Ducheneaux v. Miller
| Decision Date | 05 August 1992 |
| Docket Number | No. 17640,17640 |
| Parties | Melvin DUCHENEAUX, Plaintiff and Appellee, v. Eugene MILLER, Defendant and Appellant. |
| Court | South Dakota Supreme Court |
Thomas M. Maher of Maher and Arendt, Keith A. Tidball, Pierre, for plaintiff and appellee.
Kennith L. Gosch of Bantz, Gosch, Cremer, Peterson & Oliver, Aberdeen, for defendant and appellant.
Melvin Ducheneaux (Ducheneaux) commenced this action against Eugene Miller (Miller) alleging breach of contract, deceit, and breach of implied warranty as a result of a sale by Miller to Ducheneaux of a herd of cattle in 1987. Miller counterclaimed for the amount due on the contract for the purchase of cattle. The matter was tried to the court. Miller appeals the trial court's judgment awarding Ducheneaux compensatory damages of $103,832.28, prejudgment interest in the amount of $58,074.74, and punitive damages of $25,000. Miller raises ten issues on appeal. We have combined and rearranged some issues and will discuss them as follows:
1. Whether the trial court erred in finding Miller breached the contract.
a. Whether the trial court erred in interpreting a provision in the cattle sales contract requiring Miller to provide a "clean bill of health."
b. Whether the first contract for sale of cattle was extinguished by a later agreement through novation.
c. Whether Ducheneaux waived any breach of the contract by entering into a second agreement with Miller after he became aware the cattle were quarantined.
2. Whether the trial court erred in awarding punitive damages for deceit.
a. Whether Miller had a duty to disclose information pursuant to SDCL 20-10-2(3) and whether he breached that duty.
b. Whether the trial court's award of punitive damages was proper where it found Miller was guilty of willful, wanton or malicious conduct.
3. Whether the trial court's award of "actual damages" was clearly erroneous.
a. Whether the trial court erred in its calculation of damages.
b. Whether Ducheneaux took reasonable steps to mitigate his damages.
4. Whether the trial court's award of prejudgment interest was proper.
We affirm in part, reverse in part and modify the damage award.
Ducheneaux is an enrolled member of the Cheyenne River Sioux Indian Tribe and owns 320 acres of land on the Cheyenne River Indian Reservation in Dewey County. This land, together with grazing rights to other lands, gave Ducheneaux's ranch a carrying capacity of 500-600 cows. In the spring of 1987, Ducheneaux obtained a BIA guaranteed loan for use in stocking his ranch. He planned to purchase 500 cows with calves in the spring of 1987, and to sell the calves by early fall. The cows were then to be sold in November or December of 1987. Ducheneaux planned to use the proceeds to pay back the loan and to buy more cattle.
Miller is a farmer/rancher living near Isabel who also owns and operates a small construction business. Although Miller's formal education is limited, he has significant business experience and has served as Chairman of the Board of Directors of the Dewey County Bank. Miller has substantial experience in the buying, raising, and selling of cattle, although most transactions were handled through commission sale yards. Miller had one prior experience involving brucellosis infected cattle.
Jeff Weber (Weber), a livestock order buyer and owner/operator of the Timber Lake sale barn, located a herd of approximately 600 cattle in New Mexico at the Buddy Majors ranch early in 1987. In March 1987, Miller made a deal to purchase 600 head at $495.00 per head. He wired $230,000.00 to seller's mortgagee, the Bank of Albuquerque, as part payment, but the bank returned the money with a letter stating that members of the herd had failed a Bangs (brucellosis) 1 test. Miller later purchased the herd in early April at a cost of $480.00 per head after personally inspecting the herd at the Majors ranch. Prior to closing the transaction, the bank offered Miller $10,000.00 to cancel the deal. Miller refused the offer believing the herd could be cleaned up and resold for a substantial profit. He also suspected the bank had another buyer willing to pay more for the herd.
On April 10, 1987, while still in New Mexico, Miller contacted Dr. Sam Holland, a veterinarian employed by the South Dakota Livestock Sanitary Board. He told Dr. Holland there were some Bangs suspects in the herd. Based on the limited history furnished by Miller, Dr. Holland would not authorize shipment of the cattle to South Dakota. Instead, Weber shipped the herd to the Don Dukat ranch near Gordon, Nebraska.
Miller returned to South Dakota. On April 16, he went to Nebraska after Dukat called and told him the herd had arrived in poor condition. Dukat told Miller the cattle were malnourished and some of the cattle had died en route.
When the cattle arrived in Nebraska, Dukat's neighbors notified Nebraska health authorities, and Dr. Sahara, a veterinarian in the employ of the Nebraska Department of Agriculture, immediately quarantined the entire herd because the health certificates were not in order, because the cattle were in a very weakened condition, and because it did not appear the cattle had been tested for brucellosis within thirty days prior to import as required by Nebraska law. Arrangements were made to blood test the herd after the herd had time to recover from the stress of shipping.
On May 18, 1987, Dr. Sahara, Dr. Michael McCarthy, a veterinarian from Gordon, Nebraska, and others examined and blood tested 561 of the 563 cows (the remaining two were calving that day). Since Miller planned to move the herd to South Dakota, Sahara also checked for Bangs tattoos which indicate whether the animal had been calfhood vaccinated against brucellosis as required by South Dakota law before cattle can be legally imported. In the course of the examination, the doctors compared identifying marks on the cattle with the New Mexico health documents.
The results of the May 18 testing showed eight "reactors" and twenty-one "suspects." 2 The reactors were sold for slaughter and the suspects were isolated from the herd for future testing. Among other things, the doctors observed 198 of the cows were ineligible for import to South Dakota because they lacked a visible Bangs tattoo.
On June 2, 1987, Dr. Sahara, Miller, and others met at the Dukat ranch for a discussion of the investigation findings. At the trial, Dr. Sahara testified Miller was notified, on June 2, of the presence of suspects and reactors and that 198 cows had no visible tattoos thereby making them ineligible for shipment to South Dakota. Miller disputes this on appeal. He claims he only learned thirty-one of the cows were ineligible for import to Nebraska. Later in June, Sahara also told Miller eleven of the fourteen cows found to be suspects in the New Mexico test had actually been included in the shipment to Nebraska, a violation of Nebraska law.
The trial court found the following facts some of which are disputed. On July 14, 1987, Ducheneaux and Miller executed a "cattle contract" in which Ducheneaux agreed to buy the herd of approximately 551 cows located at the Dukat ranch. Ducheneaux agreed to pay a total purchase price of $395,965.00, or approximately $718.00 per head. The contract called for a $265,000.00 down payment, with the balance payable on or before October 15, 1987, or before the cows were branded. Miller was to pay for pasture through October 15. The agreement also called for "a clean bill of health" to be furnished by Miller. The contract was handwritten by Miller. Ducheneaux paid $265,000.00 down but claims he was never able to bring the cows or calves to his South Dakota ranch because of the presence of suspects and reactors in the herd.
The trial court concluded when Miller sold the herd to Ducheneaux on July 14, Miller was fully aware of the herd's health history. He knew the herd was illegally in Nebraska and was under quarantine in Nebraska because of positive brucellosis tests and because of irregular health documents. Miller knew the herd did not have a clean bill of health and could not get a clean bill of health for South Dakota import for another six to seven months because, according to Dr. Holland's testimony, the herd must have two negative "whole herd" tests within 180 days to be removed from quarantine. The trial court found the health history of the cattle and the test results were all material facts relating to the marketability of the herd.
Although Miller had substantial information by July 1987, concerning the health history and marketability of this herd, he failed to tell Ducheneaux that 198 of the cows could not be shipped to South Dakota at any time because they lacked visible Bangs tattoos. Miller knew Ducheneaux planned to stock his South Dakota ranch with this herd, yet he did not tell Ducheneaux that, as early as February or March, reactors and suspects had been found and removed from this herd. He did not tell Ducheneaux some of the reactors had actually been shipped to Nebraska with the rest of the herd in violation of Nebraska law. Ducheneaux was unaware until mid-October 1987, when he made arrangements to have the cows and calves shipped to South Dakota, that the herd could not be shipped to South Dakota.
Miller called several veterinarians trying to get health documents for the herd. Ducheneaux and others, on his behalf, contacted various authorities in an effort to move the herd to South Dakota.
Given the herd's reputation in the Gordon, Nebraska area, Ducheneaux believed the calves would not sell well, if at all, there. Before Ducheneaux could sell the calves in South Dakota, South Dakota health officials required him to have the heifer calves spayed. The bull calves had already been castrated. Ducheneaux sold 431 calves at the Highmore sale ring in October 1987.
Ducheneaux was still unable to move the...
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