Leonard Grywacheski - v. -, 2012 SKPC 40

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2012 SKPC 040 Date: March 20, 2012 File: 20/11 Location: Yorkton _____________________________________________________________________________ Between: Leonard Grywacheski - and - Kenneth Severson Ronald Balacko For the Plaintiff / Defendant by Counterclaim Thomas Campbell For the Defendant / Plaintiff by Counterclaim _____________________________________________________________________________ JUDGMENT R. GREEN , J _____________________________________________________________________________ I.

OVERVIEW [ 1 ] The Plaintiff, Leonard Grywacheski, and the Defendant, Kenneth Severson, both live in Norquay and farm in that area. In August of 2008, the Defendant agreed to lease from the Plaintiff 315 acres of land located on two quarters which are legally described as SE 22-34-01 W2 and SW 22-34-01 W2. The parties now disagree on the length of that lease. The Plaintiff claims it was a year to year lease, which lasted two years. The Defendant claims it was a five year lease, which the Plaintiff terminated after the second year.

[ 2 ] The Plaintiff sues for unpaid rent: one half of the land rental for the crop year 2010 ($6,615.00 plus interest of $37.31 for a total of $6,652.31).

In response, the Defendant counterclaims, or seeks to set off against any rent owing by him to the Plaintiff, for costs associated with him converting these acres from an alfalfa crop (grown by the Plaintiff in 2008) to his cereal crop production and other costs associated with the condition this land was left in by the Plaintiff. [ 3 ] 2008 was the fourth year of an arrangement the Plaintiff had with the so-called Norquay Dehy Plant, which harvested his alfalfa and then produced dehydrated alfalfa pellets.

The Defendant knew that this land had been in alfalfa production for four years prior to 2009, and knew that there were mole hills on the land as a result of this type of production. [ 4 ] The issues to be determined in this case are: 1. Was the term of this verbal lease year to year or five years? 2. Does the Defendant owe the Plaintiff rent for half of the 2010 crop year? 3.

Depending on the term of the lease, does the Plaintiff owe the Defendant damages as a result of either breaching the contract or as a result of unjust enrichment by the Plaintiff, for the costs the Defendant incurred as a result of the mole hills left on the land from the alfalfa production and, as a result, of converting these acres from alfalfa to cereal crop production? II. WHAT WAS THE TERM OF THIS LEASE? a. Leonard Grywacheski [ 5 ] The Plaintiff has been farming since the early 70s, and now both farms his land and rents some to other farmers.

In August of 2008, he heard from his son, Jeff, who is a friend of the Defendant’s son, that the Defendant might be interested in renting these 315 acres. As a result, the Defendant contacted him and the two men met shortly thereafter. The Plaintiff said he told the Defendant that the Norquay Dehy Plant had offered him $50.00 per acre for the next five years for this land, but he was not interested. The Plaintiff said the Defendant expressed concern about the cost of Roundup required to kill the remaining alfalfa plants and thereby to allow conversion of the land to a cereal crop.

As a result, the Plaintiff said he offered to reduce the rent from $50.00 to $40.00 per acre to cover that cost. He said the Defendant agreed. [ 6 ] The Plaintiff’s understanding of the agreement was that the first year was to be reduced to $40.00 per acre, to cover the cost of Roundup, and after that the land would be leased year to year at $50.00 per acre. He said he was not interested in a long term arrangement, and thought the Defendant understood this.

While he did not advise the Defendant of this, the reason for his lack of interest was that his son, Jeff, was considering getting into the farming business at some point. [ 7 ] The Plaintiff said mole hills are a common result of alfalfa production, because the land is not worked for four years while this perennial is grown. He said that the way to clean up such land, after harvest of the last alfalfa crop, is to let the alfalfa grow a bit and then to kill it with Roundup. He said the field should also be tilled to level off the mole hills, and to allow the moisture level to replenish from the snow melt.

The Plaintiff said that, in the fall of 2008, the Defendant sprayed the alfalfa with Roundup, and later complained that the cost of Roundup was drastically higher than expected. The Defendant, however, did not till the land. [ 8 ] In October of 2009, before his wheat was swathed and eventually harvested, the Defendant paid the Plaintiff the full amount of rent for that year at a full rate of $40.00 per acre, which was $13,230.00.

In the crop year 2010, the Defendant paid only half of the amount ($20.00 per acre) in the spring, but did not pay the further amount of rent owing in the fall, for which the Plaintiff now claims.

[ 9 ] The Plaintiff’s understanding, based on correspondence from the Defendant’s lawyer, was that the Defendant made $60,000.00 gross from the production of wheat on this land in 2009. His estimate of the gross amount earned by the Defendant from the canola crop in 2010, based largely on the return he received that year for canola, was $150,000.00. The Plaintiff said that, as far as he understood during 2010, the Defendant still wanted to be compensated for the cost of Roundup he incurred in cleaning up the land.

He thought this was an issue that still had to be dealt with between the two of them at this point. [ 10 ] The Plaintiff said that in the fall of 2010, he and his son, Jeff, drove out to where the Defendant was combining canola, and told the Defendant that his son was planning to farm these acres in 2011. The Plaintiff said he was advising the Defendant that he was bringing the lease arrangement to a conclusion at the end of 2010. He said the Defendant responded that it was a five year lease and that, as a result, he needed to be compensated.

The Plaintiff said he was surprised at that, and told the Defendant that it was a year to year arrangement. [ 11 ] The Plaintiff claimed that this land was some of the best land in the province, with six inches of topsoil. He said all the other leases he had negotiated were year to year. When asked whether he made it clear to the Defendant that it was a year to year lease, he said he “thought so”. [ 12 ] The Plaintiff was asked about a third quarter of his land that he had discussed with the Defendant.

He confirmed that he had a third quarter which was also in alfalfa production as a result of an agreement with the Norquay Dehy Plant, and would not be out of production under that arrangement until the end of the 2009 crop year. He said he mentioned this to the Defendant in 2008 to see if he might be interested, but said that the Defendant gave no answer one way or the other. [ 13 ] When asked why, if this was a year to year lease, he would say he would reduce the rent in the first year, the Plaintiff explained this by saying that it was possible that it would be more than a one year lease.

When asked whether he believed that $10.00 per acre in 2009 would compensate the Defendant for the cost of cleaning up an alfalfa field for conversion to wheat production, he said that this reduction was not intended to cover the entire cost of clean up, but rather just the cost of Roundup. b. Jessie Gazdewich [ 14 ] This farmer has rented land from the Plaintiff for four years, all on a year to year basis. He pays $50.00 per acre, and said that the crop grown the year before he took the land was wheat. c. Kenneth Lozinsky [ 15 ] This farmer has rented from the Plaintiff for three years on a year to year basis.

He pays $40.00 per acre. The crop previously being grown on the land before he took over was canola. d. Edward William Tanner [ 16 ] Mr. Tanner holds a Bachelor of Science in Agriculture Degree, worked as an Extension Agrologist with the Saskatchewan Department of Agriculture for seventeen years, then worked as a soils and crop specialist with the same department for eighteen years, and now has done contract work with various companies since 2006. As well, he is an alfalfa seed grower since 1983. [ 17 ] Mr.

Tanner testified that, to convert a field that has grown alfalfa for four years to production of a cereal crop there were a number of requirements, which were: 1. Tilling the soil, up to two times, and applying chemicals;

2. Up to two years required to replenish the moisture content in the soil, together with time required for the residue from the alfalfa crop to degenerate; and 3. Over time, replenishing the sulfur and potash content of the soil. [ 18 ] Mr. Tanner said that the total cost of preparing a field to move from alfalfa production (for four years) to a cereal crop was between $29.00 and $40.00 per acre. That involved the use of a field cultivator and perhaps a heavy harrow, and also the cost of a high clearance sprayer, and chemicals (including Roundup, for example).

He said that the reason for ruts in the alfalfa field, and as a result the need for heavy equipment, was that dehy plants use heavy equipment and have little discretion as to when they harvest. As a result, he said they often leave large ruts in the fields, especially if the conditions were wet when the alfalfa was harvested. [ 19 ] When asked how long it would take before a farmer was profitable in producing cereal grains off of a field previously seeded to alfalfa for four years, Mr. Tanner said it would be the third year that the field would be profitable.

He said, as a professional agrologist, he would be concerned about a one year lease in these circumstances unless the terms were “very favorable”. When asked whether a year to year lease was a common arrangement for a farmer, he said that a three year lease was more common. He admitted that fifty bushels per acre for wheat grown on this land would be a very good crop. e. Kenneth Severson [ 20 ] The Defendant is 51 years of age and has been farming since his youth. He said he met with the Plaintiff in the fall of 2008 at the Plaintiff’s farm.

The Plaintiff mentioned an offer from the Norquay Dehy Plant for $50.00 per acre, which the Plaintiff did not want to accept. He said this was the only mention of $50.00 per acre by the Plaintiff at any point in their discussions. [ 21 ] The Defendant said the Plaintiff wanted $40.00 per acre for this land, and he replied that this rate was high as it would cost him $20.00 per acre for Roundup before he could plant a cereal crop. The Plaintiff would not move on the deal, and he agreed to $40.00 over a five year lease. He described this land as in rough shape, with mole hills and weeds.

He said he would never have taken this land on a year to year lease, as alfalfa depletes the soil of moisture and sulphur, and as a result there would not be any benefit from such land until year three or four of the lease. [ 22 ] The Defendant said, at the time of the agreement for $40.00 per acre over five years, the Plaintiff said he could have a third quarter of land in 2010, after his arrangement with the Norquay Dehy Plant was completed.

The Defendant said the Plaintiff later reneged on what he took to be an agreement to lease the third quarter, and he was not allowed to farm it in 2010. [ 23 ] The Defendant said his wheat yield on the leased land in 2009 was 20% lower than he expected, given the effects of the previous alfalfa crop. He said his canola yield on this land in 2010 was thirty bushels per acre, significantly below his expected yield, because of the sulphur deficiency in the soil.

He said he had converted land from alfalfa production to cereal production seven to eight times, and knew it would take at least three years before the cereal operation would be profitable on this land. [ 24 ] The Defendant said, while he was harvesting canola on this land in 2010, the Plaintiff and his son came out to where he was in the field. The Plaintiff told him he was not farming next year, because he was giving the land to his son Jeff to farm. The Defendant responded that the lease was supposed to be five years. He said the Defendant responded that “things change”, as his son “now wanted to farm”.

The Defendant said he then asked for compensation from the Plaintiff, and suggested the Plaintiff forego half of the 2010 rent (the remaining fall payment). The Plaintiff refused, and this litigation resulted. [ 25 ] When asked why he did not till at the time he applied Roundup, after taking over this land, the Defendant said that in his view spraying killed everything. He repeatedly denied that tilling was going to be effective at all, as he said that the mole hills would come back for two to three years, even if the field had been tilled at the start.

f. Analysis [ 26 ] I have considered the Plaintiff’s argument that: (1) the lack of a written lease between the parties; and (2) the failure of the Defendant to till the land initially, supports a conclusion that it was a short term rather than long term lease. However, on balance, I am satisfied and find that the agreement between the parties, in August of 2008, was an oral lease of this land for five years at $40.00 per acre. That is because: 1. I am satisfied that a farmer in the Defendant’s position would be unlikely to agree to a lease that potentially would only last for one year, given Mr.

Tanner’s evidence that the cost of converting a field from alfalfa production to cereal crop production would be between $29.00 and $40.00 per acre - an amount far above the $10.00 per acre reduction in 2009 (a total of $3,150.00) - and that it would take until the third year of such a lease to make a profit; 2. The Plaintiff’s evidence that he reduced the rent from $50.00 to $40.00 in the first year, by implication, suggests this was more than a one year lease.

As well, the discussion about the Defendant taking over the third quarter in the second year of the lease, which I am satisfied occurred, suggests that this was more than a one year lease. Lastly, the amount of unpaid rent the Plaintiff claims for 2010 is consistent with a yearly rental rate of $40.00 per acre, and not $50.00 per acre as he suggested would be the case in all subsequent years of the lease after 2009. There is in my view no satisfactory explanation for this discrepancy, and it tends to support the Defendant’s version that the agreement was $40.00 per acre for each year of the lease; 3.

I am satisfied that the lease arrangements the Plaintiff had with Mr. Gazdewich and Mr. Lozinsky - both year to year leases - are not comparable to this situation faced by the Defendant, because the previous crop on that land was not alfalfa; 4. Having heard both parties testify, and given the relationship between the two at the time of the agreement, and in particular the relationship between their sons, I am not satisfied that, in August 2008, either party would have sought a written lease with the other, regardless of the term; 5.

The discussion during harvest in 2010 between the Plaintiff and the Defendant happened in the presence of the Plaintiff’s son, Jeff Grywacheski, who was present on the trial date, and excluded from the Court by Mr. Balacko. I draw an adverse inference from the failure of the Plaintiff’s son to testify, as he was the only other person present, and the only other person who could have refuted the Defendant’s version that, in response to his assertion of a five year lease, the Plaintiff said: “things change” and that his son now wanted to farm; and 6.

Finally, and despite what appears to be contrary evidence on farming practices from Mr. Tanner, I am satisfied that the Defendant honestly believed that it was pointless to till this land after taking possession of it, given his view that the mole hills would return for a couple of years. As a result, I draw no adverse inference against the Defendant, respecting the term of the agreement, for his failure to till the land. III.

IS THE DEFENDANT LIABLE FOR THE REMAINDER OF THE 2010 RENTAL? [ 27 ] Despite my finding that this was a five year oral lease, it is obvious that the lease was not terminated by the Plaintiff until the end of 2010. The Defendant, therefore, was able to farm this land for this entire year, and to receive the full revenue of the canola crop he grew. Before considering what damages the Defendant may be entitled to for the breach of contract, or for unjust enrichment, I can see no reason why the Plaintiff should not receive the rent due on this land for 2010.

The Plaintiff, therefore, shall have judgment for the unpaid rent of $6,615.00, and, without any evidence of an agreement as to interest, he shall have interest under The Pre-judgment Interest Act on this sum from January 1, 2011.

IV. WHAT, IF ANY, DAMAGES OR SET-OFF - FOR BREACH OF CONTRACT OR UNJUST ENRICHMENT - IS THE DEFENDANT ENTITLED TO? [ 28 ] Because the Plaintiff breached this five year lease by terminating it after the second crop year (2010), I am satisfied that the Defendant is entitled to compensation for those costs, which he proved at trial, which resulted from the truncation of the lease, as opposed to costs which were related to crop production decisions he made. a.

The cost of applying Roundup in the fall of 2008 [ 29 ] The actual cost of Roundup paid by the Defendant upon assuming this leased land was $1,782.50 (Exhibit D4), which over the 315 acres was a cost of $20.77/acre. Despite that figure, the Defendant maintained his position stated in his counterclaim of $19.88 per acre as the cost of purchasing Roundup ($6,262.20). He said an additional cost of $5.00 per acre was a standard cost of hiring someone to apply Roundup, despite the fact that he did this himself ($1,575.00). [ 30 ] Mr.

Tanner said that, based upon the Custom Rate Guide for the Province of Saskatchewan (2010/11) the cost of applying Roundup was, in general, $2.86 per acre. He, however, admitted that the rates set out in the Custom Rate Guide from the Province of Saskatchewan were higher than most farmers would apply.

He described them simply as guidelines. [ 31 ] I am satisfied that the cost of purchasing and applying Roundup was one that the Defendant incurred based on his understanding of the length of the lease and the delayed profit he would eventually receive, and was not one that could properly be described as a crop production decision. As a result, I find that he shall recover the cost of purchasing the Roundup ($6,262.00) plus the cost of applying the chemical to 315 acres at the rate contained in the Custom Rate Guide ($2.86/acre), as testified to by the Defence witness Mr.

Tanner ($900.90), for a total of $7,162.90. The Defendant shall receive interest under The Pre-judgment Interest Act on this amount from January 1, 2011, the date this lease was effectively brought to an end by the Plaintiff. b. The cost of an additional swathing operation because of the mole hills [ 32 ] The Defendant further counterclaimed for the cost of an additional swathing operation because of the mole hills, at a rate of $10.00 per acre (a total of $3,150.00).

He said the size of the mole hills left from the previous alfalfa production meant that he could not combine his wheat crop in the fall of 2009, and that as a result he had to swath. Regarding the cost of $10.00 per acre for swathing, he said this was less than the government rate in 2010/11 in the Custom Rate Guide of $14.00 per acre. [ 33 ] The Plaintiff, however, said that the Defendant chose to swath his wheat in 2009, rather than straight cutting it with a combine, because the Defendant was late and behind

schedule in harvesting, and that the wheat would have been difficult to pick up in the spring if it had been left standing when winter arrived. The Defendant denied this. [ 34 ] Regarding this counterclaim, counsel for the Plaintiff submitted that this was not an amount a lessor farmer should be responsible for, as it could have been avoided by the Defendant through tillage at the start of the lease, as suggested by Defence witness Mr.

Tanner, and further submitted that the decision to swath was a production decision made by the Defendant for which the Plaintiff should not be liable. [ 35 ] On balance, I do not accept the Defendant’s submission on this counterclaim. I think it is as likely as not that he swathed his wheat because he was concerned of the lateness of the season, and the negative effects of leaving the crop standing at the arrival of winter. This counterclaim is dismissed. c. The 10% loss of wheat because heads fell through to the ground when swathed and were not picked up later by the Defendant’s combine

[ 36 ] The Defendant further counterclaimed for a 10% loss in his 2009 wheat crop because that percentage of the heads of wheat fell to the ground when he swathed, and were not later picked up by his combine. He said this would not have occurred if he had been able to combine the wheat with a single cut. He valued this counterclaim at $20.00 per acre (five bushels at $4.00 per bushel) for a total of $6,300.00 over the 315 acres. [ 37 ] The Defendant said that in 2009 he grew a type of wheat with a shorter stem because the straw had better strength in it and it would not lay down as easily.

By implication, a shorter stem would mean the swather would cut closer to the head of the wheat, thereby leaving less stem attached to the head, and a greater chance the head would not be later picked up from the ground. [ 38 ] The Plaintiff repeated his submission that the Defendant’s decision to swath his wheat crop and the type of wheat he grew were production decisions by the Defendant that he should not be liable for.

Given my finding above - that it was as likely as not that the Defendant swathed his wheat in 2009 because he was concerned of the lateness of the season, and the negative effects of leaving the crop standing at the arrival of winter, and, hence that this was a crop production decision - I am similarly not satisfied of the validity of this counterclaim. It is, as well, dismissed. d.

Wear and tear on the sprayer and damage to the swather because of height of mole hills [ 39 ] The Defendant’s final counterclaim was for the wear and tear on his sprayer and damage to his swather because of the mole hills ($10.00 per acre for a total of $3,150.00). The Defendant claimed this was appropriate compensation for the damage and depreciation to his equipment which resulted from the rough use involved in operating over the mole hills. He admitted that he had no bills for damage to the knife or the canvass of his swather.

Nor did he file any written documentation or proof supporting his counterclaim for wear and tear to his sprayer. [ 40 ] Mr. Tanner said that, given the size of the mole hills that are common in alfalfa fields, there was a challenge for swathing a field as there had to be care taken in setting the swather above the level of the mole hills. He said swathing in these conditions could dull the knife on a swather. When asked whether there would be less risk of damage to a sprayer if that equipment was slowed down over such a field, Mr. Tanner said that this was true.

He further said, regarding the method of seeding, that whether or not a field was tilled or direct seeded was a farmer’s cropping decision. [ 41 ] The Plaintiff denied any liability for these costs, saying his agreement with the Defendant was for rental on a cash basis and that wear and tear to and depreciation of equipment were not his responsibility. [ 42 ] In total I am not satisfied that the Defendant has proved this counterclaim.

I am not satisfied that the Defendant has shown that the costs of wear and tear and depreciation - including the speed the sprayer was operated across the land - were costs that a lessee of land in his position would reasonably expect a lessor in the position of the Plaintiff to bear. Nor, as stated above, am I satisfied that the Defendant’s decision to swath in 2009 was other than a crop production decision which the Plaintiff should not be required to bear. The final counterclaim, therefore, is dismissed. V.

CONCLUSION [ 43 ] As stated above, the Plaintiff shall have judgment for the unpaid rent in 2009 of $6,615.00, together with interest under The Pre-judgment Interest Act on this sum from January 1, 2011. The Defendant, on his counterclaim, shall have judgment for $7,162.90, together with interest under The Pre-judgment Interest Act on this sum from January 1, 2011. Following the calculation of interest by my clerk, that will leave a balance in favour of the Defendant on the Certificate of Judgment. Given the competing claims in this case, I make no order as to costs.

R. Green, J