Farm Lease Follies

May 14, 2010 | Erin Herbold

 

Farm lease arrangements can give rise to numerous legal issues.  While it is almost always best to have a written agreement so as to minimize the potential legal problems that can arise, a written agreement doesn’t prevent disputes. 

Here, the tenants had leased 180 acres from the landlord since 2002 via annual written lease agreements. The parties entered into one-year written lease agreements every year from 2002 through 2006.  Each year, the landlord would send the tenant a proposed lease in January or February and the tenant would sign the lease and return it to the landlord with a deposit.  Each lease was for the particular “crop year” and did not contain any automatic renewal or extension option.  For the 2006 crop year, the landlord’s proposed lease included a $3.00 per acre increase in rent. The tenants signed and returned the lease agreement along with the normal $1000 deposit, but included a letter advising the landlord that they would like to be notified of any proposed rental increase by October 1 of the current crop year because they routinely applied fall fertilizer after harvest.  The tenants farmed the ground for the 2006 crop year and applied fertilizer again after the fall 2006 harvest in anticipation that they would be farming the ground again for the 2007 crop year.

This is the point at which confusion set in.  The landlord claimed that he had two telephone conversations with one of the tenants during the 2006 crop year, in which that tenant indicated that they would not be continuing to rent the ground. The tenants denied that these phone conversations ever took place. As mentioned above, the tenants spread fertilizer in the fall of 2006 in accordance with their usual practice.  By late February 2007, the tenants still had not received a proposed lease from the landlord so they sent try contacting the landlord by phone.  When that was unsuccessful, they sent a letter to the landlord notifying the landlord that they hadn’t received a proposed lease. The tenants sent the normal $1000 deposit by certified mail in April 2007 along with a letter requesting a meeting with the landlord. On May 1, 2007, the tenants planted their crop.

The very next day later, the landlord notified the tenants that he had already executed a land rental agreement with another farmer in January of 2007, and claimed that he had given proper notice of termination via the telephone conversations.  Understandably upset, the tenants filed suit against the landlord for breach of contract. At trial, the jury awarded the tenants damages in the amount of roughly $35,000.00. The landowner appealed the jury’s ruling.    

The landowner argued, on appeal, that the facts did not support the jury’s finding that a land rental agreement ever existed, that comments made by the renter’s attorney at trial entitled him to a new trial altogether, and that the damages awarded at trial were excessive. The Minnesota Court of Appeals disagreed and affirmed the trial court’s ruling.  

First, the appellate court discussed contract formation and whether the landlord and original tenant had an implied contract for the 2007 crop year- since they never executed a formal written agreement. The court referenced the Restatement of Contracts (widely-adopted by most states) and indicated that if a party is justified in expecting a certain outcome, silence on the part of the parties may be deemed acceptance of a contractual relationship. When the tenants applied fall fertilizer, sent a $1000 deposit and requested contact with the landlord, the landlord stayed silent. The tenants had a justifiable expectation, based upon prior rental arrangements with the landlord, that they would be farming the land for another crop year.  Thus, the appellate court found that an implied contract existed between the parties. 

Second, the court addressed comments of the tenants’ attorney at trial. The landowner claimed that the attorney’s comments were prejudicial and incited the jury to award an excessive damages award. The attorney did indicate that the new rental agreement was substantially more lucrative than the old agreement with the tenants, however, the landlord did not follow the proper technical procedure required to preserve this argument for appeal. Even though the comments of the tenants’ attorney might have been inflammatory, there was no indication that they influenced the jury’s decision. 
Finally, the appellate court addressed whether the jury’s damages award was, in fact, excessive in light of the evidence. Under Minnesota law, a trial court may grant a new trial to ascertain damages if it appears that the jury was “under the influence of passion or prejudice.” The trial court was in the best position to assess whether the jury acted inappropriately and did not make such a finding. Thus, the appellate court allowed the jury’s damages verdict to stand. 

This case clearly demonstrates the need for communication between landlord and tenant and the power of the jury in awarding damages. 

The opinion is designated as not for publication.  .Blad v. Parris, A09-908, 2010 Minn. App. Unpub. LEXIS 417 (Minn. Ct. App.  May 11, 2010).