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Glacial Plains Cooperative v. Chippewa Valley Ethanol Company, LLLP

Supreme Court of Minnesota

June 6, 2018

Glacial Plains Cooperative, formerly known as United Farmers Elevator, Respondent,
v.
Chippewa Valley Ethanol Company, LLLP, successor to Chippewa Valley Ethanol Company, LLC, Appellant.

          Court of Appeals Office of Appellate Courts

          Jason G. Lina, Fluegel, Anderson, McLaughlin & Brutlag, Chartered, Morris, Minnesota, for respondent.

          Ian A. J. Pitz, Michael Best & Friedrich LLP, Madison, Wisconsin; and Andrew S. Birrell, Gaskins Bennett Birrell LLP, Minneapolis, Minnesota, for appellant.

         SYLLABUS

         1. In order to create a contract of perpetual duration, the unambiguous terms of the contract must express an intent to do so. Any ambiguity is construed against perpetual-duration contracts. If the contract is not of definite duration, and does not unambiguously express an intent to be of perpetual duration, the contract is of indefinite duration and is terminable at will by either party after a reasonable time and with reasonable notice.

         2. Whether a "reasonable time" has passed to allow termination at will by either party of a contract of indefinite duration must be decided by the district court based on the circumstances.

          OPINION

          HUDSON, JUSTICE

         Chippewa Valley Ethanol Company, LLLP and Glacial Plains Cooperative entered into a grain-handling contract that was to "continue indefinitely." Chippewa Valley sought to end the contract with Glacial Plains Cooperative on the ground that it was a contract of indefinite duration, terminable at will by either party. Glacial Plains Cooperative argued that the contract was perpetual in duration, not indefinite, and was therefore not terminable at will. The district court held that the contract was perpetual, not indefinite, and the court of appeals affirmed. We hold that the contract does not unambiguously express an intent to form a contract of perpetual duration, and is thus a contract of indefinite duration. Accordingly, it is terminable at will upon reasonable notice once a reasonable time has passed. We therefore reverse and remand to the district court for further proceedings consistent with this opinion.

         FACTS

         This case centers on a dispute over a grain-handling contract between Chippewa Valley Ethanol Company, LLLP (CVEC) and Glacial Plains Cooperative (GPC).[1] The contract, signed in 1994, provided that GPC would invest in the ethanol plant for which CVEC was seeking financing. In return, CVEC provided GPC with land to build a grain-processing plant next to the new ethanol plant, and agreed that GPC would be the "exclusive handler of grain to the [CVEC] ethanol plant, as long as it [was] complying with all warranties and agreements" and "continue[d] to be able to handle the full capacity of corn" CVEC required to run the plant.

         Paragraph 1 of the contract states that "this agreement shall continue indefinitely until either terminated by the terms of this agreement, or by the mutual agreement of both parties." Paragraph 5 of the contract states that if GPC "default[s] or fail[s] to perform any of its obligations" under the contract, CVEC may declare, through written notice, that the contract has been breached. GPC then has 30 days to correct the breach. If GPC fails to correct the breach within 30 days, it is obligated to deed the land and the grain-processing plant back to CVEC. Disputes over whether GPC is in breach of the contract under paragraph 5 are required to be submitted to an arbitrator. The contract contains no other terms that would terminate the contract after the ethanol plant was built.

         After signing the contract, CVEC and GPC had a productive working relationship for more than 10 years. The two organizations have "very significant overlap" in members, estimated to be 60-70 percent. In 2009, a new general manager took over at CVEC, and the relationship between the two organizations deteriorated almost immediately. In 2009, the two litigated disputed grain-storage charges, and the court of appeals eventually ordered judgment in favor of GPC on the issue. Glacial Plains Coop. v. Chippewa Valley Ethanol Co., No. A10-869, 2011 WL 382710, at *1, *5 (Minn.App. Feb. 8, 2011), rev. denied (Minn. Apr. 19, 2011). In 2011, CVEC sued GPC, seeking termination of the contract for alleged breaches. The matter went to arbitration, where CVEC was awarded damages for one material breach, but the arbitrators found that GPC had not materially breached the contract in any other way. The arbitrators did not order that the contract be terminated. After the final award by the arbitration panel, CVEC notified GPC of its intent to terminate the contract. GPC filed this suit against CVEC, seeking to block the termination of the contract.

         After a bench trial, the district court issued extensive findings of fact and found that CVEC had wrongfully terminated the grain handling contract. CVEC appealed the district court's decision.

         In a published opinion, the court of appeals affirmed the district court's decision. Glacial Plains Coop. v. Chippewa Valley Ethanol Co., 897 N.W.2d 834, 836 (Minn.App. 2017). The court of appeals ruled that the intent of the parties should prevail over the general rule that contracts without definite duration are terminable at will upon reasonable notice. Id. at 840. The court was unpersuaded by the argument that the term "indefinitely" in the contract was intended to incorporate that general rule, ...


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