In re In re Estate of Hayes

Decision Date27 January 2015
Docket NumberNo. 31915–6–III.,31915–6–III.
Citation342 P.3d 1161
PartiesIn re Matter of the Estate of Elma L. HAYES, Deceased, and James L. Hayes, Appellant.
CourtWashington Court of Appeals

OPINION TEXT STARTS HERE

Affirmed. Robert Powers Hailey, Attorney at Law, Spokane, WA, for Appellant.

Charles Matthew Andersen, Winston & Cashatt, Spokane, WA, for Respondent.

FEARING, J.

¶ 1 Brothers James and Jerry Hayes dispute the meaning of their mother Elma Hayes' will. James Hayes signed a favorable lease with his mother to farm the family's land. When she died, Elma devised in her will discrete portions of the leased farmland to each of her four children. The dispute requires a ruling as to whether Elma intended to partition the lease into four separate agreements when she partitioned the farmland in her will. James contends she did, such that the lease covering his quarter share of property was extinguished when he became both the landlord and tenant, and, in turn, he could sell his land free of the favorable lease. In turn, James claims the lease continues to encumber his three siblings' leases such that they may not sell their parcels free of the lease favorable to him.

¶ 2 Jerry Hayes argues the lease remained one agreement covering the entire four quarters in the aggregate even after the four siblings inherited their parcels under their mother's will. If Jerry is correct, James' subsequent sale of his parcel violated the anti-alienation clause in the lease, thereby terminating the lease. Jerry Hayes' interests align with the brothers' other two siblings, John Hayes and Patricia Elder.

¶ 3 The trial court, after discerning the intent of Elma Hayes and noting the favorable terms of the farm lease to the tenant, agreed with Jerry Hayes. In addition to arguing the merits of the dispute on appeal, James Hayes contends the trial court exceeded its jurisdiction, incorrectly excluded testimony, erroneously took judicial notice of rental rates for Lincoln County farmland, and suffered from bias caused by his upbringing on a farm and former representation as a lawyer of grower clients. We affirm.

FACTS

¶ 4 Lloyd and Elma Hayes, husband and wife, farmed 1,225 acres near Hartline, Washington. The couple raised four children, James, John, Patricia, and Jerry.

¶ 5 In March 1991, Lloyd Hayes died. In that crop year, the farm suffered its third crop failure in five years. In 1992, the farm suffered another bad year such that the farm had accrued $123,000 of debt. The yoke of this financial burden led matriarch Elma Hayes to convene a family meeting.

¶ 6 In 1992, James, Patricia, and John met with their mother at the farm home to discuss retirement of the significant debt. Jerry, who lived out of state, did not attend the conference but told his family that he would concur in any decision. James proposed selling the farm. Elma, however, preferred that one of the three boys work the farm and assume the debt. John declined. Jerry later expressed no interest in undertaking farming operations. James reluctantly accepted farm responsibilities and its debt.

¶ 7 As an incentive to work the farm and pay the debt, Elma Hayes leased the 1,225 acres to James for five dollars an acre for 25 years. James accepted the lease because it provided him a decent living until he retired at age 65 and afforded him 25 years to service the debt.

¶ 8 Jerry Hayes describes the farm lease as a “sweetheart deal.” Clerk's Papers (CP) at 317. A tenant usually pays rent for dryland wheat property in eastern Grant County under a crop share arrangement. The landlord receives one-third of the crop, shares one-third of certain expenses, and pays all property taxes. Jerry calculated the return that the landlord would have received under a crop share basis and concluded that his brother James paid one-fifth of the market rate as rent for the Hartline farmland. Through 2012, James saved $480,000 in rent under the favorable lease, which is four times the debt he assumed on the farm. Mother Elma Hayes also gifted James $50,000 to $100,000 worth of farm equipment.

¶ 9 Jerry Hayes also calculated that a landlord under the typical crop share lease would roughly net $15,000 every two years on the Hayes' farmland, as compared to $3,000 the landlord receives under the 1993 lease. James recognized this imbalance in a July 26, 2012 e-mail message to Jerry in which he demanded that Jerry pay him to retire the lease at a higher market rate for rent. James wrote:

You are invited to buy out my interest in the lease of your land for the going market price established days ago when the Isaaks bought out my lease for 52,500/crop x 3 years or a total price of $157,500.

CP at 324.

¶ 10 Before preparation of the 1993 farm lease, Elma Hayes expressed an intent to keep the family farm as one unit with James as sole tenant and her other three children as co-landlords with herself. In accordance with this intent, attorney Kenneth Carpenter drafted a lease naming Elma, John, and Jerry Hayes and Patricia Elder as co-landlords. At trial, Carpenter testified the co-landlordship arrangement matched Elma Hayes' 1990 will that kept the farm in one unit rather than dividing the farmland into separate parcels for each child. Carpenter, however, did not draft Elma's 1990 will.

¶ 11 After Kenneth Carpenter's draft of the 1993 farm lease, Elma Hayes informed Carpenter that she questioned designating her other children as co-landlords. Carpenter advised Elma to be the only landlord signing the lease.

¶ 12 On December 22, 1993, Elma and James Hayes signed the farm lease respectively as sole landlord and tenant. John, Jerry, and Patricia did not sign the lease, although the lease contained signature lines for them. The lease entitled James to all crop revenue and any crop subsidies from the United States government. James agreed to pay Elma Hayes $6,125 annually and to pay two loans. Four important paragraphs of the lease read:

10. Indulgence not a waiver. Any indulgence in the breach of any term, condition, or covenant of this Lease by the Landlord shall not constitute a waiver nor consent to a continuation or subsequent breach thereof.

11. Attorneys Fees, Law and Venue. In the event of a breach by any party of any of the terms and conditions of this Lease, the prevailing party shall be entitled to reasonable attorney's fees and court costs against the other party. This lease is made in accordance with, and shall be interpreted and governed by, the laws of the State of Washington. If any action or other proceedings shall be brought on or in connection with this Lease, the venue of such action shall be in Grant County.

...

13. No Other Agreements. It is understood that this Lease cancels all other agreements, written or oral, entered into or agreed upon by and between the Landlord and the Tenant.

14. Binding Effect–Assignments–Personal to Tenant. This Lease shall be binding upon the heirs, personal representatives, and assigns of the Landlord herein. It is understood that this Lease is personal to the Named Tenant, and no assignment or subletting or transfer by operation of law by the Tenant will be recognized, without the written consent of the Landlord. In the event the Tenant cannot personally perform the terms, conditions, and covenants required herein upon the Tenant, then this Lease will terminate immediately.

CP at 21–22.

¶ 13 After execution of the farm lease, Elma Hayes told her attorney Kenneth Carpenter that retaining the farm as one unit after her death was not a good idea. Carpenter, at Elma's request, prepared deeds to convey to each child a partial interest in separate portions of the farmland. In 2003, Elma asked Carpenter to prepare a new will to effectuate her plan to give each child complete ownership and control over a distinct parcel of farmland. The farmland was already conveniently separated into four detached parcels.

¶ 14 Elma Hayes signed her last will and testament on January 28, 2003. The will reads, in pertinent part:

ARTICLE V

Specific Bequests

¶ 15 1. I hereby give, devise and bequeath to my son, JERRY D. HAYES, the following real property:

All of Section 6, Township 25 North, Range 30 E.W.M., South of right-of-way and East of Hartline, Grant County, Washington, Parcel No. 18–1791–000.

¶ 16 2. I hereby give, devise and bequeath to my son, JAMES L. HAYES, the following real property:

The South Half (S 1/2) of Section 17, Township 25 North, Range 30 E.W.M., Grant County, Washington, Parcel No. 18–1827–000.

¶ 17 3. I hereby give, devise and bequeath to my son, JOHN D. HAYES, the following real property:

The East Half (E 1/2) of Section 18, Township 25 North, Range 30 E.W.M., Grant County, Washington, Parcel No. 18–1828–000.

¶ 18 4. I hereby give, devise and bequeath to my daughter, PATRICIA A. ELDER, the following real property:

The West Half (W 1/2) of Section 20, Township 25 North, Range 30 E.W.M., Grant County, Washington, Parcel No. 18–1833–000.

ARTICLE VI

Distribution of Residue

I hereby give, devise and bequeath all of the rest, residue and remainder of my property of every kind, nature and description, wheresoever located or situated unto JAMES L HAYES, JOHN D. HAYES, JERRY D. HAYES, and PATRICIA A. ELDER, as their sole and separate property.

CP at 200–01.

¶ 19 Elma Hayes died in February 2012. James Hayes and Patricia Elder serve as co-personal representatives of Elma's probate estate. With attorney Kenneth Carpenter's assistance, James and Patricia created an inventory of Elma's assets. The inventory lists the farm property, but not Elma's landlord interest under the 1993 farm lease. On June 18, 2012, James and Patricia distributed the farm parcels in accordance with Elma's 2003 will. The personal representatives did not expressly distribute the landlord's interest in the lease.

¶ 20 In July 2012, the four Hayes children met. According to Jerry Hayes, he received the least valuable land, while his brother, James Hayes, received the most valuable land. Because of this...

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