IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 31706
J.R. SIMPLOT COMPANY, a Nevada )
Corporation, ) Idaho Falls, October 2006 Term
)
Plaintiff-Respondent, ) 2006 Opinion No. 105
)
v. ) Filed: November 28, 2006
)
CLAIR D. BOSEN and VIOLA BOSEN, ) Stephen W. Kenyon, Clerk
husband and wife, )
)
Defendants-Appellants. )
)
Appeal from the District Court of the Sixth Judicial District of the State of Idaho,
in and for Franklin County. The Hon. Don L. Harding, District Judge.
The judgment of the district court is affirmed.
Givens Pursley LLP, Boise, and Jay R. McKenzie, Preston, for appellants. David
R. Lombardi argued.
Baker & Harris, Blackfoot, and P. Mark Thompson, Boise, for respondent. Jared
M. Harris argued.
EISMANN, Justice.
This is an appeal from a judgment holding that an individual had personal liability on a
contract to obtain goods and services for a limited liability company. We affirm the judgment of
the district court.
I. FACTS AND PROCEDURAL HISTORY
In early 2000, Clair Bosen and Ron Achs, together with their spouses, purchased 5,100
acres of farm property in Cassia County, Idaho. Shortly after that purchase, Achs formed Hogs
‘N Kisses, LLC, a limited liability company, to operate a hog farm enterprise on the property.
On March 15, 2000, Clair D. Bosen completed and executed a form entitled “Commercial
Sales Agreement” with Soilbuilder Financial Services, Inc., in order to obtain services and
products for chemical and fertilizer applications to the farm property. In completing the Sales
Agreement, Bosen wrote that the “Customer Account Name” was “Hogs ‘N Kisses, LLC,” and
he checked the box designated “LLC” to indicate the “Type of Ownership.” When listing the
“Principals Names & Titles” he wrote “Ron Achs” and “Clair Bosen.” The form had a box
entitled “Acres Owned” and a box entitled “Acres Leased.” Bosen did not write anything in the
box entitled “Acres Leased,” but he wrote “5100” in the box entitled “Acres Owned.” The LLC
did not own any real property, so the 5,100 acres could only refer to the real property that Bosen
and his wife had purchased with Achs and his wife.
At the bottom of the Sales Agreement form was a paragraph entitled “Agricultural
Business Agreement.” The first paragraph of that section stated as follows:
Applicant agrees to pay the total amount due on each invoice/customer
statement in accordance with the payment terms thereon, unless otherwise agreed
in writing. Failure to pay when due (according to approved terms) will result in
the addition of a service charge each month at the highest rate allowed by law.
Applicant agrees to pay such service charge and all additional costs incurred by
Soilbuilders Financial Services, Inc., in collecting payments due, including
attorney’s fees for litigation or bankruptcy.
The form does not state whether the Applicant is also the Customer. In the box for “Applicant’s
Signature,” Bosen wrote “Clair D. Bosen,” without indicating that he was signing in a
representative capacity.
In order to obtain an extension of credit, Bosen executed a Security Agreement and a
Financing Statement. The Security Agreement granted Simplot a security interest in all crops
grown on the real property. “Hogs N Kisses, LLC” and “Clair D. Bosen” were each listed as a
debtor on both the Security Agreement and on the Financing Statement, and Bosen signed both
documents “Clair D. Bosen,” without indicating he was signing in a representative capacity.
On December 29, 2002, Simplot filed this lawsuit against Clair and Viola Bosen to
recover the unpaid balance owing for goods and services provided under the Commercial Sales
Agreement. It later filed an amended complaint adding Ron and Amy Achs as defendants. The
Bosens and Simplot moved for summary judgment. On October 6, 2004, the district court issued
its memorandum opinion and order granting Simplot’s motion and denying the Bosens’ motion.
The Bosens then filed a motion for reconsideration, which the district court denied by its
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memorandum decision and order issued on March 2, 2005. The Achs had also moved for
summary judgment, which the district court granted.
The district court entered a judgment in favor of the Achs, dismissing the amended
complaint as to them and awarding them costs and attorney fees against Simplot in the sum of
$5,925.99. It also entered a judgment in favor of Simplot against the Bosens in the sum of
$70,945.53 principal, plus $33,091.08 in interest and $11,672.12 as costs and attorney fees, for a
total judgment of $115,708.73. The Bosens then appealed.1
II. ANALYSIS
A. Is There a Genuine Issue of Material Fact?
Summary judgment can only be granted when there are no genuine issues of material
fact. Read v. Harvey, 141 Idaho 497, 112 P.3d 785 (2005). The first issue is whether there are
any genuine issues of material fact that would have precluded the granting of summary
judgment. The Bosens contend that there are two issues of disputed fact.
First, they contend that there is a genuine issue of material fact concerning whether
Bosen was a member of Hogs ‘N Kisses. Achs testified in his deposition that he was the only
member of the limited liability company, but that Bosen was authorized to manage the farm
operation during 2000. Bosen stated in his first affidavit, “I understood I was a member of Hogs
‘N Kisses, LLC in the year 2000.” He argues that this disputed fact is material because “he
would have no liability to Simplot under the Commercial Sales Agreement as member of the
limited liability company.” He relies upon Idaho Code § 53-6192 to support that argument. That
statute does not grant immunity to members of limited liability companies. It merely provides
that they are not liable for debts of the limited liability company “solely by reason of being a
member.” The district court did not hold Bosen liable because he was a member of Hogs ‘N
1
The Bosens have not challenged on appeal the finding of personal liability against Viola Bosen that was apparently
based solely upon the fact she was married to Clair Bosen. See Twin Falls Bank & Trust Co. v. Holley, 111 Idaho
349, 352, 723 P.2d 893, 896 (1986) (“To the extent a lending institution enters into a creditor-debtor relationship
with either member of the marital community or with both members, it does so on a purely individual basis”).
2
That statute provides:
A person who is a member of a limited liability company is not liable, solely by reason of
being a member, under a judgment, decree or order of a court, or in any other manner, for a debt,
obligation or liability of the limited liability company, whether arising in contract, tort or
3
Kisses. It found that he had personally incurred a debt for goods and services provided to the
limited liability company. Whether or not Bosen was a member of the limited liability company
is immaterial to the issue of whether he had personally incurred the debt.
The second alleged issue of material fact is based upon Bosen’s statement in his first
affidavit that he signed the Commercial Sales Agreement on behalf of Hogs ‘N Kisses and that “I
did not, at any time, enter into an agreement with Plaintiff, as an individual, for the delivery of
any fertilizer or other goods or services to the Cassia County property.” In his second affidavit,
he also stated, “At no time did I intend or agree to be personally liable or to guarantee the Hogs
N’ Kisses, LLC account with J. R. Simplot Company.” Bosen’s statement that he did not enter
into an agreement with the Simplot or intend to be liable on the Hogs ‘N Kisses account does not
create an issue of material fact.
If the provisions of a contract are ambiguous, the interpretation of those provisions is a
question of fact which focuses upon the intent of the parties. Bream v. Benscoter, 139 Idaho
364, 79 P.3d 723 (2003). The determination of the parties’ intent is to be determined by looking
at the contract as a whole, the language used in the document, the circumstances under which it
was made, the objective and purpose of the particular provision, and any construction placed
upon it by the contracting parties as shown by their conduct or dealings. Ramco v. H-K
Contractors, Inc., 118 Idaho 108, 794 P.2d 1381 (1990); International Eng’g Co., Inc. v. Daum
Indus., Inc., 102 Idaho 363, 630 P.2d 155 (1981). A party’s subjective, undisclosed intent is
immaterial to the interpretation of a contract. As explained in 17 Am. Jur. 2d, Contracts, § 347
(2004):
A party’s subjective, undisclosed intent is immaterial to the interpretation of a
contract, as under the objective law of contract interpretation, the court will give
force and effect to the words of the contract without regard to what the parties to
the contract thought it meant or what they actually intended for it to mean. The
court will not attempt to ascertain the actual mental processes of the parties in
entering into the particular contract; rather the law presumes that the parties
understood the import of their contract and that they had the intention which its
terms manifest.
otherwise or for the acts or omissions of any other member, manager, agent or employee of the
limited liability company.
4
In this case, Bosen does not contend he ever verbalized to any of Simplot’s agents his intent not
to be personally obligated under the contract. His subjective intent or belief does not create a
genuine issue of material fact.
The Bosens also argue that there is an issue regarding the credibility of Brian Davis, a
Simplot representative, based upon two statements made by Davis. The first statement was that
Bosen signed the Commercial Sales Agreement in the presence of Davis, and the second was that
Davis spoke with Bosen about obtaining a lien on the barley crop.
In his affidavit submitted in opposition to the Bosens’ motion for summary judgment,
Davis stated, “That I met with Clair Bosen personally when the documents were signed and the
documents were signed in my presence.” Bosen then deposed Davis, and he admitted that he did
not recall whether Bosen signed the Commercial Sales Agreement in his presence. The
affidavits of Bosen and Kurt Olson, a Hogs ‘N Kisses employee, show that a Simplot employee
brought the Agreement to the farm’s office, that Olson faxed it to Bosen, and that Bosen
completed and signed it and faxed it back.
Davis also testified in his deposition that he did not recall talking with anyone other than
Bosen concerning Hogs ‘N Kisses and that he discussed the crop lien with Bosen. Kurt Olson’s
responsibilities as an employee of Hogs ‘N Kisses included setting up accounts for goods and
services. He stated in his affidavit and in his deposition that he talked with Davis about
purchasing fertilizer on credit for Hogs ‘N Kisses, that Davis required a crop lien to extend
credit, and that he told Davis that Simplot could have a lien on the barley crop as security for the
transaction. The Bosens argue that the record shows that Davis did not remember his
conversation with Olson and that Davis wrongly stated that his conversation about obtaining a
lien on the barley crop was with Bosen, when it was in fact with Olson. The Bosens have not
pointed to any place in the record where Bosen denied also discussing the crop lien with Davis.
They simply argue that because Olson discussed the crop lien with Davis, Bosen must not have
done so.
“Summary judgment is not proper where the depositions and affidavits raise any question
as to the credibility of witnesses.” Athay v. Stacey, 142 Idaho 360, 367, 128 P.3d 897, 905
(2005). That rule only applies, however, if the testimony of the witness is material. The district
court did not rely upon any of Davis’s testimony in granting summary judgment, nor has Bosen
5
contended that any of Davis’s testimony, if believed, would preclude summary judgment.
Therefore, the issue of Davis’s credibility is not material to the summary judgment.
B. Does the Record Reasonably Support the Trial Court’s Findings as to the Reasonable
Inferences to be Drawn from the Facts?
In this case, neither party requested a jury trial. “When an action will be tried before the
court without a jury, the trial court as the trier of fact is entitled to arrive at the most probable
inferences based upon the undisputed evidence properly before it and grant the summary
judgment despite the possibility of conflicting inferences. Shawver v. Huckleberry Estates,
L.L.C., 140 Idaho 354, 360-61, 93 P.3d 685, 691-92 (2004). “The test for reviewing the
inferences drawn by the trial court is whether the record reasonably supports the inferences.” Id.
In its memorandum decision, the district court stated that the three documents signed by
Bosen were unambiguous and that it did not have to consider extrinsic evidence. In its decision,
however, it considered extrinsic evidence. It also recognized that when a case is to be tried to the
court without a jury, the court can resolve conflicting inferences to be drawn from the undisputed
facts. Therefore, we will review the court’s conclusions to determine whether the record
reasonably supports the inferences drawn by the court.
Bosen filled out and signed the Commercial Sales Agreement. At the top of the
Commercial Sales Agreement is a blank for inserting “Customer Account Name.” Bosen wrote
“Hogs ‘N’ Kisses LLC.” in that blank. At the bottom of the document is a paragraph entitled
“Agricultural Business Agreement” under which the “Applicant agrees to pay the total amount
due on each invoice/customer statement in accordance with the payment terms thereon, unless
otherwise agreed in writing.” The only signature space on the document is for the Applicant.
The document does not define the Applicant as being the Customer. Bosen signed as the
Applicant without designating that he was signing in a representative capacity. The document
could be read as Bosen signing in his individual capacity as Applicant or in a representative
capacity as an agent of Hogs ‘N Kisses. When deciding whether Bosen signed in his individual
capacity or in a representative capacity, the district court considered various other facts.
The court considered the Security Agreement and Financing Statement signed by Bosen,
which were executed to provide security for the debt that would be created by extending credit
under the Commercial Sales Agreement. When initially discussing the transaction, Olson had
6
told the Simplot representative that Simplot could have a security agreement in the barley crop.
Bosen did not sign the Security Agreement and Financing Statement, however, until after he had
signed the Commercial Sales Agreement. The debtor identified in the Security Agreement was
“Hogs N Kisses, LLC, Clair D. Bosen.” The district court interpreted this as indicating that
both were debtors. The Financing Statement executed at the same time listed “Hogs N Kisses,
LLC” as one debtor and “Bosen, Clair D.” as the second debtor. Bosen signed both documents
“Clair D. Bosen” without indicating he was signing in a representative capacity. The district
court inferred that by doing so, “Clair Bosen had to realize that Simplot considered him a
debtor.” He would only be a debtor in this transaction if he was personally obligated under the
Commercial Sales Agreement.
In his second affidavit, Bosen stated that he had been involved in farming and ranching
for forty years and during that time had engaged in business as a sole proprietor, a partner in a
partnership, a shareholder in a corporation, and a member of a limited liability company. The
district court noted that with that experience Bosen “filled out the agreement with a strong
knowledge and background of normal business practices.” The court also considered that when
filling out the Commercial Sales Agreement, Bosen wrote that the acres owned were 5,100 and
that Hogs ‘N Kisses did not own any land. The district court concluded that Bosen “signed the
Commercial Sales Agreement in his own name and as owner of 5,100 acres.”
The court also stated that any ambiguity created by the manner in which Bosen filled out
and signed the Commercial Sales Agreement should be construed against him. The district court
did not err in doing so. “The rule is clear, that a contract should be construed most strongly
against the party preparing it or employing the words concerning which doubt arises.” Big Butte
Ranch, Inc. v. Grasmick, 91 Idaho 6, 9, 415 P.2d 48, 51 (1966). Stated another way, “Where
there is doubtful language in a contract, it will be interpreted most strongly against the party who
provided that language.” Werry v. Phillips Petroleum Co., 97 Idaho 130, 136, 540 P.2d 792, 798
(1975).
Bosen pointed out that Simplot had never asked him to sign a personal guaranty. He
argues that had Simplot wanted him to be personally liable, it would have asked for such a
guaranty. The district court considered that fact and did not find the inferences to be drawn from
it persuasive.
7
In deciding what inferences to draw from the undisputed facts, the district court made
various factual findings based upon those inferences. Because the district court was the trier of
fact, we must uphold those findings if they are reasonably supported in the record. We cannot
conclude that the district court’s conclusions are not reasonably supported in the record. We
therefore affirm the judgment of the district court.
Part I of the dissent explains the result it would have reached as the trier of fact. In doing
so, the dissent relies upon some of the deposition testimony of Simplot’s agent Brian Davis to
conclude that Simplot was looking solely to the barley crop for repayment. There was other
testimony of Davis in which he testified he was not looking solely to the barley crop for
repayment. Davis’s deposition testimony included the following:
Q. Did you convey, and I’m not asking for your reconstruction. I’m
asking for what you actually know. Did you convey to Mr. Bosen at the time that
you collected the commercial sales agreement that you expected him to pay for
any amount of the Hogs N Kisses’ bill that was not paid by Hogs N Kisses and
the crops?
A. I don’t recall specifically saying that.
Q. Did you say anything like that to him?
A. Yes. Mr. Bosen was responsible for the bill. There was no
misunderstanding about that.
Q. How did you say that to him?
A. I don’t recall specifically. I know that we would have had to have that
conversation for me to go forward with his signature on the security documents.
Q. If you had that conversation that extended beyond the security
documents, then why didn’t you have a personal guarantee?
A. Because I didn’t need it.
Q. Why didn’t you need it?
A. Because I had a lien on the crops.
Q. My question, sir, was beyond the crops.
A. I didn’t feel—I felt that since that farm was a very large farm and it
was going to be planted in barley, there was no need for anything beyond the
crops.
Q. Okay. So you really never even considered the necessity for Mr.
Bosen to personally pay the debt to Simplot because you thought the crops were
going to be adequate, didn’t you?
MR. HARRIS: Objection. Mischaracterizes his prior testimony.
MR. LOMBARDI: It’s not a valid objection. You can answer. Go ahead.
THE WITNESS: I’m sorry. I think I got lost in the question again. I did
consider Mr. Bosen to be responsible for this bill, yes.
Q. (BY MR. LOMBARDI) But you never told him that, did you?
A. Yes, I did.
8
Q. Because if you had told him that, you would have asked him to sign a
personal guarantee.
A. Why do you make that assumption? That’s not true.
Q. Because the –
A. We do business with—we have done business with all kinds of
customers that we darn sure make them understand that they’re responsible to pay
that bill.
Q. But you don’t recall specifically saying that to Mr. Bosen, do you?
A. I don’t recall the specific words I used.
Q. Okay. And all you recall—well, you don’t recall anything. It’s just
you think that you would have said that to him; correct?
A. I’m certain that I said that to him.
Q. Okay.
A. I’m certain that Mr. Bosen understood from me that he was
responsible for this bill.
Q. How are you certain? What makes you certain?
A. Because of the conversation we had.
Q. And the conversation was what?
A. That Mr. Bosen was going to pay the bill.
Q. You had that conversation with him and he said those words?
A. We had the conversation. I don’t know. I don’t recall what words Mr.
Bosen said to me.
Q. And you don’t recall what words you said to him?
A. There was no misunderstanding between Mr. Bosen and me as to who
was going to pay this bill.
Part II of the dissent addresses issues and supporting arguments it would have presented on
appeal on behalf of the Bosens. The Bosens, however, did not raise those issues on appeal.
C. Is Either Party Entitled to an Award of Attorney Fees on Appeal?
Simplot seeks an award of attorney fees on appeal pursuant to Idaho Code § 12-120(3).
It argues that a commercial transaction is the gravamen of this lawsuit. The Bosens agree.
Because this is an action to recover on a commercial transaction and Simplot is the prevailing
party on appeal, it is entitled to an award of attorney fees pursuant to Idaho Code § 12-120(3).
The Bosens also seek an award of attorney fees on appeal pursuant to Idaho Code § 12-
120(3). Since they are not the prevailing party in this lawsuit, they are not entitled to an award
of attorney fees under that statute.
9
III. CONCLUSION
We affirm the judgment of the district court and award the respondent costs and
reasonable attorney fees on appeal.
Chief Justice SCHROEDER, and Justices TROUT and BURDICK CONCUR.
Justice JONES DISSENTING.
I dissent because of the unfortunate lessons that can be drawn from this decision. One
such lesson is that a seller of goods need no longer obtain a personal guarantee or pierce the
protective veil of a limited liability entity in order to hold a representative of the entity personally
liable for a purchase. The seller needs only to get the representative to sign a confusing, one-
size-fits-all contract, doing away with the bother of asking for a personal guarantee or the tedious
business of proving the entity’s shield of liability should be disregarded. Another lesson is that
the seller may poop away a security interest in goods that are worth much more than the
indebtedness and still nail the representative with personal liability. We need not teach these
unfortunate lessons because the district court’s decision is based on faulty factual and legal
analysis and is deserving of reversal.
I.
As the Court points out, where both parties have moved for summary judgment in a case
scheduled for court trial the trier of fact is entitled to arrive at the most probable inferences based
upon the undisputed evidence properly before it. The test for reviewing the inferences drawn by
the trial court is whether the record reasonably supports the inferences. Shawver v. Huckleberry
Estates, LLC, 140 Idaho 354, 360-61, 93 P.3d 685, 691-92 (2004). If the record does not
reasonably support the inferences drawn by the trier of fact, the summary judgment should not be
permitted to stand. With regard to matters of law, this Court exercises free review. Lettunich v.
Key Bank Nat. Ass’n, 141 Idaho 362, 366, 109 P.3d 1104, 1108 (2005).
The district court committed legal error in construing the Commercial Sales Agreement,
Security Agreement, and Financing Statement together as if they constituted the agreement
between the parties. While contemporaneous instruments executed by the same parties and
having relation to the same subject matter must be construed together as parts of one agreement
10
(Hill v. Schultz, 71 Idaho 145, 148, 227 P.2d 286, 589 (1951)), that situation is not present here.
In this case there were two distinct transactions – entry of the parties into the Commercial Sales
Agreement, which occurred on March 15, 2000, and execution of the Security Agreement and
Financing Statement, which occurred about 45 days later. The documents certainly were not
contemporaneous. And, the subsequently executed documents substantially changed the
character of the transaction. The Commercial Sales Agreement contemplated an unsecured
transaction where payment would be made in “30 days or 15th of next mo.” When it became it
apparent that Hogs ‘N Kisses was not going to be able to pay upon those terms, Simplot asked
for and received a security interest in the crops of both Hogs ‘N Kisses and Clair Bosen, thus
eliminating the 30-day payment requirement. Rather than being part of the initial agreement, the
Security Agreement and Financing Statement were a completely separate transaction and they
essentially modified the initial agreement. It was error for the district court to construe the
documents together. Indeed, the district court erred in considering the Security Agreement and
Financing Statement as extrinsic evidence of the parties’ intent in entering into the Commercial
Sales Agreement.
The Court somewhat distances itself from the district court’s conclusion that the three
documents must be construed together, but the Court is incorrect in considering the Security
Agreement and Financing Statement in determining the intent of the parties in entering into the
Commercial Sales Agreement. “The purpose of interpreting a contract is to determine the intent
of the contracting parties at the time the contract was entered.” Shawver, 140 Idaho at 361, 93
P.3d at 692. Here, the parties encountered a change in circumstances and entered into a
subsequent contract 45 days later for the purpose of modifying their initial agreement. As a
general matter, the subsequent contract would not shed a great deal of light on the intent of the
parties at the time of the initial contract. Rather, one would find better guidance as to the parties’
intent by examining the pertinent facts as of the initial contracting date.
Since the district court erroneously construed the documents together and drew
inferences as to the intent of the parties in entering into the Commercial Sales Agreement, based
upon language in the Security Agreement and Financing Statement, we do not particularly know
what inferences the district court would have drawn had it focused strictly on the Commercial
Sales Agreement. For instance, the district court determined that since Mr. Bosen is shown as
debtor on the Financing Statement, he intended to be a party to the Commercial Sales
11
Agreement. One can pledge his property as security for an obligation without becoming bound
on the obligation itself. Had the district court properly focused on the Commercial Sales
Agreement to determine whether or not Mr. Bosen was bound as a party, a different outcome
would have been warranted.
The form and content of the Commercial Sales Agreement leaves much to be desired.3
The bulk of the form deals with the “customer” and seeks information about the customer’s
address, telephone number, type of ownership, names and addresses of principals, farming
information, and lending status, both business and personal. The final part of the form employs
the word “applicant” and makes it clear that the applicant will be responsible for payment of any
bills incurred by the customer. The form has a signature line for the applicant, as well as a
signature line for a spouse or “other owner”. There is no request for the person signing to
specify any representative status, e.g., as a member of a limited liability company, officer of a
corporation, partner of a partnership, trustee of a trust, or otherwise.
The district court believed that because Mr. Bosen signed the form without indicating he
was signing in a representative capacity, he had thereby obligated both himself and Hogs ‘N
Kisses (since it was named as the customer) as parties to the contract. Although the district court
indicated that it had reached this conclusion without referring to extrinsic evidence, a review of
the court’s rulings on the summary judgment and reconsideration motion indicates otherwise.
Since Hogs ‘N Kisses was not a party to this action, the district court’s conclusion regarding the
limited liability company’s liability under the contract might be considered superfluous.
However, it does raise a good point. The Court concludes that Mr. Bosen obligated himself as a
party to the contract because he did not provide the information, which was not sought by the
form, as to whether he was signing in a representative capacity. Assuming the Court is correct,
was Hogs ‘N Kisses obligated under the contract?
The Court believes that the Mr. Bosen obligated himself, personally, by not stating that
he was signing in a representative capacity. If he was not signing in a representative capacity, it
would seem that the customer, Hogs ‘N Kisses, could not be obligated under the contract. That
would indeed be an absurd result. The form asks for no information about the applicant.
However, it wants to know a substantial amount about the customer, including business and
12
personal banking information, the last fertilizer/chemical supplier, farming information, and
other information that would be pertinent in determining the creditworthiness of the customer.
The result reached by the court – that despite all of the foregoing, Mr. Bosen was obligated
personally because he did not indicate he was signing in a representative capacity, something the
form did not ask for – would produce the anomalous result that the signer of the contract was
obligated, while the customer was not, except in the instance where a sole proprietor was
involved. It appears to be rather obvious, viewing the document within its four corners, that
customer and applicant are synonymous. Otherwise, if the applicant and customer are different
persons, there is no language in the form that imposes liability upon the customer. If Simplot
wanted to know the capacity in which someone representing an entity was signing the contract, it
should have requested that information. It is my experience that people do not answer questions
that forms do not pose nor provide information that forms do not request. If Simplot was
uninterested in knowing the signing party’s capacity, it should not be able to impose personal
liability on a non-customer signer. The form does ask for the names and titles of principals,
presumably of entity customers, and this information should be considered in determining the
capacity or authority of the person signing on behalf of the entity customer/applicant. Ideally, as
is the case with many lending institutions, a separate form would be made available to an
individual or sole proprietor and another, different form would be made available to a
contracting entity. By using a one-size-fits-all form, Simplot created confusion from which it
now seeks to benefit.
When Mr. Bosen received the Simplot form, he indicated on it that Hogs ‘N Kisses was
the customer, and that it was a limited liability company. Brian Davis, the Simplot employee
who dealt with Mr. Bosen in this matter, acknowledged that he knew he was dealing with a
limited liability company “that had been formed to protect the members.” In recognition of this
fact, when Mr. Bosen received the form, language had been added by Simplot that asked for the
tax identification number, presumably of the limited liability company.
I find nothing within the four corners of the document, either as Simplot presented it to
Mr. Bosen, or as Mr. Bosen completed it, that would justify a holding that Mr. Bosen, rather than
Hogs ‘N Kisses, was obligated as customer and applicant.
3
A copy of the first page of the Commercial Sales Agreement as submitted to Mr. Bosen by
13
If it is necessary to examine extrinsic evidence in order to determine Mr. Bosen’s
liability, I believe the same result would obtain. In making the examination one must be mindful
that “a contract should be construed most strongly against the party preparing it or employing the
words concerning which doubt arises.” Big Butte Ranch, Inc. v. Grasmick, 91 Idaho 6, 9, 415
P.2d 48, 51 (1966). It was Simplot, not Mr. Bosen, who prepared the contract form. Simplot
made the unfortunate change in terminology from “customer” to “applicant”, requested the entity
tax identification number, and did not ask that any person signing the form insert a representative
capacity.
Other evidence leads to the conclusion that Simplot was looking to Hogs ‘N Kisses as the
party obligated under the Commercial Sales Agreement. Prior to the signing of the contract,
Brian Davis acknowledged to an employee of Hogs ‘N Kisses that “he realized that this was a
large organization that [another Simplot employee] had told him that it was a large organization
with a butt load of money, not to worry about it.” Mr. Davis was speaking of an organization,
the limited liability company, rather than Mr. Bosen, an individual. Mr. Davis went on to tell the
Hogs ‘N Kisses employee that Simplot would need a lien on something, but nothing was
arranged in that regard prior to execution of the Commercial Sales Agreement. Indeed, the
Commercial Sales Agreement was unsecured. It called for payment within 30 days, which
would render a security interest in growing crops superfluous (unless they were of the extremely
fast-growing type).
Under the Commercial Sales Agreement, the “applicant” agreed to pay the total amount
due on “each invoice/customer statement.” Simplot sent its billings for fertilizer purchases to
Hogs ‘N Kisses “in care of” Clair Bosen at the farm property address, 2279 East Yale Road,
Declo, Idaho. Invoices were not sent to Mr. Bosen at his home address in Preston.
If inferences can reasonably be drawn from the execution of the security documents, the
inferences would indicate that Mr. Bosen was not personally liable as a party on the Commercial
Sales Agreement. When it turned out that Hogs ‘N Kisses did not have enough of a butt load of
money to pay invoices on a 30-day basis, Simplot sought security. Although Mr. Davis did not
recall talking to Mr. Bosen about the Commercial Sales Agreement, he did recall discussing the
Simplot is appended hereto as Figure 1.
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later-executed security documents. Mr. Bosen points out that, when asked how the account was
established for Hogs ‘N Kisses, Mr. Davis replied:
We obtained a Commercial Sales Agreement signed by Mr. Bosen. And, I don’t
recall the specifics, but at some point I understood that they were not going to be
able to pay the account net 30 days, according to our normal terms. So I agreed
with Mr. Bosen that we would extend terms to harvest in return for security in the
crops grown on the farm.
In response to the question, “So, in deciding to extend credit to Hogs ‘N Kisses, LLC, the only
thing that you relied on in making that decision was that you would have a first position lien on
the crops; is that correct?”, Mr. Davis replied, “On the crops owned by Mr. Bosen and Hogs ‘N
Kisses, that’s correct.”
Mr. Davis was asked, “Was there a way, if you intended to extend credit to a limited
liability company but you wanted to have the individual members liable for the credit extended,
was there a way you could do that?” He replied, “We could have taken a personal guarantee.”
Mr. Davis then said it was not necessary to obtain a personal guarantee from Mr. Bosen,
“Because I had a lien on Mr. Bosen’s crops and Hogs ‘N Kisses’ crops.” In response to the
question, “So, you didn’t talk with Mr. Bosen about him giving a personal guarantee because you
felt that your credit was adequately protected by your lien on the crops in Cassia County;
correct?”, Mr. Davis stated, “That’s correct.”
Thus, it becomes clear that when the Security Agreement was being discussed between
the parties, Simplot was looking solely to the crops as the source of payment. Simplot obtained a
security interest in all crops being grown, both by Hogs ‘N Kisses and Mr. Bosen, on the 5,100
acre Cassia County farm. Of further interest, is the fact that neither in Simplot’s initial complaint
nor in its amended complaint is there any mention of the Commercial Sales Agreement.
However, the amended complaint recites that “defendant” granted a security interest in all crops
growing or to be grown on their property and signed a UCC-1F “to secure the security for the
security interest granted.” The amended complaint seeks an accounting as to the location and
disposition of the crops and proceeds, as well as judgment for the remaining balance owing for
the fertilizer. The amended complaint focuses on the Security Agreement and Financing
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Statement, seeking recovery for breach of contract and accounting, including an accounting with
respect to all crops and proceeds of Hogs ‘N Kisses.
As pointed out in the Court’s opinion, Mr. Davis apparently formed an opinion at some
point that Mr. Bosen should be held personally liable on the Commercial Sales Agreement. It
appears from Mr. Davis’ testimony that this occurred at some time after the parties had entered
into the contract. When asked in his deposition whether he recalled talking with Mr. Bosen
about the Commercial Sales Agreement, Mr. Davis replied, “I don’t.” He did not recall how he
had obtained the Commercial Sales Agreement. While testifying that he thought Mr. Bosen
understood he was obligated on the contract, he couldn’t quite bring himself to say that he had
expressed to Mr. Bosen that he was looking to him for personal responsibility under the contract.
When asked, “Did you ever tell Mr. Bosen that you thought that he would be personally liable
for the fertilizer bill from Simplot to Hogs ‘N Kisses, LLC?,” he responded, “I don’t recall
specifically having that conversation.” As the Court notes, “a party’s subjective, undisclosed
intent is immaterial to the interpretation of a contract.” Mr. Davis may have decided at some
point, possibly after the suit was filed and the security disposed of, that Mr. Bosen should be held
personally liable on the Commercial Sales Agreement but it does not appear that he ever
specifically stated such intention to Mr. Bosen or that he obtained Mr. Bosen’s agreement to
such liability.
In sum, the only reasonable inferences that may be drawn from the record are that the
Commercial Sales Agreement obligated Hogs ‘N Kisses as a contracting party, not Mr. Bosen,
personally; that Simplot was initially looking to Hogs ‘N Kisses’ butt load of money as the
source of payment for the fertilizer; that when Hogs ‘N Kisses was not able to pay the fertilizer
bill as initially agreed, Simplot sought security from both Mr. Bosen and Hogs ‘N Kisses and
received a security interest in all of their crops being grown on the property; that Simplot was
looking solely to the crops as the source of payment of the fertilizer bills; that even if the
Commercial Sales Agreement could be construed to make Mr. Bosen personally liable, the
security documents modified it to make the crops the sole source of payment; and that the
contrary inferences drawn by the district court are unsupported by the record and unreasonable.
II.
As noted, this action was initiated to enforce the creditor’s rights in a secured transaction.
While Mr. Bosen did not contest the fact that he had obligated his barley crop as security for the
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Simplot fertilizer bills, he argued both below and before this Court that the extent of his liability
was the crop security granted to Simplot, particularly the barley crop that he grew on the Cassia
County property. At oral argument, it was disclosed that Simplot did receive the benefit of the
Bosens’ barley crop. The record discloses that this fell short of satisfying the fertilizer bill by
$70,945.53. The record further discloses that well over $400,000 worth of hay was grown on the
property, that Simplot had a security interest in the hay, and that Simplot purchased the hay. The
record does not disclose whether or not Simplot paid less than the market value of the hay in
order to exercise a set-off for the amount owing by Hogs ‘N Kisses or whether Simplot simply
disregarded the rights it had in the hay under the Security Agreement. Mr. Bosen did not do a
particularly comprehensive job of developing this argument.
In his motion for reconsideration, seeking to set aside the summary judgment in favor of
Simplot, Mr. Bosen contended that Simplot should have set off the balance of the fertilizer
account against the amount it paid for the hay. The district court denied the motion for
reconsideration stating:
Bosen indicates that Simplot should have retained income from the hay to pay off
their debt for the fertilizer. That argument is not persuasive since Simplot did not
have a security interest in hay regarding money owed for chemical fertilizer, but
only a security interest in barley.
The district court was mistaken because the Security Agreement granted Simplot a security
interest in “[a]ll crops grown, or now growing, or to be grown”, on the 5,100 acre farm. Both the
complaint and the amended complaint allege that Simplot was granted a security interest in all
crops growing or to be grown on the property. Simplot didn’t necessarily need an accounting
with regard to the hay crop because it bought, and gained possession of, the hay. The record
contains a letter in which Simplot acknowledges that it was buying the Hogs ‘N Kisses hay, that
it would begin hauling the hay in November 2000, and that hay would be paid for upon delivery
to its feedlot. That being the case, it appears that Simplot had possession of the collateral before
it paid for the hay. In an affidavit submitted in support of his motion for summary judgment Mr.
Bosen pointed out that Simplot had “paid at least $418,211.60 to Hogs ‘N Kisses” after
November 2000. Copies of the checks were attached, showing such payments which included
over $100,000 paid for the hay in May 2001. During oral argument, Simplot’s counsel stated
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that “Simplot always looks to their collateral first” in collecting an account. There is no
indication in the record as to whether Simplot did so in this case – by paying less than the market
value for the hay – although one might presume that this is not the case because Simplot is suing
for a deficiency. If no setoff was exercised, one might justifiably ask why.
Under Article 9 of the Uniform Commercial Code, Mr. Bosen should not face a
deficiency judgment because Simplot frittered away its security interest in the hay.4 Simplot had
validly attached a security interest in all crops. I.C. § 28-9-203(1) (2000). The Financing
Statement, which Simplot prepared and which omitted any mention of crops other than barley, is
irrelevant because the Security Agreement controls the rights between the debtor and the secured
party. I.C. § 28-9-201 (2000); Simplot v. William C. Owens, M.D., P.A., 119 Idaho 243, 244-
245, 805 P.2d 449, 450-451 (1990). In any event, a security interest is perfected by the secured
party’s taking possession of the collateral (former I.C. § 28-9-305), which Simplot did after
November 2000 and before it paid for the hay. Simplot had knowledge of its rights in the hay
and should have exercised them appropriately.
Because Simplot had a security interest in the hay, any sale of that hay should have gone
to pay off Hogs ‘N Kisses’ debt. The company purchased the hay from Hogs ‘N Kisses at what
should be described as a private sale. The secured party may buy the crop at a private sale “if the
collateral is of a type customarily sold in a recognized market.” I.C. § 28-9-504(3) (2000). The
proceeds apparently did not go to the fertilizer debt. Article 9 dictates otherwise. I.C. § 28-9-
504(1)(b) (2000) (proceeds of disposition go first to reasonable expenses, then to “satisfaction of
indebtedness secured by the security interest under which the disposition is made”); accord
Stockdale v. Stockdale, 102 Idaho 870, 874, 643 P.2d 82, 86 (App. 1982). Simplot should have
recognized its security interest in the hay and exercised a set-off from its purchase price. Because
it failed to avail itself of that opportunity, the company should not be allowed to pursue this suit
against Bosen in his individual capacity.
Aside from the application of the Uniform Commercial Code, one might wonder why
Simplot did not mitigate its damages by taking advantage of the fact that it was the purchaser and
4
Because the parties signed the Security Agreement in March 2000, the analysis will necessarily
focus on “old” Article 9 of the Uniform Commercial Code. See I.C. § 73-101 (2006) (“no part of
these compiled laws is retroactive, unless expressly so declared”). The Legislature largely
replaced Article 9 in 2001. 2001 Idaho Sess. L. ch. 208.
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possessor of the hay. It had the ability to make itself whole but failed to do so. Under such
circumstances, it is hard to see why this Court should grant another bite at the apple.
III.
I would reverse the district court’s decision and remand with instructions to grant the
Bosens’ motion for summary judgment.
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