Meadowfresh Solutions USA, LLC v. Maple Grove Farms, LLC

• Decision Date: 20 May 2020
• Docket Number: Nos. SD 35874,35882,35883,s. SD 35874
• Citation: 606 S.W.3d 193
• Parties: MEADOWFRESH SOLUTIONS USA, LLC, Plaintiff-Appellant, v. MAPLE GROVE FARMS, LLC, Leon Rinehart, Ted Dahlstrom, Carol Dahlstrom, Curtis Hall, Lisa Hall, Kyle Bounous, Defendants-Respondents/Cross-Appellants, and Eugene Enowski, Creditor-Respondent/Cross-Appellant.
• Court: Missouri Court of Appeals

606 S.W.3d 193

MEADOWFRESH SOLUTIONS USA, LLC, Plaintiff-Appellant,

v.MAPLE GROVE FARMS, LLC, Leon Rinehart, Ted Dahlstrom, Carol Dahlstrom, Curtis Hall, Lisa Hall, Kyle Bounous, Defendants-Respondents/Cross-Appellants,andEugene Enowski, Creditor-Respondent/Cross-Appellant.

Nos. SD 35874

35882

35883

Missouri Court of Appeals, Southern District, Division One.

Filed: May 20, 2020

Motion for Rehearing and/or Transfer to Supreme Court Denied June 12, 2020

Application for Transfer Denied September 29, 2020

Attorneys for Appellant – S. Jacob Sappington, Randy P. Scheer of Springfield, MO.

Attorney for Respondents Rinehart, Dahlstrom, Hall and Bounous – Kate Millington of Springfield, MO,

Attorney for Respondent Enowski – Michael L. McDorman of Lake Ozark, MO.

Nancy Steffen Rahmeyer, J.

This is a consolidated appeal and cross-appeal from the trial court's judgment finding Eugene Enowski ("Enowski") to be a partial secured creditor of Maple Grove Farms, LLC ("Maple Grove"). Meadowfresh Solutions USA, LLC ("Meadowfresh") alleges the trial court erred in finding Enowski to be a partial secured creditor of Maple Grove and brings two points on appeal. Because we find Point II of Meadowfresh's brief dispositive, we address only that point.

In Point II, Meadowfresh claims the judgment in Meadowfresh I¹ determined that All American Cattle Leasing, LLC ("AACL") was the alter ego of Maple Grove with respect to the purchase of certain Arvest Bank promissory notes secured by a deed of trust and, because of this finding in Meadowfresh I , the obligations in the notes were extinguished via the doctrine of merger when AACL, acting as Maple Grove's alter ego, purchased the debt. Accordingly, there were no obligations to secure via the deed of trust (and, thus, no security interest).² We agree and reverse the judgment.

In Meadowfresh I , Meadowfresh and John ("Jock") and Susan Fulton (collectively, "the Fultons") sued AACL, Maple Grove, Leon Rinehart, Ted Dahlstrom, Carol Dahlstrom, Curtis Hall, Lisa Hall, and Kyle Bounous (collectively, "Minority Members"),³ for claims arising out of Minority Members’ attempts to wrongfully remove Meadowfresh from Maple Grove and John Fulton as manager.⁴ Particularly important to Meadowfresh's argument regarding collateral estoppel as to the issue of whether AACL and Maple Grove were alter egos and whether merger applies are jury Instructions No. 32 for piercing the corporate veil and No. 35 which releases the Fultons from the guaranties on the loans previously owned by Arvest Bank:

Instruction No. 32

Your verdict must be for Plaintiffs Meadowfresh Solutions USA, LLC and Jock Fulton on their claim for piercing the corporate veil if you believe:

First, Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis Hall and Lisa Hall, Leon Rinehart, or Kyle Bounous exercised control of Maple Grove Farms, LLC or All American Cattle Leasing, LLC with respect to the purchase of the Arvest Bank loans by All American Cattle Leasing, LLC, the loans from All American Cattle Leasing, LLC to Maple Grove Farms, LLC, or the Lease-to-Own Agreement between Maple Grove Farms, LLC and All American Cattle Leasing, LLC; and

Second, the control of Maple Grove Farms, LLC or All American Cattle Leasing, LLC by Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis and Lisa Hall, Leon Rinehart, or Kyle Bounous was used to:

Undercapitalize Maple Grove Farms, LLC; or

Improperly avoid Maple Grove Farms, LLC's liabilities to Plaintiffs; or

Implement a plan whereby the Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis and Lisa Hall, Leon Rinehart, or Kyle Bounous could enforce the guaranties of Plaintiffs for the debt of Maple Grove Farms, LLC; and

Third, the control of Maple Grove Farms, LLC or All American Cattle Leasing, LLC by the Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis and Lisa Hall, Leon Rinehart, or Kyle Bounous caused injury or unjust loss to Plaintiffs.

Instruction No. 35

Your verdict must be for Plaintiffs Meadowfresh Solutions USA, LLC, and Jock and Susan Fulton on their claim of declaratory judgment as to their release from their guaranties for the loans previously owned by Arvest Bank if you believe:

First, Plaintiffs Meadowfresh Solutions USA, LLC, and Jock and Susan Fulton entered into Maple Grove Farms, LLC loan guaranties as the majority members of Maple Grove Farms, LLC and Meadowfresh Solutions USA, LLC, respectively; and

Second, Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis and Lisa Hall, Leon Rinehart, or Kyle Bounous used All American Cattle Leasing, LLC to purchase the loans for the purpose of holding Plaintiffs liable under their guaranties despite the attempted expulsion of Meadowfresh Solutions USA, LLC as majority member of Maple Grove Farms, LLC; and

Third, as a result of Defendants’ conduct, there is a risk of action to hold Plaintiffs liable for their guaranties.

In accordance with the jury's findings, the trial court entered its Amended Judgment. The trial court stated, in relevant part:

The Court further orders and adjudges that, in accordance with Verdict Form D signed by twelve jurors, on Plaintiffs’ [Meadowfresh and Fulton] claims to pierce the corporate veil of Maple Grove Farms, LLC and All American Leasing, LLC, judgment is hereby entered in favor of [Meadowfresh and Fulton] and against Defendants Maple Grove Farms, LLC, All American Cattle Leasing, LLC, Ted Dahlstrom, Carol Dahlstrom, Curtis Hall, Lisa Hall, Leon Rinehart, and Kyle Bounous and said Defendants are jointly and severally liable for the judgments rendered herein against Maple Grove Farms, LLC.

....

The Court, in accordance with Verdict Form E signed by the twelve jurors, hereby orders, adjudges, and declares that Plaintiffs [Meadowfresh and the Fultons] are hereby released from their guaranties securing the Maple Grove Farms, LLC loans previously owned by Arvest Bank.

Thus, the jury pierced the corporate veils of AACL and Maple Grove and released Meadowfresh and the Fultons from their obligations arising under the personal guaranties securing the debt owed by Maple Grove to Arvest Bank.

In Meadowfresh I , Meadowfresh also had equitable claims for an accounting and judicial dissolution of Maple Grove, as well as a motion for an appointment of receiver of Maple Grove.⁵ The trial court in Meadowfresh I severed the equitable claims into a separate action, case number 1731-CC01311 ("Meadowfresh II ").⁶

In Meadowfresh II , the trial court appointed a receiver. On December 4, 2017, Enowski filed a "Motion for Relief from Stay by Secured Creditor," claiming to be a secured creditor of Maple Grove by virtue of an assignment of promissory notes from AACL to him purportedly secured via a deed of trust. The trial court heard evidence on Enowski's secured creditor claim and determined he had a partial security interest in the assets of Maple Grove by virtue of the assignments of the notes from AACL. This appeal followed.

Background

The Membership Composition

Maple Grove is a limited liability company created for the purpose of raising dairy cattle for the sale of milk production and to sell cull cows. The farm is located in Jasper County, Missouri. The members of Maple Grove are Meadowfresh, Ted and Carol Dahlstrom, Curtis and Lisa Hall, and Leon Rinehart.⁷ Meadowfresh is by far the largest owner of Maple Grove. The initial members of Meadowfresh are the Fultons, the Dahlstroms, and Kyle Bounous. The Fultons have a majority membership interest in Meadowfresh. John Fulton is the Manager of both Meadowfresh and Maple Grove.

The Arvest Bank Loans to Maple Grove

In order to begin dairy operations, Maple Grove borrowed money from Arvest Bank and executed promissory notes (the "Arvest notes" or "Arvest transaction"). John Fulton, acting as managing member of Maple Grove, signed the notes. The notes were secured by a deed of trust on the real estate located in Jasper County. John Fulton, Susan Fulton, Kyle Bounous, Ted Dahlstrom, and Carol Dahlstrom executed a "Meadowfresh Solutions USA, LLC Guaranty Addendum" for the debt in proportion to their membership interest.

Attempted Removal of Meadowfresh/Fulton by Minority Members

After receiving the loans from Arvest Bank, Maple Grove operated the dairy farm with Fulton as Manager. In July 2015, the Minority Members of Maple Grove attempted to hold a meeting to remove Fulton and Meadowfresh from their respective positions in Maple Grove. The trial court determined that this action was in violation of the operating agreement and all actions after the meeting were void. The Minority Members also attempted to redistribute all of Meadowfresh's membership interest among the remaining members with no compensation to the Fultons or Meadowfresh.

The Minority Members removed Fulton's name from the business and bank accounts and further attempted to remove Fulton as the authorized representative of the daily operation with Dairy Farmers of American ("DFA"). Additionally, the Minority Members alleged that Fulton stole money from them (when in fact it was his agreed-upon salary) by giving incomplete information to law enforcement, causing criminal charges to be filed against him. The charges were later dismissed. The jury in Meadowfresh I found in favor of Fulton on his claim for malicious prosecution.

Maple Grove and AACL

While Meadowfresh I was pending, Minority Members created AACL. AACL's only business was with Maple Grove. AACL was comprised of only Maple Grove's Minority Members with membership interests being distributed proportionally to their interest in Maple Grove. Minority Members, purporting to act as Maple Grove, entered into a cattle lease agreement with AACL whereby Maple Grove leased cattle from AACL. Under the terms of the agreement, Maple Grove...