Court Opinion

ID: 4386546
Source: CourtListenerOpinion
Date Created: 2019-04-11 18:10:12.670453+00
Date Added: 2024-06-11T07:49:49.592498
License: Public Domain

Filed 4/11/19 by Clerk of Supreme Court
                        IN THE SUPREME COURT
                      STATE OF NORTH DAKOTA

                                    2019 ND 96

Debra Heitkamp, as Personal Representative
for the Estate of Nick Lyons,                                Plaintiff and Appellant

       v.

Kevin Kabella,                                              Defendant and Appellee

                                   No. 20180288

      Appeal from the District Court of Richland County, Southeast Judicial District,
the Honorable Bradley A. Cruff, Judge.

       REVERSED AND REMANDED.

       Opinion of the Court by Jensen, Justice.

      Asa K. Burck (argued) and Kip M. Kaler (on brief), Fargo, ND, for plaintiff
and appellant.

       Mark A. Meyer, Wahpeton, ND, for defendant and appellee.
                               Heitkamp v. Kabella
                                   No. 20180288

       Jensen, Justice.
[¶1]   Debra Heitkamp, the personal representative of the Estate of Nick Lyons,
appeals from a district court judgment in favor of Kevin Kabella following cross-
motions for summary judgment alleging the district court improperly determined the
parties’ agreement was invalid because it fell within the limitation on the length of
agricultural leases provided by N.D.C.C. § 47-16-02. We reverse the judgment and
remand for further proceedings.
                                          I.
[¶2]   Kevin Kabella and Nick Lyons entered into an agreement pertaining to
farmland on March 29, 2007. Under the terms of the agreement, Lyons was to pay
Kabella the total sum of $20,670. Forty percent of the total sum was paid upon the
signing of the agreement with payment equaling twenty percent of the total being
made in each of the three subsequent years. The agreement gave Lyons possession
and use of the property “in perpetuity.” In addition to receiving the property in
perpetuity, the agreement stated Kabella may sell the property subject to Lyons’ right
to purchase the property for $72,345.
[¶3]   Prior to the 2012 farming season, Kabella attempted to lease the property to
Kermit Anderson Jr. Lyons refused to vacate the property asserting he was entitled
to the use and possession of the property pursuant to his agreement with Kabella.
Anderson brought an eviction action to remove Lyons from the property. Kabella was
included as a defendant to allow a resolution of any issues regarding the agreement
between Kabella and Lyons.
[¶4]   In the litigation initiated by Anderson, Anderson and Kabella asserted the
March 29, 2007 agreement between Kabella and Lyons was invalid under N.D.C.C.
§ 47-16-02, which precludes agricultural leases in excess of ten years. Lyons asserted
the agreement did not fall within the limitation of N.D.C.C. § 47-16-02. The district
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court entered a judgment in favor of Lyons finding the March 29, 2007 agreement was
valid until at least March 29, 2017. The decision was appealed to this Court which
affirmed the district court’s decision in Anderson v. Lyons, 2014 ND 61, 845 N.W.2d
1 (Lyons I).
[¶5]   In Lyons I, Kabella and Anderson argued the agreement was a lease that fell
within the limitations of N.D.C.C. § 47-16-02. Lyons argued the agreement was not
within the limitation, and this Court declined to decide whether the agreement at issue
here was limited by N.D.C.C. § 47-16-02 because express provisions of the agreement
could terminate the agreement before ten years had passed. Lyons I, 2014 ND 61, ¶
17, 845 N.W.2d 1. In doing so, this Court cited two contingencies which could end
the agreement prior to ten years: (1) Kabella could sell the land or (2) Lyons may opt
out of the agreement. Id. We concluded “the district court did not err in determining
the 2007 agreement did not violate N.D.C.C. § 47-16-02 and was not invalid.” Id.
We specifically noted we had not determined whether the agreement would be
“invalid should it extend beyond ten years.” Id.
[¶6]   Lyons passed away in May 2013, and Debra Heitkamp was appointed personal
representative of the estate. The estate has utilized the property since that time. In
March 2017, Heitkamp, as personal representative of the estate of Lyons, brought the
present action seeking a declaratory judgment that the agreement is valid in
perpetuity. The district court granted summary judgment to Kabella and found the
agreement was a lease that fell within the restrictions of N.D.C.C. § 47-16-02, and
due to the non-occurrence of any of the contingencies contained in the agreement, it
expired on its tenth anniversary, March 29, 2017. The court awarded Kabella
damages equal to the fair value of the use of the property subsequent to March 29,
2017. The estate argues, in part, that the payments provided under the lease were not
“rent or services,” and therefore the agreement did not fall within the limitation on
agricultural leases provided by N.D.C.C. § 47-16-02. We did not address this issue
in Lyons I. The issue is also consistent with the argument made by Lyons in the 2012

                                          2
eviction action, on appeal in Lyons I, and again to the district court in this case
asserting the agreement does not fall within N.D.C.C. § 47-16-02.
                                          II.
[¶7]   This Court’s standard for reviewing a district court’s decision granting
summary judgment under N.D.R.Civ.P. 56 is well established:
       Summary judgment is a procedural device for the prompt resolution of
       a controversy on the merits without a trial if there are no genuine issues
       of material fact or inferences that can reasonably be drawn from
       undisputed facts, or if the only issues to be resolved are questions of
       law. A party moving for summary judgment has the burden of showing
       there are no genuine issues of material fact and the moving party is
       entitled to judgment as a matter of law . . . . Whether the district court
       properly granted summary judgment is a question of law which we
       review de novo on the entire record.
Estate of Christeson v. Gilstad, 2013 ND 50, ¶ 6, 829 N.W.2d 453.
[¶8]   The interpretation of a contract is generally a question of law. Flaten v.
Couture, 2018 ND 136, ¶ 14, 912 N.W.2d 330. On appeal, this Court independently
examines and construes the contract to determine if the district court erred in its
interpretation. Id. If the intent of the parties can be ascertained from the agreement
alone, interpretation of the contract is a question of law. See N.D.C.C. § 9-07-04;
Aaland v. Lake Region Grain Coop., 511 N.W.2d 244, 246 (N.D. 1994). Thus, an
unambiguous contract is particularly appropriate for summary judgment. Garofalo
v. St. Joseph’s Hosp., 2000 ND 149, ¶ 7, 615 N.W.2d 160. However, when an
ambiguous contract is at issue, the parties’ intent becomes a question of fact. Id. “[A]
contract is ambiguous when reasonable arguments can be made for different positions
on its meaning.” Moen v. Meidinger, 547 N.W.2d 544, 547 (N.D. 1996).
[¶9]   The district court acknowledged the “parties dispute the nature of the
agreement with Heitkamp [Lyons] alleging the agreement was a grant, purchase or
contract for deed, and Kabella that it was a lease for a term of years.” The court
thereafter engaged in substantial analysis of the agreement to determine whether it

                                           3
was a grant, purchase agreement, or contract for deed as asserted by the estate, or if
it was a lease as asserted by Kabella.
[¶10] There are several aspects of the document that support the estate’s
interpretation asserting the agreement was a grant, purchase agreement, or contract
for deed. The term of the agreement, “in perpetuity,” is an unusual term for lease.
The document states the property will be Lyons’ “to have and to hold in perpetuity.”
The document required Kabella to continue to pay the real estate taxes on the property
in perpetuity without any reciprocal rental income after June 2011. The continuing
obligation to pay the real estate taxes would have placed increasing pressure on
Kabella to invoke his right to sell the property and trigger the option to purchase,
making the option to purchase a significant object of the agreement. While not
prohibited, a lease for a significant term with front-loaded payments would be
unusual. In the event of escalating land prices, the agreement locked Kabella into a
fixed sales price and in the event of declining land prices, locked Lyons into the initial
fixed payments if he decided not to opt out of the agreement. This indicates the
option to purchase was a significant object of the agreement. Lyons would have
received credit for all of the prior payments in the event he elected to exercise the
option to purchase if Kabella decided to sell the property, again indicating the option
to purchase was a significant object of the agreement. Kabella was locked into
receiving a fixed amount of rent, regardless of the number of years Lyons remained
on the property or whether fair market rent increased. Lyons also had the right to
terminate the agreement without penalty and before making the total payments
required under the agreement. The visual structure of the document itself closely
resembles a deed. There are no restrictions on what Lyons could do with the property.
There are no provisions limiting improvements or determining who would own the
improvements. There are no limitations on assignment, and the document repeatedly
uses a phrase common to real property transfers by allowing Lyons to transfer his
rights under the agreement to “heirs, successors, personal representatives and

                                            4
assigns.” From a substantive standpoint, much of the agreement is an option to
purchase or contract for deed.
[¶11] There are aspects of the agreement that support Kabella’s interpretation
asserting the agreement was a lease. The document is titled “Land Rent Contract.”
The property was described as being “demised, leased and let.” There are references
to the document as a “lease.” From a semantics standpoint, the document could
reasonably be interpreted to be a lease. However, our rules of contract interpretation
also provide that “[w]ords in a contract which are inconsistent with its nature or with
the main intention of the parties are to be rejected.” N.D.C.C. § 9-07-18.
[¶12] Granting summary judgment would require the district court to have
determined the agreement was an unambiguous document intended to be a lease. On
appeal, this Court independently examines and construes the parties’ agreement to
determine if the district court erred in its interpretation. Flaten, 2018 ND 136, ¶ 14,
912 N.W.2d 330. “[A] contract is ambiguous when reasonable arguments can be
made for different positions on its meaning.” Moen, 547 N.W.2d at 547. We
conclude the estate and Kabella both have reasonable arguments regarding the nature
of the document. The document is ambiguous with regard to whether it is an option
to purchase, contract for deed, or lease.
[¶13] When an ambiguous contract is at issue, the parties’ intent becomes a question
of fact. In this instance, the question of fact, whether the document was intended to
be a lease, option to purchase, or contract for deed, is a material question of fact
which precluded the entry of summary judgment.
[¶14] The agreement also gave Lyons an undisputed right of first refusal. “When a
contract has several distinct objects, of which one at least is lawful and one at least
is unlawful in whole or in part, the contract is void as to the latter and valid as to the
rest.” N.D.C.C. § 9-04-04. We have interpreted N.D.C.C. § 9-04-04 as requiring an
agreement to be construed to give effect to the lawful objectives provided for in the
agreement. Schue v. Jacoby, 162 N.W.2d 377, 383 (N.D. 1968). Even if the district
court concludes that document is subject to the ten-year restriction of agricultural
                                            5
leases prescribed by N.D.C.C. § 47-16-02, it must still consider whether the
agreement has a separate, distinct, and enforceable objective of providing Lyons with
a right of first refusal, potentially limited by our statutory rule against perpetuities
codified in N.D.C.C. § 47-02-27.1.
                                          III.
[¶15] Reasonable persons can draw more than one conclusion regarding the nature
of the parties’ agreement, and we therefore reverse the judgment and remand for a
determination of whether this agreement is a lease subject to the limitations of
N.D.C.C. § 47-16-02, or a grant, option to purchase, or contract for deed outside the
limitations of N.D.C.C. § 47-16-02. Because the question of whether the limitation
within N.D.C.C. § 47-16-02 applies to the parties’ agreement remains undetermined,
we decline to decide if the agreement was invalid after extending for a period of ten
years.
[¶16] Jon J. Jensen
      Daniel J. Crothers
      Jerod E. Tufte

         I concur in the result.
         Lisa Fair McEvers
         Gerald W. VandeWalle, C.J.

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