The Bar ZF Ranch appeals a Chouteau County District
Court judgment awarding William Albers (Albers) damages and
costs of suit for breach of an oral contract. The District
Court, sitting without a jury, found that the Bar ZF Ranch
(Bar ZF) breached its obligation to allow Albers to
participate in the 1982 federally sponsored farm subsidy
program on farm land owned by Bar ZF and leased by Albers.
The District Court awarded Albers $18,671.04 for loss of farm
program deficiency payments, storage payments, and loss in
sales price of grain. The District Court also awarded Albers
prejudgment interest pursuant to S 27-1-211 and S 30-1-106,
MCA. Defendant Bar ZF Ranch appeals. We affirm in part,
reverse in part, and remand with instructions to recalculate
prejudgment interest.
The Bar ZF Ranch is a 3,700-acre farm located in
Chouteau County, near Carter, Montana. In 1967, the owners
of the Bar ZF, Ray and Audie Lohr, entered into an oral lease
agreement with William Albers whereby Albers would farm
approximately 1,800 acres on the Bar ZF in exchange for
two-thirds of each crop. Albers resides near Fort Benton and
farms various farmlands with his brother. The 1,800 acres
included approximately 640 acres leased by the Bar ZF from
the State of Montana. There are also 2,000 acres of
grassland on the Bar ZF that were not Albers' responsibility.
Ray Lohr and Albers worked closely together in the operation
of the farm, but farm practices were generally left t o .
Albersl discretion. In addition, Albers was to furnish all
necessary seed, fuel, fertilizer, machinery, and weed killer.
Ray Lohr died in 1979 and left Mrs. Lohr as the
presiding officer of the Bar ZF Ranch corporation. Albers
continued to farm the Bar ZF after Ray Lohrls death with very
little participation from Mrs. Lohr in day-to-day farming
operations. Albers decided what crops to plant on what
acreage and whether to participate in the federal farm
program. On March 24, 1982, Mrs. Lohr applied to participate
in the farm subsidy program with the Agricultural
Stabilization and Conservation Service (ASCS), United States
Department of Agriculture. Mrs. Lohr signed and filed the
ASCS papers at Albers' request, hut she later professed
ignorance as to the general requirements and procedures of
the farm program.
To be eligible for farm subsidy benefits for wheat, the
Bar ZF was required to limit wheat planting to 712.5 acres.
At the time of the ASCS application, Albers had approximately
705 acres of winter wheat seeded on the Bar ZF. Under the
wheat subsidy program as it then existed, the Bar ZF would
have qualified for deficiency payments and annual storage
payments for 1982 wheat stored in the federal government
reserve loan program.
During the winter of 1981, Mrs. Lohr decided to retain
a permanent tenant for the Bar ZF so she could move to Fort
Benton for health reasons. Thereafter, Mrs. Lohr entered into
an oral farm lease with Robert Bronec (Bronec) whereby Bronec
would farm and live on the Bar ZF after the 1982 harvest.
This agreement was later reduced to writing in the fall of
1982. Mrs. Lohr did not ask Albers to live on the Bar ZF
because Albers had his own farm near Fort Benton. Albers was
not informed of the Bronec lease until the end of March,
1982. Mrs. Lohr gave Albers written notice of the
termination of his lease in a letter dated April 5, 1982.
The letter required Albers to summerfallow the Bar ZF before
quitting the property. Mrs. Lohrls April 5th letter also
expressed her satisfaction with the general working
relationship between the Lohrs and Albers since Albers began
farming the Bar ZF in 1967.
Upon learning that his lease with the Bar ZF was to
end, Albers decided not to participate in the farm subsidv
program. Instead, Albers determined that the heavy stubble
and reserve moisture on the Bar ZF acreage would provide
ideal conditions for burning and recropping. Albers
testified at trial that he discussed his intentions with Mrs.
Lohr and they agreed that Albers could withdraw from the farm
subsidy program and recrop one-half of the Bar ZF stubble
acreage. The Bar ZF apparently had never been recropped in
this manner and Mrs. Lohr was reluctant to agree to Albers'
request. Mrs. Lohr testified that she was "unclear" as to
whether she told Albers he could recrop and that she probably
told him to discuss the matter with Bronec.
Albers prepared for the reseeding by burning a 184.6
acre field and by preparing a fire guard around another 94.5
acre field on May 1, 1982. Albers also cleaned seed grain,
bought fertilizer, and moved machinery in preparation for the
recropping. Mrs. Lohr noticed the smoke from the May 1st
burning and personally delivered a note to Albers that
afternoon to demand that he quit burning stubble. Mrs. Lohr
objected to recropping at that time because she believed that.
recropping would hurt the subsequent tenant, Bronec, and
because she believed there was insufficient reserve moisture
in the soil. Albers testified that Mrs. Lohr appeared very
upset and that he acquiesced to her demands in concern for
her health.
Sometime after May 1, 1982, Mrs. Lohr had Bronec probe
the soil on the Bar ZF to determine if there was sufficient.
moisture to recrop. The probes revealed marginal to
sufficient moisture on the fields in question. On May 3,
1982, Mrs. 1,ohr contacted the Montana State Department of
Lands to request permi.ssion to recrop the 640 acres of State
land leased to the Bar ZF.
Albers returned to the Bar ZF on May 5, 1 9 8 2 , and
talked with Mrs. Lohr- about what to do with the farm. They
agreed that Albers would be excused from leaving summerfallow
on the Bar ZF in exchange for his assurance that he would
attempt no further recropping. The parties exchanged written
agreements to that effect. Albers testified at trial that he
also told Mrs. Lohr that he would again be participating in
the farm subsidy program for wheat on the Bar ZF if she wou1.d
not allow him to recrop. Mrs. Lohr testified that she was
not told that Albers was back in the farm program.
A few days later, Albers observed Bronec planting on
the burned acreage. Mrs. Lohr had given Bronec permission to
seed the burned acreage to prevent erosion. Albers did not
talk to Bronec and assumed that Bronec was planting barley or
some other crop which would not effect the Bar ZF's
compliance with the farm program. Bronec seeded two fields
to wheat and one to barley by about May 1 2 , 1 9 8 2 . Albers
testified that he returned to the Bar ZF around May 1 9 , 1 9 8 2 ,
to discover that Bronec had planted wheat in an amount
sufficient to disqualify the Bar ZF from the farm subsidy
program.
On June 2 2 , 1 9 8 2 , Albers had his attorney write Mrs.
Lohr to inform her that "the present operator of the Bar ZF
Ranch has exceeded the allowable wheat acreage" for
compliance with the farm subsidy program and that
noncompliance with the program would cause Albers financial
damage. Mrs. Lohr returned to the Bar ZF from an
out-of-state trip to find the letter on July 1, 1 9 8 2 .
Thereafter, Mrs. Lohr had two weeks to bring the Bar ZF in
compliance before the July 15, 1 9 8 2 , ASCS deadline. Mrs.
Lohr elected not to destroy the additional wheat so as not to
damage Bronec. As a consequence, the Bar ZF was not able to
participate in that year's farm subsidy program.
Albers brought suit against the Bar ZF on November 14,
1984. In his amended complaint, filed on July 29, 1986,
Albers alleged breach of contract, estoppel, bad faith,
constructive fraud, unjust enrichment, constructive
evictment, and breach of the covenant of quiet enjoyment.
The Bar ZF counterclaimed with allegations that Albers failed
to summerfallow and failed to control weeds on the Bar ZF.
The case was tried before the District Court sitting without
a jury on November 17 and 18, 1986. On February 6, 1987, the
District Court issued its findings, conclusions, and decree
awarding Albers contract damages, prejudgment interest and
costs. The Bar ZF appeals and raises the following issues:
(1) Did the District Court err in determining that the
Bar ZF had a legal duty to William Albers?
(2) Was there sufficient evidence to support the
District Court's award of damages to Albers?
(3) Did the District Court err in awarding Albers
prejudgment interest?
(4) Did the District Court err in denying Bar ZF's
counterclaims?
In its first issue, the Bar ZF argues that it owed no
obligation, or duty, to assure that Albers was in compliance
with the farm subsidy program requirements. The District
Court made the following findings and conclusions relevant to
thi-s issue.
6. The court concludes that the oral,
year-to-year agreement between the Bar ZF
and Albers was a lease.
7. Lohr and Albers appeared to farm
within the customary practices applying
to oral leases in the area.
8. The lessee was obligated to follow
the better customary farm practices in
the community.