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Burgeson v. Columbia Producers Inc.

January 22, 1991


Green, C.j. Munson and Thompson, JJ., concur.

Author: Green

James D. and Mary Burgeson brought this action against Columbia Producers, Inc., for breach of a farm development lease. Judgment for $1,286.86 was entered for the Burgesons. They appeal. The primary issue is whether the court erred in admitting parol evidence to determine the parties' respective obligations for repairs to underground wells, pumps and pipelines. We reverse.

The Burgesons owned dry land acreage in Adams County. In 1975, 1976 and 1977, they signed separate 10-year development leases for different parcels of land. The lessee, Columbia Producers, agreed to develop a total of 1,045 acres, drill three irrigation wells, and install eight circle irrigation systems. Columbia Producers also agreed to pay the cost of all maintenance and repairs of the wells, mainlines, pumps, motors and irrigation equipment. At the end of each term, the ownership of the wells, pumps and circle irrigation system would revert to the Burgesons in good condition and repair subject only to reasonable wear and tear. In exchange, the Burgesons agreed to accept a token annual rent of $10 per acre.

In 1983 the Burgesons experienced financial difficulty*fn1 and needed immediate cash. Negotiations between the Burgesons, their attorney and Columbia Producers resulted in a new lease commencing January 1, 1984, and terminating December 31, 1990. However, the new rent was negotiated for 5 years (1986 through 1990) but amortized over 7 years (1984 through 1990). Thus, the annual rent, $75,000, was reduced to $54,500, or approximately $54.50 an acre.

During the fall of 1985, two irrigation wells were not producing the necessary volume of water. To solve the problem, pumps located in the wells, 400 feet beneath the surface, had to be pulled up and inspected. Columbia Producers ordered the work done in January 1986. Mr. Burgeson was not aware of this repair until after the pumps had been pulled. Columbia Producers paid for the repairs, which was set off against the rent due the Burgesons. In late 1987, the mainline between wells 1 and 3 had to be replaced. The testimony indicates Columbia Producers showed Mr. Burgeson the problem and estimated the cost at $9,000; he agreed with Columbia Producers that "whatever has to be done, has to be done." This expense was also set off against rent. Finally, in 1988 repairs were made to the wells, pumps and motors and set off against rent. Columbia Producers set off a total of $79,990.91 against the rent; the Burgesons contest $51,755.99 of that amount.*fn2

On March 26, 1987, the Burgesons sued Columbia Producers for breach of the 1984 lease, alleging (1) Columbia Producers failed to obtain the Burgesons' permission to

repair the wells and replace the mainline, and (2) Columbia Producers improperly made setoffs against rent.

At trial, the court found the lease provisions were ambiguous as to which party was obligated to pay the costs of repair associated with the underground components of the system. The court admitted and relied upon evidence of custom and usage common to a residential setting and concluded the Burgesons must pay for all the expenses associated with the underground components and Columbia Producers for the aboveground components. The court then concluded Columbia Producers had paid the proper rent, either by cash or setoff, except for $1,286.80. Judgment was entered in that amount against Columbia Producers. Finding neither party prevailed, the court declined to award attorney fees. This appeal followed.

The 1984 lease provides:

MAINTENANCE AND REPAIRS : Except as hereinafter provided, LESSEE shall, at its sole cost and expense, maintain in good condition and repair throughout the term of this lease, all of the said premises, fences and irrigation equipment, and all other improvements; and, at the termination of this lease, LESSEE shall surrender the said premises and all of the improvements and equipment to the LESSOR in good condition and repair, subject only to the consequences and effect of reasonable wear and tear.

It is understood and agreed by and between the parties that for the years 1984 and 1985, the LESSEE shall pay for all repairs and maintenance. After 1985, LESSOR shall pay the cost of parts for the repair of all irrigation equipment provided, however, LESSEE shall pay for all repairs caused by LESSEE or LESSEE'S employee's negligence. In ...

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