Ryan v Lawyers Title Insurance Corp. (IN)

Summary:  A purchase agreement granting a right of first refusal that was personal to the signatories to the agreement terminated at the death of the last surviving grantor of the right.     

Rights of First Refusal

Ryan v Lawyers Title Insurance Corp., 959 NE2d 870 (Ind Ct App, 2011). 

 Facts:  In 1972, Russell and Mary Keen sold a parcel of farm land to Richard and Elizabeth Ryan pursuant to a purchase agreement.  The Keens retained certain property adjacent to the property sold to the Ryans. 

In pre-printed text, the purchase agreement stated that “upon acceptance, this offer shall become binding upon and inure to the benefit of purchase and seller and their respective heirs, executors, administrators, successors and assigns.”  The purchase agreement also stated in type filled in on the form, “in the event seller would elect to sell remaining part of this farm, purchaser to have first refusal. … sellers are presently the owners of a farm consisting of 130 acres more or less. ... [the right of first refusal is] not to be construed as a covenant running with the land, but may only be exercised by the signatorys [sic] to this agreement.”   

Mary Keen retained the adjacent property until her death in 2006.  In June 2006, the personal representatives of Mary Keen’s estate (“the estate”) obtained an order from the probate court authorizing the sale of the adjacent property to Steve and Sandra Hageman.  The closing was performed in December 2006 at the offices of Agri Town. 

The Ryans filed a complaint for specific performance, claiming that they had a right of first refusal if the Keens ever elected to sell the adjacent property and that the estate sold the property without providing the Ryans with an opportunity to exercise this right.  The estate filed a third party complaint against Agri Town and Lawyers Title, alleging that they relied on them to convey clear title.  Lawyers Title and Agri Town filed a motion for leave to file a third party counterclaim contending that the alleged right of first refusal was invalid and filed a motion for summary judgment. 

The trial court entered summary judgment in favor of Lawyers Title and Agri Town, finding that the right of first refusal in the purchase agreement was personal to the signatories to that agreement.  Thus, the right terminated at the death of the last surviving seller (Mary Keen) and was unenforceable by the Ryans against the Keens’ heirs.  The Ryans appealed the court’s summary judgment ruling.   

Holding:  Affirmed.  The court of appeals found that the right of first refusal was personal and terminated upon the death of Mary Keen as the last surviving grantor of the right.  Generally, restrictions on transfer are to be read to further the manifest intention of the parties and because restrictions on alienation are disfavored, the terms in the restrictions are not to be expanded beyond their plan and ordinary meaning.  When interpreting a contract, specific terms control over general terms. 

The purchase agreement specifically stated that the right of first refusal was not to be construed as a covenant running with the land.  Moreover, it specified that the “sellers” were presently the owners of the adjacent property, which suggests that “seller” referred to the Keens personally, and not to their heirs, as they were not owners of the property at the time the purchase agreement was executed.  The Ryans’ right arose only if the Keens, as the sellers, offered the land for sale.  The court noted that if the parties intended to bind the heirs regarding the right of first refusal, they could have easily provided for it in the purchase agreement.  In his concurrence, Judge Baker noted that if the court had interpreted the right of first refusal to bind the Keens’ heirs, then it would violate the common law Rule Against Perpetuities. 

Opinion Year: 
By: ATG Underwriting Department | Posted on: Mon, 04/30/2012 - 1:17pm