Johnson v. Nelson
290 Neb. 703
| Neb. | 2015Background
- Johnson farmed two contiguous tracts owned by Stewart Minnick (Tract 1) and Minnick & his sister Mary Nelson as tenants in common (Tract 2) under an oral lease and entered a 2007 "buyout" agreement to purchase Minnick's interest after Minnick’s death.
- The buyout contemplated Johnson purchasing a $500,000 life insurance policy on Minnick, Johnson as owner/beneficiary; Johnson paid premiums and the policy funded the promised purchase price.
- The written buyout is signed by Johnson, Minnick, and purports to be signed "Mary Nelson by Stewart Minnick, P.O.A." (no power of attorney exists); Nelson denied authorizing Minnick to bind her.
- Minnick died in 2012; insurer paid $500,000 to Johnson, who tendered the proceeds to the estate and demanded conveyance per the agreement; the estate refused.
- District court granted summary judgment for the estate, holding the buyout unenforceable because the purchase price could not be apportioned to Minnick’s sole-owned tract and Johnson’s damages claim was time barred by the probate nonclaim statute; it dismissed the estate’s counterclaim for recovery of insurance proceeds.
- On appeal the Nebraska Supreme Court affirmed but on different grounds: it held the buyout agreement void as against public policy because the financing relied exclusively on a life-insurance policy in which Johnson, the owner/beneficiary, lacked an insurable interest in Minnick’s life; it also affirmed dismissal of Johnson’s damages claim as time barred and affirmed dismissal of the estate’s counterclaim under existing precedent.
Issues
| Issue | Johnson's Argument | Estate's Argument | Held |
|---|---|---|---|
| Whether the buyout agreement is void as against public policy because Johnson lacked an insurable interest in Minnick’s life | The buyout was a valid contract; the insurance was a legitimate financing device supporting specific performance | The insurance funding constituted a wager because Johnson lacked an insurable interest, making the agreement unenforceable | Agreement void as against public policy: Johnson had no pecuniary interest in Minnick’s continued life, so policy (and thus buyout financing) was impermissible; no specific performance available |
| Whether the estate had standing to assert lack of insurable interest as a defense to specific performance | Johnson: Ryan v. Tickle precludes third parties from challenging insurable interest; estate lacks standing to raise that defense | Estate: as a defendant it may assert defenses including lack of insurable interest | Estate may raise the defense in this context; court rejected a narrow reading of Ryan and addressed the defense on the merits |
| Whether Johnson’s alternative claim for damages was time barred under the probate nonclaim statute (§ 30-2485/2486) | Johnson: he filed timely in county/probate court (argues a petition existed) so district action was timely | Estate: Johnson filed the district action more than 60 days after notice of disallowance; nonclaim statute bars it | Held time barred: record shows Johnson filed the district action outside the 60-day limit and he failed to present proof of any timely petition in probate court |
| Whether the estate can recover the insurance proceeds from Johnson (counterclaim) because he lacked an insurable interest | Johnson: under Ryan only the insurer may raise lack of insurable interest to defeat proceeds; estate lacks standing | Estate: Ryan should be overruled so estate may recover proceeds and remove incentive for wagering on life | Court declined to overrule Ryan; estate lacks standing to recover proceeds from beneficiary under existing Nebraska precedent; counterclaim dismissed |
Key Cases Cited
- Mohrlang v. Draper, 219 Neb. 630 (Neb. 1985) (discusses requirements for specific performance of real estate contracts)
- Ryan v. Tickle, 210 Neb. 630 (Neb. 1982) (holds estates/third parties lack standing to recover insurance proceeds on ground beneficiary lacked insurable interest)
- Beard v. American Agency, 314 Md. 235 (Md. 1988) (landlord–tenant option/insurance financing does not create insurable interest when benefit arises only upon owner’s death)