Weiszhaar Farms, Inc. v. Tobin

522 N.W.2d 484, 1994 S.D. LEXIS 158, 1994 WL 515313
CourtSouth Dakota Supreme Court
DecidedSeptember 21, 1994
Docket18184, 18241
StatusPublished
Cited by13 cases

This text of 522 N.W.2d 484 (Weiszhaar Farms, Inc. v. Tobin) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Weiszhaar Farms, Inc. v. Tobin, 522 N.W.2d 484, 1994 S.D. LEXIS 158, 1994 WL 515313 (S.D. 1994).

Opinions

FITZGERALD, Circuit Judge.

Weiszhaar Farms, Inc., L.J. Hog Company, Inc., and Leroy Weiszhaar (collectively Weiszhaar) appeal from an indemnity and legal malpractice action against attorney Tom Tobin of Aberdeen. The matter was tried before the circuit court of Brown County, with the Honorable Patrick J. McKeever presiding. A jury verdict was entered for defendant Tom Tobin (Tobin). Tobin appeals from the trial court’s refusal to tax as a disbursement the fee of his expert witness. We affirm in part, reverse in part, and remand.

STATEMENT OF FACTS

Leroy and JoAnne Weiszhaar operated a farm and livestock operation near Leola, South Dakota through two corporations known as Weiszhaar Farms, Inc., and L.J. Hog Company, Inc. In 1985 Weiszhaar started getting into financial trouble with the Leola State Bank. About the same time, the bank changed ownership and was renamed the Livestock State Bank (Livestock Bank). On June 13,1986, the new bank management advised Weiszhaar that the bank would no longer finance Weiszhaar’s operation in its present condition and gave Weiszhaar ninety days to pay off a loan balance of $613,719.38. Weiszhaar wanted to keep farming and went to Tobin to determine what could be done to keep his operation going. Tobin advised Weiszhaar that he could either pay the debt owed to Livestock Bank or file a Chapter 11 bankruptcy petition for his corporations. Weiszhaar filed a Chapter 11 petition for the two corporations on September 2, 1986 with the understanding that the filing would give him some time to develop a plan to manage his debt and prevent Livestock Bank from immediately foreclosing on his property.

In the spring of 1987, Livestock Bank offered to settle Weiszhaar’s entire debt for $500,000.00. At that time Weiszhaar either could not, or did not, desire to avail himself of the offer. However, Weiszhaar agreed to make some payments to Livestock Bank in accordance with a cash collateral agreement which the Bankruptcy Court approved. These payments were not made.

In that same year, Weiszhaar went to Ashley, North Dakota to meet with Mark Sehau-naman from the McIntosh County Bank (McIntosh Bank) to negotiate the possibility of the McIntosh Bank taking over the entire loan from the Livestock Bank. These negotiations carried over to 1988, with Weiszhaar reporting back to Tobin that the McIntosh Bank was going to loan him $500,000.00. However, McIntosh Bank’s desire to loan Weiszhaar money dried up concomitantly with the weather.

In late April 1988 attorney Tobin and attorney Robert Hayes, who represented Livestock Bank in the bankruptcy proceeding, agreed on an oral stipulation before the Bankruptcy Court which settled the Weiszh-aar debt to Livestock Bank for $685,000.00. The resulting Bankruptcy Order provided a payment schedule where $80,000.00 was due May 2, 1988; $105,000.00 was due June 10, 1988 and $500,000.00 was due June 25, 1988. The stipulation also required Weiszhaar to have, by May 27, 1988, a loan commitment for $500,000.00. In the event that the above payments were not made or the loan commitment was not obtained, the stipulation’s “drop-dead” clause became effective. It allowed Livestock Bank to immediately liquidate the Weiszhaar property to pay the entire debt due of $819,374.84. If Weiszhaar had made the payments as provided for in the stipulation, Weiszhaar would have saved [486]*486approximately $134,000.00 from- the actual total debt owed.

The $80,000.00 payment was made from cash on hand, while some yearlings were liquidated to produce the $105,000.00 June 10th payment. Weiszhaar, however, was unable to obtain the loan commitment by May 27th or make the $500,000.00 June 25th payment. At that point in time, Livestock Bank was legally entitled to repossess all of Weiszhaar’s collateral and recover the total original loan balance of $819,374.84 minus the previous payments of $185,000.00. Livestock Bank did not immediately take action against Weiszhaar upon default.

At this point, Mark Schaunaman suggested that McIntosh Bank and Livestock Bank in effect split Weiszhaar’s indebtedness. Under this plan McIntosh Bank would loan Weiszh-aar $320,000.00 secured by personal property (livestock and machinery), $235,000.00 of this to be paid to Livestock Bank in partial repayment of debt. The remaining $85,000.00 would be kept by Weiszhaar to buy replacement livestock for those sold to make the $105,000.00 June payment. Purchase of replacement livestock with the $85,000.00 retained was absolutely necessary in the eyes of McIntosh Bank to provide adequate cash flow for debt service from Weiszhaar’s operation. Under this plan, Livestock Bank was to continue to carry a loan in the amount of $265,000.00 secured by Weiszhaar’s real estate. The Livestock Bank loan was depen-dant upon the further condition that Weiszh-aar obtain a 90% FmHA guarantee of the loan.1

On June 2, 1988, Livestock Bank wrote a letter informing Weiszhaar to assemble the livestock and machinery forthwith so that liquidation could begin due to Weiszhaar’s default. However, the negotiations between Weiszhaar, McIntosh Bank and Livestock Bank continued and resulted in another stipulation (second stipulation). Tobin was not involved in the negotiation of this second stipulation. Tobin testified that he was informed by Weiszhaar the agreement would not explicitly state that $85,000.00 of the $320,000.00 loaned by McIntosh Bank would be retained by him because it had to look like all the money was going to the banks. Tobin further testified that Weiszhaar informed him if there had been any such provision included in the second stipulation, there would not have been a deal. Boyd D. Hopkins, Jr., President of Livestock Bank, confirmed with his testimony that if the second stipulation read that $85,000.00 was to be retained by Weiszhaar, the bank would not have signed the second stipulation.

Tobin informed Weiszhaar that he was skeptical of Livestock Bank allowing the retention of $85,000.00 from the loan proceeds without explicitly stating it in the second stipulation, and as such, the promise to allow retention of the monies would not be legally enforceable. The second stipulation, drafted by Robert Hayes, Livestock Bank’s attorney, was sent to Tobin. Tobin forwarded it to Weiszhaar with a letter requesting that he review the stipulation and call Tobin to further discuss the matter.

Weiszhaar reviewed the second stipulation, signed it, wrote a note concerning the terms of the stipulation and returned it to Tobin. In the note Weiszhaar asked Tobin to see if he could extend the loan period and lengthen the reporting time after sale of livestock. Weiszhaar also informed Tobin that he did not have the funds to pay the additional interest payment of $4,583.00, which was in consideration for the new extension, but that it could be paid out of the $85,000.00 that he was intending to retain from the loan. Weiszhaar’s note said nothing about the lack of a provision in the second stipulation regarding the retention of $85,000.00 out of the $320,000.00 loan proceeds from McIntosh Bank. Tobin testified that Weiszhaar did not question the absence of the $85,000.00 retention, because Weiszhaar knew all along that it was going to read that way.

[487]*487The deadlines imposed by the second stipulation were not met. Additionally, during the processing of the various loan applications, Livestock Bank explicitly stated that it was going to insist on retaining the entire $320,000.00 loan proceeds and not allow Weiszhaar to retain the $85,000.00 to buy replacement livestock.

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Weiszhaar Farms, Inc. v. Tobin
522 N.W.2d 484 (South Dakota Supreme Court, 1994)

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Bluebook (online)
522 N.W.2d 484, 1994 S.D. LEXIS 158, 1994 WL 515313, Counsel Stack Legal Research, https://law.counselstack.com/opinion/weiszhaar-farms-inc-v-tobin-sd-1994.