Tommy Thompson v. Jttr Enviro, L.L.C. ( 2017 )

IN THE COURT OF APPEALS OF IOWA
No. 16-1610
Filed July 19, 2017
TOMMY THOMPSON,
Plaintiff-Appellee,
vs.
JTTR ENVIRO, L.L.C.,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Plymouth County, Jeffrey L.
Poulson, Judge.
JTTR Enviro, L.L.C. appeals a bench trial verdict in favor of Tommy
Thompson arising from a manure easement agreement. AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED.
Jeff W. Wright and Jacob V. Kline of Heidman Law Firm, L.L.P., Sioux
City, for appellant.
Chad C. Thompson of Thompson, Phipps & Thompson L.L.P., Kingsley,
for appellee.
Heard by Vaitheswaran, P.J., and Tabor and Mullins, JJ.
2
MULLINS, Judge.
JTTR Enviro, L.L.C. appeals a bench trial verdict in favor of Tommy
Thompson arising from a manure easement agreement (MEA). JTTR claims the
district court (1) improperly imposed a burden upon it, as the grantee of the MEA;
(2) improperly increased the burden placed on JTTR under the MEA;
(3) improperly interpreted the MEA to contemplate a corn-on-corn rotation; and
(4) awarded excessive damages. We affirm in part, reverse in part, and remand.
I. Background Facts and Proceedings
The facts of this case are generally not in dispute and aptly summarized
by the district court:
In the spring of 2012, Tommy Thompson purchased
approximately 146 acres of farmland from Ricke W. and Marian T.
Langel. The Langels retained a 10.25 acre parcel upon which a
hog farrowing facility was located. . . .
The unrecorded real estate contract between Thompson and
the Langels provided that Thompson would give the Langels a
permanent easement on the 146 acres and a separate manure
easement would be created at closing. The contract recited that
the Langels or the existing swine facility would place manure on the
146 acres. If [the] Langels or the existing swine facility used the
easement, Thompson would pay all pumping and application costs.
The contract provided that Thompson would receive enough
manure to cover the 146 acres and any additional manure
generated by the facility would be made available to Thompson at
market price.[1]
1
Specifically, the addendum to the real estate contract provided, with certain provisions
handwritten on the otherwise typed contract, the following:
BUYERS agree to give SELLERS or existing swine facility a
Permanent Manure Easement over the property. The parties agree to
enter into a separate Manure Easement Agreement at closing whereby
SELLERS or existing swine facility will place manure on the real estate.
In the event SELLERS or existing swine facility use this easement,
BUYERS will pay all pumping and application costs. The particulars of
said manure easement will be set forth in a separate Manure Easement
Agreement. Buyers will receive enough manure to cover the 146 acres.
Any additional manure will be made available at market price.
3
As agreed to in the real estate contract, a manure easement
was drafted, signed, and recorded on May 24, 2012. The
easement agreement noted that [the] Langels desired the
agreement as a means of applying manure and other animal waste
generated from the hog facility on Thompson’s farmland. The
agreement also noted that Thompson would receive the benefit of
reduced costs and expenses with regard to fertilizer application. . . .
The easement agreement grants to [the] Langels the right to
apply manure and other animal waste generated by the hog facility
on Thompson’s 146 acres. The agreement is permanent and runs
with the land and is binding upon successors and interest.
Under the agreement, Thompson is solely responsible for all
costs associated with the application of manure and animal waste
on the 146 acres. . . . Application should be permitted after crops
are harvested in the fall of any calendar year and up until the time
of planting the following spring.
. . . . The agreement provided that the hog facility was
currently empty and that in the event the facilities are filled and the
need to empty the pits and lagoons of manure arises, Thompson
shall be allowed as much manure as needed to cover the 146
acres. If there is excess manure, Thompson may purchase that
manure at the then market price.
Thompson is responsible for application of manure in
compliance with applicable law or regulations, including [the]
Langels’ manure management plan. . . .
....
In August of 2012, the 10.25 acre and associated hog facility
was sold by the Langels to JTTR Enviro, LLC. . . . Following the
purchase, JTTR dramatically remodeled the hog facility and rebuilt
it into a hog finishing facility. The building exterior and the [manure]
pit remain unchanged, but the building’s interior is new and entirely
different.
The facility was placed in production during the spring of
2013. In the fall of 2013, it became necessary to empty the pit.
Thompson demanded enough manure to apply on his entire 146
acre parcel consistent with the [MEA].2
JTTR filed a manure management plan which provides that
Thompson would maintain a corn-soybean rotation. Because of the
nitrogen credit associated with raising soybeans, no manure would
Notably, the contract originally read: “The parties agree to enter into a separate Manure
Easement Agreement at closing whereby SELLERS or existing swine facility may, at
their discretion but are not required to, place manure on the real estate.” The phrase
“may, at their discretion but are not required to,” was manually stricken with “will” written
in its stead.
2
JTTR argues the pit needed to be emptied before Thompson’s crops had been
harvested—and the MEA permits application of the manure only after crops have been
harvested—but JTTR provided 73-acres worth of manure anyway.
4
be applied in bean years. Because of [t]his, JTTR demanded that
either the manure be applied every other year or that 73 acres of
manure would be provided annually. Thompson accepted 73 acres
of manure in the fall of 2013. He has received no further manure
since the fall of 2013.
In May 2014, Thompson filed suit, alleging JTTR breached the MEA. A
bench trial was held in July 2016. In August 2016, the district court returned a
verdict in favor of Thompson, awarding damages in the amount of $70,433.93
plus $15,451.81 in attorney fees. JTTR filed a motion for new trial and motion to
enlarge or amend findings of fact and conclusions of law, which Thompson
resisted and the district court denied. JTTR appeals.
II. Standard and Scope of Review
We review a district court’s decision arising from a bench trial for
correction of errors at law. See Chrysler Fin. Co. v. Bergstrom, 703 N.W.2d 415,
418 (Iowa 2005). If supported by substantial evidence, the district court’s
findings of fact are binding on appeal. See id.III. Analysis
A. Burden
JTTR first argues the court erred in imposing any burden upon it, because
the document at issue is an easement agreement; JTTR is the recipient of that
easement; and, therefore, a burden can only be imposed upon Thompson as the
grantor. In JTTR’s briefing on appeal, JTTR does not argue that the specific
terms of the easement fail to impose a burden but, rather, that easements
generally cannot impose a burden on easement recipients. Thompson argues
JTTR did not preserve error on this issue. Even if this argument had been
preserved, we do not find it persuasive.
5
As a general matter, the law recognizes that burdens are also placed on
easement holders. See Koenigs v. Mitchell Cty. Bd. of Supervisors, 659 N.W.2d
589, 594 (Iowa 2003) (“[E]asement holders have all such rights as are incident or
necessary to the reasonable and proper enjoyment of their easement. However,
every benefit has a corresponding burden.” (citation omitted)). Further, we note
JTTR cites no law providing parties cannot contract to impose obligations upon
easement holders; JTTR simply relies upon the oft-stated maxim that easements
create interests for one person in the land of another resulting in a burden on the
servient estate. See McKeon v. Brammer, 29 N.W.2d 518, 524 (Iowa 1947).
Regardless, here, there is a written contract that contains the terms
agreed to by the parties. See Koenigs, 659 N.W.2d at 594 (“[T]he parties have a
contract dictating the extent of the County’s easement and consequent
obligations. As such, the issue of the County’s duty to maintain the ditch is
entirely one of contract.”). Easements are subject to ordinary contract principles.
See Tiemessen v. All. Pipeline (Iowa) L.P., No. 14-1727, 2016 WL 351471, at *5
(Iowa Ct. App. Jan. 27, 2016); see also McGrane v. Maloney, No. 08-1502, 2009
WL 929048, at *1-2 (Iowa Ct. App. Apr. 8, 2009). Accordingly, it is our
responsibility on appeal—and the district court’s duty below—to consider the
terms of this contract and the parties agreed-upon responsibilities under its
terms. See State v. Baldon, 829 N.W.2d 785, 792 (Iowa 2013) (“[C]ourts enforce
contracts because they are a product of the free will of the parties who, within
limits, are permitted to define their own obligations.”).
Thompson and the Langels entered into a real estate contract that
provided a manure easement agreement would be executed. The addendum to
6
this real estate contract said: “SELLERS or existing swine facility will place
manure on [Thompson’s] real estate” with Thompson “receiv[ing] enough manure
to cover the 146 acres.” The MEA provides “in the event the facilities are filled
and the need to empty the pits and lagoons of manure arises, [Thompson] shall
be allowed as much manure as needed to cover the ground associated with this
easement.” Further, “[i]f there is excess manure, [Thompson] may purchase that
manure at the then market price.” The terms of the agreement explicitly impose
a burden upon JTTR as the successor of the Langels and reflect the parties’
intent to impose such a burden. Those terms are controlling. We, accordingly,
affirm the district court on this issue.
B. Finishing Manure
JTTR next argues the district court order impermissibly imposed a greater
burden on JTTR than contemplated by the MEA. See C & M Prop. Mgmt. Co. v.
Bluffs U.P. Emps. Credit Union, 486 N.W.2d 596, 597 (Iowa Ct. App. 1992)
(“Generally, the servient estate is not to be burdened to a greater extent than
was contemplated at the time of the creation of the easement.”). There is
nothing in the record indicating the district court considered this argument, let
alone ruled upon it.3
Assuming this argument had been preserved, general principles of
contract interpretation apply.
3
Instead, the district court addressed whether the hog facility—as updated by JTTR—
was still governed by the MEA. The district court found it was, reasoning, “although [the
facility] has been materially changed,” “[t]he outside buildings are unchanged and the
original pit is in use.” On appeal, JTTR does not argue the building itself is somehow
outside the scope of the MEA.
7
The cardinal rule of contract interpretation is to determine
what the intent of the parties was at the time they entered into the
contract. “Words and other conduct are interpreted in the light of all
the circumstances, and if the principal purpose of the parties is
ascertainable it is given great weight.” Another relevant rule of
contract interpretation requires that “[w]herever reasonable, the
manifestations of intention of the parties to a promise or agreement
are interpreted as consistent with each other and with any relevant
course of performance, course of dealing, or usage of trade.”
Pillsbury Co. v. Wells Diary, Inc., 752 N.W.2d 430, 435 (Iowa 2008) (alteration in
original) (citations omitted).
JTTR contends this “greater burden” arises from the fact that—based on
the alterations made by JTTR—the manure produced is now far more valuable,
as manure from a finishing barn is more nutrient-rich than manure from a
farrowing barn. JTTR reasons that, when drafting the MEA, the “parties clearly
contemplated the MEA would apply to a farrowing barn.” Assuming such a
marked increase in the value of the manure exists, JTTR points to nothing in the
MEA or record that supports the parties contemplated such a limitation when the
MEA was executed.
We look first to the language of the MEA, as the agreement’s words are
“the most important evidence of the part[ies’] intentions at the time they entered
into the contract.” Id. at 436. The MEA provides the Langels have “a hog
confinement farrowing/finishing facility.” Nothing in the MEA indicates either
party intended the MEA to apply only to farrowing manure as opposed to
finishing manure. To the contrary, it is written to apply generally to “manure and
other animal waste generated by the livestock facilities.” JTTR argues,
“Nobody . . . contemplated the lengthy process of converting [the farrowing barn]
into a finishing barn.” But JTTR cites nothing to support this conclusion or to
8
indicate the MEA’s broad wording was not intended to cover such a
contingency.4 Accordingly, we affirm the district court on this issue.
C. Crop Rotation
JTTR next argues the district court erred in interpreting the MEA to adopt
a corn-on-corn rather than corn-on-soybean crop rotation. At issue is whether
the manure would need to be applied annually (under the corn-on-corn rotation)
or every other year (under the corn-on-soybean rotation). In its summary
judgment ruling, when interpreting the MEA language stating “[b]uyers will
receive enough manure to cover the 146 acres,” the district court found the term
“cover” was ambiguous.
At trial, both Ricke Langel and Thompson testified as to their intent when
entering into the MEA. Rick Langel stated he intended the MEA to employ a
corn-on-soybean rotation; Thompson testified to the opposite, stating a corn-on-
corn rotation was contemplated. After determining either interpretation was
reasonable, see Pillsbury, 752 N.W.2d at 436 (“When the interpretation of a
contract depends on the credibility of extrinsic evidence or on a choice among
reasonable inferences that can be drawn from the extrinsic evidence, the
4
JTTR relies on two cases: Schwob v. Green, 215 N.W.2d 240 (Iowa 1974), and
Schwartz v. Grossman, 173 N.W.2d 57 (Iowa 1969). In Schwob, the easement at issue
was one of “implication or necessity,” not “written grant or prescription.” 215 N.W.2d at
241. The defendant needed to use private roads in order to access property; however,
he had converted the property for commercial use, resulting in a marked increase in the
use of the private road. Id. at 242. Looking specifically within the context of an implied
easement, the supreme court affirmed the district court’s finding the easement was
granted only as to the defendant and his personal use, not to broader commercial use.
Id. at 243. In Schwartz, the plaintiff had an undisputed easement to use an alleyway.
173 N.W.2d at 59-60. The defendant then constructed various improvements that
hindered the plaintiff’s use of the alleyway. Id. The court concluded these
improvements “substantially destroyed the benefit of plaintiff’s right.” Id. at 60. Neither
of these cases is analogous to the case before us.
9
question of interpretation is determined by the finder of fact.”), the court explicitly
found Ricke Langel’s testimony was not credible, stating his testimony5 was
motivated by his desire to sell the hog facility. Upon our review of the record, we
defer to that finding. See State v. Weaver, 608 N.W.2d 797, 804 (Iowa 2000)
(“Determinations of credibility are in most instances left for the trier of fact, who is
in a better position to evaluate it.”).
In addition to weighing the testimony of the contracting parties, the district
court considered the testimony of the Langels’ attorney, who represented their
interests when entering into the purchase agreement with Thompson and
resulting MEA. In an affidavit, the Langels’ attorney admitted, “There were no
discussions between [himself, Thompson, Thompson’s son, or Thompson’s
attorney] concerning the [MEA] being limited to a certain crop rotation.”
Finally, the district court reviewed and found most compelling the terms of
the contract. The district court relied upon the following sentence, which appears
twice in the MEA: “Application [of the manure] shall be permitted after crops are
harvested in the fall of any calendar year during the term of this agreement and
up until the time for planting the following [s]pring.” The district court noted there
was no reference to fertilizing taking place every other year or that fertilizing
would occur on only half the property each year. To the contrary, the MEA
provides, “in the event the facilities are filled and the need to empty the pits and
lagoons of manure arises, [Thompson] shall be allowed as much manure as
needed to cover the ground associated with this easement.” The parties agree
the ground associated with the easement is the entire 146 acres. The district
5
Ricke Langel’s testimony was provided by deposition transcript.
10
court concluded the MEA “provided for annual applications of fertilizer, limited
only by whether or not the manure was generated in the facility.”6
There are no temporal limitations provided in the MEA beyond references
to annual occurrences.7 The MEA provides:
[Thompson] may sample the manure prior to application and
if [he] do[es], shall provide the results to [JTTR]. If, after the
sample is taken, [Thompson] has any concerns, [Thompson] shall
immediately contact [JTTR] to discuss the application plan for that
given year.
(Emphasis added.) JTTR attempts to avoid this annual provision by arguing
Thompson can apply manure to half of the property each year. But the MEA
says Thompson is “allowed as much manure as needed to cover the ground
associated with the easement” when “the facilities are filled and . . . need to [be]
empt[ied].” There is simply no indication of the limitation JTTR seeks to impose,
apart from Ricke Langel’s testimony, which the district court found was not
credible.
In support of its claim a corn-on-soybean rotation should apply, JTTR
notes this form of crop rotation is a normal farming practice and Thompson
planted soybeans, not corn, in 2012 and 2016. But interpreting the MEA to
conform to this “usage of trade” is not “reasonable” in light of the language of the
MEA itself. Pillsbury, 752 N.W.2d at 436. Further, the record reflects the MEA
was entered into in May 2012, and at that time the manure pits were empty.
6
This interpretation is also supported by the wording of the addendum to the purchase
agreement, which provided “[b]uyers will receive enough manure to cover the 146
acres.”
7
Consistent with this annual approach, Thompson is required to “keep and provide
[JTTR] with annual crop yield records” and “records of nutrient applications other than
[JTTR’s] manure.”
11
Thompson testified he planted soybeans in 2012 because he acquired the land
so late in the year only soybeans could be planted. As for 2016, JTTR stopped
providing manure in 2013. Accordingly, we cannot rely upon Thompson’s use of
soybeans as crop in 2012 and 2016—which do not require the same level of
fertilization as corn—in years when no manure was provided as proof of what
Thompson would have done and intended to do had manure been provided. We,
therefore, affirm the finding of the district court on the crop rotation issue.
D. Damages
Finally, JTTR argues the district court erred in calculating damages.
Thompson argues he suffered a total of $70,433.92 in damages from 2013
through 2015.8 According to his trial exhibit, Thompson reached this number by
utilizing the cost of commercial fertilizer. Thompson multiplied the “value of
fertilizer by gallon applied” with the number of “acres covered.” In 2013,
Thompson calculated his damages at $15,542.20 to cover half of his acreage, as
JTTR provided half of the manure required. In 2014 and 2015, Thompson
calculated his damages at $28,367.79 and $26,523.93, respectively, for
coverage of the full allotment of acres. In its order, the district court summarily
found “the damages established by the evidence are caused by the breach and
reasonably calculated” and awarded the full $70,433.92.
JTTR raises four issues on appeal: (1) the district court erred in awarding
damages for JTTR’s failure to provide the full 146-acres worth of manure in 2013;
(2) the district court erred in awarding damages for JTTR’s failure to provide
8
This represents the years the fertilization was applied, with the crop to be harvested the
following year.
12
manure in the fall of 2015; (3) the district court erred in using the cost of
commercial fertilizer as the measure of damages for replacement manure; and
(4) the district court erred in including as damages the cost of applying the
fertilizer.
“As a general rule, the party seeking damages bears the burden of proving
them; if the record is uncertain and speculative as to whether a party has
sustained damages, the factfinder must deny recovery.” Data Docs., Inc. v.
Pottawattamie Cty., 604 N.W.2d 611, 616 (Iowa 2000). “But if the uncertainty is
only in the amount of damages, a fact finder may allow recovery provided there is
a reasonable basis in the evidence from which the fact finder can infer or
approximate the damages.” Miller v. Rohling, 720 N.W.2d 562, 572 (Iowa 2006)
(citation omitted).
As to JTTR’s first claim, JTTR notes there was a dispute between the
parties as to whether Thompson’s field was ready to take the manure at the time
the manure pit needed to be emptied in 2013: Thompson’s son—who farms with
Thompson—testified the field was ready for manure application as required by
the MEA; a JTTR employee testified Thompson had not completed the harvest of
his 146 acres. By granting an award that included damages for 2013, and
denying JTTR’s post-trial motion that raised this issue, the district court implicitly
found the testimony of Thompson reliable. We defer to that finding. See
Weaver, 608 N.W.2d at 804.
JTTR next argues the district court erred in awarding damages for JTTR’s
failure to provide manure in the fall of 2015, because Thompson planted
soybeans in 2016 and soybeans do not require fertilizer. There is no evidence
13
Thompson actually purchased replacement fertilizer or manure, that his crops
(soybeans) suffered from the lack of fertilizer, or that Thompson had less profits
from soybeans than he would have earned from growing corn had he had the
fertilizer to support the growth of corn. See Midland Mut. Life Ins. Co. v. Mercy
Clinics, Inc., 579 N.W.2d 823, 830 (Iowa 1998) (“Typically, the nonbreaching
party’s recovery is limited to ‘the loss he has actually suffered by reason of the
breach.’” (citation omitted)). Because it was Thompson’s burden to prove he was
damaged, see Sun Valley Iowa Lake Ass’n v. Anderson, 551 N.W.2d 621, 641
(Iowa 1996) (“The party seeking damages has the burden to prove them.”), and
he has failed to demonstrate damages, we reverse the district court’s award of
damages for the 2015 to 2016 crop year. We therefore reduce the award by
$26,523.93 to a total of $43,909.99.
Next, JTTR argues the district court erred in using the cost of commercial
fertilizer as the measure of damages for replacement manure. The record does
not support that JTTR offered any alternative measurement to replace that of
commercial fertilizer; JTTR simply claims Thompson failed to prove the cost of
replacement manure. But Thompson had an agronomist testify regarding his
method of pricing manure based on “what a co-op or a fertilizer company would
pay for the fertilizer.”9 The agronomist did so by breaking the price down “to cost
9
Specifically, the agronomist testified: “Q. Okay. As part of your job, have you in the
past calculated a value of manure based upon the value of commercial fertilizer.
A. Yes.” On cross-examination, the agronomist conceded he did not make any effort to
establish some kind of market price for manure instead of using commercial fertilizer
costs, noting that would be “tough to do.” The nutrient management specialist similarly
testified there was no way that she knew of to calculate the cost differential between
manure and commercial fertilizer. But the agronomist also admitted “[i]t’s safe to say
that a lot of times” buying manure would cost much less than buying commercial
fertilizer.
14
per unit of nutrients.” The agronomist testified the trial exhibits relied upon by
Thompson in calculating his damages modeled the agronomist’s method of
calculating the value the manure based on commercial fertilizer. A second
party—a nutrient management specialist who writes manure plans and nutrient
management plans—testified she examined the exhibits relied upon by
Thompson and verified the accuracy of their numbers. She further testified she
found this method to be an accurate way of valuing the manure. We find this
testimony provides a reasonable basis for the district court’s reliance on the
damages as calculated by Thompson.
Finally, JTTR argues the district court erred in including as damages the
cost of applying the fertilizer, when the MEA explicitly imposes this cost on
Thompson. Thompson does not dispute the MEA imposes this cost on him; he
argues the cost of application was not included in his calculations. Further,
Thompson notes JTTR failed to argue the exclusion of or value of application
costs at trial. JTTR appears to be relying upon the language in Thompson’s trial
exhibit—which states it reflects the “value of fertilizer by gallon applied”—to
support that Thompson’s calculations include the expense of actual application.
But Thompson’s agronomist testified the numbers he used represented
wholesale costs. We find the evidence sufficient to support the district court’s
order as to the years prior to 2015 and, therefore, affirm as modified for a
damages judgment in the amount of $43,909.99.
E. Appellate Attorney Fees
“In general, attorney fees will be awarded to a prevailing party only if
pursuant to statute or written contractual provision.” Lara v. Thomas, 512
15
N.W.2d 777, 786 (Iowa 1994). The MEA contains an indemnification agreement
providing “the parties hereby agree to indemnify and hold harmless each other
for all costs related to or generated as a result of any action, duties or failure to
act . . . with such indemnification to include . . . attorney’s fees and any other
related costs.” Thompson claims fees in the amount of $4068. Given the results
of this appeal, we determine Thompson is entitled to an award of appellate
attorney fees in the amount of $3000.
IV. Conclusion
We affirm the district court except for its award of damages for the 2015 to
2016 crop year. We grant a portion of Thompson’s request for appellate attorney
fees. We remand for entry of judgment consistent with this opinion. Costs are
assessed to JTTR.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.