Sunday, June 12, 2022

More Ag Law Court Developments


Three recent court opinions from Kansas illustrate the diverse ways that the law is involved in ag-related activities.  Two of the cases involve ag real estate, with one of those having estate planning implications.  The other case involves rules involving showing animals at the State Fair. 

More ag-related court cases and their implications – it’s the topic of today’s post.

Irrigation System Value Included in Land Valuation in Partition Action 

Claeys v. Claeys, No. 124,032, 2022 Kan. App. LEXIS 16 (Kan. Ct. App. May 6, 2022)

Two brothers each inherited an undivided one-third interest in farmland, and the wife of a deceased brother owned the other one-third interest via a trust created for her benefit.  The brothers obtained a water permit, installed and $83,000 ten-tower irrigation system to convert the dryland to irrigation crop farming, and spent over $10,000 on piping and a water meter.  The irrigation system was one brother’s personal property.  The sister in-law did not contribute to the cost of these improvements. She filed a partition action seeking to sever the co-ownership. The brothers counterclaimed, asserting they improved the value of the land and that her share should be offset to account for the improvements.  Three commissioners were appointed to appraise the land and valued the dryland at $390,000 and the irrigated land at $2,065,000, not including the irrigation equipment.  The sister-in-law chose to buy the smaller, non-irrigated tract.  The commissioners determined that because her tract was less valuable, the brothers owed her $428,333 to account for her one-third interest, with $50,000 of that amount placed in escrow pending the outcome of the brothers’ counterclaim. The trial court determined that the definition of “improvements” should be limited to physical structures and equipment.  The trial court ruled for the sister-in-law on the brothers’ counterclaim, find that the brothers had not shown that they receive a credit for the irrigation-driven value increase.  According to the trial court, the irrigation equipment was personal property of one of the brothers and was not an “improvement.”  Hence, the trial court awarded the $50,000 to the sister-in-law.  On appeal, the appellate court held the trial court erred when it found the brothers did not improve the land.  The appellate court determined that Kansas law requires a “broader inquiry” into possible improvements to the land other than just physical structures and equipment, and that the trial court erred when it found that the brothers did not improve the land when they installed the irrigation system.  Changing the land’s status from dry to irrigated and obtaining a water right improved the value of the land.  “Improvements,” the appellate court determined, are not simply limited to physical additions.  The personal property (irrigation system) improved the property and should have been included in the land valuation.  The water permit was not the sole source of the higher land value for the irrigated ground – the irrigation system was necessary to make the water permit “operative.”  Accordingly, the appellate court held that the trial court erred in denying the brothers’ counterclaim and remanded the case to the trial court to determine whether to award credit for the value of the irrigation equipment based on an assessment of the evidence previously presented at trial. 

Comment:  The case points out the possible peril of leaving property to the children in co-equal undivided interests.  What often happens is that a child (or multiple children) will want to "cash-out" by filing a partition action.  That happened in this case, and then the issue of valuation came up to balance out the economics of the partition.  In determining value, "improvements" had to be dealt with. A change from dryland to irrigation farming increases the value of the land and must be accounted for in a partition action. 

Grand Champion Lamb Properly Stripped of State Fair Title

Gilliam v. Kansas State Fair Board, No. 122, 254, 2022 Kan. App. LEXIS 18 (Kan. Ct. App. May 6, 2022)

The plaintiff’s lamb was crowned grand champion of the market-lamb competition at the 2016 Kansas State Fair. State Fair rules bar exhibitors from treating any part of an animal’s body, internally or externally, with a substance to alter conformation.  Regulations also prohibit changing an animal's natural contours or appearance of an animal’s body or inserting a foreign material under the skin – known as "unethical fitting."   Before the Fair was over, the lamb was removed from display, slaughtered and its meat was sold to market.  After the lamb was processed, a veterinarian analyzed the lamb’s carcass and observed multiple injection marks on the back of both hind legs with associated swelling and discoloration in the muscle and fat and abnormal reddening of the skin over those areas.  The veterinarian concluded that multiple recent injections had likely caused the abnormalities.   Lab tests did not identify any drugs in the lamb’s system leading the veterinarian to conclude that a natural substance had been injected.  These finding led the veterinarian to conclude that injections were used to alter the lamb’s appearance, rather than treat the lamb for any illness. Consequently, the defendant (State Fair Board) determined that the plaintiff had engaged in an “unethical fitting,” and stripped the plaintiff of her title along with her championship belt buckle and her $4,000 cash prize. The plaintiff appealed to two State Fair committees with no success and then filed suit.  The trial court determined that the veterinarian’s findings did not provide “substantial evidence” as to unethical fitting.  While the veterinarian confirmed his findings of injections, the trial court noted that he did not find that the lamb’s appearance had been altered and never used the term “unethical fitting.”  Thus, the trial court held that the plaintiff had sustained her burden of proving the invalidity of the defendant’s action.  On appeal, the defendant asserted that “unethical fitting” was its determination to make, not that of a veterinarian, and that the trial court erred in basing its determination on the veterinarian’s conclusion which it found unsupported by the evidence.  The appellate court noted that state law vested in the defendant the authority to adopt rules and regulations governing the State Fair.  Those rules provided non-exhaustive examples of what could be considered unethical fitting and the appellate court determined that the defendant could consider injections to be an “unethical fitting” even though not listed in the examples.  Thus, the appellate court reversed the trial court and held that substantial evidence supported the defendant’s decision to disqualify the plaintiff’s lamb in accordance with the defendant’s rules and that a finding of “unethical fitting” need not be made nor attested to by a veterinarian.  

Comment:      The facts of the case seem to indicate that the practice of “airing” was engaged in with respect to the lamb.  Airing occurs most frequently with market animals such as steers and lambs and is a practice that injects air into the animal’s muscle.  The fat content of the animal’s feed is increased with the intent of the fat filling the “aired” area. When the practice occurs, it is possible that the animal owner does not know that it has happened.  Many animals are sent to professional “fitters” and the owner merely shows the animal. 

Landowner Establishes Adverse Possession Through “Tacking.”

Shelton v. Chacko, 501 P.3d 909 (Kan. Ct. App. 2022)

The parties owned adjacent tracts. A fence existed between the properties on the assumed boundary.  The plaintiff had a survey completed which indicated that the fence was on the plaintiff’s land inside the surveyed boundary.  The plaintiff sued to have the surveyed line established as the boundary, and the defendant counterclaimed to establish the fence line as the boundary via adverse possession.  The trial court held the appellee had established adverse possession over the property through “tacking.”  While the defendant had only possessed the strip in controversy for eight years, the defendant claimed that the evidence showed that the prior owner of the defendant’s tract had owned it and used it up to the fence for at least seven years which meant that the 15-year requirement for adverse possession was satisfied under Kansas law.  The trial court ruled that the defendant had satisfied the requirements for adverse possession via tacking because there was no interruption in possession and no abandonment for at least 15 years, and the defendant had a continual good-faith belief of ownership.  On appeal, the appellate court affirmed, noting that the defendant provided credible testimony of his belief of ownership up to the fence.  The appellate court noted that the fence was in place when the defendant bought his tract and was not repositioned when it was rebuilt. 

Note:   I often get the question of whether the 15-year requirement (Kansas) for adverse possession “resets” when there is a change in ownership.  The answer is “not necessarily so.”  Here the defendant had a good faith belief of ownership for seven years and his predecessor in interest had also treated it as the boundary, as did the adjacent owner.

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