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Neville v. Milliron

Court of Appeal of Iowa

October 23, 2013

TERRY NEVILLE and ERIN NEVILLE, Plaintiffs-Appellees/Cross-Appellants,
v.
MICHAEL MILLIRON and AG AIR LTD, Defendants/Cross-Appellees, AG AIR LTD, Counterclaimant-Appellant,
v.
MIDWEST AERIAL APPLICATIONS, LLC, and TERRY NEVILLE, Defendants to Counterclaim-Appellees.

Appeal from the Iowa District Court for Sac County, Kurt L. Wilke, Judge.

Ag Air LTD appeals, and Terry and Erin Neville cross-appeal, from the district court's order in this equity action.

Jerry L. Schnurr III, Fort Dodge, for appellant.

James R. Van Dyke of Eich, Van Dyke & Werden, P.C., Carroll, for appellees.

Heard by Vaitheswaran, P.J., and Potterfield and Danilson, JJ.

POTTERFIELD, J.

Ag Air LTD appeals, and Terry and Erin Neville cross-appeal, from the district court's ruling in this equity action. Finding no reason to disturb the court's findings and judgment, we affirm on both appeals.

I. Background Facts and Proceedings.

Terry and Erin Neville filed a petition in equity challenging "the formation and execution of" a document entitled "Declaration and Contract of Trust . . . Ag Air LTD (A Private Contract Irrevocable Trust), " which contains a declaration that it was "made" on September 9, 2009. In count I of the petition, the Nevilles asserted the trust was invalid and void pursuant to Iowa Code section 633A.2102 (2009)[1] and the common law of Iowa; in count II, the trust was created due to fraud or misrepresentation by Michael Milliron; and in count III, that Milliron had slandered and libeled them.[2] The Nevilles sought a judgment declaring the Ag Air LTD declaration of trust void and of no effect. They also asked the court for other equitable relief.

Milliron and Ag Air LTD filed an answer generally denying the allegations. Ag Air LTD filed a counterclaim, seeking damages against Terry Neville for breach of contract and breach of fiduciary duty as a result of his taking $45, 000 in assets. Ag Air LTD also sought damages and temporary and permanent injunctive relief for breach of the covenant not to compete.

The following facts can be gleaned from the trial record. Terry Neville is a resident of Sac County, Iowa. He is a farmer with many personal connections throughout the region. Erin Neville is his spouse.

Michael Milliron is a helicopter pilot specializing in crop dusting, most of which—prior to 2009—had been conducted in California. Shea Miech is his daughter. Milliron has no personal connection to Sac County, but came to Iowa in 2009 to fly for Speas Aviation. Milliron flew for Speas Aviation under the designation of "Ag Spray"[3] governed by a contract that included a two-year covenant not to compete. Milliron sprayed fields in Iowa using Speas Aviation's federal certification.

While flying for Speas Aviation in 2009, Milliron and Terry Neville became friends and discussed forming their own crop spraying business. Milliron offered aviation connections, equipment, and technical expertise. Terry offered clientele, a base of operations, and nontechnical labor.

Neither party consulted an attorney. Milliron prepared a document that purported to create an irrevocable trust called Ag Air LTD on September 9, 2009.[4] The document listed Erin Neville as the "sole settlor." Terry Neville and Shea Miech were the "trustees." The document states its "original situs" is Williamson County, Texas, and provides that it "shall be interpreted and governed by Common-Law in the State of Texas."[5] Milliron was named as successor trustee. The document included a provision that "each Trustee" agreed not to "engage in business or service now engaged by AG AIR LTD within a radius of Sixty (60) miles of the place of business of the Trust." And further, that "if any Member withdraws from the Trust, he will not, within the above described territory and for a period of five (5) years, directly or indirectly carry on, engage in or be interested in the business or service now engaged by the Trust."

On June 28, 2010, a bank account for Ag Air LTD was set up at a bank in Odebolt, Iowa. Terry Neville and Miech were designated signatories.

Milliron[6] thereafter formed a Wyoming corporation called Ag Air, Inc. As found by the trial court, "The corporation became an unexpected and necessary afterthought because of FAA rules" that did not recognize a business trust as a valid holder of the certifications necessary for spraying agricultural chemicals. The "By-laws of Ag Air, Inc." note a special meeting was held at a Buchanan Avenue, Kiron, Iowa address on May 22, 2010—that address is the Nevilles' residence. At that meeting, Milliron was named as temporary chairperson, and Shea Miech and Terry Neville were listed as shareholders.

In a separate oral agreement, Terry Neville and Milliron agreed that Terry would receive $1 per acre sprayed by Ag Air. In return, Terry introduced Milliron to his many contacts in and around Terry's home in Sac County.

Clients were billed $12 per acre for spraying. Revenue was deposited into Ag Air LTD's bank account. Ag Air LTD was to keep $2 per acre. The rest was to be used for Ag Air, Inc.'s expenses and bills, including pilots' wages, helicopter leases, airfield maintenance, insurance, fuel, general labor, and a $1-per-acre cut to Terry Neville. Although the helicopter leases and pilot contracts identified Ag Air, Inc. (the ...


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