klaphake
Yes, the trial court's findings support its conclusion that the parties had a "contrary agreement" that shifted the risk of loss to McKenzie under Minn.Stat. § 336.2-509(4). The court affirmed the trial court's finding that McKenzie directed Olmstead to park the trailer outside the fenced area and secure it with a chain for after-hours pickup, despite Olmstead's stated preference against doing so. While Minn.Stat. § 336.2-509(3) generally places the risk of loss on a merchant-seller until the buyer’s physical receipt, subsection (4) allows parties to modify this allocation by "contrary agreement." An "agreement" under the UCC, defined in Minn.Stat. § 336.1-201(3), encompasses the bargain of the parties in fact, which can be found in their language or implied from circumstances or conduct. Although such a contrary agreement, especially one shifting risk prior to receipt, must be clear and unequivocal, the trial court was entitled to credit Olmstead's testimony that McKenzie insisted on the arrangement, thereby assuming the risk. The evidence supported the conclusion that a contrary agreement existed, shifting the risk of loss to McKenzie once Olmstead complied with the directive to move the trailer outside his area of control.
Analysis:
This case clarifies the interpretation of a "contrary agreement" under UCC § 2-509(4), indicating that such agreements, even implied by conduct, can effectively shift the risk of loss from a merchant-seller to a buyer prior to physical receipt. It highlights the deference given to a trial court's credibility determinations when parties offer conflicting testimony. The decision reinforces the principle that a buyer’s specific instructions that alter normal delivery or storage arrangements, particularly those that reduce security, can imply an assumption of risk, provided the agreement is found to be clear and unequivocal. This ruling serves as a cautionary tale for buyers, emphasizing the importance of understanding how their directives might implicitly alter statutory risk allocation, potentially impacting future cases where specific pickup or storage instructions are given.
