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