Court Opinion

ID: 7923454
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:28:54.141204+00
Date Added: 2024-06-11T16:32:59.403812
License: Public Domain

Biles, J.,
dissenting in part: I would affirm the district court’s decision in its entirety. The majority's threshold premise is that the contract for deed did not constitute a “purchase” of the farmland, as that term is used in the Trust instrument, because the installment payments extended more than 3 years after Arthur Hamel’s death. The majority bases its conclusion on this language from the Trust:
“Upon my death, my Trustees shall have the farmland appraised. Based upon that appraisal, DENNIS HAMEL has the option to purchase any or all of tire farmland for three years immediately following my death at the appraised price. During *1081such time period, the trust shall continue to hold the farmland not yet purchased by DENNIS HAMEL. All net income from tire farmland shall be distributed annually to the beneficiaries in accordance with the above listed beneficiary’s fractional share of the trust. If DENNIS HAMEL has not purchased the farmland within the allotted time period, then it shall be divided in accordance with the above beneficiary’s fractional shares.” (Emphasis added.)
The majority then gleans the following conclusion: “The language of the Trust conveys Arthur’s clear intent that the farmland would be disposed of within 3 years of his death—either through Dennis’ purchase of the farm or by a division of farm property among the beneficiaries.” This does not follow from the recited language or tire remaining provisions in the Trust. And there is nothing in the quoted language that says anything about a final payout within 3 years. More importantly, this conclusion misconstrues the nature of a contract for deed, which may inadvertently do mischief with other real' estate transfers under installment if the majority’s conclusion is to be considered a correct statement of the law.
The majority agrees Dennis Hamel had 3 years to exercise the purchase option stated in the Trust instrument. The majority also agrees the Trust expressly gives the Trustees “ ‘the power to do all acts that might legally be done by an individual in absolute ownership and control of property.’ ” But if that is agreed to, it necessarily follows that the Trustee had authority to enter into a contract for deed for the farmland. Nothing in the trust instrument expresses—or even hints at—a prohibition against contracts for deed as an inappropriate vehicle to effect the farmland’s purchase.
Finally, the majority notes the Trust instrument expressly authorizes the Trustees to lend money to any beneficiary provided the loan is adequately secured and bears a reasonable interest rate. The district court determined the conditions for such a transaction were met. And no challenge is put forward that the purchase price was below market, the interest rate insufficient or unreasonable, or that security for the installment sale was inadequate. Taken together, and based on these findings by the district court, these Trust provisions authorized a contract for deed with Dennis.
*1082The district court went on to hold that terms of the contract of sale were discussed with all trust beneficiaries, including Lawrence, and that the sale was entered into in good faith. The district court concluded: “The sale of the farm ground under fhe terms contained in the contract of sale was in all respects proper under the terms of the Trust.” These conclusions are supported by tire record, and the applicable law and should be affirmed.
But according to the majority, a transgression occurs in tire term in the contract for deed drat extended installment payments beyond 3 years. The majority concludes: “Under the terms of the contract for deed at issue here, the purchase of the farmland would not be final, if at all, for more tiran 6 years after Arthur s death.” But this requires a conclusion that a contract for deed cannot be a “purchase” of real estate, as that term is used in the Trust. I disagree.
Contracts for deed are common in the acquisition of real estate in this state. K.S.A. 79-3101 has long provided that contracts for deed are treated for purposes of the applicable statutes as a mortgage of real property to secure the balance of the unpaid purpose price. And such contracts are subject to state usury laws. K.S.A. 16-207(b); Beltz v. Dings, 27 Kan. App. 2d 507, 512, 6 P.3d 424 (2000).
This court held in In re Estate of Hills, 222 Kan. 231, 241-42, 564 P.2d 462 (1977), that an installment real estate contract transfers the seller’s interest in the real estate to the buyer when the contract is made—not after all the installment payments are made. The court also noted that when a deed is placed in escrow, which is a typical feature of a contract for deed, it is “ ‘in legal effect a delivery of it to the grantee, subject only to the subsequent condition of final payment.’ ” 222 Kan. at 238 (quoting Gault v. Hurd, 103 Kan. 51, 53, 172 Pac. 1011 [1918]); see also Torluemke v. Abemathey, 174 Kan. 668, 670-71, 258 P.2d 282 (1953) (beneficial incidents of ownership under contract for deed passed at the moment of contract execution and initial actions pursuant to contract); Graham v. Claypool, 26 Kan. App. 2d 94, 95-96, 978 P.2d 298 (1999) (stating general rule that purchaser in a sale of real estate under an installment land contract, i.e., contract for deed, becomes *1083the equitable owner of tire realty and the seller, although holder of legal title, retains a secured interest in the property to protect future payments); Century Savings Ass’n v. C. Michael Franks & Co., 9 Kan. App. 2d 776, 778, 689 P.2d 915 (1984) (contract for deed operates as a transfer of real estate sufficient to trigger a due-on-sale clause in promissory note).
The formality of a contract for deed, accompanied by the facts here that Dennis acquired the right to possession, retention of income from the property, the duty to pay taxes, and responsibility for the farmland’s upkeep, is sufficient to show the Trustees completed a “purchase”—as that term should be reasonably construed from the Trust instrument—by reducing what was a farmland asset to a contract for ongoing installment payments. There is nothing in the Trust instrument from that perspective that prevents the transaction. I would affirm the district court on that basis, and with it, the remainder of the district court’s ruling founded upon that determination.