Hall v. Progress Pig, Inc.

• Decision Date: 12 May 2000
• Docket Number: No. S-98-1190.,S-98-1190.
• Citation: 259 Neb. 407,610 N.W.2d 420
• Parties: Norma L. HALL et al., appellees and cross-appellants, v. PROGRESS PIG, INC., appellant and cross-appellee.
• Court: Nebraska Supreme Court

610 N.W.2d 420

259 Neb. 407

Norma L. HALL et al., appellees and cross-appellants, v. PROGRESS PIG, INC., appellant and cross-appellee.

No. S-98-1190.

Supreme Court of Nebraska.

May 12, 2000.

Leo A. Knowles and Terry Bauman White, of McGrath, North, Mullin & Kratz, P.C., Omaha, for appellant.

Robert V. Broom, of Broom, Johnson & Clarkson, Omaha, for appellees.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, McCORMACK, and MILLER-LERMAN, JJ., and CARLSON, Judge.

WRIGHT, J.

NATURE OF CASE

Norma L. Hall, David L. Hansen, Everett Holstein, and John K. Hansen (collectively referred to as "the plaintiffs") brought this action alleging that Progress Pig, Inc., is a nonfamily farm corporation owning land used in farming, in violation of article XII, § 8, of the Nebraska Constitution. The district court held that Progress Pig was in violation of article XII, § 8. Progress Pig has appealed, and the plaintiffs have cross-appealed.

SCOPE OF REVIEW

Constitutional interpretation is a question of law on which the Nebraska Supreme Court is obligated to reach a conclusion independent of the decision by the trial court. Millennium Solutions v. Davis, 258 Neb. 293, 603 N.W.2d 406 (1999).

In an appeal of an equitable action, an appellate court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided that where credible evidence is in conflict on a material issue of fact, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Hall v. Progress Pig, Inc., 254 Neb. 150, 575 N.W.2d 369 (1998).

Although, generally, the rules governing the interpretation of legislative enactments apply to constitutional provisions adopted by the people, such constitutional provisions are to receive a broader and more liberal construction than statutes. Id.

FACTS

In June 1993, the plaintiffs commenced this action in the district court for Otoe County, alleging that the operation of Progress Pig by its sole shareholder, David Zahn, violated article XII, § 8. The district court found that the plaintiffs did not have standing to pursue their claim and dismissed the petition. The plaintiffs appealed to this court, and we reversed the judgment of the district court and remanded the cause for resolution of the issues set forth in the plaintiffs' petition. See Hall v. Progress Pig, Inc., supra.

On remand, the district court entered judgment for the plaintiffs, holding that although Zahn's responsibilities constituted labor and management, those activities were not within the day-to-day labor and management exception contained in article XII, § 8(1)(A). The district court further held that article XII, § 8, did not violate the Equal Protection Clause of the U.S. Constitution and that Progress Pig lacked standing to challenge article XII, § 8, as void for vagueness because Progress Pig's conduct was clearly prohibited and it could not maintain that the provision was void as applied to the conduct of others.

The plaintiffs are residents of Nebraska who are engaged in farming. Hall, a resident of Elmwood, is engaged in general crop farming and livestock farming in western Cass County. David Hansen is a resident of Anselmo and farms in Custer County, growing corn, alfalfa, soybeans, and rye and raising livestock, including sheep and cattle. Holstein is a resident of Blair, who grows corn and soybeans and raises hogs. John Hansen is a resident of Lincoln, who grows corn and soybeans in Madison County. The plaintiffs commenced this action to enforce the provisions of article XII, § 8, commonly known as Initiative 300.

Zahn grew up in the Syracuse area and now resides on a farm approximately 3 miles from Progress Pig's hog confinement facility. He purchased the hog confinement facility now owned by Progress Pig in 1984, held the property in his name, and operated the facility as the "Dave Zahn Pig Farm." In 1986, Zahn hired Kenneth M. Wamstad to become the assistant manager of the hog confinement facility. Wamstad later agreed to become the manager as long as he could buy into the ownership of the operation. In order to accomplish this goal, Zahn incorporated the hog confinement facility as Progress Pig in 1990, but he always maintained his status as the majority shareholder. When Wamstad left the operation in 1994, Zahn became the sole shareholder.

Progress Pig is a "for-profit" corporation, organized under the laws of the State of Nebraska, and operates a hog confinement operation near Syracuse in Otoe County. It is a 500-sow operation producing 10,000 feeder hogs annually and employing 3 full-time persons. At trial, Zahn offered an exhibit which placed the operations of Progress Pig into nine categories: administration, finance, personnel, nutrition/feeding, genetics, herd health, operations, maintenance, and marketing. He then testified as to his involvement in these categories.

With regard to administration, Zahn is solely responsible for developing Progress Pig's business strategy and handling computer input, telephone calls, and mail. In finance, Zahn handles budgeting, meeting with accountants, bill paying, deposits, checkwriting, and computer input. He is also responsible for the financial data and the resultant cost analysis that is entered into Progress Pig's computer system.

Under the personnel category, Zahn is responsible for making payroll. He also participates in the management portion of the personnel function by hiring and firing employees, setting salaries, and conducting employee interviews.

With regard to the nutrition/feeding category, Zahn meets with a nutritionist on a semiannual basis for feed formulation and monitors herd efficiency with regard to feeding the hogs. In genetics, he meets with a geneticist annually, establishes breeding strategies, and negotiates with suppliers.

The herd health function involves working with a veterinarian on a semiannual basis. Based on the reports from the veterinarian, Zahn makes decisions with regard to vaccines and changes in the hogs' feed. In operations, he generates production reports for "pro-management" meetings that are conducted once every 3 months in Des Moines, Iowa. At these meetings, he participates with three other farms of similar size in Nebraska and six or seven comparatively sized farms in Iowa.

With respect to maintenance, Zahn is involved in repairs and remodeling. He is also responsible for marketing the hogs, and, on a weekly basis, is involved with setting the prices for the hogs.

As time has progressed, Zahn's involvement in the physical chores has been eliminated and replaced by the above activities.

At trial, Zahn testified that his hired manager was responsible for managing and overseeing the chores and the tasks that are required to be done on a day-to-day basis in order to operate the farm. Additionally, Zahn stated that the manager is to report back to him on a weekly or biweekly basis. Douglas E. Beach, Zahn's manager at the time of trial, testified that he was responsible for overseeing the production, employees, and maintenance of Progress Pig. Zahn acknowledged that he did not participate in any of the activities necessary for the day-to-day operation of the farm except infrequently on an on-call basis. These activities were conducted by three onsite managers with additional part-time help.

Zahn is also a part owner of Prime Swine, another hog operation. Zahn is a paid consultant for Prime Swine and performs many of the same functions as he does for Progress Pig.

The plaintiffs' petition alleged that Progress Pig was being operated in violation of article XII, § 8, as a for-profit corporation engaged in hog farming, since the owner of more than 50 percent of the stock of the corporation neither resides on the farm nor actively engages in the day-to-day labor and management of the farm. It is undisputed that Zahn owns all the stock of the corporation and that at no time did Zahn reside on the land owned by the corporation.

On September 17, 1998, the district court held that Progress Pig was in violation of article XII, § 8; that article XII, § 8, did not violate the U.S. Constitution's Equal Protection Clause; and that Progress Pig did not have standing to challenge article XII, § 8, on the ground that it was void for vagueness. Progress Pig appealed, and the plaintiffs have cross-appealed.

ASSIGNMENTS OF ERROR

Progress Pig assigns as error that the district court erred (1) in finding that labor and management activities conducted by Zahn did not come within the exception contained in article XII, § 8(1)(A); (2) in holding that common knowledge, rather than any evidence in the record, demonstrated that the size, noise, space, and feed differences between the sources of pork and poultry provided a rational basis for treating the two industries differently; and (3) in holding that Progress Pig lacked standing to challenge article XII, § 8, as void for vagueness because Progress Pig's conduct was clearly prohibited by the amendment and that it could not maintain that the amendment is vague as applied to the conduct of others.

In their cross-appeal, the plaintiffs assert that the district court erred in determining that Zahn engaged in labor and management within the meaning of article XII, § 8, and in excluding certain evidence and the testimony of Martin Strange and David Hansen.

ANALYSIS

Article XII of the Nebraska Constitution was amended by the addition of § 8 and its subsections as a result of the passage of Initiative 300 on November 2, 1982. Article XII, § 8(1), now states:

No corporation or syndicate shall acquire, or otherwise obtain an interest, whether legal, beneficial, or otherwise, in any title to real estate used for farming or ranching in this state, or engage in farming or ranching.

Corporation shall mean any corporation organized under the laws

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