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 direc-
tors 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,
-vs-
HASS 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 & Frizzell; Thomas Frizzell,
Missoula, Montana
For Respondents:
Moulton, Bellingham, Longo & Mather; B.E. Lcngo,
Billinqs, Montana
-
Submitted on Briefs: April 25, 1985
Filed:
ii,c~I; 2 1985
Clerk
Mr. J u s t i c e L.C. Gulbrandson delivered the Opinion of the
Court.
William Harlow Hass appeals from an order of the
District Court of the Thirteenth Judicial District,
Yellowstone County, Montana, granting the specific
performance of a s e t t l e m e n t a g r e e m e n t between the parties.
W e affirm.
This appeal involves a long-standing family dispute
between William Harlow Hass and his two sisters, 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 50 percent to Tdil.liam and 25
p e r c e n t e a c h t o P a u l a and L a u r a . Hass Farms, Inc., is the
operating arm of the Hass Land Company, and owns the
m a c h i n e r y and equipment. 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
t h e corporation. The s i s t e r s c r o s s - c l a i m e d a g a i n s t William
and Hass Farms, Inc., f o r an accounting. 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 in the filing of separate complaints against
William and Hass Farms, Inc. These complaints were
consolidated 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 23, 1982, a l l of the parties, a c t i n g i n both
their persona1 and corporate capacities, entered into an
"Agreement o f S e t t l e m e n t . " 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 each corporation. I' Further, the agreement
provided that " [ t ]h e value 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 or the CCC," subject to the
qualification that I' [ o ] n l y $100,000 o f t h i r d - p a r t y debts is
to be used to reduce the market value of Hass Farms
corporat i o n . "
After executing this agreement, the sisters promptly
appointed their appraiser. William d i d n o t , 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 t h e farm. O that
n
date, 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 contract. William then appointed his
appraiser and both appraisers were able to agree on the
requested valuations. 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
April 2, 1984; through yet another planting season. The
D i s t r i c t Court entered 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
on August 20, 1984; well into the third season after the
parties had settled their disputes. W i l l i a m was in full
control of the farm during the whole time, planting,
harvesting, and s e l l i n g t h e crops each year. 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' i n t e n t , and t h e law.
3. That t h e District Court e r r e d 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 t o t e n d e r h i s sisters t o purchase
their interests. 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
valuation of the assets of Hass Farms, Inc., a n d H a s s Land
Company. William argues t h a t when the appraisers reached
these figures, they had already incorporated those debts.
Two separate clauses of the settlement agreement are
r e l e v a n t t o t h e CCC g r a i n i s s u e . 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
- - a s s e t s o f each corporation."
of the
(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
deduction for debts owed to third
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 . Board o f County Commissioners, etc. (Mont.
1 9 8 0 ) , 620 P.2d 1203, 37 St.Rep. 1965, we r e f e r r e d t o t h e
following statutes in interpreting a disputed contract
provision:
" S e c t i o n 28-3-301, MCA, p r o v i d e s :
"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 to
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 of
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 of
contracting, so f a r a s the same is
a s c e r t a i n a b l e and l a w f u l .
" S e c t i o n 28-3-303, MCA, p r o v i d e s :
"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,
39 St.Rep. 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
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
enforce it a s t h e p a r t i e s made 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 . It s p e c i f i c a l l y provides t h a t t h e
assets of 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 of its grain, [and] personal equipment . . ." The
appraisers were, by the terms of the contract, simply
d i r e c t e d t o determine t h e value of those a s s e t s . They w e r e
not directed to engage in any adjustments for debt. The
simple language in the contract, that "the value -
as
determined above" necessarily suggests that the 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. The c o n t r a c t s i m p l y p r o v i d e d first
that the appraisers were to reach a value of the assets.
Then, secondly and independently, that value would be
increased by corporate debts in excess of $100,000. The
court, in enforcing the specific performance of this
agreement did no more than the parties had agreed 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. William argues that his personal liability
under the "115 account" was released in the settlement
agreement. To determine the validity of his contention, we
must turn to the agreement itself. It directed the
appraisers, when valuing Hass Farms, Inc. to consider: "all
of its grain, personalty, equipment and machinery ... and
other equipment and personal property - - types as
of all
shown on the books of the corporation. " (Emphasis added. )
The District Court deemed this clause "clear and
unambiguous." 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.
As to 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
vacated unless it was made without
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.
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.
on 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, Inc.,
the a p p r a i s e r s overlooked those owed by Paula. A l t h o f f and
Laura Knott. 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
report. W e a f f i r m on t h i s p o i n t .
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 District Court found that the CCC loans were
corporate debt. At 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
non-recourse l o a n program a d m i n i s t e r e d by the CCC. Under
this program, a farmer borrows from t h e government 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.
At trial William presented testimony through his
a c c o u n t a n t t h a t Hass Farms, Inc., was a c a s h b a s i s e n t i t y ,
and treated the loans as 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 l o a n and n o t a s a l e . Further, t h e y argued
the contract specifically provides that CCC payments were
corporate debt. The District Court concluded that these
payments were a loan, thus debt, and d e d u c t e d t h e i r amount
from the corporate assets pursuant to the settlement
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
of t h e ~ i s t r i c t Court i n a nonjury
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 not find error. There is substantial
credible evidence on the record to support the District
Court's conclusion that Hass Farms, Inc. 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 . There i s
no t r a n s f e r o f t i t l e . 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 c l a u s e f o r t h e p a s t few y e a r s
is irrelevant. 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
record 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
Hass ... h a s c o n t i n u e d t o farm a l l o f
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
value ... [and] t h a t i f s a i d agreement
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 P.2d 879, "for future specific performance
cases, . . . reserve[d] the right to allow interest a s an
o f f s e t a g a i n s t p r o f i t s o r crops." I n specifically enforcing
this contract, the court acted 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 William's delay of now up to four years of 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