Restrictive Covenants

Hanson v Winsnes, 2006AP1497 (Wis Ct App, unpublished, 2007).

Facts: In 1992, Wayne and Nancy Hanson (Hansons) purchased real estate from Malvin and Marion Winsnes (Winsneses) and executed an agreement for a right of first refusal to approximately 52 additional acres of land. Under the agreement, if the Winsneses were to sell the additional 52 acres, the Hansons would first be offered the same terms as a third party. The signed agreement was recorded with the register of deeds.

In 2003, after Malvin Winsnes passed away and Marion Winsnes became incompetent, the Hansons learned of a pending sale of the property to Helge Vestnes. Before the sale was finalized, Everett Erlien, Marion Winsnes' brother, verbally offered to sell the property to the Hansons, but the Hansons declined. Vestnes removed timber, had five parcels annexed, and made several improvements to the property. In 2004, Vestnes sold a portion of the property containing the improvements to Robert and Erica Todahl. Subsequently, the Hansons sued several parties who had an interest in the property or the finality of its sale, including Marion Winsnes, Vestnes, the Todahls, the Stearns, Central States Mortgage, Inc., and Mortgage Electronic Registration Systems, Inc. The Hansons sought to enforce the right of first refusal and requested several remedies, including specific performance, which entailed negating the prior sales of the property and purchasing the improved property at the price Vestnes paid for it in 2003. The circuit court granted the Hansons' motion for summary judgment, holding that the verbal notice of the sale that the Hansons received was insufficient and that the defendants' claims, such as laches and waiver, did not apply. The defendants appealed.

Holding: Reversed and remanded. The appellants sought reversal on several grounds, including that written notice of the third party offer to purchase was not required, the sufficiency of the verbal notice remained a genuine issue of material fact, the Hansons' claims were barred by laches, and the Hansons waived their right of first refusal.

For a party to sufficiently argue a claim for laches, it must be proven that the claimant unreasonably delayed in bringing the claim, the defense lacked knowledge that the claimant would assert the right on which the suit is based, and the defense is prejudiced by the claimant's delay. Regarding the first element, the court of appeals held that the Hansons unreasonably delayed in bringing the claim and their argument that they were unaware of their right of first refusal was insufficient, because constructive notice is enough. Regarding the second element, the appellants had no reason to know that the Hansons would assert the right of first refusal, because they declined when offered the property verbally. Finally, the appellants would suffer prejudice if the right of first refusal were enforced, due to the numerous improvements and increased value of the property. Therefore, the Hansons' claims were barred by laches.

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