Opinion
C.A. No. OOA-04-003
Submitted: September 21, 2000
Decision: November 29, 2000
Paul G. Enterline, Esquire, 18 Chestnut Street, P.O. Box 826, Georgetown, Delaware 19947, attorney for Plaintiff Below, Appellant;
Neil F. Dignon, Esquire, BROWN, SHILLS, BEAUREGARD CHASANOV, 10 East Pine Street, P.O. Box 742, Georgetown, Delaware 19947, attorney for Defendants Below, Appellees.
MEMORANDUM OPINION INTRODUCTION
This case presents an appeal of a decision of the Court of Common Pleas that held that Defendants had no duty to grant Plaintiff access to lands which they purchased and which Plaintiff claimed were subject to a verbal lease agreement that was between him and the previous owners of the land. For the reasons that follow, the decision of the Court of Common Pleas is reversed and remanded.
NATURE AND STAGE OF THE PROCEEDINGS
This action has been brought by Tommy Lane, Appellant-Plaintiff Below ("Plaintiff'), against Joseph R. Neudeck, III and Susan Neudeck, Appellees-Defendants Below ("Defendants"), and seeks damages and a declaratory judgment resulting from the alleged breach of an agricultural lease. From 1972 or 1973 through 1998 Plaintiff leased approximately 30 acres of tillable ground in Sussex County, Little Creek Hundred, near Delmar ("the Property"). Under a verbal lease agreement, Plaintiff was granted the right to farm the Property each year in return for paying the owner one quarter of the gross from the sale of the crops produced there. Through the end of 1998, Plaintiff had paid the rent as prescribed by this agreement. Defendants contracted to buy the Property from its then owners ("Simon") in November of 1998, and received title to the Property on January 18, 1999.
The exact year was not established by either party, but both parties agree that Plaintiff has been farming the property for at least twenty years.
On September 1, 1999, Plaintiff filed a complaint with the Court of Common Pleas in and for Sussex County. and then filed a Motion for Partial Summary Judgment on February 10, 2000. After hearing, the Commissioner denied the Motion and issued the following findings and conclusion:
While Plaintiff has established that the agricultural lease in controversy came into existence and has not been terminated pursuant to the provisions of 25 Del. C. § 6702, which is specifically applicable to this controversy, the record does not establish the non-existence of an issue of fact as to the alleged unlawful ouster. Further, while it would appear that the unlawful ouster statute 25 Del. C. § 5313, in the 1996 amendments to the Landlord-Tenant code, is not applicable to the circumstances of this case, it is not clear whether the Court would apply, upon a finding of wrongful ouster, 25 Del. C. § 5317, which exposes the Defendants to treble damages, as somehow reasonably ascertained, or whether the Plaintiffs remedy is limited to damages under the common law action of assumpsit. See Tiffany Real Property, §§ 449, 450.
No exceptions were taken and the Court below adopted these findings and conclusions of the Commissioner.
On March 31, 2000, a full trial on the merits was held before the Court of Common Pleas. On direct examination in the trial court, Susan Neudeck testified that she and her husband were made aware in November of 1998 of the verbal lease that existed between Simon and Plaintiff. She testified as follows.
Q. Were you made aware, at that time that you were interested in purchasing the property, were you made aware, that there was a man who had been farming this property?
A. Yes.
Q. Okay. Who told you that?
A. Mr. Simon said that the land was farmed.
Q. And, what did he tell you, you should do?
A. He said, I'm going to call the farmer and tell him to get with you, and you know, you get with him. We said, okay.
Q. Okay. And what was the purpose of the two of you were going to get together?
A. Originally, the purpose was, that we wanted to cut out — we have horses, and we wanted to cut out enough land to establish pasture for spring, when we moved. And, you know, we knew that Mr. Lane was there. Matter of fact, his tractor was still there.
Sometime after the sale of the Property to Defendants but prior to the 1999 planting season, Plaintiff and Defendants discussed the terms under which Defendants would permit Plaintiff to continue farming the Property. Defendants wished to forgo the verbal lease/sharecropping scheme preferring instead to have a written agreement with a flat rental fee of 540 per acre. Plaintiff rejected this proposal and instead offered to pay $25, but in no event more than 530 per acre. Negotiations broke down, and no agreement was ever reached. Plaintiff never received notice of termination of his lease as prescribed by 25 Del. C. § 6702.
25 Del. C. § 6702 reads in relevant part:
a) Every verbal lease of agricultural land...shall be deemed and construed to be a lease having a term of 1 year, terminating on December 3 1
b) In every verbal lease of agricultural land...the lease shall terminate at the end of 1 year...; provided however, the landlord or tenant gives the other party notice in writing at least four months in advance of the expiration date thereof that the landlord or tenant, as the case may be, intends to terminate the lease at the expiration date thereof. If no such notice is given by either party the lease shall become a year to year lease renewing itself yearly under the same terms and conditions until the herein mentioned notice requirement is met by either party desiring to terminate said lease.
On June 4, 1999, Plaintiff appeared at the Property on a tractor and prepared to spray. Before he could begin however, Defendants approached him and told him in no uncertain terms to remove himself and his tractor from the Property. Plaintiff immediately initiated this suit seeking damages for the Defendants' breach of lease, including treble damages for unlawful ouster, or, alternatively, punitive damages, and a declaratory judgment that the lease remains in full force and effect.
At the conclusion of the trial, the Court found in favor of the Defendants. The Court, ruling from the bench, held that 25 Del. C. § 315 "provides that a contract of sale must contain notice of the existence of a lease and the termination provisions. That was clearly a duty of the seller, not of the buyer." The Court also found 25 Del. C. § 6723 to be applicable and held as follows:
25 Del. C. § 315 reads as follows:
Every contract for the sale of agricultural lands which are, either at the time of execution or at the time of settlement of said contract, subject to an agricultural lease shall include within its terms notice to the purchaser of the terms of said agricultural lease and the agricultural lease renewal provisions of Chapter 67 of this title.
25 Del. C. § 6723 reads as follows:
A lease of land on shares, including the use of buildings, farm implements, stock and other personal property, is a personal contract and is not assignable without the consent of the lessor; provided however, where the original lease runs "to the lessee and his assigns", or where the crop has been harvested and marketed, the lease shall be assignable.
As I stated before, Section 6723, Title 25 provides that lease of agricultural land is a personal contract, and is not consignable [sic] without the consent of the lessor. The lessor in this case, is the Simons. There's no evidence, that they intended to, or did assign to the plaintiff [sic], therefore, I don't think the plaintiff [sic] has any responsibility... .Judgment for the defendant.
Plaintiff appeals this decision of the Court of Common Pleas.
DISCUSSION
I. Is the verbal lease entered into by Plaintiff and the previous owners of the Property effective against Defendants as subsequent purchasers of the Property?
A lower court's statutory interpretation is a matter of law and is therefore reviewed de novo by this Court. Wilmington v. Parcel of Land, Del. Supr., 607 A.2d 1163, 1165 (1992). In construing statutes, this Court has established as its standard the search for legislative intent.Giuricich v. Emtrol Corp., Del. Supr., 449 A.2d 232 (1982). It is the obligation of this Court "to read statutory language so as to avoid constitutional questionability and patent absurdity and to give language its reasonable and suitable meaning." Moore v. Wilmington Housing Authority, Del. Supr., 619 A.2d 1166, 1173 (1993).
The Court of Common Pleas decided that 25 Del. C. § 6723 was specifically applicable to this controversy and that pursuant to this section of the code, an agricultural lease is a personal contract that is non-assignable without consent of the lessor. The Court's reasoning is that the lease existed between Plaintiff and the previous owners of the Property, and because the previous owners did not specifically assign the lease to the Defendants, the Defendants owed no obligation to the Plaintiff to honor the lease.
A review of 25 Del. C. § 6723, which became effective on January 1, 1976, 60 Del. Laws c. 175 § 1, leads this Court to conclude that it is inapplicable to the controversy at hand. The purpose of 25 Del. C. § 6723 is to prevent a farmer who is paying rent in shares of the harvested crop from assigning the lease to a less capable farmer who may not be as skilled at producing a bountiful crop. In other words, the purpose is to protect a landowner from receiving a reduced rent as the result of the tenant's assignment of the lease. This point is illustrated by Crump v. Tolbert, Ark. Supr., 198 S.W.2d 518 (1946)(Crump). In Crump, the Arkansas Supreme Court held that an agricultural lease that did not expressly or impliedly authorize substitution of parties was not assignable by the lessee as a matter of law, even though there was testimony that unskilled persons without experience in farming or cultivation of rice were, or might have been, qualified to assume the duties prescribed by the lease. This Court finds that 25 Del. C. § 6723 is not aimed at protecting a tenant from assignment of the lease by the lessor, but at protecting the lessor's rental profits, and thus is not relevant to the instant case.
The Defendants argue that 25 Del. C. § 315 was correctly applied to this controversy, and that it imposes a duty on sellers of real property to include in a contract for sale the existence and terms of any oral agricultural leases. As buyers of the Property, the Defendants assert that they had no duty to honor the oral lease when its existence was not noted in the contract for sale. They conclude that Plaintiffs cause of action, if any exists, lies only against the previous owners of the Property for neglecting to include the terms of the lease in the contract for sale as mandated by statute.
The Plaintiff contends that 25 Del. C. § 6702 clearly states that if no notice of termination is given in writing at least four months in advance of the expiration date by either the landlord or the tenant, the lease renews itself under the same terms and conditions until the notice requirement is given. Because the Plaintiff never received notice of termination from either the previous owner or the Defendants, Plaintiff argues that his lease is still in effect and that the Defendants breached the lease when they prevented him from planting his 1999 crop.
This Court is presented with the task of reconciling 25 Del. C. § 315 and 25 Del. C. § 6702. It is undisputed that Plaintiff never received notice of an intent to terminate his agricultural lease for the Property. While it is also undisputed that the seller did not disclose the existence of the lease in the deed of the Property to Defendants, Defendants admit that the seller verbally informed them of the lease at the time they purchased the Property. In fact, beginning in November of 1998, Defendants negotiated with Plaintiff to modify the terms of the lease until an impasse was reached in March of 1999. It seems that until March 1999, Defendants had no desire to terminate the lease.
The general rule is that the purchaser of realty takes subject to the rights of the tenant under the lease if the purchaser has notice of the lease, and the notice may be actual or constructive. 49 Am. Jur. 2d Landlord and Tenant § 1061; 51C C.J.S. Landlord and Tenant § 258(2). Maryland courts have decided in favor of the general rule. InAchtar v. Posner, Md. Ct. App., 56 A.2d 797 (1948) (Achtar), the Court held that where a tenancy was extended by former owners before the sale of property, the new owner could not take possession until the expiration of the extended term, when he knew, or circumstances were such that the law charged him with knowledge, of the tenancy. In Achtar, the new owner was aware that the property was subject to a lease at the time of sale and that the lease contained a provision allowing the lessee, at his option, to renew the lease for three more years after the original term expired. The new owner, while aware of this provision, did not inquire as to whether or not the lessee had exercised the renewal option. The Court held that the verbal lease extension would be binding upon the new owner.
New Jersey also adheres to the general rule that a purchaser of rented lands takes subject to the letting. Zurick v. Perlmutter, N.J. Supr., 110 A. 826 (1920) (Zurick). In Zurick, the Court held a subsequent purchaser of rented property liable under a contract between the tenants and the original landlord that required the landlord to pay the water tax for the property. The subsequent purchaser was liable even though the record of the lease did not show the contract to pay the tax.
Pennsylvania, too, has long held as its general rule that ordinarily, when there is a change in ownership of a reversion, the new owner succeeds to the lessor's rights. Metropolitan Life Ins. Co. v. Associated Auctioneers, Pa. Super., 177 A. 483 (1935).
25 Del. C. § 315 was enacted to protect purchasers of agricultural lands from being forced to accept for a protracted period of time a lease of which they had no knowledge. Senate Bill No. 258, January 11, 1994, Synopsis. The Court finds that this statute gives rights to a buyer as against a seller. It does not impact on tenants' rights. In the instant case, Defendants were aware of the lease and actually wished to continue the lease with Plaintiff, but under different terms. When new terms could not be agreed upon, Defendants then wished to end the lease altogether. However, 25 Del. C. § 6702 plainly and unambiguously states that absent proper notification of termination of the lease, Plaintiffs lease automatically renewed under the same terms and conditions on January 1, 1999. This means that Plaintiffs lease for 1999 was already in effect when Defendants purchased the Property on January 18, 1999. Even though the lease was not specifically mentioned in Defendants' deed to the Property, Defendants were admittedly aware of its existence as early as November 1998. The Defendants are not the ignorant buyers that the legislature sought to protect when it enacted 25 Del. C. § 315. Plaintiffs lease was no surprise to Defendants, and they should not be able to cast aside obligations imposed upon them by a lease of which they had knowledge prior to purchasing the Property.
The synopsis reads as follows:
Agricultural leases are subject to automatic renewal for the following year if notice of termination is not issued by either the landlord or tenant at least 4 months prior to the lease expiration date. (citation omitted). This provision of the law is occasionally overlooked in the purchase and sale of agricultural lands with the result that a purchaser of such lands finds him or herself committed by law to lease the purchased lands for a year or more past settlement.
This Act would require disclosure of the existence of any agricultural lease and its potential for automatic renewal as part of the sales contract.
Defendants further seek to uphold the decision of the Court of Common Pleas with the argument that Plaintiff failed to provide sufficient evidence of actual damages that resulted from Defendants' breach of the lease. Because the trial court made no findings on the issue of damages, this Court cannot review that issue. The court below is directed to make appropriate findings with regard to what damages, if any, were sustained by Plaintiff.
CONCLUSION
This Court finds that the intent of the legislature in enacting 25 Del. C. § 315 was to prevent purchasers of agricultural lands from being bound to a lengthy lease of which they had no knowledge. Defendants do not fall into that class of persons that the legislature is intent on protecting. Not only were they aware of Plaintiffs lease before entering into a contract for purchase, but the record shows that they fully intended to continue that lease under their new ownership of the Property. The record also shows that Plaintiff never received notice of termination of the lease as prescribed by 25 Del. C. § 6702. It would be patently unfair for this Court to allow Defendants to escape the obligations of a lease of which they had actual notice simply because the terms of the verbal lease were not reduced to writing within the contract for sale of the Property. While 25 Del. C. § 315 may give the Defendants a claim against the previous owners, it does not provide any rights to the Defendants to terminate Plaintiff's lease. 25 Del. C. § 315 may not be used as a method for avoidance of a valid lease of which Defendants had actual notice. The decision of the Court of Common Pleas is reversed and remanded for a determination of damages sustained by the Plaintiff.
IT IS SO ORDERED.