Chariton Feed and Grain, Inc. v. Harder, 83-983

• Decision Date: 19 June 1985
• Docket Number: No. 83-983,83-983
• Parties: CHARITON FEED AND GRAIN, INC., an Iowa Corporation, Appellee, v. Isaac HARDER, Appellant, Carl T. Davidson, Carl or Dorothy Davidson, Davidson's Holstein and Angus Farm, and 3-D Farms, Defendants.
• Court: Iowa Supreme Court

Page 777

369 N.W.2d 777

CHARITON FEED AND GRAIN, INC., an Iowa Corporation, Appellee, v. Isaac HARDER, Appellant, Carl T. Davidson, Carl or Dorothy Davidson, Davidson's Holstein and Angus Farm, and 3-D Farms, Defendants.

No. 83-983.

Supreme Court of Iowa.

June 19, 1985.

Bert A. Bandstra, Knoxville, and Paul Doster, Pella, for appellant.

William L. Shelton, Chariton, for appellee.

Considered en banc.

REYNOLDSON, Chief Justice.

We granted further review in this appeal to determine whether trial court erred in holding a landlord under the usual stock-share lease liable to a livestock feed supplier on the theories of partnership, agency and unjust enrichment. The court of appeals split three to three, hence the trial court's decision stood affirmed by operation of law. We vacate the court of appeals disposition and reverse the district court judgment.

Most of the facts developed at trial were undisputed. Defendant Isaac Harder, employed as an engineer in a Texas aircraft factory, purchased a 308-acre Marion County farm on contract in 1974. For reasons detailed later, it was unfortunate that he executed a routine fifty-fifty crop-share lease with defendant Carl Davidson, ¹ to commence March 1, 1977. It was still more unfortunate that he executed a stock-share lease with Davidson for a term commencing March 1, 1978. As it turned out, the most Harder received for a $30,000 payment to Davidson for livestock was, according to Davidson, "maybe a few sheep."

There seems to be no dispute that the stock-share lease was prepared by Davidson, or by someone else at his direction. Although inartfully drawn in some respects, it appears to be the ordinary farm lease commonly employed in Iowa for situations in which the landlord and tenant share interests and expenses not only in the crops but also in the livestock. The instrument was entitled "Farm Lease," and consistently referred to the parties as "Landlord" and "Tenant." The tenant was to pay the landlord " 1/2 of the receipts from all farm products sold." There is an itemization of the expenses to be shared, including feed. Other identified expenses were to be the separate obligations of the landlord and of the tenant. Especially relevant to the issues in this appeal are two paragraphs of the lease:

11. The Tenant shall have full management control, including but not limited to, when to sell the goods, where to sell the goods, to whom to sell the goods, what feed to buy, where to buy the feed, and how much feed to buy.

12. Tenant shall use the proper farming methods in the management of said farm.

No joint bank account was established. This left the problem of when and in what manner Harder was to pay his share of the joint expenses. Consistent with his contractual management role, Davidson bought feed from various firms. There is no evidence Harder ever exercised any control over where the feed was purchased, the amount, or the price. He did receive some of the bills and part of the time these accounts were placed in Harder's name. Sometimes Harder sent the feed expense money to Davidson, sometimes directly to the seller. Later, and long before any of the feed involved in this controversy was sold, Davidson--again exercising his contractual right to manage the operation--unilaterally started to purchase all feed in his own name and thereafter sought reimbursement from Harder for one-half. Davidson testified the parties understood that he was then going to take the responsibility for paying the feed bills.

The feed furnished by plaintiff Chariton Feed and Grain, Inc. (Chariton Feed), was fed to livestock in which Harder thought he had a one-half interest but which, in fact, Davidson brought to the farm through leases and other arrangements with third parties. On the occasions when Harder visited the farm he always was led to believe all the livestock he saw there was subject to the stock-share lease arrangement. There is no dispute that Davidson consistently lied to and misled Harder, and the stock-share lease agreement never functioned as contemplated by the written agreement. Harder lived in Texas and traveled about 750 to 800 miles to Iowa once or twice a year, when, of course, he would check on his substantial farm investment. At intervals Davidson sent him reports and accounts, usually showing expenses that exceeded the receipts. Davidson could not remember sending Harder any money.

The feed Davidson purchased from Chariton Feed was purchased in his own name during the period May 18, 1979 to June 21, 1980. The payments Davidson did make were on his personal checks, variously styled "Davidson's Holstein and Angus Farms" and "3-D Farms" (after his wife's name, Dorothy Darlene Davidson). Paul Umbenhower, manager and owner of Chariton Feed, testified Davidson led him to believe that he, Davidson, owned all the cattle on the Harder farm. The account was in Davidson's name alone. Umbenhower looked to Davidson alone for payment. There is no evidence Chariton Feed had any knowledge of an alleged interest of Harder in the livestock until all the feed had been purchased and Davidson was being pursued for payment.

In January 1981 Umbenhower placed a telephone call to Harder in Texas. The former testified at trial that, "I asked Mr. Harder if he was the one that was in partnership with Mr. Carl Davidson and he said, yes, he was." Harder denied he ever indicated to anyone he was a partner of Davidson in the farming operation. He testified concerning this conversation:

Q. All right. Just tell us as best you recall what he said to you and what you said to him.... A. He asked me if I owned half the cattle up in Iowa and at the time I thought I did and I did say, "Yes." Then he said that Carl had been charging feed to him and he owed a bill.

Now, I don't remember whether he even told me the size and then he said that, you know, he never indicated I owed anything, didn't even ask me that. But he said he was going to take some action against Carl and I am sure I said, "Okay."

Trial court adopted Umbenhower's version of this conversation. The court further found that Harder in this telephone exchange "admitted liability for the feed purchased on account by Davidson from Chariton Feed & Grain, Inc." Even Chariton Feed does not contend there was any evidence to support the latter finding.

Both Davidson and Harder testified that in making their second agreement they intended to make a stock-share lease, not a partnership. There is a substantial question left by this record whether Davidson even intended to comply with a stock-share lease. Further evidence of Davidson's actual and fraudulent intent during his association with Harder was supplied through the testimony of John Jensen, county supervisor for the Farmers Home Administration (F.H.A.) in Marion County. Davidson sought an operating loan from F.H.A. in February 1979. He presented Jensen with a crop-share lease upon which Harder's name had been forged, and claimed to own all the livestock on the farm.

The record reflects that at least by the fall of 1980 Davidson was in deep financial trouble, and his creditors, including Chariton Feed, were closing in. He sold numerous cattle belonging to other people. Before or during January 1981, Davidson abandoned the farm and any agreement he had with Harder was terminated.

It was at this point that Harder, seeking to salvage something, authorized his brother-in-law, who lived in Knoxville, to pick up and sell some of the stock remaining on the farm. On January 19, 1981, several butcher hogs and small pigs were sold at public auction for $1768.69 in Harder's name. An attempt on January 20, 1981, to sell 50 stock cows in which Harder thought he owned an interest was aborted when a third party claimed them. By January 24, 1981, the sheriff was on the farm with F.H.A.'s Jensen, Harder and several third persons. When various owners finished claiming their livestock, thirteen dairy cows remained. These were sold and F.H.A. paid Harder one-half of the proceeds.

Trial court overruled Harder's motions for a directed verdict, for judgment notwithstanding the court's ruling, and for new trial.

The court, proceeding for the most part from the above facts, concluded a partnership existed. In reaching this determination it may not have had the benefit of several Iowa decisions because, as the trial ended, the court advised counsel that, "rather than to have you submit any briefs--and I think it is a question of law--I think I will ask the same effort that would go into preparing briefs go into preparation of proposed Findings and Conclusions." The court also found Harder liable on the basis of agency, and on the ground of "unjust enrichment or quantum meruit."

Iowa decisions have treated these livestock-share leases as sui generis, and generally hold they are leases and not partnerships in the absence of stipulations or evidence clearly manifesting a contrary purpose. Our view that the lease in issue is the sort of ordinary farm lease commonly seen in Iowa is supported in this record by F.H.A.'s Jensen, who testified such stock-share leases are more common in Marion County than crop-share leases. Thus we reexamine our long-standing common law with a careful concern for the impact on the great number of Iowans who will be affected. ²

I. Issue of Jurisdiction.

Chariton Feed raises a threshold question relating to our jurisdiction for further review. We transferred the case for determination by the court of appeals under Iowa Rule of Appellate Procedure 401. As we already have noted, that court was evenly divided. Hence, the decision of the trial court stood affirmed by operation of law. Iowa Code § 602.5106 (1985).

Chariton Feed points to Iowa Code section 602.4102, which delineates the right to our further review of court of appeals decisions. Iowa Code section 602.4102(2) provides that supreme court jurisdiction over the appeal "ceases" when the case is transferred, and is...