Purported Oral Agreement For Option To Buy Farm At Deep Discount Leads to Family Dispute
It is not uncommon in farm estates for a particular child that has an interest in farming to be given an option to acquire the farmland at a particular value upon the death of the last of the parents. Many times, these option agreements are contained in wills that were drafted years ago and set an exercise price that is much lower than current fair market land values. That price difference can create tension between the on–farm heir and the off-farm siblings. To make matters worse, sometimes those option agreements are only oral. That only increases the potential for future litigation, which is exactly what happened in this case.
The parents in this case created living trusts as part of their estate plan. Each of the trusts held a 50 percent interest in two tracts of farmland, and each gave one son an option to buy any portion of the farmland within six months of the death of the last of the parents to die. The purchase price under the option was to be established by agreement of all of the children or at the value as determined by an independent appraiser accompanied by a $30,000 credit for the son. Dad died first, and upon Mom’s death an appraisal pegged the value of one tract at $4,450/acre and $3,400/acre for the other tract. Before the six-month post-death deadline expired, the son informed the estate that he was exercising the option at $300/acre for both parcels in accordance with an oral agreement he had with his father. The estate rejected the son’s option exercise and offered the real estate for sale among the surviving children in accordance with other trust provisions. The son filed a claim in the probate maintaining he had a right to buy the land at $300/acre. The estate executors disallowed the claim and a daughter ended up buying one tract, with another brother buying the other tract.
The son sought a probate hearing where he claimed that the oral agreement with his father should have been enforced, and that a temporary injunction should be entered enjoining the sale of the tracts to his siblings. The siblings, in turn, sued for intentional interference with their purchase contracts seeking damages for legal fees and expenses and the closing delays that were caused. The trial court jury ruled in favor of the siblings and awarded them attorney fees for the cost of dissolving the temporary injunction. However, the trial court judge directed a verdict for the son. The siblings appealed.
On appeal, the court affirmed on the basis that the siblings did not present enough evidence that the son’s predominant purpose in interfering with their contracts was to cause injury to them. Rather, the court determined that the son’s motive was simply to assert his legal rights based on the oral agreement he allegedly had with his father. Contractually injuring his siblings was not the son’s only motivation and wasn’t incident to his primary purpose of asserting his claimed legal rights. As for attorney fees, the court denied the award to the siblings because the son was seeking specific performance of the alleged oral agreement with his father and seeking to enforce trust provisions that called for a family conference before the sale of the property to the siblings. As such, the injunction was only tangentially related to the son’s request for a hearing. Hackett v. Gaeta, No. 3-651/12-2302, 2013 Iowa App. LEXIS 889 (Iowa Ct. App. Aug. 7, 2013).