Court Opinion

ID: 4249230
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:16:17.590537+00
Date Added: 2024-06-11T14:43:57.921180
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 14–1622

                        Filed December 23, 2016

                       Amended March 13, 2017

RUSSELL L. NEWHALL,

      Appellee,

vs.

MARCIA ELAINE NEWHALL ROLL,

      Appellant.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Butler County, Gregg R.

Rosenbladt, Judge.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED.

      Thomas D. Hanson of Dickinson, Mackaman, Tyler & Hagen, P.C.,

Des Moines, for appellant.

      Mark McCormick of Belin McCormick, P.C., Des Moines, and

Megan R. Rosenberg of Cady & Rosenberg Law Firm, P.L.C., Hampton,

for appellee.
                                            2

HECHT, Justice.

       In this partition action, the plaintiff sought partition by sale of one

tract of real estate located in Hardin County and another tract located in

Butler County. The defendant opposed the proposed partition by sale,

preferring partition in kind instead. On appeal from the district court’s

decision ordering the sale of both tracts, the court of appeals reversed.

On further review, we conclude the defendant failed to prove it would be

equitable and practicable to partition the tracts in kind and therefore

vacate the decision of the court of appeals and affirm the district court’s

judgment. 1

       I. Background Facts and Proceedings.

       Russell Newhall and Marcia Roll are biological siblings who own

two farm properties as tenants in common.                The first tract, located in

Butler County, was transferred to Russell and Marcia by inter vivos gift

from their parents in 2006. The second tract, located in Hardin County,

was transferred to Russell and Marcia in 2011 through a testamentary

gift from their biological aunt.        Russell owns several grain bins and a

grain dryer on the Butler County land.

       The Butler County tract and the Hardin County tract are both
subject to leases.      Russell leases and farms the tillable portion of the

Butler County farm. 2 Third parties rent pastureland on both the Butler

and Hardin County tracts.

       1Our   decision in Roll v. Newhall, 888 N.W.2d 422 (Iowa 2016) involving the same
parties is also filed today. In that case, Marcia asserted Russell could not inherit under
their biological mother’s will because their biological aunt adopted him after the will
was executed but before the testator died.
       2Although  he has farmed the tillable portion of the Butler County tract since
1974, Russell’s primary enterprise at the time of trial was farming and raising cattle in
North Dakota.
                                     3

        Russell and Marcia have an acrimonious relationship, and Russell

sought to sever their interests in the two tracts by agreement on multiple

occasions before this litigation was commenced.         In October 2007,

Russell offered to sell his interest in the Butler County land to Marcia.

In May 2012, Russell again offered to sell his interest in the Butler

County land or to trade it for Marcia’s interest in the Hardin County

land.    On each occasion, Marcia expressed no interest in Russell’s

proposed partition of the tracts.

        A. The Consolidated Actions.       In March 2013, Russell filed

separate actions against Marcia in Butler and Hardin counties seeking a

judicial partition by sale of both tracts. Marcia responded by requesting

the properties be partitioned in kind. The two actions were consolidated

for trial in Butler County upon joint motion of the parties.

        At the trial, both parties presented evidence of the nature and

value of the properties. The tract in Butler County consists of 315.30

acres—115 acres devoted to row crops, approximately 150 acres of

pastureland and timberland, and the remainder devoted to hay ground

and buildings.    Russell’s expert appraised the Butler County land at

$929,000 (excluding the value of the grain bins purchased and installed

there by Russell). Marcia’s expert appraised the property at a fair market

value of $1,200,000 (including the value of the grain bins).

        The Hardin County tract consists of 162.92 acres—approximately

110 acres of tillable land and the remainder in pastureland. Russell’s

expert appraised the Hardin County land at a fair market value of

$778,000; Marcia’s expert opined that the property’s fair market value is

$620,000.

        Without the value of the grain bins factored in, the difference

between the market values of the two properties according to the experts
                                       4

ranged from $151,000 (Russell’s expert) to $535,500 (Marcia’s expert).

After reviewing the experts’ methodology and hearing their testimony, the

district court found the experts were both “very credible.”

      B. The Parties’ Positions in District Court.             At trial, Marcia

urged the court to award Russell the Hardin County property and make

a specific allotment of the Butler County property to her under Iowa Rule

of Civil Procedure 1.1216.     See Iowa R. Civ. P. 1.1216 (permitting the

trial court to allot a specific tract to a specific party).   Because the land

in Butler County was worth more than the land in Hardin County,

Marcia proposed that the distributions could be equalized if the court

awarded Russell an additional sum of money or about 70 acres from the

Butler County farm, consisting primarily of pasture and hay land.

      Russell urged the partition be achieved through a sale of both

tracts. In the alternative, Russel requested the Butler County tract be

allocated to him if the court were to choose an in-kind distribution in lieu

of a sale. Although both parties expressed a desire to receive the Butler

County land if the land were partitioned in kind, neither party opposed

the sale of the Hardin County land.

      The parties presented testimony explaining why the court should

award the Butler County land to them if a partition in kind were to be

ordered.   Both parties were raised there on the family farm, and each

claimed an emotional connection with the land and a desire to pass it on

to their children who are interested in farming the ground.          Although

Russell relocated to North Dakota in 2008, he maintained his vocational

connection with the Butler County farm, having raised row crops there

since 1974.

      Marcia claimed a stronger tie to the Butler County farm because

she lives nearby and developed her avocation of collecting and selling
                                          5

antiques on the farm. She further asserted the family farm should be

allocated to her because she stayed in Iowa to take care of her parents in

their old age while Russell moved to North Dakota in 2008. Marcia also

opposed partition by sale of the Butler County tract because a sale would

cause her to incur a tax liability in the range of $145,000 to $164,000.

         C. The District Court’s Decision. The district court concluded

Marcia did not meet her burden to prove a partition in kind would be

equitable and practicable. The court found Marcia’s proposed division of

the Butler County farm—with the tillable land allocated to her and

pasture and hay ground allocated to Russell—would diminish the

aggregate value of the property. The court also found the Butler County

and Hardin County tracts carried substantially different tax bases, which

would complicate efforts to equitably divide the land through an in-kind

distribution.    Specifically, the party receiving the Hardin County land

would receive land with a stepped-up basis while the party receiving all

or most of the Butler County land would receive property with a very low

basis.

         Marcia appealed. We transferred the case to the court of appeals.

         D. Court of Appeals Decision. The court of appeals reversed in a

split decision, concluding that Marcia proved it is both equitable and

practicable to award Russell the Hardin County tract, award Marcia the

Butler County tract, and order an equalization payment of $75,000 from

Marcia to Russell. 3 We granted Russell’s application for further review to

determine whether the district court erred in ordering partition by sale of

         3Likethe district court, the court of appeals found it would be inequitable to
divide the Butler County farm between the parties because doing so would decrease the
total value of the entire tract and present practical problems of access and fencing of
the hay and pasture ground.
                                      6

the Butler County and Hardin County tracts under the circumstances of

this case.

      II. Scope of Review.

      Actions to partition real or personal property are equitable

proceedings, which we review de novo. Iowa R. Civ. P. 1.1201(1); Iowa R.

App. P. 6.907; see also Martin v. Martin, 720 N.W.2d 732, 735 (Iowa

2006). In equity cases, the trial court’s findings of fact are not binding

on us, but we give them weight, especially when they concern a witness’s

credibility. Iowa R. App. P. 6.904(3)(g); Martin, 720 N.W.2d at 735.

      III. Analysis.

      Our analysis in this case begins with an overview of the legal

principles governing partition actions in Iowa. With those principles in

mind, we shall determine whether the district court erred in rejecting

Marcia’s request for a partition in kind in lieu of sale.

      A. Rules Governing Partition Actions in Iowa. Partition actions

are governed by Chapter 651 of the Iowa Code and Division XII of the

Iowa Rules of Civil Procedure. See Iowa Code §§ 651.1–.6 (2014); Iowa

Rs. Civ. P. 1.1201–1.1228.         Together with the relevant statutory

provisions, the applicable procedural rules establish “a rough legal

blueprint” for partitioning concurrently owned real or personal property.

N. William Hines, Joint Tenancies in Iowa Today, 98 Iowa L. Rev. 1233,

1249–50 (2013).

      Prior to the effective date of the Iowa Rules of Civil Procedure in

July 1943, partition in kind was favored over partition by sale. Spies v.

Prybil, 160 N.W.2d 505, 507 (Iowa 1968). At common law and under the

previous statutory framework, property was partitioned in kind unless

the parties agreed to a sale or the property could not “be equitably

divided into the requisite number of shares.”       Id.; see also Iowa Code
                                      7

§ 12326 (1939); Metcalf v. Hoopingardner, 45 Iowa 510, 511–12 (1877)

(noting the statute permitted partition by sale only if the property could

not equitably be divided in kind). But “[t]his is no longer true in Iowa.”

Spies, 160 N.W.2d at 508.      The rules adopted in July 1943 effected a

“change in emphasis.”       Id. at 507 (quoting an advisory committee

comment to then Iowa Rule of Civil Procedure 278).          We explained in

Spies that the new rule “is unequivocal in favoring partition by sale and

in placing upon the objecting party the burden to show why this should

not be done in the particular case.” Id. at 508.

        Under the present framework, a co-owner of real or personal

property may request a judicial partition of the property in one of two

ways:     (1) partition by sale or (2) partition in kind.   Iowa R. Civ. P.

1.1201; cf. Iowa Code § 651.3 (2014) (permitting partial partitions in

kind). In a partition by sale, the property is sold and the sale proceeds

are distributed according to the parties’ respective interests. 59A Am.

Jur. 2d Partition § 117, at 94 (2015). When real estate is partitioned in

kind, the property is divided into parcels, and the parcels are allotted to

the parties by share. 68 C.J.S. Partition §§ 1, 146, at 91, 131–32 (2009).

The party seeking a partition in kind has the burden to prove it would be

both equitable and practicable.     Iowa R. Civ. P. 1.1201(2).     “For good

reasons shown, the court may order referees making a partition in kind

to allot a particular tract or article to a particular party.” Iowa R. Civ. P.

1.1216.

        Some limitations on in-kind partitions of real estate are well-

established under Iowa law.      In-kind partition is not appropriate if a

division into separate parcels would depreciate their aggregate value.

Murphy v. Bates, 224 Iowa 389, 391, 276 N.W. 29, 30–31 (1937);

Branscomb v. Gillian, 55 Iowa 235, 236, 7 N.W. 523, 523 (1880).
                                    8

Further, “if a division in kind is impracticable and cannot be effected

without sacrifice in value and to the best interest of all parties,” then a

sale must be ordered. Nehls v. Walker, 215 Iowa 167, 168–69, 244 N.W.
850, 851 (1932). Notably, these limiting principles were recognized even

at a time when partition in kind was favored in Iowa. See Branscomb, 55
Iowa at 236, 7 N.W. at 523.

      On first glance, Iowa law appears somewhat unique in that our

“default” method of partition is partition by sale. Compare Iowa R. Civ. P.

1.1201(2) (“Property shall be partitioned by sale and division of proceeds,

unless a party prays for partition in kind by its division into parcels and

shows that such partition is equitable and practicable.”), with 68 C.J.S.

Partition § 125, at 113.   Our research reveals only one other state—

Kentucky—expresses a preference for partition by sale.       See Ky. Rev.

Stat. Ann. § 389A.030(3) (West, Westlaw current through 2016 regular

sess.).   That said, although only Iowa and Kentucky have codified the

preference for judicial sale, several other states tend not to utilize

equitable remedies that could obviate the need for a sale. See Yun-Chien

Chang & Lee Anne Fennell, Partition and Revelation, 81 U. Chi. L. Rev.

27, 30 (2014) (“Most American jurisdictions have a common law rule that

purports to favor partition in kind, but scholars suggest that courts

usually order partition by sale.”). One observer has noted that although

most states have claimed adherence “to the historical preference for

physical division,” there is a general trend toward judicial sales either

because the parties desire sale “or because courts are easily convinced

that sale is necessary for the fair treatment of the parties.”    John G.

Casagrande, Jr., Note, Acquiring Property Through Forced Partitioning

Sales: Abuses and Remedies, 27 B.C. L. Rev. 755, 771 & n.141 (1986).
                                    9

      B. Two Proposals for a Partition In Kind. In this case, Marcia is

the party seeking a partition in kind. Consistent with Iowa’s preference

for partition by sale, Marcia thus bears the burden of proving a partition

in kind would be both equitable and practicable.         Iowa R. Civ. P.

1.1201(2).

      Marcia offers two alternatives for an in-kind division that she

contends would be equitable and practicable. Both alternatives allocate

all or most of the Butler County farm to her.        The first alternative

allocates most of the Butler County farm to her and gives Russell the

Hardin County farm plus a 70-acre parcel from the northern portion of

the Butler County property. The second alternative allocates all of the

Butler County property to Marcia and gives Russell the Hardin County

property plus an equalization payment offsetting the difference in value

between the two farms.

      Russell rejects both alternatives and instead urges the sale of both

tracts.   However, he contends in the alternative that if the court

concludes a partition in kind is equitable and practical, the Butler

County property should be allocated to him.         Like Marcia, Russell

testified at trial and asserted in his brief that he would approve of a

partition that allocates all or most of the Butler County real estate to

him; however, also like Marcia, he does not wish to receive an in-kind

distribution of the Hardin County farm.

      We now turn to the question of whether Marcia met her burden of

proof under either of her proposed alternatives.

      1. Alternative 1: Hardin tract plus a parcel of Butler tract. Under

the first alternative, Marcia would receive the tillable portion of the

Butler County land and Russell would receive the tillable portion of the

land in Hardin County. The remaining acres would then be split between
                                     10

the parties, with Russell receiving the remainder of the Hardin County

land and a 70-acre parcel of the northernmost portion of the Butler

County land.

      Although Russell and his expert conceded at trial that the division

of the Butler County land proposed by Marcia might appear feasible on

paper, they posited it would be neither equitable nor practicable in

reality. Having farmed the land for forty years, Russell credibly opined

that parceling off the northernmost portion of the Butler County land

consisting primarily of timber and hay ground would produce a parcel of

land that is not economically viable as a separate farming unit for several

reasons. Specifically, he explained (1) the parcel lacks access to fresh

water for livestock in the winter; (2) although the owner of the proposed

parcel could gain access to the east side, a river obstructs access to its

west side; (3) the existing fences on the parcel are inadequate for raising

livestock there; (4) the part of the parcel that is suitable for pasture is

subject to recurrent flooding; and (5) the parcel is too small to be

economically viable for raising livestock.

      Marcia presented testimony from an expert appraiser disputing

Russell’s opinion on problems with access to the proposed parcel and

fencing if the parcel were to be separated from the Butler County farm.

These potential problems are insubstantial and surmountable, Marcia’s

expert asserted; and the parcel allocated to Russell from the Butler

County farm could be drawn entirely from the west side to avoid any

need to cross the river.     Simply put, Marcia’s expert opined that a

practical and equitable division of the Butler County farm could be

achieved.

      Like the trial court, we credit Russell’s testimony and find the in-

kind division of the Butler County farm proposed by Marcia would be
                                      11

impractical. Russell has farmed the tillable ground for more than forty

years.    Because of this experience, Russell is more intimately familiar

than any other witness with the farm’s row-crop productivity potential,

its topographical features rendering parts of it vulnerable to flooding, and

its suitability for hay and pasture ground. We find this experience also

gives persuasive force to Russell’s opinion on the limited suitability of

access routes to the northern portion of the farm that Marcia proposes to

allocate to him. Lastly, we find Russell’s experience as a cattle farmer

also gives persuasive force to his opinions on the unattractiveness of the

proposed parcel for raising livestock. Accordingly, we find Marcia failed

to meet her burden to establish the in-kind division of the Butler County

farm is practical.

         Marcia’s proposed in-kind division of the Butler County farm fails

for yet another reason.     Russell’s expert appraiser persuasively opined

that—based on practical farming considerations—the value of the acres

Marcia proposed for allocation to Russell would be diminished if they

were separated from the rest of the farm.        Accordingly, we conclude

Marcia’s proposed in-kind division setting aside part of the Butler County

farm to Russell must be rejected because the division into separate

parcels would depreciate their aggregate value. See Murphy, 224 Iowa at

391, 276 N.W. at 30–31; Branscomb, 55 Iowa at 236, 7 N.W. at 523.

         2. Alternative 2: Hardin tract plus equalization payment. Under the

second alternative, Marcia would receive the Butler County farm and

Russell would receive the Hardin County farm, along with a sum of

money to equalize the value of the allocations. The payment of money as

a means of offsetting unequal distributions of real property in partition

actions is commonly referred to as “owelty.”
                                     12

      Owelty is an equitable remedy developed at common law and used

in partition actions to equalize the value of property each party receives

through the payment of a sum of money from the recipient of the higher-

value property to the recipient of the lower-value property.         Owelty,

Black’s Law Dictionary (3d pocket ed. 2006). Courts utilize the remedy

when “[i]n making divisions along natural and practical lines the

allotments cannot . . . be made of equal area or value” without impairing

the aggregate value of the parcels, and it would be disadvantageous to

sell the property. See Sawin v. Osborn, 126 P. 1074, 1075 (Kan. 1912);

68 C.J.S. Partition § 132, at 120; see also 59A Am. Jur. 2d Partition

§ 154, at 123–24.     Courts in jurisdictions favoring partition in kind

regard owelty as preferable to partition by sale.      See, e.g., Schnell v.

Schnell, 346 N.W.2d 713, 720–21 (N.D. 1984) (stating that partition in

kind with owelty should be preferred to sale); Chesmore v. Chesmore, 484
P.2d 516, 518 (Okla. 1971) (noting partition in kind with owelty is

preferable to sale); see also 68 C.J.S. Partition § 145, at 130. For that

reason, owelty is commonly justified as a means of avoiding judicial sale.

59A Am. Jur. 2d Partition § 155, at 124; see, e.g., Sawin, 126 P. at 1075;

R.R. Thompson Estate Co. v. Kamm, 213 P. 417, 418 (Or. 1923); Updike v.

Adams, 52 A. 991, 991–92 (R.I. 1902) (per curium).

      Russell asserts owelty is not recognized as an available remedial

tool under Iowa law.     He contends the Iowa Rules of Civil Procedure

governing partition actions leave no middle ground for owelty, permitting

only partition by sale or partition in kind. See Iowa R. Civ. P. 1.1201(2)

(“Property shall be partitioned by sale and division of the proceeds,

unless a party prays for partition in kind . . . , and shows that such

partition is equitable and practicable.”); see also 68 C.J.S. Partition §§ 2,

132, at 10, 120 (noting owelty is often “enabled by statute”).       Russell
                                          13

further posits that our recognition of the doctrine of owelty would

undermine Iowa’s statutory preference for partition by sale. See Iowa R.

Civ. P. 1.1201(2).

       Marcia contends owelty has long been recognized by courts of

equity and should be adopted in Iowa as an appropriate remedial tool in

partition actions.      Because it is an equitable remedy and partition

actions are equitable proceedings, Roll contends sound public policy

should lead this court to adopt and apply owelty in this case.

       Upon consideration, we need not decide whether the doctrine of

owelty is available in Iowa. Under the circumstances of this case, Marcia

cannot prove a superior claim of entitlement to the Butler County farm.

Like Marcia, Russell was raised on the farm and claims an abiding

connection to it. 4 Like Marcia, Russell has a child to whom he wishes to

succeed him in ownership of the family farm. And although Marcia and

her daughter live in Iowa in close proximity to the Butler County farm

and Russell lives in North Dakota, he has maintained an intimate

connection with the property by continuously farming it.                 Under these

unique circumstances, we cannot say the Butler County farm should be

set aside to Marcia “[f]or good reasons shown.” Iowa R. Civ. P. 1.1216.
Nor can we conclude it would be equitable to allocate the Butler County

farm to Marcia and award the Hardin County farm and some equalizing

       4We   do not overlook Marcia’s contention that Russell’s claim of attachment to
the family farm is less profound than hers because he made overtures to sell or trade
his interest several years ago. In our view, Russell’s unaccepted offers to amicably
separate his ownership interest from Marcia’s should be viewed as a good faith effort to
resolve differences rather than an expression of insubstantial attachment to the family
farm where he grew up and farmed as an adult for more than forty years. Likewise, we
do not consider Marcia’s refusal to pursue Russell’s settlement overtures giving her an
opportunity to obtain the Butler County land as evidence that she lacks a substantial
attachment to the Butler County farm.
                                          14

amount of money to Russell. 5          Although Marcia’s connection with the

family farm is sincere and profound, we cannot say it is measurably

superior to Russell’s or that equity therefore demands the property be

allocated to her. Thus, we do not decide in this case whether to adopt

the doctrine of owelty and leave that question for another day.

       IV. Conclusion.

       We conclude Marcia failed to meet her burden to prove a partition

in kind allocating all or most of the Butler County farm to her would be

practical and equitable. Accordingly, we vacate the decision of the court

of appeals and affirm the district court’s decision.

       DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED.

         5We have not overlooked Marcia’s contention that she will suffer an adverse tax

consequence from the sale of the Butler County farm. The parties have a low tax basis
in the property, and they both could experience a substantial gain and potential tax
liability from the sale. As both parties hold the same basis in the property, we cannot
say the potential tax consequences of the sale augur in favor of Marcia’s claim that
equitable principles should lead this court to allocate the Butler County farm to her.