Archer-Daniels-Midland Company v. Beadles Enterprises, Inc.

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ARCHER­DANIELS­MIDLAND COMPANY v. BEADLES  ENTERPRISES, INC.  05­1192  ___ S.W.3d ___  Supreme Court of Arkansas  Opinion delivered June 29, 2006  1.  JUDGMENT – FINDINGS BY THE CIRCUIT COURT – CIRCUIT COURT DID NOT CLEARLY ERR.  – After reviewing the evidence, the supreme court did not agree with the appellant’s  contention  that  there  was  no  evidence  that  any  of  appellee’s  hogs  contracted  salmonella group B from a receiving center from hogs which were temporarily stored  due to alleged contamination from appellant’s feed; it was clear that the circuit court  found credible Dr. Robert Conner, Jr.’s testimony concerning what he believed was  the  cause  of  the  increased  death  loss  at  appellee’s  facility  and,  given  the  due  deference to a trial judge’s determination of credibility, the supreme court could not  say that the circuit court clearly erred in finding that the increase in the annual death  loss in appellee’s hog herd from 1997 through 2001 was caused by salmonella group  B and other diseases that were introduced by the rejected hogs.  2.  JUDGMENT – ALLEGED LACK OF EVIDENCE – REASON FOR REJECTION WAS IMMATERIAL.  – The supreme court did not need to determine whether the circuit court abused its ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 2  discretion  in  admitting  evidence  concerning  the  reason  the  purchaser­to­be  of  appellee’s  hogs  rejected  the  shipment  because  the  reason  for  rejection  was  not  essential  to  appellee’s  claim;  appellee  claimed  that  had  it  known  that  appellant’s  soybean  meal  was  allegedly  contaminated  with  dioxin,  it  either  would  not  have  shipped the hogs, or it would have tested the shipment prior to sending it out and,  thus, it was immaterial why the purchaser­to­be rejected the shipment.  3.  DAMAGES – FOUNDATION FOR DAMAGES – CIRCUIT COURT’S FINDINGS NOT CLEARLY  ERRONEOUS. – While appellant argued that there was an inadequate foundation for  appellee’s  evidence  of  damages,  the  supreme  court  could  not  say  that  the  circuit  court’s findings were clearly erroneous, where the circuit court concluded: (1) that  the increase in the annual death loss in appellee’s hog herd from 1997 through 2001  was the result of diseases transmitted from the hogs that were returned infecting other  hogs in the facility and infecting the facility itself; (2) that it was not necessary that  appellee  establish  with  absolute  certainty  as  to  exclude  every  other  reasonable  conclusion  that  damages  appellee  suffered  were  a  result  of  the  shipment  of  hogs  returned to appellee, causing an outbreak of salmonella and other diseases in the hog  herd; and (3) that it was sufficient that appellee established by substantial evidence ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 3  that the increased death loss in its hog herd was the result of salmonella and other  disease being spread by the returned shipment of hogs to the other hogs in the barns.  4.  EVIDENCE – CUMULATIVE EFFECT OF EVIDENCE – NO NEED TO DETERMINE WHETHER  CIRCUIT COURT ABUSED ITS DISCRETION. – While appellant argued that Exhibit BB,  the list of purchasers of the allegedly contaminated feed, was inadmissible hearsay  and, further, that even if the list was admissible, it would not prove that the purchaser­  to­be of the hogs based its rejection of the appellee’s hogs on appellee’s inclusion on  the list, the supreme court held that it need not determine whether the circuit court  abused its discretion in admitting evidence to prove why the purchaser­to­be rejected  the  shipment  because  the  reason  for  the  rejection  was  not  essential  to  appellee’s  claim.  5.  JUDGMENT – FINDINGS BY THE CIRCUIT COURT – ARGUMENT WAS WITHOUT MERIT. –  While appellant argued that the circuit court erroneously found that the cause of death  for the hogs that were necropsied from the new barn was salmonella group B, a cause  of death not present on the farm prior to the return of the rejected hogs, its argument  was without merit; while the necropsy reports did not specifically use the term “cause ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 4  of death,” they did use the term “diagnosis,” and Dr. Conner testified that “diagnosis”  referred to cause of death.  6.  EVIDENCE – ADMISSIBILITY – EVIDENCE WAS ADMISSIBLE. – Appellant argued that the  circuit  court  abused  its  discretion  in  admitting  into  evidence,  over  appellant’s  objection, interrogatory responses and documents produced by appellant in response  to  appellee’s  requests  for  production  of  documents;  the  supreme  court  disagreed,  observing  that  answers  to  interrogatories  may  qualify  as  admissions  by  a  party­  opponent which are not hearsay, as defined, and therefore may constitute substantive  evidence and be admissible in a party’s case­in­chief.  7.  EVIDENCE ­ HEARSAY – LETTER WAS ADMISSIBLE. – The circuit court did not abuse its  discretion in admitting a letter, which was a statement and warning sent out by the  FDA under its duty to protect the public from consuming adulterated food and which  instructed  feed  mill  operators  who  had  received  contaminated  soybean  meal  to  discontinue use of the soybean meal and to hold any remaining soybean meal and  feed made from that soybean meal, as it was admissible pursuant to Ark. R. Evid.  803(8). ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 5  Appeal  from Monroe  Circuit  Court;  Harvey  Lee  Yates,  Judge;  affirmed;  court  of  appeals reversed.  Barber, McCaskill, Jones & Hale, P.A., by:  D. Keith Fortner, for appellant.  Moore, Serio, & Bishop, by:  Robert G. Serio, and Daggett, Donovan, Perry, and  Flowers, by:  Robert J. Donovan, for appellee.  JIM  HANNAH, Chief Justice.  Appellee Beadles Enterprises, Inc., is a hog­finishing  operation owned by Wayne Beadles, Sr., and Wayne Beadles, Jr. This operation takes young  hogs, feeds them until they attain a certain weight, and then sells them to slaughterhouses.  Beadles makes its own hog feed, part of which contains soybean meal that is purchased from  1  appellant Archer­Daniels­Midland Company (ADM).  In April and May of 1997, Beadles  purchased two shipments of soybean meal from ADM.  ADM later learned that the soybean  meal  it  had  sold  to  Beadles  might  have  contained  ball  clay  that  was  contaminated  with  dioxin; however, ADM did not inform Beadles.  Subsequently, on July 21, 1997, Beadles  sold and attempted to ship 126 hogs that had been fed the allegedly contaminated feed to an  Iowa purchaser, IBP, Inc.  IBP, having learned of the alleged contamination from “an official 1  ADM is the successor company to Quincy Soybean Company, which sold the  allegedly contaminated soybean meal to Beadles.  ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 6  notification,” halted the shipment in Missouri, and Beadles’s hogs were stored temporarily  at a receiving center.  During this time, three hogs were slaughtered and tested for dioxin;  the test results were negative.  In addition, another hog died, though the cause of death was  unknown.  Beadles then shipped the remaining 122 hogs back to its farm.  Beadles’s hogs are kept in an “old barn” and a “new barn,” which are approximately  fifty yards apart. Beadles returned the 122 hogs to the new barn, from which they originated.  When  the  hogs  returned,  they  were  extremely  stressed  and  laid  in  an  open­flush  gutter  system to cool themselves; this system washed feces and dirt from the hogs.  Other hogs in  the new barn that were penned down slope came into contact with that water, feces,  and dirt.  The IBP hogs were ultimately reshipped and sold to IBP at a reduced price because they had  lost  weight.  The  hogs  that  were  penned  down  slope  from  the  IBP  hogs  began  dying  approximately two or three weeks thereafter.  Beadles sued, claiming that while being stored  at the receiving center, the IBP shipment of hogs became infected with salmonella group B,  which somehow spread to Beadles’s other hogs when the IBP shipment was returned and  caused an increased death rate in its hog operation through 2001.  A bench trial was held on October 29­30, 2003.  The circuit court concluded that  ADM was liable for fraud and made numerous findings of fact, including the following:  1.  ADM knew prior to July 21, 1997, and no later than July 7, 1997, that ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 7  the federal  government was concerned that the soybean meal ADM  sold in April and May of that year was contaminated.  2.  ADM  had  a  special  relationship  with  Beadles  based  on  their  past  dealings, and based on its knowledge that the soybean meal it sold to  Beadles would be fed to hogs and then placed into the food chain for  ultimate human consumption.  3.  ADM had a duty to disclose to Beadles that the feed ADM had sold  Beadles in April and May, 1997 might be contaminated with dioxin,  and ADM’s failure to disclose such information breached its duty to  Beadles.  4.  ADM’s failure to disclose to Beadles that the soybean meal ADM had  sold Beadles in April and May, 1997, was alleged to be contaminated  with dioxin resulted in Beadles sustaining damage.  5.  Soon after the 122 hogs were again shipped to IBP, other hogs in the  new barn began to have symptoms of salmonella and other diseases.  Hogs from the facility began to die.  Some hogs from the facility were  sent to Arkansas Livestock and Poultry Commission for necropsy.  The  cause of death for those hogs was listed as salmonella group B, a new  strain of salmonella not detected as a cause of death prior to July 21,  1997.  6.  The increase in Beadles’s annual hog­death loss from 1997 through  2001  was  “the  result  of  diseases  transmitted  from  hogs  that  were  returned from the July 21, 1997, shipment infecting other hogs in the  facility and infecting the facility itself.”  7.  ADM’s failure to disclose the alleged dioxin contamination resulted in  total damage to Beadles in the amount of $309,371.58.  ADM appealed, and the court of appeals reversed and dismissed. See Archer­Daniels ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 8  Midland Co. v. Beadles Enters., Inc., 92 Ark. App. 462, ___ S.W.3d ___ (2005).  Beadles  then filed a petition for review, which this court granted, pursuant to Ark. Sup. Ct. R. 1­2(e).  Upon a petition for review, we consider an appeal as though it had originally been filed in  this court.  Wallace v. West Fraser South, Inc., 365 Ark. 68, ___ S.W.3d ___ (2006).  On  appeal, ADM argues: (1) there was no evidence salmonella group B or any other diseases  came  from  the  July  21,  1997,  shipment;  (2)  there  was  no  admissible  evidence  that  IBP  rejected  the  shipment  because  of  concerns  about  dioxin;  (3)  there  was  an  inadequate  foundation for Beadles’s evidence of damages; and (4) other findings and evidentiary errors  require reversal.  We affirm.  In bench trials, the standard of review on appeal is not whether there is substantial  evidence to support the findings of the court, but whether the judge’s findings were clearly  erroneous or clearly against the preponderance of the evidence.  Chavers v. Epsco, Inc., 352  Ark. 65, 98 S.W.3d 421 (2003).  A finding is clearly erroneous when, although there  is  evidence  to  support  it,  the  reviewing  court  on  the  entire  evidence  is  left  with  a  firm  conviction that a mistake has been committed.  Id.  Disputed facts and determinations of  credibility are within the province of the fact­finder.  Id.  To establish fraud, a plaintiff must show: (1) a false representation of material fact;  (2) knowledge that the representation is false or that there is  insufficient evidence upon ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 9  which to make the representation; (3) intent to induce action or inaction in reliance upon the  representation; (4) justifiable reliance upon the representation; and (5) damage suffered as  a  result  of  the  reliance.  McAdams  v.  Ellington,  333  Ark.  362,  970  S.W.2d  203  (1998).  Constructive fraud can exist in cases of breaches of fiduciary duties, but a plaintiff must  show a material representation of fact.  See Scollard v. Scollard, 329 Ark. 83, 947 S.W.2d  345 (1997).  A confidential or special relationship between parties gives rise to a duty to  speak and clarify information upon which others might rely.  See SEECO, Inc. v. Hales, 341  Ark. 673, 22 S.W.3d 157 (2000).  ADM argues that there is no evidence of the cause of death of over 95% of Beadles’s  2600­plus hogs, no evidence that any of the hogs contracted salmonella group B from the  Missouri receiving center in July 1997, and no evidence that any of the rejected hogs ever  had  salmonella  group  B.  Accordingly,  ADM  argues  that  this  court  should  reverse  and  dismiss the circuit court’s findings and judgment.  The record reveals that Wayne Sr. testified that the returned hogs were placed in pens  3, 4, and 5 of the “new barn,” and that these were the same pens that those hogs had been  in prior to shipment.  He stated  that  when the hogs were returned, they were extremely  stressed and laid in the gutter to cool off in the water.  He explained that the open flush  gutter system used in the barn washed the dirt and grime off those hogs and that the pigs ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 10  below those pens came in contact with all that dirt and grime.  He testified that the pigs in  the lower pens began to get sick, noting that the pigs would not eat, drink, or move around.  He also testified that the pigs developed diarrhea.  Wayne Sr. testified that soon, the pigs  began dying, and that in one pen alone, 60% of the hogs were lost.  Wayne Sr. said that more  pigs were lost in one pen than were lost in the entire barn in the seven years prior to July 21,  1997.  Wayne Jr. testified that some of the pigs exhibited purple bellies, snouts, and ears.  ADM states that these are the same symptoms of actinobacillus pleuropneumonia, and that  the circuit court was simply left to speculate that the over 2600 hogs Beadles lost in 1997 and  thereafter died from salmonella group B, as opposed to actinobacillus pleuropneumonia or  other diseases present at Beadles’s facility many months prior to July 1997.  ADM states that  the  mere  fact  that  Beadles’s  hogs  died  was  not,  of  itself,  evidence  that  ADM  somehow  caused the death of the hogs.  There is no dispute that none of the hogs from the July 21, 1997, shipment underwent  necropsies.  However, Beadles points to other evidence that demonstrated that the hogs from  that shipment contracted salmonella group B.  Dr. Robert Conner, Jr., a veterinarian who  testified on behalf of Beadles, explained how hogs generally die from diseases.  Dr. Conner  stated that stress was a major factor in contracting diseases, and that stress could be brought ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 11  on by moving pigs, depriving pigs of feed and water, and crowding the pigs too tightly.  Dr.  Conner  explained  that  stress  causes  the  bacteria  in  a  hog  to  start  multiplying  rapidly  to  literally billions per gram of intestinal content.  He described how hogs undergo stress being  hauled to slaughter, stating that the hogs would urinate and defecate between thirty and fifty  pounds of waste, and that the waste would contaminate the truck.  As to the July 21, 1997,  shipment,  Dr.  Conner  opined  that  due  to  the  stressful  environment,  hauling  the  pigs  to  slaughter  and  then  bringing  them  back  to  Beadles’s  facility  was  a  “disaster  waiting  to  happen.”  Dr. Conner opined that the jump of a 3% loss in 1996 to a 40% loss in 1997 was an  explosion of disease caused by hauling the hogs back to the Beadles’s facility.  He further  stated that, based on the continuing losses from 1998 to 2001, the death loss was related to  salmonella group B.  Dr. Conner opined that most of the hogs died of contamination brought  on by the hogs that were returned to the facility.  Dr. Conner also opined that the salmonella  group B came from either the truck hauling the July 21, 1997, shipment or from the holding  pens  at  the  receiving  center  in  Missouri.    He  based  this  opinion  on  the  fact  that  the  salmonella group B appeared for the first time in an August 1997 necropsy report, which was  after the rejected hogs were returned to the Beadles’s facility, and the fact that Beadles did ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 12  2  not buy feeder pigs from “sale barns.”  In light of the foregoing evidence, we do not agree with ADM’s contention that there  was no evidence that salmonella group B or any other diseases came from the July 21, 1997,  shipment.  Further, it is clear that the circuit court found credible Dr. Conner’s testimony  concerning what  he  believed  was  the  cause  of  the  increased  death  loss  at  the  Beadles’s  facility.  This  court  gives  due  deference  to  the  superior  position  of  the  trial  judge  to  determine the credibility of witnesses and the weight to be accorded to their testimony.  City  of Rockport v. City of Malvern, 356 Ark. 393, 155 S.W.3d 9 (2004).  With this standard in  mind, we cannot say that the circuit court clearly erred in finding that the increase in the  annual death loss in Beadles’s hog herd from 1997 through 2001 was caused by salmonella  group B and other diseases that were introduced by the rejected hogs.  Next,  ADM  argues  that  there  was  no  admissible  evidence  that  IBP  rejected  the  shipment because of concerns about dioxin.  The circuit court found that IBP rejected the  shipment because the hogs had a reputation of having eaten soybean meal contaminated with  dioxin.  ADM points out that no one from IBP testified at trial, and that all of Beadles’s 2  Wayne Sr. testified that a “sale barn” is a place where hogs and other animals are  brought to a barn for sale with the hogs presumably coming into contact with other  animals.  ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 13  testimony and evidence relating to this issue was admitted over ADM’s hearsay objection.  ADM states that this issue is significant because in order to hold ADM responsible for the  shipment being returned to Beadles’s facility and allegedly spreading diseases, Beadles had  to prove that IBP rejected the shipment based on something ADM did or failed to do.  Stated  differently,  ADM  contends  that  if  there  was  no  admissible  evidence  to  show  why  IBP  rejected the shipment, then ADM could not be held responsible for that rejection and the  events that allegedly followed.  We disagree.  As previously noted, the circuit court found that ADM had a special relationship with  Beadles based on their past dealings and based on its knowledge that the soybean meal it sold  to Beadles would be fed to hogs and then placed into the food chain for ultimate human  consumption.  Based on this special relationship, the circuit court concluded that ADM had  a duty to disclose to Beadles that the soybean meal it sold to Beadles was alleged to have  been contaminated with dioxin, and ADM’s failure to disclose this information breached its  duty to Beadles.  We need not determine whether the circuit court abused its discretion in  admitting evidence concerning the reason IBP rejected the shipment because the reason for  rejection is not essential to Beadles’s claim.  Beadles contended that had it known that the  soybean meal was allegedly contaminated with dioxin, it either would not have shipped the  hogs, or it would have tested the shipment prior to sending it out.  Thus, it is immaterial why ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 14  IBP rejected the shipment.  ADM next argues that there was an inadequate foundation for Beadles’s evidence of  damages.  Dr. Conner established through necropsy reports that a new strain of salmonella  had  been  introduced  into  Beadles’s  facility  after  the  IBP  shipment  was  returned  to  the  facility.  Dr. Conner further stated that most of the hogs died as a result of contamination  from the return of shipped hogs to its facility.  Beadles showed that the death rate among the  hogs in its facility prior to July 21, 1997, was less than five percent, and that after July 21,  it  experienced  an  annual  death  loss  in  1997  of  40.03%,  in  1998  of  25.09%,  in  1999  of  15.83%, in 2000 of 22.25%, and in 2001 of 28.5%.  The circuit court concluded that the  increase in the annual death loss in Beadles’s hog herd from 1997 through 2001 was the  result of diseases transmitted from hogs that were returned from the July 21, 1997, shipment  infecting other hogs in the facility and infecting the facility itself.  The circuit court stated  that it was not necessary that Beadles establish with absolute certainty as to exclude every  other  reasonable conclusion that damages Beadles suffered were a result of the July 21,  1997, shipment of hogs that were returned to Beadles, causing an outbreak of salmonella and  other diseases in its hog herd.  Further, the circuit court concluded that  it was sufficient that  Beadles established by substantial evidence that the increased death loss in its hog herd was  the result of salmonella and other diseases being spread by the returned shipment of hogs to ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 15  the  other  hogs  in  the  barns.  We  cannot  say  that  the  circuit  court’s  findings  are  clearly  erroneous.  Finally, ADM claims that the cumulative effect of several other erroneous findings  and errors requires reversal.  First, ADM argues that Exhibit BB, the list of purchasers of  feed, was inadmissible hearsay and, further, that even if the list were admissible, it would  not prove that IBP based the rejection of the shipment on Beadles’s inclusion on the list.  As  previously noted, we need not determine whether the circuit court abused its discretion in  admitting  evidence  to  prove  why  IBP  rejected  the  shipment  because  the  reason  for  the  rejection is not essential to Beadles’s claim.  Next, ADM argues that the circuit court erroneously found that the cause of death for  the hogs that were necropsied from the new barn was salmonella group B, a cause of death  not  present  on  the  farm  prior  to  July  21,  1997.  As  pointed  out  by  Beadles,  while  the  necropsy reports do not specifically use the term “cause of death,” they do use the term  “diagnosis,” and Dr. Conner testified that “diagnosis” referred to cause of death.  ADM’s  argument is without merit.  ADM  next  argues  that  the  circuit  court  abused  its  discretion  in  admitting  into  evidence, over ADM’s objection, interrogatory responses and documents produced by ADM  in response to Beadles’s requests for production of documents.  We disagree.  As noted in ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 16  Piercy  v.  Wal­Mart  Stores,  Inc.,  311  Ark.  424,  844  S.W.2d  337  (1993)  (supplemental  opinion), answers to interrogatories may qualify as admissions by a party­opponent which  are  not  hearsay,  as  defined,  and  therefore  may  constitute  substantive  evidence  and  be  admissible in a party’s case­in­chief.  Finally, ADM argues that the circuit court abused its discretion in admitting over  ADM’s hearsay objection a certified copy of a letter from the FDA.  The letter at issue is a  statement  and  warning  sent  out  by  the  FDA  under  its  duty  to  protect  the  public  from  consuming adulterated food.  Further, the letter, which was addressed to feed mill operators,  stated that recipients of contaminated soybean meal were to discontinue use of the soybean  meal  and  to  hold  any  remaining  soybean  meal  and  feed  made  from  that  soybean  meal.  Beadles contends that the letter was admissible pursuant to Ark. R. Evid. 803(8).  We agree.  Pursuant to Rule 803(8), “records, reports, statements, or data compilations in any form of  a  public  office  or  agency  setting  forth  its  regularly  conducted  and  regularly  recorded  activities, or matters observed pursuant to duty imposed by law and as to which there was  a  duty  to  report,  or  factual  findings  resulting  from  an  investigation  made  pursuant  to  authority granted by law” are not excluded by the hearsay rule.  The circuit court did not  abuse its discretion in admitting the letter.  In sum, because we find that the circuit court’s findings are not clearly erroneous, we ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 17  affirm.  Affirmed.  GLAZE, J., dissents.  GUNTER, J., not participating.  The majority finds that the reason for IBP’s rejection of the shipment of hogs is of no  consequence to Beadles’s claim.  The court explains its position as follows:  We  need  not  determine  whether  the  circuit  court  abused  its  discretion  in  admitting  evidence  concerning  the  reason  why  IBP  rejected  the  shipment  because the reason for rejection is not essential to Beadles’s claim.  Beadles  contended that had it known that the soybean meal was allegedly contaminated  with dioxin, it either would not have shipped the hogs, or it would have tested  the shipment prior to sending it out.  Thus, it is immaterial why IBP rejected  the shipment.  The basis for the majority’s decision is both ambiguous and illogical; therefore, I disagree  and respectfully dissent.  In order to establish a valid cause of action for fraud or constructive fraud, a plaintiff ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 18  3  must  show  —  among  the  other  elements  —  that  the  alleged  damages  would  not  have  occurred but for the conduct of the defendant.  See Tyson Foods, Inc. v. Davis, 347 Ark. 566,  66 S.W.3d 568 (2002). Here, Beadles claims that ADM’s failure to warn of the potential  dioxin contamination put into motion a chain of events that resulted in the loss of 2600 hogs.  According to Beadles’s allegations, the causal chain progressed as follows:  •  ADM failed to warn Beadles of the potential dioxin contamination;  •  Beadles, assuming that nothing was wrong, shipped its hogs to  IBP, a hog  buyer located in Iowa;  •  IBP rejected the hogs, en route, because IBP believed that ADM has possibly  sold Beadles contaminated soybean meal;  •  Beadles was forced to store its hogs at a holding facility in Missouri; 3  The tort of fraud or deceit consists of five elements that the plaintiff must prove  by a preponderance of the evidence: (1) a false representation of a material fact; (2)  knowledge that the representation is false or that there is insufficient evidence upon  which to make the representation; (3) intent to induce action or inaction in reliance upon  the representation; (4) justifiable reliance on the representation; and (5) damage suffered  as a result of the reliance.  See Tyson Foods, Inc., infra (emphasis added).  Constructive  fraud can exist in cases of breaches of fiduciary duties, but a plaintiff must show a  material representation of fact.  See Scollard v. Scollard, 329 Ark. 83, 947 S.W.2d 345  (1997).  Constructive fraud, while requiring proof of all the necessary elements of actual  fraud, misrepresentation, and deceit, may be proven even when there is a complete  absence of any moral wrong or evil intention.  See Roach v. Concord Boat Corp., 317  Ark. 474, 880 S.W.2d 305 (1994).  ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  •  Page 19  while  in  the  holding  facility,  the  hogs  contracted  salmonella  and  other  diseases;  •  the infected hogs were then transported back to Beadles’s facility, where they  infected other hogs;  •  Beadles suffered the loss of 2600 hogs as a result.  Each of these allegations provides a link in a causal chain that logically proves that Beadles’s  damages were caused by ADM’s failure to warn.  The failure to substantiate any one of these  allegations will result in the removal of a link and a break in the causal chain.  According to the majority, Beadles is entitled to damages, regardless of the reason  IBP rejected the hog shipment.  This reasoning is incorrect.  Let us assume, for argument’s  sake, that IBP rejected the hogs for an unrelated reason, such asa too­high price for the hogs.  Under this hypothetical, Beadle would have lost its 2600 hogs regardless of ADM’s failure  to warn.  Given this situation, it would be impossible for Beadles to prove that ADM was the  cause­in­fact of Beadles’s alleged damages.  This example illustrates that, in order to prove  damages, Beadles had to show that IBP rejected the hog shipment because IBP feared that  4  the hogs were contaminated.  Only then can Beadles establish a causal chain and show that 4  The reasoning follows that, if ADM had warned Beadles of the alleged  contamination, then Beadles would not have shipped its hogs, or it would have tested the  ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 20  ADM’s actions caused Beadles’s damages.  The court of appeals addressed this issue and correctly held that, at trial, Beadles  relied on inadmissible hearsay to prove why IBP rejected the shipment. See Archer­Daniels­  Midland  Co. v. Beadles Enterprises, Inc, ___ Ark. App. ___, ___ S.W.3d ___ (Oct. 12,  5  2005).  Once  the  inadmissible  hearsay  is  set  aside,  there  is  no  evidence  to  substantiate hogs prior to shipment.  Either way, the hogs would not have been rejected mid­transit,  would not have contracted salmonella, and would not have contaminated Beadles’s  facility.  5  Beadles presented the following evidence to prove why IBP rejected the hog  shipment:  (1)  Exhibit Z, a memo to Beadles, dated January 15, 1998, from Larry Betrand,  IBP’s Area Procurement Supervisor.  In this memo, Bertrand states that IBP  stopped the shipment of hogs “based on an official notification that Beadles  Enterprises may have received feed for their hogs that contained  contaminated ball clay”;  (2)  Wayne Beadles, Sr., testified that his son, Wayne Beadles, Jr., told him  about a telephone conversation with someone at IBP who informed Wayne  Jr. that the shipment was being rejected for the same reason;  (3)  Wayne Beadles, Jr., also testified as to the substance of his telephone  conversation with the IBP representative; and  (4)  Exhibit BB, a list labeled “Soybean Meal Consignees.”  Wayne Beadles,  Sr., testified that this list was faxed to him after IBP informed him that  Beadles was on a list of purchasers who had possibly bought contaminated  feed.  ___________________________  HANNAH, C.J. ­ 1  ARCHER­DANIELS­MIDLAND CO. v. BEADLES ENTERS., INC.  Cite as 36_ Ark. ___ (2006)  Page 21  Beadles’s claim as to why IBP rejected the hog shipment.  Consequently, Beadles failed to  prove that ADM’s actions were the cause­in­fact of Beadles’s alleged damages.  In short,  Beadles’s claim should not succeed, due to Beadles’s failure to prove damages.  For this  reason, I dissent. Each of these pieces of evidence qualifies as inadmissible hearsay; that is, they are  “out­of­court statement[s] made by someone other than the declarant that [are] offered to  prove the truth of the matter asserted.”  See Ark. R. Evid. 801(c).  ___________________________  HANNAH, C.J. ­ 1 

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