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In re Estate of Sauder

April 27, 2007; as amended May 16, 2007

IN THE MATTER OF THE ESTATE OF DAVID E. SAUDER, DECEASED.


Review of the judgment of the Court of Appeals in an unpublished opinion filed December 16, 2005. Appeal from Coffey district court; PHILLIP M. FROMME, judge. Judgment of the Court of Appeals affirming in part, reversing in part, and remanding with directions is affirmed in part and reversed in part. Judgment of the district court is affirmed in part, reversed in part, and remanded with directions.

SYLLABUS BY THE COURT

1. The questions of whether written or oral farm leases continue after the death of the lessee and whether a contract is a personal services contract that terminates on the death of the lessee are questions of law subject to de novo review by this court.

2. Construction of a written agricultural lease is a question of law subject to de novo review by this court.

3. Pursuant to K.S.A. 58-2506(d), a farm tenant becomes a tenant from year to year by occupying the premises after the expiration of the term in a written lease. Year-to-year tenancies following a holdover from a written lease are generally extended or renewed on the same terms as the original lease.

4. One who leases farm property and performs customary tillage practices, plants crops, or applies fertilizers, herbicides, or pest control is occupying and cultivating the leased premises within the meaning of K.S.A. 58-2506 and K.S.A. 58-2506a, which require a statutory notice to quit in order to terminate a farm lease.

5. Under K.S.A. 58-2519, a lease, including an agricultural sharecrop lease, continues in effect upon the death of the tenant unless the parties have contracted otherwise, and the executor or administrator of the lessee's estate has the fiduciary obligation to see that the lessee's obligations are met.

6. When courts are called upon to interpret a written instrument, the primary rule is to ascertain the intent of the parties. As a general rule, if the language of the written instrument is clear, there is no room for rules of construction. Courts must ascertain the meaning of a written agreement by considering all pertinent provisions and not by the critical analysis of a single or isolated provision.

7. When parties to a sharecrop farm lease agree that the terms of the contract shall apply to and be binding upon the heirs, successors, executors, and administrators of the parties, they express an intent that the contract is not a personal services contract that terminates on the death of one of the parties.

8. An agreement by the parties of a sharecrop farm lease that allows the landlord to re-enter the premises or terminate the lease and relet it if the tenant fails to perform any covenant is enforceable, and the landlord may exercise those rights.

9. Generally, if a tenant abandons, surrenders, or repudiates a lease, the landlord has an obligation to mitigate damages, including reletting the premises.

10. While K.S.A. 58-2506 and K.S.A. 58-2506a prescribe the method for terminating an oral farm lease while the tenant is occupying and cultivating the property and thereby provide some protection to the tenant, the provisions do not force the landlord to suffer a loss of income when the tenant does not occupy and cultivate the land. The failure to timely plant crops in keeping with customary farm practices means that the tenant is no longer occupying and cultivating the premises pursuant to the oral lease and a statutory notice to quit is unnecessary.

11. Oral farm leases consist of a landlord's promise to furnish land, and a tenant's promise to furnish care, skill, and labor. The contract is executory, and the contractual provisions are mutually dependent. A tenant is not in control of the land to use it at the tenant's pleasure. The tenant is bound to plant, care for, and harvest crops from which proceeds will be obtained and divided. A failure to plant crops would defeat the essence of a farm lease justifying a landlord's recision of the lease.

12. An appellate court reviews the district court's findings of fact to determine if the findings are supported by substantial competent evidence and whether the findings are sufficient to support the district court's conclusions of law. Substantial evidence is such legal and relevant evidence as a reasonable person might accept as sufficient to support a conclusion.

13. Where a district court renders a correct judgment under the facts and the law, the judgment will not be disturbed merely because an appellate court relies upon a different rationale.

14. The theory of unjust enrichment rests upon three elements: (1) a benefit conferred; (2) an appreciation or knowledge of the benefit by the one receiving the benefit; and (3) the acceptance or retention of the benefit under such circumstances as to make it inequitable to retain the benefit without payment of its value.

The opinion of the court was delivered by: Luckert, J.

The coadministrators of the Estate of David E. Sauder (Estate) seek a determination of the effect of the decedent's written and oral sharecrop farm leases upon the ownership of crops that the decedent had planted as a sharecrop tenant but had not harvested at the time of his death and of crops planted, grown, and harvested after his death on property which the decedent had prepared for planting. The coadministrators contend that several oral leases and one written lease under which David farmed the property of others did not terminate upon David's death, entitling the Estate to ownership of the tenant's share of all crops on the property. Gene Sauder, one of the landlords who was also David's father, and Spencer West, the person who harvested the growing crops and planted new crops on the leased properties, contend farm leases, whether written or oral, are personal service contracts that do not survive the death of the tenant. Alternatively, they contend the common law relating to termination of commercial leases, general contract law, and equity do not allow the Estate's claim to the crops.

Facts

On January 1, 1999, David executed a written "Farm Lease Agreement" in which he obtained the right to occupy property owned by Gene in exchange for rental payments in the amount of one-half of all harvested crops. David and Gene agreed to each pay one-half the expenses for fertilizer and chemicals. As conditions of the lease, David agreed to "cultivate, fertilize and manage the farm in a husbandlike manner" and to "insure that all crops are cut, threshed, combined, or husked, and otherwise properly cared for at all times." The lease also provided that David would lease farm equipment from Gene and make an annual payment in addition to the crop sharing payments. The lease was for 12 months ending December 31, 1999.

Although the written lease was not renewed, David was still farming his father's land when he died intestate on March 30, 2004. At the time of his death, David had approximately 200 acres of winter wheat growing on Gene's land, and David was preparing other acreage for corn and beans. Within a week of his death and before estate administrators had been appointed, Gene and Spencer -- Gene's grandson and David's nephew -- planted corn on 302 acres that had been subject to the 1999 written lease.

At the time of his death, David also farmed approximately 460 acres under oral leases with several other landlords. Under these agreements, David was to receive two-thirds of the crops and the landlords one-third. David had not planted any crops on the property subject to the oral leases. However, the previous fall, David had worked the land and applied fertilizer. Within a short time of David's death and before estate administrators were appointed, Gene negotiated with these landlords to have Spencer lease these properties. Spencer borrowed money for seed and planted corn on the properties subject to the oral leases.

On April 30, 2004, David's ex-wife, Michelle Thompson, and his daughter, Alexandria Cox, were appointed coadministrators of the Estate. On May 28 and July 6, 2004, Cox signed United States Department of Agriculture (USDA) contracts which listed Spencer as an owner or operator of the leased premises.

After borrowing money, Spencer planted soybeans on the balance of the acreage David had leased from Gene and the other landlords. The beans were planted during May, June, and July, with the last planted on July 13, 2004.

Gene and Spencer also harvested the winter wheat growing on Gene's property. They delivered one-half of the crop for the benefit of the Estate and made a claim against the Estate for the custom harvesting expenses. The Estate did not object to the claim for custom harvesting or the splitting of the proceeds from the wheat.

On July 15, 2004, the coadministrators informed Gene and Spencer that the Estate was also claiming the corn and bean crops. Prior to this date, the coadministrators had neither authorized nor prohibited Gene and Spencer from farming David's leaseholds. Evidence indicates that the coadministrators were aware Spencer was farming the property. Specifically, there was evidence that Cox worked at the bank from which Spencer borrowed money to buy seed for the land, signed the USDA forms necessary for the crops to be farmed, and knew of the plans for harvesting the wheat and planting crops.

In an apparent response to the Estate's assertion of a right to proceeds from the corn and bean crops, Gene filed a petition in the estate proceedings. He requested that the district court "construe what farm lease rights, if any, the Estate of David E. Sauder, deceased, may possess and claim against the 2004 corn and bean crops planted by Petitioner and his assigns . . . ." Spencer joined him on the trial brief in which they requested a determination that the leases terminated upon David's death. (The landowners are not parties; rather, the issues involved in this appeal arise because Gene and Spencer object to the Estate's claim to the tenant's share of proceeds under these sharecrop farm leases).

The district court entered judgment against the Estate on Gene's petition, concluding that the Estate could not enforce the farm leases for three reasons:

"First, the agricultural leases are personal services contracts which terminate on the death of the tenant. Second, the Estate failed to obtain approval from the probate court to continue the farming lease under K.S.A. 59-1402; and so the Estate lacks authority to enforce the leases. Third, the Estate failed to act under circumstances which resulted in injury to Spencer West and the Estate is prevented from benefitting under the equitable doctrine of laches."

The Estate appealed, challenging each of these findings.

In its unanimous per curiam opinion, a Court of Appeals panel held that the district court erred in concluding the written lease terminated at David's death. In re Estate of Sauder, No. 93,556, unpublished opinion filed December 16, 2005. The panel relied upon a disclaimer which stated that "[t]his lease is not intended nor shall it be construed to be an employment contract" to conclude the parties did not intend that the contract be one for personal services. The panel further concluded that "it is well established that upon the death of a lessee, the personal representative assumes the rights and obligations of the decedent by operation of law." Consequently, the panel held the written agreement was enforceable by the Estate. Sauder, slip op. at 6.

Nevertheless, in discussing the oral leases, the Court of Appeals noted that there was policy support in Kansas for the principle that "agricultural leases are personal in nature" and further agreed that the principle had "received general acceptance" as the "majority rule." Sauder, slip op. at 8. However, the court ultimately did not opine whether these oral farm leases were personal services contracts that terminated on David's death. The Court of Appeals instead determined that David's interest, "if any," in the oral leases terminated either at the end of the lease term in February or at his death, and, therefore, the Estate had no interest in crops growing on third-party land; the crops were subject to the renegotiated oral leases. Sauder, slip op. at 9.

The Court of Appeals also held that the district court erred in concluding that court approval under K.S.A. 59-1402 was a necessary condition precedent to the Estate's authority to conduct farming operations under the leases. That statute requires the probate court's authority for the personal representative to operate any business of a decedent. K.S.A. 59-1402. The Court of Appeals determined that K.S.A. 59-1402 had no application to the leasehold interests of a decedent. Sauder, slip op. at 10-11. The parties did not seek review of this portion of the decision and, therefore, this issue is not before this court.

Finally, the Court of Appeals affirmed the district court's application of laches as to the soybean crop planted after the coadministrators of the Estate had been appointed; it agreed that the Estate was barred from any claims to that crop because substantial evidence supported the district court's finding that the Estate "sat back and watched the [crops] grow." Sauder, slip op. at 13. However, as to the corn crop planted on Gene's property, the Court of Appeals reversed the district court's application of laches because the corn was planted "well in advance of the appointment of the coadministrators. Under the circumstances presented, it was unreasonable to expect action well in advance of appointment in order to protect the interests of the Estate." Sauder, slip op. at 13-14. Consistent with this determination, the Court of Appeals remanded the case to the district court to determine the extent of the Estate's interest in the corn crop, offset by reasonable costs and the value of services provided by Gene and Spencer. Sauder, slip op. at 14-15.

The Estate petitions for review of the Court of Appeals' rulings that the oral leases were personal services contracts that terminated on David's death and that laches barred the Estate's claim against the soybean crop planted on Gene's land.

On cross-petition, Gene and Spencer seeks review of the Court of Appeals' decision that the written lease between Gene and David did not terminate with David's death. They also argue that if the doctrine of laches applies, it should have been applied to bar the Estate's claim against the corn crop. Finally, they seek clarification of the Court of Appeals' opinion on the ...


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