A jury in Third District Court decided last month Tooele City owes $2.76 million to a sod farm company that claimed the city wrongfully terminated a management lease and owed the business money to compensate for its sod crop.
But the jury also decided Aposhian Sod Farm Company owes the city $137,000 for damages and waste left on the 1,784-acre farm in Vernon the city bought in 1990 for future water development.
The city has filed post trial motions that challenge the decision and assert “mistakes” occurred by the court and jury during the trial.
“If the judge denies our post-trial motions, we are not going to pay $2.76 million,” said Tooele City Attorney Roger Baker. “We will appeal.”
According to Rogers, the city decided to terminate the lease in 2012 because it had become “dissatisfied” with how Aposhian was managing and maintaining the property.
The jury’s decision in the 3 and one-half-year-old lawsuit between the city and Aposhian came on Dec. 14 before Judge Robert K. Adkins. The lawsuit originally stems from conflicting interpretations between the city and Aposhian over a 1998 lease agreement signed by both parties.
The lease, called “Vernon Ranch Management Agreement and Grazing Lease,” spells out terms between the city and Aposhian, with the sod farm company paying $30,000 per year to use the Vernon farm’s acreage and wells to grow and sell commercial sod. The farm is located 33 miles south of Tooele City, west of state Route 36.
The main disagreement between both parties involves the lease’s term, its termination clause, and how much sod crop buy-out the city owed at the lease’s termination.
The lease document states: “The term of this agreement and lease shall begin on the 1st day of July, 1998 and shall terminate without notice on the 31st day of December, 2007. This ten-year agreement shall automatically renew at the beginning of each new calendar year for the full ten-year term, subject to the provisions of this agreement.”
The termination clause states: “This agreement may be terminated without cause by either party by giving the other party 120 days advance written notice of such termination.”
The lease’s sod crop buy-out provides if the city terminates the agreement without cause, the city would pay Aposhian the value of its sod crop at the date of termination. Payments to Aposhian would be made annually, with the first payment made 30 days after termination, or after when the market value of the sod is determined, whichever is later.
How much the city would pay is also determined by a schedule included in the lease. The schedule requires the city to pay 100 percent of market value if the city terminates the lease within the first three years. By the fourth year it drops to 60 percent of value, and continues to drop by 10 percent each subsequent year.
By the tenth year or more, according to the schedule, the city is not required to pay Aposhian any percentage for the value of its sod crop at termination.
The city’s position is the lease terminated on Dec. 31, 2007 and was in its full right to issue a termination letter, presented by Clyde Snow Attorneys at Law, Salt Lake City, to Aposhian on Nov. 20, 2012.
The letter explained the lease terminated on Dec. 31, 2007 and the city had allowed Aposhian to remain on the property since then to November 2012, on a year-to-year basis, as a tenant at will.
It further stated Aposhian’s tenancy would terminate Dec. 31, 2012 but the city would provide “reasonable time” in 2013 for Aposhian to vacate the property. On Jan. 18, 2013 another termination letter was sent to Aposhian that specified Aposhian had to vacate the property within 120 days. However, it would allow the company access to the property until Dec. 31, 2014 to maintain and harvest sod crop already planted as of Jan. 18, 2013.
But in court documents, Aposhian argued the lease agreement provided for automatic renewals for successive 10-year terms beginning at the start of each calendar year and would not vacate the property.
Aposhian also claimed because the city had allowed the company to remain on the property after Dec. 31, 2007 the city should be barred from asserting that such termination occurred “by virtue of its silence and unbroken course of conduct in which Tooele acted as if the parties were operating under the terms of the lease agreement” before the first termination letter on Nov. 20, 2012.
On May 5, 2013, Tooele City filed a complaint in Third District Court. To summarize, the lawsuit asserted the lease agreement expired on Dec. 31, 2007 without need for further notice and was properly terminated while Aposhian was an at will tenant of the city.
It also stated that Aposhian waived its right to sod crop loss and other payments under the lease by failing to accept the city’s offer to allow the company to mitigate its damages after May 18, 2013. The complaint also calls for Aposhian to vacate the property and pay $40 per day for every day it remained on the property after the lease terminated.
In its counterclaim, Aposhian’s attorneys said Tooele City never suggested the lease had terminated between Dec. 31, 2007 and Nov. 20, 2012, nor did the city ask to renegotiate the terms of Aposhian’s tenancy. The counterclaim further stated after the termination date, Aposhian commissioned a professional valuation of the sod crop, which concluded it was worth in excess of $3 million. On April 9, 2013 Aposhian notified the city of the amount and demanded payment within 30 days. That payment did not occur.
The counterclaim also says the city breached the lease, and also breached the implied covenant of good faith and fair dealing, by terminating the lease first upon 30 days notice and then 120 days notice, but failing to pay for the sod crop and capital improvements.
The counterclaim says Aposhian is entitled to direct damages in excess of $300,000 plus consequential and incidental damages, the exact amount to be proven at trial.
For months both sides filed motions for summary and partial summary judgments with Adkins, some of which were granted by the judge, but none resolved the case to the satisfaction of both parties. The case was scheduled to go to trial in the fall of 2015 but was canceled. It finally went to trial early last month.
The eight-member jury decided the city did prove Aposhian committed waste on the property and should pay $137,000 in damages to the city. But it also decided the city did not prove Aposhian remained in possession of the property after Dec. 10, 2013, nor did the city prove that Aposhian breached the lease agreement.
The jury further determined the value of Aposhian’s sod crop as of Jan. 18, 2013 to be $2,768,154. It further determined Aposhian received no revenue from its sod farm and related agricultural operations during 2013.
In a prepared statement, Tooele City Attorney Roger Baker said, “The verdict was contrary to all Tooele City expectations based on the judge’s rulings and orders in the case. Tooele City believes that errors were made at trial that require the verdict be significantly reduced, or the matter be tried again to a new jury.”
But a prepared statement by Aposhian’s law firm of Bennett Tueller Johnson & Deere, Salt Lake City, says “The jury rejected the city’s attempt to deny Aposhian compensation under the lease, and rejected nearly every argument and claim made by the city. Notwithstanding, the city refuses to accept the judgment of the eight jurors impaneled to decide the case.”
The statement further said the city “had the option to avoid such payment by simply giving advance notice. However, the city chose to take a different path. When the LDS Church expressed interest in the farm, the city did not give advance notice.”
Court documents include a letter dated Nov. 15, 2012 from Richard A. Droubay, president of the Tooele Utah South Stake, which states “This letter will serve as a formal notification of our intent to pursue and secure the lease on the Vernon, Utah property owned by Tooele City.”
Baker said the LDS Church’s interest stated in the Nov. 15, 2012 letter is not what prompted the first termination letter to Aposhian on Nov. 20, 2012 as indicated by Aposhian’s attorneys. He said a letter was received from the Tooele South Stake in early 2012 about leasing the farm.
Rogers said the Tooele South Stake was interested in running livestock on the ranch. He said lease terms were discussed but were never finalized and Tooele South Stake withdrew without explanation.
He added the farm has been without a tenant for three years.
Attorneys for both parties indicated the case will likely be appealed depending on which way Adkins decides on Tooele City’s post-trial motions. They also indicated the case could possibly go on for years before a final resolution is reached.
Tooele City bought the Vernon property for $650,000 in July 1990 to tap into its certificated water right of 4,181 acre-feet (1.36 billion gallons) per year and with hope to someday pipe part of that water to Tooele City for culinary use by residents.