Opinion ID: 2586150
Heading Depth: 3
Heading Rank: 3

Heading: Are the Oral Leases Personal Services Contracts?

Text: Alternatively, the panel concluded the oral contracts terminated on the date of David's death. Sauder, slip op. at 7-9. The rationale for this conclusion appears to be that the contracts were personal in nature. The Estate, on review, asks us to reverse this conclusion. The question of whether a sharecrop farm lease is a personal services contract is a matter of first impression in Kansas. The issue was discussed but not decided in Jinnings v. Amend, 101 Kan. 130, 132, 165 P. 845 (1917). In Jinnings, a sharecropping tenant had broken sod on 500 acres and plowed 400 acres of cultivated land but had not sowed a crop when he was arrested and placed in jail. Within a few days of the tenant's arrest, the landlords took possession of the property and would not return it to the tenant when he was paroled. The tenant argued that the parties' written agreement did not contain an express provision regarding termination of the tenancy and, as a result, the lease did not expire until the end of the 3-year lease term. He sought to characterize the lease as a standard property agreement. The landlords argued that the croppers agreement for sharing proceeds from crops and for receipts for pasturing cattle meant that the agreement was one for personal services. The court's opinion included language suggesting the contract was a personal services contract, stating: His personal services were engaged; his skill as a farmer was involved; he had no power of substitution or subletting. 101 Kan. at 132, 165 P. 845. However, ultimately, the court declined to answer the question of whether the contract was one for personal services, concluding: We do not consider it necessary to decide what expression most fitly describes the relationship into which the parties entered. 101 Kan. at 132, 165 P. 845. The parties have cited no other Kansas cases addressing the question directly. However, several basic principles guide our consideration of the issue. Generally, `the obligations of a lessee under the contract [pass] on his death to his personal representative who assumes in his fiduciary capacity the performance of the contract in the same manner that its performances could have been demanded of the lessee.' [Citation omitted]. Olson v. Frazer, 154 Kan. 310, 312, 118 P.2d 505 (1941). However, where the existence of a particular person is necessary for the performance of a contractual duty, the death of that person, or his or her loss of capacity to perform the duty, discharges the obligor's duty to perform. See Restatement (Second) of Contracts § 262 (1979). Generally referred to as personal services contracts, these contracts are not assignable, do not survive without the consent of both parties, and terminate automatically upon the death of the party performing the unique service. See 1 Friedman on Leases § 2:1.7 (5th ed.2004); 29 Williston on Contracts § 74:27 (4th ed.2003); 30 Williston on Contracts § 77:72 (4th ed.2004). The rationale for considering sharecrop farm lease agreements to be personal services contracts was explained in Ames v. Sayler, 267 Ill.App.3d 672, 205 Ill.Dec. 223, 642 N.E.2d 1340 (1994). In the case, the estate of a deceased farm tenant sought a determination that it could continue to farm the landowners' land under the terms of decedent's oral lease, and the landowners filed a counterclaim. The Illinois appellate court recognized the common-law rule that a farm lease is a personal services contract that terminates on the tenant's death, stating that a farm tenancy is an estate in land, but it is more than that. A farm tenant not only has possession of land, he is expected to perform services which require skill and judgment. A farm landlord usually does not view tenants as interchangeable, and usually chooses to lease his farm only to those in whom he has particular confidence. No satisfactory reason appears why a farm owner should be forced to accept a substitute, if the farm owner can be said to have entered into a `tenancy,' but not if what is basically the same relationship is labeled a personal services contract. Farm tenancies and personal services contracts are not mutually exclusive categories. Farm tenancies in fact are more readily viewed as personal services contracts than are employee or custom hire relationships. A farm owner places more trust in a tenant than he does in an employee or a custom hire operator. The question in this case should be answered by determining whether the contract between the farm owner and the worker is a personal services contract. 267 Ill.App.3d at 675-76, 205 Ill.Dec. 223, 642 N.E.2d 1340. See In re Estate of Long, 311 Ill.App.3d 959, 964, 244 Ill.Dec. 591, 726 N.E.2d 187 (2000). Other states have reached the same result upon similar rationales. E.g., Crump v. Tolbert, 210 Ark. 920, 924, 198 S.W.2d 518 (1946) (lease of land on shares, including use of buildings, farm implements, stock, and other personal property is personal contract because the amount to be received by the lessor and the care of the property depend on the character, industry, and skill of the lessee); Randall v. Chubb, 46 Mich. 311, 312, 9 N.W. 429 (1881) (farm lease is personal services contract because [t]he rent or share which the [lessor] would receive, must depend very much upon the character of the lessee); Greeson v. Byrd, 54 N.C.App. 681, 682, 284 S.E.2d 195 (1981) (A farm lease [sharecropping] agreement is personal in nature and thus non-assignable without the landlord's consent since the landlord's receipts under the contract are directly related to the lessee's skill and industry.); Tipton v. Martzell, 21 Wash. 273, 276, 57 P. 806 (1899) ([T]he landlord depends on the character and skill of the lessee, and [a contract of this nature] would seem to be personal and not assignable.); see 9 Corbin on Contracts § 865 (Interim ed.2002). At least one jurisdiction has held that farm leases are not personal services contracts. Walker's Estate, 6 Pa. C.C. 515 (1889). However, the majority of jurisdictions have noted that considerable skill and judgment are required in farming and a landlord's confidence in the lessee is personal and not assignable, transferable, or inheritable. In response to this line of authority, the Estate argues, in part, that it does not matter what common-law doctrines apply because the Kansas Legislature has prescribed the time and method for farm lease terminations through K.S.A. 58-2506, requiring that the notice to terminate . . . must be given in writing at least 30 days prior to March 1 and must fix the termination of the tenancy to take place on March 1. In support of its argument, the Estate cites Read v. Estate of Mincks, 176 N.W.2d 192 (Iowa 1970). In Read, the Iowa Supreme Court concluded that the common-law rule that a share crop farm lease was ordinarily regarded as a personal services contract, which does not survive the lessee's death, was materially restricted by an Iowa statute that required several month's written notice to terminate a farm tenancy. 176 N.W.2d at 193. However, the Illinois court in Ames reached the opposite conclusion. Considering a similar statute that required 4 months' notice of termination before March 1, the Illinois appellate court in Ames determined the statute did not apply when there was a death, stating: In any event we reject the view that the question presented in this case is answered (or even addressed) by the four-month statute, or by considering whether plaintiff was a tenant. The four-month statute deals with termination at the end of the year, not termination upon the death of one of the parties. 267 Ill.App.3d at 675, 205 Ill.Dec. 223, 642 N.E.2d 1340. The court then engaged in a lengthy analysis of the nature of personal services required, but at the conclusion of that discussion again noted: We do not question there was a landlord-tenant relationship in this case and that the four-month notice statute would apply in the event an attempt had been made to terminate this lease at the end of the year. As we have explained above, however, that is not relevant on this appeal. What is important is whether the parties entered into this contract upon the understanding that it would be performed by decedent and no others. The trial court made that finding, that this contract was a personal services contract, and that finding is supported by the evidence. 267 Ill.App.3d at 677, 205 Ill.Dec. 223, 642 N.E.2d 1340. The Estate argues that the Ames court's analysis cannot be applied in Kansas because of another statute, K.S.A. 58-2519, which states: Executors and administrators shall have the same remedies to recover rents, and be subject to the same liabilities to pay them, as their testators and intestates. Without citing to K.S.A. 58-2519 as authority, this court applied the general rule of this provision to the lease of a business building. The Olson court determined that upon a lessee's death, the lessee's obligations pass to his or her personal representative who assumes in a fiduciary capacity the performance of the contract in the same manner that its performances could have been demanded of the lessee. 154 Kan. at 312, 118 P.2d 505. Even though K.S.A. 58-2519 is a general statute that does not specifically refer to farm leases and Olson related to the lease of a business building, there is no indication the legislature intended a different rule for farm leases. Article 25 of Chapter 58, K.S.A. 58-2501 et seq., which deals generally with non-residential landlord and tenant relationships, is sprinkled with other provisions creating special rules for farm sharecrop leaseholds. Yet, the Kansas Legislature did not provide for special rules relating to executors and administrators assuming responsibilities with farm tenancies. Furthermore, commentators suggest K.S.A. 58-2519 applies to farm leases. Professor James Wadley, of Washburn University School of Law, and Sam Brownback, former Kansas Secretary of Agriculture, in their treatise on Kansas agricultural law, state: If either the landowner or tenant dies while a farm lease is in effect, the decedent's executor or administrator is required to comply with the terms of the lease as if the decedent or tenant were still alive. Brownback and Wadley, Kansas Agricultural Law, pp. 193-94 (1994). In support of this statement, the authors cite Jewell v. McFarland, 141 Kan. 40, 40 P.2d 330 (1935), another case related to the lease of a business building. The decision in Jewell is based, in part, on the predecessors to K.S.A. 58-2519, G.S. 1869, ch. 55, sec. 19; R.S.1923, 67-519; and G.S.1949, 67-519, which were simply a codification of the common law. Hannah, The Legal Status of Tenant Farmers in Kansas, 7 Kan. L.Rev. 295, 301 (1959). We, therefore, conclude that 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. Therefore, the oral leases did not terminate upon David's death.