McCord v. Foster
2016 Ark. App. 500
| Ark. Ct. App. | 2016Background
- In 2008 Sylvester Brandon leased 160 acres to Ronnie and Clint McCord for ten years; the lease included (1) a clause making the lease binding on heirs/assigns and (2) a right-of-first-refusal for Brandon’s children (Linda Alden and Danny Brandon) and a second-refusal to the McCords if the children declined.
- Sylvester died in 2010; by his will the 160 acres were split and distributed to Alden and Danny Brandon, who thereafter held fee title while the McCords continued to farm under the lease.
- In November 2011 the Fosters contracted to buy all 160 acres from Danny Brandon; Alden did not sign that contract but both cashed the earnest-money checks. Alden and Brandon then signed contracts acknowledging the McCords’ right of refusal at the Foster price; the McCords then contracted to sell to Ditch 56 Farms for the same price.
- The Fosters sued for specific performance against Alden and Brandon and asked the court to declare the McCords’ right of refusal unenforceable; the court granted summary judgment and ordered specific performance to the Fosters, holding that the heirs’ preemptive rights merged into title on inheritance and that the McCords’ secondary right of refusal never ripened.
- The circuit court also denied Ditch 56 Farms’ motion to intervene as moot. The Court of Appeals reversed: it held genuine factual issues exist about whether the lease’s successors/assigns clause preserved the McCords’ right of refusal after Alden and Brandon inherited, and remanded for further proceedings and for the trial court to properly consider intervention.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the McCords’ right of first/second refusal survived when heirs inherited (i.e., whether Paragraph 9 makes the right assignable/survive) | Fosters: right never ripened because original owner never offered to sell during life; heirs’ rights merged into title and extinguished preemptive rights | McCords: Paragraph 9 (successors/assigns) shows lease and its preemptive rights bind heirs/assigns so McCords’ right survived and could be triggered by heirs’ later sale | Reversed summary judgment; material factual dispute exists about intent of parties and interaction of Paragraphs 9 and 19 — issue is for factfinder, not summary judgment |
| Whether a right of first refusal is assignable or survives owner’s death absent express language | Fosters: customary rule that preemptive rights are personal and extinguish on owner’s death; no sale during decedent’s life so McCords’ right never ripened | McCords: lease language altering the default rule by extending obligations to heirs/assigns | Court: recognized prevailing rule but found lease language could reasonably be read otherwise; ambiguity prevents summary judgment |
| Whether summary judgment was appropriate | Fosters: entitlement as matter of law because no offer by decedent and heirs’ rights merged into fee | McCords: factual dispute over contract interpretation and intent (ambiguity) | Court: summary judgment improper because intent and meaning of lease terms are factual matters |
| Whether Ditch 56 Farms could intervene | Ditch 56: has a contract with McCords contingent on McCords’ exercise of refusal and therefore has an interest that could be impaired | Fosters/Trial court: intervention was moot after summary judgment extinguishing McCords’ right | Court: reversed denial of intervention and remanded for proper Rule 24 analysis because summary judgment basis was reversed |
Key Cases Cited
- Estate of Johnson v. Carr, 706 S.W.2d 388 (Ark. 1986) (distinguishes preemptive rights from absolute options; owner must decide to sell before right ripens)
- Po-Boy Land Co. v. Mullins, 384 S.W.3d 555 (Ark. Ct. App. 2011) (contract interpretation: unambiguous writings are questions of law; ambiguous writings are factual)
- Park Station Ltd. P’ship v. Bosse, 835 A.2d 646 (Md. 2003) (rights of first refusal are presumed personal and not assignable absent language showing transferability)
- Masterson v. Sine, 436 P.2d 561 (Cal. 1968) (early authority on nonassignability of preemptive rights and related principles)