Case of the Day – Friday, August 18, 2017

ONE BIG HAPPY FAMILY

We dimly recall those halcyon days of first-year law school, when our minds were exposed to all of the many ways people could own the land. There were divided interests, undivided interests, partitions, fee tails, tortious fees, tenancies in common… We also recall there was a bar across the street from the law school, and often we would flee the property law classroom for the comfort of a tall, cold one.

That was not always such a good idea. Had we retreated instead to the library, we might have appreciated some of the nuances of real estate ownership better than we did. Had logger Richard Lessard’s attorney appreciated those finer points, his client might have been saved becoming one of the actors in today’s case.

Duane Henry owned 40 acres in Winneshiek County, Iowa. He also co-owned another 120 acres with his four adult kids, with Dad owning 60% and the four children each having an undivided 10% interest. The arrangement may have been some lawyer’s idea of estate planning, or even a protection against the state forcing a sale if senior citizen Richard needed Medicaid for long-term nursing home care.

Whether the ownership would have shielded the land from a Medicaid claim is beyond our ken, and when the questions have come up in our parents’ affairs, we willingly hired lawyers who do nothing but elder law. We do know, however, that whatever its merit as an estate planning tool, this kind of ownership – a cotenancy – plays havoc with getting anything done with the land.

When Dad Duane needed money for a nursing home, he signed a deal with logger Richard Lessard to cut enough timber to pay the bill. Richard knew about the cotenancy, but he thought that Duane could sign the contract.

Richard started to work, but within a day was thrown off the property by one of Duane’s kids. The kids apparently didn’t much like the deal Dad had made from his nursing home bed. They later took bids on timbering the land, and all of the owners – the kids and Dad – signed a deal with another company.

Richard’s problem was this: in a cotenancy, all of owners may have interests, but none of them is automatically an agent for the others. A contract for timber has to be ratified by all of the owners, even that third cousin once removed who lives in Jerkwater, West Dakota, that no one has seen for a decade.

If you’re cutting timber, buying an easement, or making some other deal to materially affect the value of the property, be sure that you know who the owners are and that you have signatures from everyone who needs to sign. Your lawyer can advise you, and the bill will be a lot lower than the costs of being wrong.

Lessard v. Henry, 804 N.W.2d 315 (Ct.App., Iowa, 2011). Duane Henry co-owned 120 acres with his four adult children. Duane owned an undivided 60% of the acreage, and each child owned an undivided 10% interest.

Duane hired Richard Lessard, a logger, to cut timber on Duane’s own 40 acres, and on the 120 acres he owned with his children. Richard Lessard knew that the 120 acres was owned in the 60-10-10-10-10 cotenancy. The contract Duane and Richard signed specified that Lessard Logging would cut down mature trees on Richard’s 40 acres and the 120-acre cotenancy. Duane would receive 60% of the profits, and Lessard 40%. The agreement also provided Duane’s children would each receive 5% percent of Duane’s share. Duane was in a nursing home at the time they entered into the agreement, and wanted the money to help pay nursing home bills.

One or two days after the contract was signed, Richard moved a skidder to the property. Duane’s son, David, told him to remove the skidder, which he promptly did. Soon after that, Richard learned that Duane and his children were taking bids for logging on their property. Eventually another person entered into a contract with Duane and his children to cut 345 trees on the property.

Richard sued, but he lost in the trial court, because Duane’s children, as cotenants of the property, had not authorized or ratified the contract. The court found the children “had given their father no authority to enter into any kind of a logging agreement with the Plaintiff as to the parcels of land in which they have an ownership interest.”

Richard appealed.

Held: Richard’s contract was no good. The appeals court said that the existence of a cotenancy does not imply an agency relationship between the cotenants. One cotenant owner cannot ordinarily bind cotenants by contracts with third persons or transfer or dispose of the interest of another cotenant in such a manner as to be binding, unless authorized to do so or unless his act is thereafter ratified by other cotenants.

Richard had no evidence that Duane was authorized by his kids to enter into the timber contract, and there was no proof they had ever ratified the contract after the fact. “Where there has not been authorization or ratification,” the Court of Appeals said, “any dealing on the part of one cotenant in relation to the common property is a nullity insofar as their interests are concerned.”

Richard also argued for the first time in the court of appeals that logging contracts do not require cotenants’ assent. He maintained that Duane could agree to sell 60% of the timber – his share of it – without the kids’ OK. The Court noted that this has once been the law, but the courts now held that a cotenant may not sever timber from the land without consent of the other cotenants. But since Richard had not raised the argument in the trial court, the Court of Appeals refused to reach the issue.

– Tom Root

TNLBGray140407

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