Lollar v. A.O. Smith Harvestore Products, Inc.

• Decision Date: 10 July 1990
• Docket Number: No. WD,WD
• Citation: 795 S.W.2d 441
• Parties: Wayne LOLLAR, d/b/a Lollar Farms, Respondent, v. A.O. SMITH HARVESTORE PRODUCTS, INC., Appellant. 42537.
• Court: Missouri Court of Appeals

Page 441

795 S.W.2d 441

Wayne LOLLAR, d/b/a Lollar Farms, Respondent, v. A.O. SMITH HARVESTORE PRODUCTS, INC., Appellant.

No. WD 42537.

Missouri Court of Appeals Western District.

July 10, 1990.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Aug. 28, 1990.

Application to Transfer Denied Oct. 16, 1990.

Donald E. Egan, Chicago, Ill., John C. Dods, Kansas City, David A. Domina, Omaha, Neb., for appellant.

Thomas J. Conway, Kansas City, John R. Elrod, Siloam Springs, Ark., James P. Valbracht, Chillicothe, for respondent.

Before TURNAGE, P.J., and LOWENSTEIN and GAITAN, JJ.

GAITAN, Judge.

Appellant, A.O. Smith Harvestore Products, Inc. ("AOSHPI"), appeals the jury verdict rendered in favor of respondent, Wayne Lollar d/b/a Lollar Farms ("Lollar") for fraud in the amounts of $426,000 actual and $500,000 punitive damages. The alleged fraud occurred when appellant represented its feed storage equipment to be "oxygen-limiting," yet referred to its process as oxygen eliminating in its brochures and videotaped advertising upon which respondent relied. The respondent's petition was initially in three counts. However, both count I, breach of implied warranty, and count II, breach of express warranty, were directed out by the trial court; neither party appealed these directed verdicts. On appeal, the appellant contends that the trial court erred by: (1) failing to grant its motion for judgment notwithstanding the verdict ("JNOV") because defendant failed to prove the elements of fraud; (2) failing to grant its motion for JNOV as to punitive damages because there was no proof of outrageous conduct; (3) permitting respondent to use an improper damage instruction relative to compensatory damages; and (4) excluding testimony of satisfied users of the so-called "oxygen limiting" structures. We affirm.

Having been raised on a dairy farm and later developing his own dairy farming operation in the mid-50s, Wayne Lollar had been a dairy farmer throughout his life. Between 1957 and 1980, Lollar fed his dairy cattle feed from a pit silo. In 1959, Lollar was milking fourteen cows, and by the mid-to-late 1970s, he had 80 to 85 head of cattle. During this time period, Lollar packed his pit silos with silage to prevent spoilage, and fed his cattle from the pit silo, supplementing the feed with sixteen percent complete protein. In the mid-60s, Lollar averaged forty pounds of milk, per cow, per day; by the 1970s, he averaged up to fifty pounds of milk, per cow, per day. Lollar maintained herd health through regular visits by his veterinarian, who considered Lollar an above average farmer.

Lollar first heard of Harvestore structures in the mid-1970s. The Harvestore sales representatives, Finis Watt and Harry Dunn, visited Lollar once or twice a year, obtaining information regarding his dairy farm. At these visits, no films or literature were provided to Lollar.

In early 1981, the Harvestore salesmen returned. As part of the selling process, Lollar was taken on several "farm tours." Lollar visited both the Staiger and Parkhurst farms. Lollar listened to what the farmers said, but did not engage in any conversations with them. Watt and Dunn told Lollar that if he bought or leased a Harvestore structure, his milk production would increase, feed costs would decrease because there would be no need to supplement feed with protein, and that the structures would be labor-saving. Thus, the Harvestore structures would, in effect, pay for themselves.

The salesmen told him that the structures would "seal up like grandma's fruit jar." They demonstrated this process by dropping a match into a miniature Harvestore, closed it up, and the match went out. Lollar received several brochures about the Harvestore structures, published by AOSHPI. He also viewed at least two films provided by AOSHPI. In April of 1981, Lollar leased two Harvestore structures and purchased equipment necessary to begin operations.

Lollar put fescue, a grass silage, in one of the structures. This fescue was taken from another Harvestore structure. Watt located the fescue, and arranged for Lollar to purchase it. When he started feeding from this structure, his milk production went down. He contacted Watt and Dunn, who assured him that once he started feeding the oatlage, his milk production would increase; which it did. However, the increased production did not continue.

In the other structure, Lollar placed high moisture corn, sealed the structure in late October or early November, 1981, and let it set until December 8 or 9. Thereafter, on approximately February 9, 1982, the feed in both structures was tested, and Watt and Dunn told Lollar that he no longer needed to supplement the feed with sixteen percent protein. Lollar's milk production again dropped. He began experiencing problems with calf deaths. He noticed mold on the oatlage, and later on the sudex. Lollar also noticed mold on the high moisture corn. During this time, he was losing eighty percent of his calves.

He contacted his veterinarian, Dr. Clark Gwin, who was unable to solve the problem. He then contacted Dr. Krautman, whose assistance helped save some calves. Lollar described his cattle as being generally unthrifty during this time period. The cows had rough hair, dull eyes, and sores on their legs and bellies. Lollar continued to be concerned with his milk production. Again, he sought the advice of Watt. Watt recommended that beans and milo be fed to the cattle. Finally in April, 1984, Lollar began feeding sixteen percent protein in the barn, as he had done in the past. By October, 1984, Lollar quit using the structures altogether, and began feeding his cattle from his old pit silos, as well as supplementing the feed with sixteen percent protein.

Dr. Gwin testified that between 1980 and 1985 Lollar's cows were not in as good a physical condition as they had been in the past. He noticed that the cows' coats were rough, and that, generally, rough coats are indicative of parasite problems, disease problems, or nutritional problems. However, Dr. Gwin stated that he did not believe that Lollar's herd had suffered from any metabolic, viral disease or parasitic problems. Dr. Gwin did recall a lab report, indicating that twenty to twenty-five of Lollar's calves were affected by pneumonia in June, 1982. In October of 1985, Lollar, having experienced severe financial problems, had a dispersal sale of his livestock. He received mere slaughter value for his herd because of their poor health.

In 1983, Robert Zoyiopoulos, a licensed engineer, was invited to determine if the Harvestore structures were oxygen-limiting. As a part of this investigation, he reviewed a book published by AOSHPI called The Winning System. The Winning System defines "oxygen-limiting" as "a feed storage system in which the ensiled feeds are protected from access of oxygen." As part of his research, Zoyiopoulos also reviewed various patents and internal engineering and research reports prepared by AOSHPI. Additionally, he examined over 200 Harvestore structures. The patents referred to the Harvestore structures as designed "to make an oxygen-free environment."

In Zoyiopoulos' opinion the Harvestore structures were not oxygen-limiting, but in fact oxygen-enhancing. He stated that in a conventional silo the top feed is always exposed to air, but, when you remove feed twice a day from the top, remaining feed is exposed to oxygen less than 12 hours per day. With respect to the Harvestore structure, it takes approximately two to two and one half days for the cutter arm of the unloader to make one complete revolution. Thus, the dome area is in constant contact with oxygen, saturating the feed. In Zoyiopoulos' opinion the problem was not with the Harvestore design, but rather with the concept.

At trial, Lawrence Scott, an animal nutritionist, described the fermentation process in feed, which takes about twenty-five to forty-eight hours for the feed to consume all the oxygen, and another seven to twenty-one days to completely ferment the feed. Reintroduction of oxygen to already fermented silage will only start the process all over again, resulting in oxidation. Oxidation is the process where oxygen molecules are added to carbohydrates and the protein, lowering the protein and energy availability to the animals consuming the feed. Scott described the process of oxidation as much like "grapes, the first fermentation you get wine, the second, you get vinegar, and the third time, you don't want to use it." Excessive amounts of oxygen reaching the silage mass binds the protein molecules. As more oxygen is introduced to the feed mass, heat will develop, and it is the temperature of the feed mass that binds the protein, producing mold growth. When heat-bound protein feed is fed to a cow, the animal will experience the following conditions: weight loss, drop in milk production, drop in reproductive performance, dull eyes, rough hair, and loss of appetite resulting in weight loss.

Dr. William G. Olson, a veterinarian and nutritionalist, explained that heat damage begins at ninety degrees Fahrenheit. He concurred with Scott on the effects of oxygen exposure to the feed. Upon reviewing Lollar's records as well as the feed samples, Dr. Olson's opinion was that there was heat damage to the feed, and that it was this damage that created poor quality feed, resulting in sickly performance by the herd. Dr. Olson did not agree that the Harvestore structures hold ensiled losses to a minimum, explaining that the Harvestore structures are not operated under the same conditions as the university studies indicate, because the farmer is continuously harvesting and feeding from the structure. Dr. Olson conceded that dull eyes, rough hair, and general unthriftiness can be caused by a variety of different causes, but he explained that the first cause he would focus on as a veterinarian and nutritionalist would be the energy-protein content of the feed.

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