Grengs v. Lakefield
2015 ND 152
| N.D. | 2015Background
- Anita Grengs (decedent) executed a 2001 will devising farmland to her five children and requiring deeds to Rostad, Jay, and Marsland to include first/second options to purchase in favor of Greg and Gary while they were actively farming (or until 12/31/2030).
- The will also provided a reciprocal option to lease on a share-crop basis: "a net one-third of the grains and crops raised on the land to be paid to owner thereof."
- Anita died in 2009; Jay predeceased her. Greg was initially personal representative, later resigned; successor PR sought to sell the parcel devised to Jay. Greg exercised written notices purporting to exercise the purchase and lease options.
- The district court initially held the purchase provision unambiguous and conditioned on the owner’s decision to sell (a right of first refusal style), and held the lease provision meant owner receives one-third of crops while tenant pays production costs.
- On appeal the Supreme Court held the purchase provision was ambiguous and, based on uncontroverted extrinsic evidence (attorney testimony about testator intent), Greg’s purchase option was not conditioned on the owner’s willingness to sell and includes mineral interests; the court affirmed the district court’s interpretation of the lease provision.
Issues
| Issue | Plaintiff's Argument (Greg) | Defendant's Argument (Marsland/Rostad) | Held |
|---|---|---|---|
| Whether the option-to-purchase clause is ambiguous and how it should be construed | Clause is ambiguous; Anita intended Greg to have an unconditional option to purchase (not dependent on owner wanting to sell) | Clause unambiguous; it conditions Greg’s option on the landowner’s desire to sell (right of first refusal) | Clause is ambiguous; extrinsic evidence shows testator intended an option to purchase not conditioned on owner willingness to sell (reversed on this point) |
| Whether extrinsic evidence may resolve the ambiguity | Use attorney and witness testimony to show testator’s intent | Clause plain on its face; no need for extrinsic evidence | Extrinsic evidence admissible and persuasive; attorney’s testimony established testator’s intent |
| Whether the option-to-purchase includes mineral interests | Greg: option covers surface and mineral interests when he exercises option | Marsland/Rostad: owner may sell surface and reserve minerals; option limited to what owner conveys | Court: because option is not conditioned on willingness to sell and will does not permit reservation, Greg may purchase mineral interests when exercising option (court so held) |
| Construction of the option-to-lease phrase "a net one-third of the grains and crops" (who bears production costs; insurance; marketing decisions) | Greg: "net one-third" means landlord gets one-third after deducting production expenses | Marsland/Rostad: means landlord receives one-third of crops and tenant bears all production costs; "net" is used in customary lease sense | Court: clause ambiguous; after evaluating extrinsic evidence and custom, held landlord receives one-third of crops (tenant pays production costs); tenant controls production/marketing; owner may insure her one-third; court’s finding affirmed |
Key Cases Cited
- Investors Title Ins. Co. v. Herzig, 785 N.W.2d 863 (N.D. 2010) (appealability/finality principles)
- In re Estate of Eggl, 783 N.W.2d 36 (N.D. 2010) (will construction and ambiguity rules)
- In re Estate of Flynn, 606 N.W.2d 104 (N.D. 2000) (testator’s intent controls will construction)
- Ruud v. Frandson, 704 N.W.2d 852 (N.D. 2005) (ambiguity and use of extrinsic evidence; standard of review)
- Berry-Iverson Co. of N.D., Inc. v. Johnson, 242 N.W.2d 126 (N.D. 1976) (distinction between an option and right of first refusal)
- Northern Plains Alliance, L.L.C. v. Mitzel, 663 N.W.2d 169 (N.D. 2003) (right of first refusal explained)