Summary
determining that Woodard lacked persuasive value in the context of the intestate transfer at issue in Kuhn
Summary of this case from Kollmann v. GardingOpinion
A22-1298
05-01-2023
Jeffrey D. KUHN, Appellant, v. Richard G. DUNN, et al., Respondents.
David C. McLaughlin, Fluegel, Anderson, McLaughlin & Brutlag, Chartered, Ortonville, Minnesota (for appellant) Alex T. Mastellar, Isak P. Hawkinson, Rinke Noonan, Ltd., St. Cloud, Minnesota (for respondents)
David C. McLaughlin, Fluegel, Anderson, McLaughlin & Brutlag, Chartered, Ortonville, Minnesota (for appellant)
Alex T. Mastellar, Isak P. Hawkinson, Rinke Noonan, Ltd., St. Cloud, Minnesota (for respondents)
Considered and decided by Bratvold, Presiding Judge; Johnson, Judge; and Bryan, Judge.
BRYAN, Judge Appellant challenges the district court's decision dismissing his complaint, which sought to enjoin respondents from cancelling a contract for deed. Appellant argues that the district court erred when it determined that, based on this court's decision in Woodard v. Krumrie , No. A19-0800, 2020 WL 996746 (Minn. App. Mar. 2, 2020), rev. denied (Minn. May 19, 2020), the anti-transfer clause of the contract for deed precluded intestate transfers. We conclude that, unlike the assignment of interest at issue in Woodard , the intestate transfer of the purchaser's interest in this case was not a sale, assignment, or transfer made by the purchaser, and was not precluded by the anti-transfer provision of the contract for deed.
Because Woodard is not a precedential opinion, the decision reached there does not bind this court or the district court. Minn. R. Civ. App. P. 136.01 (stating that "[n]onprecedential opinions ... are not binding authority.").
The dissent refers to this provision as a "consent-to-transfer clause" because the clause bars only transfers made without the seller's consent. While this term reflects the types of permitted transfers, we nevertheless use the term "anti-transfer clause" because that is the term used by the district court and the parties.
FACTS
In July 2019, Rory B. Dunn entered into a contract for deed with his parents, respondents Richard G. and Paulette A. Dunn, to purchase the family farm (the farm). Rory passed away in August 2021 without a will. Rory's estate—including Rory's equitable title to the farm —automatically devolved to his 3-year-old son, B.D., by intestate succession. In May 2022, respondents served appellant Jeffrey D. Kuhn, the personal representative of Rory's estate, with a notice of cancellation of the contract for deed, alleging that the intestate transfer of Rory's interest breached the contract for deed.
Because both the purchaser and respondents share a last name, we refer to the purchaser by his first name throughout this opinion.
A contract for deed allows a person to purchase property by borrowing from the seller. In re Butler , 552 N.W.2d 226, 229 (Minn. 1996) ; see also 25 Larry M. Wertheim, Minnesota Practice § 6.2 (2022-23 ed. 2022). "The [purchaser] has equitable title, and the [seller] retains the legal title as security." Butler , 552 N.W.2d at 229 ; see also Wertheim, supra , § 6.5.
A purchaser's equitable interest acquired in a contract for deed is generally transferrable. See, e.g. , Midtaune v. Burns , 434 N.W.2d 474, 477 (Minn. App. 1989) (discussing assignment of purchaser's interest), rev. denied (Minn. Mar. 29, 1989); Gilbert Builders, Inc. v. Cmty. Bank of DePere , 407 N.W.2d 706, 708 (Minn. App. 1987) (holding that the purchaser's interest is mortgageable), rev. denied (Minn. Aug. 19, 1987). The parties do not dispute that a purchaser's interest can devolve to an heir upon death, and although we are unaware of Minnesota cases addressing this issue, caselaw from other states indicates that a purchaser's interest in a contract for deed passes to the purchaser's heirs. See, e.g. , Graves v. Am. Acceptance Mortg. Corp. , 469 Mich. 608, 677 N.W.2d 829, 833 (2004) (stating that purchaser's equitable interest "is a present interest in realty that may be sold, devised, or encumbered"); In re Briebach's Est. , 132 Mont. 437, 318 P.2d 223, 225 (1957) ("[U]pon the death of the [purchaser], his interest in the land by virtue of the contract is deemed realty, and goes to his heirs at law and not to his legal representatives." (quotation omitted)); Love v. Butler , 129 Ala. 531, 30 So. 735, 737 (1901) ("The [purchaser] is the owner of the land, and on his death it descends to his heirs, or to those to whom he may have devised it by will.").
Under Minnesota law, when a person dies without a will and, in some circumstances even when that person has a will, the estate passes by intestate succession. Minn. Stat. §§ 524.2-101, .2-103, .3-101 (2022). Here, Rory's estate automatically passed to B.D., his only child, by intestate succession.
Kuhn initiated a lawsuit seeking temporary and permanent injunctions to prevent the cancellation of the contract. The complaint asserted that the intestate transfer of Rory's interest did not breach the contract for deed. An affidavit by Kuhn was attached to Kuhn's motion for a temporary injunction. The affidavit was accompanied by three exhibits: the contract for deed, an amendment to the contract for deed, and the notice of cancellation of the contract for deed. All three documents were referenced in the complaint.
The contract for deed sets forth various rights and responsibilities for Rory (referred to in the contract for deed as "Purchaser") and respondents (referred to in the contract for deed as "Seller"). For example, it provides a schedule for "Purchaser" to pay the purchase price, gives "Purchaser" the right to prepay subject to certain terms, and states that "Purchaser shall" record the contract for deed, pay certain taxes, obtain certain insurance, and indemnify respondents from certain injuries. Central to the parties’ dispute here, the contract for deed contains the following anti-transfer clause:
Transfer Restrictions. Purchaser may not sell, assign, or otherwise transfer Purchaser's interest in this Contract, or the Property, or any part thereof, or if Purchaser is an entity,[ ] the controlling interest in Purchaser may not be transferred without the written consent of Seller, which consent ... shall be granted or withheld in the sole discretion of Seller.
The parties agree that the language permitting transfers with the seller's consent applies to transfers made by an individual purchaser and those made by an entity. Given the arguments presented, we assume that this clause unambiguously permits an individual purchaser to make a transfer with the seller's consent.
The contract for deed also has a provision for defaults and remedies, which provides in relevant part:
The time of performance by Purchaser of the terms of this Contract is an essential part of this Contract. If Purchaser fails to timely perform any term of this Contract, Seller may, at Seller's option, elect to declare this Contract cancelled and terminated by notice to Purchaser in accordance with applicable law or elect any other remedy available at law or in equity. If Seller elects to terminate this Contract, all right, title, and interest acquired under this Contract by Purchaser shall then cease and terminate, and all improvements made upon the Property and all payments made by Purchaser pursuant to this Contract (including escrow payments, if any) shall belong to Seller as liquidated damages for breach of this Contract .... After service of notice of default and failure to cure such default within the period allowed
by law, Purchaser shall, upon demand, surrender possession of the Property to Seller ....
Finally, the contract for deed provides that "[t]he terms of this Contract shall run with the land and bind the parties hereto and the successors in interest."
The district court held a hearing on Kuhn's motion for a temporary injunction on June 21, 2022. The district court denied Kuhn's motion for temporary injunction at the hearing, reasoning that Kuhn was unlikely to succeed on the merits of his claim. See Dahlberg Bros. v. Ford Motor Co. , 272 Minn. 264, 137 N.W.2d 314, 321 (1965) (holding that likelihood of success on the merits is one of five factors relevant to issuance of a temporary injunction). The district court also sua sponte dismissed the complaint at the temporary injunction hearing. The district court reasoned that the intestate transfer of Rory's interest in the farm to B.D. materially breached the anti-transfer clause, applying this court's nonprecedential decision in Woodard . The district court issued a written order on June 27, 2022, further explaining its reasoning for dismissing Kuhn's complaint. The order noted that it can convert a motion for judgment on the pleadings to a motion for summary judgment and stated that, "[a]lthough Defendants did not file a Rule 12 or 56 motion, the relevant facts are not disputed, and this Court has concluded the Woodard decision bars any injunctive or equitable remedy for Plaintiffs."
Although Kuhn criticizes the sua sponte dismissal of the complaint at this stage, he does not specifically assign error to this process. For this reason, and given our decision, we need not address whether the district court erred in sua sponte converting respondents’ opposition to a temporary injunction into a summary judgment motion.
Kuhn filed a motion for a new trial, asserting that the district court committed legal error by relying on Woodard . The district court denied Kuhn's motion on August 26, 2022. The district court stated that "no trial has been held in this matter" and that "[t]he Court granted summary judgment to Defendants following the temporary injunction hearing as there were no material facts in dispute and they were entitled to judgment as a matter of law as to either a temporary or permanent injunction." The district court also reaffirmed its decision that the intestate transfer of Rory's property interest breached the anti-transfer clause. Kuhn appeals.
ISSUE
Did the intestate transfer of Rory's equitable interest in the farm breach the anti-transfer clause in the contract for deed?
ANALYSIS
Kuhn argues that because Rory did not take any action to "sell, assign, or otherwise transfer" his interest in the farm, the district court erred when it relied on Woodard to dismiss the complaint. We agree with Kuhn.
Because we agree with Kuhn's primary argument, we need not address Kuhn's alternative arguments that the district court relied on parol evidence, the breach was immaterial, and the anti-transfer clause was void.
If the purchaser of a contract for deed materially breaches the contract, the seller may cancel the contract. Minn. Stat. § 559.21, subd. 2a (2022) ; Sitek v. Striker , 764 N.W.2d 585, 592-93 (Minn. App. 2009), rev. denied (Minn. July 22, 2009). Upon notice, the contract will terminate unless the purchaser cures the asserted breach and meets several other statutory requirements. Minn. Stat. § 559.21, subd. 2a ; Butler , 552 N.W.2d at 230. Minnesota Statutes section 559.211, subdivision 1 (2022), allows a purchaser to seek "an order temporarily restraining or enjoining further proceedings." In that action, the purchaser may "plead affirmatively any matter that would constitute a defense to an action to terminate the contract." Minn. Stat. § 559.211 ; see also Sitek , 764 N.W.2d at 590.
Interpretation of an unambiguous contract presents a question of law that we review de novo. Valspar Refinish, Inc. v. Gaylord's, Inc. , 764 N.W.2d 359, 364-65 (Minn. 2009) ; Roemhildt v. Kristall Dev., Inc. , 798 N.W.2d 371, 373 (Minn. App. 2011), rev. denied (Minn. July 19, 2011); see also, e.g. , Sipe v. STS Mfg., Inc. , 834 N.W.2d 683, 686 (Minn. 2013) (applying a de novo standard of review to the decision to grant a motion to dismiss for failure to state a claim); Montemayor v. Sebright Prods., Inc. , 898 N.W.2d 623, 628 (Minn. 2017) (applying a de novo standard of review to the decision to grant a summary judgment motion).
Neither party argues that the anti-transfer clause in the contract for deed is ambiguous.
Given the district court's reasoning, we begin the analysis with a summary of Woodard . In that case, this court considered whether a purchaser's execution of a transfer on death deed (TODD) violated an anti-transfer clause in a contract for deed that conveyed equitable title in a family farm. Woodard , 2020 WL 996746 at *1. The anti-transfer clause in Woodard was nearly identical to the one in this case and stated that "[t]he purchasers shall not sell, assign or otherwise transfer their interest without written consent of the sellers." Id. Our decision in that case was based on the statutory provisions defining the nature of a TODD. Id. at *2 (quoting Minn. Stat. § 507.071, subd. 2 (2018) ). We concluded that the purchaser breached the anti-transfer clause when he signed the TODD. Id.
With that decision in mind, we turn to the anti-transfer clause and the nature of the intestate transfer in this case. We conclude that the intestate transfer does not fall within the prohibitions of the anti-transfer clause for two reasons. First, the intestate transfer here resulted from Rory's inaction. On its face, the anti-transfer clause is written in active voice and prohibits Rory from transferring his interest by taking any one of three specified actions: he may not "sell, assign, or otherwise transfer" his equitable interest. Unlike the actions of the purchaser in Woodard who signed a written document to assign and subsequently transferred his equitable interest, Rory took no action to assign or otherwise transfer his interest. Indeed, it was Rory's lack of action that resulted in the devolution of the estate by operation of law. See Minn. Stat. 524.3-101 (stating that "[u]pon death , a person's real and personal property devolves" (emphasis added)); Laymon v. Minn. Premier Props., LLC , 913 N.W.2d 449, 454 (Minn. 2018) (noting that property devolves "upon death of the testator, which is to say, immediately" (quotation omitted)); In re Beachside I Homeowners Ass'n , 802 N.W.2d 771, 774 (Minn. App. 2011) ("Minnesota has long recognized the principle that title to a decedent's estate vests automatically"). The intestate transfer of Rory's estate as a result of Rory's inaction cannot violate an anti-transfer clause that prohibits Rory from taking one of the specified actions.
When appellate courts interpret law or contracts, the use of active voice instead of passive voice is an important distinction that we do not overlook. See, e.g. , Johnson v. Paynesville Farmers Union Co-op. Oil Co. , 817 N.W.2d 693, 716 (Minn. 2012) (Page, J., dissenting) (observing that for purposes of statutory interpretation, the "use of the passive voice generally indicates the focus of the language is ‘whether something happened—not how or why it happened.’ " (quoting Dean v. United States , 556 U.S. 568, 572, 129 S.Ct. 1849, 173 L.Ed.2d 785 (2009) ).
When interpreting a statute or contract that includes a list of specific terms followed by a general term, the meaning of the general term is confined by the characteristics that it shares with the other terms in the list. See, e.g. , State v. Taylor , 594 N.W.2d 533, 536 (Minn. App. 1999) ("Pursuant to the doctrine of noscitur a sociis , a word should be construed with reference to the words around it."); Wayne v. MasterShield, Inc. , 597 N.W.2d 917, 920 (Minn. App. 1999) (interpreting the meaning of an unambiguous statute on the basis that "a phrase capable of several meanings is defined by the words with which the phrase is associated"), rev. denied (Minn. Oct. 21, 1999).
We also note that the TODD statute distinguishes between two actions, each which occurs on different dates: (1) the assignment of an interest, which occurs on the date the TODD is signed; and (2) the effective date of the transfer of that interest, which occurs upon death of the grantor. Minn. Stat. § 507.071, subd. 2 (defining a TODD as "[a] deed that conveys or assigns an interest in real property," "expressly states that the deed is only effective on the death of ... the grantor owners," and that has the effect of "transfer[ing] the interest to the grantee beneficiary upon the death of the grantor"). Therefore, anti-transfer clauses in contracts for deed (like the ones at issue in Woodard and in the instant case) that do not allow a purchaser to "assign" equitable title would prohibit the purchaser from assigning equitable title through a TODD.
Second, the anti-transfer clause has a specified actor or subject (the purchaser) and does not prohibit a transfer caused by a third party or the operation of law. There are various situations in which a property interest is transferred by someone other than its owner, without the direct action of the owner. For instance, property may be transferred by court order when a marriage is dissolved, during a judicial foreclosure, or when a judgment is executed in favor of a third-party creditor. We do not decide whether any of these kinds of transfers would be restricted by the anti-transfer clause in this case. Instead, we make this observation to emphasize that the use of active voice in the anti-transfer clause, coupled with the identification of a specified actor, has potential applications and meaning apart from the possibility of intestate transfer.
Kuhn directs our attention to additional language in the contract for deed, which states that "[t]he terms of this Contract shall run with the land and bind the parties hereto and the successors in interest." Kuhn argues that by referring to both parties’ successors in interest, this additional language undermines respondents’ interpretation of the anti-transfer clause. We do not agree with Kuhn that this clause necessarily nullifies the anti-transfer clause because the anti-transfer clause allows certain transfers with the "written consent of Seller." Thus, both parties to the contract may have successors in interest. The additional language cited by Kuhn does, at least arguably, indicate that the anti-transfer clause may continue to bind B.D. We do not address this issue, however, as it falls outside of the scope of the complaint and the appeal. Nothing in this opinion is intended to address whether B.D. or Kuhn is prohibited from selling, assigning, or otherwise transferring the equitable interest that automatically passed to B.D. upon Rory's death.
In the context of corporate stock sales, we note that the supreme court has held that anti-transfer clauses like the one at issue here do not preclude involuntary transfers or transfers by operation of law: "[r]estrictions on the sale of corporate stock apply only to voluntary sales, and not to transfers by operation of law, in the absence of a specific provision to that effect." Castonguay v. Castonguay , 306 N.W.2d 143, 144-45 (Minn. 1981) (holding that a provision that "[n]o holder of shares of stock in this corporation shall sell, assign, transfer, pledge, hypothecate or in any other manner dispose of" the shares without notice did not prevent the transfer of shares by court order in a dissolution case (quotation omitted)). The supreme court has also held that a similar provision in a mortgage contract did not apply to a transfer by a third-party. Gate Co. v. Midwest Fed. Sav. & Loan Ass'n , 324 N.W.2d 202, 204-06 (Minn. 1982) (holding that a due-on-sale clause in a mortgage that required seller's consent when the property was "sold or transferred by Borrower" did not apply to a transfer of an interest by a third party "which clearly was not a borrower"). We see no reason to treat those restrictions differently from the clause at issue here.
In sum, the parties bargained for this contractual language, and the anti-transfer clause prohibits a specified actor from taking listed actions. Rory did not "sell, assign, or otherwise transfer" his interest. The intestate transfer of Rory's estate—including his equitable interest in the farm—as a result of Rory's inaction does not violate the anti-transfer clause.
DECISION
Woodard ’s persuasive value is limited to the facts of that case and is distinguishable from the intestate transfer that occurred in this case. We therefore reverse the district court's decision to dismiss Kuhn's complaint based on Woodard , and we conclude that the intestate transfer did not violate the unambiguous anti-transfer clause. We remand the matter to the district court. Although we are not aware of any other grounds respondents would have to cancel the contract for deed or object to Kuhn's requested permanent injunction, nothing in this opinion is intended to prevent respondents or Rory's successor in interest from exercising their rights under the contract.
We also note that in Woodard , this court explicitly declined to address whether the transfer of property through a will executed by the purchaser would violate the anti-transfer clause. 2020 WL 996746, at *2. As in Woodard , we need not decide whether Rory would have violated the anti-transfer clause by executing a will that devised his interest in the farm to B.D.
Reversed and remanded.
Dissenting, Bratvold, Judge
BRATVOLD, Judge (dissenting)
I respectfully dissent. This appeal raises a close question that is one of first impression: whether transferring property by intestate succession breaches a consent-to-transfer clause in a contract for deed. The answer lies at the intersection of contract law and real-property rights. Minnesota courts generally have enforced consent-to-transfer clauses as reasonable restrictions on the alienation of real property.
The Minnesota Supreme Court has stated that "consent clauses in contracts for deed are valid and enforceable and can defeat the right of third parties who deal with the contract vendee." Bank Midwest, Minn., Iowa, N.A. v. Lipetzky , 674 N.W.2d 176, 179 & n.5, 181 (Minn. 2004) (holding purchaser's grant of mortgage breached the consent-to-transfer clause in a contract for deed); see also Larson v. Johnson , 175 Minn. 502, 221 N.W. 871, 872-73 (1928) (rejecting argument that consent-to-transfer clause unlawfully suspended "the power of alienation" and holding purchaser's assignment of mortgage breached the consent-to-transfer clause in a contract for deed). Other cases enforcing consent-to-transfer clauses include Minn. Cent. R.R. v. MCI Telecomms. Corp. , 595 N.W.2d 533, 538 (Minn. App. 1999) (holding purchaser's sale of easement breached the consent-to-transfer clause in an easement agreement), rev. denied (Minn. Sept. 14, 1999), and Karim v. Werner , 333 N.W.2d 877, 878-79 (Minn. App. 1983) (holding purchaser's sale of commercial property breached the consent-to-transfer clause in a contract for deed).
Like the district court, I conclude that the parties’ contract for deed unambiguously required the purchaser to obtain the seller's consent before he could "sell, assign or otherwise transfer" his interest. Because Rory B. Dunn (Rory) transferred the farm to his son by intestate succession without the consent of respondents Richard G. and Paulette A. Dunn (the Dunns), he breached the contract for deed. Because I also conclude that this breach was material, I would affirm the district court's decision.
I. Transferring Rory's interest in the farm by intestate succession breached the consent-to-transfer clause.
"The primary goal of contract interpretation is to determine and enforce the intent of the parties." Travertine Corp. v. Lexington-Silverwood , 683 N.W.2d 267, 271 (Minn. 2004). Interpretation of unambiguous contract language is a question of law, and "[w]here there is a written instrument, intent of the parties is determined from the plain language of the instrument itself." Id. "[W]hen a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction." Id. Appellate courts "read contract terms in the context of the entire contract and will not construe the terms so as to lead to a harsh and absurd result." Brookfield Trade Ctr., Inc. v. County of Ramsey , 584 N.W.2d 390, 394 (Minn. 1998) ; see also Gill v. Gill , 919 N.W.2d 297, 312 (Minn. 2018).
In the contract for deed signed by Rory and the Dunns, the parties agreed that the purchaser (Rory) must obtain the seller's (the Dunns’) written consent to transfer the purchaser's interest:
Transfer Restrictions. Purchaser may not sell, assign, or otherwise transfer Purchaser's interest in this Contract , or the Property, or any part thereof, or if Purchaser is an entity, the controlling interest in Purchaser may not be transferred without the written consent of Seller, which consent ... shall be granted or withheld in the sole discretion of Seller.
(Emphasis added.)
A consent-to-transfer clause is not unusual; indeed, here it appeared in an addendum to a "check-the-box" form contract for deed. Minnesota generally recognizes that consent-to-transfer clauses are important to the seller, who "is interested in having the property which has been [e]ntrusted to the possession of another properly cared for" and thus "should have a voice in the selection of a proper caretaker." Larson , 221 N.W. at 873 ; see generally Travertine , 683 N.W.2d at 271 ("The primary purpose of clauses prohibiting the assignment of contract rights is to protect the contracting party from dealing with parties he has not chosen to do business with.").
To determine whether transferring Rory's interest to his son breached the consent-to-transfer clause, I first consider the meaning of "otherwise transfer." Courts may look to dictionaries to determine the plain meaning of a contract term. Laymon v. Minn. Premier Props., LLC , 913 N.W.2d 449, 453 (Minn. 2018). In Bank Midwest , for example, the supreme court applied the definition of "transfer" as a verb from Black's Law Dictionary : "[t]o convey or remove from one place or one person to another; to pass or hand over from one to another, esp. to change over the possession or control of." 674 N.W.2d at 180 (quoting Black's Law Dictionary 1504 (7th ed. 1999)). The bank argued that the purchaser's grant of a mortgage to the bank did not violate a consent-to-transfer clause because the mortgage did not produce an immediate change of possession. Id. at 181. The supreme court disagreed, reasoning that granting a mortgage conferred to the bank "the power to obtain possession, albeit a conditional power that requires default and foreclosure." Id. The supreme court concluded that the grant of a mortgage was a transfer that violated the consent-to-transfer clause, and thus reinstated summary judgment for the seller. Id. Here, the consent-to-transfer clause provides that the purchaser may not "sell, assign, or otherwise transfer" the purchaser's interest in the farm without the seller's consent. (Emphasis added.) "Otherwise," when used as an adverb, means "in a different way; in another manner" or "by other causes or means." Black's Law Dictionary 1328 (11th ed. 2019). Thus, applying the common meaning of "otherwise transfer," I conclude that the consent-to-transfer clause requires the seller's consent for the purchaser to sell, assign, or "in a different way" "pass or hand over from one to another" the purchaser's interest in the farm.
Next, I consider whether transferring Rory's interest to his son by intestate succession "otherwise" transferred the purchaser's interest in the farm and required the seller's consent.
Passing real property by will or intestate succession is a devolution or transfer of property rights to another by operation of law upon the death of the testator or intestate person. "Upon death, a person's real and personal property devolves to the persons to whom it is devised by last will ... or in the absence of testamentary disposition, to the decedent's heirs." Minn. Stat. § 524.3-101 (2022). The supreme court, interpreting section 524.3-101, has explained: "Devolve is a legal term that means to transfer (rights, duties, powers, etc.) to another and, when concerning money or land, means to pass by transmission or succession." Laymon , 913 N.W.2d at 453 (quotation omitted). When an interest in real property "devolves" by testamentary disposition or to a decedent's heirs through intestate succession, it transfers "upon death ... which is to say, immediately." Id. at 454 (quotation omitted).
Thus, Rory's interest in the farm transferred to his son by intestate succession upon Rory's death. Rory did not sell or assign his interest in the farm to his son. Still, based on the meaning of "otherwise transfer" in the consent-to-transfer clause of the contract for deed, I conclude that Rory "otherwise transfer[red]" his interest in the farm by intestate succession. As a result, transferring the farm by intestate succession required the Dunns’ consent.
I find our nonprecedential decision in Woodard v. Krumrie persuasive. No. A19-0800, 2020 WL 996746 (Minn. App. Mar. 2, 2020), rev. denied (Minn. May 19, 2020). In Woodard , this court held that a consent-to-transfer clause was violated when the purchaser's interest in a family farm passed to his child through a transfer-on-death deed (TODD). 2020 WL 996746, at *2. We reasoned that a TODD "transfers the interest to the grantee beneficiary upon the death of the grantor owner." Id. (quotation omitted). Because the purchaser in Woodard did not obtain the seller's consent, we affirmed summary judgment for the seller after also determining that the breach was material. Id. at *4, *6. Woodard did not interpret the consent-to-transfer clause, but its conclusion persuades me that the clause applies here. Transferring the family farm in Woodard occurred without the seller's consent and at the same time as transferring the family farm here: upon the death of the purchaser.
I do not agree with the majority's reasons for distinguishing Woodard . First, differentiating between Rory's "action" and "inaction" ignores that these parties agreed that the seller's consent was needed to transfer the farm. The majority correctly points out that the consent-to-transfer clause uses active voice. And the clause mentions two specific acts—Rory seeking consent to transfer and a subsequent transfer. Further, the majority emphasizes that transfer by intestate succession is unlike transfer by a TODD because, for example, the purchaser in Woodard took action when he signed a TODD. In contrast, Rory signed nothing showing his intent to pass his equitable interest to his son.
Woodard ’s reasoning does not hinge on viewing a TODD as an assignment. Woodard refers to a TODD as an attempted assignment, but also describes a TODD as "a transfer of a property interest" and states that the purchaser breached the consent-to-transfer clause because he "executed the TODD without the [seller's] consent." Id. at *2. I read Woodard to say that the purchaser breached the contract because he executed the TODD without the seller's consent. So, too, Rory's interest in the farm passed by intestate succession to his son without the Dunns’ consent.
Still, the use of active voice in the consent-to-transfer clause does not alter its plain meaning, which is to require the seller's consent for a valid transfer of the purchaser's interest in the farm. We "read contract terms in the context of the entire contract." Brookfield Trade Ctr. , 584 N.W.2d at 394 ; cf. Avis Budget Car Rental LLC v. County of Hennepin , 937 N.W.2d 446, 452 (Minn. 2020) (concluding for purposes of statutory interpretation that "in the context of surrounding sections," use of passive voice did not affect a statute's meaning (quotation omitted)). Another provision in the contract for deed also shows the importance the parties attached to the Dunns’ consent: The parties agreed that improvements to the farm costing more than $75,000 require the Dunns’ consent. The contract for deed therefore requires the seller's consent both for transferring the purchaser's interest in the farm and for making any improvements costing more than $75,000. Reading the contract as a whole, I conclude that the contract's focus is on requiring the seller's consent for significant changes—transfer and improvements—and not on whether the transfer is because the purchaser failed to act.
The majority notes that "in the absence of a specific provision to that effect," restrictions on the sale of corporate stock do not preclude involuntary transfers by operation of law and apply only to voluntary sales. Castonguay v. Castonguay , 306 N.W.2d 143, 144-45 (Minn. 1981) (quotation omitted). Castonguay , however, dealt with personal property. Although courts are averse "to construe laws as prohibiting the right of any one to alienate what is his," whether it be personal or real property, judicial tolerance of alienation restrictions is distinct for each property type. Townsend v. Fenton , 30 Minn. 528, 16 N.W. 421, 421 (1883). Indeed, one cannot absolutely suspend the power to alienate real property. In re O'Leary's Est. , 136 Minn. 126, 161 N.W. 392, 393-94 (1917). Yet courts uphold spendthrift prohibitions of "any other transfer, voluntary or involuntary," from a beneficiary's interest in trust principal or interest. In re Tr. Created Under Agreement , 361 N.W.2d 43, 45 (Minn. 1985). I see a significant distinction between the supreme court's tolerance of alienation restrictions for real and personal property, so I do not find Castonguay persuasive in this case involving real property.
Also, if we distinguish between transfers when the purchaser "acts" or "fails to act," we are adding words to the consent-to-transfer clause. Generally, courts will not add words to a contract. Savela v. City of Duluth , 806 N.W.2d 793, 797 (Minn. 2011) (refusing to "add words" to an unambiguous contractual provision). The word "active" or "inactive" is not found in the contract for deed. And by distinguishing between a purchaser's "action" and "inaction" before a transfer, we are suggesting that transferring an equitable interest in a contract for deed by a legal instrument—such as a TODD or a will—violates a consent-to-transfer clause, while transferring the same equitable interest by intestate succession does not violate the same consent-to-transfer clause. That seems to me to be an odd suggestion that implicitly encourages intestate succession to circumvent the consent-to-transfer clause.
Second, differentiating between various actors involved in transferring property raises more questions than it answers. The majority reads the consent-to-transfer clause as prohibiting Rory from transferring the farm and not prohibiting transfers by a third party or by operation of law. In my view, this ignores that "otherwise transfer" means transfer "in a different way," which encompasses both voluntary transfers, like the one in Woodard , and involuntary transfers, like judicial foreclosure for nonpayment of property taxes. Also, transfer by a third party or by operation of law does not necessarily mean the purchaser has not acted—a property owner may know about his tax delinquency, for example, and actively choose not to pay.
Here, it is significant that the supreme court in Bank Midwest discussed and relied on the definition of "transfer" as a noun, which means:
The sale and every other method , direct or indirect , of disposing of or parting with property or with an interest therein, or with the possession thereof, or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or involuntarily , by or without judicial proceedings , as a conveyance, sale, payment, pledge, mortgage, lien, encumbrance, gift, security or otherwise ....
674 N.W.2d at 180 (emphasis added) (quoting Black's Law Dictionary 1497 (6th ed. 1990)). This definition provides added support for my view that a transfer encompasses "every other method" of "parting with property"—direct or indirect, voluntary or involuntary, by or without judicial proceedings. Based on the common meaning of the word "transfer," I reject the view that the consent-to-transfer clause does not apply to transfers that are inactive, automatic, or by operation of law.
I also question whether intestate succession is properly characterized as inaction on Rory's part. I note the lack of Minnesota authority using any term like "action" or "inaction" to describe intestate succession. A Minnesota statute says both testate and intestate succession occurs automatically upon death by operation of law. Minn. Stat. § 524.3-101. Neither the automatic nature of succession, nor the passing on death, addresses whether intestate succession results from inaction.
More to the point, intestate succession may be a planned transfer. The law has long recognized that joint bank accounts with a right of survivorship are a "poor person's will." Enright v. Lehmann , 735 N.W.2d 326, 332 (Minn. 2007) (citing Note, The "Poor Man's Will" Gains Respectability: Using the Minnesota Multi-Party Accounts Act , 1 Wm. Mitchell L. Rev. 48, 50 (1974)). The same may be said of intestate succession. And just as an individual may direct the transfer of a real-property interest upon their death by devising the interest or executing a TODD, an individual might also choose to take no action and allow their interest to transfer based on the laws of intestate succession. First Nat'l Bank of Minneapolis v. Comm'r of Tax'n , 250 Minn. 122, 84 N.W.2d 55, 59 (1957) (noting trust beneficiary had the power to "control succession" of his interest in the trust, and by failing to do so in a will, "he has by necessary implication indicated that those named" in the trust "take upon a default in the [beneficiary's] exercise of the power").
Because the contract for deed expressly required the seller's consent for the purchaser to transfer his interest in the property, and because the contract for deed did not differentiate between transfers by "action" or "inaction" of the purchaser, I would hold that transferring Rory's interest in the farm to his son by intestate succession required the Dunns’ consent. The parties agree that the Dunns did not give their consent. Thus, I conclude that transferring the farm to Rory's son breached the contract for deed. II. Transferring Rory's interest in the farm by intestate succession materially breached the consent-to-transfer clause.
A seller in a contract for deed may cancel the contract after any material breach. Minn. Stat. § 559.21, subd 2a (2022). A material breach must be "significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages." BOB Acres, LLC v. Schumacher Farms, LLC , 797 N.W.2d 723, 728 (Minn. App. 2011) (quotation omitted), rev. granted (Minn. June 14, 2011) and appeal dismissed (Minn. Aug. 12, 2011). In other words, a material breach "goes to the root or essence of the contract." Id. (quotation omitted). Whether an act is a material breach of a contract is a fact question. Sitek v. Striker , 764 N.W.2d 585, 593 (Minn. App. 2009), rev. denied (Minn. July 22, 2009). When material facts are undisputed, summary judgment may be appropriate. Dempsey v. Jaroscak , 290 Minn. 405, 188 N.W.2d 779, 782 (1971) ; see Sitek , 764 N.W.2d at 593 (concluding that the breach was material, and summary judgment was appropriate, when the parties stipulated that the purchaser had not made payments on a contract for deed for more than three years).
Appellant Jeffrey D. Kuhn's brief to this court argues that the record could support a finding that breach of the consent-to-transfer clause was not material. First, Kuhn, the personal representative of Rory's estate, contends that the Dunns waited more than eight months to serve Kuhn with a notice of cancellation, and Rory's estate was prepared to continue the required payments under the contract for deed or make a prepayment of the balance. Even if we assume these facts are undisputed, neither addresses the absence of the Dunns’ consent to transfer. The supreme court has held that a consent-to-transfer clause protects the seller's "voice in the selection of a proper caretaker" for the real property. Larson , 221 N.W. at 872-73. Although it is true that the contract for deed allows for prepayment, Rory did not exercise the option to prepay, and there are currently more than twenty-five years of scheduled payments remaining. Neither prepayment nor assumption of the scheduled payments gives the Dunns a "voice" in the selection of the farm's caretaker.
Second, Kuhn contends the contract for deed suggests that the essence of the agreement was the Dunns’ financial interest in the farm, not controlling ownership of the farm. But Kuhn's analysis overlooks that the parties voluntarily added the consent-to-transfer clause—as well as a clause requiring consent for certain improvements to the farm—by checking boxes in an addendum to the contract for deed. Moreover, the parties elected to check the box providing that consent "shall be granted or withheld in the sole discretion of Seller" and did not check the box providing that consent "shall not be unreasonably withheld or delayed by Seller." Based on the language of the contract for deed, I would conclude that the consent-to-transfer clause goes to the essence of the contract for deed. Because there is no genuine issue of material fact that the Dunns did not consent to transferring the farm to Rory's son, I would conclude there was a material breach of the contract for deed. For these reasons, I respectfully dissent and would affirm the district court's order dismissing Kuhn's claim for an injunction against cancellation of the contract for deed.
Kuhn also argues that, even if the alleged breach were material, he should be allowed to cure the breach. A contract for deed terminates by a notice of cancellation unless the purchaser "complies with the conditions in default." Minn. Stat. § 559.21, subd. 2a(1). Because transferring Rory's interest in the farm by intestate succession cannot be undone without cancelling the contract for deed, I conclude that the breach cannot be cured.
Kuhn makes two other arguments that the consent-to-transfer clause is void as against public policy. I do not address these arguments because Kuhn forfeited them when he failed to raise them before the district court. See Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988) ("A reviewing court must generally consider only those issues that the record shows were presented and considered by the trial court in deciding the matter before it." (quotation omitted)).