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affirming the district court's order awarding a partition in kind and a partition by sale
Summary of this case from Wihlm v. CampbellOpinion
No. 4-668 / 03-2045
Filed December 8, 2004
Appeal from the Iowa District Court for Boone County, David R. Danilson, Judge.
The defendants appeal from the district court's ruling directing the partition of farms by awarding one farm to the plaintiff and directing the sale of the other farms with a provision for an equitable distribution of the proceeds. AFFIRMED.
Colin J. McCullough of McCullough Law Firm, Sac City, for appellants.
Keith Ferguson, Dayton, for appellee.
Heard by Huitink, P.J., Mahan, Miller, and Vaitheswaran, JJ., and Snell, S.J.
Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2003).
I. Background Facts Proceedings
Marilyn Anderson (Anderson) and LaVerne Johnson (Johnson) are the children of Ivar and Gladys Johnson. Upon the death of Gladys Johnson in January 2002, Anderson and Johnson each became the owner of an undivided one-half interest in the following agricultural real estate: (1) about 142.27 acres in Section 16 of Township 85 in Boone County; (2) about 86.4 acres in Section 20 of Township 85 in Boone County; (3) about 143.11 acres in Section 21 of Township 85 in Boone County; and (4) about 98.49 acres in Section 11 of Township 86 in Webster County.
At the time of Ivar Johnson's death in February 1999, the federal estate taxes were reduced by a Qualified Family Owned Business Deduction. See I.R.C. § 2057(a) (1998). In order to take this deduction, qualified family-owned business interests must be taken over by a qualified heir. I.R.C. § 2057(b). The tax deduction is recaptured if, within ten years, the heir no longer materially participates in the family-owned business. I.R.C. § 2057(f)(1). There is no tax recapture if the qualified family-owned business interests are taken over by any member of the heir's family. I.R.C. § 2057(f)(3). Thus, if the land is sold to someone outside the family within a ten-year period after taking the deduction, the deduction will have to be repaid.
Anderson and Johnson are both active farmers. Johnson has farmed the Boone County property for many years. In 1994 he entered into a lease for the Boone County property for the period March 1, 1994, to February 28, 2005. The lease also provided:
Unless otherwise agreed in writing, or unless notice is served by either party on the other in the manner required by Iowa Code chapter 562, this lease shall be extended annually for an additional one-year period.
Notice of termination of the lease was sent in March 2003.
Anderson has farmed the Webster County property for many years. Anderson's husband's family owned the property in the past, but in the 1980s it was sold to the Johnson family. The land lies adjacent to her present farm and farmstead.
Anderson filed a petition for partition, alleging "[t]he real estate involved is all agricultural real estate and it is feasible to partition the real estate in kind and said partition is the Plaintiff's desire and demand." Johnson filed a counterclaim in which he also sought partition of the property, but asked that the partition be by sale instead of in kind. Johnson also sought recognition that his farm lease extended until February 28, 2013.
The district court determined the farm lease terminated on February 28, 2005. The court concluded the lease was not a bar to partition in kind. The court awarded Anderson the property in Webster County and determined the rest of the property should be partitioned by sale. The court appointed a referee for both the partition in kind and the partition by sale and ordered that the property should be appraised. See Iowa R. Civ. P. 1.1210. Johnson appeals.
II. Standard of Review
An action to partition real property is an equitable proceeding. Iowa R. Civ. P. 1.1201(1). Our review is de novo. Iowa R. App. P. 6.4. In equity cases, especially when considering the credibility of witnesses, we give weight to the fact findings of the district court, but are not bound by them. Iowa R. App. P. 6.14(6)( g).
III. Partition
Johnson contends Anderson did not sufficiently show the property here could be equitably partitioned in kind. He asserts all of the property should be partitioned by sale. The relevant rule provides:
(2) Property shall be partitioned by sale and division of the proceeds, unless a party prays for partition in kind by its division into parcels, and shows that such partition is equitable and practicable. But personalty which is subject to any lien on the whole or any part can be partitioned only by sale.
(3) When partition can be conveniently made of part of the premises but not of all, one portion may be partitioned and the other sold, as provided in the rules of this division.
Our rules favor partition by sale. See Spies v. Prybil, 160 N.W.2d 505, 507 (Iowa 1968). The party seeking partition in kind has the burden to show this remedy is equitable and practicable. Id. at 508. At trial, Anderson admitted it would be very difficult to equitably partition all of the property in kind. She suggested partitioning some of the property in kind and selling the rest in order to use those proceeds to equalize the division. Thus, she had the burden of proving partition partly in kind and partly by sale was equitable and practicable. See id.
Anderson testified she and her husband were interested in retaining the property they had farmed for many years, and which previously had been owned by her husband's family. The property was adjacent to Anderson's farm. Anderson also pointed out that there were positive tax consequences in awarding her at least some of the property in kind.
Rule 1.1201(3) specifically permits a combination of partition in kind and partition by sale. See also Iowa Code § 651.3 (2003) ("When partition can be conveniently made of part of the premises but not of all, one portion may be partitioned and the other sold, as provided in this chapter."). The district court ordered a new appraisal of the property. By awarding one parcel to Anderson and ordering a sale of the remainder of the property, an equitable division, either in property or sale proceeds, should be realized. On our de novo review, we conclude the district court reached an equitable solution in this case. Equity jurisdiction allows a court the necessary flexibility to determine the equities between the parties. Farmers Sav. Bank v. Gerhart, 372 N.W.2d 238, 245 (Iowa 1985).
IV. Lease
Johnson claims the district court improperly interpreted his lease on the Boone County property. Under rule 1.1207, in a partition action "there shall be no joinder of any other claim and no counterclaim." There may be an adjudication, however, of "the rights of any or all parties as to any or all matters growing out of or connected with the property, including liens between them." Iowa R. Civ. P. 1.1207. See also Baker v. Cutting, 280 N.W. 548, 550-51 (Iowa 1938) (noting that in a partition action a court may settle and adjust the rights of the parties in order to avoid multiplicity of litigation). We determine the matter of the interpretation of the farm lease may be considered in this action.
Johnson claimed the lease was a rolling ten-year lease. He asserted that each year the lease was not cancelled, the lease extended for another ten-year period from that time. The lease had an initial period from 1994 until February 28, 2005. Johnson claims that because the parties did not cancel the lease in 1995, the lease automatically extended to February 28, 2006, and so forth for each year the lease was in existence. He states that because the lease was not cancelled until 2003, it will not terminate until February 28, 2013. Johnson's interpretation of the lease was supported by Steve Hendricks, the attorney who drew up the lease.
Our goal in interpreting a lease is to ascertain the meaning and intention of the parties. Howard v. Schildberg Constr. Co., Inc., 528 N.W.2d 550, 554 (Iowa 1995). Leases which contain provisions for perpetual renewals of the lease are not favored by the courts. Horizon Homes v. Nunn, 684 N.W.2d 221, 227 (Iowa 2004). The supreme court has stated:
In order to be enforceable, a provision for extension or renewal must be definite and certain in its terms, particularly with respect to the duration of the additional term and the amount of rent to be paid. See Potter v. Henry Field Seed Co., 239 Iowa 920, 928, 32 N.W.2d 385, 390 (1948); 49 Am. Jur. 2d Landlord Tenant § 150, [at 160] (1995); [52] C.J.S. Landlord Tenant § [74, at 139 (2003)]. The terms and conditions of a renewal should be specified with such definiteness and certainty that the court may determine what has been agreed upon, and if it falls short of this requirement it is not enforceable. See [52] C.J.S. Landlord Tenant § [74, at 139 (2003)].
Petty v. Faith Bible Christian Outreach Ctr., Inc., 584 N.W.2d 303, 306 (Iowa 1998).
The district court determined the lease was ambiguous. The court found:
Paragraph 33 can also be interpreted to be applicable only upon the termination of the original term of years. Such an interpretation would allow for a tenancy until February 28, 2005, and one year extensions thereafter for each year in which notice was not served on either party or the parties did not otherwise agree. There is no language in Paragraph 33 which suggests that extensions may accrue in a pyramid fashion during the original term. Generally, if the parties desire to covenant for a second renewal or extension, the right to renew or extend the contract does not accrue until during the first renewal or extension. Since perpetual leases are not favored and Paragraph 33 fails to identify the amount of rent to be paid as well as if multiple extensions can accrue during the original term of the lease, Paragraph 33 lacks definitiveness and certainty. Accordingly, Paragraph 33 is considered ambiguous and unenforceable. The lease is therefore construed to terminate on February 28, 2005.
(Citation omitted.)
We agree with the district court's interpretation of the lease. The extension provision is ambiguous as to whether it provides for a rolling ten-year lease, or whether it provides for annual extensions after the expiration of the original ten-year period. Because the extension provision is not definite and certain, we concur in the district court's conclusion that the provision is not enforceable. See Petty, 584 N.W.2d at 306. We determine the lease terminates on February 28, 2005.
V. Attorney Fees
Johnson asserts that he should have been awarded trial attorney fees. He claims he was the prevailing party because he sought partition by sale and the district court ordered most of the property to be sold. Iowa Rule of Civil Procedure 1.1225 provides that attorney fees may be taxed as costs. Under rule 1.1224, "Costs created by contests shall be taxed against the losing contestant unless otherwise ordered." We do not find that Johnson was the prevailing party below. As noted above, Anderson had the burden to prove partition partly in kind and partly by sale was equitable and practicable, which she met. We also note that Johnson is the party that appealed.
Johnson furthermore claims that if he is the prevailing party on appeal, then he should be awarded attorney fees. Johnson has not been the prevailing party in this appeal, however, and we decline to award him attorney fees.
We affirm the decision of the district court.