The State of Minnesota Supreme Court holds that an intestate transfer of a family farm violated the transfer prohibition in the contract for deed conveying property interest to the decedent. In Jeffrey D. Kuhn v. Richard G. Dunn, et al. (Minn. No. A22-1298, June 26, 2024).
Richard and Paulette Dunn conveyed their family farm to their son, Rory Dunn, using a contract for deed for less than fair market value. Because they desired the farm to stay in the family, the contract included a provision restricting the transfer of the property. It provided that the son could not sell, assign, or otherwise transfer the property without his parents’ consent and that the parents could take possession of the farm as a remedy.
Two years later, Rory Dunn died intestate. Per the rules of intestate succession, his estate went to his 3-year-old son. The personal representative, Jeffrey Kuhn, sent the Dunns a letter of intent to divide the property and sell a portion to benefit the boy. The Dunns responded with a notice of cancellation of the contract for deed because the intestate transfer lacked their consent.
Mr. Kuhn sued the Dunns to prevent the cancellation. The district court dismissed the case, but the court of appeals reversed, finding the intestate transfer was outside the prohibitions of the consent-to-transfer provision. The appellate court read the provision as applying only to actions taken by Rory Dunn since it employed active voice. The Dunns appealed.
A contract for deed allows a buyer to purchase property by borrowing money from the seller. The seller retains legal title until the buyer pays the amount in full. Meanwhile, the buyer has rights to the property.
The court first considers whether the intestate transfer violated the consent-to-transfer provision in the contract for deed.
Since the provision states that the buyer may not sell, assign, or otherwise transfer the farm without consent, the highest court of Minnesota looks to the meaning of transfer. The plain meaning of the word transfer is broad, and the term otherwise also conveys that the parties intended a wide meaning. The transfer restricting provision encompasses all transfers, including unintentional ones.
Mr. Kunh’s reading was incorrect. It is illogical to focus on the use of active or passive voice because, within the provision, some sentences are active while others are passive. His interpretation would require adding the word “purposefully,” which the court declines to do.
Given the broad meaning of transfer, the intestate transfer violated the provision.
Next, the court reviews whether the breach was material to the contract. A material breach goes to the root or essence of the agreement. Here, the consent-to-transfer provision was essential. It ensured the Dunns had meaningful control over the farm until the contract for the deed was fully paid. The intestate transfer of the farm was a material breach of the contract for deed.
The intestate transfer violated the consent-to-transfer provision in the contract for deed, materially breaching the contract. The Minnesota Supreme Court reverses the appellate court’s decision.
Subscribe to the Knowledge Bank.
