Stephan, J.
In 2007, Chad P. Johnson and Stewart S. Minnick entered into a written agreement whereby, after Minnick's death, Johnson would purchase farmland he had been renting from Minnick and Minnick's sister for a specified price. The purchase price was to be funded by an insurance policy owned by Johnson on Minnick's life. Following Minnick's death in 2012, the proceeds of the policy were paid to Johnson. He tendered them pursuant to the agreement, but the personal representative of Minnick's estate refused to consummate the sale.
Johnson then brought an action for specific performance and other relief. The district court for Frontier County held the
Since 1997, Johnson has farmed land owned by Minnick and Minnick's sister Mary E. Nelson pursuant to an oral lease agreement. The lease terms required Johnson to pay cash rent for pastureland and to pay a share of the crop on the remaining land. The land is made up of two contiguous tracts. What is referred to in the record as "Tract 1" was owned solely by Minnick, and what is referred to as "Tract 2" was owned by Minnick and Nelson as tenants in common. Minnick's family had a long association with the land. Johnson always dealt directly with Minnick on matters pertaining to both tracts; Nelson had no direct involvement.
In the fall of 2006, Johnson met with an insurance agent and discussed taking out a life insurance policy on Minnick and then using the proceeds to purchase the farmland after Minnick's death. The agent was Johnson's cousin. The agent advised Johnson that he would need an insurable interest in Minnick's life and recommended that Johnson and Minnick enter into a buyout agreement. Minnick agreed to the plan and worked with the agent to find a company willing to issue a $500,000 insurance policy on his life. Eventually, an application for life insurance signed by both Johnson and Minnick was submitted to a life insurance company and a policy was issued with an effective date of March 12, 2007. Johnson was the owner of the policy, Minnick was the named insured, and Johnson and his wife were the primary and secondary beneficiaries, respectively. On the effective date of the policy, Minnick was 80 years old.
The buyout agreement is dated January 16, 2007. It specifically provides that Johnson will purchase life insurance on Minnick; that on Minnick's death, Johnson will pay the proceeds of the policy to the personal representative of Minnick's estate; and that the estate shall then transfer the farmland to Johnson. The agreement is signed by Johnson, Minnick, and "Mary Nelson by Stewart Minnick, P.O.A."
Minnick died in January 2012. He never married, and had no surviving children. Nelson was his only surviving sibling. His will, executed in 2002, designates Nelson's three adult children as residual beneficiaries.
Prior to Minnick's death, Johnson paid approximately $170,000 in premiums on the life insurance policy. After Minnick died, the insurer paid the policy proceeds of $500,000 to Johnson. Johnson then tendered this amount to the personal representative of Minnick's estate and requested conveyance of the farmland pursuant to the buyout agreement. The personal representative refused to convey the farmland.
Nelson testified that she and Minnick discussed the possibility of selling the farmland on only one occasion, in late 2006, and that she told Minnick at that time she was unwilling to sell. She denied giving Minnick either verbal permission or a written power of attorney authorizing
Following Minnick's death, the personal representative published a notice to creditors stating that claims against the estate were to be filed by April 17, 2012. On March 21, Johnson filed a claim against Minnick's estate in the county court for Furnas County, seeking specific performance of the buyout agreement. On April 2, the personal representative mailed a notice of disallowance of the claim to Johnson.
On July 2, 2012, Johnson filed this action in the district court for Frontier County seeking specific performance of the buyout agreement and other relief. In the operative complaint, he alleged that when the agreement was executed in 2007, the farmland was worth approximately $450,000, and that the farmland was worth $1.25 million at the time of Minnick's death in 2012. The original defendants were Nelson and the personal representative. Nelson's three children later intervened in their individual capacities. For purposes of clarity, we shall refer to the personal representative, Nelson, and her children collectively as "the estate."
In his amended complaint, Johnson alleged that Minnick owned tract 1 in fee simple and owned an undivided one-half interest in tract 2. Johnson acknowledged that when Minnick executed the buyout agreement, he lacked the requisite power of attorney to convey Nelson's interest. Johnson further alleged that an award of damages would not adequately compensate him for the personal representative's "refusal to convey that portion of the
The estate filed an answer alleging that the buyout agreement was void for various reasons, including that Johnson lacked an insurable interest in Minnick's life. It also alleged that Johnson's claim for damages was barred by his failure to file a timely claim as required by Neb.Rev.Stat. § 30-2485 (Cum.Supp.2014). In addition, it asserted counterclaims for slander of title and equitable distribution of the insurance proceeds.
Johnson moved for partial summary judgment on his specific performance claim, and the estate moved for summary judgment in its favor with respect to all of Johnson's claims. In overruling Johnson's motion for summary judgment, the district court rejected the estate's claim that the buyout agreement was void as against public policy because Johnson had no insurable interest in Minnick's life, reasoning the estate had no standing to raise that claim. The court also rejected the estate's claims that the buyout was unenforceable as an "agreement to agree" or as an unreasonable restraint on alienation of land. The court determined, however, that the buyout agreement could not be specifically performed, because there was no means of apportioning the $500,000 purchase price between Minnick's interest in the land and Nelson's interest in the land. Further, the court determined that Johnson's claim for damages was time barred by § 30-2485(a)(1),
The district court also dismissed the estate's counterclaim for equitable distribution, concluding that only the insurer can assert a claim against a beneficiary based upon a lack of insurable interest. The court ultimately entered summary judgment for the estate on all of Johnson's claims, and the estate dismissed its counterclaim for slander of title.
Johnson filed this timely appeal, and the estate cross-appealed. We granted the estate's petition to bypass.
Johnson assigns, restated and summarized, that the district court erred (1) in failing to grant specific performance of the buyout agreement and (2) in dismissing his claim for damages.
On cross-appeal, the estate assigns, restated and summarized, that the district court erred in (1) failing to rule that the buyout agreement was an unreasonable restraint on alienation, an unenforceable agreement to agree, or void due to the absence of an insurable interest, and (2) holding that it could not assert an equitable claim to the insurance proceeds paid to Johnson based upon a claim that Johnson lacked an insurable interest in Minnick's life.
Summary judgment is proper if the pleadings and admissible evidence offered at the hearing show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.
An appellate court will affirm a lower court's grant of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from the facts and that the moving party is entitled to judgment as a matter of law.
When reviewing cross-motions for summary judgment, an appellate court acquires jurisdiction over both motions and may determine the controversy that is the subject of those motions; an appellate court may also specify the issues as to which questions of fact remain and direct further proceedings as the court deems necessary.
The equitable remedy of specific performance regarding a contract for the sale of real estate may be granted where a valid, binding contract exists which is definite and certain in its terms, mutual in its obligations, free from overreaching fraud and unfairness, and where the remedy at law is inadequate.
The estate alleged that specific performance was improper for four reasons: (1) The buyout agreement was simply an agreement to agree, (2) the buyout agreement was an unreasonable restraint on alienation, (3) there was no means of abating the purchase price to account for Nelson's interest, and (4) the buyout was void because Johnson lacked an insurable interest in Minnick's life. The district court determined the buyout was not simply an agreement to agree and was not an unreasonable restraint on alienation. It also concluded that because there was no means of abating the purchase price to account for Nelson's interest, the buyout agreement could not be enforced by ordering specific performance. The court refused to decide whether Johnson lacked an insurable interest in Minnick's life, reasoning the estate lacked standing to raise that defense. Both Johnson and the estate challenge the district court's ruling on specific performance.
We first address the estate's claim that the buyout was void because Johnson lacked an insurable interest in Minnick's life.
At common law, life insurance policies issued to a party not having an insurable interest in the life of an insured are considered a wager on the life of another and therefore void as being against public policy.
The district court rejected this defense on the ground that the estate did not have standing to question Johnson's insurable interest in Minnick's life. In reaching this conclusion, it relied on Ryan v. Tickle,
In the estate's cross-appeal, it argues that the district court erred in concluding that Ryan precluded it from asserting that the buyout agreement was
We acknowledge that there is language in Ryan which, taken out of context, could suggest that a party other than the insurer cannot raise the lack of an insurable interest under any circumstances. For example, we stated in Ryan that there was established law in other jurisdictions that "only the insurer can raise the objection of want of an insurable interest."
The question, then, is whether the defense has merit. In Nebraska, an "[i]nsurable interest, in the matter of life and health insurance, exists when the beneficiary because of relationship, either pecuniary or from ties of blood or marriage, has reason to expect some benefit from the continuance of the life of the insured."
This court has not decided the type of pecuniary or economic relationship which may form the basis of an insurable interest in the context of life insurance. Some courts have held that one business partner may have an insurable interest in the life of another business partner where there is an expectation of pecuniary benefit from the continued life of the insured partner.
At the time the policy issued, the relationship between Johnson and Minnick was that of (1) landlord and tenant under an oral farm lease and (2) parties to the buyout agreement, which could be performed only after Minnick's death. A similar relationship was the subject of a Maryland case, Beard v. American Agency.
We need not decide whether a landlord-tenant relationship with respect to agricultural property could ever form the basis of an insurable interest. We conclude only that in this case, as in Beard, it did not. The agent who procured the policy for Johnson described the insurable interest as "guaranteeing a buyer for ... Minnick and his sister at a price agreeable to both parties, while at the same time ensuring... Johnson and his family the opportunity and resources to purchase this farm property essential to continuing their farm business." But this does not meet the requirement of § 44-103(13)(b) that for there to be an insurable interest, the beneficiary must have "reason to expect some benefit from the continuance of the life of the insured." Like the farmer in Beard, Johnson had no reason to expect any pecuniary benefit from the continuance of his landlord's life. As long as Minnick lived and was willing to rent the land to Johnson, Johnson would remain a tenant on the land. The only difference in the relationship after the execution of the buyout
The insurance policy on Minnick's life was an integral component of the buyout agreement which Johnson sought to enforce after Minnick's death. The agreement was the reason for the policy, and the policy was the exclusive financing mechanism for the agreement. The power of courts to invalidate contracts for being in contravention of public policy is a very delicate and undefined power which should be exercised only in cases free from doubt.
Johnson argues that the district court erred in determining that his alternative claim for damages based on theories of breach of contract, fraudulent misrepresentation, and negligent misrepresentation was time barred by § 30-2485(a)(1). That statute provides that all claims against a decedent's estate which arose before the death of the decedent are barred unless presented within 2 months after the date of the first publication of notice to creditors. Under Neb.Rev.Stat. § 30-2486 (Reissue 2008), claims against a decedent's estate may be presented either by filing a written statement with the clerk of the court
This action was filed on July 2, 2012, which was outside the 60-day period specified in § 30-2486(3), and for that reason, the district court concluded it was time barred. In his brief, Johnson asserts that he filed and served a petition for allowance of claim in the county court on April 10, 2012. He concedes this document does not appear in the record, but argues its existence "can, and should have been, inferred from the record."
We find no merit in this argument. If such a document existed, Johnson had the opportunity to offer it into evidence at the summary judgment hearing. Even though Johnson as the party opposing a motion for summary judgment is entitled to all reasonable inferences in his favor,
For completeness, we note that Johnson also argues that the district court lacked subject matter jurisdiction to decide whether his claim for damages was timely filed, because the probate court has exclusive jurisdiction over claims against the estate. This argument is also without merit. Johnson invoked the jurisdiction of the district court to adjudicate his claim for damages, and the district court clearly had subject matter jurisdiction to interpret and apply the nonclaim statutes in order to adjudicate the defense that the action was time barred.
The estate counterclaimed for "Equitable Distribution of [the] Insurance Proceeds," alleging that because Johnson lacked an insurable interest in Minnick's life, Minnick's estate and heirs "are the proper beneficiaries of any insurance upon his life." The estate prayed for judgment against Johnson in the amount of $500,000, the amount of the life insurance policy proceeds.
The district court dismissed this counterclaim, reasoning it was barred by our holding in Ryan v. Tickle.
This claim is barred by our holding in Ryan, because the estate lacks standing to assert the claim against Johnson. But the estate asks that we overrule Ryan, because the "only effective means of enforcing the prohibition against wagers on an individual's life is to remove the economic incentive for such wagers by recognizing that the estate and heirs of the deceased have standing to challenge the payment of
Although Ryan is consistent with case law in other jurisdictions,
A few state courts have departed from the majority position and held that an estate has standing to challenge a beneficiary's right to retain insurance proceeds where the beneficiary lacked an insurable interest in the life of the deceased insured.
We conclude that the better course is not to overrule Ryan. We leave to the Legislature the policy questions of whether and under what circumstances an estate of an insured may recover insurance proceeds paid to a beneficiary who lacks an insurable interest in the life of the insured. Accordingly, we conclude that the district court did not err in dismissing the counterclaim.
Although our reasoning differs from that of the district court, we conclude that it did not err in dismissing Johnson's claims and the estate's counterclaim. Accordingly, we affirm.
AFFIRMED.
Wright, J., not participating.