Johnson v. Nelson

Facts

P 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. P always dealt directly with Minnick on matters pertaining to both tracts; Mary had no direct involvement. In the fall of 2006, P 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 P's cousin. The agent advised P that he would need an insurable interest in Minnick's life and recommended that P 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, a policy was issued with an effective date of March 12, 2007. P was the owner of the policy, Minnick was the named insured, and P 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 P will purchase life insurance on Minnick; that on Minnick's death, P 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 P. The agreement is signed by P, Minnick, and 'Mary Nelson by Stewart Minnick, P.O.A.' Minnick died in January 2012. Mary was his only surviving sibling. His will, executed in 2002, designates Mary's three adult children as residual beneficiaries. Prior to Minnick's death, P paid approximately $170,000 in premiums on the life insurance policy. After Minnick died, the insurer paid the policy proceeds of $500,000 to P. Johnson then tendered this amount to the personal representative of Minnick's estate (D) and requested conveyance of the farmland pursuant to the buyout agreement. D refused to convey the farmland. P sued D for specific performance. Mary 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 him to enter into the agreement with P on her behalf. There is no power of attorney in the record, and the parties agree that Minnick had no authority to enter into the agreement on behalf of Mary. During his lifetime, Minnick did not disclose the agreement to Mary, her children, or the attorney who drew his will and regularly handled his financial affairs. P 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. Mary's three children later intervened in their individual capacities. P alleged that Minnick owned tract 1 in fee simple and owned an undivided one-half interest in tract 2. P acknowledged that when Minnick executed the buyout agreement, he lacked the requisite power of attorney to convey Mary's interest. D alleged that the buyout agreement was void for various reasons, including that Johnson lacked an insurable interest in Minnick's life. The district court rejected D's claim that the buyout agreement was void as against public policy because P had no insurable interest in Minnick's life, reasoning the estate had no standing to raise that claim. The court determined 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 Mary's interest in the land. The court determined that P's claim for damages was time-barred by § 30-2485(a)(1) because he filed this action more than 60 days after the notice of disallowance of the claim was mailed. The district court dismissed D'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 entered summary judgment for D on all of P's claims, and D dismissed its counterclaim for slander of title. P appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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