Christian v. Smith

• Decision Date: 12 December 2008
• Docket Number: No. S-07-215.,S-07-215.
• Citation: 276 Neb. 867,759 N.W.2d 447
• Parties: Chris W. CHRISTIAN and Tabitha Christian, Husband and wife, appellees and cross-appellants, v. Bert SMITH IV, appellee and cross-appellee, and B4 Cattle Company, Inc., appellant and cross-appellee.
• Court: Nebraska Supreme Court

759 N.W.2d 447

276 Neb. 867

Chris W. CHRISTIAN and Tabitha Christian, Husband and wife, appellees and cross-appellants, v. Bert SMITH IV, appellee and cross-appellee, and B4 Cattle Company, Inc., appellant and cross-appellee.

No. S-07-215.

Supreme Court of Nebraska.

December 12, 2008.

John C. Hahn, Lincoln and Brett T. Daee, of Jeffrey, Hahn, Hemmerling & Zimmerman, P.C., for appellant and for appellee Bert Smith IV.

Edward F. Fogarty, of Fogarty, Lund & Gross, Omaha, for appellees Chris W. Christian and Tabitha Christian.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

McCORMACK, J.

I. NATURE OF CASE

This case involves an oral contract. The dispute involves the terms of the oral contract and whether the oral contract was between Chris W. Christian and Bert Smith IV or between Christian and B4 Cattle Company, Inc. (B4), Smith's corporation. Smith claims that the oral agreement was between Christian and B4. Under the terms of the oral agreement, Christian would borrow money from the Citizens National Bank of Wisner, Nebraska (CNBW), to purchase and feed cattle on behalf of Smith or B4. In exchange for the use of Christian's credit line, Smith or B4 promised to pay Christian a fee for each lot of cattle purchased. Christian's line of credit was also used to purchase feed for the cattle, and the debt incurred from the purchase of feed was to be paid using the money from the eventual sale of the cattle. The parties disagree whether Smith or B4 promised to pay the line of credit should the proceeds from the sale of the cattle be insufficient for Christian to do so. The cattle sales were insufficient to pay the lines of credit, Christian defaulted on the loan, and CNBW obtained a judgment against him. Smith and B4 refused to indemnify Christian, and Christian filed this breach of contract claim. Christian contends that B4 was the alter ego of Smith and that the corporate existence of B4 should be disregarded.

II. BACKGROUND

Christian and Smith were longtime friends who grew up together in Tennessee. Christian is a full-time physical therapist who occasionally hauls hay or cattle. Smith has been in the cattle business all of his life. Smith claims that in entering into the oral agreement with Christian, he was acting on behalf of B4. Smith incorporated B4 in 2001 in Virginia. He is the president and sole stockholder of B4. Smith testified that he is the sole member of the board of directors of B4 and holds "[a]ll positions" of B4. Smith divides his time between Tennessee and Virginia. Christian lives in Tennessee.

1. ORAL AGREEMENT

It is undisputed that in the spring of 2003, Christian and Smith had a telephone conversation about a possible arrangement in which Smith or B4 would use Christian's line of credit to purchase, feed, and care for cattle. Christian testified that Smith or B4 wanted to use Christian to borrow money because Smith or B4 could not get any more credit. Smith proposed that in exchange for the use of Christian's credit line, Smith or B4 would pay Christian a fee, that the parties call a "commission," for each lot of cattle purchased. The exact amount of the fee is disputed. Smith claims the fee was $250, while Christian claims it was $500. The debt on Christian's line of credit was to be paid off using the money from the eventual sale of the cattle.

Under their agreement, Christian would borrow the money from CNBW. The loans for the purchase of the cattle would be in Christian's name, and the cattle would also be titled in Christian's name. The cattle would be kept and cared for at feedlots owned and operated by Max Kant in Norfolk, Nebraska. Smith would make all management decisions concerning the purchasing and feeding of the cattle.

According to Christian, he "just wanted the commission off of it" and Smith would take "all profit and all loss." Smith, on the other hand, testified that there was never a meeting of the minds on profits and losses. Smith testified that they agreed to talk about profits and losses later. In his deposition, however, portions of which were read into the record at trial, Smith stated that Christian "`assumed that if I was getting the profit that I would take the loss.'"

Pursuant to their oral agreement for the Nebraska-fed cattle, Christian established three lines of credit with CNBW as follows: (1) August 2003, $925,000 accruing interest immediately at 6.25 percent; (2) August 2003, $178,000 accruing interest immediately at 6.25 percent; and (3) October 2003, $112,850 accruing interest immediately at 6.5 percent. All three lines accrued interest at maturity of 16 percent per annum.

Once the first line of credit was established, Smith, or Smith on behalf of B4, began using it to fund the location and purchase of cattle. Under the usual procedure, Smith would locate, select, and sort cattle. Once the cattle were chosen, Smith would fax a handwritten invoice to Christian, who would write a check for the purchase price. Smith's father would usually pick up Christian's check and send it to the seller. Christian would then be reimbursed plus the "commission." Christian testified that his account was often overdrawn because Smith was slow in sending the reimbursement checks. After about 3 months, Smith or B4 stopped buying cattle.

Christian's line of credit continued to be used to pay for the ongoing care of the cattle on Kant's feedlot. Kant had the authority to draw on Christian's credit line to pay for feed. If any of the fattened cattle were sold, Kant would apply the proceeds to pay down Christian's credit line.

If there was excess money remaining after the credit line was paid, the arrangement was that Kant would send the profits "back to Tennessee." Kant testified that on only one occasion were there excess profits after paying the credit line. Kant testified that he sent those profits, around $28,000, to Smith. Christian testified that he was never informed of nor received any portion of those profits. He thought this was proper because, under their agreement, the profits were Smith's. Christian stated that "it was defined to me that [Smith] got all profits and all losses and all I got was the commission per load." Smith acknowledged at trial that he had testified in his deposition that he was to receive the profits, if any, from the arrangement with Christian.

The cattle were titled in Christian's name, and the signed CNBW loan documents stated that Christian was not acting as a straw man for anyone. Nevertheless, Christian testified that the agreement was that Smith owned the cattle. Smith likewise admitted at trial that the cattle were actually owned by him. In his testimony, Smith would not refer to B4 as owning the cattle, but would always say that they were owned by him.

Kant, the feedlot owner, also testified that Smith was the owner of the cattle purchased with Christian's line of credit. To ensure that the feedlot record of ownership was correct, Smith had sent a fax to Kant requesting the feedlot to change all cattle titled in Christian's name to Smith's name. After receiving the written request Kant updated his records to reflect that Smith was the owner of the cattle.

Eventually, all the cattle that had been financed using Christian's line of credit were sold. The sales were insufficient to pay the lines of credit, and Christian defaulted. Christian testified that after CNBW called to inform him that he owed $168,000, Christian alerted Smith. Christian testified that Smith said, "Don't worry about it, they'll probably just role [sic] it over into my debt." Christian had no further discussions with Smith until CNBW sued Christian on June 7, 2004. Upon receiving the complaint, Christian faxed it to Smith. Although Smith was not a party to the action, he told Christian he would help Christian find an attorney in Nebraska and assist Christian "with some money." Christian and CNBW settled the case, and on January 5, 2006, CNBW took judgment of $168,000 with 16 percent interest.

After the judgment was entered, CNBW began to execute on the judgment by levying Christian's bank accounts and garnishing his wages. At the time of trial, $20,060.29 had been taken from Christian. Because Christian did not have enough money to pay the judgment, CNBW pursued Kant, who was a signed guarantor on Christian's line of credit. Eventually, Kant paid CNBW $130,000 and was assigned the $169,379 judgment against Christian. Kant also received the ongoing garnishment against Christian's checking account.

2. TRIAL

Christian brought a claim against Smith and B4 in the district court for Cuming County, Nebraska, for breach of the alleged agreement to hold him harmless for any losses resulting from the cattle transactions. Christian styled his complaint as against "Bert Smith IV and B4 Cattle Company." In the body of the complaint, it alleges that Smith and B4 "wanted to increase the number of cattle they had on feed in Nebraska" and that Smith, "in his personal capacity, asked his life long friend, Chris Christian, to enable him to do this."

On the day before the trial, B4 moved to dismiss, arguing that the suit was not brought under the correct choice of law. B4 argued that Tennessee law, not Nebraska law, was the appropriate law to govern this action, because Tennessee had a more significant relationship to the transaction and the parties. Christian responded that most of the contacts surrounding the case were in Nebraska and that therefore Nebraska law was the correct choice of law. Christian also argued that regardless of the choice of the law, the statutes of frauds in Nebraska and Tennessee are essentially the same. The district court overruled B4's motion regarding choice of law and applied Nebraska law to the claim.

B4 also filed a motion to dismiss under the doctrine of forum non conveniens on the day before trial. The court overruled the motion, because the parties and witnesses were already in Nebraska...