Court settles siblings' dispute over 50-year lease

February 9th, 2011 10:39am
Law of the Land

Tara-Nicholle Nelson
Inman News™

Lawrence and Norma Erdman had eight children and a parcel of lakefront property. Over an eight-day period in 1980, the Erdmans signed three separate transfer documents regarding this property.

First, they signed a warranty deed conveying the property to one son, Wayne, and his wife.

Eight days later, they signed a quitclaim deed transferring the property to this same son and his wife for $1; however, on the same day they signed the quitclaim, the Erdmans also signed a lease agreement with their other seven children, which would allow the other seven to lease the property for 50 years, according to court records.

Legally speaking, the sequence of events actually transferred the property to Wayne and his wife free and clear of the 50-year lease to his siblings.

For the next 27 years, various of the seven non-owner siblings leased the property or mobile homes on the property consistently, mostly during summer vacation season, under the 50-year lease.

In 1986, Wayne told one of the leasing siblings that he intended to build a home for himself on the property, which would prevent the leasing siblings from leasing the property as they had been, and as contemplated by the 50-year lease.

After this intention to develop the property was reiterated in 2007, Pellman (one of the leasing siblings) filed suit for a preliminary injunction to prevent Wayne from restricting the other seven siblings from using the property as allowed under the lease.

By the time the matter came to trial, patriarch Lawrence Erdman had passed away. His wife Norma, though, gave testimony that it was her and her husband's intention to sign ownership of the property over to Wayne and his wife, subject to the right of the other seven siblings to continue using the property for 50 years.

Norma went so far as to say she felt her signature had been forged on the warranty deed, but later realized she was confused and acknowledged that it was her signature.

All of the Erdman children -- including Wayne -- testified that they knew their parents' intent was to have Wayne own the property and the rest of the siblings could both use it and contribute to the maintenance and upkeep on the mobile homes on the property. Wayne, however, claimed not to be aware of the lease itself until 2007.

Additionally, Lawrence and Norma Erdmans' attorney testified that the Erdmans expressed that this was their intention to him at the time they signed all of these documents; he also testified that he drafted only the quitclaim deed and the lease, and that he instructed the Erdmans that a warranty deed would run counter to their intentions.

The trial court ruled that because Wayne was not a good faith purchaser and because the warranty deed was issued only due to a mistake on the part of Lawrence and Norma Erdman, Wayne's ownership rights are subject to the lease agreement with the seven other Erdman siblings.

The court issued an injunction barring Wayne and his wife from interfering with the other siblings' rights to lease and use the property. Wayne appealed.

The Court of Appeals of Minnesota upheld the lower court's ruling. In Minnesota, a court has the power to reform a deed where: "(1) there was a valid agreement between the parties expressing their real intentions; (2) the written instrument allegedly evidencing the agreement failed to express the real intentions of the parties; and (3) this failure was due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party."

Virtually none of the elements required to reform the deed to be subject to the lease were in real dispute, except that Wayne argued there was no mutual mistake -- i.e., that he always understood that he owned the property free of the lease.

The court found it implausible that Wayne, who first expressed a desire to develop the property in 1986, would have leased the property against their wishes to the siblings for more than 20 years if Wayne did not believe he was required to by the deed and the lease.

Accordingly, the Court of Appeals found it to be highly credible that a mutual mistake existed between the Erdmans and Wayne when they signed the warranty deed. The trial court's reformation of Wayne's deed, to be subject to the 50-year lease to his siblings, was affirmed.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   
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