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Division III: Farm Lease Nixed When Sibling Sells Prematurely Despite Covenant (and a classic bar exam problem).

In re: Estate of Hayes

I’ll give my usual disclaimer here. Talk to you children regarding inheritances in order to avoid bad blood. So many people end up in court and in the process destroy whatever familial bond they had.

Okay, we’re going to go old school law exam here.

M=Mom

S1=Son 1, 2, etc.

Blackacre=generic piece of land

M has 4 children, S1-4. M leases Blackacre to S1. M dies, leaving four pieces of Blackacre to S1-4.

S1 wants to sell his land, claiming that he had four leases, one on each section of Blackacre, and his lease is now extinguished on his portion. S2-4 claim the lease was over the land as a whole, and thus is not extinguished by S1 owning part of the leasehold. 

Held: S1’s sale of the land fell under the anti-alienation clause of the lease, and extinguished the lease as a whole. 

You see, part of the lease was that if S1 couldn’t be the tenant on the land for whatever reason, that the lease terminated. Here, since S1 claimed his lease had extinguished and sold it, he was no longer a tenant on the land, and thus the lease overall terminated. Further, as S1 and S2-4 all held mom’s portion of the lease, by selling off his portion, he extinguished the lease overall. They get this from the intent of M’s will, which was to treat each child fairly.

 

Elma Hayes' will shows a desire to treat all children fairly. She gave each child one ofthe four tracts comprising the family farm. Her residuary clause devised "all of the rest, residue and remainder of [her] property of every kind, nature and description, wheresoever located or situated unto [her children]." CP at 201. Under James Hayes’ theory, the devising ofthe farm land into four tracts shows intent to split the 1993 farm lease into four discrete agreements. But the will does not divide the lease. Under James Hayes' plan, he may sell his parcel to a neighbor at a going rate free ofthe farm lease, while he can extort his siblings by demanding a lease buyout before each sibling may sell his or her parcel. James Hayes' scheme does not treat each child fairly.

Washington treats leasehold interests for a term less than life as personal property. Andrews v. Cusin, 65 Wn.2d 205, 207, 396 P.2d 155 (1964). Elma Hayes' will did not expressly devise the farm lease. As residue of her estate, the lease passed under the residuary clause. Legal title to property passing under a will's residuary clause upon completion of probate is held by the beneficiaries as tenants in common. In re Estate of Telfer v. Bd. DfCounty Comm 'r's, 71 Wn. App. 833, 837, 862 P.2d 637 (1993). This court presumes Elma knew the law when she executed the will. Estate ofMell, 105 Wn.2d at 524. Under the residuary clause, Elma evidences her intent to devise the lease to her children as tenants in common. . . . 

A related question is whether James Hayes violated the farm lease, when selling his parcel, resulting in the lease's termination. Under its TEDRA authority, the trial court concluded the farm lease ended by its terms upon James' sale of his parcel to Isaak Land. James argues he did not violate the covenant in Article 14 that prohibited him from assigning, subletting, or transferring the lease. We disagree in that the covenant expressed an intent that the tenant remain the sole farmer on the four parcels, so that the family farm would remain as one. By selling his parcel, James transferred control of a portion of the family farm to a third party.

James Hayes ignores another covenant he made. He agreed that, in the event he cannot personally perform the terms, conditions, and covenants required upon the tenant, the lease terminates immediately. Thus, the lease automatically terminated if he could not personally perform any ofthe 21 other covenants he made. Among other promises, James agreed to devote the entire 1,225 acres he leased, including his parcel, to growing a crop and farming in a good and sufficient farm-like manner. He cannot personally perform any of these promises on the parcel of land he sold. As a result, the lease terminated by its own terms.

This is one of those cases that should be taught in law schools both in property law and in wills, trusts, and estates classes. Very interesting indeed.

The attorneys at Issaquah Legal Services are skilled in both trust and estates matters, as well as property law. Allow our Issaquah Lawyers the chance to work with you to avoid contentious outcomes.

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