Langer v. Bartholomay

Decision Date29 February 2008
Docket NumberNo. 20070056.,20070056.
Citation2008 ND 40,745 N.W.2d 649
CourtNorth Dakota Supreme Court
PartiesHenry J. LANGER, Mary Ann Weiss, Plaintiffs, Appellants and Cross— Appellees and Josephine I. Pender, Plaintiff v. Lyle BARTHOLOMAY and Kelly A. Thompson, d/b/a B & T Farms, Defendants, Appellees and Cross-appellants.

Jonathan T. Garaas, Garaas Law Firm, DeMores Office Park, Fargo, N.D., for defendants, appellees and cross-appellants.

VANDE WALLE, Chief Justice.

[¶ 1] Henry J. Langer and Mary Ann Weiss ("landowners") appeal, and Lyle Bartholomay and Kelly A. Thompson, doing business as B & T Farms, cross-appeal from a judgment entered after a bench trial awarding B & T Farms $37,081.82 for the breach of a farm lease. We conclude the district court's findings that B & T Farms did not breach the lease by producing sugar beets on the land, the landowners' repudiation constituted an anticipatory breach of the lease, and the court's award of damages are not clearly erroneous. We affirm the judgment.

I

[¶ 2] Langer, Weiss, and Josephine Pender own eight quarter-sections of farmland in Cass County, which they rent out. Langer manages the property and is responsible for soliciting prospective tenants and negotiating rental contracts.

[¶ 3] In 1999, the landowners began looking for a new tenant and accepted bids from interested farmers. They sent B & T Farms a letter inviting a bid, which included information about the land and preferred payment terms, but did not disclose that the landowners did not want to rent to someone who planned to grow sugar beets on the land. The landowners received a bid from B & T Farms, which said, "[d]ue to the low crop prices of wht [sic], corn, soybeans, and all other farm commodities. We are offering a bid of $57 per acre." After some negotiations about the rental price, the landowners agreed to rent 1,176.3 acres of farmland to B & T Farms for $59 per acre for the 2000 through 2004 crop years. A one-page lease containing a description of the land and the negotiated terms was signed. In 2004, the parties negotiated a new lease. Under the new agreement, B & T Farms rented 1,190.9 acres of farmland for the 2005, 2006, and 2007 crop years, at $70 per acre. Both leases contained a termination clause, which said, "both parties have the option to leave the contract with written notice by September 1, of each year."

[¶ 4] In March 2005, the landowners learned B & T Farms was planning to grow sugar beets on the rental land. Langer contacted Bartholomay and informed him he did not want sugar beets grown on the land. Langer and Bartholomay testified this was the first time they discussed Langer's desire not to have sugar beets grown on the land. Lager testified he learned in April 2005, B & T Farms sublet approximately 140 acres of the rental land to another farmer for $110 per acre and sugar beets had been planted on that portion of the land.

[¶ 5] In an August 23, 2005, letter, the landowners advised B & T Farms the lease did not allow them to produce sugar beets or assign, sublet, or sharecrop the land. The landowners claimed B & T Farms were in breach of the lease, they threatened to sue if the dispute was not amicably resolved, and stated they would accept $15,000 to settle the matter. On September 9, 2005, B & T Farms sent the landowners a letter in response denying the lease did not allow subletting or the production of sugar beets. B & T Farms claimed they had fully honored the lease and the landowners' claims were frivolous.

[¶ 6] On September 15, 2005, Langer sent B & T Farms a letter notifying them he was cancelling the lease. B & T Farms responded four days later, advising the landowners that cancelling the lease would constitute an anticipatory breach of the lease, requesting a retraction, and questioning whether all three landowners agreed to terminate the lease. The landowners responded on September 26, 2005, confirming that Langer represents the landowners for purposes of dealing with B & T Farms and the landowners all agreed to cancel the lease, and claiming the notice of termination was timely and B & T Farms breached the lease.

[¶ 7] The landowners sued B & T Farms in November 2005, alleging B & T Farms breached the lease by growing sugar beets, seeking damages for the breach, and requesting declaratory relief holding the landowners timely terminated the lease. B & T Farms filed an answer and counterclaim, denying they breached the lease, and seeking damages for lost profits for the 2006 crop year arguing the landowners' untimely notice of termination constituted an anticipatory breach of the lease. B & T Farms sought damages of $148,327.28, based on the amount of profits they would have lost if they had planted approximately 1,200 acres of soybeans on the landowners' property during the 2006 crop year. B & T Farms claimed they would have planted 910.7 acres of food grade soybeans, which would have an average yield of 32 bushels per acre, and would have sold for a price of $8.03 per bushel. They claimed they would have planted "Roundup Ready" soybeans on the remaining 280.2 acres, which would average 32 bushels per acre, and would have sold for $5.43 per bushel. They calculated projected expenses of $150,795.74, which included the cost of seed, chemicals, insurance, fuel, rent, and repairs. Based on these calculations, B & T Farms claimed they would have a net profit of $148,327.28 for the 2006 crop year. B & T Farms relied on 2004 and 2005 Cass County average yields to calculate its estimated 2006 yields, and it used the market values of the two types of soybeans at the time of its counterclaim to estimate the value of the crops. Bartholomay and Thompson testified they had never grown the particular type of food grade soybeans used in their damage calculations, and they had never grown all soybeans on the landowners' property. Bartholomay testified B & T Farms historically grew wheat, corn, soybeans, and barley on the landowners' property. There was evidence B & T Farms only planted soybeans on 300 acres of the landowners' farmland in prior years with a normal crop rotation.

[¶ 8] A bench trial was held in July 2006. The district court found the lease was fully integrated and unambiguous and the parties' obligations under the terms of the lease were not subject to modification by circumstances or parol evidence, and therefore B & T Farms did not breach the lease. The court also found, "Plaintiffs argue custom and usage should dictate that the planting of sugar beets or subletting to others would be a basis for termination. The Court does not find that custom or usage has been proved by Plaintiffs under the circumstances of the case." The court held the landowners' repudiation constituted an anticipatory breach because time was of the essence and the landowners did not timely terminate the lease. The court awarded B & T Farms damages in the amount of $37,081.82 for lost profits, finding B & T Farms failed to provide credible evidence of all its lost profits:

The Court does not find it realistic that Defendants would have planted every acre to soybeans in 2006 when their historical rotation included wheat, corn and barley. No evidence was submitted relative to the Defendants' history other than that they were good operators. The Court doesn't doubt this. The tax returns were not helpful since they included income from more acres than the leased acres from Plaintiff. Three hundred acres is one-quarter of the leased acres. There is evidence that last year they planted 300 acres to soybeans. One-quarter of $148,327.28 is $37,081.82. As to the balance of the acreage, the Court does not find the Plaintiffs [sic] presented credible evidence on which it can make an award.

[¶ 9] On June 9, 2006, Pender died. Neither party moved to substitute her estate and the action against her was later dismissed.

II

[¶ 10] The landowners argue the district court erred in finding B & T Farms did not breach the lease by allowing sugar beets to be produced on the rental property. The landowners contend there was an implied agreement based on custom and usage that sugar beets would not be grown on the land. They ,argue there was evidence farmland is rented at a higher price when it is used to produce sugar beets, they declined a higher bid from another farmer who wanted to grow sugar beets, B & T Farms originally submitted a bid for a lower price which would not include growing sugar beets, and B & T Farms did not use the land to grow sugar beets during the first lease. They claim this is evidence of an implied agreement that B & T Farms would not use the land to produce sugar beets, and B & T Farms breached the agreement.

[¶ 11] A party has breached a contract when it fails to perform a contractual duty when it is due. WFND, LLC v. Fargo Marc, LLC, 2007 ND 67, ¶ 13, 730 N.W.2d 841. The burden of proving a breach occurred is on the party asserting the breach. Id. The district court's finding about whether a party has breached a lease is a finding of fact subject to the clearly erroneous standard of review. Keller v. Bolding, 2004 ND 80, ¶ 17, 678 N.W.2d 578. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, on the entire record, we are left with a definite and firm conviction a mistake has been made. Id. at ¶ 15.

[¶ 12] Contracts are construed to give effect to the parties' mutual intent at the time the contract was formed, and if possible, we look to the writing alone to determine the parties' intent. Fargo Foods, Inc. v. Bernabucci, 1999 ND 120, ¶ 13, 596 N.W.2d 38. Interpretation of a contract is a question of law, if the parties' intent can be determined from the language of the contract alone. VND, LLC v. Leevers Foods, Inc., 2003 ND 198, ¶ 34,...

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