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Friday, March 2, 2012

Sask. Court rules husband's seed and chemical debt can be set off against payment to wife for grain

A Judge of the Provincial Court of Saskatchewan has ruled that a farm supply company was justified in setting off a husband's debt owing for seed and chemical against a payment to be made to his wife for grain.  Denise Korpan had sold feed barley to Parrish and Heimbecker Ltd., and the company deducted from the payment to Ms. Korpan the amount her husband owed for seed and chemical.  She sued the company alleging there was no right to set off the husband's debt and alleging that the debt was not as much as was deducted.

Ms. Korpan, the Plaintiff, and her husband, Ed Korpan, are farmers running a mixed farming operation.  They have never incorporated their farming operation. Initially they carried on as a family run farm, however some 12 years ago, at their accountant’s suggestion, they divided the responsibilities in their farming operation. The Plaintiff now looks after the cattle portion of the farming operation while her husband is responsible for the grain portion of the operation. Both have knowledge of what the other is doing and make decisions about the farming operation together, but both own farmland and farm assets in their own names. Even though certain machinery and/or vehicles are owned by one of them, the other can use the machinery or vehicles if necessary.

In February, 2008, Norman Cobb, a sales representative for the Defendant, Parrish & Heimbecker Ltd., met with the Korpans at their farm. At this meeting, Ed Korpan filled out a credit application with the Defendant which was later approved. The Plaintiff did not sign the credit application, but was present when her husband signed it and took an active role in the discussions surrounding it. In the course of filling out the application, Mr. Cobb confirmed with them that they ran a family farm. Nothing was said about them running separate farming operations. In the 2008 crop year, Ed Korpan purchased canola seed and chemical from the Defendant on credit. The Plaintiff was aware that he had done this although she did not recall seeing the actual contract. This was not out of the ordinary as Ed signed all of the grain related contracts on behalf of the family.

In order to decide the set off issue, the Judge had to determine if the Plaintiff and her husband were operating the farm as a partnership or if they were each running their own farming operation. The Defendant company argued that it was former while the Plaintiff was adamant that her and her husband were each sole proprietors of separate farming operations.  The Judge found that the Plaintiff had not satisfied the Court on a balance of probabilities that she and her husband ran separate farming operations.  The evidence established the contrary - that they were engaged in a partnership.  Under the Partnership Act, "every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while he/she is a partner...".  On this basis, the Defendant was entitled to set the husband's debt off against the wife's sale of barley (i.e. set off the parternship's debt against the payment to the partnership for the barley).

Read the decision at: Korpan v Parrish and Heimbecker Ltd.