HomeMy WebLinkAbout99-1677 EquityJAMES E. DEITCH,
Plaintiff
VS.
FRED E. DEITCH,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
99-1677 EQUITY
CIVIL ACTION - EQUITY
OPINION AND DECREE
BEFORE HESS. J.
The plaintiff, James E. Deitch (James), and the defendant, Fred E. Deitch (Fred), are
brothers. This case arises from the dissolution of their farm business partnership known as
Deitch Farms. On December 31, 1995, Patricia Day Deitch, the parties' mother, executed and
delivered to James and Fred a series of deeds conveying to them as tenants-in-common the land
constituting the farm. On January 1, 1996, James and Fred entered into a written partnership
agreement under the name of Deitch Farms which sought to continue a dairy farm business
which had been previously conducted by their parents. On March 12, 1999, James filed the
instant action seeking to buy out Fred's one-half interest or, in the alternative, to partition the
assets and liabilities of the partnership.
The parties eventually agreed to mediation by Robert M. Frey, Esquire. Mr. Frey
recommended that one party offer a settlement proposal that he would be willing to take or give
and the other party would choose one side or the other of the proposal. On March 14, 2000, Fred
gave to James a proposal containing two options that he, himself, would either take or give.
James selected the second of the two options. Then began a series of letters between attorneys.
These were memorialized in a stipulation which was entered by the court on March 29, 2000.
This stipulation reflected that the only outstanding and unresolved issues were a debt James
believed was allocable to a certain building lot and a one thousand gallon fuel tank.
NO. 99-1677 EQUITY
After the stipulation was entered on March 29, 2000, a number of differences have arisen
between the parties. These differences are addressed in "Defendant's Petition to Confirm
Settlement" (May 23, 2000), "Plaintiff' s Answer to Defendant's Petition to Confirm Settlement,
with New Matter and Petition for Enforcement of Settlement" (May 31, 2000), "Petitioner' s
Reply to Respondent's New Matter" (June 14, 2000), "Plaintiff' s Answer to Defendant's Petition
to Enforce Settlement, and Cross-Petition of Plaintiff for Enforcement of Settlement" (November
13, 2002), and "Defendant's Answer to Plaintiff' s Cross-Claim for Enforcement of Settlement"
(January 7, 2003). The matters raised in these pleadings were heard at a hearing on June 4, 2003.
We will discuss the resolution of the various issues separately.
I. Subdivision of the Shughart Farm Property
The agreement between James and Fred provided for the subdivision of two properties
owned jointly by the brothers. The properties were the "Home Farm" and the "Shughart Farm."
The Shughart Farm requires subdivision to implement the parties' agreement. The southeastern
portion of the Shughart Farm is crossed by North Dickinson School Road so that about seventeen
acres of this tract are southeast of the road and the remainder of the Shughart Farm is northwest
of the road. Under the agreement, the Shughart Farm was to be subdivided with the side A
partner (Fred) receiving twenty acres and barn buildings and the side B partner (James) receiving
the remaining acreage, estimated to be eighty-three acres. The precise acreage found to be
remaining was to be determined by a survey. The boundary line of the end of the tract, or
"boot," was to be adjusted accordingly. The issue in dispute is whether the parties agreed that
James' parcel will have road frontage or whether it would be landlocked and simply added to
James' adjacent home farmland property. Both parties agree that no mention was made, in any
of the settlement documents, that James' portion of the Shughart Farm would include access to
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North Dickinson School Road. Fred points to a letter from James' attorney dated September 20,
1999, acknowledging that there would be no road frontage. This, however, was with respect to
James' retention of seventy acres as opposed to the approximately eighty-three acres eventually
agreed upon.
It is true that the Shughart Farm can be subdivided without James' access to North
Dickinson School Road. Such a landlocked parcel can be used, however, only if it abuts a tract
of land owned by the same person. With road frontage, the tract can be subdivided so that it may
be held independently of any adjoining land. This latter subdivision is in accordance with
township ordinances and involves sensible land use planning. It simply makes no sense to create
landlocked parcels when more sensible alternatives are readily available.
Most importantly, however, utilizing the three-acre adjustment in the "boot" in a manner
which would assure road frontage most closely implements the agreement of the parties. James
correctly contends that the parties agreed that the price per acre of the Shughart farmland going
to each party would be the same. If the eighty-three acre portion of the Shughart acreage is left
without road frontage, it is significantly less valuable than the property which would go to Fred.
Accordingly, we will direct the subdivision of the Shughart Farm in accordance with Carl B.
Bert's drawing number 3, plaintiff's exhibit number 2, with a direction that the green shaded area
thereof be conveyed along with the brown shaded area to James and the yellow portion, along
with the remainder of the farm, conveyed to Fred.
II. Milk Checks
Dairy farmers are paid twice per month for their milk production. In the case of Deitch
Farms, these checks were received toward the end of the month and in the beginning of the
following month. Effective March 17, 2000, the partnership was dissolved and James became
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solely responsible for the dairy herd. (N.T. 22). On March 27, 2000, a milk check in the amount
of $7,390.00 was deposited into the Deitch Farms partnership account. (Id.)
In this respect, the Settlement Agreement states:
Partnership Checking Account: The partnership checking
account shall be frozen as of March 17, 2000 except that the
partner receiving Side A shall be entitled to withdraw
$15,000.00 which shall be considered partnership assets.
Thereafter, the partnership checking account shall be used only
to pay partnership debt incurred prior to March 17, 2000 and
no further withdrawals shall be permitted without the
agreement of both parties. With the exception of $8,000 of
milk checks referred to in 10 below, all income to which the
partnership became entitled to before March 17, 2000 shall be
deposited into the partnership checking account whenever
received. Then the account shall be closed, and the balance
divided equally between the partners on December 31, 2000.
Any SCC money to which the partnership became entitled
prior to March 17, 2000 shall be deposited into this account.
10.
Milk Money: The first $8,000.00 of milk checks received on
or after March 17, 2000 shall be considered partnership assets
and shall be part of Side A. (Defendant's Exhibit #1)
James correctly observes that under the settlement agreement, the partner continuing the
dairy operation was to receive $15,000 in cash and an additional $8,000. In March of 2000,
James received a total of $23,000 from the partnership account. (N.T. 23). In early April 2000,
Fred and James signed an authorization directing Land O'Lakes to make all further milk checks
payable directly to James by deposit to his personal bank account.
Fred contends that the additional $8,000.00, above referenced, should be paid back to the
partnership, asserting that this was an overpayment to his brother. James, citing the above
referenced language in the stipulation, contends that, inasmuch as the "first check received after
March 17, 2000" did not come to him but, instead, went into the partnership account, he was
properly reimbursed for that amount.
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On this issue, the stipulation and the correspondence is extremely confusing. Our
paramount goal, in this regard, is, of course, to ascertain and to give effect to the parties' intent.
Dieter v. Fidelcor, Inc., 657 A.2d 27 (Pa. Super. 1995). In order to do this, we must look not only
to the stipulation but also to the subsequent correspondence of counsel. It appears clear that the
parties intended to freeze the bank account of the partnership so that it could be divided at the
end of the year 2000. Deposits into the partnership checking account would include all income
to which the partnership became entitled to prior to March 17, 2000. Logically, the partnership
would get the benefit of approximately half of the milk sold in the month of March. Since James
ran the dairy farm after the middle of March, it is to be expected that he would receive the
income from the sale of milk. The check for the last half of March was received in April. What
complicates the situation is that the April check was not the first milk check received "on or after
March 17, 2000."
We are satisfied that the parties intended to split the income from milk sales in the month
of March with the first half going to the partnership and the second half going to James. Thus,
Mr. Beshore wrote in his letter of March 21, 2000, that "[w]e understand that the first milk check
received in April will become partnership account proceeds, to the extent that it is greater than
$8,000.00. All subsequent checks for milk proceeds will be Jim's property as the dairy farm
proprietor." Apparently, the parties assumed that the April milk check would be deposited in the
partnership account and that the only way to give effect to their agreement was to write a check
from the partnership account to James for an additional $8,000.00. James received this
$8,000.00 but he was also able to arrange that the April check was made payable to him. We are
satisfied that he has, in fact, been paid twice.
to the partnership.
We will therefore direct the return of the $8,000.00
NO. 99-1677 EQUITY
III. The Dairy Market Loss Assistance Payment
In January of 2001, the United States Department of Agriculture paid Deitch Farms
$10,338.48. This was paid pursuant to the Dairy Market Loss Assistance (DMLA) program
which provides for payments to dairy farmers for losses resulting from low milk prices. In late
2000, Congress authorized funds to make payments to dairy farmers under the DMLA program
because of extremely low milk prices that year. The payment made in January of 2001 was
made to Deitch Farms as the producer which had received payments in 1998 and 1999. James
was denied payment as a new producer. (N.T. 146-148).
James argues that the money should go to him as he was the person who continued in the
dairy business. Fred contends that the money belongs to the partnership. The settlement
agreement states:
9.
Partnership Checking Account:...Any SCC money to which the
partnership became entitled to prior to March 17, 2000, shall be
deposited into this account. (Defendant's Exhibit #1)
The question then becomes what is meant by the phrase "became entitled to." In this regard, we
reiterate that the money was paid because of extremely low milk prices in the year 2000. It was
during that year, therefore, that the partnership became "entitled to" the money. Specifically, the
partnership should receive that portion of the moneys allocable to the time period from January
1st to March 17th, a period of approximately seventy-six days. This amounts to slightly more
than twenty percent of the check or $2,152.67. The remainder of $8,185.78 should be paid to
James.
IV. Land O' Lakes Equity
In the brothers' agreement, James acquired "equity" in Land O' Lakes, the milk
marketing cooperative to which Deitch Farms belonged. Cooperative "equity" is a form of
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ownership in a cooperative. (N.T. 29-33). In order for James to acquire the equity of Deitch
Farms, it had to be assigned to him. James contends that Fred did not sign the equity over in a
timely fashion, requiring James to start a new equity account with Land O' Lakes at a loss to
him.
Fred asserts that no specific time frame was agreed upon for assignment of the
partnership's equity interest. In addition, Fred makes the case that certain documents were not
forwarded in a timely fashion but that it was not his fault. We agree that Fred did not
intentionally delay the transfer of the Land O' Lakes equity and therefore we will make no
assessment against him on that account.
V. Fred Potteiger's Cows
According to James, Deitch Farms purchased two dairy heifers from Fred Potteiger for
$1,700.00, only $1,000.00 of which was paid at the time. The balance of the bill has not been
paid and he contends it is a debt of the partnership.
Fred Potteiger did not testify and the only documentary evidence proffered was a
photocopy of a bill dated March 10, 1998, to James Deitch for two heifers. Nancy Nealy, the
account supervisor for Deitch Farms, testified that she was not aware of the purchase of these
cows and that there were no purchases for the partnership listed for the date of March 10, 1998.
The evidence is simply insufficient to support a claim by the partnership of $700.00.
VI. Tenant's Security Deposit
The home on the Shughart Farm, acquired by Fred Deitch, has two apartments. One of
the apartment tenants had placed a security deposit of $500.00 with Deitch Farms in 1998.
Pursuant to the agreement, Fred has required the right to receive the rents from the tenants and
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has, in fact, collected $1,000.00 per month since March of 2000. Clearly, since Fred has become
liable for the return of the security deposit, those moneys should be given to him.
VII. Gas Tax Refund
In July 2000, Deitch Farms filed for a refund of gasoline tax paid to the Commonwealth
of Pennsylvania. A refund was received in the amount of $315.00 for the period of July 1999
through June 2000. James contends that from March 17th to June 30th of 2000, he incurred all of
the costs of gasoline used in the farm operation and in therefore entitled to reimbursement of a
portion of the tax refund obtained for the account of Deitch Farms. While Fred agrees that James
was operating the farm in April, May and June of 2000, he observes that there is nothing in the
record that can be used to calculate how much gas tax is paid during those three months. In
addition, James testified that he could have submitted a separate application for himself for those
three months, but did not do so. There is no good rationale for giving James a greater share of
this money than would go to Fred. For that reason, we will direct that the 2000 state gas refund
remain in the partnership account.
VIII. Construction Materials
Pursuant to the parties' agreement, Fred was to receive $250.00 worth of construction
materials located around the Shughart Farm. However, the materials actually belonged to a
relative who has since removed them. Fred argues that, due to his mistake regarding ownership
of the materials, he should be paid $250.00 out of the partnership account. Inasmuch, however,
as Fred was in the best position to research the ownership of these materials, we will not direct
that this payment be made.
NO. 99-1677 EQUITY
IX. Theft of Topsoil
In 2003, Fred hired a contractor to remove five large truckloads of topsoil from the
portion of the Shughart property which is James's and deposited it onto land owned by Fred.
The settlement agreement provides:
11. Management Possession: Management and possession of the dairy
operation shall be vested in the partner receiving Side A as soon as he is
determined. Thereafter, the partner receiving Side B [Fred] shall vacate
himself and all of his personal property from the farm within ten days.
Any property not removed after ten days shall be considered
abandoned. (Defendant's Exhibit #1)
James contends that Fred abandoned the topsoil since he did not remove it within ten days of the
effective date of the settlement. Fred counters that he never interpreted his topsoil to be
"personal property" and that he removed what he believed to be his topsoil within a reasonable
period of time. He therefore argues that no compensation is due his brother for the removal of
topsoil. We agree.
X. Feed Bill
Subsequent to the settlement, James paid a feed bill in the amount of $1,700.00 from the
partnership account. James has conceded that this will be repaid to the partnership account.
(Defendant's Post-hearing Brief, p.9).
XI. Arbitrator's Award Regarding AgChoice Farm Credit Debt
AgChoice Farm Credit held the mortgage on the land consisting of the original dairy
farm. That property went to James and there is no dispute in that regard. On April 15, 1996,
James and Fred purchased an approximate five-acre tract referred to as the "building lot" for
$40,000.00. The purchase price was financed by a mortgage, also through AgChoice Farm
Credit. Over the years, Deitch Farms paid the mortgage and, by the time of settlement, the
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mortgage balance was approximately $20,000.00. This mortgage balance was paid without
prejudice to either party to seek reimbursement from the other.
In this case, the "building lot" went to Fred. By agreement of the parties, the issue of the
responsibility for debt allocable to the building lot was to be submitted to Mr. Frey. Mr. Frey
submitted his "Report of Master and Arbitrator" on April 20, 2000. His report was "adopted and
made an order of court" by order of April 26, 2000. In his report, Mr. Frey concluded that "the
debt incurred which is a lien on the land in question must be borne by the person receiving the
land on which the lien exists." This would mean that Fred is responsible for the full lien and
must reimburse James his pro rata share.
The court's confirmation of the arbitration award was required by law and is considered a
final judgment. See Sage v. Greenspan, 765 A.2d 1139, reargument denied, appeal denied, 566
Pa. 684, 784 A.2d 119 (2000). In the absence of a timely filed petition to vacate an arbitration
award, statutory procedure requires the trial court to enter judgment confirming a binding
arbitration award. Sage, 765 A.2d at 1143. We are satisfied that our prior confirmation of the
arbitrator's award was a final judgment and cannot be considered to be pending in the context of
the instant litigation. Accordingly, we will ratify the finding of the arbitrator for the record.
ORDER
AND NOW, this day of August, 2003, it is ordered and directed that
1. The "Shughart Farm" be subdivided in accordance with Carl B. Bert's drawing
number 3, plaintiff' s exhibit number 2, such that the green shaded area thereof shall be conveyed
along with the brown shaded area to James and the remainder of the farm conveyed to Fred.
2. James shall pay back to the partnership the sum of $8,000.00 as a result of an
overpayment with respect to milk checks.
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3. Of the $10,338.48 DMLA payment, it is directed that the sum of $2,152.67 shall be
paid to the partnership account and the remainder shall be paid to James.
4. It is directed that Fred shall retain the security deposits with respect to the rental
properties which are the subject of this action.
5. The AgChoice Farm Credit debt shall be dealt with in accordance with Mr. Frey's
arbitrator's report which has, previously, been made an order of court.
6. The remaining claims of the parties are DENIED.
BY THE COURT,
Marvin Beshore, Esquire
For the Plaintiff
Thomas J. Williams, Esquire
For the Defendant
:rlm
Kevin A. Hess, J.
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JAMES E. DEITCH,
Plaintiff
VS.
FRED E. DEITCH,
Defendant
AND NOW, this
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
99-1677 EQUITY
CIVIL ACTION - EQUITY
OPINION AND DECREE
ORDER
day of August, 2003, it is ordered and directed that
1. The "Shughart Farm" be subdivided in accordance with Carl B. Bert's drawing
number 3, plaintiff' s exhibit number 2, such that the green shaded area thereof shall be conveyed
along with the brown shaded area to James and the remainder of the farm conveyed to Fred.
2. James shall pay back to the partnership the sum of $8,000.00 as a result of an
overpayment with respect to milk checks.
3. Of the $10,338.48 DMLA payment, it is directed that the sum of $2,152.67 shall be
paid to the partnership account and the remainder shall be paid to James.
4. It is directed that Fred shall retain the security deposits with respect to the rental
properties which are the subject of this action.
5. The AgChoice Farm Credit debt shall be dealt with in accordance with Mr. Frey's
arbitrator's report which has, previously, been made an order of court.
6. The remaining claims of the parties are DENIED.
BY THE COURT,
Kevin A. Hess, J.
Marvin Beshore, Esquire
For the Plaintiff
Thomas J. Williams, Esquire
For the Defendant
:rlm