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Monsanto Co. v. KT Farms Partnership

Court of Appeals of Louisiana, Second Circuit

November 15, 2017

MONSANTO COMPANY Plaintiff-Appellee
v.
KT FARMS PARTNERSHIP Defendants-Appellants

         Appealed from the Sixth Judicial District Court for the Parish of Tensas, Louisiana Trial Court No. 23583 Honorable Michael E. Lancaster, Judge

          MICHAEL E. KRAMER Counsel for Appellants

          LEVIN LAW OFFICES Counsel for Appellee By: Richard B. Levin J. Brint Marks

          Before BROWN, GARRETT, and COX, JJ.

          GARRETT, J.

         The defendants, KT Farms Partnership ("KT Farms"), Kyle Aymond, Thad Herron, KT-One Farms, LLC ("KT-One") & Thad Kyle Investments, LLC ("TKI"), appeal from a trial court judgment finding them all liable in solido to the plaintiff, Monsanto Company ("Monsanto"), in the amount of $671, 041.60 for seed and products, plus interest and court costs, as well as attorney fees of $50, 000. For the following reasons, we amend in part, and as amended, affirm the trial court judgment.

         FACTS

         Aymond and Herron were farmers in Tensas and Franklin Parishes, and they, along with KT-One, were partners in KT Farms. Aymond and Herron formed KT-One and TKI. In February 2011, KT Farms submitted an interest-free seed financing application to Monsanto, requesting a credit limit of $245, 000. This document was signed by Aymond. In addition, he signed an "Interest Free Seed Financing" agreement with Monsanto that is the subject of this case. The dealer who was to supply the Monsanto products under this agreement was Tensas Farm Service ("Tensas").

         Also in 2011, TKI executed a guaranty agreement to cover the obligations of KT Farms to Monsanto. Aymond signed the guaranty on behalf of TKI. All purchases made by KT Farms from Monsanto in 2011 were paid for.

         In 2013, Aymond and Herron, on behalf of KT Farms, signed one page of an incomplete document reflecting that the local dealer had been changed to Helena Chemical Company ("Helena"). According to Monsanto, in 2013, KT Farms purchased a total of $671, 041.60 in seed and other products and did not pay for the goods. Demand for payment was made by certified letters mailed in February 2014 to Aymond and Herron as partners of KT Farms.[1] The letters were unclaimed and were marked "return to sender."

         In July 2014, Monsanto filed a petition to collect under the 2011 financing agreement, naming as defendants KT Farms, through its partners, Aymond, Herron, and KT-One, and TKI as guarantor of KT Farms. Attached to the petition was a blurred and partially illegible copy of the financing agreement signed by Aymond in 2011; a copy of a page from an unidentified document changing the dealer to Helena, which was signed in 2013 by Aymond and Herron on behalf of KT Farms as customer; a copy of the guaranty signed by Aymond on behalf of TKI in 2011; and copies of the demand letters to KT Farms through Aymond and Herron. Monsanto alleged that, under the terms of the agreement, the defendants were liable for the debt, as well as 18% interest per year on the debt from December 31, 2013, until paid, plus 25% attorney fees.

         The defendants filed an answer alleging that the copy of the 2011 agreement attached to the petition was not legible, making it impossible to determine the terms and conditions of the alleged agreement. The defendants urged that there was no information to support the claims of purchase of product, and that 25% attorney fees were excessive. They also disputed the balance owed. A pleading in the record indicates that in October 2015, KT Farms filed for bankruptcy, which was dismissed in April 2016, and the bankruptcy stay was lifted.

         The matter was tried on November 30, 2016. Sharon Hernandez, the collection manager for Monsanto from Missouri, testified that KT Farms applied to Monsanto for credit through an interest-free credit financing agreement in February 2011. The agreement was to cover any purchases made from Monsanto until cancelled. Aymond, on behalf of TKI, signed a guaranty agreement to cover the debt of KT Farms to Monsanto. Copies of the credit application, the 2011 agreement, and the guaranty agreement were filed into evidence. However, the copy of the 2011 agreement filed into evidence was not entirely legible and was introduced over an objection by the defendants. As explained in one of the briefs on appeal, the original document was electronically stored. The resulting copy was only partially legible. Monsanto produced neither the original agreement signed by Aymond nor a legible copy.

         Hernandez identified a blank agreement submitted by Monsanto that purported to supply the missing language in the original agreement. It also provided a copy of a document signed by Aymond and Herron on behalf of KT Farms in 2013, when the Monsanto dealer was changed to Helena. Monsanto did not argue that KT Farms executed a new financing agreement in 2013. Hernandez stated that the only change to the 2011 agreement was that Helena became the dealer instead of Tensas. These documents were admitted into evidence, subject to the defendants' objection that they were not complete.

         Credit memos and delivery tickets were admitted into evidence to prove that KT Farms made the alleged purchases from Monsanto. Hernandez testified that these documents corroborated the Monsanto statement of account, dated February 18, 2014, which was also admitted into evidence. She stated that Monsanto had not received payment for any of the charges, even though formal demand for payment had been made on the defendants. According to Hernandez, the goods were supplied by Helena, but the debt was owed to Monsanto.

         On cross-examination, Hernandez acknowledged that the 2011 agreement had a credit limit of $245, 000; she opined that KT Farms asked for and received a higher credit limit. She stated she did not know if any purchases were made in 2012, or what the credit limit was in 2013.

         Mike Willis, a credit manager for Helena from Tennessee, identified documents connected with the sale of the Monsanto goods to KT Farms in 2013. He said that, once executed, a financing agreement remained in effect and the only paperwork that would have to be resubmitted to Monsanto would be acknowledgement of a change of dealer. This would allow the new dealer to receive payments from Monsanto. Willis identified the invoices and delivery tickets sent from Helena to Monsanto for payment. When Monsanto paid Helena, Helena assigned all rights for payment on the invoices to Monsanto. Willis identified credit memos from Monsanto to Helena for the invoices submitted for payment.

         Willis said that customers often called in orders which Helena delivered to the farms after purchase. Sometimes they were signed for and sometimes they were not. He was asked how Helena verified that the person placing the order was the person who received the delivery. He stated that their locations were very familiar with their customers and recognized their voices on the telephone. They also knew the locations where the products were to be delivered. He said sometimes a customer will pick up an order. Willis testified that he did not know of any complaints that orders placed for KT Farms were not legitimate or were not delivered.[2]

         Aymond testified that he and Herron handled all orders placed with Helena. Sometimes they would call the store and sometimes they went to the store to place orders. Products were then delivered to them. Aymond examined the delivery tickets and invoices and observed that some of them were difficult to read. He claimed the tickets were not signed by people connected with KT Farms and said he had no way to know if he received the seed and supplies represented by the tickets.

         On cross-examination, Aymond acknowledged signing the financing agreement with Monsanto in 2011, with a $245, 000 credit limit, but said the signature on the document supplied by Monsanto did not look like his. He also denied ever signing a personal guaranty agreement or entering into a financing agreement with Helena as the supplier in 2013.

         Herron was called by Monsanto on cross-examination. He acknowledged that, in 2011, KT Farms applied to Monsanto for interest-free financing. He examined the 2011 financing agreement and said the signature on the document looked like Aymond's. Herron acknowledged that KT Farms made purchases from Helena in 2013. He said he was a partner in TKI, but did not remember the company signing a guaranty agreement with Monsanto in 2011. Herron first testified that KT Farms did not file for bankruptcy in 2015. He later said that Aymond filed the paperwork, but KT Farms did not go through with the bankruptcy. He did not know if the $671, 041.60 debt at issue in this case was listed as a debt in the bankruptcy filings or if he signed the bankruptcy papers.

         The trial court took the matter under advisement and issued written reasons and a judgment in favor of Monsanto. In the reasons for judgment, the trial court found that, in 2011, KT Farms entered into the "Interest Free Seed Financing Agreement" with Monsanto. The court found that TKI, "Kyle Aymond and Thad Herron guaranteed the obligations of KT Farms." In 2013, the dealer was changed from Tensas to Helena. The court stated that, from April to June 2013, KT Farms used the credit extended in the financing agreement to obtain products totaling $671, 041.60. No payments were made and no response was made to Monsanto's demand for payment. The court noted that, at trial, Aymond and Herron claimed that the goods were not delivered to KT Farms.

         The court found that Monsanto carried its burden of proof on the amount owed and noted that the agreement called for 18% interest per year, from December 31, 2013, until paid, along with reasonable attorney fees. According to the court, Monsanto sought 26% attorney fees, which would amount to $175, 000, but the trial court found this was unconscionably excessive.[3] The trial court considered the hours worked, the expertise of the attorney, and the fact that the attorney took the case on a 15% contingency fee agreement. The court noted that the matter required more skill than a regular open account case. The trial court awarded attorney fees in the amount of $50, 000. The trial court signed a judgment in favor of Monsanto and against KT Farms, Aymond, Herron, KT-One, and TKI, in solido, for $671, 041.60, plus 18% interest per year on the unpaid balance from December 31, 2013, until paid, together with court costs and $50, 000 in attorney fees. The defendants appealed.

         RIGHT TO RECOVER ON DEBT, INTEREST, AND ATTORNEY FEES

         The defendants argue that the trial court erred in granting judgment in favor of Monsanto based upon the provisions of the 2011 and 2013 "Interest Free Seed Financing" agreements. They maintain that the 2011 agreement filed into evidence was illegible, making it impossible to determine its terms and provisions. They assert that the first three pages of the 2013 agreement were blank. Therefore, according to the defendants, there are no applicable provisions in either agreement which would render them liable to Monsanto.

         The defendants also argue that the trial court erred in awarding Monsanto $50, 000 in attorney fees. They contend that the 2011 and 2013 agreements did not provide for the award of attorney fees. In the alternative, the defendants argue that, if attorney fees are due, Monsanto is limited to an award of reasonable attorney fees. Based upon the affidavit of Monsanto's attorney regarding the amount of work done in this matter, Monsanto should only recover $15, 000, not $50, 000 as awarded by the trial court.

         As will be discussed below, we find that the trial court properly awarded Monsanto the money due for items purchased by KT Farms, but erred in basing that decision entirely on the 2011 agreement. Also, the trial court erred in awarding interest and attorney fees based solely upon the 2011 contract and erred in the amounts awarded. The trial court further erred in finding that Aymond and Herron personally guaranteed the debts of KT Farms, in addition to the guaranty executed by TKI, and erred in finding all the defendants liable to Monsanto in solido.

         2011 Agreement

         While the trial court properly awarded Monsanto $671, 041.60 for charges made by KT Farms, it erred in basing that decision solely upon the terms of the 2011 financing agreement. The copy of the 2011 contract filed into evidence does not contain any legible provisions setting an 18% per year interest rate or entitling Monsanto to recover attorney fees. The legible portion of the 2011 agreement provided:

         FarmFlex 2010-2011

Interest Free Financing Agreement
[Illegible] below ("Customer") agrees to pay Monsanto Company ("Monsanto") for the purchase of Monsanto seed products that Customer has [Illegible] Dealer listed below and that the Dealer has assigned to Monsanto pursuant to the terms of Monsanto's current FarmFlex Financing [Illegible] of Customer's purchases that the Dealer may assign to Monsanto is limited to the Customer's credit limit approved in relation to this [Illegible] may change or withdraw that credit limit at anytime [sic], except to the extent seed that has already been delivered to ...

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