HASS v HASS LAND CO
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No. 84-470 IN THE SUPREME COURT OF THE STATE OF MONTANA 1985 WILLIAM HARLOW HASS, individually and on behalf of HASS LAND COMPANY, Plaintiff and Appellant, HASS LAND COMPANY, a Mont. corp., and PAULA ALTHOFF and LAURA JEAN KNOTT, individually and as directors of said corporation, ******************* Defendants and Respondents. HASS LAND COMPANY and PAULA ALTHOFF and LAURA JEAN KNOTT, individually and in the right of HASS FARMS, INC., a Montana corp., Cross-Plaintiffs and Respondents, -vsHASS FARi?4S, INC., and WILLIAM HARLOW HASS, individually and as President and Director of Bass Farms, Inc., Cross-Defendants and Appellants. APPEAL FROM: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone, The Honorable Robert W. Holmstrom, Judge presiding. COUNSEL OF RECORD: For Appellants: Tipp, Hoven, Skjelset Missoula, Montana & Frizzell; Thomas Frizzell, For Respondents: Moulton, Bellingham, Longo Billinqs, Montana & Mather; B.E. Lcngo, - Submitted on Briefs: Filed: ii,c~I; 2 1985 Clerk April 25, 1985 J u s t i c e L.C. Court. Gulbrandson William Hass Mr. District Harlow Court Yellowstone of performance of appeals the County, delivered the from Thirteenth Montana, Opinion of an order the s e t t l e m e n t a g r e e m e n t between a the of District, Judicial granting the specific the parties. W e affirm. This between appeal involves William Harlow a long-standing and Hass family sisters, his two dispute Paula A l t h o f f and L a u r a J e a n K n o t t , o v e r t h e c o n t r o l and o p e r a t i o n o f two f a m i l y f a r m c o r p o r a t i o n s i n S h e r i d a n County, Montana. Hass Land Company owns a p p r o x i m a t e l y 6,130 a c r e s o f farm l a n d which was t h e f a m i l y farm b e q u e a t h e d by M a r g a r e t Hass i n the approximate shares of percent 50 p e r c e n t e a c h t o P a u l a and L a u r a . operating arm of the Hass m a c h i n e r y and equipment. Land to Tdil.liam Hass Farms, Company, and is the Inc., and 25 the owns I t was a l s o b e q u e a t h e d by M a r g a r e t Hass t o h e r c h i l d r e n i n a p p r o x i m a t e l y t h e same p r o p o r t i o n s a s t h e Land Company. I n 1976, William f i l e d s u i t a g a i n s t h i s sisters, Paula and Laura, and Hass Land Company, alleging stockholder o p p r e s s i o n and r e q u e s t i n g t h e a p p o i n t m e n t o f a r e c e i v e r f o r The s i s t e r s c r o s s - c l a i m e d t h e corporation. and Hass Farms, Inc., f o r an accounting. a g a i n s t William On t h e motion of William t h e D i s t r i c t Court severed t h e sisters1 cross-claim, resulting William in and consolidated the filing Hass Farms, of separate Inc. complaints These against complaints were f o r t r i a l w i t h t h e Hass Land and W i l l i a m Hass suit. O July n their 23, persona1 1982, and a l l of corporate "Agreement o f S e t t l e m e n t . " the parties, capacities, a c t i n g i n both entered into an Among o t h e r a r r a n g e m e n t s s e t t l i n g t h e v a r i o u s l a w s u i t s , t h e Agreement c a l l e d f o r t h e p a r t i e s t o a p p o i n t a p p r a i s e r s who w e r e t o " d e t e r m i n e t h e e n t i r e v a l u e o f the assets of provided each corporation. " [ t ]h e that Further, I' value the agreement ... determined [by the a p p r a i s e r s ] s h a l l b e r e d u c e d by c o r p o r a t e d e b t s owed t o t h i r d parties such as banks qualification that to be used corporat i o n . After to I' the subject CCC," to reduce the market value of the debts is [ o ] n l y $100,000 o f t h i r d - p a r t y Hass Farms " executing appointed or their this agreement, appraiser. sisters the William d i d n o t , promptly and, in fact d e l a y e d u n t i l May 11, 1 9 8 3 , t h r o u g h an e n t i r e p l a n t i n g s e a s o n d u r i n g which h e was i n f u l l c o n t r o l o f date, t h e farm. O that n t h e sisters f i l e d a p e t i t i o n w i t h t h e D i s t r i c t Court r e q u e s t i n g t h a t t h e c o u r t enforce t h e s p e c i f i c performance o f the settlement appraiser and contract. both appraisers requested valuations. April 1984; 2, through parties had control of harvesting, 1984; 20, settled the and were then able appointed to agree on his the The p e t i t i o n d i d n o t r e a c h t r i a l u n t i l D i s t r i c t Court entered on August William yet planting season. The i t s f i n d i n g s , c o n c l u s i o n s , and o r d e r well their farm another into the disputes. during the third season after W i l l i a m was whole time, s e l l i n g t h e crops each year. in the full planting, William t h e n appealed t h e District Court's o r d e r t o t h i s Court. W e note t h a t it i s now f o u r y e a r s s i n c e t h e p a r t i e s " s e t t l e d " t h e i r dispute. A p p e l l a n t r a i s e s t h e f o l l o w i n g i s s u e s on a p p e a l : 1. That t h e D i s t r i c t Court erroneously s u b s t i t u t e d i t s judgment f o r t h e a p p r a i s e r s i n making a d d i t i o n s t o t h e m a r k e t v a l u e o f Hass Land Company and Hass Farms. 2. That even i f t h e s e t t l e m e n t agreement allowed the D i s t r i c t C o u r t t o d e t e r m i n e t h e p r i c e t o b e p a i d by W i l l i a m t o h i s sisters, t h e c o u r t i n t e r p r e t e d t h e agreement c o n t r a r y t o the parties' 3. i n t e n t , and t h e law. t h e District Court e r r e d That in levying i n t e r e s t a g a i n s t William. I n h i s f i r s t a l l e g a t i o n o f e r r o r , William contends t h a t t h e D i s t r i c t Court e r r e d i n adding t o t h e appraised value o f Hass Farms, Inc. the amount of the Commodity Credit C o r p o r a t i o n (CCC) g r a i n h e l d a s l o a n c o l l a t e r a l , a n d t h e " 1 1 5 a c c o u n t " ; t h e r e b y i n c r e a s i n g t h e amount h e w a s r e q u i r e d u n d e r the settlement agreement their interests. valuation of Company. these The a p p r a i s e r s had p r e v i o u s l y a g r e e d t o t h e the assets of William figures, Two t o t e n d e r h i s sisters t o purchase argues they separate had clauses Hass Farms, t h a t when the Inc., a n d H a s s Land appraisers already incorporated of the r e l e v a n t t o t h e CCC g r a i n i s s u e . settlement reached those debts. agreement are The f i r s t s t a t e s : "The a p p r a i s e r s w i l l d e t e r m i n e t h e v a l u e of the - - a s s e t s o f each corporation." (Emphasis added.) And t h e s e c o n d : "The v a l u e a s d e t e r m i n e d a b o v e s h a l l b e r e d u c e d b y c o r p o r a t e d e b t s owed t o t h i r d p a r t i e s s b c h a s b a n k s o r t h e CCC. ... "Only $100,000 o f t h i r d p a r t y d e b t s is t o b e used t o reduce t h e market val-ue o f H a s s Farms c o r p o r a t i o n . " On t h i s p o i n t , t h e D i s t r i c t C o u r t f o u n d : "The c o u r t f i n d s t h a t t h e p r o v i s i o n t o f i n d i n g market v a l u e contained i n t h e agreement o f s e t t l e m e n t i s p l a i n and u n a m b i g u o u s a n d a l l g r a i n owned b y H a s s Farm a s o f J u l y 2 3 , 1 9 8 2 , i s t o b e included in the valuation of the corporate assets and further, the to third deduction for debts owed p a r t i e s , i n c l u d i n g t h e CCC i s l i m i t e d t o $100,000 . . ." In Ryan v . 1 9 8 0 ) , 620 P.2d Board o f County Commissioners, 1203, 37 St.Rep. 1965, etc. (Mont. we r e f e r r e d t o t h e following statutes in interpreting disputed a contract provision: MCA, p r o v i d e s : " S e c t i o n 28-3-301, "A c o n t r a c t must b e s o i n t e r p r e t e d a s g i v e e f f e c t t o t h e mutual i n t e n t i o n t h e p a r t i e s a s it e x i s t e d a t t h e t i m e contracting, so f a r a s the same a s c e r t a i n a b l e and l a w f u l . to of of is MCA, p r o v i d e s : " S e c t i o n 28-3-303, "When a c o n t r a c t i s r e d u c e d t o w r i t i n g , t h e i n t e n t i o n o f t h e p a r t i e s i s t o be a s c e r t a i n e d from t h e w r i t i n g a l o n e i f p o s s i b l e , s u b j e c t , however, t o t h e o t h e r provisions of t h i s chapter." F u r t h e r , i n Wortman v . G r i f f (Mont. 1 9 8 2 ) , 651 P.2d 998, 1916, w e h e l d t h a t where t h e " l a n g u a g e i s c l e a r 39 St.Rep. and unambiguous a n i t s f a c e , it i s t h e d u t y o f t h e c o u r t t o it a s t h e p a r t i e s made enforce i t . " ( C i t i n g Ryan, supra.) The D i s t r i c t C o u r t h e l d t h a t t h e c o n t r a c t was c l e a r and unambiguous and w e a g r e e . assets of It s p e c i f i c a l l y provides t h a t t h e each corporation includes " a l l personal property owned and u s e d i n t h e o p e r a t i o n o f Hass Land f o r Hass Farms, all its of grain, were, appraisers [and] by personal the terms equipment of the . . ." contract, directed simple to engage language determined in above" in any the adjustments contract, necessarily for that suggests simply They w e r e d i r e c t e d t o determine t h e value of those a s s e t s . not The debt. "the The value that the as value r e f e r r e d t o i s antecedent t o t h e adustment f o r d e b t . In the c l a u s e where t h e d e b t a d j u s t m e n t i s d i r e c t e d no r e f e r e n c e t o t h e a p p r a i s a l i s made. that appraisers were the Then, secondly increased court, The c o n t r a c t s i m p l y p r o v i d e d in agreement by and did no more reach a independently, corporate enforcing to debts in value that excess the specific than the of the value of had assets. would $100,000. performance parties first The this of agreed be to do. William made a practice over the years of drawing on the bank account of Hass Farms, Inc. as though it was his own personal bank account. By deposition, Cordell Almond, a CPA and accountant for Hass Farms, testified that this account, called the "115 account," was a personal checking account of William, though drawn on the corporation. William argues that his liabilities under this account were released when all of the claims were released by the settlement agreement. Alternatively, he contends the account, being an asset of the corporation, was specifically includ-ed within the appraisers calculations and the parties are bound thereby. The District Court held: "The said account is an asset of the corporation and should be included in determining the value of the assets of said corporation and that in addition thereto, accounts owed by Paula Althoff and Laura Jean Knott to Hass Land Company should be included as an asset of said corporation for the purpose of determining the value of its assets." We affirm the District Court for two reasons. First is that the court's order effectuated the parties' contractual expectations. under the William argues that his personal liability "115 account" was released in the settlement agreement. To determine the validity of his contention, we must to turn the agreement itself. It directed the appraisers, when valuing Hass Farms, Inc. to consider: "all of its grain, personalty, equipment and machinery other equipment shown on The the personal property books of the corporation. " District unambiguous." and Court deemed this ... and - - types as of all (Emphasis added. ) clause "clear and Based on evidence on the record that William, Paula, and Laura owed money to Hass Farms, Inc., and that these debts were "on the books" the court determined that they were corporate assets and added them to the amount reached by the appraisers. Since the Agreement of Settlement is controlling, appellants argument mentioned above is irrelevant. to As William's argument that the appraiser's c a l c u l a t i o n s a r e binding, we recognize t h e general r u l e t h a t : " [A]n award made by t h e a p p r a i s e r s i s s u p p o r t e d by e v e r y r e a s o n a b l e i n t e n d m e n t and p r e s u m p t i o n , and it s h o u l d n o t be it was made without vacated unless a u t h o r i t y , o r was t h e r e s u l t o f f r a u d o r mistake, or the misfeasance or malfeasance of t h e appraisers.'' Lee v . Providence Washington Insurance Co. ( 1 9 2 8 ) , 82 Mont. 264, 274, 266 P. 640, 643. on I n a c c o r d , 5 W i l l i s t o n - C o n t r a c t s , 5802, p. 825. H e r e i t was c l e a r t h a t t h e a p p r a i s e r s m i s t a k e n l y f o r g o t t o include i n t h e a s s e t valuation of each corporation those d e b t s t h a t t h e i n d i v i d u a l p a r t i e s owed t h e r e t o . Along w i t h n e g l e c t i n g t o c o n s i d e r W i l l i a m ' s d e b t s t o Hass Farms, the a p p r a i s e r s overlooked Laura Knott. those owed by Inc., Paula. A l t h o f f and This type of mistake, a f f e c t i n g both p a r t i e s , n e g a t e s any i n f e r e n c e o f p a r t i a l i t y o r b i a s . I t is t h i s type o f m i s t a k e , where t h e i n d i c a o f i m p a r t i a l i t y i s s t r o n g , t h a t t h e D i s t r i c t C o u r t may c o r r e c t when e x a m i n i n g a n a p p r a i s e r ' s W e a f f i r m on t h i s p o i n t . report. William n e x t contends t h a t even i f t h e D i s t r i c t Court was empowered u n d e r t h e c o n t r a c t t o make d e d u c t i o n s from t h e appraisal value that it e r r e d i n d e t e r m i n i n g t h a t t h e CCC loans w e r e corporate debt. The corporate debt. non-recourse this Court District program, At found that CCC were loans i s s u e i s g r a i n used a s c o l l a t e r a l f o r a l o a n program a d m i n i s t e r e d a the farmer borrows by from t h e the CCC. government Under a sum c a l c u l a t e d t o r e f l e c t t h e v a l u e o f t h e c r o p and p u t s u p t h e crop i t s e l f a s c o l l a t e r a l . I f t h e market p r i c e o f t h e g r a i n t u r n s o u t h i g h e r t h a n t h e l o a n r a t e , t h e Farmer c a n s e l l t h e crop, satisfy the loan, and k e e p the difference. If the m a r k e t p r i c e d o e s n o t go above t h e l o a n r a t e , t h e f a r m e r c a n activate a "non-recourse clause" in the l o a n a g r e e m e n t and turn over t h e crop t o s a t i s f y h i s obligation. trial At William presented a c c o u n t a n t t h a t Hass Farms, and treated the loans as Inc., testimony through his was a c a s h b a s i s e n t i t y , sales. Paula Althoff and Laura K n o t t p r ~ s e n t e de v i d e n c e t o t h e e f f e c t t h a t t h e CCC payments were a c t u a l - l y a the contract corporate l o a n and n o t a s a l e . specifically debt. The payments were a loan, from the provides District assets that Court thus debt, corporate Further, t h e y argued payments CCC concluded that were these and d e d u c t e d t h e i r amount pursuant to settlement the agreement. I n Lauterjung v. J o h n s o n ( 1 9 7 7 ) , 175 Mont. 74, 572 P.2d 511, w e s t a t e d : "'When r e v i e w i n g f i n d i n g s o f f a c t and c o n c l u s i o n s o f law o f a d i s t r i c t c o u r t , s i t t i n g without a jury, t h i s Court has repeatedly held such findings and conclusions w i l l n o t be d i s t u r b e d i f s u p p o r t e d by s u b s t a n t i a l e v i d e n c e and by t h e law When r e v i e w i n g e v i d e n c e it w i l l b e viewed i n t h e l i g h t most favorable t o t h e prevailing party i n t h e d i s t r i c t c o u r t , and t h e c r e d i b i l i t y o f w i t n e s s e s and t h e w e i g h t a s s i g n e d t o t h e i r testimony i s f o r t h e determination nonjury of t h e ~ i s t r i c t Court i n a trial. (Citations omitted.)'" Citing Luppold v . Lewis ( 1 9 7 7 ) , 172 Mont. 280, 2 8 4 , 5 6 3 P.2d 538, 540 .... Given o u r d e f e r e n c e t o t h e D i s t r i c t C o u r t ' s f i n d i n g s and conclusions we do credible evidence Court's not on conclusion find the that error. record Hass to is There support Farms, Inc. substantial the District treated the Commodity C r e d i t C o r p o r a t i o n ' s l o a n s a s c o r p o r a t e d e b t . The CCC l o a n s have few o f t h e a s p e c t s o f a t r u e s a l e . no t r a n s f e r o f t i t l e . There i s Under t h e l o a n program t h e f a r m e r h a s t h e c o n t i n u i n g power t o d i s p o s e o f t h e g r a i n s h o u l d t h e p r i c e go h i g h e r o r o t h e r w i s e d e s i r e s t o d o s o . Actual t i t l e o r ownership (possession with the intent to exclude) of the g r a i n i s n o t s p e c i f i c a l l y t r a n s f e r r e d u n t i l t h e farmer e i t h e r activates the non-recourse clause or pays his loan. The government p a y s t h e f a r m e r f o r s t o r i n g t h e g r a i n d u r i n g t h e t e r m o f t h e l o a n , b u t a s i d e from t h a t h a s no o t h e r power t o use the same. The fact, f r e q u e n t l y mentioned by W i l l i a m , t h a t t i t l e t o t h e g r a i n h a s gone t o t h e government t h r o u g h a c t i v a t i o n of t h e non-recourse is irrelevant. record c l a u s e f o r t h e p a s t few y e a r s There i s s u b s t a n t i a l c r e d i b l e evidence i n t h e s u p p o r t i n g t h e D i s t r i c t C o u r t ' s d e t e r m i n a t i o n and w e a f f i r m t h e same. F i n a l l y , William argues t h a t t h e D i s t r i c t Court e r r e d i n awarding interest to t h e respondents. On t h i s point, the court held: "That f o r many y e a r s W i l l i a m Harlow h a s c o n t i n u e d t o farm a l l o f Hass t h e Hass Land Company's l a n d s i n c e t h e d a t e of t h e execution o f t h e agreement of s e t t l e m e n t ; t h a t a n y r e n t a l p a i d by Hass Farms, Inc. since the appraisal date, was n o t t a k e n i n t o a c c o u n t i n the determination of market [and] t h a t i f s a i d agreement value i s s p e c i f i c a l l y e n f o r c e d and t h e c o u r t d o e s h e r e b y c o n c l u d e t h a t i t s h o u l d be s p e c i f i c a l l y e n f o r c e d , Hass Farms, I n c . and W i l l i a m Harlow Hass w i l l h a v e g a i n e d u n f a i r a d v a n t a g e by t h e d e l a y i n t h e closing of t h i s transaction i n t h a t they have had t h e u s e o f t h e l a n d and n o t had t o pay any r e n t t h e r e u p o n ; t h e c o u r t t h e r e f o r e c o n c l u d e s t h a t it would b e f a i r and e q u i t a b l e f o r i n t e r e s t t o b e p a i d by W i l l i a m Harlow Hass and Hass Land upon t h e amount s t a t e d from September 5 , 1982, t h e date of t h e anticipated closing." ... ... ... The g e n e r a l rule s t a t e d i n 81A Corpus J u r i s Secundum, S p e c i f i c P e r f o r m a n c e , S198, p. 164 is: "Where t h e r e i s d e l a y i n t h e c o m p l e t i o n o f a c o n t r a c t f o r t h e s a l e o r conveyance of p r o p e r t y , an adjustment o f t h e r i g h t s o f t h e p a r t i e s may b e made by p r o v i d i n g f o r a n a c c o u n t i n q a s t o t h e r e n t s and p r o f i t s , o r f o r t h e payment o f i n t e r e s t on t h e purchase p r i c e . " Accord, 71 Am.Jur.2d, S p e c i f i c Performance, $219, pp. 282-283. T h i s C o u r t , i n S c h u l t z and Wood v. Campbell ( 1 9 6 6 ) , 147 Mont. 439, 413 cases, P.2d 879, . . . reserve[d] "for the future right to o f f s e t a g a i n s t p r o f i t s o r crops." this contract, the court acted specific allow performance interest a s an I n specifically enforcing under the general equity u m b r e l l a and had t h e power t o a d j u s t t h e p a r t i e s o b l i g a t i o n s t o p u t them i n n e a r l y a s good a p o s i t i o n a s i f t h e c o n t r a c t had b e e n p e r f o r m e d when r e q u i r e d and a s r e q u i r e d . In this case of William's delay of now up to four years his performance under t h e s e t t l e m e n t agreement c l e a r l y deprived P a u l a A l t h o f f and Laura K n o t t o f t h e b e n e f i t o f t h o s e y e a r s i n t e r e s t on t h e r e n t t o b e p a i d by W i l l i a m . F u r t h e r , h e had t h e use of a s u b s t a n t i a l piece of property f o r t h a t period. The D i s t r i c t C o u r t a c t e d f u l l y w i t h i n i t s powers i n a w a r d i n g interest. The o r d e r o f D i s t r i c t C o u r t i s a f f i r m e d . 4 ,/ ief Justice
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