Opinion ID: 2586150
Heading Depth: 2
Heading Rank: 1

Heading: Did the Contracts Terminate Upon David's Death?

Text: 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, as is the construction of the written agricultural lease at issue here. As such, the district court's determinations of these issues are subject to de novo review by this court. See Unrau v. Kidron Bethel Retirement Services, Inc., 271 Kan. 743, 763, 27 P.3d 1 (2001).
A threshold question is whether there were valid leases through which the Estate can claim a right to farm the various properties. In proceedings before the district court, the parties did not dispute that there were leases in effect at the time of David's death; thus, the district court did not discuss whether the leases were valid. However, the Court of Appeals panel did discuss the issue, and the analysis was critical to the panel's treatment of the leases, especially the oral leases. Therefore, we begin our review with the question of whether valid leases were in force at the time of David's death. Regarding the written lease, the panel wrote: Although the district court did not address the continued vitality of the 1999 written lease agreement during 2004, it is apparent that David had occupied the premises on a continuous basis since 1999 and that in the absence of timely written notice of termination, he became a tenant from year to year after expiration of the fixed term by operation of law. Sauder, slip op. at 5. The parties do not dispute this conclusion. Indeed, K.S.A. 58-2506(d) provides a farm tenant becomes a tenant from year-to-year by occupying the premises after the expiration of the term in a written lease. Additionally, year-to-year tenancies following a holdover from a written lease are generally extended or renewed on the same terms as the original lease. See Kearns v. Clark, 159 Kan. 353, 355, 154 P.2d 479 (1945). Hence, the lease between David and Gene was in effect on the date of David's death on the same terms and conditions as in the original contract. The panel reached a different conclusion regarding the oral leases, however, deciding that the leases terminated in February before David's death. The panel applied the provisions of K.S.A. 58-2506(a), which provides in part: Except as may be otherwise provided by this section or by a written lease signed by the parties thereto, in cases of tenants occupying and cultivating farms or occupying or leasing pastureland, the notice to terminate such a farm or pastureland tenancy 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. The Estate argues that because no notice of termination was given by either party, the oral leases were continued beginning March 1 and were in effect on March 30, the date of David's death. The panel questioned the direct applicability of this statute because [n]either party contends that David was `occupying' the leased premises pursuant to these oral leases at the time of his death or at anytime within 30 days of March 1. Sauder, slip op. at 7. After additional discussion of the nature of personal contracts and cases from other jurisdictions, the panel held: Based upon the unique facts of this case, including no apparent `occupying' by the tenant during the statutory period for notice of termination and the renegotiations of leases by lessors who desired to provide for continued farming operations on their lands, we hold that David's interests, if any, in the oral agricultural leases, either terminated at the end of the lease term in February or upon his March 2004 death. Sauder, slip op. at 9. Contrary to the panel's conclusion, the record reflects that both parties acknowledged that David was occupying the property at the time of his death. The Estate's case is premised upon occupation and continuation of the leases, and Gene testified that David was farming all the property at issue. Additionally, there was evidence that David had prepared the ground for corn and beans and applied dry fertilizer in the fall of 2003. The panel did not discuss this evidence, nor did it explain its construction of the phrase occupying and cultivating. The phrase occupying and cultivating is not defined in the statute. However, guidance as to the intended meaning of the phrase is provided through two other statutory provisions relating to the timing and effect of notices of termination. We must construe these provisions along with K.S.A. 58-2506 to determine the legislature's intent. See Pieren-Abbott v. Kansas Dept. of Revenue, 279 Kan. 83, 89, 106 P.3d 492 (2005) (several provisions of an act in pari materia must be construed together when determining legislative intent and reconciling provisions). First, K.S.A. 58-2506(b) provides that the termination date of leases will be extended to August 1 if a fall seeded grain crop has been prepared in conformance with normal practices in the area. Second, pursuant to K.S.A. 58-2506a, if a landlord gives notice of termination of a lease, a tenant who has performed customary tillage practices or has applied or furnished fertilizers, herbicides or pest control substances but not planted crops is entitled to payment for the fair and reasonable value of the services furnished and the fertilizers, herbicides or pest control substances furnished. Thus, these provisions vest tenants with certain rights if a tenant performs one or more of the listed tasks. From these provisions, we discern a legislative intent that 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 the notice requirements of K.S.A. 58-2506 and K.S.A. 58-2506a. Because David had worked and applied fertilizer to the property that was subject to the oral leases, David was occupying and cultivating the property. Consequently, the leases were in effect at the time of David's death because no notice of termination was provided by any landlord or David before March 1, 2004.
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.
However, a different conclusion could apply to the written lease in this case because the statutory requirements regarding termination do not apply if the parties to a written contract agree to other terms. (K.S.A. 58-2506[a] begins: Except as may be otherwise provided . . . by a written lease signed by the parties thereto. . . .). Furthermore, public policy encourages the freedom to contract, which should not be interfered with lightly. Miller v. Foulston, Siefkin, Powers & Eberhardt, 246 Kan. 450, 463, 790 P.2d 404 (1990). Consequently, nothing should prohibit parties to a contract from agreeing to terms which would take the arrangement outside the statutory rule that a lease is binding upon the heirs of the parties; the parties could agree that a written contract will terminate immediately upon the lessee's death. We, therefore, must construe the contract between Gene and David to determine whether the written contract continued upon David's death. When courts are called upon to interpret a written instrument, the primary rule is to ascertain the intent of the parties. Marquis v. State Farm Fire & Cas. Co., 265 Kan. 317, 324, 961 P.2d 1213 (1998). 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. 265 Kan. 317, Syl. ¶¶ 2, 3, 961 P.2d 1213. Ideally, parties to a farm lease would clearly express their intent regarding the effect of the death of a tenant, the issue we have in this case, or the death of a landlord. Indeed, we would encourage scriveners of such agreements to include a provision expressing the parties' intent. However, in this case, there was no such clear expression. We, therefore, must examine the written lease to determine the effect of various terms which are less clear expressions of the parties' intent. The Court of Appeals, in rejecting the contention the written farm lease between David and Gene was a personal services contract, focused upon paragraph 12, which stated, in part: This lease is not intended nor shall it be construed to be an employment contract, partnership, joint venture, or profit-sharing enterprise between the Landlord and the Tenant. Because the lease expressly disclaimed any intention to create an employment contract, the panel concluded the contract was not one for personal services. Sauder, slip op. at 6. The panel cited no authority for its conclusion that a personal services contract must be an employment contract. Furthermore, no party has argued that the agreement constituted an employment contract; clearly, the agreement indicates that it is not to be so construed. Parties to crop share agreements have been determined to have a variety of relationships, including cropper and employer, landlord and tenant, joint venture participants, partners, and tenants in common. See 21A Am.Jur.2d, Crops §§ 45, 46, 55-62. Paragraph 12 clarifies the parties' intent that the contract establishes a relationship between Gene and David as landlord and tenant and not one of the other types of relationships. When an employment or cropper relationship exists, the contract is usually deemed to be a personal services contract. However, even when the contract is viewed as one between a landlord and a tenant, many jurisdictions have found the cropshare lease to be one involving personal services. 21A Am.Jur.2d, Crops § 53. Contrary to the panel's analysis, we conclude that paragraph 12 does not mean that the written agreement could not be construed as a contract for the performance of personal services independent of an employment relationship. The Court of Appeals panel also considered the district court's conclusion that paragraph 12 was inconsistent with paragraph 4(d). Paragraph 4(d) of the agreement provided that the tenant would not assign this lease nor sublet the premises. Although the provision did not contain language governing assignment upon the death of the lessee, the district court concluded that the parties clearly stated their intent that the contract be a personal services contract subject to the discretion of the landlord. The panel rejected this conclusion based upon its reading of a different provision, paragraph 15, which the panel viewed as evidence of the parties' intent that the lease survive David's death. Sauder, slip op. at 5-6. Paragraph 15 directed that the agreement shall apply to and be binding upon the heirs, successors, executors, and administrators of the parties hereto. The Court of Appeals panel concluded this provision was not inconsistent with the nonassignment clause of paragraph 4(d), apparently because the circumstances surrounding an administrator assuming the duties and obligations of a decedent under a contract is not an assignment or sublease. The Court of Appeals' interpretation is supported by the Illinois appellate court's decision in Ames, 267 Ill.App.3d at 677, 205 Ill.Dec. 223, 642 N.E.2d 1340, in which the court noted that similar language could remove the lease from operation of the common-law rule. We conclude this contractual language had the same effect as K.S.A. 58-2519. 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. Therefore, under such a contract, the deceased lessee's estate has a fiduciary obligation to perform the contract in the same manner that performance could have been demanded of the decedent. Because of this provision in the contract between Gene and David, the contract did not terminate upon David's death.