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Green River Ranches, LLC v. Silva Land Company, LLC

Supreme Court of Idaho

June 29, 2017

SILVA LAND COMPANY, LLC, Defendant. JACK MCCALL, Plaintiff-Respondent,
SILVA DAIRY, LLC, an Idaho limited liability company, Defendant-Appellant, and MAX SILVA, an individual, Defendant.

         2017 Opinion No. 77

         Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Twin Falls County. Hon. Randy J. Stoker, District Judge.

         The district court's dismissal of Silva Dairy's claim is affirmed. Attorney fees and costs on appeal are awarded to respondent.

          Mayness, Taggart, PLLC, Idaho Falls, attorneys for appellant Silva Dairy, LLC. Steven Taggart argued.

          Givens Pursley LLP, Boise, attorneys for respondent Jack McCall. Bradley J. Dixon argued.

          JONES, Justice

          I. Nature of the Case

         This is a companion case to Green River Ranches, LLC v. Silva Land Company, LLC, Docket No. 43548. In an appeal arising out of Twin Falls County, Appellant Silva Dairy, LLC ("Silva Dairy"), challenges a district court's holding that Silva Dairy's claim against Respondent Jack McCall ("McCall") for herd management services is offset by amounts that Silva Dairy owes McCall for feed expenses and pasture rent. McCall owns a livestock business and used Silva Dairy's herd management services. The district court found that McCall's total claims against Silva Dairy were at least $492, 464.77 and exceeded Silva Dairy's claim by $287, 487.12. Accordingly, the district court dismissed Silva Dairy's claim with prejudice. We affirm the district court's judgment.

         II. Factual and Procedural Background

         Between 2009 and 2012, McCall, Silva Dairy, members of the Silva family, and related business entities owned by McCall or members of the Silva family engaged in various cattle-related business transactions. The transactions relevant to this appeal are: (1) Silva Dairy's management of McCall's herd; (2) McCall's provision of feed to Silva Dairy; and (3) Silva Dairy's pasture rental from McCall. In 2010, Silva Dairy filed for Chapter 12 bankruptcy. Thereafter, McCall began removing himself from the parties' business relationship. Litigation ensued between the individuals and their business entities.

         Three actions were consolidated below. First, on March 27, 2013, Green River Ranches, LLC, an entity owned in large part by McCall, sued Silva Land Company, LLC seeking payment on a loan made in 2009. Second, McCall sued Max Silva for damages related to the sale of 101 cattle, and Silva Dairy filed a third party complaint against McCall alleging that it was owed over $245, 000 for the management of McCall's herd. Third, McCall sued Silva Dairy for, inter alia, conversion of feed, pasture rent, and feed payment.

         It is important to note that because Silva Dairy filed a Chapter 12 bankruptcy proceeding in August 2010, and later entered a confirmed Chapter 12 plan, the district court's analysis of McCall's claims against Silva Dairy was limited to whether they offset Silva Dairy's claim against McCall. Indeed, the parties agreed that affirmative relief could not be awarded against Silva Dairy and that the district court was to determine whether Silva Dairy's claim exceeded McCall's claims.

          This case illustrates the problems that arise when businessmen fail to formalize oral agreements with written contracts. The parties formed a series of vague oral agreements and planned on settling up at a later date. Their business relationship soured and, unsurprisingly, they were unable to settle their respective debts. Needless to say, the fact that Silva Dairy filed bankruptcy did not simplify matters. The undisputed facts are sparse and left the district court, as the fact-finder, in the difficult position of untangling the oral agreements. Between April 2010 and August 2012, McCall placed his herd under the management of Silva Dairy. There was not a written agreement between the parties concerning the management fee McCall was to pay Silva Dairy; however, the parties agreed that McCall was required to provide feed for his cattle. Silva Dairy managed its own cattle at the same time it managed McCall's cattle, stored its own feed in the same location where McCall's feed was stored, and fed McCall's feed to Silva Dairy cattle. While both parties understood that neither was obligated to provide feed for each other's cattle, both parties acknowledged that the feed was commingled and fed to both herds. Indeed, the herd nutritionist admitted that McCall's feed and Silva Dairy's feed were intentionally mixed to achieve a desired balance of nutrients. In the spring of 2012, McCall observed that his feed costs were exorbitant; however, he continued to supply feed until August 2012, when he removed his cattle from Silva Dairy's management. Separately, between June 2011 and August 2012, cattle owned by Silva Dairy were placed on property owned or leased by McCall. The parties did not have an agreement as to the pasture rental fee.

         The district court held two bench trials. The first bench trial, held on June 26 and 27, 2014, determined whether either party was liable for damages on the various claims. In a memorandum opinion, the district court concluded as follows, in pertinent part: (1) Max Silva owed McCall for unpaid pasture rent; (2) McCall owed Silva Dairy for approximately two years of herd management fees; and (3) McCall was permitted to offset his management fee liability with his feed conversion claim.

         The second bench trial, held on June 24-26, 2015, determined the amount of damages. The district court issued a memorandum opinion and corresponding judgment on July 16, 2015. First, the district court held that Silva Dairy was entitled to $204, 977.65 for managing McCall's herd. Second, the district court revised its previous holding that Max Silva was personally liable for McCall's pasture rent claim. The district court held that Silva Dairy was actually liable for the pasture rent after learning that the "MS" brand that was on the pastured cattle stood for "Manuel Silva and Sons, " which was Silva Dairy's brand. Previously, the district court was under the impression that "MS" stood for Max Silva. The district court concluded that credible testimony from McCall and his pasture manager proved the dates the cattle were pastured and the associated costs. Accordingly, the district court held that Silva Dairy's management fee would be offset by $52, 386.90 for the pasture rent. Third, the district court concluded that McCall was owed $40, 067.87 for feed purchases he made for Silva Dairy's cattle. Fourth, the district court addressed McCall's claim that Silva Dairy had converted his feed. The district noted as follows:

The parties spent an [sic] substantial amount of time . . . attempting to prove their claims [with] theoretical calculations of what cattle should have eaten, what they should have been fed, and what the feed was worth over the 28 months . . . . Unfortunately, there is little, if any, hard evidence of the amount of McCall's feed consumed by Silva Dairy cattle, and vice versa. That fact, however, does not preclude the [c]ourt from determining whether there is merit to McCall's claim.

         The district court found "several problems with McCall's methodology" in calculating that he was owed $881, 864 for feed that was converted. However, the district court found the testimony of McCall's expert, Mr. Onaindia, to be "extremely credible." (Emphasis in original). Mr. Onaindia, an experienced banker and dairyman, estimated that an $800, 000 to $900, 000 gap existed between the value of feed McCall purchased and the value of McCall's feed that remained in Silva Dairy's possession, less the value of the amount of feed that should have been fed to McCall's cattle. The district court accepted Mr. Onaindia's calculation and deducted the remaining feed inventory, $386, 047, from $800, 000 to conclude that Silva Dairy converted "at least" $413, 953 of McCall's feed. (Emphasis in original). In sum, the district court dismissed Silva Dairy's herd management claim with prejudice because it was more than offset by McCall's claims. Silva Dairy appealed.

         III. ...

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